EXHIBIT B
Conformed Copy
_____________________________________________________________
PRIMARY AGREEMENT
dated as of December 1, 1998
between
TELENOR EAST INVEST AS,
as the Purchaser
and
OPEN JOINT STOCK COMPANY "VIMPEL-COMMUNICATIONS",
as the Issuer
with respect to 8,902,201 shares of
common stock of
OPEN JOINT STOCK COMPANY "VIMPEL-COMMUNICATIONS"
_____________________________________________________________
PRIMARY AGREEMENT dated as of December 1, 1998 between TELENOR EAST INVEST
AS, a corporation organized and existing under the laws of Norway (the
"Purchaser"), and OPEN JOINT STOCK COMPANY "VIMPEL-COMMUNICATIONS", an open
joint stock company organized and existing under the laws of the Russian
Federation (the "Issuer").
WITNESSETH
WHEREAS, the Issuer desires to issue and to sell, and the Purchaser desires
to subscribe for and purchase, shares of Common Stock equal to twenty-five
percent (25%) plus one (1) share of the issued and outstanding voting capital
stock of the Issuer, calculated on a fully diluted basis (including, without
limitation, treating the Options under the Stock Option Plan as having been
exercised in respect of One Million (1,000,000) shares of Common Stock reserved
for issuance thereunder), on the terms and subject to the conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I DEFINITIONS AND INTERPRETATION
1.01 Definitions
-----------
As used herein, the following terms shall have the following meanings:
"Act" shall mean the United States Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder.
"Actions or Proceedings" shall mean any action, suit, proceeding or
arbitration commenced, brought, conducted or heard by or before any Governmental
or Regulatory Authority.
"ADSs" shall mean the Issuer's American Depositary Shares, each
representing three-quarters (3/4) of one (1) share of the Issuer's Common Stock,
which are currently listed on the NYSE.
"Affiliate" shall mean, with respect to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any relative or
spouse of such individual, or any relative of such spouse, any one of whom has
the same home as such individual, and any trust or estate for which such
individual serves as a trustee or in a similar capacity or in which such
individual has a substantial beneficial interest and any Person who is
controlled by any such member or trust. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise) of any other Person, provided that, in any event, any Person which
owns, directly or indirectly, a majority of the securities having ordinary
voting power for the election of directors or other governing
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body of a corporation or a majority of the partnership or other ownership
interests of any other Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
"Agreement" shall mean this Primary Agreement and the Exhibits and the
Schedules hereto and the certificates delivered in accordance with Article VIII
and Article IX.
"amendments to the Charter" shall have the meaning specified in Section
5.04.
"Applicable Rate" shall mean the rate of interest from time to time
announced by The Chase Manhattan Bank as its prime commercial lending rate.
"Assets and Properties" shall mean, with respect to any Person, all assets
and properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, used, operated, owned or leased by such Person, including,
without limitation, cash, cash equivalents, Investments, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Audited Consolidated Financial Statement Date" shall mean December 31,
1997, the last day of the most recent fiscal year of the Issuer for which
Audited Consolidated Financial Statements have been delivered to the Purchaser
pursuant to Section 3.08(a)(i).
"Audited Consolidated Financial Statements" shall mean the financial
statements, prepared in accordance with GAAP, for the fiscal year ended December
31, 1997, the most recent fiscal year of the Issuer, delivered to the Purchaser
pursuant to Section 3.08(a)(i).
"Bee Line Fund" shall mean the Fund for Non-Commercial Programs "Bee Line",
a non- profit organization organized and existing under the laws of the Russian
Federation.
"Bee Line Licensee" shall have the meaning set forth in Section 3.16(a).
"Bee Line Name" shall mean the brand name and trademark "Bee Line" used by
the Issuer.
"Benefit Plan" shall mean any Plan established by the Issuer or the
Significant Subsidiary, existing at the Closing Date or prior thereto, to which
the Issuer or the Significant Subsidiary contributes or has contributed, or
under which any employee, former employee, director, consultant or independent
contractor of the Issuer or the Significant Subsidiary or any beneficiary
thereof is covered, is eligible for coverage or has benefit rights.
"Board" shall mean the Board of Directors of the Issuer.
"Business Combination" shall mean, with respect to any Person, any merger,
consolidation or combination to which such Person is a party, the issuance or
disposition or acquisition of any shares to or from, as applicable, any third
party, any sale, dividend, split or other disposition or acquisition of Equity
Interests of such Person, any sale, dividend or other disposition or acquisition
of all or substantially all of the Assets and Properties of such Person or the
creation of any Subsidiary, the value of which exceeds Five Million US Dollars
(US$5,000,000), provided that the Issuer's proposed consolidation, disposition
or dissolution of certain of its indirect Subsidiaries or acquisition of Equity
Interests of any related Person or the
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Assets and Properties of any related Person shall not constitute a Business
Combination for purposes of this Agreement so long as the cost of such
transactions to the Issuer and its Consolidated Subsidiaries, on a consolidated
basis, does not exceed Five Million US Dollars (US$5,000,000).
"Business Day" shall mean a day other than a Saturday, a Sunday or any day
on which banks located in Moscow, Russia, Oslo, Norway or New York, New York are
authorized or obliged to close.
"Business or Condition of the Issuer" shall mean the business, condition
(financial or otherwise), results of operations and Assets and Properties of the
Issuer and its Subsidiaries taken as a whole.
"Call Option" shall have the meaning specified in Section 2.07.
"Call Option Notice" shall have the meaning specified in Section 2.07.
"Call Option Shares" shall have the meaning specified in Section 2.07.
"CBR" shall mean the Central Bank of Russia (Tsentralniy bank Rossii or TsB
Rossii), including any applicable territorial agent thereof, or any successor
thereto.
"CBR License" shall mean the license to be issued by the CBR (or any
amendment to an existing license issued by the CBR) to the Issuer, in each case,
which will allow the Issuer to receive the Purchase Price (or a portion
thereof), denominated in US Dollars, in the Issuer's Account.
"Charter" shall mean the most recent version of the charter (ustav) of the
Issuer, as registered with the MRC on August 23, 1996, and as amended on October
3, 1996 (approved by the Board on September 30, 1996), December 17, 1996
(approved by the GMS on November 20, 1996), December 17, 1996 (approved by the
GMS on November 29, 1996) and September 3, 1998 (approved by the GMS on June 16,
1998).
"Charter Capital" (ustavniy kapital) shall mean the aggregate value of the
ownership interests of a Person as stated in its charter, provided that, with
respect to a joint stock company, the Charter Capital shall mean the aggregate
nominal value of its issued shares.
"Class B Preferred Stock" shall mean the non-voting cumulative class B
preferred stock referred to in the amendments to the Charter.
"Closing" shall mean the first closing of a Purchase, as contemplated by
Section 2.03.
"Closing Date" shall mean the date on which the Closing is to occur, which
date shall be the earlier of (a) at least three (3) Business Days after the
Issuer has furnished written notice to the Purchaser of the Closing Date and (b)
June 1, 1999.
"Common Stock" shall mean the shares of common stock of the Issuer, as
defined in Section 6.1 of the Charter .
"Consolidated Subsidiaries" shall mean, with respect to the Issuer, the
Significant Subsidiary, Impuls-KB and RTI Services Svyaz.
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"Contract" shall mean any agreement, letter of intent, lease, license,
evidence of Indebtedness, mortgage, indenture, security agreement or other
contract (whether written or oral), in each case, to the extent legally binding.
"D-AMPs" shall mean Digital Advanced Mobile Phone System, a standard for
digital mobile telephone transmissions at a frequency of 800 MHz.
"Xx. Xxxxx" shall mean Xx. Xxxxxx Xxxxxxxxxx Xxxxx, a Russian citizen.
"Environmental Law" shall mean any Law or Order relating to the regulation
or protection of human health and safety, the environment or hazardous or toxic
substances, wastes, pollutants or contaminants.
"Equity" shall mean the aggregate of the Charter Capital, any surplus
capital (dobavochniy kapital), reserve fund, retained earnings and any other
elements determining the net worth of a Person.
"Equity Interest" in a Person shall mean any share of stock of such Person,
or any partnership share or other ownership interest in such Person.
"Escrow Agent" shall mean Den norske Bank ASA, as escrow agent under the
Escrow Agreement.
"Escrow Agreement" shall mean the Escrow Agreement dated December 1, 1998,
among the Purchaser, the Escrow Agent and the Issuer.
"Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC thereunder.
"Exercise" shall have the meaning specified in Section 2.07.
"Exercise Price" shall have the meaning specified in Section 2.07.
"FCSM" shall mean the Federal Commission for the Securities Market of the
Russian Federation (Federalnaya komissiya po xxxxx tsenikh bumag Rossisiikoi
Federatsii or "FKTsB"), or any successor thereto, including any applicable
territorial agent thereof.
"Financial Statements" shall mean the financial statements of the Issuer,
delivered to the Purchaser pursuant to Section 3.08, Section 5.02(a)(i) or
Section 5.02(a)(ii).
"First Board Date" shall mean the date of the first board meeting at which
duly elected designates of the Purchaser are sitting on the Board.
"Form 20-F" shall mean the Annual Report of the Issuer on Form 20-F, as
filed with the SEC pursuant to Section 15(d) of the Exchange Act on June 30,
1998, a copy of which is attached hereto as Exhibit D.
"GAAP" shall mean United States generally accepted accounting principles.
"Glavsotkom" shall mean Glavsotkom LLC, a limited liability company
organized and existing under the laws of the Russian Federation.
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"GMS" shall mean the general meeting of the shareholders (obschee sobraniye
aktsionerov) of the Issuer, as defined in Article 9 of the Charter.
"GSM" shall mean Global System for Mobile Communications.
"GSM 1800" shall mean GSM in the 1800 MHz frequency range.
"GSM 900" shall mean GSM in the 900 MHz frequency range.
"Governmental or Regulatory Authority" shall mean any court, tribunal,
arbitrator, legislature, government, ministry, committee, inspectorate,
authority, agency, commission, official or other competent authority of the
Russian Federation, any other country or any state, as well as any county, city
or other political subdivision of any of the foregoing.
"Guarantee Agreement" shall mean the Guarantee Agreement dated December 1,
1998, between Telenor AS and the Issuer.
"Indebtedness" shall mean, with respect to any Person, all obligations of
such Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or
similar instruments, (c) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (d) under capital leases or (e) in the nature of a guarantee of any
obligation described in clauses (a) through (d) above of any other Person.
"Indemnified Party" shall have the meaning specified in Section 11.01(c).
"Indemnifying Party" shall have the meaning specified in Section 11.01(c).
"Initial Purchase Price" shall mean the product, expressed in US Dollars,
of (a) US$18.19 (constituting the price on the Closing Date per each Purchaser's
Share) and (b) Eight Million Nine Hundred Two Thousand Two Hundred One
(8,902,201).
"Intellectual Property" shall mean patents and patent rights, licenses,
inventions, copyrights and copyright rights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks and trademark rights, service
marks and service xxxx rights, trade names and trade name rights, service names
and service name rights, brand names, processes formulae, trade dress, business
and product names, logos, slogans, industrial models, processes, designs,
methodologies, software programs (including all source codes) and related
documentation, technical information, manufacturing, engineering and technical
drawings and all pending applications for and registrations of patents,
trademarks, service marks and copyrights.
"Investments" shall mean all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures, general and limited partnerships, and other Persons, mortgage loans
and other investment or portfolio assets owned of record or beneficially by a
Person (other than (a) any direct or indirect Subsidiaries of the Issuer or any
ownership interests therein and (b) any short-term trade receivables generated
in the ordinary course of business).
"Issuer" shall have the meaning specified in the preamble to this
Agreement.
"Issuer's Account" shall mean the bank account specified in the CBR License
as the account in which the Issuer is authorized to receive the Initial Purchase
Price.
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"JSC Law" shall mean the RF Law No. 208-FZ "On Joint Stock Companies",
dated December 26, 1995 , as amended on June 13, 1996.
"Knowledge of the Issuer" or "Known to the Issuer" shall mean to the best
of the knowledge and belief of the Issuer after having made reasonable
inquiries.
"Knowledge of the Purchaser" or "Known to the Purchaser" shall mean to the
best of the knowledge and belief of the Purchaser after having made reasonable
inquiries.
"Laws" shall mean all laws, decrees, resolutions, instructions, statutes,
rules, regulations, acts, ordinances and other pronouncements having the effect
of law or regulation of the Russian Federation, any other country or any state,
as well as any county, city or other political subdivision of any of the
foregoing.
"Liabilities" shall mean all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" shall mean all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority, including,
without limitation, all Telecom Licenses; provided, however, that for purposes
of this Agreement, the licenses for GSM 1800 services issued to the Issuer and
Significant Subsidiary shall not be deemed to include any amendments thereto
relating to GSM 900 service.
"Lien" shall mean any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" shall mean any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including, without limitation, interest,
court costs, fees of attorneys, accountants and other experts or other expenses
of litigation or other similar proceedings or of any claim, default or
assessment).
"Major Inside Shareholders" shall mean Xx. Xxxxx, Glavsotkom LLC and the
Bee Line Fund.
"MAMP" shall mean the Ministry for Anti-Monopoly Policy and Support for
Entrepreneurship of the Russian Federation (Ministerstvo po Antimonopolnoy
politike i podderzhke predprinimatelstva Rossiiskoi Federatsii, or "GAK
Rossii"), or any successor thereto, including any applicable territorial agent
thereof.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on or with respect to the business, assets, financial
condition or results of operations of such Person and its Subsidiaries taken as
a whole, or upon such Person's ability to perform its obligations under this
Agreement and the other Principal Agreements, if any, to which it is a party.
"MRC" shall mean the Moscow Registration Chamber (Moskovskaya
registratsionaya palata), or any successor thereto.
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"New Rubles" shall mean the lawful currency of the Russian Federation, as
redenominated on January 1, 1998, such that One (1) New Xxxxx is equal to One
Thousand (1,000) Old Rubles.
"NRC" shall mean the Russian closed joint stock company National Registry
Company (Natsionalnaya Registratsionnaya Kompaniya), the duly appointed
shareholder registrar of the Issuer, or any successor thereto.
"NYSE" shall mean The New York Stock Exchange.
"Old Rubles" shall mean the lawful currency of the Russian Federation prior
to the redenomination thereof of January 1, 1998, such that One Thousand (1,000)
Old Rubles equals One (1) New Xxxxx.
