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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-20444
PLD TELEKOM INC.
(FORMERLY PETERSBURG LONG DISTANCE INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 13-3950002
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
680 FIFTH AVENUE, 24TH FLOOR 10019
NEW YORK, NY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(212) 262-6060
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, PAR VALUE $.01 PER SHARE NASDAQ NATIONAL MARKET
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this annual report on Form 10-K or any amendment to
this annual report on Form 10-K. [ ]
As of March 27, 1998, the aggregate market value of the Common Stock held
by non-affiliates of the registrant was $178,045,652. Such aggregate market
value was computed by reference to the closing sale price of the Common Stock as
reported on the National Market segment of The Nasdaq Stock Market on such date.
For purposes of making this calculation only, the registrant has defined
affiliates as including all executive officers, directors and beneficial owners
of more than ten percent of the Common Stock of the Company.
As of March 27, 1998, there were 33,324,290 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
As stated in Part III of this annual report on Form 10-K, portions of the
definitive proxy statement to be filed within 120 days after the end of the
fiscal year covered by this annual report on Form 10-K are incorporated herein
by reference.
Unless the context indicates otherwise, the terms "PLD" and "Company" refer
to PLD Telekom Inc.
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PLD TELEKOM INC.
FORM 10-K ANNUAL REPORT FOR FISCAL YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 63
Item 3. Legal proceedings........................................... 64
Item 4. Submission of matters to a vote of security holders......... 64
PART II
Item 5. Market for registrant's common equity and related
stockholder matters......................................... 64
Item 6. Selected financial data..................................... 66
Item 7. Management's discussion and analysis of financial condition
and results of operations................................... 67
Item 8. Financial statements and supplementary data................. 84
Item 9. Changes in and disagreements with accountants on accounting
and financial disclosures................................... 84
PART III
Item 10. Directors and executive officers of the registrant.......... 85
Item 11. Executive compensation...................................... 85
Item 12. Security ownership of certain beneficial owners and
management.................................................. 85
Item 13. Certain relationships and related transactions.............. 85
PART IV
Item 14. Exhibits, financial statement schedules and reports on forms
8-K......................................................... 86
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PART I
ITEM 1. BUSINESS
OVERVIEW
PLD Telekom Inc. ("PLD" or the "Company"), through its operating
subsidiaries, is a major provider of local, long distance and international
telecommunications services in the Russian Federation and Kazakhstan. The
Company's four principal operating businesses are: (i) PeterStar Company Limited
("PeterStar"), which provides integrated local, long distance and international
telecommunications services in St. Petersburg through a fully digital fiber
optic network; (ii) Technocom Limited ("Technocom"), which, through Teleport-TP,
provides dedicated international telecommunications services to Russian and
foreign businesses in Moscow and operates a satellite-based pan-Russian long
distance network; (iii) Baltic Communications Limited ("BCL"), which provides
dedicated international telecommunications services in St. Petersburg; and (iv)
BECET International ("BECET"), which currently provides the only national
cellular service in Kazakhstan. Since 1994, Cable and Wireless plc ("Cable &
Wireless"), a leading global communications company whose shares are listed on
the London and New York Stock Exchanges, has invested approximately $85 million
for an approximately 30% stake in the Company's Common Stock. Cable & Wireless
has recently announced that it is involved in active discussions with a view
towards disposing of its stake in the Company, but that no definitive agreement
has been reached. See "-- Relationship with Cable and Wireless plc."
The Company's objective is to be a leading participant in the targeted
development of telecommunications infrastructure in the emerging markets of the
Russian Federation and other countries of the former Soviet Union. The Company
expects to achieve this goal through: (i) expanding and further integrating its
existing business and network infrastructure into the public telecommunications
networks; (ii) providing high quality national long distance services in the
Russian Federation to complement the international long distance services it
currently provides to its business customers; (iii) providing additional
value-added services such as wireless communications, fax, data and Internet
service as a means of developing new traffic streams; and (iv) further
developing relationships with local and national strategic partners in the
Russian Federation and other countries of the former Soviet Union.
The Company has several potential sources of cash flows, including fees
from management services, dividends, repayment of intercompany advances, lease
payments and payments under equipment sales contracts. The Company currently
generates fees from management services provided to certain of its operating
subsidiaries. Although its ability to generate dividend income in the near
future may be limited due to the cash flow requirements of its operating
businesses, the Company expects to receive dividends in the future. One of its
operating subsidiaries, BECET, paid two dividends in 1997. The Company received
payments in respect of intercompany advances during the course of 1997 and
expects this to continue in 1998. In relation to leases and equipment sales
contracts entered into with its operating subsidiaries, the Company anticipates
starting to receive payments during 1998.
The fostering of existing, and the creation of new, partnerships with local
and regional partners is crucial to the long-term success of the Company in this
environment. In its operating businesses, the Company's partners include:
Petersburg Telephone System ("PTS"), the local telephone system operator in St.
Petersburg, and St. Petersburg Intercity & International Telephone ("SPMMTS"),
the gateway for national and international long distance calls to and from St.
Petersburg, which together hold an indirect 14% interest in PeterStar;
Kazakhtelekom, the state-owned national telecommunications operator in
Kazakhstan and the holder of a 50% interest in BECET; and AO Rostelecom
("Rostelecom"), the primary long distance and international carrier in the
Russian Federation and a 44% shareholder in Teleport-TP. The Company will seek
to continue developing ventures with local partners who can provide: (i)
assistance in obtaining telecommunications operating licenses; (ii) access to
network facilities; and (iii) political support.
CORPORATE STRUCTURE
The following chart shows the corporate structure of the Company and its
material interests (but excludes intermediate holding companies and leasing
companies such as NWE Capital (Cyprus) Ltd.
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("NWE Cyprus") and PLD Asset Leasing Limited ("PLD Leasing")), together with the
percentage of equity ownership of the Company and Technocom in each operating
subsidiary and other significant investments.
[CORPORATE STRUCTURE CHART]
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(1) The Company holds its interests in a number of its subsidiaries through NWE
Cyprus to take advantage of the double taxation treaty between Cyprus and
the Russian Federation.
(2) The other shareholders of PeterStar are: PLD Holdings Ltd., a company
registered in Bermuda (11%), which is indirectly wholly owned by Cable &
Wireless; and Telecominvest (29%), which is owned 51% by an affiliate of
Commerzbank AG, 25% by PTS and 24% by SPMMTS, and which was formed by PTS
and SPMMTS to act as a holding company for their respective interests in a
number of telecommunications ventures in Northwest Russia.
(3) In November 1997, the Company acquired an additional 29.65% of the ordinary
shares in Technocom, bringing its total interest to the current 80.40% As a
result, the remaining interests in Technocom are beneficially owned by: (i)
Plicom Limited (14.57%), an Irish company beneficially owned by the family
interests of Mr. Mark Klabin ("Plicom"); and (ii) Elite International
Limited (5.03%), an Irish company beneficially owned by a trust advised by
Dr. Boris Antoniuk ("Elite"). The Company
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understands that Dr. Antoniuk has the power to exercise the voting rights of
the shares in Technocom owned by Elite. The remainder of the interests held
by Plicom and Elite are subject to put and call arrangements with the
Company. See "-- Acquisition of Additional Interests in Technocom;" "-- Risk
Factors -- Risks Involving the Company -- Effect of Technocom Minority
Shareholders' Put Options."
Technocom also holds an effective 100% interest in Space Communication
Services (SCS) Limited, a company organized under the laws of Guernsey,
Channel Islands ("SCS"), which acts as Teleport-TP's marketing arm for the
selling and administration of TV broadcasting services, and a 50% interest
in Rosh Telecom Limited, a telecommunications equipment distributor.
(4) The Company holds its 50% interest in BECET through its wholly owned
subsidiary, Wireless Technology Corporations Limited ("WTC"), a corporation
organized under the laws of the British Virgin Islands, which in turn is
wholly owned by NWE Cyprus. The other 50% interest in BECET is currently
held by Kazakhtelekom, a Kazakh joint stock company, formerly wholly owned
by the government of Kazakhstan, which operates the public telephone network
in that country. In May 1997, the Kazakh government announced the sale of a
40% stake in Kazakhtelekom to Daewoo. However, in March 1998, it was
reported that Daewoo had sold a portion of its stake (reported to be
approximately 10%) to an unnamed third party. The report did not indicate
whether Daewoo proposed to sell or retain the remainder of its stake in
Kazakhtelekom.
(5) In 1996, Technocom's interest in Teleport-TP was increased to its current
49.33% (56% voting interest) through: (i) its acquisition of a 55.51%
interest in JV Technopark Limited ("Technopark"), which owns a 7.5% interest
in Teleport-TP; and (ii) the acquisition by Roscomm Limited, a Guernsey
company ("Roscomm"), which is 66.67% beneficially owned by Technocom and
which already owned a 5% interest in Teleport-TP, of an additional 5%
interest previously held in trust for the VVC, the All-Russian Exhibition
Center, a business park in Moscow. Technocom holds 38.5% of its beneficial
interest directly, 6.67% through its 66.67% beneficial interest in Roscomm
(which owns a 10% interest in Teleport-TP), and 4.16% through its 55.51%
interest in Technopark (which owns a 7.5% interest in Teleport-TP). The
remaining 44% voting interest in Teleport-TP is held by Rostelecom.
Teleport-TP holds a 25% interest in Gorizont-RT, a cellular
telecommunications operator in the Republic of Sakha. The remaining
interests in Gorizont-RT are held by Sakhatelekom (51%) and local business
partners (24%).
(6) Technocom holds a 49% interest in MTR-Sviaz, a wireline telecommunications
operator in Moscow. The remaining 51% interest is held by Mosenergo, the
Moscow city power utility.
RELATIONSHIP WITH CABLE AND WIRELESS PLC
The Company has had a working relationship with Cable & Wireless, which
currently holds a 30% stake in the Company's Common Stock, since the time Cable
& Wireless first acquired an interest in the Company in 1994. The relationship
has allowed the Company to draw upon Cable & Wireless' commercial and technical
expertise and has provided the Company with access to Cable & Wireless': (i)
expatriate management; (ii) training facilities; and (iii) technical and project
management staff to assist in evaluating and implementing new investment
opportunities. Cable & Wireless currently holds two of the 10 seats on the
Company's Board of Directors and will continue to do so as long as it holds at
least a 25% voting interest in the Company. Cable & Wireless has recently
announced that it is involved in active discussions with a view towards
disposing of its stake in the Company, but that no definitive agreement has been
reached. See "-- Risk Factors -- Risks Involving the Company -- Historical
Dependence on Cable and Wireless plc."
THE PRIVATE PLACEMENT OF NOTES AND WARRANTS
In June 1996, the Company issued the following securities to a limited
number of U.S. institutional investors (the "June 1996 Placement"): (i)
$123,000,000 aggregate principal amount at maturity of 14% Senior Discount Notes
due 2004 (the "Senior Notes"); (ii) 123,000 warrants (the "Placement Warrants")
to purchase an aggregate of 4,182,000 shares of Common Stock (the "Placement
Warrant Shares"); and (iii) $26,500,000 aggregate principal amount of 9%
Convertible Subordinated Notes due 2006 (the
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"Convertible Notes" and together with the Senior Notes, the "Notes"). The Senior
Notes and the Placement Warrants were initially issued as units (the "Units")
and the Placement Warrants became separable from the Senior Notes on December
10, 1996.
Pursuant to a consent solicitation dated March 4, 1998, the Company
proposed, and the required number of holders of the Senior and Convertible Notes
approved, certain amendments to the Senior Note and Convertible Note Indentures.
See "-- The Consent Solicitation."
Unless the context clearly requires otherwise, references to the "Notes",
the "Senior Notes" and the "Convertible Notes" shall refer to such securities as
so amended, and references to the "Senior Note Indenture", the "Convertible Note
Indenture" and the "Indentures" shall refer to such indentures, as so amended.
CHANGE OF COMPANY NAME AND CONTINUANCE
Effective August 1, 1996, the Company changed its name from Petersburg Long
Distance Inc. to PLD Telekom Inc. Prior to February 28, 1997, the Company was a
corporation organized under the laws of the Province of Ontario. On February 28,
1997, after having obtained the necessary authorizations from its shareholders
and Canadian authorities, the Company simultaneously discontinued its existence
in Ontario and continued as a corporation organized under the laws of the State
of Delaware (the "Continuance"). The Continuance effected a change in the legal
domicile of the Company as of February 28, 1997, but did not change the business
or operations of the Company or the directors or officers of the Company.
Following the Continuance, the Company has established its executive offices in
New York, New York.
ACQUISITION OF ADDITIONAL INTERESTS IN TECHNOCOM
On November 26, 1997 the Company acquired a further 59 ordinary shares of
Technocom, thereby increasing its percentage interest in Technocom from 50.75%
to 80.4%. The Company acquired 30 of these shares from Plicom, one of the two
other shareholders of Technocom, for $18.5 million in cash. The remaining 29
shares were acquired from the other shareholder of Technocom, Elite, for $6.25
million in cash and 1,316,240 shares of Common Stock. Sale of these shares is
prohibited prior to January 1, 2000.
In addition, the Company restructured certain "put and call" arrangements
with the other two shareholders of Technocom. Under these arrangements as
originally structured, the remaining ordinary shares of Technocom held by these
shareholders (29 shares, or approximately 14.6% of the total ordinary shares
outstanding, in the case of Plicom, and 10 shares, or approximately 5% of the
total ordinary shares outstanding, in the case of Elite) were to have been
independently valued in 1999 and the Company had the right to call, and Plicom
and Elite had the right to put, their respective interests at the per share
value established by the valuation.
These arrangements were restructured as follows. In the case of the
interest held by Plicom, while the date on which the put or call could be
exercised did not change, the valuation procedure was eliminated and the "put
and call" price for its interest was set at a fixed $17,500,000. In the case of
Elite, two of its remaining ten ordinary shares were made subject to a new put
and call arrangement which would come into effect in 1998, with the "put and
call" price to be $1 million or, at Elite's option, that number of shares of the
Common Stock which resulted from dividing $1 million by the lower of $5.85 and
the average closing price of such shares over the preceding ten trading days.
The remaining eight ordinary shares continued to be subject to the existing put
and call arrangements in 1999, except that the valuation would be made by the
Company and the amount paid pursuant to the exercise of either the put or the
call could not exceed $9,620,689 or be less than $6,689,655.
The Company financed these acquisitions by using $9 million from the
proceeds of the Senior Notes (and, pursuant to the terms of the Indenture
governing the Senior Notes, pledging 17 of the Technocom shares acquired), and
also by issuing $12.32 million in 12% Series A secured revolving credit notes
(the "Series A Notes") and $3.1 million in 12% Series B revolving credit notes
(the "Series B Notes" and, together with the Series A Notes, the "Revolving
Credit Notes"), to The Travelers Insurance Company and
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The Travelers Indemnity Company (collectively, the "Travelers Parties") pursuant
to a Revolving Credit Note and Warrant Agreement dated November 26, 1997 between
the Company and the Travelers Parties (the "Revolving Credit Agreement").
Required amortization of the Revolving Credit Notes at the rate of $1,000,000
per month commences on July 31, 1998. The Series B Notes come due on September
30, 1998, and the Series A Notes come due on December 31, 1998. Both the Series
A Notes and the Series B Notes are secured by the Company's inventory and
accounts receivable. In addition, the Series B Notes are secured by 28 of the
Technocom shares acquired. In addition to issuing the Series A and Series B
Notes, the Company also issued to the Travelers Parties a total of 423,000
warrants to purchase Common Stock at $8.625 at any time up to December 31, 2008
(the "Travelers Warrants"). A value of $423,000, which has been ascribed to the
Travelers Warrants, has been included in the Company's shareholders' equity.
In addition, the Company will be obligated to issue additional warrants to
the holders of the Series A and B Notes should the Company not effect certain
"targeted reductions in commitment" as follows:
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COMMITMENT REDUCTION DATE TARGETED REDUCTION AMOUNT
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July 31, 1998 $ 500,000
August 31, 1998 $ 500,000
September 30, 1998 $1,000,000
October 31, 1998 $1,500,000
November 30, 1998 $1,500,000
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The holders of the Series A Notes will receive 30,000 additional warrants
to purchase shares of the Company on each date on which such reduction was not
made. In the event that the Company has not made the "targeted reductions"
scheduled for July 31, 1998 and August 31, 1998, the holders of the Series B
Notes will receive 16,000 additional warrants to purchase shares of such common
stock. The exercise price of the above warrants is $8.625 per share, except
that, if the Series B Notes are not repaid in full by September 30, 1998, the
exercise price of all warrants issued to the holders of the Series B Notes
becomes $0.01 per share, and, if the Series A Notes are not repaid in full by
December 31, 1998, the exercise price of all warrants issued to the holders of
the Series A Notes also becomes $0.01. The total number of warrants which could
be issued under these arrangements is 182,000. All of the warrants expire on
December 31, 2008.
In addition, if the Series B Notes are not repaid in full on September 30,
1998, then, commencing September 30, 1998 and on the last day of each succeeding
month until the Series B Notes have been repaid in full, the holders of the
Series B Notes shall receive 32,000 additional warrants to purchase shares of
the Company's stock at a price of $0.01 per share. If the Series A Notes are not
repaid in full on December 31, 1998, then, commencing December 31, 1998 and on
the last day of each succeeding month until the Series A Notes have been repaid
in full, the holders of the Series A Notes shall receive 32,000 additional
warrants to purchase shares of the Company's stock at a price of $0.01 per
share. All such warrants, referred to as "Default Warrants" will have an
expiration date ten years after their respective dates of issue.
THE CONSENT SOLICITATION
In 1997, the Company made the determination to solicit the holders of the
Senior Notes and the Convertible Notes with a view to making certain amendments
to the Indentures governing such Notes, intended to give the Company more
flexibility in conducting its business and also to clarify certain provisions of
those Indentures, in both cases based upon the Company's experience in operating
under the terms of the Indentures since they were first executed in June 1996.
In summary, the amendments were intended to achieve the following:
- Broaden the range of transactions by which the Company can use escrowed
funds in order to make telecommunications assets available to its
operating companies
- Permit the Company or its special purpose subsidiaries to use escrowed
funds to secure letters of credit issued to suppliers of
telecommunications assets
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- Clarify that the purchase price of telecommunications assets which is to
be funded out of escrowed funds may include certain "soft costs" related
to the acquisition of such assets
- Eliminate certain provisions in the Indentures having relevance only when
the Company was a Canadian corporation
- Permit the use of U.S. as well as Cyprus special purpose subsidiaries
- Authorize the conversion of a lease entered into by PLD Leasing, a
special purpose subsidiary of the Company, into an installment sale
accompanied by a pledge of the equipment being sold, and the transfer of
PLD Leasing's interest to a new special purpose subsidiary incorporated
in the U.S.
- Revise certain covenants relating to incurrence and guaranteeing of
indebtedness, to:
- provide a more specific definition of the term "revolving credit
facilities"
- specify that the maximum amount of general indebtedness (i.e., other
than certain specific forms of "permitted indebtedness", including
so-called "international vendor indebtedness") that may be incurred at
the subsidiary level, whether in the form of revolving credit
facilities or otherwise, is $15 million
- clarify that the Company may guarantee on an unsecured basis any
general indebtedness and any so-called "international vendor
indebtedness" which its subsidiaries are permitted to incur, without
such guarantee being counted as "indebtedness" of the Company for
purposes of a $25 million limitation on Company level indebtedness
- specify that subsidiaries of the Company may no longer guarantee
indebtedness of the Company, and that any guarantees of any other
indebtedness will count as "indebtedness" for purposes of the $15
million limitation on subsidiary level indebtedness
- specify that, since these changes would mean that the Series A and
Series B Notes issued to the Travelers Parties in November 1997 (see
"-- Acquisition of Additional Interests in Technocom") would be in
violation of the terms of the Indentures, the transaction pursuant to
which such Notes were issued and certain guarantees given in
connection therewith are specifically exempted from the applicable
terms of the Indentures, although the amount of the Notes issued will
be counted against the $25 million limit on Company level
indebtedness.
- Permit the advance by the Company to its subsidiary Technocom of $8
million of the proceeds of the Senior Notes being held in escrow to fund
the purchase of telecommunications assets
Under each of the Indentures, the consents of holders of not less than a
majority in principal amount at stated maturity of each of the Senior Notes and
the Convertible Notes are required to authorize their amendment.
Prior to soliciting the consent of the holders of the Senior and
Convertible Notes to the proposed amendments, the Company had various
discussions with Merrill Lynch as a result of which the Company entered into an
agreement with Merrill Lynch Global Allocation Fund, Inc. and Merrill Lynch
Equity/Convertible Series -- Global Allocation Portfolio (collectively, "ML
Global"), which together were the holders of approximately 62% in principal
amount at stated maturity of the Senior Notes and approximately 72.5% in
principal amount at stated maturity of the Convertible Notes, under which ML
Global agreed to direct the nominees through which they held their Senior and
Convertible Notes to consent to the amendment of the Indentures.
On March 4, 1998, the Company mailed to the holders of record on March 3,
1998 of the Senior Notes and the Convertible Notes a consent solicitation
statement (the "Consent Solicitation"). Pursuant to the Consent Solicitation,
the Company offered to each holder of the Senior Notes who consented to the
amendment of the Senior Note Indenture a five-year warrant to purchase 1.8
shares of Common Stock at a price of $6.90 per share for each $1,000 in unpaid
principal amount at stated maturity of the Senior Notes held by such holder, and
to each holder of the Convertible Notes who consented to the amendment of the
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Convertible Note Indenture a five-year warrant to purchase 2 shares of Common
Stock at a price of $6.90 per share for each $1,000 in unpaid principal amount
of the Convertible Notes held by such holder.
As of close of business on March 18, 1998, when the solicitation period
ended, parties holding 100% in principal amount at stated maturity of the Senior
Notes and 85.66% in principal amount at stated maturity of the Convertible Notes
had consented to the amendments. Pursuant to such consents, The Bank of New
York, as trustee under the Indentures, the Company and certain other parties
executed a supplemental indenture, dated March 20, 1998 (the "Supplemental
Indenture"), bringing the amendments to the Indentures and certain related
documents into effect. In addition, the Company issued a total of 123,000
five-year warrants to purchase 1.8 shares of Common Stock at $6.90 per share to
the holders of the Senior Notes, and a total of 22,700 five-year warrants to
purchase 2 shares of Common Stock at a price of $6.90 per share to the holders
of the Convertible Notes. If all of these warrants are exercised, the Company
will issue a total of 266,800 shares of Common Stock.
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The Company's executive offices are located at 680 Fifth Avenue, 24th
Floor, New York, New York, 10019 (telephone number (212) 262-6060).
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "PLDI" and the Toronto Stock Exchange under the symbol "PLD". It is
also quoted on SEAQ International and traded on the Berlin and Frankfurt Stock
Exchanges. Prior to March 6, 1997, the Company's trading symbol on the Nasdaq
National Market was "PLDIF."
TELECOMMUNICATIONS IN THE FORMER SOVIET UNION
In the Soviet era, telecommunications in the Russian Federation and other
republics of the former Soviet Union were designed principally to serve the
defense and security needs of the state. The telephone network itself was highly
centralized, reflecting the centralized nature of the Soviet economy. Telephonic
links were directed towards the center of the network while neglecting
inter-regional links. As a result, the ability to direct calls between regions
without going through the center remains limited, which in turn has been a major
constraint on economic growth in regional markets. Being committed to a "hub and
spoke" network, the former Soviet Union never developed a trunk "backbone"
capable of providing network expansion on a nationwide basis.
Consistent with a political philosophy which limited access to the world
outside the former Soviet Union, all international calls originating in the
former Soviet Union until 1992 were routed through a single international
exchange in Moscow which had a capacity of only 3,200 circuits. Due to the
inadequacies of the public network, as well as to ensure secrecy, many
individual ministries and security organizations, including the Communist Party
itself, established their own private nationwide networks. These private
networks absorbed a substantial amount of the relatively limited resources
available for investment in telecommunications. At the same time, these networks
currently present an opportunity for the development of a national network apart
from the existing public network.
With the break-up of the Soviet Union and the liberalization of the
economies of its former republics, the demand for telecommunications services
has increased significantly. However, the governments of the countries of the
former Soviet Union do not currently have the significant capital necessary for
the development of the telecommunications infrastructure. As a result, they have
actively encouraged market liberalization, privatization and foreign investment
in the telecommunications sector. This has resulted in significant development
in the areas of fixed wire overlay systems, private networks and cellular and
data services. As modern telecommunications capability is critical to the
successful transition to a market economy, it is expected that the next stage of
development will focus on basic telecommunications infrastructure.
TELECOMMUNICATIONS IN THE RUSSIAN FEDERATION
The Russian telecommunications sector has experienced substantial
difficulty in meeting the rapidly growing demand for telecommunications services
in the Russian Federation. At the local level, there has been
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a significant growth in joint ventures providing discrete telecommunications
services, such as international access and cellular service. While the bulk of
this activity has been in Moscow and St. Petersburg, it has occurred in other
regions as well. This trend has been encouraged by the Russian government which
has issued over 600 licenses through the Ministry of Communications of the
Russian Federation (the "Former MOC") (which as of March 17, 1997 has been
replaced by the Russian Federal Committee on Telecommunications and Informatics
(the "RFCTI")) to these new service providers. Most joint ventures involve a
Russian and a foreign partner. Many of these joint ventures have remained
moribund; however, where they have commenced operations, there has been an
immediate improvement in telecommunications services in the targeted areas.