"Option" shall mean, with respect to any Person, any security, right,
subscription, warrant, option, phantom stock right or other Contract that gives
the right to (a) purchase or otherwise receive or be issued any Equity Interest
in such Person or any security of any kind convertible into or exchangeable or
exercisable for any Equity Interest in such Person or (b) receive or exercise
any benefits or rights similar to any rights enjoyed by or accruing to the
holder of any Equity Interest in such Person, including any rights to
participate in the equity or income of such Person or to participate in or
direct the election of any directors or officers of such Person or the manner in
which any Equity Interests in such Person are voted.
"Order" shall mean any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority .
"Permitted Lien" shall mean (a) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (b) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent, and (c) any
mechanic's, materialman's or other similar Lien arising by operation of Law or
any minor imperfection of title or similar Lien, none of which individually or
in the aggregate with other such Liens materially impairs the value of the
property subject to such Lien or the use of such property in the conduct of the
business of the Issuer.
"Person" shall mean any natural person, corporation, general partnership,
simple partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority,
whether incorporated or unincorporated.
"Plan" shall mean any pension, profit sharing, stock purchase, stock
option, stock ownership, stock appreciation rights or phantom stock plan,
practice, policy or other arrangement of any kind, whether written or oral and
whether covering current or former employees, officers, directors, consultants
or independent contractors.
"Power of Attorney" shall mean power of attorney dated the Closing Date, in
substantially the form of Exhibit I, executed and delivered by Xx. Xxxxx in
favor of the Purchaser.
"Preferred Stock" shall mean, collectively, the shares of preferred stock
of the Issuer, as defined in Section 6.1 of the Charter, and, after giving
effect to the issuance thereof, the Class B Preferred Stock.
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"Principal Agreements" shall mean this Agreement, the Escrow Agreement, the
Shareholders Agreement, the Registration Rights Agreement, the Guarantee
Agreement and the Service Obligation Agreements.
"Purchase" shall mean the purchase of the Purchaser's Shares on the Closing
Date and each Subsequent Payment Date, if any, in each case, on and subject to
the terms and conditions hereof.
"Purchase Price" shall mean the aggregate of the Purchase Price Amounts.
"Purchase Price Amount" shall mean each portion of the Purchase Price set
forth in Schedule I attached to Schedule 2.01 for any given day.
"Purchaser" shall have the meaning specified in the preamble to this
Agreement.
"Purchaser's Shares" shall mean Eight Million Nine Hundred Two Thousand Two
Hundred One (8,902,201) shares of Common Stock.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of December 1, 1998 between the Issuer, the Purchaser and the
Major Inside Shareholders.
"Representatives" shall mean, with respect to any Person, its officers,
directors, shareholders, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives.
"SCCI" shall mean the State Committee of the Russian Federation for
Communications and Information (Gosudarstveniy komitet Rossiiskoi Federatsii po
svyazi i informatizatsii or Goskomsvyaz), including any applicable territorial
agent or any successor thereto.
"SEC" shall mean the Securities and Exchange Commission of the United
States of America, or any successor thereto.
"SEC Documents" shall have the meaning specified in Section 3.27.
"Service Obligation Agreements" shall mean, collectively, the VimpelCom
Service Obligation Agreement and the Telenor Service Obligation Agreement.
"Shareholders Agreement" shall mean the Shareholders Agreement dated as of
December 1, 1998 by and among the Purchaser, the Major Inside Shareholders,
Xxxxx X. Xxxxxx, XX and Geneva Investment Trust I, L.L.C.
"Significant Subsidiary" shall mean KB Impuls, an open joint stock company
organized and existing under the laws of the Russian Federation.
"Specified Percentage" shall mean, with the respect to any Person, twenty
five percent (25%) plus one share of the then issued and outstanding shares of
voting capital stock of the Issuer
"SRC" shall mean the State Registration Chamber under the Ministry of
Justice of the Russian Federation (Gosudarstvennaya registratsionnaya palata pri
Ministerstve iustitsii Rossiiskoi Federatsii), or any successor thereto.
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"Stock Option Plan" shall mean the employee stock option plan, as approved
by a simple majority of the members of the Board of the Issuer eligible to vote
on such issue (and to be submitted to the shareholders of the Issuer for
approval, if required by applicable law), contemplating the issuance of up to
One Million (1,000,000) shares of Common Stock.
"Strategic Investor" shall mean any Person which derives at least fifteen
percent (15%) of its revenues, on a consolidated basis with its affiliates, from
operations in the telecommunications industry, other than the Purchaser or its
Affiliates.
"Subsequent Payment Date" shall mean, after the Closing Date, each of the
payment dates set forth on Schedule I attached to Schedule 2.01 of this
Agreement, provided that, if any such date is not a Business Day, such
Subsequent Payment Date shall be the next succeeding Business Day.
"Subsidiary" of a Person shall mean any Person at least a majority of the
voting shares or voting Equity Interests of which is, directly or indirectly,
owned or controlled collectively by such Person.
"Tax Document" shall mean any return, declaration, report, claim for
refund, assessment, demand, act, or information return, statement or other
document relating to Taxes, including any Schedule or attachment thereto, and
including any amendment thereof, whether prepared by the taxpayer, a tax
preparer or a Governmental or Regulatory Authority.
"Taxes" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added alternative or add-on minimum, estimated, or other
tax, duty, governmental fee or charge of any kind whatsoever, including any
interest, penalty, or addition thereto.
"Telecom Licenses" shall mean (a) the Issuer's licenses for D-AMPs service
in Moscow and the Moscow Region (Moskovskaya oblast), (b) the Issuer's four (4)
super-region GSM licenses and (c) the license for GSM 1800 services issued to
the Issuer and the Significant Subsidiary (provided, however, that for purposes
of this Agreement, the licenses for GSM 1800 services issued to the Issuer and
the Significant Subsidiary shall not be deemed to include any amendments thereto
relating to GSM 900 service), and (d) frequency permits relating to the licenses
referred to in clauses (a), (b) and (c) of this definition.
"Telenor Service Obligation Agreement" shall mean the Telenor Service
Obligation Agreement dated as of December 1, 1998 between the Issuer and the
Purchaser pursuant to which the Purchaser shall render certain services to the
Issuer.
"Unaudited Consolidated Financial Statement Date" shall mean September 30,
1998, the last day of the most recent fiscal quarter of the Issuer for which
Unaudited Consolidated Financial Statements have been delivered to the Purchaser
pursuant to Section 3.08(a)(ii).
"Unaudited Consolidated Financial Statements" shall mean the unaudited
consolidated financial statements for the fiscal quarter of the Issuer ended
September 30, 1998, the most recent fiscal quarter of the Issuer for which
Unaudited Consolidated Financial Statements have been delivered to the Purchaser
pursuant to Section 3.08(a)(ii).
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"US Dollars" and "US$" shall mean the lawful currency of the United States.
"Veto Rights" shall have the meaning specified in Section 5.05.
"VimpelCom Service Obligation Agreement" shall mean the VimpelCom Service
Obligation Agreement dated as of December 1, 1998 between the Issuer and the
Purchaser pursuant to which the Issuer shall render certain services to the
Purchaser.
"Year 2000 Problems" shall mean errors or impaired performance in data
processing, in the output of data or in the operation of any equipment or
software which are connected with or relate to the failure of any system
software or other processing equipment used by the Issuer to give chronological
recognition to calendar dates before, on or after January 1, 2000 when
processing data.
1.02 Interpretations
---------------
Unless the context of this Agreement otherwise requires, the following
rules of interpretation shall apply to this Agreement:
(a) the singular shall include the plural, and the plural shall include
the singular;
(b) words of any gender shall include each other gender;
(c) the words "hereof", "herein", "hereby", "hereto" and similar words
refer to this entire Agreement and not to any particular Section or any other
subdivision of this Agreement;
(d) a reference to any Article, Section, Schedule or Exhibit is a
reference to a specific Article or Section of, or Schedule or Exhibit to, this
Agreement;
(e) a reference to any law, statute, regulation, notification or statutory
provision shall include any amendment, modification or re-enactment thereof, any
regulations promulgated thereunder from time to time, and any interpretations
thereof from time to time by any regulatory or administrative authority;
(f) a reference to any agreement, instrument, contract or other document
shall include any amendment, amendment and restatement, supplement or other
modification thereto;
(g) a reference to any Person shall include such Person's successors and
permitted assigns under any agreement, instrument, contract or other document;
(h) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" shall refer to the business and practice
of the Issuer;
(i) the word "pending" shall mean, with respect to a particular matter,
the service of process or delivery of written notice to the Person to whom such
matter relates;
(j) whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified; and
(k) all accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
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ARTICLE II SALE OF SHARES AND CLOSING
2.01 Purchase and Sale
-----------------
Subject to the terms and conditions contained in this Agreement, in
accordance with the procedures set forth in Schedule 2.01 attached hereto and on
the basis of the representations and warranties contained herein, the Issuer
agrees to issue and sell to the Purchaser, and the Purchaser agrees to subscribe
for and purchase from the Issuer, the Purchaser's Shares at the Closing. The
execution of this Agreement shall not constitute placement (razmescheniye) of
the Purchaser's Shares. The placement shall occur on the date on which the
Purchaser's Shares are disposed of (otchuzhdeny) by the Issuer in favor of the
Purchaser by transferring the title to a portion of the Purchaser's Shares to
the Issuer at the Closing or on a Subsequent Payment Date. In no event shall
the disposition (otchuzhdenie) of the Purchaser's Shares or any part thereof
take place prior to the registration of the issuance of the Purchaser's Shares
with the FCSM.
2.02 Purchase Price
--------------
Subject to the terms and conditions hereof and in consideration of the sale
and transfer to the Purchaser by the Issuer of the Purchaser's Shares, the
Purchaser shall pay to the Issuer the Purchase Price in the manner provided in
Section 2.03, Section 2.04 and Section 2.05, as applicable, and the Purchase
Price shall be allocable entirely to, and deemed to be in consideration of, the
Purchaser's Shares being purchased hereunder.
2.03 Pre-Closing; Closing; Subsequent Payment Dates
----------------------------------------------
(a) On a date which is five (5) Business Days prior to the Closing Date
the Issuer and the Purchaser shall (i) attend a pre-closing meeting at the
offices of the Purchaser's counsel, located at Xxxxxx Xxxxxxxxxxxxxx 00, Xxxxxx
000000, Xxxxxx (or at such other place as the Purchaser and the Issuer mutually
agree) at 10:00 am local time, and (ii) review the documents to be delivered at
the Closing to determine whether the conditions precedent specified in Section
8.01 have been, or will on the Closing Date be capable of being, fulfilled by
the Issuer.
(b) The Closing will take place at the offices of the NRC, 00 Xxxxxxx
Xxxxxx, Xxxxxx, or at such other place as the Purchaser and the Issuer mutually
agree, at 10:00 am local time on the Closing Date. At the Closing, if the
conditions precedent specified in Section 8.01 have been fulfilled by the Issuer
(or waived in writing by the Purchaser), then (i) the Purchaser shall, in
accordance with the terms of the Escrow Agreement, execute a joint instruction
to the Escrow Agent from the Purchaser and the Issuer, instructing the Escrow
Agent to pay to the Issuer the Purchase Price Amount for the Closing Date (or
such other amount as shall have been agreed by the parties in accordance with
the terms hereof and of the Escrow Agreement), by wire transfer (or such other
form of payment as shall be mutually agreed upon by the Issuer and the Escrow
Agent) of immediately available funds to the Issuer's Account, and (ii) upon
receipt by the Issuer of written confirmation from the Escrow Agent that it has
irrevocably issued wire transfer instructions for the Purchase Price Amount to
be paid on the Closing Date and the first Subsequent Payment Date, the Issuer
shall deliver to the Purchaser an extract from the share register of the Issuer
issued by the NRC and showing the Purchaser as the owner of the Purchaser's
Shares.
12
(c) If the Purchase Price has not been paid in full prior to such date,
on each Subsequent Payment Date, the Purchase Price Amount payable on such
Subsequent Payment Date shall be paid in accordance with the Escrow Agreement
without further instruction from the Issuer or the Purchaser.
2.04 Acceleration of Purchase
------------------------
At any time after the Closing, the Purchaser shall have the right
unilaterally to accelerate its purchase of the Purchaser's Shares by delivering
an instruction to the Escrow Agent in accordance with Section 4(e) of the Escrow
Agreement specifying (i) the number of Purchaser's Shares for which accelerated
payment will be made, and (ii) the Subsequent Payment Date(s) on which such
payments would be made but for such acceleration; provided, however, that the
-----------------
Purchaser shall not have the right to accelerate any portion of an amount
payable on a particular Subsequent Payment Date unless the entire amount payable
on such Subsequent Payment Date is accelerated.
2.05 Escrow of Purchase Price
------------------------
Simultaneously with the execution and delivery of this Agreement and the
other Principal Agreements by the parties hereto and thereto, the Purchaser
shall deposit by wire transfer of immediately available funds the Initial
Purchase Price with the Escrow Agent. Thereafter, the Initial Purchase Price
shall be held in escrow, shall accrue interest as set forth in the Escrow
Agreement, and shall be paid over as the Purchase Price, in each case, in
accordance with this Agreement and the Escrow Agreement.
2.06 Liquidated Damages
------------------
If the shareholders of the Issuer fail to approve the transactions
described in Section 5.04(a) on or prior to February 1, 1999 and, within
eighteen (18) months after the date on which a meeting of shareholders is held
at which a vote of such shareholders is conducted concerning such transactions,
the Issuer or the Significant Subsidiary issues Shares to, merges or
consolidates with, or sells all or substantially all of its Assets and
Properties to, a Strategic Investor other than a Person whose Equity Interests
are at least fifty-one (51%) beneficially owned by Russian Persons and which
derives its income principally from the telecommunications industry in the
Russian Federation (except that liquidated damages shall be paid on the terms of
this Section 2.06 in connection with a sale of shares of the Issuer to such a
Person for cash), then on the date of consummation of such issuance, merger,
consolidation or sale (provided such date falls within such eighteen (18) month
period), the Issuer shall pay, as liquidated damages for loss of a bargain and
not as a penalty, to the Purchaser an amount equal to Twenty Million US Dollars
(US$20,000,000), by wire transfer of immediately available funds to an account
of the Purchaser's designation.
2.07 Call Option
-----------
(a) If the Issuer shall not have adopted the Stock Option Plan or issued
any shares of Common Stock in connection therewith, then the Issuer shall have
the right (but not the obligation), exercisable by the Issuer or any Affiliate
thereof designated by the Issuer, to purchase from the Purchaser (and any of the
Purchaser's Affiliates then holding Shares) up to
13
the number of Shares (the "Call Option Shares") equal to the difference between
(i) aggregate number of the Purchaser's Shares and (ii) twenty-five percent
(25%) plus one share of the then issued and outstanding shares of voting capital
stock of the Issuer (such right to purchase the Call Option Shares hereinafter
referred to as the "Call Option"), adjusted for any dilution incurred prior to
the date of such exercise.
(b) The exercise price (the "Exercise Price") for each of the Call Option
Shares shall be equal to the price per Share reflected in the Initial Purchase
Price plus interest thereon at the London Inter Bank Offered Rate (LIBOR) for
deposits in US Dollars for a period of six months, as published in the Financial
Times on the Closing Date and at each six-month interval thereafter, from (and
including) the Closing Date to (but excluding) the date of purchase of the Call
Option Shares which shall be payable in US Dollars at the closing of such
purchase.
(c) No later than fifteen (15) days prior to any exercise of the Call
Option ("Exercise"), the Issuer shall send written notice (the "Call Option
Notice") to the Purchaser setting forth (i) the Exercise Date, (ii) the number
of Call Option Shares that shall be the subject of such Exercise and (iii) the
aggregate Exercise Price (which aggregate Exercise Price shall reflect the price
per Call Option Share in accordance with paragraph (b) of this Section 2.07).
(d) The closing for purchase and redemption of the Call Option Shares
shall occur at the Issuer's principal office, or such other place as shall be
mutually agreed by the Issuer and the Purchaser, not less than fifteen (15) nor
more than thirty (30) Business Days after receipt by the Purchaser of the Call
Option Notice, unless prior thereto, the Issuer shall have withdrawn the
Exercise in writing.
The provisions of this Section 2.07 shall be enforceable against the
successors of the Purchaser, the Controlled Affiliates of the Purchaser and
their respective successors, if any, which hold Purchaser's Shares. If at the
time of any Exercise any of the Call Option Shares are held by any Controlled
Affiliate of the Purchaser, the Purchaser shall cause such Controlled Affiliate
to take such action and to execute and deliver to a Person designated by the
Issuer any agreements, documents, certificates or other instruments as shall be
reasonably necessary or appropriate to give effect to or otherwise enable the
consummation of the transactions contemplated by this Section 2.07 or to
acknowledge compliance by such Controlled Affiliate of this Section 2.07.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ISSUER
Subject to the information contained the Issuer's Form 20-F and Form 6-Ks
filed with the SEC since the date of such Form 20-F (including the Issuer's Form
6-K filed on the date hereof) and the Schedules hereto, the Issuer hereby
represents and warrants to the Purchaser that, as of the date of this Agreement
and, solely with respect to those representations and warranties specified in
Section 8.01(a), as of the Closing Date:
3.01 Organization of the Issuer
--------------------------
The Issuer is an open joint stock company and has been duly organized, is
validly existing as a legal entity properly organized, registered and existing
under the laws of the Russian Federation, with corporate power and authority to
carry on its business as it is currently being conducted and to own, lease and
operate its Assets and Properties, and is not
14
required to be qualified as a foreign corporation or other entity authorized to
do business in any other jurisdiction.
3.02 Authority
---------
(a) The Issuer has full power and authority to execute and deliver this
Agreement and the other Principal Agreements to which the Issuer is a party.
(b) This Agreement and the other Principal Agreements to which the Issuer
is a party have been duly and validly authorized, executed and delivered by the
Issuer and constitute the legal, valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies generally
and by general equitable principles (whether applied by a court of law or
equity), except as rights to indemnity and contribution may be limited by
applicable law or public policy and except to the extent any clause hereof
provides for the payment of a penalty.
(c) Subject only to the actions and proceedings identified in Schedules
3.04(c), 3.12, 8.01(e) and 8.01(f), the Issuer has full power and authority to
perform the Issuer's obligations hereunder and under the other Principal
Agreements to which the Issuer is a party, and to consummate the transactions
contemplated hereby and thereby, including, without limitation, to issue and
sell (pursuant to this Agreement) the Purchaser's Shares to the Purchaser.
3.03 Charter Capital of the Issuer
-----------------------------
(a) The Charter Capital of the Issuer consists solely of Nineteen Million
Two Hundred Eighty Thousand (19,280,000) issued shares of Common Stock and Six
Million Four Hundred Twenty-Six Thousand Six Hundred (6,426,600) issued shares
of Preferred Stock. After giving effect to the issuance of all of the
Purchaser's Shares, the Issuer's Charter Capital shall consist of Twenty-Eight
Million One Hundred Eighty Two Thousand Two Hundred and One (28,182,201) issued
shares of Common Stock and Six Million Four Hundred Twenty-Six Thousand Six
Hundred (6,426,600) issued shares of Preferred Stock.
(b) All of the outstanding Equity Interests of the Issuer (excluding the
Purchaser's Shares) (i) have been duly authorized and validly issued, (ii) are
fully paid, and, except as described on page 28 of Form 20-F ("Assessability of
Shares"), non-assessable, (iii) are not subject to any preemptive or similar
rights with respect to the Issuer, and (iv) were properly registered with the
appropriate authorities competent for registration of the issue of such shares.
All of the shares of the Issuer, including the Purchaser's Shares, are
uncertificated.
(c) As of the Closing Date and each Subsequent Payment Date, if any, the
Purchaser's Shares (i) will have been duly authorized, (ii) when issued to the
Purchaser as provided herein and in accordance with the documents to be filed
with the FCSM, and delivered to and paid for by the Purchaser as provided for by
this Agreement and the CBR License, will be validly issued, fully paid and,
except as described on page 28 of Form 20-F ("Assessability of Shares"), non-
assessable, (iii) (upon registration of a report on the issuance thereof with
the FCSM, compliance with the disclosure requirements of the Russian Federation
Federal Law on the Securities Markets and regulations of the FCSM, and approval
of the amendments to the Charter by the Board and their registration with the
MRC and SRC), the issuance of such Purchaser's Shares shall have been properly
registered with the appropriate authorities competent therefor, and (iv) the
Purchaser shall acquire the Purchaser's Shares, free and clear of
15
all Liens. As of the Closing Date, the Purchaser's Shares will have been
transferred from the Issuer to the Purchaser, and the Purchaser's shareholding
with respect to the Purchaser's Shares will have been entered into the
shareholder register of the Issuer.
(d) After giving effect to the issuance of all of the Purchaser's Shares,
notwithstanding the issuance of an additional One Million (1,000,000) shares
(currently contemplated to be issued under the Stock Option Plan) and regardless
of whether the Issuer exercises the Call Option, the Purchaser's Shares shall
represent not less than twenty-five percent (25%) plus one share of all voting
capital stock of the Issuer, inclusive of all issued shares of Common Stock and
all issued Preferred Stock.
(e) Immediately following the issuance to the Purchaser of all of the
Purchaser's Shares and payment in full therefor, the Purchaser shall have
sufficient voting power to block any decision of the GMS requiring an
affirmative vote of three-quarters (3/4) of the shareholders present and
eligible to vote at the GMS.
(f) Neither the Issuer nor, to the Knowledge of the Issuer, any Person
affiliated (as defined in Rule 405 of the Act) with the Issuer, has taken,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Issuer.
(g) No holder of any security of the Issuer, other than the Purchaser and
the Major Inside Shareholders and any Person who has acquired rights to require
registration of the Issuer's Securities in accordance with the Registration
Rights Agreement, has any right to require registration of the shares of Common
Stock or any other security of the Issuer under the Act.
(h) Except as otherwise set forth in Schedule 3.03, there are no
outstanding Options related to or entitling any Person to purchase or otherwise
acquire from the Issuer or the Significant Subsidiary any Equity Interest in the
Issuer or any such Significant Subsidiary, as the case may be.
3.04 Subsidiaries of the Issuer
--------------------------
(a) The direct Subsidiaries of the Issuer and the material indirect
Subsidiaries consist entirely of the entities set forth in Schedule 3.04(a).
(b) The Consolidated Subsidiaries consist entirely of the entities
identified in Schedule 3.04(b) as the "Consolidated Subsidiaries". Each of the
Consolidated Subsidiaries of the Issuer has been duly organized, is validly
existing as a legal entity properly organized, registered and existing under the
laws of the Russian Federation, with corporate power and authority to carry on
its business as it is currently being conducted and to own, lease and operate
its Assets and Properties, and is not required to be qualified as a foreign
corporation or other entity authorized to do business in any other jurisdiction.
(c) Except as set forth on Schedule 3.04(c), all of the outstanding Equity
Interests of each of the Consolidated Subsidiaries of the Issuer have been duly
authorized and validly issued and are fully paid and, except as described on
page 28 of Form 20-F ("Assessability of Shares"), non-assessable, and the
issuance of such Equity Interests was properly registered with the appropriate
authorities competent therefor, and, to the extent owned by the Issuer, are
16
owned by the Issuer free and clear of any Liens (other than Permitted Liens).
The Issuer owns directly or indirectly such percentage of the Equity Interests
of the Consolidated Subsidiaries of the Issuer as is specified in Schedule
3.04(b) as being owned by the Issuer, and, except as specified in Schedule
3.04(c) hereof, all approvals of Governmental or Regulatory Authorities required
therefor have been obtained.
3.05 No Conflicts
------------
The execution, delivery and performance by the Issuer of this Agreement
and the other Principal Agreements to which it is a party, compliance by the
Issuer with all of the provisions hereof and thereof and the consummation by the
Issuer of the transactions contemplated hereby and thereby:
(a) will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the Charter (after giving effect to the
amendments described in Section 5.04 of this Agreement), or the charter of the
Significant Subsidiary,
(b) subject to obtaining the third party consents referred to in Schedule
8.01(f), will not conflict with or constitute a breach of any Contract or
License to which the Issuer or the Significant Subsidiary is a party as of the
date of this Agreement or by which the Issuer or the Significant Subsidiary or
any of their respective Assets and Properties is bound, and
(c) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Schedule 8.01(e) hereto, will not
violate or conflict with any Orders or Laws applicable to the Issuer, the
Significant Subsidiary or any of their respective Assets and Properties,
except, in the case of clauses (b) and (c), any conflict, breach, violation,
failure to obtain consent or approval or make any filing or give any notice,
which would not have a Material Adverse Effect on the Issuer.
3.06 Governmental Approvals and Filings
----------------------------------
Except as set forth in Schedule 8.01(e), the execution, delivery and
performance by the Issuer of this Agreement and the other Principal Agreements
to which it is a party, the compliance by the Issuer with all of the provisions
hereof and thereof and the consummation of the transactions by the Issuer
contemplated hereby and thereby will not require any consent, approval,
authorization or other order of any Governmental or Regulatory Authority.
3.07 Books and Records
-----------------
(a) Schedule 3.07(a) is a true and complete list of all written protocols
of meetings and all written consents in lieu of GMSs and of the Board of the
Issuer and the Significant Subsidiary from November 15, 1996 up to and including
the date of this Agreement. A true and complete copy of each such consent and
the minutes of each such meeting has been made available for review by the
Purchaser.
(b) True and complete copies of the share registers of the Issuer and the
Significant Subsidiary (as provided by the share registrars of the Issuer and
the Significant Subsidiary), and a complete list of shareholders of each other
direct Subsidiary of the Issuer, are attached hereto as Schedule 3.07(b).
17
(c) Neither the Issuer nor the Significant Subsidiary holds its share
register, Telecoms Licenses or accounting records at any location other than one
of the locations specified in Schedule 3.07(c).
(d) Each of the Issuer and the Significant Subsidiary makes and keeps
accurate books and records and maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of the
Financial Statements in conformity with GAAP and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3.08 Financial Statements
--------------------
(a) Prior to the execution of this Agreement, the Issuer has delivered to
the Purchaser true and complete copies of the following Financial Statements:
(i) the Audited Consolidated Financial Statements and the Financial
Statements of the Issuer as of December 31, 1995 and December 31, 1996 and for
the fiscal years then ended, together with, in each case, a true and correct
copy of the report on such audited information by Ernst & Young (CIS) Limited;
(ii) the Unaudited Consolidated Financial Statements and the
Financial Statements of the Issuer as of March 31, 1998 and June 30, 1998 and
for the quarters then ended,
(b) Except as disclosed therein, all such Financial Statements:
(i) were prepared in accordance with GAAP, respectively, subject
in the case of unaudited Financial Statements to normal year-end adjustments and
the absence of notes to such Financial Statements;
(ii) present fairly the consolidated financial position, and
results of operations as to the Audited Consolidated Financial Statements and
the other Financial Statements referred to in Section 3.08(a)(i) only, and
changes in financial position of the Issuer and its Consolidated Subsidiaries at
the respective dates for the respective periods to which they apply; and
(iii) comply in all material respects with the requirements of the
Act applicable to annual and quarterly financial statements of foreign issuers.
(c) Ernst & Young (CIS) Limited are independent public accountants with
respect to the Issuer as required by the Act.