Since much of the marketing activity has been aimed at the business community,
the benefits of these improvements have not been (and for the foreseeable future
are not likely to be) widely felt by residential customers, particularly those
outside major metropolitan areas.
When the Former MOC was reorganized in 1991, the Russian government decided
to convert each regional telephone center into a separate, privatized company
with the government maintaining the controlling interest in the company. There
are approximately 85 of these regional telephone companies. The government's
interests in these companies are now held through Sviazinvest.
The national and international long distance market in the Russian
Federation is dominated by Rostelecom, a formerly state-owned enterprise which
has been privatized, but in which the Russian government continues to hold a 38%
equity and 51% voting interest through Sviazinvest. Until 1991, Rostelecom was
the monopoly provider of national and international long distance service. Since
then, the Former MOC has issued licenses to approximately twenty other providers
of international services. Rostelecom itself has entered into a number of joint
ventures to develop its network and services, including through its
participation in Teleport-TP. Rostelecom was originally charged by the Former
MOC with the task of developing a long distance "backbone" as the basis for a
new nationwide network, known as the "Russian Digital Overlay Network" or "50 X
50" (based on the fact that the "backbone" was to consist of fifty digital trunk
switches and 50,000 kilometers of fiber optic cables and microwave relays).
However, work on the "50 X 50" project ceased in June 1995, when the government
of the Russian Federation announced that Sviazinvest would become a second long
distance and international carrier in the Russian Federation, with the intention
that it would become a nationwide competitor to Rostelecom.
Sviazinvest, which was originally 100% owned by the Russian State Property
Committee, is a holding company for the Russian government's interests in the 85
local and regional telephone companies across the Russian Federation. In
general, Sviazinvest has a portfolio that comprises holdings of 35% of the
equity interest and 51% of the voting interests, with a number of notable
exceptions, in these telephone companies. Sviazinvest is represented on the
board of directors of each of these companies, but does not participate in the
day-to-day management of the operations.
In 1997, it was reported that, notwithstanding its previously announced
plans to have Sviazinvest compete with Rostelecom, the Russian government had
consolidated its telecommunications holdings in Sviazinvest and Rostelecom by
transferring its shareholding in Rostelecom (38% of the common stock, and 51% of
the voting stock) to Sviazinvest. The balance of the shares in Rostelecom remain
in the hands of private investors. In April 1997, the government announced that
it was seeking to sell 49% of Sviazinvest in two auctions, one as to a 25% stake
open to Russian and foreign investors and the other as to a 24% stake open only
to Russian investors. In July 1997, the government announced that the 25% stake
had been sold to a consortium which included Oneximbank and Renaissance Capital,
for a purchase price of $1.875 billion. Following this auction, the Russian
government announced its intention to increase the size of the other stake being
sold to 25% minus one share. The schedule for the auction of the second stake
has not been announced, but it is currently expected to occur by the end of the
third quarter of 1998. While it is not yet clear how the proceeds of this sale
will be employed, it is understood that the government wishes to have a
substantial part, if not all, of the proceeds allocated to its current budget
deficit. At the same time, Sviazinvest has announced plans to raise $400 million
through a Eurobond offering later in 1998. In light of all of the foregoing, it
is unclear what impact the consolidation of the government's telecommunications
holdings and the auctions of significant stakes in Sviazinvest will have on the
Russian telecommunications market in general and the Company in particular.
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<PAGE> 11
The provision of telecommunication services is currently regulated by the
Law on Telecommunications which came into effect on February 22, 1995 (the
"Telecommunications Law"). While the Former MOC had significant regulatory
powers prior to the passage of the Telecommunications Law, principally through
the issuance of new licenses, telecommunications had traditionally been viewed
as the province of the military and security services. The Telecommunications
Law placed control of the Russian telecommunications network in the hands of a
civilian regulatory authority. Under the Telecommunications Law, the Former MOC
was, and now the RFCTI is, charged with the responsibility of coordinating the
development of telecommunications in the Russian Federation and regulating the
provision of services. Specifically, the Former MOC was and now the RFCTI is,
given authority to issue telecommunications licenses, allocate frequencies and
certify equipment for use in Russia, although it is not yet clear whether the
RFCTI will in fact continue to operate in the same manner, and wield the same
influence as the Former MOC. See "-- Risk Factors -- Risks Involving the
Company -- Regulatory Uncertainties." The Telecommunications Law also
establishes a number of important principles in the telecommunications area,
including the guarantee of equal access for all providers of telecommunications
services and safeguards for private business activity in the telecommunications
sector. The Telecommunications Law extends these principles to foreign companies
and individuals, thereby recognizing the need to encourage foreign participation
in the development of the Russian telecommunications sector.
The Federal Committee for Regulating Natural Monopolies in
Telecommunications has been empowered to regulate international and, since
mid-1997, domestic long distance tariffs, together with interconnect fees for
public operators in the Russian Federation. In addition, this Committee has the
authority to establish the framework for local fees and tariffs which, in the
future, will be regulated by newly-established Regional Committees for
Regulating Natural Monopolies. At the current time, regional governments set and
regulate local tariffs, and it is currently uncertain as to how, and when, local
tariff regulation will be transferred to the Regional Committees. The Company's
businesses are not public operators and will therefore not be directly affected
by any tariff regulation imposed by the Federal or Regional Committees.
While the RFCTI appears to have succeeded to all of the powers and
authorities of the Former MOC (with the exception of tariff regulation), it is
not yet clear whether it will in fact continue to operate in the same manner,
and wield the same influence as the Former MOC. In particular, it is not clear
whether the RFCTI will be able to control the actions of local governmental and
other regulatory authorities who may endeavor to impose their own informal
licensing and other regulatory requirements or conditions on operators. In
addition, in the area of tariff regulation, it is not yet clear how the various
Committees will interact with the regional governments, and the regional
governments may continue to seek to regulate tariffs in their regions. See
"-- Risk Factors -- Risks Involving Technocom Limited and Teleport-TP -- Network
Expansion."
Moscow. Local public fixed-line telephone service in Moscow is provided by
MGTS, a recently privatized company which operates the telephone network in
Moscow. MGTS currently serves 4,900,000 subscribers, of which 79% are
residential. Approximately 10% of the switches on the MGTS network are digital
and digital service generally is available to only 10% of its subscribers. Since
local calls are free, the bulk of MGTS' revenue comes from line rental. However,
MGTS has announced plans to introduce call metering as part of a major
redevelopment of its network.
MGTS has also announced a number of initiatives designed to develop the
Moscow public network. In 1996, it was reported that MGTS planned to invest
approximately $70 million in modernization programs. Two projects are to be
carried out jointly with AT&T and Rostelecom and are aimed at creating 400,000
new access lines using fiber optic cable and digital exchanges. MGTS will be
responsible for 75% to 80% of the total cost of the investments, with the
remainder being supplied by joint venture partners and through credits. To date,
MGTS has received a $50 million credit from Credit Suisse associated with
equipment supplied by AT&T. A second project involving Siemens contemplates the
installation of an additional 300,000 digital lines.
In addition to MGTS, there are a number of digital overlay networks in
Moscow which involve a Western investor (e.g., GPT, Belgacom, Lucent
Technologies (formerly, AT&T Network Systems ("Lucent")) and Global TeleSystems
("GTS")) and a local Russian partner (usually MGTS, the Central Telegraph Office
or
9
<PAGE> 12
Rostelecom). Finally, there are a number of private network facilities owned by
the local and regional utilities that provide services to a limited market
segment.
MGTS routes long distance traffic through a gateway exchange called MMTS.
This traffic is directed to the Rostelecom long distance network for delivery to
the regional telephone operators. International traffic is also passed to
Rostelecom via MMTS. The international network of Rostelecom is supported by a
combination of Russian and Western satellite capacity including that provided by
Teleport-TP. However, there continues to be considerable congestion at the MMTS
and Rostelecom switching centers due to their inability to keep up with demand.
Certain calls to other countries of the former Soviet Union can still be routed
through the Rostelecom network although this network primarily consists of
analog switching and is characterized by significant call failure rates. For
callers on private networks, international access is generally provided by
direct satellite facilities, such as Teleport-TP. The telecommunications market
in Moscow also supports four cellular operators (two analog and two digital) and
nine paging networks.
In August 1997, the Moscow city government (which holds a 33% voting stake
in MGTS) announced the planned consolidation of its telecommunications holdings,
through the formation of Mostelekom. It has been reported that Mostelekom will
act as a holding company for the city's shares in MGTS and other
telecommunications interests, including MGTS's 50% holding in Comstar, a joint
venture with GPT.
St. Petersburg. The telephone network serving St. Petersburg is operated
by PTS, the local telephone company which was privatized in May 1993. PTS has
1,800,000 lines in operation, amounting to a nominal penetration rate of 36%.
PTS's intra-city traffic is carried through a network of thirty-four transit
exchanges distributed throughout St. Petersburg and all connected to each other
in a "cobweb" fashion. The existing PTS network is outdated and overloaded,
producing congestion, interference, "crossed lines" and poor transmission
quality. Only 23% of PTS's exchanges are digital/electronic, and some of its
equipment is over 40 years old. PTS has recently installed a modern fiber optic
loop which, once operational, will significantly enhance its ability to deliver
traffic throughout its service area, and in addition has commenced efforts to
access the international capital markets in order to raise funds with which to
further modernize its system. PTS has entered into a number of other, primarily
wireless, telecommunications joint ventures.
PTS routes long distance traffic through a gateway exchange operated by
SPMMTS. This traffic is then passed to the Rostelecom long distance network for
delivery throughout the rest of the Russian Federation and the other countries
of the former Soviet Union. The Company acquired a 10.4% equity interest in
SPMMTS in 1994, which it sold in June 1997.
SPMMTS is the gateway for international calls to and from St. Petersburg.
SPMMTS has a number of options for the forwarding of international calls. Such
calls can be directed to an international gateway owned by St. Petersburg
International ("SPI"), a joint venture between British Telecommunications plc
("BT") and SPMMTS which has satellite connections to the UK. In addition, SPMMTS
has access, via Rostelecom, to the undersea cable between Russia and Denmark for
international traffic. Finally, SPMMTS has the option to route international
traffic through the international gateway in Moscow. In addition to SPMMTS,
there are several independent dedicated networks which provide international
telecommunications access in St. Petersburg, including BCL. Under the terms of
its license, PeterStar is required to route its long distance and international
traffic via the public network gateway.
The telecommunications market in St. Petersburg also supports three
cellular operators (two analog and one digital) and a number of paging networks.
In 1996, PTS and SPMMTS formed Telecominvest, originally as a joint venture
to act as a holding company for their respective interests in a number of
telecommunications ventures in Northwest Russia. Subsequently, also in 1996, a
Commerzbank affiliate acquired a 51% interest in Telecominvest. Currently
Telecominvest owns 29% of PeterStar, 31% of North West GSM ("NW GSM"), the
digital 900 MHZ operator for St. Petersburg, 49% of Neva Cable and 5% of Neda
Paging. It is understood that PTS intends to transfer all or part of its
interests in Delta Telecom and Neva Paging to Telecominvest, subject to final
agreement with their joint venture partners. Although as a result of this
activity Telecominvest will hold interests in regional cellular operators which
are customers of PeterStar, as well as other ventures which may
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<PAGE> 13
be possible customers for PeterStar, it is unclear what the exact nature of
Telecominvest's plans are with respect to these holdings or how such plans will
affect PeterStar.
TELECOMMUNICATIONS IN KAZAKHSTAN
At the time of Kazakhstan's independence in 1991, the Kazakh telephone
system consisted of the same outdated network equipment as the other telephone
systems in the former Soviet republics. Currently, only 13% of Kazakhstan's
population of approximately 17,000,000 has telephone lines. The existing
national telephone network consists of approximately 1,900,000 lines, of which
330,000 are in Almaty. Due to the outdated condition of much of the
telecommunications infrastructure in Kazakhstan, basic telephone service is
characterized by poor transmission quality. Quality international lines are
available only to subscribers willing to pay premium rates for the services of
an overlay operator. As a result, wireless communications are becoming an
increasingly important aspect of telecommunications in Kazakhstan.
The national network is served by trunk switches in 19 regional centers
throughout the country. New transit switches supplied by Alcatel and Lucent have
been installed in approximately one half of the regional centers, and there are
plans to complete the modernization of the remaining regional centers. The
existing inter-regional long distance transmission network is wholly analog,
based on high capacity coaxial cables running north to south and east to west
through the major cities. In addition, a balanced pair cable route passes
diagonally northwest from Almaty to the remaining regional centers in the middle
of Kazakhstan. All of these cables are equipped with outdated Soviet or East
German analog transmission equipment. These analog transmission routes are
expected to be replaced by modern fiber optic cable and digital transmission
systems. Kazakhtelekom, in a joint venture with Deutsche Telekom, has developed
a fiber optic network linking Alekseyevka (a city 30 kilometers from Almaty) to
the new capital city of Akmola.
All local exchange switching in Kazakhstan has been via electromechanical
exchanges using outdated equipment. The first modern digital exchange installed
in Almaty consists of an early generation digital switch with a capacity of
20,000 lines. Conversion of all local exchanges to modern digital equipment is
planned and some conversion has already begun. However, since modernization of
the local exchanges and associated networks will be extremely costly and likely
to produce a slow return on capital investment, it is estimated to be at least
two to three years before there is a significant increase in modern digital
local exchange capacity and growth in network capacity.
Until 1992, the sole means of international access to and from Kazakhstan
was through a central switch located in Moscow. Kazakhstan acquired its own
international gateway in August 1992 when a new AT&T 5ESS switch was installed
in Almaty. It now has approximately 800 direct international circuits via
satellite with 22 countries, including the United States, Japan, Australia,
Germany, France, Israel and Turkey and via analog cables to Moscow. Kazakhstan
has also announced plans to participate in projects to install fiber optic cable
links between China, the countries of Central Asia and Europe, which on current
forecasts will commence service in 2000.
The Kazakh Law on Enterprises dated February 13, 1991 authorizes the
Cabinet of Ministers to issue licenses for certain types of activities in
Kazakhstan, including the provision of telecommunications services. The Cabinet
of Ministers delegated the authority to license telecommunication providers,
allocate frequencies and certify telecommunications equipment to the Kazakh
Ministry of Communications (the "KMOC"). Pursuant to this delegation of
authority, the KMOC adopted temporary procedures for the consideration of
applications for and the issuance of such licenses. In April 1995, President
Nazarbayev issued a decree setting forth the licensing procedures in greater
detail. The decree also confirmed the authority of the Cabinet of Ministers to
grant licenses and the right of non-Kazakh companies and individuals to equal
treatment in the granting of licenses. However, apart from these licensing
procedures, there is virtually no other regulation in the telecommunications
sector, and no comprehensive regulatory framework. Administration of the
telecommunications sector is essentially left to the discretion of the KMOC.
Actual operation of the public telephone network is carried out by
Kazakhtelekom, which was created for this purpose in June 1994, as well as
regional operators. A variety of functions previously carried out by other
governmental entities, including representation of the Kazakh government in
international telecommunica-
11
<PAGE> 14
tions matters and the planning and development of the network in Kazakhstan,
have been transferred to Kazakhtelekom. Kazakhtelekom has recently been granted
a revised license giving it specific authority to act as the exclusive operator
of the Kazakh national network and to represent the Kazakh government in
international telecommunications matters, along with a broad series of powers to
enable it to fulfil this function. Kazakhtelekom carries out its functions under
the oversight and direction of the KMOC. In May 1997, the Kazakh government
announced that it had sold a 40% stake in Kazakhtelekom to Daewoo. However, in
March 1998, it was reported that Daewoo had sold a portion of its stake
(reported to be approximately 10%) to an unnamed third party. The report did not
indicate whether Daewoo proposed to sell or retain the remainder of its stake in
Kazakhtelekom. See "-- Risk Factors -- Risks Involving BECET
International -- Sale of Stake in Kazakhtelekom" and "-- Ownership and
Management of Operating Subsidiaries -- BECET International -- Relationship with
Other Equity Holders."
PETERSTAR COMPANY LIMITED
OVERVIEW
PeterStar, in which the Company owns a 60% interest, operates a fully
digital, city-wide fiber optic telecommunications network in St. Petersburg that
is interconnected with the network of PTS, the local telephone company, as well
as the Russian national and international long distance systems. PeterStar
provides integrated, high quality, digital telecommunications services with
modern transmission equipment, including local, national and international long
distance and value-added services, to businesses in St. Petersburg. The
PeterStar network provides an alternative to the PTS network, which to date has
been characterized by significant capacity constraints. PeterStar is able to
provide integrated telecommunications services to business customers, including
users of high bandwidth voice, data and video communications services.
PeterStar's network is designed to support a wide range of telecommunications
products and services with a high degree of reliability. Additionally, PeterStar
provides the three cellular operators in St. Petersburg with access to digital
switching and transmission capacity which significantly improves their ability
to consistently receive and deliver their customers' traffic. As of December 31,
1997, PeterStar had a total of 114,774 lines, of which 85,948 were provided to
cellular operators.
PeterStar, which started limited service in 1993, generated net income for
the year ended December 31, 1997 of $16.5 million on operating revenues of $54.5
million, as compared to net income of $5.9 million on operating revenues of
$32.5 million for the year ended December 31, 1996. Subscriber lines installed
increased from 52,005 at the end of 1996 to 114,774 at December 31, 1997,
reflecting increased penetration of the business community and cellular
operators. PeterStar accounted for 47.6% of the Company's operating revenues for
the year ended December 31, 1997, as compared to 52.4% for the year ended
December 31,1996.
STRATEGY
PeterStar's strategy is to meet the growing demands of business customers
and other network operators in St. Petersburg through the expansion of its
current numbering capacity of 100,000 lines allocated by the RFCTI to a total of
approximately 200,000 lines by 2001. PeterStar has recently added incremental
transmission capacity and upgraded its transmission network from STM-4 to
STM-16, as well as introducing new service features such as ISDN capability,
which allows simultaneous transmission of voice, data, video and still images.
In addition, as part of its strategic relationship with PTS, PeterStar intends
to continue to provide targeted support to PTS in its efforts to upgrade and
modernize its network. The business environment in St. Petersburg continues to
improve, with the ongoing growth of small to mid-sized Russian and foreign
businesses and the development of the banking and financial services industries.
PeterStar has placed increased emphasis on this market segment in order to
capitalize on what it considers to be a significant market opportunity.
PeterStar has recently commenced several projects designed to expand its
direct dial services in St. Petersburg and Northwest Russia. PeterStar has
agreed with PTS to undertake a major infrastructure project involving the
replacement of analog exchanges with digital exchanges for certain parts of the
network on Vassilievski Island, a city district in St. Petersburg. This project
will require the conversion of
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<PAGE> 15
approximately 30,000 business and residential lines that are currently operated
by PTS, after which such lines become a part of the PeterStar network. In
addition, PeterStar plans to further enhance its transit network capabilities in
order to provide continued support to the cellular and other network providers
in terminating traffic in St. Petersburg and to the national and international
gateway.
PRODUCTS AND SERVICES
PeterStar currently provides: (i) voice and data services to business and
residential customers; (ii) switched transit services for cellular and other
network operators; and (iii) value-added voice and data services. PeterStar
markets its products and services through its own direct sales force which
targets mainly corporate accounts.
PeterStar also provides, or plans to introduce, a number of value-added
voice and data services to complement the basic fixed network services it
currently provides. The Company believes that the ability to provide such
services on the PeterStar digital network is a key competitive advantage in the
St. Petersburg marketplace. Current and planned services include the following:
Data Services. PeterStar provides high speed data links across the city of
St. Petersburg. These connections provide links between the computer networks of
banks and large companies, allowing for data interchange between a variety of
back office systems. The target customer for such services is the emerging
financial sector, with the Russian Stock Market, Sberbank, Promstroibank, and
Bank St. Petersburg all currently using PeterStar's services. Other customers
for these high speed links, such as Reuters, utilize PeterStar to deliver
value-added services to their own customers.
Operator services. PeterStar has provided operator assistance service
since the third quarter of 1995 pursuant to a 1995 agreement with SPMMTS. The
agreement with SPMMTS provides PeterStar with primary access to the "07" (long
distance) operators connecting customers on a non-automatic dial destination
throughout the Russian Federation and the other countries of the former Soviet
Union. Other operator services offered include conference calling and
person-to-person calling. PeterStar also plans to provide access to wider
databases including those provided by C.P.Y. Yellow Pages Limited, the Company's
wholly owned subsidiary which publishes a business-to-business directory for St.
Petersburg ("Yellow Pages").
Calling Card Services. In November 1995, PeterStar launched a direct dial
calling card service, enabling subscribers to dial directly through to the
PeterStar network if using a tone dial telephone. The service, which provides
both debit and credit card service, is also available via the PeterStar operator
service for pulse and rotary dial telephones. PeterStar has recently expanded
this service offering through co-operation with Comstar, a network operator in
Moscow, providing PeterStar customers access in Moscow. The Company is currently
considering a further expansion of its calling card platform in conjunction with
the development of the Teleport-TP national network facilities.
Audiotext. PeterStar has recently launched audiotext (i.e., "1-900")
services, offering recorded information including information on cultural
events, weather, traffic and horoscopes.
Equipment Sales. PeterStar offers customers a wide range of
telecommunications equipment as a means of enhancing its service. It offers
PBXs, key systems, handsets, and the full range of customer terminals including
Partner, Partner Plus, Merlin and Definity. PeterStar also offers a maintenance
service for the equipment.
Frame Relay. PeterStar has commenced the operation of a frame relay data
network service as an enhanced feature of its current service offering.
Customers include Citibank, the Russian Central Bank and the Russian Stock
Market.
ATM. PeterStar has installed an ATM service, including eight switches, for
selected customers to complement the existing service offering. Customers
include Coca-Cola and financial institutions such as Promstroibank and Bank St.
Petersburg, and it is anticipated that an expansion of this service will take
place once market demand has been confirmed.
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<PAGE> 16
ISDN. PeterStar has installed an ISDN platform to service the demand in
the local marketplace. PeterStar also offers international ISDN services,
following agreement on the standard for C-7 signaling and the upgrading of the
international gateway.
Internet. Since August 1996, PeterStar has provided its subscribers access
to the Internet via WEBplus, a local Internet service provider. PeterStar
provides dial-up and dedicated network access to customers wishing to use the
WEBplus service.
CUSTOMERS AND MARKETING
PeterStar's customer base currently consists of three general categories:
(i) business customers; (ii) cellular and other network operators; and (iii)
residential customers. PeterStar's primary focus is the provision of voice and
data services to business customers, including those which generate large
amounts of outgoing long distance and international traffic.
PeterStar has experienced a shift in its customer base, from foreign
companies (which tend to use the higher priced international services) to
predominantly Russian businesses and, to a lesser extent, residential customers
(for whom local calling is the principal usage).
The following table illustrates, as of December 31, 1994, 1995, 1996 and
1997, the number of lines on the PeterStar network, set forth by customer
segment:
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF NO. OF
LINES LINES LINES LINES
AS OF % OF AS OF % OF AS OF % OF AS OF % OF
DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1995 DEC. 31, 1994
TYPE OF CUSTOMER 1997 TOTAL 1996 TOTAL 1995 TOTAL 1994 TOTAL
- ---------------- -------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct dial -- business......... 24,344 21% 12,482 24% 4,840 23% 1,500 36%
Direct dial -- residential...... 4,482 4% 2,310 4% 2,029 9% 214 5%
Cellular operators.............. 85,948 75% 37,213 72% 14,659 68% 2,386 59%
------- --- ------ --- ------ --- ----- ---
Total................. 114,774 100% 52,005 100% 21,528 100% 4,100 100%
======= === ====== === ====== === ===== ===
</TABLE>
COMMERCIAL VOICE AND DATA SERVICES
PeterStar's digital overlay network provides its customers with improved
connectivity, as well as a package of exchange services such as call waiting,
call forwarding and three-way conferencing. PeterStar offers its customers a
choice between new digital installations or the upgrading of existing PTS analog
connections to digital capability. New lines are provided via either traditional
copper connections or fiber optic cables.
For domestic long distance connections, PeterStar offers dedicated digital
circuits to Moscow. Moscow is the destination of approximately 80% of the long
distance traffic from St. Petersburg, all other national traffic being directed
to the national switching center of Rostelecom in Moscow for delivery throughout
the Russian Federation.
SPMMTS is the gateway for international calls to and from St. Petersburg
and SPMMTS has a number of options for the forwarding of international calls.
Such calls can be directed to an international gateway owned by SPI, a joint
venture between BT and SPMMTS which has satellite connections to the UK. In
addition, SPMMTS has access, via Rostelecom, to the undersea cable between
Russia and Denmark for international traffic. Finally, SPMMTS has the option to
route international traffic through the international gateway in Moscow. In
addition to SPMMTS, there are several independent dedicated networks which
provide international telecommunications access in St. Petersburg, including
BCL.
Call revenues and total minutes in the commercial voice and data services
segment (i.e, non-cellular) amounted to $22.5 million, $12.8 million, $6.2
million and $4.4 million, and 126,220,000, 71,128,000, 19,995,000, and
6,153,000, in 1997, 1996, 1995 and 1994, respectively.
Business Customers. PeterStar's primary focus has been the provision of
telecommunications products and services to business customers, including those
which generate large amounts of outgoing international
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<PAGE> 17
traffic. PeterStar targets both foreign and, increasingly, Russian businesses
which have requirements for high quality local, long distance and international
telecommunications services. As of December 31, 1997, Russian businesses, such
as Baltika Brewery and LenEnergo, represented approximately 70% of PeterStar's
19,862 business subscriber lines and foreign businesses, such as ABB, Rothmans
Inc., Unilever N.V., Littlewoods, Coopers and Lybrand and Cadbury, represented
the balance. Total call revenues from PeterStar's directly connected business
customers were $19.6 million in 1997, 45% of which was accounted for by Russian
businesses.