18
3.09 Absence of Changes
------------------
Except as set forth in Schedule 3.09 and except for the execution and
delivery of this Agreement and the other Principal Agreements and the
transactions contemplated hereby and thereby, since the Audited Consolidated
Financial Statement Date:
(a) there has been no material adverse change in the condition (financial
or otherwise) or prospects of the Issuer and the Significant Subsidiary, taken
as a whole, whether or not arising from transactions in the ordinary course of
business;
(b) there has been no transaction entered into by the Issuer or the
Significant Subsidiary material to the Issuer, on a consolidated basis, other
than in the ordinary course of business;
(c) there has been no dividend or distribution of any kind declared, paid
or made, or any direct or indirect redemption, by the Issuer or the Significant
Subsidiary on any class of its capital stock;
(d) there has been no bankruptcy or administrative proceeding (nabludenie)
declared or commenced by a Governmental or Regulatory Authority of competent
jurisdiction with respect to the Issuer or the Significant Subsidiary;
(e) without limiting the generality of the foregoing, except as set forth
in Schedule 3.09(b), there has not occurred between the Audited Consolidated
Financial Statement Date and the date hereof, any of the following with respect
to the Issuer or the Significant Subsidiary:
(i) any authorization, issuance, sale or other disposition of any
Equity Interest or Option other than the Issuer's phantom stock program and
similar arrangements with employees of the Issuer or the Significant Subsidiary,
or any modification or amendment of any right of any holder of any Equity
Interest of or Option of the Issuer on a consolidated basis (except as set forth
in Schedule 3.03);
(ii) any increase in the salary, wages or other compensation of any
director, officer or employee whose annual salary or wages are, or after giving
effect to such change would be, US$500,000 or more;
(iii) any physical damage, destruction or other casualty loss
(whether or not covered by insurance) affecting any movable or immovable
property or equipment (whether owned, leased or used) in an aggregate amount
which would have a Material Adverse Effect on the Issuer;
(iv) except as described on Schedule 3.09(e)(iv), any material
change in any method of calculating bad debt or accounting, financial reporting
or Tax practice or policy or (B) any change in the fiscal year;
(v) any write off or write down of or any determination to write
off or write down any of the Assets and Properties in an aggregate amount
exceeding US$10,000,000 (without taking into account normal year-end audit
adjustments);
19
(vi) any (A) amendment to its charter, (B) any recapitalization,
reorganization, liquidation or dissolution, in each case, as such terms are
defined under the laws of the Russian Federation; or (C) any Business
Combination in which the Issuer or the Significant Subsidiary has paid or
received more than US$10,000,000;
(vii) any entering into any amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any consent with
respect to any Telecom License;
(viii) any capital expenditures or commitments for additions to
property or equipment constituting capital assets in an aggregate amount
exceeding US$10,000,000;
(ix) any commencement or termination of any material line of
business; or
(x) any transaction with any Affiliate (A) outside the ordinary
course of business consistent with past practice, or (B) other than on an arm's
length basis, or (C) other than pursuant to any Contract disclosed pursuant to
Section 3.17, in each case, which is material to the Issuer and the Significant
Subsidiary, taken as a whole.
3.10 No Undisclosed Indebtedness, Liens and Liabilities
--------------------------------------------------
Except as disclosed in Schedule 3.10, (a) there is no Indebtedness the
value of which exceeds Ten Million US Dollars (US$10,000,000), (b) there are no
Liens (other than Permitted Liens) on any of the Assets and Properties of the
Issuer, and (c) there are no Liabilities against, relating to or affecting the
Issuer or any Consolidated Subsidiary or any of their respective Assets and
Properties, other than Indebtedness, Liens and Liabilities incurred in the
ordinary course of business consistent with past practice which in the aggregate
are not material to their Business or Condition.
3.11 Taxes
-----
Except as set forth in Schedule 3.11, to the Knowledge of the Issuer, each
of the Issuer and the Significant Subsidiary has duly filed with the appropriate
taxing authorities (or has received an extension for filing with respect to) all
Tax Documents required to be filed by it, and each such Tax Document was, when
filed, accurate and complete in all material respects; and, to the Knowledge of
the Issuer, each of the Issuer and the Significant Subsidiary has duly paid, on
time, or has made adequate reserves for, or has contested in good faith, all
Taxes required to be paid or remitted by it or levied against it, and, to the
Knowledge of the Issuer, no material Tax deficiency is currently asserted
against the Issuer or the Significant Subsidiary.
3.12 Legal Proceedings; Liability
----------------------------
Except as set forth in Schedule 3.12 :
(a) there is no Action or Proceeding pending or, to the Knowledge of the
Issuer, threatened which will result in, or would reasonably be expected to
result in, the issuance of an Order which (i) questions the validity of this
Agreement or any of the other Principal Agreements or any action taken or to be
taken pursuant hereto or thereto, or (ii) restrains, enjoins or otherwise
prohibits or makes illegal consummation of any of the transactions contemplated
by this Agreement or any of the other Principal Agreements, or (iii) otherwise
results in a material impairment of the Purchaser's rights under this Agreement
or any of the
20
other Principal Agreements to which the Purchaser is a party, or (iv) if
determined adversely to the Issuer or a Consolidated Subsidiary of the Issuer,
could reasonably be expected to result in (A) any injunction or other equitable
relief against such Person that would interfere in any material respect with its
business or operations or (B) Losses by such Person, individually or in the
aggregate, in excess of US$10,000,000;
(b) there are no facts or circumstances Known to the Issuer that could
reasonably be expected to give rise to any Action or Proceeding that would be
required to be disclosed pursuant to clause (a) above;
(c) there are no material Orders outstanding against the Issuer or the
Consolidated Subsidiaries of the Issuer; and
(d) neither the Issuer nor any Subsidiary of the Issuer has any material
Liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of (i) any service rendered by the Issuer or
any Subsidiary or (ii) the ownership, possession or use of any product
manufactured, sold, leased or delivered by the Issuer or any Subsidiary.
3.13 Compliance With Laws and Orders
-------------------------------
(a) Except for any violation or alleged violation of, or default or
alleged default under, any Law or Order applicable to the Issuer or any of its
Assets and Properties which has been settled or otherwise resolved, neither the
Issuer nor the Significant Subsidiary is, or has at any time since November 15,
1996, received any written notice that it is, or has at any time since November
15, 1996 been, in violation of or in default under any Law or Order applicable
to it or any of its Assets and Properties, in each case, which could have a
Material Adverse Effect on that Issuer.
(b) Neither the Issuer nor the Significant Subsidiary, nor any director,
officer, agent, employee or other person associated with or acting on behalf of
the Issuer or the Significant Subsidiary, (i) has used any corporate funds for
any unlawful contributions, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any governmental official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (iv) made any bribe, unlawful rebate, payoff, influence payment,
kickback or other unlawful payment in connection with the business of the
Issuer.
3.14 Benefit Plans
-------------
Except as disclosed in the Issuer's Form 20-F and in Schedule 3.03, and
except for the Stock Option Plan, neither the Issuer nor any of its Consolidated
Subsidiaries has any material Benefit Plans.
3.15 Immovable Property
------------------
(a) Schedule 3.15 contains a true and correct list of the three (3)
principal buildings owned or leased by the Issuer or any of its Consolidated
Subsidiaries or used by the Issuer and/or its Consolidated Subsidiaries. Each
of the Issuer and the Consolidated Subsidiaries, as
21
applicable, has good and valid title, free and clear of all Liens, except
Permitted Liens, to the buildings which Schedule 3.15 indicates are owned by it.
(b) No default has occurred or is continuing in respect of any lease of a
building or portion thereof to which the Issuer or any of its Consolidated
Subsidiaries is a party as lessee and which is listed in Schedule 3.15, and the
Issuer and the Consolidated Subsidiaries enjoy peaceful and undisturbed
possession under all such leases to which any of them is a party as lessee with
such exceptions as do not materially interfere with the use made by the Issuer
or such Consolidated Subsidiary.
3.16 Intellectual Property Rights
----------------------------
Except as set forth in Schedule 3.16(a), the Issuer and the Significant
Subsidiary possess the material Intellectual Property (with the exception of the
software comprising their respective subscriber billing programs), employed by
them in connection with the business as it is currently being conducted and as
it is proposed to be conducted, as described in Form 20-F, and neither the
Issuer nor the Significant Subsidiary has received any notice of infringement of
or conflict with asserted rights of others with respect to the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect on the Issuer. Without
limitation to the generality of the foregoing:
(a) The Issuer has the exclusive right to use the Bee Line Name, except to
the extent the Issuer has, directly or indirectly, licensed the Bee Line Name
to, or authorized the use of the Bee Line Name by, a third party (each, a "Bee
Line Licensee").
(b) The Issuer has registered title to the Bee Line Name as a trademark,
free and clear of any Liens except for Permitted Liens and the rights of Bee
Line Licensees under Contracts in respect of the use of the Bee Line Name.
(c) All registrations with and applications to any Governmental or
Regulatory Authorities required to protect the rights of the Issuer and any Bee
Line Licensee to the Bee Line Name are valid and in full force and effect and
are not subject to the payment of any Taxes or maintenance fees or the taking of
any other actions by the Issuer to maintain their validity or effectiveness,
except for (i) such payments which will be made prior to Closing and (ii) any
payments for actions which if they were not made or taken would not result in a
Material Adverse Effect on the Issuer.
(d) The Issuer and, to the Knowledge of the Issuer, each Bee Line
Licensee, have taken reasonable security and enforcement measures to protect the
value of the Bee Line Name and to prevent its use by unauthorized Persons.
(e) Neither the Issuer nor, to the Knowledge of the Issuer, any Bee Line
Licensee is, nor has the Issuer or, to the Knowledge of the Issuer, any Bee Line
Licensee, received any written notice that the Issuer or any Bee Line Licensee
is, in default (or with the giving of notice or lapse of time or both, would be
in default) in any material respect under any Contract to use the Bee Line Name.
(f) To the Knowledge of the Issuer, the Bee Line Name is not being
infringed by any Person.
22
3.17 Contracts; No Default
---------------------
(a) Schedule 3.17(a) contains a true and complete list of all Contracts
(true and complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to the Purchaser prior to
the execution of this Agreement), dated on or after January 1, 1998, to which
the Issuer or the Significant Subsidiary is a party or by which any of their
Assets and Properties is bound which involve an obligation of the Issuer or the
Significant Subsidiary to make payments in any year, other than with respect to
salary or incentive compensation payments in the ordinary course of business, to
any Person exceeding US$5,000,000 in the aggregate (other than Contracts
referred to in Sections 3.10 or 3.15).
(b) Neither the Issuer nor the Significant Subsidiary has received any
notice of default in connection with the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of Indebtedness or in any other agreement, indenture or instrument to
which the Issuer or the Significant Subsidiary is a party or by which the Issuer
or the Significant Subsidiary or their respective Assets and Properties are
bound.
(c) Schedule 3.17(c) contains a true and complete list of the Issuer's
existing commitments and obligations to purchase any goods (including equipment
and handsets) and to retain any services (including leases of interconnect
lines), in each case, exceeding US$15,000,000 in the aggregate in any fiscal
year.
3.18 Year 0000 Xxxxxxxx
------------------
The letters which the Issuer has received from Alcatel SEL AG and Ericsson
Project Finance AB and AB LM Ericsson Finans are attached hereto as Schedule
3.18.
The Issuer has investigated the possibility of the occurrence of Year 2000
Problems and:
(a) has utilized and intends to continue utilizing internal and external
resources to identify, correct, reprogram and test its computer systems to
address Year 2000 Problems; and
(b) expects to replace some systems and modify others as part of the
process in identifying, correcting, reprogramming and testing its computer
systems for Year 2000 Problems;
provided that the Issuer makes no representation or warranty whatsoever, direct
or indirect, explicit or implicit, with respect to any cost or Loss the Company
may incur as a result of or in connection with Year 2000 Problems affecting any
Person, including, without limitation, Year 2000 Problems affecting the Issuer
or any Person on which the Issuer's operations or the operations of any of its
Subsidiaries directly or indirectly rely.
23
3.19 Licenses
--------
(a) Except as otherwise set forth in Schedule 3.19(a), the Issuer and each
of the Consolidated Subsidiaries have such Licenses as are used or necessary to
own, lease, and operate its respective Assets and Properties and to conduct its
business, except where the failure to have such Licenses would not have a
Material Adverse Effect on the Issuer;
(b) Except as otherwise set forth in Schedule 3.19(b), the Issuer and each
of the Consolidated Subsidiaries of the Issuer has fulfilled and performed all
of its material obligations with respect to such Licenses and no event has
occurred which allows, or after notice or lapse of time would allow, revocation
or termination thereof or results in any other material impairment of the rights
of the holder or any such License, except such as would not have a Material
Adverse Effect on the Issuer;
(c) Except as otherwise set forth in Schedule 3.19(c), no such License
contains any restrictions that have or that the Issuer could reasonably expect
to have a Material Adverse Effect on the Issuer.
(d) Except as set forth on Schedule 3.19(b), no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the Issuer
or the Significant Subsidiary in respect of any Telecom License.
3.20 Insurance
---------
The Issuer and the Consolidated Subsidiaries have insured their respective
Assets and Properties as set forth on Schedule 3.20.
3.21 Employees; Labor Relations
--------------------------
(a) Neither the Issuer nor the Significant Subsidiary has violated any
applicable Russian or foreign, including in each instance federal, state or
local, Law or regulation relating to discrimination in the hiring, promotion or
pay of employees, which might reasonably be expected to result in any Material
Adverse Effect.
(b) No labor strike, dispute, disturbance, lockout, slowdown or stoppage
of employees of the Issuer or the Significant Subsidiary exists and, to the
Knowledge of the Issuer, no such action is imminent.
3.22 Environmental Matters
---------------------
(a) Neither the Issuer nor the Significant Subsidiary has violated any
Environmental Law, which might reasonably be expected to result in a Material
Adverse Effect on the Issuer.
3.23 Interconnect Providers
----------------------
No gateway operator or other provider of interconnect services to the
Issuer or the Significant Subsidiary has ceased or materially reduced its
provision of services to the Issuer or the Significant Subsidiary since the
Audited Consolidated Financial Statement Date or threatened to cease or
materially reduce such provision of services after the date hereof.
24
3.24 Investments
-----------
Schedule 3.24 hereto sets forth a list of each equity Investment of the
Issuer (other than in respect of its Subsidiaries). All such equity Investments
are free and clear of all Liens other than Permitted Liens.
3.25 Accounts Receivable
-------------------
The accounts and notes receivable of the Issuer and each Significant
Subsidiary reflected on the balance sheet included in the Unaudited Consolidated
Financial Statements, and all accounts and notes receivable arising subsequent
to the Unaudited Consolidated Financial Statement Date, (a) arose from bona fide
sales transactions in the ordinary course of business and are payable on
ordinary trade terms, (b) to the Knowledge of the Issuer are legal, valid and
binding obligations of the respective debtors generally enforceable in
accordance with their terms, (c) are collectible in the ordinary course of
business consistent with past practice in the aggregate recorded amounts
thereof, net of any applicable reserve reflected in the balance sheet included
in the Unaudited Consolidated Financial Statements, and (d) are not the subject
of any Actions or Proceedings brought by or on behalf of the Issuer or the
Significant Subsidiary.