Residential Customers. As of December 31, 1997, PeterStar had connected
4,482 residential customers to its network. Revenues from direct dial
residential customers (principally connection charges and line rentals) totaled
$171,000 in 1997. At present, PeterStar does not directly receive any call
revenues from its residential customers. See "-- Billing, Tariffs and
Interconnection Charges -- Tariffs -- Residential Customers." PeterStar has
commenced a project with PTS to upgrade telecommunications services on
Vassilievski Island, a project which will increase the number of residential
customers on the PeterStar network. See "-- Expansion of Voice and Data
Services."
EXPANSION OF VOICE AND DATA SERVICES
PeterStar has agreed with PTS to undertake an infrastructure project
centering on the replacement of analog step-by-step and cross-bar exchanges with
digital telecommunications equipment for Vassilievski Island, a city district in
St. Petersburg. The project will require the conversion of a total of
approximately 30,000 business and residential lines that are currently operated
by PTS, over the 1997-98 period, after which such lines become part of the
PeterStar network and the users will become PeterStar customers. Approximately
2,800 lines were converted at the end of 1997; an additional 3,000 lines are
expected to be converted by the end of the second quarter of 1998, with the
balance completed by the end of the third quarter of 1998. While the business
customers will be charged PeterStar tariffs, the residential customers will only
pay PeterStar the equivalent PTS rate for the line rental. PeterStar anticipates
collecting the revenues on national and international calling from these
customers, although the level of such calling for residential customers, who are
expected to be the bulk of the new customers, is not expected to be substantial.
The total cost of the project is estimated at between $18-20 million, of which
$13 million is for network infrastructure and the balance for civil works and
local network upgrades. This amount also includes approximately $3 million for
an upgrade to the core PeterStar overlay network.
PeterStar also expects to increase its operating presence in Northwest
Russia through the targeted development of digital infrastructure to connect
business customers and to develop operational relationships with the regional
telephone companies. PeterStar is exploring the possibilities for closer
cooperation with both Teleport-TP and BCL in connection with the expansion of
its core business in St. Petersburg and the implementation of its strategy in
Northwest Russia.
The implementation of the proposed expansion in direct dial services
involves a variety of risks, including those set forth in "-- Risk
Factors -- Risks Involving PeterStar Company Limited and Baltic Communications
Limited."
CELLULAR SERVICES
The three cellular operators in St. Petersburg currently utilize the
PeterStar network to deliver high quality services to their customers and
provide reliable access to the local, long distance and international networks.
PeterStar's digital infrastructure enhances the ability of the cellular
operators to consistently receive and deliver their customer's traffic, a
benefit that is not achievable by using the outdated PTS transmission network.
In addition, the lack of capacity on the PTS network provides a significant
constraint on the ability of the cellular operators to expand their capacity to
meet market demand. Access to the PeterStar network provides these cellular
operators with the additional capacity necessary to accommodate their planned
growth.
The number of cellular customers in St. Petersburg has increased from
approximately 6,400 at December 31, 1994 to approximately 107,000 at December
31, 1997, as St. Petersburg has become one of the
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fastest growing cellular markets in Russia. Subscribers are primarily business
customers who use cellular service as a mobile telecommunications tool rather
than as an alternative to the wireline network.
The three cellular operators in St. Petersburg are:
Delta Telecom. Delta, the NMT 450 operator, was connected to the PeterStar
network in September 1995. Delta, a joint venture between PTS and an affiliate
of U.S. West Media Group, Inc., has over 30,000 active subscribers on its
network, of which 16,596 were connected as of December 31, 1997 to the PeterStar
network for local access and overflow long distance and international access,
with the balance connected via PTS. PeterStar recently reached an agreement with
Delta whereby Delta has connected the remainder of its cellular subscribers to
the PeterStar network.
North West GSM. NW GSM, the digital 900 MHZ operator for the city, has
been connected to the PeterStar system since September 1994. At December 31,
1997, all of NW GSM's subscribers (of which 52,681 are active) were connected to
the PeterStar network, which provides NW GSM with local, long distance and
international digital access.
Fora Communications. Fora, a joint venture between Millicom International
Cellular ("Millicom") and the City of St. Petersburg, is an AMPS 800 cellular
system that has been connected to the PeterStar network since July 1994. At
December 31, 1997, all of Fora's subscribers (of which 16,671 are active
subscribers) were connected to the PeterStar network, which provides Fora with
local, long distance and international digital access.
The following table sets forth, for each cellular operator, the number of
active lines connected to PeterStar at December 31, 1994, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
CELLULAR OPERATOR DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Fora Communications.... 16,671 8,603 3,410 1,896
NorthWest GSM.......... 52,681 22,210 7,049 490
Delta Telecom.......... 16,596 6,400 4,200 --
</TABLE>
Call revenues and total minutes in the cellular segment amounted to $9.0
million, $5.2 million, $2.2 million and $0.2 million, and 119,096,000,
57,729,000, 17,830,000, and 2,005,000 minutes, in 1997, 1996, 1995 and 1994,
respectively.
NETWORK AND FACILITIES
PeterStar's network and facilities give it the ability to provide advanced
digital services to the telecommunications market in St. Petersburg, services
that the Company believes PTS, with its primarily analog network, will be unable
to provide in the near term due to internal funding constraints at PTS. The
PeterStar network consists of digital exchanges which are connected by fiber
optic cables, advanced transmission systems and remote switching units and
concentrators. The fiber optic network forms three rings, permitting traffic to
be re-routed in the event that a cable is cut or damaged. The network is fully
interconnected with the PTS network, with direct and indirect connections via
approximately 540 kilometers of fiber optic cable to all thirty-four PTS transit
exchanges distributed throughout St. Petersburg. These direct connections to all
of the primary PTS exchanges enable callers to by-pass congestion on the PTS
network. The fiber optic cables also provide direct links to the national and
international switch, providing PeterStar customers with high quality long
distance and international access. PeterStar expects that it will continue to
incrementally add switching, transmission capacity and local loop infrastructure
to its core network in order to address its target market in St. Petersburg and
regional points of presence.
In addition to core network development, PeterStar, as part of its goal to
be the full service telecommunications provider to the business community in St.
Petersburg, undertook a number of specialized customer connections to its
network, tailoring the solution to the specific customers' needs. This involved
investment in, among other things, new cable, trunked radio, and customer
premises equipment. Contracts concluded in 1997 include those with the Central
Bank of Russia, Pepsi, Pratt & Whitney, AT&T (USA Direct) and IBM.
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PeterStar has signed a contract with Tadiran, an Israeli wireless equipment
manufacturer, to supply 1,500 lines of wireless local loop infrastructure.
PeterStar intends to deploy such equipment where: (i) local loop infrastructure
is non-existent or of poor quality; and (ii) the cost of installing cable would
be prohibitive. PeterStar may expand this service if the initial project proves
successful. It is anticipated that the equipment will be installed during the
first half of 1998.
The PeterStar network currently consists of two AT&T 5ESS exchanges and
several remote concentrators. PeterStar's Vassilievski Island exchange now
serves as its main transit exchange, and is linked to the other PeterStar
exchange located in Ligovskaia, in the central business district of St.
Petersburg, as well as with PTS and SPMMTS. The Vassilievski Island exchange has
the capacity to serve a large number of customers, both in the immediate
vicinity of Vassilievski Island and at remote locations via the fiber optic
network. This capacity enables PeterStar to carry substantial volumes of traffic
to and from the PTS network to other network operators, such as cellular,
Internet and paging operators, and to provide high quality links for long
distance and international calls. PeterStar has recently added incremental
transmission capacity and upgraded its transmission network from STM-4 to
STM-16, as well as working on the provision of new service features. In
addition, as part of its strategic relationship with PTS, PeterStar intends to
continue to provide targeted support to PTS in its effort to upgrade and
modernize its network. See "-- Risk Factors -- Risks Involving PeterStar Company
Limited and Baltic Communications Limited -- Dependence on PTS Facilities" and
"-- Products and Services -- Expansion of Voice and Data Services."
BILLING, TARIFFS AND INTERCONNECTION CHARGES
Billing
PeterStar provides monthly itemized bills to its customers denominated in
U.S. Dollars. Installation and initiation charges, line rental and local and
long distance call charges must be paid in Roubles at the U.S. Dollar/Rouble
exchange rate on the date when the customer instructs its bank to make payment.
Currency regulations govern the currency in which international call charges may
be paid. Russian resident companies are required to pay in Roubles, while
non-resident companies may pay in Roubles or U.S. Dollars. Customers who are
permitted to pay in U.S. Dollars are also able to pay by U.S. Dollar-denominated
credit cards, as PeterStar is now registered to accept all major credit cards.
Late fees are assessed on all invoices after 30 days, at the rate of 7.25% per
month. By denominating its bills in U.S. Dollars (and exchanging Roubles at the
then current U.S. Dollar/Rouble exchange rate), PeterStar limits the exchange
rate risk otherwise associated with transacting business in a foreign currency.
See "-- Risk Factors -- Country Risks -- Currency Risks."
Tariffs
There are no specific regulations regarding tariffs charged by PeterStar.
PeterStar sets its tariffs taking into account those charged by PeterStar's
interconnect parties, namely PTS, SPMMTS and SPI, as well as competitive
pressures in the marketplace. PeterStar charges its customers for the
installation of equipment and initiation of service, line rental, local, long
distance and international calls and special services.
In the period during which PeterStar has operated, there has been
significant price convergence between PeterStar and public network national and
international call tariffs. As PeterStar has widened its customer base, it has
reduced its national and international call tariffs. At the same time, public
network tariffs have increased for long distance access. Until PTS introduces
local call metering to its customers, PeterStar will not receive any such
revenues from its residential customers, and the timing of the introduction of
such metering remains unclear.
PeterStar's published tariff for local calls is $0.03 per minute peak (8 AM
to 8 PM) and $0.02 per minute at other times. For domestic long distance calls,
the tariffs range from $0.38 to $0.98 per minute, depending on the call's
destination and the time of the call. For international long distance calls,
tariffs are based on the call's destination and the time of the call, with peak
time tariffs ranging from $0.98 to $2.98 per minute. The tariffs for peak time
calls to Europe and North America are $1.30 and $1.90 per minute, respectively.
PeterStar offers discounts, based on call volumes, for customers who make a
large number of calls per month.
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<PAGE> 20
The installation charge for PeterStar telephone lines has been $500 per
line for the first 4 lines, $350 per line for the next five lines and $200 per
line for each line above nine lines. Commencing April 1998, the installation
charge will be $450 per line, regardless of the number of lines installed. For 2
Mb/s digital circuits, the installation charge is currently $4,500 for the first
circuit and $3,500 for each additional circuit. The monthly rental charge is $20
for a telephone line and $750 for a 2 Mb/s digital circuit.
Business Customers. PeterStar business customers are charged the full
PeterStar published tariffs for installation and initiation charges, line rental
and local, long distance and international calls. Certain discounts are given
for installations based on the number of lines installed at a single customer
location and for call volumes.
Cellular Operators. The cellular companies pay PeterStar for the
installation and lease of 2 Mb/s links, a connection charge for each number
connected and a monthly rental fee for each number, plus volume related call
charges.
Residential Customers. PeterStar currently only receives line rental and
connection charges from residential customers at the PTS rate. PeterStar will
not receive local call charges from residential customers until PTS imposes such
charges and then will only receive charges at the PTS rate. Long distance and
international calls are billed directly to residential customers by SPMMTS and
PeterStar receives no part of these revenues. For residential customers
connected as part of the Vassilievski Island project, PeterStar collects all
revenues for long distance and international calling, with some of the charges
at PTS tariff levels.
Interconnection Charges
PeterStar has been able to negotiate favorable tariffs for interconnection
fees and carrier charges with both PTS and SPMMTS. PeterStar's current
interconnect agreements with PTS and SPMMTS expire in December and November
1998, respectively. The agreements provide for automatic extensions at the end
of their term unless otherwise terminated by either party. The interconnection
fees and carrier charges payable under the interconnect agreements are subject
to renegotiation between the parties from time to time. PeterStar anticipates
that it will have to pay a local line rental charge to PTS commencing in 1998.
The exact fee, and the timing of the fee, has not yet been determined, but
PeterStar believes that a certain element of such fee can be exchanged for
transmission capacity provided by PeterStar to PTS. See "-- Risk Factors --
Risks Involving PeterStar Company Limited and Baltic Communications
Limited -- Dependence on Interconnect Parties" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations."
SUPPLIERS
Lucent is PeterStar's primary network equipment supplier. PeterStar has
entered into a series of equipment supply agreements with Lucent for the
purchase of telecommunications equipment, including transmission systems,
switching equipment and related software, for the PeterStar network. In
addition, Lucent has been the provider of the switching and other equipment for
the Vassilievski Island project. See "-- Description of Agreements -- PeterStar
Company Limited." PeterStar also has supplier relationships with ECI/Rosh
Telecom for SDH transmission equipment, GDC for the supply of certain elements
of its data network and Tadiran for the supply of wireless local loop
infrastructure.
BALTIC COMMUNICATIONS LIMITED
BCL, in which the Company acquired a 100% equity interest in April 1996,
provides international direct dial, international payphone and leased line
services for Russian and foreign businesses in St. Petersburg and, commencing
during 1997, the Leningrad Oblast. BCL also offers a number of advanced
broadband services, as well as "carrier's carrier" services to other
telecommunications operators. BCL has its own switching and international
transmission facilities in St. Petersburg, which act as a gateway for corporate
customers in both Moscow and St. Petersburg. The BCL network consists of an
international and local switch and capacity on the international fiber optic
cable via Finland to Sweden and the United Kingdom. BCL's primary international
carrier relationships are with Telia of Sweden, Cable & Wireless Communications
of the United
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<PAGE> 21
Kingdom and Lattelekom of Latvia. BCL rents local access from PeterStar and PTS
to connect its customers in St. Petersburg.
See "-- Telecommunications Licenses -- Baltic Communications Limited" for a
description of the telecommunications licenses held by BCL.
BCL had approximately 1,200 lines as of December 31, 1997 and generated
approximately 8.3 million minutes of traffic for the year ended December 31,
1997. BCL is currently investigating means to increase the capacity on its
network and to provide additional capacity for "carrier's carrier" services.
The Company endeavors to cross-sell the distinct service offerings provided
by PeterStar and BCL to their respective customer bases. For example,
PeterStar's marketing representatives are now also able to market BCL's
international private line services to PeterStar's and other corporate
customers. In addition, the acquisition provides the Company with the
opportunity to: (i) potentially realize economies of scale at the operational
level (i.e. a single sales and customer services channel and coordinated
technical resources); and (ii) introduce new services to targeted markets in a
more efficient manner. In addition, PeterStar and BCL are exploring the
possibilities of closer cooperation in connection with the expansion of their
respective core businesses in St. Petersburg and the implementation of their
strategies in Northwest Russia.
BCL generated net income for the year ended December 31, 1997 of $0.5
million on operating revenues of $7.6 million. The Company acquired BCL in April
1996 and it therefore accounted for only nine months of earnings to December 31,
1996. BCL generated net income for the nine months ended December 31, 1996 of
$0.7 million on operating revenues of $5.1 million. BCL accounted for 6.6% of
the Company's operating revenues for the year ended December 31, 1997, compared
to 8.2% for the year ended December 31, 1996.
CPY YELLOW PAGES LIMITED
Yellow Pages, a Cyprus company in which the Company holds a 100% interest,
is the owner of one of the most comprehensive databases of Russian and foreign
businesses in St. Petersburg and publisher of what is primarily a business to
business directory. Yellow Pages has 18 employees in St. Petersburg who handle
all of the graphic design and database management. Yellow Pages hires part-time
workers for the periodic update of the directory. The directory is printed in
Denmark because printing of the requisite quality is not currently available in
Russia. However, it is intended to switch printing operations to Russia once
this has been remedied. The Company is seeking to utilize the database of Yellow
Pages to the benefit of PeterStar and BCL, particularly in more effective target
marketing and in operator services.
The Yellow Pages database is widely respected as the most comprehensive and
reliable data source for organizations operating within the city. Local
governmental bodies, including the local telephone company, cannot provide
accurate data information due to bureaucratic intricacies and a number of
peculiarities of operating within the city's developing economy.
TECHNOCOM LIMITED
OVERVIEW
Technocom, in which the Company owns a 80.4% interest, through its
subsidiaries, is the primary mechanism through which the Company provides high
quality long distance telecommunications infrastructure and services in the
Russian Federation. Technocom's principal asset is its 49.33% equity interest
(56% voting interest) in Teleport-TP, a Moscow-based long distance and
international operator targeting the commercial sector and other
telecommunications operators with its satellite-based telecommunications
services. Technocom also holds a 49% interest in MTR-Sviaz, a venture formed by
Technocom and Mosenergo, the Moscow city power utility, to modernize and
commercialize a portion of Mosenergo's internal telecommunications network. See
"-- Ownership and Management of Operating Subsidiaries -- Technocom Limited."
In addition, Teleport-TP is a 25% shareholder in Gorizont-RT, a GSM
cellular operator in the Republic of Sakha, an autonomous region within the
Russian Federation. Teleport-TP is required to supply switches to
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<PAGE> 22
Gorizont-RT, which Technocom is supplying to the venture through a lease
arrangement. In addition to realizing lease revenues from the equipment,
Teleport-TP will be a primary carrier for long distance traffic for both the
cellular network and the local telephone company, Sakhatelekom, which is the
majority shareholder in Gorizont-RT.
Other interests of Technocom include: a 50% interest in Rosh Telecom
Limited, a telecommunications equipment distributor, and an effective 100%
interest in SCS, a marketing company responsible for selling and administering
television broadcasting services.
Technocom recorded a net loss for the year ended December 31, 1997 of $4.7
million on operating revenues of $21.2 million, as compared with a net loss of
$0.2 million on operating revenues of $4.4 million for the year ended December
31, 1996. Technocom accounted for 18.5% of the Company's operating revenues for
the year ended December 31,1997 as compared to 7.1% for the year ended December
31, 1996.
Teleport-TP recorded a net loss for the year ended December 31, 1997 of
$2.8 million on operating revenues of $16.9 million, as compared with a net loss
of $0.1 million on revenues of $11.1 million for the year ended December 31,
1996.
STRATEGY
Teleport-TP is expanding its existing operations from the provision of
international telecommunications services to the provision of domestic long
distance telecommunications services in the Russian Federation utilizing Western
satellite capacity and technology. The Company believes that there is a largely
untapped market for satellite-based services between various regions of the
Russian Federation due to the current poor quality, or total absence, of
terrestrial long distance lines in many areas. Installation of the first phase
of the long distance network commenced in the second half of 1996, with 29 sites
installed as of December 31, 1997. Technocom has contracted with the
telecommunications equipment supplier Scientific-Atlanta, Inc. to supply
equipment for a total of 45 sites which, based on current plans, will be
installed by the end of the first half of 1998. Technocom is currently
formulating its plans in connection with the installation of additional earth
stations and has held preliminary discussions with Scientific-Atlanta on this
subject.
Technocom expects to further develop its group's presence in Moscow through
the targeted development of infrastructure via Teleport-TP and MTR-Sviaz, and
through co-operation agreements with other network providers to deliver value
added voice and data services to the corporate market. Teleport-TP and MTR-Sviaz
are presently working together to address the corporate market, with MTR-Sviaz
providing or arranging to provide the local infrastructure in Moscow, connecting
customers to Teleport-TP for national and international access.
TELEPORT-TP
Overview
Since 1994, Teleport-TP has operated an international telecommunications
network providing dedicated voice, data and video services, as well as
bandwidth, to Russian and foreign businesses and private telecommunications
networks. During 1997, Teleport-TP continued the installation of a long distance
network which is being targeted to high volume customers requiring high quality,
reliable long distance service across the Russian Federation. Targeted customers
include: (i) regional public telephone companies (Electrosviaz); (ii) local
public telephone companies; (iii) private cellular, wireline, data and other
network operators; and (iv) corporate users.
Dedicated International Network Services
Products and Services
Teleport-TP provides international voice and data services, as well as
bandwidth, to a number of private networks in the Russian Federation and to
Russian and foreign businesses, including Rostelecom, the primary national and
international long distance carrier in the Russian Federation and a 44%
shareholder in Teleport-TP, Sprint and MTR-Sviaz. As of December 31, 1997,
Teleport-TP provided access to over 1,200
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<PAGE> 23
international digital circuits to 27 operators in 24 countries, making it one of
the largest international carriers in the Russian Federation. Teleport-TP has
recently opened up direct routes to Georgia and Turkmenistan in the CIS.
Teleport-TP provides these international telecommunications services
through access to two Intelsat satellites and one Eutelsat satellite.
Teleport-TP's arrangements with Intelsat and Eutelsat provide it with flexible
and reliable satellite capacity, allowing Teleport-TP to provide consistent,
high quality dedicated international telecommunications services to Russian and
foreign businesses. The Company believes these arrangements represent a
competitive advantage over carriers using less reliable Russian-made satellite
systems.
In order to reach those countries to which it has not yet opened direct
routes, Teleport-TP has entered into carrier relationships with Deutsche Telekom
("DT") in Germany, AT&T in the United States and Kokusai Denshin Denwa Co., Ltd.
("KDD") in Japan. Teleport-TP receives at least the same accounting rates and
equal division of revenues from DT, AT&T and KDD as has been negotiated between
the predecessor to the RFCTI and the German, United States and Japanese
governments.
Television Transmission. An additional source of revenue for Teleport-TP
has been the provision of international circuits for the transmission of
television signals to broadcasters who require international transmission
capacity on an as-needed, rather than a scheduled, basis. Customers for this
service include Capital Cities -- ABC, NHK and Fuji TV of Japan and TV India.
Revenues from the transmission of television signals totaled approximately
$413,000 for the year ended December 31, 1997, accounting for approximately 2.4%
of Teleport-TP's revenues for the period.
Customers and Marketing
Rostelecom. Rostelecom, the primary national and international carrier in
the Russian Federation and the holder of a 44% ownership interest in
Teleport-TP, is Teleport-TP's principal customer for dedicated international
network services. As of December 31, 1997, Teleport-TP leased approximately 900
active circuits via Intelsat and Eutelsat to Rostelecom, pursuant, as to the
Intelsat circuits, to a five-year contract signed on December 1, 1992 and, as to
the Eutelsat circuits, a ten-year contract which commenced in September 1995.
Revenue from Rostelecom in 1997 totaled $4.7 million. The contract with respect
to the Intelsat circuits was renewed in December 1997 for an additional
three-year term, and is automatically renewable upon the expiration of its
initial term, unless terminated by either party. Rostelecom utilizes Teleport-TP
on traffic routes where it does not yet have a direct terrestrial connection and
where the cost of a terrestrial connection would be prohibitive. On such routes,
Teleport-TP provides Rostelecom with a means of accessing high quality digital
international circuits that are not available via other Russian satellite or
terrestrial means. See "-- Risk Factors -- Risks Involving Technocom Limited and
Teleport-TP -- Dependence on Rostelecom as Customer; Necessity to Further
Develop Customer Base."
Carrier Relationships. Teleport-TP, through its direct carrier
relationships principally with KDD of Japan, generates revenues from the
carriage of traffic to and from the Russian Federation. Teleport-TP carried
approximately 4.1 million minutes of incoming international traffic to its
private network during the year ended December 31, 1997.
Private Networks. Teleport-TP also has relationships with a number of
business centers and private network operators. Teleport-TP's most important
private network customer to date has been Sprint Sviaz, a Russian subsidiary of
Global One, which leases 60 international circuits. Other customers include
MTR-Sviaz, Technopark, the Intourist Computer Center and the Oil House Business
Center.
Network and Facilities
Teleport-TP Network. Teleport-TP's dedicated international
telecommunications network consists of an earth station (with three antennae),
an international gateway switch and fiber optic cable. These network facilities
are owned by Technocom and leased to Teleport-TP. The earth station consists of
two Standard-A 18.3 meter antennas linked to two Intelsat satellites, one of
which (at 342 degrees) serves Western Europe and the
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<PAGE> 24
United States and the other of which (at 62 degrees) serves the Far East, and a
13 meter antenna linked to a Eutelsat satellite (at 21.5 degrees) which provides
additional connectivity to European countries. See "-- Description of
Agreements -- Technocom Limited -- Teleport-TP -- International Network
Facilities -- Intelsat" and "-- Eutelsat."
Fiber optic cable links Teleport-TP's switch with its principal customers,
including the national network of Rostelecom, the national television switching
center in Ostankino, and a number of business parks, overlay network operators
such as MTR-Sviaz and Comstar, and state-owned utilities located in Moscow and
the Moscow region.
Teleport-TP is connected to the facilities of MTR-Sviaz to terminate
certain traffic to users on the MTR-Sviaz network. MTR-Sviaz uses both leased
circuits from a number of network providers, access to the Teleport-TP fiber
optic facilities, and the Mosenergo internal communications network to terminate
its calls. Teleport-TP also uses the MTR-Sviaz facilities to locate its Internet
gateway, from which links to Internet Service Providers are provided via leased
and dial-up lines on the public network. Teleport-TP also acts as the long
distance gateway for subscribers on the MTR-Sviaz network.
The fiber optic cable utilizes the underground duct facilities of MGTS, the
operator of the local telephone network in Moscow, under one year agreements
which are subject to automatic one year renewals unless either party provides
timely notice of cancellation. The current agreements expire on December 31,
1998. See "-- Risk Factors -- Risks Involving Technocom Limited and
Teleport-TP -- Dependence on MGTS Facilities."
Intelsat Arrangements. Teleport-TP currently routes international traffic
through two Intelsat satellites at 342 degrees and 62 degrees pursuant to a
fifteen year contract with Intelsat signed in January 1993. In addition,
Teleport-TP has commenced using transponder capacity on a third Intelsat
satellite (at 66 degrees) in connection with the development of its long
distance network program. The agreement requires quarterly payments of $616,500
for the remainder of its term. See "-- Long Distance Network Services -- Network
and Facilities."
The Intelsat system, with 22 operational satellites of 4 different
configurations, is of significantly greater size, and provides greater coverage,
than any of its competitors. Intelsat's global capacity makes it the leading
international telecommunications satellite operator. The Intelsat organization
is able to offer flexible and reliable satellite capacity, supported by a
variety of contingency plans. Additionally, because of the strength of the
Intelsat organization, manufacturers and operators have designed their ground
stations to be compatible with Intelsat's specifications, creating a system that
is global and transparent to users and their customers.
Since January 1993, Teleport-TP has been one of only three direct Intelsat
customers in the Russian Federation. In December 1997 the government of the
Russian Federation also designated Teleport-TP as that country's sole private
investing entity, as a result of which, following the completion of certain
licensing requirements, Teleport-TP will become an equity participant in the
Intelsat organization. Teleport-TP's relationship with Intelsat provides a
number of advantages to Teleport-TP and its customers, including: (i) high
quality and reliable service resulting from the reliability of the satellite
system; (ii) a wide range of service options; (iii) a wide range of consulting
and training services; and (iv) operational planning and management services
reflecting Intelsat's experience with in excess of 60 telecommunications
satellites over a period of 30 years. See "-- Long Distance Network
Services -- Network and Facilities."
Eutelsat Arrangements. Pursuant to a ten-year agreement with Eutelsat,
which commenced in September 1995, Teleport-TP has access to a total switched
capacity of 1,800 international circuits. Teleport-TP currently provides access
to six countries in Europe via a Eutelsat satellite at 21.5 degrees.
Teleport-TP is the only private registered Eutelsat operator in the Russian
Federation and, during 1997, became an equity participant in Eutelsat as well.
Eutelsat is the intergovernmental organization responsible for providing
satellite communications space segment facilities for almost all European
nations. Although originally designed to provide principally television and
radio capacity, Eutelsat satellites now carry large quantities of
telecommunications traffic. Unlike Teleport-TP, most of the signatories to
Eutelsat are national telephone companies, often with a right to exclusive use
or monopoly control of operations of users within their home territory.
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<PAGE> 25
Teleport-TP has already benefitted from its relationships with Eutelsat by
obtaining relatively inexpensive access to the Eutelsat system. Pursuant to the
initial agreement between Teleport-TP and Eutelsat, 50% of the cost of the earth
station is being financed on favorable terms by Eutelsat and 300 satellite
circuits are being provided free to Teleport-TP for the first three years.
The Eutelsat system is designed to have high transponder capacity, with
built-in redundancy, both within its satellites and by the provision of in-orbit
spare capacity. Additionally, the transponder, antenna and cross-connect
facilities make for very flexible space segment capacity. The Company believes
that Teleport-TP's position as a participant in Eutelsat and a provider of
Eutelsat services in the Russian Federation will provide it with a considerable
strategic advantage with respect to intra-European telecommunications.
Long Distance Network Services
Products and Services
The Company believes that there is a largely untapped market for satellite
links between various regions of the Russian Federation due to the current poor
quality, or total absence, of terrestrial long distance lines in many areas. In
order to expand its customer base beyond Moscow and to meet growing demand for
reliable telecommunications links, Teleport-TP is developing satellite links
using PAMA/SCPC (Pre-Assigned Multiple Access/Single Channel Per Carrier)
technology between cities and regions in the Russian Federation. These links
will be provided by Teleport-TP, under the registered tradename "Satelink",
directly between cities and regions, without going through Teleport-TP's Moscow
hub. In particular, Teleport-TP is seeking to address the market for
inter-regional communications where call completion rates are understood to be
low, primarily due to the underdeveloped nature of the Rostelecom
infrastructure. In addition, Teleport-TP is seeking to address the market for
intra-regional communications where call completion is the responsibility of the
regional network provider. In such instances Teleport-TP becomes an integral
part of regional network developments. Currently, Teleport-TP has reached
agreements with Uraltelecom and the regional operators in Tomsk, Sakha, Rostov
and Chita for such regional networks. While, due to various startup problems
including logistical difficulties and administrative difficulties with local and
regional governmental authorities, there have been significant delays in the
installation of, and the clearance to operate the equipment for this network, it
is expected that a total of 45 sites will be installed by the end of the first
half of 1998. See "-- Risk Factors -- Risks Involving Technocom Limited and
Teleport-TP -- Network Expansion."
Internet Services. Teleport-TP opened an Internet gateway during the first
quarter of 1997, using the registered tradename "Portal." The gateway is
configured to provide high speed data access to regional Internet service
providers as well as leased line and dial-up access in Moscow for corporate
clients.
Television Services. Teleport-TP has formulated a strategy to address the
growing demand for the resale of transponder capacity to domestic television
companies for: (i) the distribution of programming to regional sites for onward
terrestrial re-broadcasting; and (ii) direct distribution of digital TV
broadcasting. Both services would utilize additional capacity on the Intelsat 66
degrees satellite.
Private Line Services. Teleport-TP also provides national and
international private leased circuit access to corporate entities, either as
part of an integrated private network package or on a case-by-case basis as
defined by the customer.
Value-Added Services. The Company anticipates that Teleport-TP will
develop a portfolio of corporate network services to address this specific
market sector as Teleport-TP's operations mature. Cooperation with PeterStar in
addressing this corporate market is also envisaged.
Customers and Marketing
These long distance services are being targeted to high volume customers
requiring high quality, reliable long distance service across the Russian
Federation. Targeted customers include: (i) regional and local public telephone
companies (Electrosviaz); (ii) private cellular, wireline, data and other
network operators; and (iii) corporate users. As of December 31, 1997, 22
contracts had been signed (covering a total of 39 cities). Of
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these, 9 are with regional and local public telephone companies, 6 are with
cellular operators and alternative local access providers and the balance are
with corporate and individual users.
Implementation of these contracts in a timely manner is subject to the
ability of Teleport-TP to comply with any new operating conditions that may be
set by the local and regional governmental authorities in the areas in which it
operates. See "-- Risk Factors -- Risks Involving Technocom Limited and
Teleport-TP -- TP -- Network Expansion."
Teleport-TP will act as a "carrier's carrier" to public telephone companies
and cellular, wireline and other operators. Teleport-TP will provide these
operators with long distance and, in many cases, international access so that
these operators can provide high quality access to their own subscribers.
In developing a package of voice and data services for the corporate user,
Teleport-TP has enhanced its marketing and sales functions through recruitment
of experienced sales personnel and is addressing three distinct corporate market
segments: (i) the corporate market where the main focus of the customer is
located in Moscow and St. Petersburg (where co-operation can take place with
PeterStar and BCL), but where the customer also requires regional network
services; (ii) international ventures with requirements for both national and
international connectivity; and (iii) the corporate market in which the customer
has made the decision to expand to the regional cities or in which the
decision-making will take place in the regional centers.
Network and Facilities
The Teleport-TP network uses Scientific-Atlanta Skylinx.DDS(TM) Digital
PAMA/SCPC and IDR satellite telephony systems, a technology that is used by
public telephone companies either as a market entry mechanism or as an
enhancement of the existing terrestrial infrastructure. The network utilizes an
18.3-meter Standard-A Intelsat satellite master antenna at the hub site in
Moscow. Agreements are in place with Intelsat for access to 72 MHZ of
transponder capacity on the Intelsat 704 satellite at 66 degrees. Teleport-TP
believes that using this digital capacity from Intelsat represents a competitive
advantage over telecommunications operators using less reliable Russian domestic
satellite systems. Customers on Teleport-TP's long distance network, initially
public and private telecommunications companies, have the choice of taking
permanent leased circuits or switched circuits, depending on their requirements.
In addition, corporate customers now have the ability to create their own
private networks throughout the Russian Federation using this combination of
permanent and switched circuits.
As of December 31, 1997, 29 medium (7 meter) and small (4.5 meter) antenna
terminals had been installed in major cities throughout the Russian Federation;
including Murmansk, Volgodonsk, Cheliabinsk, Ekaterinburg, Rezh, Yakutsk, Mirny
and Neriungry, providing digital voice and data services. It is anticipated that
a total of 45 antennas will be installed by the end of the first half of 1998.
The system is designed to be flexible, allowing for timely installation of
antennas in regional sites without changing the existing network configuration.
Additional channel units can be quickly installed at existing sites should
demand increase.
The network will have full mesh topology allowing customers in remote sites
to connect with other remote sites without going through a central hub station,
thus avoiding a "double-hop" on the satellite. This offers considerable
improvement over traditional "star" configuration satellite-based systems.
In order to satisfy the demands of the corporate market, Teleport-TP
intends to install antennas of 2.4 meter diameter for specific corporate
customer applications. These antennae will be supplied by the current network
provider, Scientific-Atlanta, and will be configured to offer the same
functionality as the larger antennae connected to the public network providers.
It is anticipated that Teleport-TP will either sell or lease these antennae to
the end-user customer.
In addition, the Teleport-TP long distance network interconnects with
Rostelecom for the delivery of calls to locations where Teleport-TP does not
have its own facilities.
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MTR-SVIAZ
MTR-Sviaz, which commenced operations in November 1996 and had
approximately 700 lines connected as of December 31, 1997, provides local,
national and international services to both corporate customers and the Internet
market. MTR-Sviaz uses leased circuits from a number of providers, access to the
Teleport-TP fiber cable facilities and the Mosenergo internal communications
network to terminate its calls. Teleport-TP uses the MTR-Sviaz facilities to
locate its Internet gateway, from which links to Internet service providers
(ISPs) are provided via leased and dial-up lines on the public network.
MTR-Sviaz also acts as a local provider to the Teleport-TP international and
long distance gateway.
MTR-Sviaz is a venture between Mosenergo (51%) and Technocom (49%) to
modernize and commercialize a portion of Mosenergo's internal telecommunications
network. MTR-Sviaz commenced operations in the third quarter of 1996 with the
initial network program encompassing the installation of a 10,000 line Siemens
exchange as a central switching node on the existing Mosenergo
telecommunications network. The switch is connected to Teleport-TP via fiber
optic cable, giving customers on the Mosenergo network direct access to the
digital long distance facilities of the Teleport-TP network. In addition to the
Mosenergo organization itself, other entities connected to the Mosenergo network
include commercial enterprises located at business centers on Mosenergo
premises.
Technocom's contribution to MTR-Sviaz includes provision of the switch to
service 8,000 Moscow city lines and 2,000 lines on the internal Mosenergo
network and the acquisition of 4,000 Moscow city lines. The switch and lines
were purchased by Technocom and are leased to MTR-Sviaz. See "-- Description of
Agreements -- Technocom Limited -- MTR-Sviaz." Further capital investment may be
required if subscriber demand is greater than anticipated. Customers on the
MTR-Sviaz network include Mosenergo (1,000 lines) and nine Internet service
providers.
OTHER ACTIVITIES
Cellular Services. Teleport-TP holds a 25% interest in Gorizont-RT, a
joint venture which has a license to provide GSM cellular service in the
Republic of Sakha, a semi-autonomous region of the Russian Federation. The other
parties to the joint venture are Sviazservice (24%) and Sakhatelekom, the local
Electrosviaz (51%). The network is currently operational in the city of Yakutsk
and service is expected to commence in the first half of 1998 in the cities of
Mirny and Neriungry. In addition to taking an equity interest in the project,
Teleport-TP will provide the long distance access for the venture through the
installation of Satelink antennae at the above three sites. In addition,
Teleport-TP has an agreement with Sakhatelekom for the provision of long
distance access. The telecommunications network equipment for the two additional
network sites has been bought by Technocom from Italtel and is being leased to
Gorizont-RT. As of December 31, 1997, Gorizont-RT had approximately 1,000
subscribers generating approximately $180,000 in revenues per month.
Teleport-TP paid an initial fee for its participation, and was required to
provide three antennae and two digital switches capable of serving 1,500
subscribers. Teleport-TP receives 27% of the income derived from new
installations, line rentals and local calling, and 80% of the income derived
from long distance and international calling. Sakhatelekom has committed to
provide a minimum of 90,000 minutes of traffic per month, at a minimum tariff of
$1.50 per minute. Gorizont-RT's license has a term of eight years and requires
that 20% coverage of the territory of the Republic of Sakha (and an installed
network capacity of 3,000 numbers) be achieved by the end of 1997 and 50%
coverage of the territory of the Republic of Sakha (and an installed network
capacity of 20,000 numbers) be achieved by the end of 2004. Gorizont-RT did not
meet the initial coverage requirement by the end of 1997, but management does
not believe that this will have any material impact on its future licensing
position.
Other Joint Ventures. Technocom anticipates that it may, either directly
or through Teleport-TP, enter into joint ventures with local partners in
connection with the development of local network infrastructure either wireline
or wireless, to complement the development of its long distance network.
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SUPPLIERS
The telecommunications equipment for the long distance network is being
supplied by Scientific-Atlanta. Under the initial supply agreement entered into
in November 1995, Teleport-TP was supplied with one master earth station and
seven medium and 23 small remote earth stations. An amendment to this agreement,
made in November 1996, provides for the supply of an additional 11 medium and
three small earth stations, in addition to upgrades to seven existing
facilities. Additional amendments to the agreement were made in 1997 to cover
the purchase of additional equipment and upgrades to existing facilities. The
master earth station is co-located, together with Teleport-TP's international
network facilities, on the grounds of the VVC. Technocom has commenced
preliminary discussions with Scientific Atlanta regarding expansion of the
network program in 1998. The equipment is owned by Technocom and leased to
Teleport-TP. See "-- Description of Agreements -- Technocom
Limited -- Teleport-TP -- Long Distance Network Facilities."
Technocom has used a variety of major international suppliers to acquire
equipment for the building of the Teleport-TP network for dedicated
international telecommunications services.
Lucent supplied the two initial Intelsat Standard-A earth stations and the
associated 5ESS international switch, along with a vendor financing package.
Hughes supplied the Eutelsat earth station, which is being financed 50% by
Hughes and 50% through a financing package arranged by Eutelsat.
The third Intelsat antenna and all remote antennas, together with other
operating equipment and software for the Satelink network, have been supplied by
Scientific-Atlanta and Siemens.
ECI Telecom of Israel has supplied the Digital Channel Multiplication
Equipment and modems for the Teleport-TP international and domestic long
distance service facilities.
Teleport-TP has contracted with Siemens AG of Germany for the supply of the
converter technology to ensure that the Teleport-TP network can interface
correctly with the many switching protocols used in the Russian public network.
Supply arrangements were concluded with Italtel for the provision of GSM
cellular switches and related equipment for the Gorizont-RT venture; this
equipment has been installed in the cities of Mirny and Neriungry.
BILLING AND TARIFFS
Billing
International Network Services. Teleport-TP bills the operators of the
networks it serves, who in turn are responsible for billing the individual
subscribers to those networks. For its foreign carrier relationships,
Teleport-TP has agreed with KDD, DT and AT&T the inter-administration settlement
process for international traffic settlements.
Long Distance Network Services. Teleport-TP invoices the operators of
public telephone, and private cellular, wireline and other networks, which in
turn invoice their own subscribers. Teleport-TP invoices all corporate users
directly.
Currency of Billing. Teleport-TP's bills are predominantly denominated in
U.S. Dollars. Installation and initiation charges, line rental and local and
long distance call charges must be paid in Roubles at the U.S. Dollar/Rouble
exchange rate on the date when the customer instructs its bank to make payment.
Currency regulations govern the currency in which international call charges may
be paid. Russian resident companies are required to pay in Roubles, while
non-resident companies are permitted to pay in Roubles or U.S. Dollars. By
denominating its bills in U.S. Dollars (and exchanging Roubles at the then
current U.S. Dollar/Rouble exchange rate), Teleport-TP limits the exchange rate
risk otherwise associated with transacting business in a foreign currency. See
"-- Risk Factors -- Country Risks -- Currency Risks."
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Tariffs
International Network Services. Teleport-TP is not subject to federal or
local regulation on tariffs. Teleport-TP sets its tariffs taking into account
those charged by its interconnect parties, as well as competitive pressures in
the marketplace. Teleport-TP maintains tariffs for international calls, private
line services for corporate clients and television transmissions. Teleport-TP
also has fixed line charges, for connection and rental fees, although these
currently do not contribute significantly to its revenues. However, as
Teleport-TP expands its activities and more private customers are connected to
its network, revenues from fixed line charges may become more significant.
The tariff schedule that Teleport-TP offers to its dedicated network
customers for international calls ranges from $1.35 to $2.60 per minute,
depending on the call's destination and the volume of calls placed by each
customer regardless of the time or day. Teleport-TP offers a range of discounts
for customers that exceed a certain targeted level of call minutes. Discount
packages are being developed for individual customers on a case-by-case basis as
the business matures. Teleport-TP provides international private leased circuits
to corporate customers commencing at $2,600 per month for point-to-point 64 kb/s
circuits, with prices determined by the amount of bandwidth and the destination
required by the customer.
International Television Broadcasting Services. The basic charge for use
of Teleport-TP facilities for television broadcasting is $803 for the first ten
minutes of broadcast time, and $25 for each additional minute. Due to the
administration required for each set-up, the customer is charged for a minimum
of ten minutes on each occasion.
Domestic Long Distance Network Services. Tariffs for the satellite-based
domestic long distance network services range between $0.20 and $1.50 per
minute, depending on the call's destination and the volume of traffic. The
tariffs for PAMA and IDR circuits will be determined by the distance to the
operator and will range between $10,000 and $40,000 per month. Tariff packages
are being developed for individual customers on a case-by-case basis as the
business matures and will incorporate, where necessary, the sale or lease of the
antenna as part of the package. Tariffs for private leased circuits to corporate
customers range between $3,000 and $5,000 per month for point-to-point 64 kb/s
circuits, with higher prices for higher bandwidth as required by the customer.
BECET INTERNATIONAL
OVERVIEW
BECET, in which the Company owns a 50% interest, currently operates the
only national cellular network in Kazakhstan. The other 50% of BECET is held by
Kazakhtelekom, the operator of the national telephone network in Kazakhstan. In
May 1997, the Kazakh government announced the sale of a 40% stake in
Kazakhtelekom, the state-owned telecommunications company, to Daewoo. However,
in March 1998, it was reported that Daewoo had sold a portion of its stake
(reported to be approximately 10% of Kazakhtelekom) to an unnamed third party.
The report did not indicate whether Daewoo proposed to sell or retain the
remainder of its stake in Kazakhtelekom. Kazakhtelekom recently received a
revised license specifically naming it as the exclusive national network
operator in Kazakhstan, and giving it a wide range of powers to carry out this
function.
The Company's primary objectives for BECET are to increase revenues and
cash flows through increased subscriber penetration, usage and network coverage.
Cellular service provides a rapid and relatively inexpensive way to overcome the
deficiencies of the wireline telecommunications infrastructure in Kazakhstan.
BECET's cellular telecommunications network in Kazakhstan currently consists of
separate systems in Almaty, South Kazakhstan (Chimkent), Karaganda, Pavlodar,
Akmola, Aktyubinsk, Kustanai, East Kazakhstan (Ust-Kamenogorsk), Atyrau, Taraz,
Petropavlovsk and Kyzl Orda. As of December 31, 1997, BECET's cellular
telecommunications network covered a geographic area of approximately 4,200,000
people, or "POPS", representing 24% of the total population, in 12 cities. BECET
commenced cellular service in September 1994 and has since experienced
significant subscriber and revenue growth. As of December 31, 1997, BECET had
11,102 subscribers, as compared to 6,957 subscribers as of December 31, 1996.
During the
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year ended December 31, 1997, BECET's subscribers generated average monthly
recurring revenues of $220 per subscriber.
See "-- Telecommunications Licenses -- BECET International" for a
description of the telecommunications license held by BECET.
BECET, which began operations in September 1994, generated net income for
the year ended December 31, 1997 of $7.2 million on operating revenues of $30.0
million, as compared to net income of $4.5 million on operating revenues of
$19.1 million for the year ended December 31, 1996. The subscriber base grew
from 2,882 at the end of 1995 to 11,102 at December 31, 1997. BECET accounted
for 26.2% of the Company's operating revenues for the year ended December 31,
1997.
STRATEGY
The Company believes the development of a market economy in Kazakhstan is
likely to increase demand for modern telecommunications services, including
wireless communications, as demonstrated by the subscriber growth experienced to
date by BECET. While the Kazakh telephone network is expected to be modernized
over time, the Company believes this is likely to be an expensive and lengthy
process. The Company believes that this environment provides BECET with the
opportunity to provide customers in Kazakhstan with a viable, high quality
alternative to wireline telephone service during the period it will take to
modernize the basic public network.
NETWORK AND FACILITIES
As of December 31, 1997, BECET's cellular telecommunications network in
Kazakhstan consisted of separate systems in Almaty, South Kazakhstan (Chimkent),
Karaganda, Pavlodar, Akmola, Aktyubinsk, Kustanai, East Kazakhstan
(Ust-Kamenogorsk), Atyrau, Taraz, Petropavlovsk and Kyzl Orda, and it met the
second (and final) "coverage" condition of its license from the KMOC by having
11 systems in place by December 31, 1996. Further installations remain dependent
upon many factors including the successful location of additional cell sites and
the results of marketing and other studies. As of December 31, 1997, investment
in BECET's cellular network infrastructure and support facilities totaled
approximately $28.9 million. BECET anticipates that its capital expenditure
program in 1998 will total approximately $8.2 million and will be used to
develop new installations, expand network capacity in the existing cities
(particularly in Almaty, Akmola and Atyrau), introduce pre-paid cellular
services and technical safeguards against cloning fraud, and to upgrade
equipment. The Company believes that this funding will all be provided by
internally generated cashflows.
All BECET systems are connected to the local telephone network and the
regional trunk switch in the cities where they are located. The system in Almaty
is also linked to an international trunk exchange and the Akmola system will be
linked to a new international switch in that city when it becomes operational.
Long distance and international calls are completed using the national and
international network of Kazakhtelekom. International calls are switched through
a digital exchange in Almaty.
Space for most BECET switches, cell sites and associated equipment is
provided by Kazakhtelekom. BECET also uses space in a Kazakhtelekom exchange
building in Almaty for office and administrative purposes. BECET has also
established, and will continue to establish, customer service centers in each
city in which service is offered. Virtually all space for customer service
centers and equipment not provided by Kazakhtelekom is leased, although BECET
has purchased its facilities in Taraz, one base station site and building in
Chimkent and a base station building in Karaganda. BECET is considering the
purchase of a central office building in Almaty, although suitable premises have
yet to be identified. Commencing March 1998, BECET is leasing new premises in
Almaty to combine its central retail store and provide a larger customer service
center.
In November 1997, the official political capital of Kazakhstan was moved
from Almaty to Akmola. Although BECET does have a presence in Akmola, the
long-term effect of this move on BECET's business remains uncertain. For
example, BECET could need to incur the cost of moving its administrative
functions to
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Akmola. Currently, both the number of customers in Akmola and the traffic
between Almaty and Akmola are increasing, but there is a risk that the move
could result in reduced cellular activity in Almaty in the future.
PRODUCTS AND SERVICES
BECET customers may choose from three types of cellular service: service
within a single city, service within Kazakhstan as a whole, and full service
including international access. Optional services include call waiting, three
party conferencing, call forwarding, voice mail and busy transfer. BECET also
markets cellular telephones and related equipment manufactured by Motorola.
BECET offers a roaming facility between the home city of the subscriber and
other cities served by the BECET network. In addition, as of December 31, 1997,
BECET had established roaming agreements with other cellular operators: (i)
Katel in Kyrgyzstan; (ii) Uzdunrobita in Uzbekistan, (iii) SCC in the Russian
city of Omsk, (iv) BEELINE in Moscow; and (v) Fora in St. Petersburg.
BECET will introduce a pre-paid cellular system by mid-1998, thereby adding
to its existing service offerings. In addition to further reducing the potential
for bad debts, this system will also permit BECET to market a portable unit
having fewer features and more economical pricing, thus enabling BECET to expand
into a new and potentially much larger market segment than that to which it has
addressed its marketing efforts to date.
BECET markets its cellular services through its own outside direct sales
force, which targets corporate and government accounts and high volume
consumers, together with customer service centers. Although subscribers to
BECET's services include individuals, BECET anticipates that for the foreseeable
future its services will appeal principally to businesses. While all market
segments are growing, BECET is experiencing the most significant growth in the
area of Kazakh businesses and individuals.
BECET does business under the registered trade name "ALTEL" and features
this name in all of its marketing and promotional activity. BECET uses a variety
of marketing channels to promote its services, including television, radio,
newspapers, billboards and sponsorship of concerts and other popular events.
BECET believes that both the identification of the "ALTEL" trade name with its
services, and its marketing activities, have been effective in stimulating
demand for its products and services. In order to reinforce this identification,
BECET is in the process of changing its corporate name to "ALTEL".
OPERATIONS
Billing and Tariffs
Subscribers are billed monthly in U.S. Dollars for access charges, airtime
charges, and toll charges and optional services. Government regulations
determine the currency in which invoices may be paid, which depends upon the
residency status of the customer. Domestic subscribers may pay only in Tenge,
while foreign subscribers are permitted to pay in Tenge or U.S. Dollars.