3.26 Brokers
-------
Except as described on Schedule 3.26, all negotiations relating to this
Agreement and the transactions contemplated hereby have been carried out by the
Issuer directly with the Purchaser without the intervention of any Person on
behalf of the Issuer in such manner as to give rise to any valid claim by any
Person against the Purchaser or the Issuer or any Significant Subsidiary for any
finder's fee, brokerage commission or similar payment.
3.27 SEC Documents
-------------
(a) The Issuer has filed all reports, Schedules, forms, statements and
other documents with the SEC (collectively, and in each case including all
Exhibits and SchedulEs thereto and documents incorporated by reference there,
the "SEC Documents") required to be filed by it prior to giving effect to the
transactions contemplated by this Agreement and the other Principal Agreements.
(b) Each part of the SEC Documents, when such part became effective, (i)
did not contain and each part, as amended or supplemented, if applicable, does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) complied in all material respects with the Act and, as amended or
supplemented, if applicable, complied in all material respects with the Act;
provided, however, that the representations and warranties set forth in this
Section 3.27(b) do not apply to statements or omissions in the SEC Documents
that are based on information relating to any underwriter or shareholder
furnished to the Issuer in writing by such underwriter or shareholder,
respectively.
3.28 Disclosure
----------
To the Knowledge of the Issuer, the Issuer has disclosed all material
facts relating to the Business or Condition of the Issuer and the Significant
Subsidiary of the Issuer to the Purchaser in or in connection with this
Agreement. No representation or warranty contained in this
25
Agreement, and no statement contained in the attached Schedules (including,
without limitation, the Financial Statements), or in the Certificate of the
President delivered to the Purchaser in connection with the execution of this
Agreement on the date thereof, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
herein or therein, in the light of the circumstances under which they were made,
not misleading.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Issuer as follows:
4.01 Organization; Ability to Consummate Transactions
------------------------------------------------
The Purchaser is a corporation duly organized and validly existing under
the Laws of the Kingdom of Norway. The Purchaser has full power and authority to
execute and deliver this Agreement and the other Principal Agreements to which
it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, provided that the
Purchaser must obtain the approval of the MAMP to consummate the acquisition of
the Purchaser's Shares.
4.02 Authority
---------
The execution and delivery by the Purchaser of this Agreement and the
other Principal Agreements to which it is a party, and the performance by the
Purchaser of its obligations hereunder and thereunder, have been duly and
validly authorized by the Board of Directors of the Purchaser, no other
corporate action on the part of the Purchaser or its stockholder being
necessary. This Agreement has been duly and validly executed and delivered by
the Purchaser and constitutes, and upon the execution and delivery by the
Purchaser of the other Principal Agreements to which it is a party, such other
Principal Agreements will constitute, the legal, valid and binding obligations
of the Purchaser enforceable against the Purchaser in accordance with their
terms.
4.03 No Conflicts
------------
The execution, delivery and performance by the Purchaser of this Agreement
and the other Principal Agreements to which it is a party and the consummation
of the transactions contemplated hereby and thereby, will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the charter (vedtekter) of the Purchaser;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Schedule 4.04 hereto, conflict with
or result in a violation or breach of any term or provision of any Law or Order
applicable to the Purchaser or any of its Assets and Properties; or
(c) conflict with or constitute a breach of any Contract or License to
which the Purchaser is a party or by which any of its Assets and Properties is
bound.
26
4.04 Governmental Approvals and Filings
----------------------------------
Except as disclosed in Schedule 4.04 hereto, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of the Purchaser is required in connection with the execution, delivery
and performance of this Agreement or the other Principal Agreements to which it
is a party or the consummation of the transactions contemplated hereby or
thereby.
4.05 Legal Proceedings
-----------------
There are no Actions or Proceedings pending or, to the knowledge of the
Purchaser, threatened against, the Purchaser or any of its Assets and Properties
which could reasonably be expected to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the other Principal Agreements.
4.06 Brokers
-------
All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by the Purchaser directly with the
Issuer without the intervention of any Person on behalf of the Purchaser in such
manner as to give rise to any valid claim by any Person against the Issuer for
any finder's fee, brokerage commission or similar payment.
4.07 Investment Intent
-----------------
The Purchaser is acquiring the Purchaser's Shares for its own account for
investment purposes only and not with a view to, or for sale or resale in
connection with, any public distribution thereof or with any present intention
of selling, distributing or otherwise disposing of such Shares, except in
compliance with the Act and all other applicable securities laws.
4.08 Knowledgeable Investor
----------------------
The Purchaser (a) possesses such knowledge and experience in financial and
business matters as to enable it to evaluate the merits and risks of its
investment in the Purchaser's Shares, (b) understands that the Purchaser's
Shares that are to be acquired by it under this Agreement are not registered
under the Act, (c) understands and is able to bear the economic risk involved in
acquiring the Purchaser's Shares, including any loss relating to or arising out
of such investment, (d) is not a "U.S. person", as such term is defined under
Rule 902 of Regulations S under the Act, and is not acquiring the Purchaser's
Shares for the account of a U.S. person (as so defined) and (e) is an
"accredited investor" as defined in Rule 501(a) under Regulation D under the
Act, experienced in investing in emerging markets.
4.09 Compliance with Securities Laws
-------------------------------
Neither the Purchaser nor, to the Knowledge of the Purchaser, any Person
affiliated (as defined in Rule 405 of the Act) with the Purchaser, has taken,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in, under the Exchange Act or
otherwise, stabilization or manipulation of the price of any security of the
Issuer. The acquisition of the Purchaser's Shares by the Purchaser pursuant to
this Agreement is, and at all times has been, in compliance with the securities
laws of each
27
jurisdiction applicable to it, including, without limitation, United States
securities laws and NYSE rules and regulations relating to xxxxxxx xxxxxxx.
4.10 No Knowledge of Breach
----------------------
There is no breach by the Issuer known to the Purchaser of any
representation or warranty made by the Issuer in this Agreement.
4.11 Independent Investigation
-------------------------
The Purchaser has (a) conducted its own investigation with respect to the
Purchaser's Shares, the Issuer and its Subsidiaries and Affiliates, and Russia
in connection with its acquisition of the Purchaser's Shares, and has had the
opportunity to ask executive officers of the Issuer such questions as it has
considered necessary, relevant or appropriate with respect to the Purchaser's
Shares, the Issuer and its Subsidiaries and Affiliates, and Russia; (b)
consulted its own legal advisors with respect to its investment in the
Purchaser's Shares and the risks associated with such investment to the extent
the Purchaser deems necessary or appropriate; and (c) received all information
that it believes is necessary, relevant or appropriate in connection with its
acquisition of the Purchaser's Shares.
ARTICLE V COVENANTS OF THE ISSUER
The Issuer covenants and agrees with the Purchaser that, at all times from
and after the date hereof until the Closing (except with respect to Section
5.02(a), Section 5.08 and Section 5.09(a), which shall survive until the date on
which the Purchaser, having once attained ten percent (10%) or more of the
issued and outstanding voting capital stock of the Issuer, holds less than ten
percent (10) of the issued and outstanding voting capital stock of the Issuer,
Section 5.05 which shall survive only until the First Board Date and Section
5.07 and Section 5.09(b), which shall survive until the first date on which the
Purchaser, having once attained the Specified Percentage, holds less than the
Specified Percentage), the Issuer will comply with all covenants and provisions
of this Article V, except to the extent the Purchaser may otherwise consent in
writing.
5.01 No Solicitations
----------------
During the period commencing on the date of the execution of this
Agreement and ending on the earlier of (a) the First Board Date and (b) the date
which is one hundred eighty (180) calendar days from the execution of this
Agreement, the Issuer will not take, nor will it permit any Consolidated
Subsidiary (or authorize or permit any investment banker, financial adviser,
attorney, accountant or other Person retained by or acting for or on behalf of
the Issuer or any Consolidated Subsidiary) to take, directly or indirectly, any
action to initiate, assist, solicit, negotiate, encourage or accept any offer or
inquiry from any Strategic Investor (or any Person known by the Issuer to be
acting on behalf of any Strategic Investor) (i) to engage in, reach any
agreement or understanding (whether or not such agreement or understanding is
absolute, revocable, contingent or conditional) for, or otherwise attempt to
consummate, any issuance of shares to such Strategic Investor or merger or
consolidation with such Strategic Investor, or sale of all or substantially all
of the assets of the Issuer or its assets or the assets of any Consolidated
Subsidiary to such Strategic Investor, or (ii) to furnish or cause to be
furnished any information with respect to the Issuer or any Consolidated
Subsidiary to any
28
Strategic Investor (or any Person known by the Issuer to be acting on behalf of
any Strategic Investor) (other than as contemplated by Section 5.02) who the
Issuer, or any Consolidated Subsidiary (or any Person acting for or on their
behalf) knows or has reason to believe is in the process of considering any of
the transactions described in clause (i) of this Section 5.01. If the Issuer or
any Consolidated Subsidiary (or any Person acting for or on their behalf)
receives from any Strategic Investor (or any Person known by the Issuer to be
acting on behalf of any Strategic Investor) any offer, inquiry or informational
request referred to in this Section 5.01, the Issuer will (if not the original
recipient thereof) promptly advise such Person, by written notice, of the terms
of this Section 5.01 and, in each case, will promptly in writing advise the
Purchaser of such offer, inquiry or request and deliver a copy of such notice to
the Purchaser, provided that the foregoing shall not apply to normal investor
relations activities of the Issuer.
5.02 Financial Statements and Reports; Filings
-----------------------------------------
(a) Commencing on the date of this Agreement, the Issuer shall deliver to
the Purchaser:
(i) As promptly as practicable and in any event no later than
ninety (90) days after the end of each fiscal quarter ending after the date
hereof and before the Closing, true and complete copies of the unaudited
consolidated balance sheet of the Issuer and the Consolidated Subsidiaries, and
the related unaudited consolidated statement of income of the Issuer and its
Consolidated Subsidiaries, as of and for such period, prepared on a basis
consistent with the Audited Consolidated Financial Statements, subject to normal
year-end audit adjustments, except as otherwise stated therein.
(ii) As promptly as practicable and in any event no later than one
hundred eighty (180) days after the end of each of the Issuer's fiscal years
ending after the date hereof, true and complete copies of a consolidated balance
sheet of the Issuer and its Consolidated Subsidiaries as at the end of such
fiscal year, and consolidated statements of income and cash flows of the Issuer
and its Consolidated Subsidiaries for such fiscal year, prepared in accordance
with GAAP and setting forth in each case in comparative form these figures for
the previous fiscal year, all in reasonable detail and certified by independent
public accountants of recognized international standing, and a comparison to the
Issuer's budget for such years prepared by the Issuer. The Issuer will deliver
the Audited Consolidated Financial Statement for its fiscal year ended December
31, 1998 to the Purchaser not later than June 30, 1999.
(iii) As promptly as practicable, true and complete copies of such
other financial statements and reports as are specified in Schedule 5.02.
(iv) Promptly upon their becoming available, copies of all
registration statements, annual reports on Form 20-F, any reports on Form 6-K
and such proxy statements and other information as shall be filed by the Company
with the SEC or any national or regional securities exchange or otherwise
generally distributed to shareholders of the Company.
(b) During the period from the date of this Agreement up to the Closing,
the Issuer shall deliver to the Purchaser, as promptly as practicable, copies of
all Telecom Licenses received after the execution of this Agreement and, upon
request of the Purchaser, all roaming and interconnect applications and other
material filings made by the Issuer or the Significant Subsidiary after the date
hereof and before the Closing with any Governmental or Regulatory Authority
(other than routine, recurring filings made in the ordinary course of business
consistent with past practice)
29
5.03 Certain Restrictions
--------------------
Except as contemplated by the Principal Agreements, without the prior
written consent of the Purchaser, the Issuer shall refrain from (and shall
cause, to the extent of its voting power or control, the Significant Subsidiary
to refrain from):
(a) amending its charter, delisting the ADSs from the NYSE or taking any
action with respect to any such amendment or delisting or any recapitalization,
reorganization, liquidation or dissolution of the Issuer or the Significant
Subsidiary;
(b) declaring, setting aside or paying any dividend or other distribution
in respect of the Equity of the Issuer or the Significant Subsidiary, or
directly or indirectly redeeming, purchasing or otherwise acquiring any Equity
Interest in or any Option with respect to the Issuer;
(c) engaging with any Person in any Business Combination;
(d) entering into any Contract to do or engage in any of the foregoing.
5.04 Charter Amendments
------------------
(a) Prior to the Closing, the Issuer shall have effected the amendments
to its Charter, described below (the "amendments to the Charter") and shall have
registered such amendments with the MRC and SRC which shall have the effect of:
(i) fixing the number of members of the Board at nine;
(ii) providing that a three-quarters (3/4) majority of members of
the Board shall be required to amend the Board Rules;
(iii) providing that two-thirds (2/3) of the total number of members
of the Board shall constitute a quorum for any meeting of the Board; provided,
however, that the presence (or, with respect to any meeting by ballot, the vote)
of at least one duly elected member of the Board nominated separately by each
holder (if any) of at least twenty-five percent (25%) plus one share of the
issued and outstanding voting capital stock of the Company shall be required to
constitute any such quorum;
(iv) providing that an affirmative vote of three-quarters (3/4) of
the shareholders of the Issuer present and eligible to vote at shareholder
meetings shall be required in connection with the issuance of any authorized
(but unissued) shares and the corresponding increase in the Charter Capital of
the Issuer, and providing that an affirmative vote of three-quarters (3/4) of
the directors shall be required in connection with the amendments of the Charter
related thereto; and
(v) providing that the names of the non-Russian shareholders of
the Issuer which appear in the register of shareholders of the Issuer from time
to time shall be deemed to be incorporated by reference in the Charter as if
they were set forth in full therein.
(b) Prior to March 30, 1999, the Issuer shall use its best efforts to
cause amendments to be made to its Charter to state the Charter Capital in New
Rubles, unless such amendment is not then required by Russian Law.
30
(c) As soon as practicable after registration of the report on the issuance
of securities, the Issuer shall:
(i) amend the Charter to show an increase in the Charter Capital
equal to the number of the Purchaser's Shares sold to the Purchaser;
(ii) cause the amendment referred to in clause (i) above to be
registered with the MRC and the SRC;
(iii) deliver to the Purchaser registration certificates evidencing the
registrations referred to in clause (ii) above; and
(iv) deliver to the Purchaser evidence of payment of the securities
Tax.