Historically, if the payment was made in Tenge, the subscriber was required to
convert the invoice amount to Tenge at the exchange rate effective on the date
of payment. Commencing March 1998, BECET is now required to issue a tax invoice
with each bill stating the amount in Tenge as of the billing date, and the
customer then pays that Tenge amount. BECET is therefore now exposed to a
greater currency risk since the Tenge could weaken against the U.S. Dollar in
the time between the dates the bill is issued (and the exchange rate set) and
the bill is paid.
Under the terms of its license, BECET is free to establish the rates for
all cellular services provided on its network, without prior approval from the
KMOC. BECET's pricing is subject to review by the Kazakh Anti-Monopoly
Commission. BECET currently employs one pricing structure for all of its
customers, but Kazakh government agencies are offered a 25% discount on
activation and a 35-40% discount on monthly access fees and airtime charges.
Currently, BECET has 141 subscribers in this category and management does not
expect this number to increase significantly over time.
A new subscriber currently pays a one-time activation fee of $474 or $336
and makes a security advance of $500, $250, or $100 to cover monthly fees and
usage charges depending on whether the subscriber has
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international, inter-city or local access, respectively. Non-residents of
Kazakhstan pay security advances of $850, $350 or $250 depending on whether the
subscriber has international, inter-city or local access. Monthly access fees
are $24 for local service alone, $48 for inter-city service and $78 for full
international service. Usage charges are $0.30 off-peak and $0.48 per minute
plus the applicable tariffs for international and inter-city calls. In addition,
there is a monthly fee of $6.00 for each optional service, including call
waiting, three party conferencing, call forwarding, itemized billing and busy
transfer. BECET also charges its subscribers a fee for the ability to roam to
other regional cities. BECET periodically offers special tariff-related
promotions which include discounts on certain elements of the tariff schedule
when packaged together. In addition, certain customers are offered volume
discounts on the tariff schedule. BECET is currently developing a simplified
range of tariff packages, effectively bundling the service offering and linking
call tariffs to the subscribers' calling patterns. It is anticipated that these
tariff packages will be available to the market during the first half of 1998.
All of the above tariffs include VAT at the rate of 20%.
Interconnection
BECET is dependent on its interconnection to networks operated by
Kazakhtelekom for the completion of its local, long distance and international
calls. BECET pays an annual license fee to the KMOC in lieu of all frequency or
interconnection charges, equal to up to 6% of its after-tax profits as
calculated by the Kazakh statutory audit. BECET pays Kazakhtelekom a tariff in
respect of local calls, and enjoys a preferential tariff in respect of long
distance and international calls which provides BECET with an average margin of
25% on such calls. Kazakhtelekom has recently been authorized, in connection
with its appointment as the exclusive operator of the Kazakh national network,
to levy interconnection charges, and to do this on a basis which yields it a
profit. There can be no assurance that Kazakhtelekom will not use this authority
to start assessing interconnection charges against BECET, notwithstanding that
BECET is already paying a license fee expressly stated to be in lieu of
interconnection charges. See "Risk Factors -- Risks Involving BECET
International -- Dependence on Interconnect Parties" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Year Ended December 31, 1997 Versus Year
Ended December 31, 1996 -- BECET International."
Suppliers
BECET has entered into a series of agreements with Motorola for the
purchase of the equipment required for its cellular network. See "-- Description
of Agreements -- BECET International."
OTHER OPERATIONS
PLD MANAGEMENT SERVICES LIMITED
PLD Management Services Limited ("PLDMS") is a wholly owned subsidiary of
the Company based in the United Kingdom that to date has performed certain
management, commercial and technical consulting, investor relations, new
business development, corporate finance and accounting services for and on
behalf of the Company. As a result of the Continuance, the Company has
transferred most of these functions to New York City. PLDMS has charged, and
will continue to charge, the costs it incurs in providing its services,
principally salaries, travel and office costs, to both the Company and its
subsidiaries.
COMPETITION
PETERSTAR COMPANY LIMITED
PeterStar is building and operating its business in a highly competitive
environment. PeterStar does not have an exclusive license to provide
telecommunications services in St. Petersburg, and a number of other entities,
including Russian companies and international joint ventures, are competing with
PeterStar for a share of the St. Petersburg telecommunications market. A number
of such companies (or their joint venture partners) are larger than PeterStar
and have greater access to capital or resources.
Although PTS has historically supported the development of PeterStar, PTS
and PeterStar must be regarded as competitors in the telephony segment. PTS can
offer its customers the same core services as
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PeterStar, notwithstanding (to date) the lower transmission quality and call
completion rates of the PTS network. Furthermore, PTS has recently completed the
installation of a modern fiber optic loop in St. Petersburg which, when
operational, will significantly enhance its ability to carry traffic and
therefore to compete with PeterStar (in particular for the carriage of cellular
traffic). In addition, PTS has commenced efforts to raise funds to further
modernize its network by accessing the international capital markets. Although
PeterStar believes that PTS would require substantial additional capital to
completely modernize its network, PTS, either alone or though Telecominvest, is
free at any time to enter into joint venture arrangements with other foreign
partners to modernize its network independently of PeterStar. While PeterStar
believes that there is a constructive working relationship between PeterStar and
PTS, there can be no assurance that PTS will not in the future start to compete
more aggressively with PeterStar and/or that future disputes between the
partners will not occur and/or that PTS will not seek another partner. See
"-- Risk Factors -- Risks Involving PeterStar Company Limited and Baltic
Communications Limited -- Dependence on Interconnect Parties" and "-- Ownership
and Management of Operating Subsidiaries -- PeterStar Company Limited."
The other major competitors to PeterStar are: (i) Global One, the
international joint venture between Sprint, DT, France Telecom and its Russian
partner, the telegraph office, which provides national and international voice
and data services to certain destinations; and (ii) Sovintel, a joint venture
between Rostelecom and GTS, which is currently based in Moscow, both of which
have been expanding their operations in St. Petersburg. Since they are generally
unable to compete effectively with PeterStar based on quality, these competitors
principally compete on the basis of price, thereby exerting some price pressure
on PeterStar. PeterStar reacted to the increased competition from GlobalOne and
Sovintel in 1997 through a combination of, among other things, tariff
reductions, volume discounts and dialing plans for large customers.
Other competitors include: (i) Combellga, a joint venture of CominCom,
BelgaCom, Alcatel Bell and MMTS which operates an international overlay network
in Moscow and has been attempting to penetrate the St. Petersburg market,
offering international access similar to BCL, as well as long distance access to
Moscow; (ii) JS Leivo, a joint venture of LenEnergo and Imatran Voima of Finland
which provides outgoing international access; (iii) St. Petersburg Teleport,
which offers only outgoing international services and offers lower priced
services; and (iv) Metrocom, which provides local data access in St. Petersburg.
In addition, the three cellular operators in St. Petersburg are competitors of
PeterStar because they offer local, long distance and international access. At
the same time, each cellular operator uses PeterStar to deliver its traffic. See
"-- PeterStar Company Limited -- Products and Services -- Cellular Services."
TELEPORT-TP
Teleport-TP is building and operating its business in a highly competitive
environment. Both in the market for international telecommunications services
and the pan-Russian long distance market, Teleport-TP faces competition from a
number of entities, including Russian companies and international joint
ventures. A number of such companies (or their joint venture partners) are
larger than Teleport-TP and have greater access to capital or resources.
International Network Services
In providing international circuits and direct dial services in Moscow,
Teleport-TP faces competition from a number of operators offering similar
services. Such operators, including Comstar, Combellga, Telmos and Sovintel, are
primarily targeting Russian and foreign businesses in the city, replicating the
services that PeterStar is providing in St. Petersburg. In terms of providing
international circuits, Teleport-TP faces direct competition from the Russian
Space Communications Corporation, the state owned operator which uses both
Intelsat and the Russian satellites, and indirectly from Rostelecom, which owns
capacity in and operates the international cable facilities connecting the
Russian Federation to the telecommunications networks of the major global
carriers.
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Long Distance Network Services
In providing long distance services, Teleport-TP faces competition from a
number of sources, both on a national and regional basis. Nationally,
Teleport-TP faces competition from Rostelecom in the provision of long distance
access to the local telephone companies. Rostelecom currently appears to support
the continued development of Teleport-TP and Rostelecom stands to gain from its
relationship with Teleport-TP, not only as a Teleport-TP shareholder but also to
the extent that expansion of the Teleport-TP network facilitates the
modernization of the Rostelecom network on a targeted basis. There are no other
commercial national networks of the same scale as the Rostelecom network,
although there are a number of private networks, including those of the
Ministries of Defense and Railways, that could, if funding were made available,
provide further competition to Teleport-TP.
At this time, it is unclear what impact the consolidation of the
government's telecommunications holdings and the auctions of significant stakes
in Sviazinvest will have on the Russian telecommunications market in general and
the Company in particular. See "-- Telecommunications in the Former Soviet
Union -- Telecommunications in the Russian Federation."
Teleport-TP also faces competition from other Western-financed entities
seeking to provide various forms of higher bandwidth voice and data
communications services throughout Russia, including: (i) TeleRoss, a subsidiary
of GTS, which is offering service in 12-15 cities using the Russian domestic
satellite systems; (ii) Rosnet, principally a provider of data network services;
(iii) Aerocom, a satellite and fiber optic-based carrier's carrier based in
Moscow, which provides international circuits via the Russian Express satellite
network; (iv) Belcom, a private carrier providing international point-to-point
leased circuits to the oil and gas companies in remote locations, and secondly
closed user group services to communities of interest; (v) Romantis, a satellite
based provider of services targeted at the corporate user; and (vi)
Tass-Loutsch, a satellite-based venture formed by Trans-World Communications and
ITAR-TASS to offer access to network operators.
BECET INTERNATIONAL
There is currently no other licensed cellular network operating in
Kazakhstan. A local "pirate" operator named Tolkyn at one time operated a
limited radio-based communications system, which was believed to have no more
than 200 subscribers in the city of Almaty. However, the government of
Kazakhstan appears desirous to establish a GSM network in Kazakhstan and to
license one or more parties to develop this. See "-- Telecommunications
Licenses -- BECET International." Until more details of the network and
licensing process are known, BECET is currently unable to assess the impact of
this potential development upon its business.
TELECOMMUNICATIONS LICENSES
PETERSTAR COMPANY LIMITED
In June 1996, PeterStar was granted a license, which superseded a license
granted in November 1994, for an eight year term expiring November 2004 to
provide local, national and international telecommunications services within St.
Petersburg and the surrounding region. One of the conditions of this license is
that access to long distance and international communications be through the
public network. Other licenses that have been issued to PeterStar include a
dedicated network license (expiring September 2001), a data communications
license (expiring May 2001), a telematics license (expiring May 2001) and a
videoconferencing license (expiring June 2001). Management believes that, so
long as they are being actively utilized, all such licenses will be renewed at
the end of their respective terms.
The main PeterStar license, governing the provision of public
telecommunications services, sets the number of lines which PeterStar may have
in St. Petersburg and the surrounding region at 106,000, and requires that
capacity equal to 74,200 lines be introduced by June 1999. Management of
PeterStar believes that the maximum and minimum number of lines are not strict
requirements but are instead designed to provide general guidance as to the
number of lines intended to be included on the system. As of December 31,
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1997, PeterStar had 114,774 lines, of which 85,948 were provided to cellular
operators. PeterStar does not believe that its license would be terminated or
re-negotiated, that it would be forced to reduce the number of its subscribers,
or that other penalties would be imposed, by reason of its exceeding its 106,000
line ceiling, but there can be no assurance that the RFCTI would not take a
different position.
The dedicated network license permits PeterStar to provide long distance
and international telephone transmission services to dedicated network operators
(such as BCL) in St. Petersburg and the surrounding region for a term expiring
in September 2001. This license therefore enables PeterStar to offer its clients
the potential cost efficiencies and synergies which come from working with
affiliated companies, as well as allowing PeterStar and BCL to explore ways to
work together to provide integrated solutions to customer needs. The dedicated
network license sets the number of lines which PeterStar may have at 30,000 and
requires that capacity equal to 21,000 lines be introduced by September 1999.
Once again, management of PeterStar believes that the maximum and minimum number
of lines are not strict requirements but are instead designed to provide general
guidance as to the number of lines intended to be included on the system. See
"-- Risk Factors -- Risks Involving PeterStar Company Limited and Baltic
Communications Limited -- Telecommunications Licenses."
BALTIC COMMUNICATIONS LIMITED
BCL's primary license permits it to provide long distance and international
telephone, facsimile and data transmission services within St. Petersburg and
the surrounding region for a term expiring on December 31, 2003. Management
believes that, so long as it is being actively utilized, BCL's license will be
renewed at the end of its current term. BCL is not required to route its long
distance traffic through the facilities of SPMMTS, and has its own international
facilities providing cable access. However, BCL's license does not permit it to
interconnect with PTS's public network. BCL is therefore working with PeterStar
to explore providing integrated long distance and international solutions for
customers. The license sets the upper limit of subscribers to the BCL network at
100,000 and requires that 70,000 of these be in place by January 2001. BCL had
approximately 1,200 lines as of December 31, 1997. Management of BCL believes
that the maximum and minimum line numbers are not strict requirements but are
instead designed to provide general guidance as to the number of lines intended
to be included on the system. See "-- Risk Factors -- Risks Involving PeterStar
Company Limited and Baltic Communications Limited -- Telecommunications
Licenses."
TECHNOCOM LIMITED
Teleport-TP
Teleport-TP has been issued two licenses for long distance and
international leased circuits for dedicated network services and for television,
and a data license providing for interconnection to the public network. In
addition, Teleport-TP has been issued an overlay license to offer local, long
distance and international voice and data services which are interconnected to
the public telephone network in the 40 regions (plus Moscow and St. Petersburg)
in which Teleport-TP's long distance network will initially be operational.
Management believes that, so long as they are being actively utilized, all of
the licenses will be renewed at the expiration of their respective terms.
License N4207, issued in October 1996 (replacing earlier licenses N100 and
N1661 obtained by Teleport-TP) authorizes Teleport-TP to provide long distance
and international telecommunications services to private networks within
Moscow's city limits and, to a limited extent, elsewhere in the Russian
Federation. No interconnection of the Teleport-TP network with the public
switched telephone network is permitted under this license. License N4207
expires in November 2004.
A second license, license N4437, issued in October 1996 (replacing an
earlier license N386), authorizes Teleport-TP to provide international leased
lines and circuits for the transmission of television signals within Moscow's
city limits. International lines may only be leased to customers holding an
appropriate license granted by the RFCTI. The license also provides that
Teleport-TP may lease up to 1,000 international circuits for the transmission of
television and telecommunications services. Teleport-TP believes that this
number of
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lines and circuits is sufficient to cover its requirements through the remainder
of the current term of the license. License N4437 expires October 28, 2004.
The data license, license N3654, authorizes Teleport-TP to provide data
transmission services in Moscow, St. Petersburg and other cities of the Russian
Federation and permits interconnection with the public network. The data license
expires in January 2002.
The overlay license, license N4199, permits Teleport-TP to offer local,
long distance and international voice and data services which are interconnected
to the public telephone network in the 40 regions (plus Moscow and St.
Petersburg) in which Teleport-TP's long distance network will initially be
operational. This permits Teleport-TP to deliver calls to all subscribers on the
public network in such regions. License N4199 expires in May 2001.
License N4207 limits the number of subscribers under such license to 15,000
and requires that 10,500 be in place by October 1999. License N4437, unlike its
predecessor N386, makes no reference to minimum subscriber targets. (License
N386 limited the number of subscribers to 1,700 and required that 1,190 be in
place by October 28, 1997.) License N3654 provides that the installed subscriber
capacity of Teleport-TP's data network should permit the connection of at least
70,000 subscribers by December 2000 and at least 100,000 subscribers by the end
of the license, but it does not impose any limit on the number of subscribers.
License N4199 provides that the total installed capacity of the long distance
network should be at least 100,000 numbers with at least 70,000 numbers
operational by May 2000. Management of Teleport-TP believes that these
subscriber provisions are not strict requirements, but are instead designed to
provide general guidance as to the number of subscribers intended to be included
on the system. Management further believes that, so long as a license is being
actively utilized, such license will not be terminated nor other sanctions
imposed if Teleport-TP failed to have the minimum number of subscribers in place
by any date specified or if it was to exceed the maximum number of subscribers
permitted by the license, but there can be no assurance that the RFCTI would not
take a different position, which in turn could result in the revocation of the
license or its renegotiation on unfavorable terms. See "-- Risk Factors -- Risks
Involving Technocom Limited and Teleport-TP -- Telecommunications Licenses."
MTR-Sviaz
MTR-Sviaz has been issued license N3644 which authorizes MTR-Sviaz to
provide local telephone service through interconnection with the public switched
telephone network within the city and region of Moscow. The license permits
connection only through the Mosenergo network. License N3644 is limited to a
maximum of 9,500 lines in the city of Moscow and a further 500 lines in the
Moscow oblast. License N3644 expires in December 2006. Under the terms of the
license, MTR-Sviaz is obligated to have at least 70% of the total number of
subscribers permitted under the terms of the license in place within six years.
MTR-Sviaz has also been issued license N2463 which authorizes MTR-Sviaz to
provide local and long distance leased line services within the city and region
of Moscow. Local and long distance lines may only be leased to customers holding
an appropriate license issued by the RFCTI. License N2463 is limited to a
maximum of 3,500 lines and expires in October 2001. MTR-Sviaz is obligated by
the terms of the license to have at least 70% of the total number of subscribers
permitted under the license in place by October 1999.
BECET INTERNATIONAL
BECET holds a 15-year renewable license issued in February 1994 for the
creation and operation of cellular communications networks in Kazakhstan for
local, long distance and international calling, using the 800 MHZ frequency band
and "AMPS" technology. Under the terms of the license BECET was required to
provide cellular services to Almaty and ten to twelve additional regional
centers by the end of 1996, a condition which has been met. See "-- BECET
International -- Network and Facilities."
The license specifies that BECET is to be the exclusive provider of
cellular service in Kazakhstan for the first five years of the license term. The
license also specifies that, if the KMOC determines that it will issue any other
license to create and operate a cellular network in accordance with GSM or
NMT-450 standards or
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any other technology, BECET will be given the right of first refusal with
respect to such license. Additionally, the license is transferable upon approval
by 75% of BECET's shareholders.
The exclusivity provision of BECET's license has recently been the subject
of scrutiny by various governmental agencies in Kazakhstan, and questions have
been raised as to its validity. In order to put the matter to rest, BECET has
been discussing with the KMOC substituting a new license with revised terms for
its existing license. While those terms are not finally negotiated, they would
likely include a combination of:
- eliminating the exclusivity provision (which terminates in any event in
February 1999);
- eliminating BECET's right of first refusal with respect to other
licenses, in favor of giving it a guaranteed right to participate in any
tenders or negotiations for a new license; and
- eliminating the ability to transfer the license,
in return for a new 15 year license to be valid from the date of issue.
Management of BECET believes that a resolution of the kind envisaged would
put to rest the issues that have been raised regarding BECET's existing license
and assure BECET a suitable environment in which to continue the development of
its business. Management also believes that, by virtue of its cost structure and
its market penetration to date, it is in a good position to compete with any
parties who are hereafter licensed to operate cellular networks in Kazakhstan,
even those which may enjoy the backing of the KMOC or other agencies of the
government of Kazakhstan. However, there can be no assurance that efforts to
limit the scope of its license or otherwise revise its terms in a way which
could be detrimental to BECET will not continue, or that BECET will in fact be
able to compete successfully with any new licensees. See "-- Risk Factors --
Country Risks -- Legal Risks" and "-- Risks Involving BECET
International -- Telecommunications License."
DESCRIPTION OF AGREEMENTS
PETERSTAR COMPANY LIMITED
Equipment. Lucent is PeterStar's primary network equipment supplier. In
recent years, both PeterStar and the Company have entered into equipment supply
agreements with Lucent for the purchase of telecommunications equipment,
including transmission systems, switching equipment and related software, for
the PeterStar network, including for the Vassilievski Island project.
During 1997, PeterStar signed contracts totaling approximately $16.7
million with Lucent for the supply of telecommunications switching equipment and
services for the development of its network and for the Vassilievski Island
project.
In 1996, contracts totaling $6.6 million were signed with Lucent for the
supply of telecommunications switching and transmission equipment and services
to PeterStar. The equipment is owned by PLD Leasing and leased to PeterStar for
a five year term, with PeterStar having the right to purchase the equipment at
the end of the term. Following the execution of the Supplemental Indenture, the
Company intends to convert the equipment lease with PeterStar into an
installment sales contract.
Cellular and Other Operators. Pursuant to interconnect agreements with
Delta, NW GSM and Fora, PeterStar provides interconnect service from the
cellular networks to the local network and a gateway for long distance and
international networks. Traffic interconnections are linked and made through
PeterStar's switch system. The interconnect agreements provide for the following
payments to be made by each cellular operator to PeterStar based on 2 Mb/s trunk
connections, monthly lease fees for each trunk, per-subscriber number fees and
per-minute tariffs. The Delta agreement is for a one year term, renewable for
additional one year periods by mutual agreement. The NW GSM agreement is for a
minimum period of two years, after which
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either party may terminate upon not less than three months prior written notice.
The agreement with Fora is for two years and may be extended by mutual agreement
for successive five year periods.
BALTIC COMMUNICATIONS LIMITED
The Company acquired 100% of the outstanding share capital of BCL on April
1, 1996 for $3.0 million plus an additional capital commitment of up to $1.5
million to cover certain existing liabilities payable to Mercury Communications
(for carrier charges) and to Eutelsat (for satellite circuit charges). Long-term
debt of BCL owed to Cable & Wireless was transferred to (i.e., became payable
to) NWE Cyprus as part of the transaction. In addition, BCL has contracted with
Cable & Wireless Communications of the United Kingdom, Telia of Sweden, and
Comstar and Sovintel of Moscow, for the provision of transit traffic services
through the BCL gateway switch in St. Petersburg.
TECHNOCOM LIMITED
Acquisition of Additional Interests in Technocom Limited. In November
1997, the Company increased its voting interest in Technocom to 80.4% through
the acquisition of additional interests from Plicom and Elite. See "-- Ownership
and Management of Operating Subsidiaries -- Technocom Limited."
Acquisition of Additional Interests in Teleport-TP. As a result of two
acquisitions in 1996, Technocom increased its economic interest in Teleport-TP
to 49.33%, its voting interest to 56%, and its control of the nomination of
directors on the five seat board of directors to three.
First, in May 1996, Roscomm, an entity in which Technocom beneficially owns
a 66.67% interest, increased its ownership interest in Teleport-TP from 5% to
10%. Roscomm purchased the additional 5% interest from VVC for a cash payment of
$2.0 million.
Second, in December 1996, Technocom acquired a 55.51% interest in
Technopark, which, in turn, holds a 7.5% interest in Teleport-TP and controls
the nomination of one director on the Teleport-TP board. The Technopark interest
was acquired in separate transactions from Elite (38% interest in Technopark)
and Plicom (17.5% interest in Technopark) for an aggregate cash payment of $3.0
million, pursuant to separate Sale-Purchase Agreements between Technocom and
each of Elite and Plicom. Immediately prior to transferring their interests to
Technocom, Elite and Plicom had purchased their interests from five shareholders
of Technopark.
Equipment Leases. Equipment purchased by Technocom for the various
projects undertaken by Teleport-TP is leased to Teleport-TP pursuant to lease
agreements between Technocom and Teleport-TP. Equipment purchased by Technocom
for the various projects undertaken by MTR-Sviaz is leased to MTR-Sviaz pursuant
to lease agreements between Technocom and MTR-Sviaz.
Teleport-TP -- International Network Facilities -- Intelsat. The original
two Intelsat antennas and the AT&T type 5ESS switch for Teleport-TP's operations
were supplied on a turnkey basis by AT&T for a total cost of approximately $12.8
million (inclusive of all financing charges) payable under a supplier financing
arrangement with AT&T over 48 months. Rostelecom, Technocom and Technopark
guaranteed Teleport-TP's obligations to AT&T, and Teleport-TP provided a
security interest in its assets, including receivables, as security for its
obligations under the financing. In July 1995, Technocom agreed to pay off the
outstanding balance on the AT&T debt of $8.0 million in Teleport-TP in return
for ownership of the assets. Technocom then leased the equipment back to
Teleport-TP over a ten year lease period. In addition, Technocom has purchased
additional network telecommunications equipment valued at $0.5 million which was
also leased to Teleport-TP.
Teleport-TP -- International Network Facilities -- Eutelsat. The Eutelsat
antenna was supplied on a turnkey basis pursuant to an equipment purchase and
installation agreement, dated August 25, 1995, between Technocom and Hughes for
a total cost of approximately $2.8 million, including equipment and services.
Fifty percent of the purchase price was financed by the supplier pursuant to a
three-year supplier credit agreement between Technocom and Hughes, supported by
a guarantee drawn on the Bank of Austria as security for Technocom's obligations
to Hughes. The remaining fifty percent of the purchase price was financed by a
five-
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year loan agreement, dated September 12, 1995, between Eutelsat and Teleport-TP,
which provides for no principal payments during the first 18 months. Pursuant to
the loan agreement, Eutelsat made disbursements under the loan directly to
Hughes. Teleport-TP's obligations to Eutelsat have been guaranteed by the RFCTI.
The funds were provided by Eutelsat on the condition that Teleport-TP will use
the TDMA earth station exclusively for the Eutelsat space segment for a minimum
continuous period of ten years from the start of the earth station's operation.
The equipment is being leased to Teleport-TP by Technocom under a lease
agreement, dated September 1, 1995, pursuant to which Teleport-TP, for a period
of eight years, will make monthly payments of $103,000 to Technocom (which sum
will cover the loan payments due to Eutelsat). Teleport-TP has the right to
purchase the equipment from Technocom at the end of the lease period.
Teleport-TP -- Long Distance Network Facilities. The initial equipment for
the satellite-based network, consisting of a master 18-meter antenna in Moscow,
and seven 7-meter and twenty three 4.5-meter remote antennas, was supplied by
Scientific-Atlanta for a total cost of $12.0 million, pursuant to a purchase and
installation agreement between Technocom and Scientific-Atlanta, dated November
16, 1995.
In November 1996, Technocom and Scientific-Atlanta extended this agreement
to provide for 11 new 7-meter and three new 4.5-meter remote antennas, IDR
equipment for seven of the existing 7-meter remote antennas, one IDR upgrade for
an 11-meter antenna in Kazan and an expansion of the 18-meter master antenna in
Moscow. The total cost of this new agreement is $14.0 million.
Two further amendments were made to the basic Scientific-Atlanta agreement
during 1997, to cover additional equipment and upgrades to existing facilities,
with a total cost of approximately $1.85 million.
All of the telecommunications equipment purchased under the
Scientific-Atlanta agreement is being leased to Teleport-TP by Technocom
pursuant to telecommunications asset leases.
In August 1997, the Company entered into an agreement with Siemens for the
purchase of converters and other telecommunications equipment related to the
long distance network for an aggregate purchase price of approximately three
million Deutsche Marks. The equipment is being leased by Technocom to
Teleport-TP.
MTR-Sviaz. Technocom's contribution to MTR-Sviaz included provision of,
among other things, a switch to service 8,000 Moscow city lines and 2,000 lines
on the internal Mosenergo network. Technocom also purchased 4,000 Moscow city
lines, for which it will be paid by MTR-Sviaz as part of the equipment lease
described below. Mosenergo's contribution to MTR-Sviaz includes the provision of
Moscow city lines at a discounted price, the premises for the switch and the
construction of the fiber optic connections between the Mosenergo network and
the Moscow city network. Mosenergo is also responsible for network design,
securing the numbering plan for the 4,000 city lines and supplying the technical
data for connecting the Mosenergo network to the city network. To meet its
contribution commitment, Technocom arranged for the purchase of a HICOM 300
switch for MTR-Sviaz pursuant to a purchase agreement, dated June 2, 1995,
between Technocom and Siemens, for a total cost of approximately DM 4.9 million
(approximately $2.9 million). Seventy percent of the purchase price is being
financed by the supplier, pursuant to a five-year supplier loan agreement
between Technocom and Siemens, supported by a guarantee drawn on the Bank of
Austria as security for at least fifty percent of Technocom's obligations to the
supplier. The HICOM 300 switch is being leased by Technocom to MTR-Sviaz under
an eight-year lease agreement, dated June 1, 1995, pursuant to which MTR-Sviaz
will make monthly payments to Technocom of $253,000. MTR-Sviaz will have the
right to purchase the equipment from Technocom at the end of the lease period.
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BECET INTERNATIONAL
BECET has agreed pursuant to an agreement entered into in May 1994 (the
"Motorola Purchase Agreement") to purchase from Motorola the infrastructure
equipment required for the cellular systems to be installed in Almaty and
eighteen other regional centers throughout Kazakhstan. The Motorola Purchase
Agreement requires that BECET purchase the equipment required for Almaty in all
events for the sum of $7.8 million. Management believes that BECET has now met
this requirement. The agreement permits BECET to not proceed with the purchase
of equipment for any of the other sites by so notifying Motorola, subject to
incurring a penalty if this is done less than a specified number of days before
the applicable equipment is scheduled for shipment. Management also believes
that it has complied with these requirements in reducing the total number of
installations in Kazakhstan to 12, including Almaty. Finally, the agreement
prohibits BECET from purchasing cellular system equipment from other suppliers
during the five year term unless the delivery by Motorola of any equipment
ordered by BECET is unreasonably delayed.
Pursuant to a separate agreement, Motorola has agreed to furnish services
with respect to the equipment, which will include system design, installation,
optimization, system engineering, program management, software maintenance and
on-site switch maintenance.
The term of both agreements is five years. Thereafter, each agreement will
automatically renew for consecutive five-year terms unless either BECET or
Motorola notifies the other of its intent to terminate such agreement at least
30 days prior to the expiration of the then current five-year term.
EMPLOYEES
PLD TELEKOM INC.
As of December 31, 1997, the Company had ten employees, nine of whom were
full-time.
PLD MANAGEMENT SERVICES LIMITED
As of December 31, 1997, PLDMS had five employees, four of whom were
full-time.
PETERSTAR COMPANY LIMITED
As of December 31, 1997, PeterStar had 392 employees, of whom 306 were
full-time. Of these employees, 390 were Russian nationals and two were
expatriate managers. None of its employees is subject to a collective bargaining
agreement. PeterStar believes that its relations with its employees are good.
TECHNOCOM LIMITED
As of December 31, 1997, Technocom and Teleport-TP had 9 and 103 employees,
respectively, all of whom were fulltime. All but two of these employees were
Russian nationals. None of Technocom's or Teleport-TP's employees is subject to
a collective bargaining agreement. Technocom believes that its relations with
its employees are good.
BECET INTERNATIONAL
As of December 31, 1997, BECET had 428 employees, two of whom were
part-time. Of these employees, 426 were Kazakh nationals and two were expatriate
managers. The number of employees involved in branch operations was 181. None of
its employees is subject to a collective bargaining agreement. BECET believes
that its relations with its employees are good.
BALTIC COMMUNICATIONS LIMITED
As of December 31, 1997, BCL had 84 employees, all of whom were full-time.
Of these employees, 83 were Russian nationals and one was an expatriate manager.
None of its employees is subject to a collective bargaining agreement, although
there is a union representative at BCL. BCL believes that its relations with its
employees are good.
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OWNERSHIP AND MANAGEMENT OF OPERATING SUBSIDIARIES
PETERSTAR COMPANY LIMITED
Ownership Structure
The Company holds its 60% interest in PeterStar through NWE Cyprus. It
acquired its interest at various times over the period 1992 - 96.
Prior to 1997, the other shareholders of PeterStar were Telecominvest (20%)
and Complus Enterprises Holding S.A. ("Complus") (20%). Telecominvest was a
joint venture between PTS and SPMMTS formed to act as a holding company for
their respective interests in a number of telecommunications ventures in
Northwest Russia. Telecominvest acquired its interest in PeterStar from PTS as
part of PTS' contribution to this joint venture. Complus was a 55% owned
indirect subsidiary of Cable & Wireless.
In 1996, a Commerzbank affiliate acquired a 51% interest in Telecominvest.
In May 1997, the holdings in PeterStar were restructured in connection with the
recapitalization of PeterStar, so that Telecominvest came to acquire an
additional 9% interest in PeterStar from Complus, while at the same time the
Commerzbank affiliate gave up its interest in Complus, which thereafter became
wholly owned by Cable & Wireless. Cable & Wireless then transferred its 11%
interest in PeterStar from Complus to PLD Holdings. Accordingly, as of December
31, 1997 PeterStar was owned 60% by NWE Cyprus, 11% by PLD Holdings, and 29% by
Telecominvest, which is owned 51% by the Commerzbank affiliate, 25% by PTS and
24% by SPMMTS.
Relationship with Other Equity Holders
Under the PeterStar foundation documents, a general meeting of shareholders
may take action through a simple majority of those present. Accordingly, since
the Company has a 60% interest in PeterStar, it should be assured of being able
to take whatever action it requires once a meeting is constituted. However,
representatives of 75% of the ordinary shares must first be present to
constitute a quorum. Thus, it is possible for Telecominvest (and Commerzbank,
through its control position in Telecominvest) to prevent action from being
taken by ensuring that there is no quorum at a shareholders meeting. Also,
pursuant to the PeterStar foundation documents, the shareholders have rights of
first refusal to purchase any shares which any shareholder wishes to transfer,
and to purchase any shares held by any shareholder who is bankrupt or goes into
liquidation.
PeterStar is dependent on PTS for the completion of most of its calls, and
the PeterStar network is linked to the PTS network, giving PeterStar access to
PTS's large local subscriber base. In addition, PeterStar is dependent on PTS's
buildings, ducts and tunnels in order to house its exchanges and to reach its
customers. To date, PTS has permitted PeterStar to house its exchanges in PTS
buildings and use its other facilities without paying rent or call charges.
Although PTS is required to do this under the terms of PeterStar's foundation
documents, the presently unforeseen refusal by PTS to honor this commitment for
free access or to condition access on unfavorable terms, or to restrict or
condition completion of calls from the PeterStar network, could have a material
adverse effect upon PeterStar, and hence upon the Company. PTS has been pressing
PeterStar to commence making payments for the use of its local lines and
negotiations have been conducted between the parties for the introduction of
local line rental charges. At present it is not possible to predict the outcome
of these negotiations, nor their impact upon PeterStar's results of operations.
Given the extent of the reliance of PeterStar upon PTS, PTS is clearly in a
position to exercise a high degree of influence over PeterStar's affairs as a
practical matter, even as an indirect minority shareholder.
Notwithstanding its ability to influence PeterStar's affairs, the Company
believes that PTS will continue to support the development of PeterStar's
business as presently planned, and that PTS's business objectives are basically
consistent with PeterStar's own plans.
Management
At the beginning of 1997, the board of directors of PeterStar consisted of
seven directors, three of whom were appointed by the Company, two by
Telecominvest and one by Complus. The seventh director was the General Director,
who is required to be nominated by the Company but approved by the general
meeting of
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shareholders. During 1997, the size of the board was increased to eight, with
three each being appointed by the Company and Telecominvest, and one being
appointed by PLD Holdings, which is wholly owned by Cable & Wireless. The eighth
director remained the General Director, who is still required to be nominated by
the Company subject to final approval by the shareholders.
Inasmuch as six of the eight directors must be present to constitute a
quorum, the possibility exists that the Telecominvest directors (or any three
other directors) may be able from time to time to prevent the creation of a
quorum. Once a quorum is present, however, the Company is currently reasonably
assured of a majority of the votes on the board, on the basis that both the
director appointed by PLD Holdings, which is wholly-owned by Cable & Wireless,
the Company's principal shareholder and therefore presumed to be likely to
support the Company in respect of matters coming before the PeterStar board, and
the General Director, who is a Company appointee, will vote with the three
Company-appointed directors. Even if only the PLD Holdings director votes with
the three Company appointees, the Company can still achieve a majority of votes
because the PeterStar foundation documents specify that the person designated as
Chairman of the Board (whom the Company is entitled to appoint) also has a
casting vote in the event of a tie vote among the board of directors. This
situation is not expected to change even if Cable & Wireless was to dispose of
its interest in the Company, as it has announced it is in active discussions to
do, because the interests of the Company and Cable & Wireless on matters coming
before the PeterStar board have tended (and are anticipated to continue) to be
identical. However, if (whether as part of its disposition of its interest in
the Company or otherwise) Cable & Wireless was to dispose of its interest in PLD
Holdings to an entity whose objectives or interests are not necessarily aligned
with those of the Company, then the Company's ability to control the PeterStar
board would be placed in question, and the Company would likely have to rely to
a significantly greater degree upon its right to veto specific initiatives at
the PeterStar board level. This right is set forth in a provision in the
foundation documents which specifies that certain significant actions of the
board of directors of PeterStar, including changing its bankers or auditors,
entering into related party transactions, making acquisitions or dispositions
not contemplated by PeterStar's business plan and giving guarantees and pledging
assets, require the affirmative vote of at least one of the three directors
appointed by the Company.
The day-to-day management of PeterStar is the responsibility of the General
Director and a management board which is composed of the PeterStar divisional
directors. The PeterStar operational divisions are: Sales and Marketing,
Finance, Technical and Operations and Administration.
The officers of PeterStar are as follows:
<TABLE>
<S> <C>
Vladimir A. Akulich.................. General Director
Stephen Gardner...................... Sales and Marketing Director (through April 1998)
Rick Macy............................ Commercial Director (commencing April 1998)
James Maude.......................... Finance Director
Alexander Belyakov................... Technical and Operations Director
</TABLE>
Vladimir Akulich became Acting General Director of PeterStar in March 1995
and was confirmed as General Director in May 1995. Previously, he had been its
Technical and Operations Director. After completing his education at the St.
Petersburg Institute of Communications in 1978, Mr. Akulich worked in the Radio
Communications Equipment Factory until 1982. In 1983, he began his professional
career in the telecommunications industry, holding positions of increasing
responsibility at PTS. His last position at PTS was as Chief Engineer of one of
five telephone nodes in the PTS network. Mr. Akulich is 39 years of age.
Stephen Gardner became Sales, Marketing and Customer Service Director on
January 1, 1996. Effective April 1998, he will become Vice
President -- Commercial, Russia for PLD. Previously, he was Commercial Director
of BCL, on secondment from Cable & Wireless, in St. Petersburg from February
1994 to December 1995. Prior to that time, he had been an employee of Cable &
Wireless in San Francisco since 1989 as a District Manager and in Los Angeles as
a Senior Sales Executive. Mr. Gardner is a graduate of the University of
Southern California, with a degree in business. Mr. Gardner is 31 years of age.
Rick Macy is expected to join PeterStar as Commercial Director in April
1998, replacing Stephen Gardner who will then become Vice
President -- Commercial, Russia for PLD. Prior to joining PeterStar,
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<PAGE> 43
Mr. Macy was the Commercial Director, Moscow for Millicom International
Cellular, where he was responsible for the sales and marketing of all of
Millicom's Russian cellular joint ventures. Previously, he was Area Sales
Manager for Harris Corporation, responsible for their European markets. He also
spent four years as an electronics technician in the U.S. Navy. Mr. Macy is 33
years old.
James Maude joined PeterStar as Finance Director in September 1996. Prior
to this he worked as an auditor for Deloitte and Touche, opening their office in
St. Petersburg in 1993. During this time he was responsible for world clients of
Deloitte and Touche such as RJR Nabisco. Before moving to Russia, Mr. Maude
worked for Deloitte and Touche in Malawi, Africa, and Binder Hamlyn in London.
Mr. Maude is 36 years old.
Alexander Belyakov became Technical and Operations Director in May 1996.
His previous positions were Acting Technical and Operations Director (beginning
in March 1995) and Chief Engineer of the Technical Department. Mr. Belyakov
graduated from the St. Petersburg Institute of Communications in 1978. From 1978
until 1982, he worked in "Mezhgorsvjazstroy", where his responsibilities were
the installation of optical fiber links and switching equipment. From 1982
through 1992, he worked in PTS as a leading engineer in digital
telecommunication systems. In January 1993, Mr. Belyakov joined PeterStar and
became Transmission Systems Manager. Mr. Belyakov is 40 years old.
Service Agreement
PeterStar entered into a service agreement, dated January 1, 1998, with NWE
Cyprus, pursuant to which, for a one-year term, NWE Cyprus will provide
management services to PeterStar, including advice and assistance with respect
to the design, implementation, operations, marketing and expansion of
PeterStar's network for a one-year term. NWE Cyprus invoices PeterStar quarterly
for these services in U.S. Dollars. PeterStar has had similar agreements with
NWE Cyprus for all years dating back to 1992.
PLD Telekom Inc. Representative Office
Following approval by the Company's Board of Directors in April 1997, the
Company has established a representative office of the Company in St.
Petersburg. The office is co-located at the premises of BCL. The Company employs
as its Representative Director Peter Owen Edmunds, formerly with PeterStar, and
two administrative staff members. Mr. Owen Edmunds, who was previously the
Deputy General Director and Sales and Marketing Director of PeterStar, formed
part of the initial team from the Company that helped formulate the development
of PeterStar commencing in April 1992. Prior to joining the Company, Mr. Owen
Edmunds served for 14 years as an officer in the British Army. He served in the
United Kingdom and Germany, ending his military career in Berlin on the Five
Nation Liaison team. Mr. Owen Edmunds underwent Russian language training in the
service and is a qualified Russian interpreter. Mr. Owen Edmunds is 39 years of
age.
TECHNOCOM LIMITED
Ownership Structure
The Company holds a 80.4% voting interest in Technocom, with the balance
being held by Plicom (14.57%) and Elite (5.03%). In November 1997, the Company
acquired: (i) 30 Technocom ordinary shares (or approximately 15.1% of the total
such shares issued) held by Plicom, an Irish company beneficially owned by the
family interests of Mr. Mark Klabin, for $18.5 million in cash; and (ii) 29
Technocom ordinary shares (or approximately 14.8% of the total such shares
issued) held by Elite, an Irish company beneficially owned by a trust advised by
Dr. Boris Antoniuk, for $6.25 million in cash and 1,316,240 shares of Common
Stock. See "-- Acquisition of Additional Interests in Technocom."
Technocom's principal asset is its equity interest in Teleport-TP. The
shareholders of Teleport-TP are Technocom (38.5%), Rostelecom (44%), Roscomm
(10%) and Technopark (7.5%). During 1996, Technocom's direct and indirect
interests in Teleport-TP were increased to 49.33% through: (i) the acquisition
of a 55.51% interest in Technopark, a 7.5% shareholder in Teleport-TP; and (ii)
the acquisition by
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<PAGE> 44
Roscomm (in which Technocom holds a 66.67% interest) of a 5% interest previously
held in trust for the VVC. The completion of these transactions by Technocom has
given Technocom the ability to control 56% of the voting shares in Teleport-TP
and nominate three of the five seats on the Teleport-TP board, thereby
permitting the consolidation of Teleport-TP's financial results into the
Company's consolidated financial statements under U.S. GAAP effective December
31, 1996. See "-- Risk Factors -- Risks Involving the Company -- Absence of
Complete Control; Dependence on Local Partners."
Technocom also owns a 49% beneficial interest in MTR-Sviaz. The remaining
51% is owned by Mosenergo, the Moscow city power utility. MTR-Sviaz is a joint
venture formed to modernize and commercialize a portion of Mosenergo's internal
telecommunications network. See "-- Technocom Limited -- MTR-Sviaz."
Technocom also holds a 50% interest in Rosh Telecom, a venture with ECI, an
Israeli equipment supplier. Rosh Telecom is the exclusive agent for ECI in the
Russian Federation.
Technocom also has an effective 100% of SCS. SCS acts as Teleport-TP's
marketing arm for satellite circuit capacity made available by Teleport-TP to
international television agencies with occasional broadcasting requirements.
Relationship with Other Equity Holders
In connection with the November 1997 acquisitions of portions of the
Technocom interests held by Plicom and Elite, the Company entered into a revised
put and call option agreement with Plicom, whereby Plicom has the right,
commencing June 30, 1999 and continuing until June 30, 2019, to require the
Company to acquire its remaining holding in Technocom, and the Company has the
right to require Plicom to sell such holding, for a purchase price of $17.5
million. In addition, the Company entered into a revised put and call option
agreement with Elite, whereby: (i) Elite has the right, commencing June 30, 1998
and continuing until June 30, 2019, to require the Company to acquire 2 of its
remaining shares in Technocom, and the Company has the right to require Elite to
sell such shares, for a purchase price of $1.0 million or, at Elite's option,
that number of shares of Common Stock which results from dividing $1 million by
the lower of $5.85 and the average closing price of such shares over the
preceding ten trading days; and (ii) Elite has the further right, commencing
June 30, 1999 and continuing until June 30, 2019, to require the Company to
acquire its 8 remaining shares in Technocom, and the Company has the right to
require Elite to sell such shares, for a purchase price based on the Company's
valuation of Technocom, provided that such purchase price shall not be less than
$6,689,655 nor more than $9,620,689. See "-- Risk Factors -- Risks Involving the
Company -- Limitations on Ability to Transfer Interests."
The success of Teleport-TP's business is very dependent upon the continuing
support of Rostelecom. Rostelecom holds a 44% interest in Teleport-TP, and Mr.
Oleg Belov, the general director of Rostelecom, is Rostelecom's representative
on the Teleport-TP board of directors.
Currently, Rostelecom is Teleport-TP's largest customer for its
international network services, accounting for approximately 27% of total
Teleport-TP revenues in 1997, as compared to 41% in 1996. Teleport-TP leases
Intelsat circuits to Rostelecom pursuant to a five-year contract which commenced
in December 1992 and Eutelsat circuits pursuant to a ten year contract which
commenced in September 1995. The Intelsat contract was renewed in December 1997
for an additional three year term, and is automatically renewable upon the
expiration of its initial term, unless terminated by either party.
Additionally, to date Rostelecom has supported all of Teleport-TP's plans
(and related license applications) for the expansion of its "Satelink" network
in Russia, even though Rostelecom is the principal provider of national and
international long distance service in Russia (see "-- Telecommunications in the
Former Soviet Union -- Telecommunications in the Russian Federation"), and thus
in direct competition with Teleport-TP (see "-- Competition -- Teleport-TP").
Rostelecom's motivation appears to be its equity interest in Teleport-TP as well
as the fact that Teleport-TP's network provides improved telecommunications
links with areas of the Russian Federation which Rostelecom is unable to serve
fully, or at all, and thus
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<PAGE> 45
increases traffic utilizing Rostelecom's own network. See "-- Technocom
Limited -- Teleport-TP -- Dedicated International Network Services -- Customers
and Marketing."
In 1997, it was reported that, notwithstanding its previously announced
plans to have Sviazinvest compete with Rostelecom, the Russian government had
consolidated its telecommunications holdings in Sviazinvest and Rostelecom by
transferring its shareholding in Rostelecom (38% of the common stock, and 51% of
the voting stock) to Sviazinvest. The balance of the shares in Rostelecom remain
in the hands of private investors. In April 1997, the government announced that
it was seeking to sell 49% of Sviazinvest in two auctions, one as to a 25% stake
open to Russian and foreign investors and the other as to a 24% stake open only
to Russian investors. In July 1997, the government announced that the 25% stake
had been sold to a consortium which included Oneximbank and Renaissance Capital,
for a purchase price of $1.875 billion. Following this auction, the Russian
government announced its intention to increase the size of the other stake being
sold to 25% minus one share. The schedule for the auction of the second stake
has not been announced, but it is expected to be completed by the end of the
third quarter of 1998. While it is not yet clear how the proceeds of this sale
will be employed, it is understood that the government wishes to have a
substantial part, if not all, of the proceeds allocated to its current budget
deficit. At the same time, Sviazinvest has announced plans to raise $400 million
through a Eurobond offering later in 1998. In light of all of the foregoing, it
is unclear what impact the consolidation of the government's telecommunications
holdings and the auctions of significant stakes in Sviazinvest will have on the
Russian telecommunications market in general and the Company in particular. See
"-- Telecommunications in the Former Soviet Union -- Telecommunications in the
Russian Federation."
In view of the importance of the relationship of Rostelecom to Teleport-TP
and the central position which Rostelecom plays in the Russian
telecommunications industry, Rostelecom is clearly in a position to exercise
considerable influence over Teleport-TP's affairs, notwithstanding the fact that
it holds a minority position in the company and its representative on the board
of directors is also in a minority. While there is no guarantee that Rostelecom
will continue to support the expansion of Teleport-TP, the Company knows of no
reason to believe, based on the nature of its support to date and the benefits
it receives from the relationship, that Rostelecom will not continue to support
Teleport-TP in the future. See "-- Risk Factors -- Risks Involving Technocom
Limited and Teleport-TP -- Dependence on Rostelecom as Customer; Necessity to
Further Develop Customer Base."
Management
Technocom is managed by a board of directors consisting of five members,
three of whom are designated by the Company, with Plicom and Elite, Technocom's
other shareholders, each nominating one member. The day-to-day management of
Technocom is the responsibility of Boris Antoniuk, who is the principal
executive officer of Technocom. The Company has identified a number of other
executives to work with Dr. Antoniuk, as a result of which efforts Mr. David
Castillo was appointed as Chief Operating Officer of Technocom in January 1998,
and Mr. Michael Maltby was appointed Finance Director of Technocom in February
1998. The Company has also provided, and will continue to provide, logistical,
engineering and project management support to the development of Teleport-TP's
satellite-based long distance network, the costs associated with which are borne
by Technocom.
In connection with the Company's acquisition of the additional interests in
Technocom, the Company entered into a amendment to its existing consulting
agreement with Plicom, amending and increasing the duties to be performed
thereunder, increasing the annual fee payable thereunder from $100,000 to
$200,000, providing for the payment of expenses reasonably incurred, and
specifying that the agreement will terminate once the Company has acquired the
remainder of Plicom's interest in Technocom. The Company also entered into an
amendment to its existing consulting agreement with Elite, increasing the annual
fee from $108,333 to $158,333. Separately, both Mr. Klabin and Dr. Antoniuk have
agreed not to compete with the Company in the field of telecommunications in the
former Soviet Union both while they are directors of Technocom and for two years
after they cease to be directors of Technocom. See "-- Risk Factors -- Risks
Involving the Company -- Dependence on Key Management."
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Boris Antoniuk has served as general manager of Technocom and Chairman and
Chief Executive Officer of Teleport-TP since 1992. Dr. Antoniuk has also served
as a Director of the Company since June 1997 and as Group Director -- CIS and
Russia of the Company since November 1997. He has many years' experience in the
telecommunications field, having worked for various government agencies and
trade delegations in the Soviet Union and Russia since 1974, including six years
as head of the U.S. department of the USSR State Committee for Science and
Technology in Moscow and three years as economic adviser to a deputy Prime
Minister of the USSR Council of Ministers. Since the economic liberalization of
Russia, he has been involved in a number of commercial ventures, including the
publishing of several Russian computer magazines. He also holds the post of
Deputy Chairman of Technopark, a subsidiary of Technocom.