5.05 Purchaser's Pre-Closing Veto Rights
-----------------------------------
During the period commencing on the date of this Agreement and ending on
the First Board Date, the Purchaser shall have the right to veto the following
actions by the Issuer and the Significant Subsidiary, except to the extent
expenditures related to the following actions are contemplated by the Issuer's
1998 budget, as amended, and the January 1999 budget adopted by the Board (the
"Veto Rights"):
(a) the issuance of any new shares of capital stock of the Issuer (except
as contemplated or referred to herein) or of any of its Consolidated
Subsidiaries;
(b) the creation of any new Subsidiary or any Investment in any new
Subsidiary in an amount exceeding US$5,000,000 in the aggregate during such
period; provided, however, that the Purchaser shall not have the right to veto
(i) any merger, consolidation or combination to which any such Subsidiary is a
party, the issuance or disposition or acquisition of any shares to or from, as
applicable, any third party, any sale, dividend, split or other disposition or
acquisition of Equity Interests of such Subsidiary, any sale, dividend or other
disposition or acquisition of all or substantially all of the Assets and
Properties of such Subsidiary or the creation of any Subsidiary, or (ii) any
consolidation, disposition and dissolution of certain of the Issuer's indirect
Subsidiaries or acquisition of Equity Interests of any related Person or Assets
and Properties of any related Person, so long as the aggregate cost to the
Issuer and its Consolidated Subsidiaries, for any and all such transactions
referred to in this Section 5.05(b) does not exceed US$5,000,000;
(c) the entry into any Contract or series of Contracts (other than
Indebtedness), including in respect of the sale of assets having a value per
Contract greater than US$5,000,000;
(d) (i) any transaction between the Issuer, on the one hand, and any
Subsidiary of the Issuer, other than the Significant Subsidiary, or any direct
or indirect Subsidiaries of any such Subsidiary, on the other hand, having an
aggregate value in excess of US$1,000,000; (ii) any transaction between any
direct or indirect Subsidiary of the Issuer, on the one hand, and any other
direct or indirect Subsidiary of the Issuer, on the other hand, having an
aggregate value in excess of US$1,000,000; and (iii) any transaction between the
Issuer or any direct or indirect Subsidiary of the Issuer, on the one hand, and
any officer, director or shareholder or direct or indirect Subsidiary of any
such officer, director or shareholder (other than the Issuer or any
31
direct or indirect Subsidiary of the Issuer), on the other hand, having an
aggregate value in excess of US$250,000;
(e) the incurrence of any Indebtedness (including under any guarantee but
excluding Indebtedness consisting of re-financing of existing Indebtedness or
the deferred purchase price of goods and services in the ordinary course of
business) by the Issuer or any of its Subsidiaries or Affiliates, on a
consolidated basis calculated in accordance with GAAP, in an amount exceeding
US$5,000,000; provided, however, this clause (e) shall not apply to (i) any
existing commitments for additional Indebtedness of the Issuer from Ericsson
Project Finance AB, AB LM Ericsson Finans or Alcatel SEL AG or (ii) Indebtedness
of the Issuer from the Savings Bank of the Russian Federation (Sberbank) in an
aggregate principal amount not to exceed US$30,000,000;
(f) the creation or adoption of any Benefit Plan (other than the Stock
Option Plan); and
(g) the incurrence of any Lien over the Assets and Properties of the
Issuer or any Subsidiary of the Issuer (other than a Permitted Lien) securing
Indebtedness of the Issuer or any Subsidiary of the Issuer in an amount
exceeding US$5,000,000; provided, however, this clause (g) shall not apply to
any Lien securing Indebtedness of the Issuer from Ericsson Project Finance AB,
AB LM Ericsson Finans or Alcatel SEL AG or (ii) Indebtedness of the Issuer from
the Savings Bank of the Russian Federation (Sberbank) in an aggregate principal
amount not to exceed US$30,000,000.
The Issuer shall request approval from the Purchaser for any of the foregoing
transactions by sending written notice to the Purchaser in accordance with
Section 13.01 hereof. If the Purchaser does not object in writing to the
Issuer's request within the shorter of (i) seven (7) Business Days and (ii)
fourteen (14) calendar days after receiving such notice, the Purchaser shall be
deemed to have approved such transaction.
5.06 Budget
------
The Issuer will (a) provide the Purchaser's representative on the Budget
Committee of the Issuer with the Issuer's entire draft budget for fiscal year
1999 at least fifteen (15) days prior to the First Board Date and (b) cause the
First Board Date to occur within five (5) days after the date of the GMS in
January 1999.
5.07 Involvement of Purchaser in Issuer's Business
---------------------------------------------
Promptly following the execution of this Agreement, the Issuer shall
appoint a designee of the Purchaser as a secondee (in accordance with the terms
of the Telenor Service Obligation Agreement) (at the deputy or assistant manager
level) to each of the policy organs of the Issuer (as designated by the Issuer),
within divisions or working groups within the Issuer carrying out or responsible
for (a) strategy, (b) marketing, (c) information technology, (d) financial
management and (e) budgeting, provided such secondees must possess sufficient
expertise and knowledge and be resident in Russia for the first six months of
such secondment.
5.08 Transactions with Affiliates
----------------------------
Except as expressly permitted by this Agreement, the Issuer will not, and
will not permit any of its Subsidiaries to, directly or indirectly: (a) make any
Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any assets to an Affiliate; (c) merge into
32
or consolidate with or purchase or acquire assets from an Affiliate; or (d)
enter into any other transaction directly or indirectly with or for the benefit
of an Affiliate (including, without limitation, guarantees and assumptions of
obligations of an Affiliate); provided that, notwithstanding the foregoing
provisions of this Section 5.08, (i) any Affiliate who is an individual may
serve as a director, officer or employee of the Issuer or any of its
Subsidiaries and receive reasonable compensation for his or her services in such
capacity and (ii) the Issuer and its Subsidiaries may enter into (x)
transactions (other than extensions of credit by the Issuer or any of its
Subsidiaries to an Affiliate) providing for the leasing of property, the
rendering or receipt of services or the purchase or sale of inventory and other
assets in the ordinary course of business if the monetary or business
consideration arising therefrom would be substantially as advantageous to the
Issuer and its Subsidiaries as the monetary or business consideration which
would obtain in a comparable transaction with a Person who is not an Affiliate
or (y) any other transaction, including any Business Combination between or
among the Issuer and any of its Subsidiaries which is approved by the Board.
5.09 The Significant Subsidiary
--------------------------
The Issuer shall exercise its voting rights in respect of the shares of
capital stock of the Significant Subsidiary owned by it and take such other
steps as are necessary (to the extent of its voting power or control) from time
to time to procure that:
(a) there are five (5) members of the board of directors of the
Significant Subsidiary, one (1) of whom has been designated by the Purchaser,
nominated for election and elected to such board of directors; and
(b) none of the following actions are taken by the Significant Subsidiary,
the members of the Board of Directors of the Significant Subsidiary or the
shareholders of the Significant Subsidiary, as the case may be, without the
prior written consent of the Purchaser:
(i) the adoption or approval of any amendment to the charter of the
Significant Subsidiary;
(ii) any merger, reorganization, consolidation, dissolution,
liquidation, or sale of all or substantially all of the Assets and Properties of
the Significant Subsidiary to or with any Person other than the Issuer;
(iii) the incurrence of any Indebtedness (including under any
guarantee but excluding the re-financing of existing Indebtedness and
Indebtedness in respect of the deferred purchase price of goods and services in
the ordinary course of business) by the Significant Subsidiary in an amount
exceeding US$15,000,000;
(iv) the incurrence of any Lien (other than Permitted Liens) over
the Assets and Properties of the Significant Subsidiary securing Indebtedness of
the Significant Subsidiary in an amount exceeding US$5,000,000; provided,
however, this clause (iv) shall not apply to any Lien in favor of the Issuer or
securing Indebtedness of the Significant Subsidiary to Alcatel SEL AG;
(v) the creation of any new Subsidiary of the Significant
Subsidiary; or
(vi) any transaction between the Significant Subsidiary or any
direct or indirect Subsidiary of the Significant Subsidiary, on the one hand,
and any officer, director or
33
shareholder or direct or indirect Subsidiary of any such officer, director or
shareholder, on the other hand, having an aggregate value in excess of
US$1,000,000; or
(vii) any authorization, issuance, sale or other disposition of any
Equity Interest or Option of the Significant Subsidiary by the Issuer; provided,
however, that this clause (vii) shall not restrict any issuance, sale or other
disposition by the Significant Subsidiary to the Issuer; or
(viii) any dividend or distribution of any kind, or any direct or
indirect redemption by the Significant Subsidiary on any class of its capital
stock.
5.10 Fulfillment of Conditions
-------------------------
The Issuer will execute and deliver at or prior to the Closing each other
Principal Agreement, will take all commercially reasonable steps necessary and
proceed diligently and in good faith to satisfy each other condition to the
obligations of the Purchaser contained in Article VIII.
ARTICLE VI NOTICE AND CURE
Each party will notify the other party in writing of, and will use all
commercially reasonable efforts to cure, before the Closing, any violation or
breach, as soon as practicable after such party becomes aware of such violation
or breach of any representation, warranty, covenant or agreement made by such
party in this Agreement, whether occurring or arising before, on or after the
date of this Agreement, provided that no notice given pursuant to this Article
VI shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit the Purchaser's
right to seek indemnity under Article XI.
ARTICLE VII COVENANTS OF THE PURCHASER
The Purchaser covenants and agrees with the Issuer that, at all times from
and after the date hereof until the Closing (or, in the case of Section 7.02,
until the date on which the Purchaser, having once attained ten percent (10%) or
more of the then issued and outstanding voting capital stock of the Issuer,
holds less than ten percent (10%) of the then issued and outstanding voting
capital stock of the Issuer and, with respect to Section 7.05, for the time
period specified therein), the Purchaser will comply with all covenants and
provisions of this Article VII, except to the extent the Issuer may otherwise
consent in writing.
7.01 Regulatory and Other Approvals
------------------------------
The Purchaser will (a) take all commercially reasonable steps necessary or
desirable, and proceed diligently and in good faith and use all commercially
reasonable efforts, as promptly as practicable to obtain all consents, approvals
or actions of, to make all filings with and to give all notices to Governmental
or Regulatory Authorities or any other Person required of the Purchaser or the
Issuer to consummate the transactions contemplated hereby and by the other
Principal Agreements, including, without limitation, those described in Schedule
4.04 hereto (and shall in any event make all necessary applications to and file
all notices and other filings
34
with the MAMP as soon as practicable but no later than thirty (30) calendar days
after the date of execution of this Agreement), (b) provide such other
information and communications to the Issuer, such Governmental or Regulatory
Authorities or other Persons as the Issuer or such Governmental or Regulatory
Authorities or other Persons may request in connection therewith and execute all
documents as may be reasonably requested by the Issuer in connection therewith
and (c) cooperate with the Issuer as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with, and giving all
notices to, Governmental or Regulatory Authorities or other Persons required of
the Issuer to consummate the transactions contemplated hereby and by the other
Principal Agreements. The Purchaser will provide prompt notification to the
Issuer when any such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as applicable, and will
advise the Issuer in writing of any communications (and, unless precluded by
Law, provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement or any of the other Principal
Agreements.
7.02 Compliance with Securities Laws
-------------------------------
From and after the date of this Agreement, the Purchaser will not take,
and will cause all Persons subject to its direct or indirect control not to
take, directly or indirectly, any action (i) designed to or which might
reasonably be expected to cause or result in manipulation of the price of any
security of the Issuer in violation of the Exchange Act or (ii) in violation of
the Issuer's policies, as in effect from time to time, relating to trading in
the Issuer's securities.
7.03 Escrow of Purchase Price
------------------------
From and after the date on which the Initial Purchase Price has been
deposited with the Escrow Agent and until the Initial Purchase Price has been
repaid to the Purchaser or paid to the Issuer, in each case, in accordance with
the terms of the Escrow Agreement, the Purchaser shall ensure and hereby
covenants and agrees that no Liens in respect of Indebtedness of the Purchaser
shall attach to the Initial Purchase Price.
7.04 Fulfillment of Conditions
-------------------------
The Purchaser will execute and deliver at the Closing each Principal
Agreement that the Purchaser is hereby required to execute and deliver as a
condition to the Closing, will take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy each other
condition to the obligations of the Issuer contained in this Agreement.
7.05 Projects and Corporate Opportunities
------------------------------------
Notwithstanding any other provision of this Agreement:
(a) From the date of this Agreement until the earlier of (i) the
termination of this Agreement without the occurrence of the Closing as provided
in Article XII hereof, and (ii) following the Closing, the date on which the
Purchaser and its Affiliates have sold or otherwise disposed of shares of Common
Stock or ADSs such that the Purchaser and its Affiliates no longer hold in
excess of the Specified Percentage of the issued and outstanding voting capital
stock of the Issuer, the Purchaser intends to conduct all of its new
telecommunications business and projects in the Russian Federation and the
Commonwealth of Independent States through the Issuer unless, in each case, the
Issuer declines such opportunity. In addition, the Purchaser
35
will inform the Issuer of any opportunities in the telecommunications business
in the Russian Federation and the Commonwealth of Independent States that are
brought to the attention of the Purchaser and its Affiliates by any third party.
(b) The Purchaser shall use reasonable efforts to coordinate its interest
in each of the projects, operations and other commercial activities in Russia
and the Commonwealth of Independent States in which it currently holds an
interest with the activities of the Issuer. The Issuer acknowledges that this
Section 7.05(b) shall not in any way limit the Purchaser's right to develop the
Purchaser's existing interests to maximize value.