David Castillo became Chief Operating Officer of Technocom and Teleport-TP
in January 1998. Prior to joining the Company, he was Country Manager of Russia
and the CIS for Dow Jones. From 1994 to 1996, Mr. Castillo was Project and
Development Director for Reuters Russia and CIS, and prior to that he was
Operations Director for Reuters in England. Mr. Castillo is 53 years old.
Michael Maltby became Finance Director of Technocom in February 1998. Prior
to joining the Company, he was the Financial Director of Belcel, a cellular
operator based in Minsk, Belarus. From 1995 to 1996, Mr. Maltby was a Financial
Systems Accountant for Comstar in Moscow. Previously, he was a chartered
accountant with Ernst & Young where he worked in the London, St. Petersburg and
Moscow offices. Mr. Maltby is 33 years old.
BECET INTERNATIONAL
Ownership Structure
The Company's 50% interest in BECET is held by WTC, a British Virgin
Islands corporation and a wholly owned indirect subsidiary of the Company. The
shares of WTC are held by the Company through NWE Cyprus. The other 50% interest
in BECET is currently held by Kazakhtelekom, a joint stock company which is
owned by the government of Kazakhstan and which operates the public telephone
network in that country (the authority to operate such network having been
recently confirmed by the grant to Kazakhtelekom of specific authority to act as
the exclusive operator of the public network in Kazakhstan and as representative
of the Kazakh government in international telecommunications matters). In May
1997, the Kazakh government announced that it had sold a 40% stake in
Kazakhtelekom to Daewoo. However, in March 1998, it was reported that Daewoo had
sold a portion of its stake (reported to be approximately 10% of Kazakhtelekom)
to an unnamed third party. The report did not indicate whether Daewoo proposed
to sell or retain the remainder of its stake in Kazakhtelekom. See "-- Risk
Factors -- Risks Involving BECET International -- Sale of Stake in
Kazakhtelekom" and "-- Relationship with Other Equity Holders."
Relationship with Other Equity Holders
The relationship between WTC and Kazakhtelekom is governed principally by
the terms of a joint venture agreement entered into in December 1993. The
agreement sets forth the respective capital contributions of the parties. In the
case of the Kazakh partner, these consisted of the cellular license and
frequencies, as well as all physical facilities required for the operation of
the cellular network. As required, WTC contributed cash, equipment, property and
services with an aggregate value of $20.0 million by February 1995. WTC has no
obligation to make any additional contributions. Should the board of directors
of BECET determine that BECET requires an additional capital contribution, then
each shareholder will be required to contribute its proportionate share of the
capital contribution or face dilution.
Each BECET shareholder has the same voting, distribution and liquidation
rights, except that upon a liquidation, WTC is entitled to receive out of any
distributions the first $20.0 million for its capital contribution plus any
subsequent capital contributions not matched by Kazakhtelekom.
Prior to February 4, 1999, neither party may sell, assign, pledge or
otherwise transfer its equity interest in BECET without the written consent of
the other party. After February 4, 1999, either party may transfer its equity
interest provided that the transferee agrees to be bound by the terms of the
Joint Venture Agreement.
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BECET and Kazakhtelekom entered into an interconnection agreement pursuant
to which Kazakhtelekom agreed to provide BECET with access to the public
switched telephone network in Kazakhstan for the fifteen year term of BECET's
current license free of charge (but subject to payment of certain charges to
local operators for carriage and termination of calls from BECET's network).
While there is no reason to suppose that Kazakhtelekom will not honor this
commitment, the loss of, or any significant limitation on its access to the
network could have a material adverse effect on the operations of BECET.
While WTC may have the power, pursuant to the management structure
described below, to direct the operations or determine the strategies of BECET,
management believes that it is unlikely, in view of the pivotal importance of
Kazakhtelekom to the business of BECET, that any significant initiatives would
be undertaken by WTC without the consent of Kazakhtelekom. To date,
Kazakhtelekom has not used its position to undermine initiatives proposed by
WTC, nor to cause BECET to take any action to WTC's detriment; however, there
can be no assurance that it will not do so in the future.
The sale of a 40% stake in Kazakhtelekom to Daewoo in May 1997 may result
in changes in the relationship between BECET and WTC, on the one hand, and
Kazakhtelekom, on the other, but the effects are not possible to predict at the
present time. The March 1998 report regarding the sale by Daewoo of a portion of
its stake (reported to be approximately 10%) to an unnamed third party also
increases uncertainty, as to the government's attitude towards Kazakhtelekom and
Daewoo's intentions with respect to the remainder of their stake. Additionally,
it is not known what effect on BECET, or its license or business, the recent
designation of Kazakhtelekom as the exclusive operator of the public network, or
the recent efforts by the KMOC to eliminate the exclusivity element of BECET's
license and to appoint new licensees, will have. All of these developments will
present new uncertainties and challenges for BECET. See "-- Risk Factors --
Risks Involving BECET International -- Sale of Stake in Kazakhtelekom" and
"-- Telecommunications License," "-- Telecommunications in the Former Soviet
Union -- Telecommunications in Kazakhstan" and "-- Telecommunications
Licenses -- BECET International."
In connection with the grant of its telecommunications license in 1994, WTC
agreed to lend the KMOC up to $3 million on commercial terms for use for various
KMOC projects. During 1995, the Company advanced $3 million to Monogram Finance
Group Limited ("MFGL") in exchange for a convertible promissory note due on
February 20, 2000. The note is convertible at any time prior to February 29,
2000 into common stock of MFGL representing 50% of its total issued and
outstanding common stock. Its sole asset is an agreement to acquire a 50%
interest in Monogram Telecommunications Limited, a Bermuda company ("MTL"). MTL
has an agreement to acquire 100% of an Irish company known as Kazakhstan
Telecommunications Development Corporation Limited ("KTDC"). KTDC has agreed in
principle with the government of Kazakhstan to assist the government in
connection with the privatization of Kazakhtelekom. While the Company believes
that this arrangement satisfies the commitment given by WTC to the KMOC, there
can be no assurance that the KMOC will not still call upon WTC to advance, and
that WTC will not be obligated to pay, the $3 million.
Management
BECET is managed by a board of directors consisting of six members, three
designated by Kazakhtelekom and three by WTC. WTC designates the Chairman of the
Board who has a casting vote in the event of a tie vote. At least four members
of the board are required to approve any of the following actions: amendment of
BECET's charter, dissolution, voluntary bankruptcy, approval of the annual
budget, acquisition of assets or businesses in excess of $5 million or any
disposition or transfer of the BECET license, other investments in excess of $1
million or incurring indebtedness in excess of $2 million. These arrangements
cannot be changed without WTC's consent. Accordingly, while there may be some
question about the enforceability of these arrangements, WTC believes that it
has the ongoing ability to make all significant strategic, operating, financing
and investing decisions on behalf of BECET through the arrangements described
above, although it is not likely that it would choose to take action without the
approval of Kazakhtelekom.
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BECET has two co-chief executive officers ("Co-CEOs") and a treasurer who
is also the chief financial officer ("CFO"), and may appoint other officers as
the board determines. In addition, BECET has a chief Kazakh financial officer
("CKFO") who reports directly to the CFO and who is responsible for accounting
matters under Kazakh law as well as serving as a liaison between BECET and the
Kazakh tax authorities. One of the Co-CEOs and the CKFO are appointed by the
directors who are designees of Kazakhtelekom and the other Co-CEO and the CFO
are appointed by the directors who are designees of WTC. The Co-CEO appointed by
the WTC directors has the ultimate responsibility for the management of BECET,
subject to the authority of the board of directors.
The officers of BECET are as follows:
<TABLE>
<S> <C>
Rex Power........................... Co-Chief Executive Officer
Maxut Sauranbekov................... Co-Chief Executive Officer
Tamara Darcy........................ Acting Chief Financial Officer (through April 1998)
Michael Leaver...................... Chief Financial Officer (commencing April 1998)
Natalia V. Sauranbekova............. Chief Kazakh Financial Officer
</TABLE>
Rex Power became Co-Chief Executive Officer of BECET in June 1997. He is a
registered chartered engineer and a registered European engineer. Prior to
joining BECET, he worked for Cable & Wireless for over 30 years, mostly in
overseas assignments, including management positions in Nigeria, Saudi Arabia
and Macau. Additional positions with Cable & Wireless included Regional Business
Manager for the Bermuda, Caribbean and Atlantic Islands Region and General
Manager, Eastern Russia/Director, Special Projects in the Northeast Asia Region,
Hong Kong and Japan. Mr. Power is 50 years old.
Maxut Sauranbekov became Co-Chief Executive Officer of BECET in June 1997.
He joined BECET in October 1994 as Vice President for Marketing, Sales and
Customer Service and then served as Vice President for Corporate Affairs. Prior
to joining BECET, he worked for eight years in various other commercial and
financial ventures. Mr. Sauranbekov is 35 years old.
Tamara Darcy has served as Acting Chief Financial Officer of BECET since
January 1998, while BECET sought a new Chief Financial Officer. Ms. Darcy has
many years of accounting and financial consulting experience, including with DHL
Worldwide Express in Moscow and Glaxo Holdings in Moscow. She has also worked as
a financial consultant for BCL. Ms. Darcy, who graduated from the Technical
University in St. Petersburg with an engineering degree, is a Chartered
Management Accountant and is fluent in Russian and English. She will resign from
her position upon Michael Leaver becoming the Chief Financial Officer in April
1998.
Michael Leaver is expected to join BECET as Chief Financial Officer in
April 1998, replacing Tamara Darcy. From 1995 until joining BECET, he was Deputy
General Director of Uralwestcom, a cellular telephony operator in Yekaterinburg.
Previously, Mr. Leaver was the Financial Director for Kiev Tetra Pak, a
Ukrainian joint venture, for three years during its start-up phase. Mr. Leaver
is 41 years old.
Natalia V. Sauranbekova has more than seven years experience in finance.
For over three years, she was Financial Director at Kazryastechnika, which
provided research and planning services for the KMOC, and prior to that she was
an economist with a number of Kazakh government agencies. She is married to Mr.
Maxut Sauranbekov, one of the two Co-Chief Executive Officers.
BECET entered into a Consulting and Information Services Agreement with
WTC, dated January 30, 1995, pursuant to which WTC provided certain consulting,
information, management services and personnel expertise to BECET. In
consideration for these services, BECET paid WTC a fee of $25,000 per month plus
3% of BECET's monthly gross revenues. This agreement was terminated as of
December 31, 1997, and BECET is currently negotiating with the Company and
Kazakhtelekom for new consulting agreements. These contracts are anticipated to
provide for consulting fees, in the case of the Company, of $25,000 per month
plus 3.4% of BECET's gross revenues, and, in the case of Kazakhtelekom, of
300,000 Tenge per month plus 1% of BECET's gross revenues, and to be effective
as of January 1, 1998, with a one year term automatically renewable for
successive one year periods unless terminated by either party.
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RISK FACTORS
This document contains certain forward-looking statements that are subject
to risks and uncertainties. Forward-looking statements include certain
information relating to political, social and economic conditions in the
countries of the former Soviet Union and the Commonwealth of Independent States,
the commencement of certain programs and the proposed offering of certain
services by the Company's operating subsidiaries, proposed changes in the
Company's corporate structure and centers of operations and interpretations and
actions of certain regulatory authorities, including in the United States,
Canada, Russia and Kazakhstan, as well as information contained elsewhere in
this Report where statements are preceded by, followed by or include the words
"believes," "expects," "anticipates" or similar expressions. For such statements
the Company claims the protection of the safe harbor for forward-looking
statements contained in the private Securities Litigation Reform Act of 1995.
Actual events or results may differ materially from those discussed in
forward-looking statements as a result of various factors, including without
limitation, those discussed elsewhere in this Report and in the documents
incorporated herein by reference.
COUNTRY RISKS
General. Foreign companies conducting operations through affiliates in the
Russian Federation and Kazakhstan face significant political, economic,
currency, legal and social risks. For example, a report released February 20,
1997 by the United States Embassy in Moscow on the commercial environment in the
Russian Federation listed the following general difficulties affecting trade and
investment in the Russian Federation, most of which are also encountered in
Kazakhstan and some or all of which could affect the ability of the Company or
its operating businesses to conduct or realize income from their businesses:
- ownership disputes
- high taxes, and a frequently changing tax regime
- high operating costs
- lack of systematic and accessible credit information
- corruption and commercial crime
- financial illiquidity of many Russian firms
- changing requirements from regulatory bodies
- lack of market information
- an infant commercial legal framework
- cultural and language differences
- infrastructure problems
- payments, arrears and frozen accounts
- frequent changes in governmental personnel
Political Risks. Since the breakup of the Soviet Union, the political
situation in the Russian Federation and Kazakhstan has been characterized by
uncertainty and instability.
In the Russian Federation, the political situation has been characterized
by tensions between the executive and legislative branches of the government and
efforts by the regions and autonomous republics of the Russian Federation to
gain a greater degree of independence (the most dramatic example of which was
the conflict in Chechnya). Lack of consensus between local and regional
authorities and the federal government often results in the enactment of
conflicting legislation at various levels and may result in political
instability. This lack of consensus may have negative economic effects on the
Company, which could be material to its operations. Communist and nationalist
parties wield strong influence in the lower house of Parliament (the Duma) and
have made gains in regional governorships which could result in a slow down or
reversal of the development of a free market economy.
During the transformation to a market-oriented economy in the Russian
Federation, legislation has been enacted to protect property against
expropriation and nationalization. However, a resurgence in nationalism could
result in pressures for the reduction or even elimination of non-Russian
ownership of Russian businesses, and there can be no assurance that such
recently enacted protections would be enforced in the event of an attempted
expropriation or nationalization. Legislation to restrict foreign ownership in
the telecommunications
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industry is introduced from time to time and, while not expected to become law,
is symptomatic of these increasingly nationalistic attitudes. Boris Yeltsin,
President of the Russian Federation, recently announced that he will not run for
re-election in 2000. The resulting change in leadership at that time could
result in political instability and substantial changes in government policies.
Any such matters could have a material adverse effect on the Company.
The political situation in Kazakhstan is characterized by one-man rule by
President Nursultan Nazarbayev who demonstrates considerable political power.
While such concentration of power may at times be perceived as providing a
stabilizing influence, it also increases the risk of nepotism, arbitrary
decision-making and significant policy changes in the event of succession. In
addition, Russia has substantial political and economic influence in Kazakhstan
and may seek to use such influence to further its own goals, which may be
inconsistent with the national interests of Kazakhstan and create political
instability in that country, which could have a material adverse effect on the
Company.
Economic Risks. Until recently, the economies of both the Russia
Federation and Kazakhstan were administered by the central authorities of the
former Soviet Union. Following the collapse of those authorities and the command
economy they managed, the governments of both the Russian Federation and
Kazakhstan sought to implement policies designed to introduce free market
economies into their respective countries. While these policies have met with
some success, the economies of both the Russian Federation and Kazakhstan have
been characterized by high unemployment, high rates of business failure, the
deterioration of certain sectors of the economy, high government debt relative
to gross domestic product and declining real wages. In both the Russian
Federation and Kazakhstan real economic improvement has been limited to specific
regions (the Moscow and St. Petersburg regions in Russia, and Almaty in
Kazakhstan). The Russian Federation is still experiencing a lack of political
consensus as to the scope, content and pace of free market reforms. No assurance
can be given that policies to introduce or support a free market economy will
continue to be implemented in either the Russian Federation or Kazakhstan, that
these countries will remain receptive to foreign investment or that the
economies of the Russia Federation or Kazakhstan will stabilize. The failure of
any of these to occur could have a material adverse effect on the Company. In
addition, the Russian Federation currently receives substantial financial
assistance from several foreign governments and international organizations. To
the extent any of this financial assistance is reduced or eliminated, economic
development in the Russian Federation may be adversely affected, and any
resulting difficulties in the Russian economy could have a material adverse
effect on the Company.
Russian businesses have limited operating history in free market conditions
and have had limited experience compared with Western companies with the
entering into and performance of contractual obligations. Accordingly, as
compared to Western companies, such businesses are often characterized by
management that lacks experience in responding to changing market conditions and
limited capital resources with which to develop their operations. In addition,
the Russian Federation has limited infrastructure to support a market system and
banks and other financial systems are not well developed or well regulated.
Businesses therefore may experience difficulty in obtaining working capital
facilities. Moreover, the Russian banking system has faced and may encounter in
the future liquidity crises as well as other problems arising as a result of
under-capitalization of the banking sector as a whole. A general Russian banking
crisis could have a material adverse effect on the Company's operations and
financial performance and on the ability of its customers to pay amounts due.
Currency Risks. The Russian Rouble and the Kazakh Tenge are not
convertible outside of the Russian Federation and Kazakhstan, respectively.
Within those countries, a market exists for the conversion of Roubles and Tenge
into other currencies, but it is limited in size and is subject to rules
limiting the purposes for which conversion may be effected. The history of
trading in the Russian Rouble and Kazakh Tenge against the U.S. Dollar has been
characterized by significant declines in value and considerable volatility.
Although the Russian Rouble and the Kazakh Tenge experienced relative stability
against the U.S. Dollar during 1996 and 1997, there is a risk of further
declines in value and continued volatility in the future. Historically, the
Company has largely been able to limit its exposure to declines in the value of
the Rouble and the Tenge because its operating businesses invoice their
customers in U.S. Dollars which is permitted under current Russian and Kazakh
regulations. The Company's customers then pay in local currency at the
then-current
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exchange rate to the U.S. Dollar. The Company's operating businesses have
experienced certain costs in exchanging local currencies for U.S. Dollars, but
to date these have not been material. Nonetheless, no assurance can be given
that the Company's operating businesses will continue to be able to bill
customers in U.S. Dollars or in local currencies in amounts determined by
reference to the value of the U.S. Dollar, or that they will continue to be able
to exchange local currencies for U.S. Dollars without significant difficulties,
delays or costs. In particular, BECET may face greater exchange risks as a
result of new Kazakh regulations regarding invoicing. See "-- BECET
International -- Operations -- Billing and Tariffs." Any of these developments,
in conjunction with further declines, or volatility, in the value of the Rouble
or the Tenge against the U.S. Dollar, could have a material adverse effect on
the Company. See also "-- Risks Involving the Company -- Currency Controls;
Restrictions on Repatriation of Payments; Prior Investments."
Legal Risks. Both the Russia Federation and Kazakhstan lack fully
developed legal systems. Russian and Kazakh law is evolving rapidly and in ways
that may not always coincide with market developments, resulting in ambiguities,
inconsistencies and anomalies, and ultimately in investment risk that would not
exist in more developed legal systems. Furthermore, effective redress in Russian
and Kazakh courts in respect of a breach of law or regulation, or in an
ownership dispute, may be difficult to obtain.
Risks associated with the Russian and Kazakh legal systems include: (i) the
untested nature of the independence of the judiciary and its immunity from
economic, political or nationalistic influences; (ii) the relative inexperience
of judges and courts in commercial dispute resolution, and generally in
interpreting legal norms; (iii) inconsistencies among laws, presidential decrees
and governmental and ministerial orders and resolutions; (iv) often times
conflicting local, regional and national laws, rules and regulations; (v) the
lack of judicial or administrative guidance on interpreting the applicable
rules; and (vi) a high degree of discretion on the part of government
authorities and arbitrary decision-making which increases, among other things,
the risk of property expropriation. The result has been considerable legal
confusion, particularly in areas such as company law, property, commercial and
contract law, securities law, foreign trade and investment law and tax law. No
assurance can be given that the uncertainties associated with the existing and
future laws and regulations of the Russian Federation or Kazakhstan will not
have a material adverse effect on the Company. In addition, there is no
guarantee that a foreign investor would obtain effective redress in any court.
No treaty exists between the United States and the Russian Federation or
Kazakhstan for the reciprocal enforcement of foreign court judgments.
Furthermore, the relative infancy of business and legal cultures in the
Russia Federation and Kazakhstan are reflected in the inadequate commitment of
local business people, government officials, agencies and the judicial system to
honor legal rights and agreements, and generally to uphold the rule of law.
Accordingly, the Company may, from time to time, confront threats of, or actual,
arbitrary or illegal revision or cancellation of its licenses and agreements,
and face uncertainty or delays in obtaining legal redress, any of which could
have a material adverse effect on the Company.
The Civil Code of the Russian Federation and the Law of the Russian
Federation on Joint Stock Companies generally provide that shareholders in a
Russian joint stock company are not liable for the obligations of the joint
stock company, and only bear the risk of loss of their investment. However, if a
company (an "effective parent") is capable of determining decisions by another
company (an "effective subsidiary"), and such capability is provided for in the
charter of the effective subsidiary or in a contract between the companies, and
if the effective parent gives obligatory directions to the effective subsidiary,
such effective parent bears joint and several responsibility for transactions
concluded by such effective subsidiary in carrying out such directions. In
addition, an effective parent is secondarily liable for an effective
subsidiary's debts in the event an effective subsidiary becomes insolvent or
bankrupt resulting from the action or inaction of an effective parent which is
capable of determining decisions of the effective subsidiary whether as a result
of the effective parent's ownership interest, pursuant to the terms of a
contract between the companies or in any other way. In such instances, other
shareholders of the effective subsidiary may claim compensation for the
effective subsidiary's losses from the effective parent which caused the
effective subsidiary to take action(s) or fail to take action(s) knowing that
such action(s) or failure to take action(s) would result in losses. Accordingly,
it is possible that the Company may be deemed to be an effective parent of
certain of its
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subsidiaries and therefore be liable in certain cases for the debts of its
effective subsidiaries. Such liability could have a material adverse effect on
the Company.
Russian laws regulating ownership, control and corporate governance of
Russian companies may, in some cases, provide limited protection to minority
shareholders. Disclosure and reporting requirements, and anti-fraud and insider
trading legislation have only recently been enacted and most Russian companies
and managers are not accustomed to such restrictions on their activities. The
concept of fiduciary duties on the part of management or directors to their
companies or shareholders is also new and is not well developed.
Social Risks. The political and economic changes in both the Russian
Federation and Kazakhstan since the break up of the former Soviet Union have
resulted in significant social dislocations, as existing governing structures
have collapsed and new ones are only beginning to take shape. The resulting
broad decline in the standard of living has often resulted in substantial
political pressure on the government to slow or even reverse the economic
policies currently being pursued. In addition, such decline in the standard of
living has led in the past, and could lead in the future, to labor and social
unrest. Such labor and social unrest may have political, social and economic
consequences, such as increased support for a renewal of centralized authority,
increased nationalism (with restrictions on foreign investment in the Russian or
Kazakh economy) and increased violence, any of which could have a material
adverse effect on the Company.
In addition, the local and international press have reported significant
organized criminal activity, particularly in large metropolitan centers,
directed at revenue-generating businesses, and an increased integration of
Russian organized crime with major international criminal organizations. A
substantial increase in property crime in large cities has also been reported.
Finally, the local and international press have reported high levels of official
corruption in the locations where the Company's operating businesses operate. No
assurance can be given that organized or other crime or claims that the Company
or any of its operating businesses has been involved in official corruption will
not in the future have a material adverse effect on the Company.
Official Data Reliability. The official data published by Russian federal,
regional and local governments and federal agencies, and by the Kazakh
government and its agencies, are substantially less complete or reliable than
those of Western countries, and there can be no assurance that the official
sources from which certain of the information set forth herein has been drawn
are reliable. Official statistics may also be produced on different bases than
those used in Western countries. Any discussion of matters relating to the
Russian Federation or Kazakhstan herein must therefore be subject to uncertainty
due to concerns about the completeness or reliability of available official and
public information.
RISKS INVOLVING THE COMPANY
History of Losses. The Company has reported net losses during each of its
years of operations and there can be no assurance that the Company will be able
to generate profits in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Capital Requirements. The Company's capital requirements arise in three
main areas. First, it may need to provide for the capital expenditures and
working capital needs of its operating businesses until such time as such
operating businesses become self-sustaining. To date, only BECET has achieved
that position. The Company has significant cash; however, the bulk of this
(representing the proceeds of the Senior Notes) is being held in escrow and can
only be released from escrow upon compliance with certain conditions. Those
conditions include a specific requirement that the funds be used solely to
acquire assets for use in a telecommunications business. This requirement means,
among other things, that these funds cannot be used for the working capital
needs of the operating businesses, or to pay for civil engineering and related
works required in connection with the installation of telecommunications
networks. In addition, the Company has found compliance with the conditions for
release burdensome, in that it is time consuming and expensive.
Second, the Company needs funds to acquire and/or develop new businesses.
Again, the funds in escrow can only be used for this to the extent that
equipment is being purchased; start up costs and working capital have to be met
out of other Company funds.
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Lastly, the Company has significant debt service requirements. Currently,
it is indebted under the Series A and Series B Notes to the Travelers Parties in
the amount of $15,420,000, which bears interest at an annual rate of 12%,
payable monthly in cash. This interest rate increases to 15% if the Company has
not raised $20,000,000 in additional equity by May 31, 1998. The Series A and
Series B Notes are required to be amortized at the rate of $1,000,000 per month
starting in July 1998. The Series B Notes, whose original principal amount is
$3,100,000, are due in full on September 30, 1998, and the Series A Notes, in
the original principal amount of $12,320,000, are due in full on December 31,
1998. In addition, the Company is obligated under the Senior Notes and the
Convertible Notes issued in June 1996. As of December 31, 1997, the value of the
Senior Notes on the Company's balance sheet was $95.7 million. These Notes
accrete at the rate of 14% per year until December 1, 1998, when interest on the
full accreted value of $123,000,000 is payable semi-annually thereafter in cash.