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
8.01 Conditions Precedent to Closing
-------------------------------
The obligation of the Purchaser to cause the Escrow Agent to deliver the
Purchase Price Amount payable at the Closing to the Issuer is subject to the
fulfillment, on or before the Closing, of each of the following conditions
precedent (all or any of which may be waived in whole or in part by the
Purchaser in writing in its sole discretion), and fulfillment of which by the
Issuer shall, in the case of Section 8.01(a), (b), (d), (e) and (f), be
confirmed by officer's certificate of the Issuer:
(a) Representations and Warranties. The representations and warranties
------------------------------
made by the Issuer in Article III shall have been true and correct on and as of
the date of this Agreement and on and as of the First Board Date. In addition,
the representations and warranties made by the Issuer in Section 3.01, Section
3.02, Section 3.03, Section 3.04(b) (but solely with respect to the Significant
Subsidiary), Section 3.05, Section 3.06, Section 3.09(d), Section 3.12(a)(i)-
(iii) (other than in respect of any Order which is threatened) and the
representation that none of the Telecom Licenses have been terminated or revoked
and no notice of termination or revocation with respect to such Telecom Licenses
has been received, shall, in each case, be true and correct on and as of the
Closing Date as though each such representation or warranty were made on and as
of the Closing Date; provided that if there are any changes to the Schedules
referred to in the Sections of this Agreements referred to in the previous
sentence between the date of execution of this Agreement and the Closing, the
Issuer shall provide updated versions of such Schedules on the day of the
Closing.
(b) Performance. The Issuer shall have performed and complied with each of
-----------
its obligations under Article V and the Major Inside Shareholders shall have
performed and complied with their respective obligations under Article IV of the
Shareholders Agreement.
(c) Certificates. The Issuer shall have delivered to the Purchaser (i) a
------------
certificate, dated the Closing Date and executed by the President of the Issuer,
substantially in the form of Exhibit A and (ii) a certificate dated the Closing
Date and executed by the Head of Legal Department of the Issuer, substantially
in the form of Exhibit B, attached to which are, among other things, true and
correct copies of (A) resolutions of the GMS approved by a three-quarters (3/4)
majority of the shareholders present and eligible to vote, (1) approving the
issuance of the Purchaser's Shares to the Purchaser, (2) approving the
amendments to the Charter as provided in Section 5.04(a) hereof; and (3) by
cumulative voting, electing the Purchaser's three nominees to the Board,
effective as of the date of Closing and in effect until
36
the next annual GMS, and (B) resolutions of the Board approved by a three-
quarters (3/4) majority of the members, approving the issuance of the
Purchaser's Shares to the Purchaser.
(d) Orders and Laws. There shall not be in effect on the Closing Date any
---------------
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
any of the other Principal Agreements or which could reasonably be expected to
otherwise result in a material impairment of the Purchaser's rights under this
Agreement or any of the other Principal Agreements to which the Purchaser is a
party, and there shall not be pending on the Closing Date any Action or
Proceeding or any other action in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any
such Order or the enactment, promulgation or deemed applicability to the
Purchaser or the Issuer or the transactions contemplated by this Agreement or
any of the other Principal Agreements of any such Law.
(e) Regulatory Consents and Approvals. All consents, approvals and actions
---------------------------------
of, filings with and notices to any Governmental or Regulatory Authority
described in Schedule 8.01(e) which are required to have been obtained, made or
given (as applicable) by the Issuer pursuant to applicable Law (i) shall have
been duly obtained, made or given, (ii) shall not be subject to the satisfaction
of any condition that has not been satisfied or waived (unless any such
condition relates to reporting or other requirements which by the terms of such
consents, approvals, actions, filings or notices can only be effected on or
after the Closing) and (iii) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority shall be in full force and effect as necessary for the
performance of the obligations of the Issuer under this Agreement and the other
Principal Agreements to be performed on or before the Closing Date.
(f) Third Party Consents. All consents (or in lieu thereof waivers) and
--------------------
agreements described in Schedule 8.01(f)(i) shall have been obtained, (ii) shall
not be subject to the satisfaction of any condition that has not been satisfied
or waived (unless any such condition relates to reporting or other requirements
which by the terms of such consents can only be effected on or after the
Closing) and (iii) shall be in full force and effect.
(g) Current Charter and Shareholder Registry. The Issuer shall have
----------------------------------------
delivered to the Purchaser (i) notary certified copy of the Charter, including
all amendments thereto (including, without limitation, the amendments to the
Charter contemplated by Section 5.04 hereof) and (ii) an extract from the
register of the Issuer's shareholders, as maintained by the NRC, dated the day
of the Closing, showing the Purchaser as the owner of such portion of the
Purchaser's Shares as the Purchaser is purchasing on the Closing Date, free and
clear of all Liens.
(h) Other Principal Agreements. Each of the other Principal Agreements
--------------------------
shall have been executed and delivered by the parties thereto other than the
Purchaser.
(i) Certain Outstanding Indebtedness. The Issuer shall have obtained and
--------------------------------
delivered to the Purchaser (i) an original or certified copy of a waiver by
Ericsson Project Finance AB and AB LM Ericsson Finans, of Section 5.29 of the
Supplementary Agreement (non-dilution) with respect to the shares of Common
Stock pledged to secure the Issuer's obligations thereunder or (ii) documents
evidencing an increase in the number of shares of Common Stock pledged in
connection therewith, sufficient to satisfy the terms of the Supplementary
Agreement relating to the pledge of shares of Common Stock.
37
(j) Wire Instruction. The Issuer shall have delivered to the Purchaser the
----------------
Issuer's instruction for the wire transfer of the Initial Purchase Price by the
Escrow Agent to the Issuer's bank account identified on the CBR License.
(k) Receipt. The Issuer shall have delivered to the Purchaser a receipt,
-------
signed by the Issuer's Chief Accountant, confirming that upon receipt of the
wire transfer from the Escrow Agent, such portion of the Purchaser's Shares will
have been fully paid.
(l) Power of Attorney. Xx. Xxxxx shall have delivered to the Purchaser the
-----------------
Power of Attorney.
(m) Legal Opinion. The Purchaser shall have received an opinion of Akin,
-------------
Gump, Strauss, Xxxxx & Xxxx, L.L.P., special New York and Russian counsel to the
Issuer, in substantially the form of Exhibit C.
ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ISSUER
The obligations of the Issuer hereunder are subject to the fulfillment, at
or before the Closing, of each of the following conditions precedent (all or any
of which may be waived in whole or in part by the Issuer in writing in its sole
discretion):
9.01 Representations and Warranties
------------------------------
Each of the representations and warranties made by the Purchaser in this
Agreement shall be true and correct in all material respects on and as of the
Closing Date as though such representation or warranty were made on and as of
the Closing Date.
9.02 Performance
-----------
The Purchaser shall have performed and complied with, in all material
respects, each agreement, covenant and obligation required by this Agreement to
be so performed or complied with by the Purchaser at or before the Closing,
unless such agreement, covenant or obligation has been waived in writing by the
Issuer.
9.03 Certificates
------------
The Purchaser shall have delivered to the Issuer (a) a certificate, dated
the Closing Date and executed by the President of the Purchaser, substantially
in the form of Exhibit E hereto, and (b) a certificate, dated the Closing Date
and executed by a member of the Board of Directors of the Purchaser,
substantially in the form of Exhibit F hereto.
9.04 Orders and Laws
---------------
There shall not be in effect on the Closing Date any Order or Law
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the other Principal Agreements or which could reasonably be expected to
otherwise result in a material impairment of the Issuer's rights under this
Agreement or any of the other Principal Agreements to which the Issuer is a
party, and
38
there shall not be pending or threatened on the Closing Date any Action or
Proceeding or any other action in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any
such Order or the enactment, promulgation or deemed applicability to the
Purchaser or the Issuer or the transactions contemplated by this Agreement or
any of the other Principal Agreements of any such Law.
9.05 Regulatory Consents and Approvals
---------------------------------
All consents, approvals and actions of, filings with and notices to any
Governmental or Regulatory Authority reasonably necessary to permit the Issuer
and the Purchaser to perform their respective obligations under this Agreement
and the other Principal Agreements and to consummate the transactions
contemplated hereby and thereby (a) shall have been duly obtained, made or
given, (b) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (c) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the other Principal Agreements shall have
occurred.
9.06 Third Party Consents
--------------------
Certified copies (except as noted) of all confirmations of compliance and
absence of default, consents (or in lieu thereof waivers) and agreements listed
in Schedule 9.06, and all other confirmations of compliance and absence of
default, consents (or in lieu thereof waivers) and agreements to the performance
by the Purchaser of its obligations under this Agreement and the other Principal
Agreements or to the consummation of the transactions contemplated hereby and
thereby as are required under (or are necessary to avoid or prevent conflict
with or breach or default of) any material Contract to which the Purchaser is a
party or by which any of its Assets or Properties are bound (a) shall have been
obtained, (b) shall be in form and substance reasonably satisfactory to the
Issuer, (c) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (d) shall be in full force and effect.
9.07 Other Principal Agreements
--------------------------
Each of the other Principal Agreements shall have been executed and
delivered by the parties thereto.
9.08 Legal Opinions
--------------
The Issuer shall have received opinions of Coudert Brothers, special New
York and Russian counsel to the Purchaser, in substantially the form of Exhibit
G and Exhibit H, respectively.
ARTICLE X SURVIVAL OF REPRESENTATIONS,WARRANTIES, COVENANTS AND AGREEMENTS
The Issuer and the Purchaser have the right to rely fully upon the
representations, warranties, covenants and agreements of the other contained in
this Agreement. Unless otherwise noted herein, all representations, warranties,
covenants and agreements of the Issuer and the Purchaser contained in this
Agreement will survive the Closing and remain in effect until three (3) months
from the publication date of the audited, consolidated financial statements for
the Issuer's fiscal year ending December 31, 1999, provided that any such
39
representation, warranty, covenant or agreement that would otherwise terminate
will continue to survive if a written claim for indemnity shall have been made
under Section 11.01 on or prior to such termination date, until such claim has
been satisfied or otherwise resolved.
ARTICLE XI INDEMNIFICATION
11.01 Indemnification
---------------
(a) (i) Subject to Section 11.03, in the event the Closing occurs, the
Issuer shall indemnify the Purchaser in respect of, and hold the Purchaser
harmless from and against, any and all Losses suffered, incurred or sustained by
the Purchaser resulting from, arising out of or relating to any
misrepresentation, breach of warranty or non-fulfillment of or failure to
perform any covenant or agreement on the part of the Issuer contained in this
Agreement (to the extent not waived in writing by the Purchaser), provided that
the Purchaser shall have made a written claim for indemnification against the
Issuer pursuant to Section 13.01 within the survival period specified in Article
X.
(ii) With respect to those Subsidiaries of the Issuer which are not
described in Schedule 3.04(a), in the event the Closing occurs, the Issuer shall
indemnify the Purchaser in respect of, and hold the Purchaser harmless from and
against, any and all losses suffered, incurred or sustained by the Purchaser
resulting from, arising out of, or relating to any such Subsidiary or the
Issuer's non-disclosure of any such Subsidiary
(b) In the event that Closing occurs, the Purchaser shall indemnify the
Issuer in respect of, and hold the Issuer harmless from and against, any and all
Losses suffered, incurred or sustained by the Issuer resulting from, arising out
of or relating to any misrepresentation, breach of warranty or non-fulfillment
of or failure to perform any covenant or agreement on the part of the Purchaser
contained in this Agreement (to the extent not waived in writing by the Issuer),
provided that the Issuer shall have made a written claim for indemnification
against the Purchaser pursuant to Section 13.01 within the survival period
specified in Article X.
(c) In the event that any claim is asserted against any party hereto, or any
party hereto is made a party defendant in any Action or Proceeding, and such
claim, Action or Proceeding involves a matter which is the subject of a claim
for indemnification under Section 11.01(a) or (b), then such party (an
"Indemnified Party") shall (i) promptly give written notice pursuant to Section
13.01 to the Purchaser or the Issuer, as the case may be (the "Indemnifying
Party"), of such claim, Action or Proceeding, and (ii) not make any admission of
liability, agreement or compromise with any Person in relation to such claim
without prior written notice to the Indemnifying Party; and such Indemnifying
Party shall have the right to join in the defense of said claim, Action or
Proceeding at such Indemnifying Party's own cost and expense and, if the
Indemnifying Party agrees in writing to be bound by and to promptly pay the full
amount of any final judgment from which no further appeal may be taken to the
extent such judgement involves an indemnifiable claim under this Section 11.01
and subject to the limitations in Section 11.03, and if the Indemnified Party is
reasonably assured of the Indemnifying Party's ability to satisfy such
agreement, then, at the option of the Indemnifying Party, such Indemnifying
Party may take over the defense of such claim, Action or Proceeding, except
that, in such case, the Indemnified Party shall have the right to join in the
defense of said claim, Action or Proceeding at its own cost and expense.
40
11.02 Determination of Losses
-----------------------
The parties shall take into account the time value of money (using the
Applicable Rate as the discount rate) in determining Losses for purposes of this
Article XI.
11.03 Limitations on Liability of Issuer
----------------------------------
Notwithstanding any other provision of this Agreement to the contrary:
(a) the aggregate liability of the Issuer in respect of all claims shall be
limited to seventy-five percent (75%) of the Initial Purchase Price;
(b) the Issuer will have no liability in respect of any claim unless such
claim is made in good faith and unless written particulars of such claim (giving
such details of the specific matter in respect of which such claim is made as
are then in the possession of the Purchaser) shall have been given to the Issuer
within the period specified in Article X;
(c) the Issuer will have no liability in respect of any claim:
(i) to the extent that it arose or is increased as a result of an
increase in rates of Tax on or after the date immediately prior to the Closing
Date or the passing of any legislation (or making of any subordinate legislation
or any change in any published practice of any Tax authority) with retrospective
effect, or any provision or reserve in the Unaudited Consolidated Financial
Statements being insufficient solely by reason of any increase in rates of
taxation after the date immediately prior to the Closing Date;
(ii) to the extent that such claim arose due to anything voluntarily
done or omitted to be done after the Closing by the Purchaser or the Issuer or
any of their respective successors or assigns hereunder outside the ordinary
course of business of the Issuer;
(iii) to the extent that such claim relates to any Loss for which the
Purchaser or the Issuer actually recovers under the terms of any insurance
policy in effect at the Closing Date; or
(iv) to the extent such claim:
(A) relates to any matter provided for, or included as a liability
in, the Audited Consolidated Financial Statements; or
(B) relates to any liability for Tax arising out of the ordinary
course of business of the Issuer after the Closing Date; or
(C) arises solely as a result of any change in the accounting
policy, practice or accounting reference date of the Issuer after the Closing
other than a change required by Law or to comply with GAAP, as amended from time
to time;
(v) to the extent the amount of any such claim does not exceed
US$3,000,000; provided, however, that if the amount of any single claim for
indemnification made by the Purchaser hereunder exceeds US$10,000,000, then the
foregoing limitation contained in this Section 11.03(c)(v) shall not apply; and
41
(d) the Purchaser shall not be entitled to be paid more than once, in
respect of any claim arising out of the same subject matter;
(e) if any potential claim shall arise by reason of a liability of the
Issuer which is contingent only, then the Issuer shall not be under any
obligation to make any payment in respect of such claim until such time as the
contingent liability ceases to be contingent and becomes actual;
(f) the Issuer will have no liability in respect of any claim if, as of the
time such claim is made, the aggregate amount of all claims for indemnification
made by the Purchaser under this Article XI does not exceed US$15,000,000; and
(g) as used in this Article XI, "claim" shall mean any claim which would
(but for this Section 11.03) be capable of being made against the Issuer under
this Article XI.
11.04 Other Indemnification Provisions
--------------------------------
The foregoing indemnification provisions are in addition to, and not in
derogation of, any statutory, equitable, or common law remedy any party may have
for any misrepresentation made in connection with the transactions contemplated
by this Agreement, breach of warranty or non-fulfillment of or failure to
perform any covenant or agreement.
ARTICLE XII TERMINATION
12.01 Termination
-----------
This Agreement shall terminate and the transactions contemplated hereby
shall be abandoned:
(a) at any time prior to the Closing, by mutual written agreement of the
Issuer and the Purchaser;
(b) if the Closing shall not have occurred on or before such date, on June
1, 1999; or
(c) the date on which a meeting of the shareholders of the Issuer is held at
which a vote of such shareholders is conducted concerning the transactions
contemplated by this Agreement and the other Principal Agreements and such
shareholders fail to approve the transactions contemplated by this Agreement and
the other Principal Agreements.
12.02 Effect of Termination
---------------------
(a) If this Agreement is validly terminated pursuant to Section 12.01, this
Agreement will forthwith become null and void, and there will be no liability or
obligation on the part of the Issuer or the Purchaser (or any of their
respective officers, directors, employees, agents or other representatives or
Affiliates), except that the provisions with respect to issuance of Equity
Interests in Section 5.03(b), expenses in Section 13.03 and confidentiality in
Section 13.05 will continue to apply following any such termination.
(b) Notwithstanding any other provision in this Agreement to the contrary,
upon termination of this Agreement pursuant to Section 12.01(b), the Issuer will
remain liable to the
42
Purchaser for any breach of this Agreement by the Issuer existing at the time of
such termination, and the Purchaser will remain liable to the Issuer for any
breach of this Agreement by the Purchaser existing at the time of such
termination, and the Issuer or the Purchaser may seek such remedies, including
damages and fees of attorneys, against the other with respect to any such breach
as are provided in this Agreement or as are otherwise available at Law or in
equity.
ARTICLE XIII MISCELLANEOUS
13.01 Notices
-------
All notices, requests and other communications hereunder must be in writing
and will be deemed to have been duly given only if delivered personally or by
facsimile transmission or sent by courier to the parties at the following
addresses or facsimile numbers:
If to the Purchaser, to:
Telenor East Invest AS
Keysers Xxxx 00
0000 Xxxx
Xxxxxx
Facsimile No.: x00-00-000000
Attn: Xxxxxx Xxxxxxxxx
with a copy to:
Advokatene i Telenor
Xxxxxxxxxxxxxxxxx 0
0000 Xxxx
Xxxxxx
Facsimile No.: x00-00-000000
Attn: Xxxxx X. Risung
If to the Issuer, to:
Vimpel-Communications
10-12, Xxxxxx 0-Xxxxx
000000, Xxxxxx
Xxxxxxx Federation
Facsimile No.: x0000 000-0000
Attn: Xxxxxx Xxxxxxxxxx
General Counsel
with a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
Dukat Place II
7, Xxxxxx Xxxxxxx
00
000000, Xxxxxx
Russian Federation
Facsimile No. x0000-000-0000
Attn: Xxxxxxx X. Xxxxxxxx
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 13.01, be deemed given
upon delivery, (b) if delivered by facsimile transmission to the facsimile
number as provided in this Section 13.01, be deemed given upon receipt, and (c)
if delivered by courier in the manner described above to the address as provided
in this Section 13.01, be deemed given upon confirmed receipt (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section 13.01). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving written notice specifying such change to the other parties hereto.
13.02 Entire Agreement
----------------
This Agreement and the other Principal Agreements supersede all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof, and contain the sole and entire agreement between the
parties hereto and thereto with respect to the subject matter hereof and
thereof.
13.03 Expenses
--------
Except as otherwise expressly provided in this Agreement (including, without
limitation, as provided in Section 12.02), whether or not the transactions
contemplated hereby are consummated, each of the parties will pay its own costs
and expenses, including, without limitation, legal fees, incurred in connection
with the negotiation, execution and closing of this Agreement and the other
Principal Agreements and the transactions contemplated hereby and thereby;
provided that the Issuer shall pay, without limitation, all costs associated
with the registration of the Purchaser's Shares as required by all applicable
Laws and Russian Federation securities regulations, including the costs
associated with preparing a prospectus, if any, and the Purchaser shall pay the
fee charged by the NRC to register the Purchaser's ownership of the Purchaser's
Shares.
13.04 Public Announcements
--------------------
At all times at or before the Closing, neither the Issuer nor the Purchaser
will issue or make any reports, statements or releases to the public or,
generally, to the employees, customers, suppliers or other Persons to whom the
Issuer sells goods or provides services or with whom the Issuer otherwise has
significant business relationships with respect to this Agreement or the
transactions contemplated hereby without the consent of the other, which consent
shall not be unreasonably withheld. If any party is unable to obtain the
approval of its public report, statement or release from the other parties and
such report, statement or release is, in the opinion of legal counsel to such
party, required by Law or rule of any stock exchange in order to discharge such
party's disclosure obligations, then such party may make or issue the legally
required report, statement or release and promptly furnish the other party with
a copy
44
thereof. The Issuer and the Purchaser will also obtain each other party's prior
approval of any press release to be issued immediately following the Closing
announcing the consummation of the transactions contemplated by this Agreement.
13.05 Confidentiality
---------------
Each party hereto will hold, and will use its best efforts to cause its
Affiliates, and their respective Representatives to hold, in strict confidence
from any Person (other than any such Affiliate or Representative), unless (a)
compelled to disclose by judicial or administrative process (including, without
limitation, in connection with obtaining the necessary approvals of this
Agreement and the transactions contemplated hereby of Governmental or Regulatory
Authorities) or by other requirements of Law or (b) disclosed in an Action or
Proceeding brought by a party hereto in pursuit of its rights or in the exercise
of its remedies hereunder, all documents and information concerning the other
party hereto or any of its Affiliates furnished to it by such other party or
such other party's Representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such documents or
information can be shown to have been (i) previously known by the party
receiving such documents or information, (ii) in the public domain (either prior
to or after the furnishing of such documents or information hereunder) through
no fault of such receiving party or (iii) later acquired by the receiving party
from another source if the receiving party is not aware that such source is
under an obligation to another party hereto to keep such documents and
information confidential; provided that following the Closing the foregoing
restrictions will not apply to the Purchaser's use of documents and information
solely concerning the Issuer in accordance with the terms of this Agreement
furnished by the Issuer hereunder. In the event the transactions contemplated
hereby are not consummated, upon the request of the other party, each party
hereto will, and will cause its Affiliates and their respective Representatives
to, promptly redeliver or cause to be redelivered all copies of documents and
information furnished by the other parties in connection with this Agreement or
the transactions contemplated hereby and destroy or cause to be destroyed all
notes, memoranda, summaries, analyses, compilations and other writings related
thereto or based thereon prepared by the party furnished such documents and
information or its Representatives.
13.06 Waiver
------
Any term or condition of this Agreement may be waived at any time by the
party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any party of any term
or condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.
13.07 Amendment
---------
This Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each party hereto.
45
13.08 No Third Party Beneficiary
--------------------------
The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third party
beneficiary rights upon any other Person.
13.09 No Assignment; Binding Effect
-----------------------------
Neither this Agreement nor any right, interest or obligation hereunder may
be assigned by any party hereto without the prior written consent of the other
party hereto and any attempt to do so will be void, except (a) for assignments
and transfers by operation of Law and (b) that the Purchaser may assign any or
all of its rights, interests and obligations hereunder (including, without
limitation, its rights under Article XI) to a wholly owned Subsidiary, provided
that any such Subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein, but no such assignment referred to
in clause (b)) shall relieve the Purchaser of its obligations hereunder.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
13.10 Headings
---------
The headings used in this Agreement have been inserted for convenience of
reference only and do not define or limit the provisions hereof.
13.11 Arbitration; Consent to Jurisdiction; Service of Process; Waiver of
-------------------------------------------------------------------
Sovereign Immunity
------------------
(a) Any and all disputes and controversies arising under, relating to or in
connection with this Agreement shall be settled by arbitration by a panel of
three (3) arbitrators under the United Nations Commission on International Trade
Law (UNCITRAL) Arbitration Rules in force (the "UNICITRAL Rules") in accordance
with the following terms and conditions:
(i) In the event of any conflict between the UNCITRAL Rules and the
provisions of this Agreement, the provisions of this Agreement shall prevail.
(ii) Either party to this Agreement may refer a matter to arbitration
by written notice to the other party.
(iii) The place of the arbitration shall be Stockholm, Sweden.
(iv) The claimant party shall appoint one (1) arbitrator and the
respondent party shall appoint one (1) arbitrator, and the two (2) arbitrators
so appointed shall appoint the third arbitrator, in accordance with the UNCITRAL
Rules. In the event of an inability to agree on a third arbitrator, the
appointing authority shall be the Arbitration Institute of the Sweden Chamber of
Commerce, Stockholm.
(v) The English language shall be used as the written and spoken
language for the arbitration and all matters connected with all references to
arbitration.
(vi) The decision of the arbitrators shall be made by majority vote
and shall be in writing.
46
(vii) The decision of the arbitrators shall be final and binding on
the parties to this Agreement, save in the event of fraud, manifest mistake or
failure by any of the arbitrators to disclose any conflict of interest.
(viii) The decision of the arbitrators may be enforced by any court of
competent jurisdiction and may be executed against the person and assets of the
losing party in any jurisdiction.
(b) In the event any dispute is submitted to arbitration pursuant to Section
13.11(a), the panel of arbitrators may, if it deems such award appropriate,
award a party costs and expenses incurred by such party in enforcing its rights.
Except as so awarded, each party shall bear its own costs and expenses of
enforcing its rights to arbitrate under this Section 13.11.
(c) Except for arbitration proceedings pursuant to Section 13.11(a), no
action (other than the enforcement of an arbitration decision or an action to
compel arbitration), lawsuit or other proceeding shall be brought by or between
the parties to this Agreement and/or any of their Affiliates in connection with
any matter arising out of or in connection with this Agreement.
(d) Each party hereto irrevocably appoints CT Corporation System, located on
the date hereof at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, XXX, as its true and
lawful agent and attorney to accept and acknowledge service of any and all
process against it in any action, suit or proceeding permitted by Section
13.11(c) hereof, with the same effect as if such party were a resident of the
State of New York and had been lawfully served with such process in such
jurisdiction, and waives all claims of error by reason of such service, provided
that the party effecting such service shall also deliver a copy thereof to the
other party at its address specified in Section 13.01. Each party to this
Agreement will enter into such agreements with such agent as may be necessary to
constitute and continue the appointment of such agent hereunder. In the event
that any such agent and attorney resigns or otherwise becomes incapable of
acting, the affected party will appoint a successor agent and attorney in New
York reasonably satisfactory to each other party, with like powers. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City, in any such action, suit or proceeding,
and agrees that any such action, suit or proceeding shall be brought only in
such court, provided, however, that such consent to jurisdiction is solely for
the purpose referred to in this Section 13.11(c) and shall not be deemed to be a
general submission to the jurisdiction of said courts of or in the State of New
York other than for such purpose. Each party hereby irrevocably waives, to the
fullest extent permitted by Law, any objection that it may now or hereafter have
to the laying of the venue of any such action, suit or proceeding brought in
such a court and any claim that any such action, suit or proceeding brought in
such a court has been brought in an inconvenient forum. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
Law or to commence legal proceedings or otherwise proceed against the other in
any other jurisdiction in a manner not inconsistent with Section 13.11(c).
(e) Each of the Purchaser and the Issuer hereby represents and acknowledges
that it is acting solely in its commercial capacity in executing and delivering
this Agreement and each of the other Principal Agreements to which it is a party
and in performing its obligations hereunder and thereunder, and each of the
Purchaser and the Issuer hereby irrevocably waives with respect to all disputes,
claims, controversies and all other matters of any nature
47
whatsoever that may arise under or in connection with this Agreement or any of
the other Principal Agreements and any other document or instrument contemplated
hereby or thereby, all immunity it may otherwise have as a sovereign, quasi-
sovereign or state-owned entity (or similar entity) from any and all proceedings
(whether legal, equitable, arbitral, administrative or otherwise), attachment of
assets, and enforceability of judicial or arbitral awards.
13.12 Invalid Provisions
------------------
If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future Law, and if the rights or obligations
of any party hereto under this Agreement will not be materially and adversely
affected thereby, (a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (c) the remaining provisions of
this Agreement will remain in full force and effect and will not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom and
(d) in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
13.13 Governing Law
--------------
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, United States of America, applicable to contracts
executed and performed in such jurisdiction, without giving effect to the
conflicts of laws principles thereof which would result in the application of a
different law.
13.14 Counterparts
-------------
This Agreement may be executed in any number of counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
48
IN WITNESS WHEREOF, this Primary Agreement has been duly executed and
delivered by each party hereto as of the day and year first above written.
The Purchaser
-------------
TELENOR EAST INVEST AS
By /s/ Xxxxxx Xxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Attorney-in-Fact
The Issuer
----------
OPEN JOINT-STOCK COMPANY
"VIMPEL-COMMUNICATIONS"
By /s/ Xxxxxx Xxxxxxxxxx Xxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxxx Xxxxx
Title: President and Chief Executive Officer
By /s/ Xxxxxxxx Mikhailovich Bychenkov
---------------------------------------
Name: Xxxxxxxx Mikhailovich Bychenkov
Title: Chief Accountant