The first such semi-annual cash payment, amounting to $8,610,000, is due on June
1, 1999. The Senior Notes will accrete at 14.5% per year if the Company has not
raised $20,000,000 in additional equity by May 31, 1998. They come due in full
on June 1, 2004. The Convertible Notes (in the principal amount of $26,500,000)
come due on June 1, 2006, and bear interest, payable semi-annually in cash, at
the rate of 9% per year.
In addition, pursuant to the terms of the Travelers Warrants, under certain
circumstances additional warrants may be issued and/or the exercise price of the
Travelers Warrants may be reduced. In the event that the Company does not effect
any of the specified targeted reductions in commitment for the Series A Notes,
the holders of the Series A Notes will receive 30,000 additional warrants to
purchase shares of the Company's common stock on each date on which such
reduction was not made. In the event that the Company does not effect the
specified targeted reductions in commitment for the Series B Notes scheduled for
July 31, 1998 and August 31, 1998, the holders of the Series B Notes (which
otherwise come due on September 30, 1998) shall receive 16,000 additional
warrants to purchase shares of such common stock. Any additional warrants are
referred to as the "Additional Warrants." The Company could be required to issue
up to 182,000 additional 10-year warrants to purchase shares of Common Stock
under these arrangements.
The exercise price for the Travelers Warrants and Additional Warrants is
$8.625 per share, except that, if the Series B Notes are not repaid in full by
September 30, 1998, the exercise price of all warrants issued to the holders of
the Series B Notes becomes $0.01, and, if the Series A Notes are not repaid in
full by December 31, 1998, the exercise price of all warrants issued to the
holders of the Series A Notes also becomes $0.01. All of the warrants expire on
December 31, 2008. In addition, if the Series B Notes are not repaid in full on
September 30, 1998, then, commencing September 30, 1998 and on the last day of
each succeeding month until the Series B Notes have been repaid in full, the
holders of the Series B Notes shall receive 32,000 additional warrants to
purchase shares of the Company's common stock at a price of $0.01 per share. If
the Series A Notes are not repaid in full on December 31, 1998, then, commencing
December 31, 1998 and on the last day of each succeeding month until the Series
A Notes have been repaid in full, the holders of the Series A Notes shall
receive 70,000 additional warrants to purchase shares of such common stock at a
price of $0.01 per share. These default warrants (the "Default Warrants") have
an expiration date ten years after their respective dates of issue.
The issuance of Additional Warrants and/or the Default Warrants could
result in the issuance of a substantial number of additional shares of Common
Stock upon their exercise. In addition, any adjustment of the exercise price on
the Travelers Warrants, the Additional Warrants and the Default Warrants would
result in the issuance of the shares of Common Stock at a significant discount,
resulting in substantial dilution to the holders of the Company's Common Stock.
The Company may face significant challenges in meeting its obligations to
pay cash interest on the indebtedness referred to above, and in effecting its
repayment upon its maturity. See "-- Holding Company Structure; Barriers to
Realizing Cash from Subsidiaries."
Any or all of these matters may require that the Company raise funds in a
public or private equity or debt offering. If the Company is required to conduct
such an offering, its ability to do so on acceptable terms, if at all, will be
affected by several factors, including financial market conditions and the value
and performance of the Company at the time of such offering or refinancing,
which in turn may be affected by many factors,
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including economic and industry cycles. There can be no assurance that such an
offering can or will be completed on satisfactory terms.
Failure to generate sufficient funds for these matters in the future,
whether from operations or additional debt or equity financing, or difficulties
encountered in providing capital to its operating businesses, may require the
Company to delay or abandon some or all of its anticipated expenditures and
expansions, or in an extreme case to sell some or all of its assets, any of
which could have a material adverse effect upon the growth of the Company's
businesses and on the Company.
Effect of Substantial Leverage. As of December 31, 1997, the Company had
approximately $133.5 million of consolidated long-term debt and shareholders'
equity of approximately $126.8 million.
The degree to which the Company is leveraged could have important
consequences including, but not limited to, the following: (i) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate or other purposes may be
limited; (ii) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of interest on, and the principal of, its debt;
(iii) the agreements governing the Company's indebtedness contain certain
restrictive financial and operating covenants which could limit the Company's
ability to compete and expand; and (iv) the Company's substantial leverage may
make it more vulnerable to economic downturns, limit its ability to withstand
competitive pressures and reduce its flexibility in responding to changing
business and economic conditions. Certain of the Company's competitors currently
operate on a less leveraged basis and have significantly greater operating and
financial flexibility than the Company.
Holding Company Structure; Other Barriers to Realizing Cash from
Subsidiaries. As a holding company that conducts virtually all of its business
through subsidiaries, the Company has essentially no source of cash other than
distributions and other payments from its subsidiaries. In order to pay cash
interest on the Convertible Notes and the Series A and Series B Notes (and, in
the case of the Senior Notes, after December 1, 1998, when cash interest on the
Senior Notes commences to accrue) or the principal amount of the Notes and the
Series A or Series B Notes at maturity, or to redeem or repurchase the Notes or
the Series A or Series B Notes, the Company will be required to obtain the
necessary cash from its subsidiaries. As set forth hereinafter, there may be a
number of legal and other hurdles to be overcome in connection with obtaining
such cash from its subsidiaries.
The ability of the Company's subsidiaries to make payments to the Company
may be constrained by: (i) their own ability to generate sufficient cash from
their operations; (ii) the level of taxation, particularly corporate profits and
withholding taxes, in the jurisdictions in which they operate, see
"-- Taxation"; (iii) exchange controls and repatriation restrictions in effect
in the jurisdictions in which they operate, see "-- Currency Controls;
Restrictions on Repatriation of Payments; Prior Investments"; and (iv) the
ownership interests of other investors in the Company's subsidiaries.
Taxation. Taxes payable by Russian and Kazakh companies are substantial
and include value-added taxes ("VAT"), excise taxes, export taxes and income
taxes. The tax risks of investing in the Russian Federation and Kazakhstan can
be substantial. Obtaining the benefits of any relevant tax treaties can be
extremely difficult due to the documentary and other requirements imposed by the
Russian and Kazakh authorities and, in the case of Kazakhstan, the unfamiliarity
of those administering the tax system with the international tax treaty system.
In addition, a recent instruction issued by the Russian State Tax Service
mandates full withholding regardless of tax treaty status and requires the
recipient to seek to obtain a refund for withholding in excess of treaty
amounts. The need to deal with these issues may negate or impair tax planning
initiatives undertaken by the Company to reduce its and its subsidiaries'
overall tax obligations. Furthermore, the taxation systems in the Russian
Federation and Kazakhstan are at an early stage of development and are subject
to varying interpretations, frequent changes and inconsistent and arbitrary
enforcement at the federal, regional and local levels. In certain instances, new
taxes have been given retroactive effect.
Technocom established a representative office in Moscow in October 1995 and
registered this office with the relevant Russian tax authorities. As a result of
this, Technocom became subject to profits and other
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Russian taxes as of such date. Inasmuch as Technocom operated to some extent in
the Russian Federation prior to this date, without clarifying its tax status
with any Russian taxing authority, it is also possible that tax officials may
take the position that Technocom may be subject to Russian taxes with respect to
the period before October 1995. See "-- Country Risks -- Legal Risks."
Currency Controls; Restrictions on Repatriation of Payments; Prior
Investments. While applicable legislation in both the Russian Federation and
Kazakhstan currently permits the repatriation of profits and capital and the
making of other payments in hard currency, the ability of the Company to
repatriate such profits and capital and to make such other payments is dependent
upon the continuation of the existing legal regimes for currency control and
foreign investment, administrative policies and practices in the enforcement of
such legal regimes and the availability of foreign exchange in sufficient
quantities in those countries.
In addition, under current currency regulations in the Russian Federation
and Kazakhstan, while there do not appear to be additional administrative
requirements for the payment of dividends or interest on debt, specific licenses
from both the Central Bank and the National Bank of Kazakhstan are required for
the making of equipment lease payments to a foreign lessor and for repayments of
principal on debt with a term of more than 180 days. Failure to obtain such
currency licenses where required can result in the imposition of fines and
penalties. While the requirements for obtaining such licenses largely involve
the production of documentation, not only are the documentary requirements
themselves burdensome, but there can be no assurance that the entity granting
the licenses may not impose additional, substantive requirements for the grant
of a license or deny a request for a license on an arbitrary basis. See
"-- Country Risks -- Legal Risks." Furthermore, the time typically taken by the
Central Bank and the National Bank of Kazakhstan to issue such licenses can be
lengthy. In the case of the Central Bank, delays of up to one year or more in
the issuance of licenses have not been uncommon. The failure of the Company to
obtain, or any significant delay in the issuance of, such licenses could
substantially delay the time at which the Company may receive payments under
such leases. To address this problem, and based on the Company's belief that
currency licenses are presently not required in the Russian Federation for
payments under installment sales contracts, the Company has proposed providing
equipment to its operating businesses on an installment sales basis rather than
through leasing and, as a result of the Consent Solicitation, the Indentures
have been amended to permit the Company to make installment sales as well as
leases of equipment to its operating businesses. However, there is no assurance
that the Central Bank or other relevant Russian entity will not construe the
applicable currency legislation as requiring licenses for installment sales as
well as leases. Failure to obtain currency licenses, where required, can result
in the imposition of fines and penalties, significant delays in delivering
equipment to the Company's operating businesses and resulting difficulties in
generating cash flows from the Company's operating businesses in the Russian
Federation.
Finally, the Company's ability to repatriate distributions and other
payments in hard currency will be dependent upon the continued ability of the
Company's operating subsidiaries to bill their customers in U.S. Dollars or the
equivalent amount of local currency, as well as their ability to freely exchange
local currency receipts into U.S. Dollars. See "-- Country Risks -- Currency
Risks." There can be no assurance that, because of changes in Russian and Kazakh
currency regulations, the Company's ability to fully and/or on a timely basis
realize benefits from its operations in the Russian Federation and Kazakhstan
through the receipt of hard currency payments will continue.
Until 1995, most direct foreign investment in the Russian Federation
appears to have been made without licenses from the Central Bank, due to the
lack of clear guidelines from the Central Bank governing such investments.
However, in 1995 the Central Bank confirmed that licenses were required for such
direct foreign investments and that upon application it would issue licenses
specifically authorizing such direct foreign investments in Russian companies.
In response to private inquiries, the Central Bank also indicated that it would
consider retroactive licensing of previously made direct foreign hard currency
investments upon appropriate application. The Company is actively reviewing with
the managements of its operating subsidiaries its obligations to comply with
these licensing requirements, particularly on a retroactive basis. If the
Central Bank were to determine that the Company did not hold the required
licenses, this could give rise to substantial fines and penalties.
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Anti-Monopoly Committee Approval. Under Russian anti-monopoly legislation,
transactions which potentially influence competition in the Russian Federation
are subject to the prior consent of the Russian Anti-Monopoly Committee. The
Anti-Monopoly Committee generally has wide discretion to approve or disapprove
transactions falling within the scope of its authority, though in practice
transactions are rarely challenged. The time typically required by the
Anti-Monopoly Committee to review a proposed transaction varies between three
and four months. Failure to obtain prior consent may constitute grounds for the
Anti-Monopoly Committee to seek a court decision declaring the relevant
transaction null and void. In particular, transactions (including rental or
lease transactions) which involve the transfer of assets amounting to more than
10% of the assets of a transferor to a transferee, are subject to prior consent
of the Anti-Monopoly Committee.
This requirement on its face applies to companies leasing assets to other
companies, including Technocom and PLD Leasing, which would therefore need to
obtain such consent before leasing equipment to the Company's operating
subsidiaries. While the Company has been advised that such requirement should
not apply to such arrangements, there can be no assurance that the Anti-Monopoly
Committee will concur and accordingly that the Anti-Monopoly Committee will not
require such consent. Although the Company does not believe that equipment
leases could have an anti-competitive effect in the Russian Federation, no
assurance can be given that consent from the Anti-Monopoly Committee will be
granted. The refusal of the Anti-Monopoly Committee to give consent to any
equipment leases could have a material adverse effect upon the Company.
Absence of Complete Control; Dependence on Local Partners. The Company's
principal assets are its interests in its operating subsidiaries. The Company
holds a 60% ordinary share interest in PeterStar and a 50% interest in BECET.
The Company also has a 80.4% interest in Technocom, which in turn currently has
a 49.33% direct and indirect beneficial economic interest (56.0% voting
interest) in Teleport-TP and a 49% interest in MTR-Sviaz. While the Company may
have the ability, in the case of PeterStar, BECET and Teleport-TP, to direct the
operations or determine the strategies of such subsidiaries under the terms of
their respective constituent documents, the enforceability of some of the
Company's rights is uncertain. See "-- Country Risks -- Legal Risks." Further,
the other shareholders may, as a practical matter, be able to impede the
Company's ability to exercise effective control. In addition, the Company would
be unlikely to take significant initiatives without the approval, in the case of
PeterStar, of Telecominvest and PTS; in the case of BECET, of Kazakhtelekom;
and, in the case of Teleport-TP, of Rostelecom. See "-- Ownership and Management
of Operating Subsidiaries." Certain of the Company's operating subsidiaries are
dependent on continued access, on favorable terms, to the facilities of certain
of the Company's partners, and this may adversely affect the Company's ability
to rely on its legal rights to influence the conduct of the business of its
operating subsidiaries. Finally, in the case of PeterStar, any disposition by
Cable & Wireless of its 11% interest in PeterStar could adversely affect the
Company's ability to control the PeterStar board. The likelihood of such
disposition has increased significantly as a result of Cable & Wireless'
announcement that it is considering alternatives for disposing of its interest
in the Company. See "-- Ownership and Management of Operating
Subsidiaries -- PeterStar Company Limited." In summary, the absence of complete
legal control by the Company over the operations of PeterStar, BECET and
Teleport-TP, coupled with the dependence of these ventures on continued access
to the facilities of the Company's partners, could have a material adverse
effect on the Company. Finally, PeterStar, Technocom, Teleport-TP and BECET are
all restricted subsidiaries under the Senior Note Indenture and the Convertible
Note Indenture, and the Company is required by the terms of such indentures not
to permit its restricted subsidiaries to violate the various covenants contained
in such Indentures. There can be no assurance that the Company will always be in
a position to comply with this obligation, and its failure to do so could cause
a default under the Senior Note Indenture or the Convertible Note Indenture.
Susceptibility to Political and Other Pressures. Although the governments
of the countries and regions in which the Company operates may be limited in the
extent to which they can legally direct the Company's policies, in practice they
may be able to exercise significant influence. As a consequence, not only may
the Company's activities be restrained if a governmental entity is not
supportive, but the Company may be forced to take action to support policies or
agendas of the government which are not in its commercial or other
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interests. In addition, in order to maintain good working relationships with its
partners, the Company may need to take certain actions which may not necessarily
be in its commercial or business interests. See "-- Risks Involving PeterStar
Company Limited and Baltic Communications Limited -- Dependence on PTS
Facilities."
Dependence on Key Management. The Company's various operating businesses
are managed by a small number of key management personnel, both expatriate and
local. PeterStar is dependent upon its general director, Vladimir Akulich, and
upon its expatriate managers, James Maude and Stephen Gardner. The Company also
relies heavily on the experience of Maxut Saurenbekov and Rex Power for the
technical guidance and operational and financial management of BECET. The
further expansion of the Technocom business depends upon the continued
involvement of Boris Antoniuk in the management of Technocom's affairs and those
of its subsidiaries. While Dr. Antoniuk is under contract to Technocom and the
Company, no assurance can be given that his services or the services of these
other key individuals will continue to be available to the Company's operating
subsidiaries. In addition, the Company is dependent on its core management team
of James Hatt, John Davies, Simon Edwards, Alan Brooks and Conor Carroll, as
well as Peter Owen Edmunds, who heads the Company's representative office in St.
Petersburg. Neither the Company nor its operating subsidiaries carry "key-man"
insurance with respect to these individuals. The Company could be materially and
adversely affected if any key management personnel should cease to be active for
any reason in the management at the corporate and/or operating subsidiary level.
Historical Dependence on Cable and Wireless plc. The Company is engaged in
developing various telecommunications businesses in challenging environments.
The scope of some of its projects, e.g. the development of a cellular network in
Kazakhstan and the development of a satellite-based long distance network across
the Russian Federation, requires both significant financial and human resources.
The Company has been able to draw, when necessary, on the worldwide expertise
(access to which is paid for on a case by case basis) of Cable & Wireless to
assist the Company's operating businesses in certain areas of their operations.
The Company and Cable & Wireless have entered into a support services agreement
which sets out the terms, on an arm's-length basis, under which the Company and
its subsidiaries have access to Cable & Wireless' resources. Cable & Wireless
has recently announced that it is involved in active discussions with a view
towards disposing of its stake in the Company, but that no definitive agreement
has been reached. If such a disposition occurs, no assurance can be made that
such support will continue to be made available to the Company.
Competition. The Company is developing and operating its businesses in
highly competitive environments. A number of companies compete with the
Company's operating businesses, many of which have access to greater financial
and technical resources than the Company. There can be no assurance that the
Company will be able to overcome successfully the competitive pressures to which
it is subject, both in the markets in which it currently operates and in markets
into which it might expand. Furthermore, in many instances the Company's
partners in its operating businesses are also potential -- and in some cases
actual -- competitors. For example, PTS has recently completed the installation
of a fiber optic network in St. Petersburg which will improve call completion
rates on the PTS network and could provide a serious alternative to PeterStar's
network and permit PTS to compete more effectively for business in St.
Petersburg. In addition, while Rostelecom appears to be generally supportive of
the development of Teleport-TP's long distance network, such network is in
direct competition with the national long distance network operated by
Rostelecom, and there can be no assurance that Rostelecom will continue to
support the development of Teleport-TP's network. Similarly, BECET's cellular
network in Kazakhstan could be seen as being in competition with the national
network operated by Kazakhtelekom. At this time it is unclear what impact the
consolidation of the Russian government's holdings in Sviazinvest and Rostelecom
and the sale of significant stakes in Sviazinvest to Russian and foreign
investors will have on the Russian telecommunications market in general and the
Company in particular, nor what impact the recently announced sale of a 40%
stake in Kazakhtelekom to Daewoo and the efforts by the KMOC to limit BECET's
exclusive license and permit more cellular operators in Kazakhstan will have
upon the Kazakh telecommunications market and the Company in particular. See
"-- Auction of Stakes in Sviazinvest" and "-- Risks Involving BECET
International." Finally, the increasing ability of Russian telecommunications
companies to access Western capital markets for their financing needs
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may reduce their reliance on the Company for financing and improvement of their
networks. Such reduced reliance may affect the Company's ability to exert
influence on its Russian partners in the operating businesses. See "-- Auction
of Stakes in Sviazinvest," "-- Telecommunications in the Former Soviet Union"
and "-- Competition."
Potential Conflicts of Interest. Cable & Wireless and each of the
Company's principal partners in PeterStar, BECET and Teleport-TP have interests
that may conflict with those of the Company.
Cable & Wireless, which holds an indirect 11% interest in PeterStar, has
other investments in the Russian Federation and other countries of the
Commonwealth of Independent States. PTS, which holds its interest in PeterStar
through Telecominvest and is the main provider of basic telephony services in
St. Petersburg, already competes to some degree with PeterStar for customers and
may increasingly become a substantial competitor with the eventual upgrading of
its telecommunications network. See "-- Competition -- PeterStar Company
Limited." Kazakhtelekom, the public switched telephone network operator and the
Company's partner in BECET, may be a significant competitor for BECET's cellular
operations when it improves the telephony services it provides in Kazakhstan by
upgrading its fixed wire telecommunications network, or if it should be awarded
one of the new cellular licenses the Kazakh government is considering issuing.
See "-- Competition -- BECET International." Rostelecom, the Russian
telecommunications company that is Technocom's principal partner in the
Teleport-TP venture, competes with Teleport-TP, both directly and indirectly
through joint ventures with other international companies in the provision of
telephony and related services. See "-- Competition -- Teleport-TP." Finally,
certain directors of the Company's operating subsidiaries also act as directors
or officers of its partners in the Russian Federation and Kazakhstan. See
"-- Dependence on Key Management."
In light of these competing interests, and, in particular, the extent of
the legal and practical control that the Company's partners have over the
affairs of the Company and its operating subsidiaries, any or all of the
companies named above may use their influence, through the directors they
appoint to the boards of the Company and its operating subsidiaries or
otherwise, to benefit themselves or other businesses in which they have an
interest at the expense of the Company and its operating subsidiaries, subject
to such limited fiduciary duties as they may have under applicable law.
Moreover, such persons are not obliged (except for such obligations as they may
have under applicable law) to allocate to the Company and its operating
businesses corporate opportunities of which they become aware through the
directors referred to above or otherwise. No assurance can be given that the
fiduciary duty and corporate opportunity doctrines that exist under United
States law will provide adequate protections to the Company's shareholders
against the pursuit of such conflicting interests. Kazakh law currently provides
no protection in this regard and, while Russian corporate law has recently
introduced the concept of the fiduciary duties of corporate officers and
directors, the law is too new for any prediction to be made as to how much
protection it will, in fact, provide. The pursuit of conflicting interests by
the persons referred to above could have a material adverse effect on the
Company.
Auction of Stakes in Sviazinvest. In 1997, it was reported that,
notwithstanding its previously announced plans to have Sviazinvest compete with
Rostelecom, the Russian government had consolidated its telecommunications
holdings in Sviazinvest and Rostelecom by transferring its shareholding in
Rostelecom (38% of the common stock, and 51% of the voting stock) to
Sviazinvest. The balance of the shares in Rostelecom remain in the hands of
private investors. In April 1997, the government announced that it was seeking
to sell 49% of Sviazinvest in two auctions, one as to a 25% stake open to
Russian and foreign investors and the other as to a 24% stake open only to
Russian investors. In July 1997, the government announced that the 25% stake had
been sold to a consortium which included Oneximbank and Renaissance Capital, for
a purchase price of $1.875 billion. Following this auction, the Russian
government announced its intention to increase the size of the other stake being
sold to 25% minus one share. The schedule for the auction of the second stake
has not been announced, but it is expected to be completed by the end of the
third quarter of 1998. While it is not yet clear how the proceeds of this sale
will be employed, it is understood that the government wishes to have a
substantial part, if not all, of the proceeds allocated to its current budget
deficit. At the same time, Sviazinvest has announced plans to raise $400 million
through a Eurobond offering later in 1998. In light of all of the foregoing, it
is unclear what impact the consolidation of the government's
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telecommunications holdings and the auctions of significant stakes in
Sviazinvest will have on the Russian telecommunications market in general and
the Company in particular.
Regulatory Uncertainties. The Company's operating businesses operate in
uncertain regulatory environments. The Russian telecommunications system is
currently regulated by the RFCTI, and the Kazakh telecommunications system is
currently regulated by the KMOC, largely through the issuance of licenses.
Despite the 1995 enactment of the Telecommunications Law in Russia, considerable
uncertainty still exists as to the application and interpretation of many of its
terms. There is currently no comprehensive legal framework with respect to the
provision of telecommunications services in Kazakhstan, although a number of
laws, decrees and regulations govern or affect the telecommunications sector.
Further, the recently announced appointment of Kazakhtelekom as the exclusive
operator of the public telephone network in Kazakhstan and/or the recently
announced sale of a 40% stake in Kazakhtelekom to Daewoo, may lead to
restructuring of the telecommunications sector in Kazakhstan, the effects of
which are difficult to predict at the present time. See "-- Risks Involving
BECET International -- Sale of Stake in Kazakhtelekom."
While the RFCTI appears to have succeeded to all of the powers and
authorities of the Former MOC, it is not yet clear whether it will in fact
continue to operate in the same manner and wield the same influence as the
Former MOC. In particular, it is unclear whether the RFCTI will be able to
control the actions of local and regional governmental authorities who may
endeavor to impose new conditions upon operators in their respective
jurisdictions or areas of influence. As an example, significant delays in the
rollout of Teleport-TP's long distance network have been caused by
administrative difficulties experienced with local and regional governmental
authorities. See "-- Risks Involving Technocom Limited and
Teleport-TP -- Network Expansion."
The absence of adequate regulation in the telecommunications sector has
meant that decisions, including the granting and renewal of licenses, may at
times be made by governmental officials without reference to precedent or
procedure. The introduction of regulation of tariffs, or any other type of
regulation, could have far-reaching, and potentially materially adverse effects
on the Company.
Limitations on Ability to Transfer Interests. The terms of the PeterStar
and BECET shareholder and joint venture agreements, and the terms of the
shareholder and joint venture agreements relating to Teleport-TP and MTR-Sviaz,
impose restrictions on the Company's ability to transfer its interests in such
companies and give the other shareholders in such companies certain pre-emptive
and other similar rights. It is likely that the Company's ability to transfer
its interests in other future investments will be similarly limited. The
restrictions on, and other provisions relating to the sale of these interests,
and the lack of liquidity in the market for interests the Company now holds or
may acquire, may impede their resale by the Company. While it may be possible to
arrange for negotiated sales with one or more buyers, the Company may not be
able to realize value from these interests, or acceptable terms, in a timely
manner or at all.
Effect of Technocom Minority Shareholders' Put Options. The Company has
put and call agreements with Plicom and Elite which, following the November 1997
acquisition by the Company of a portion of each of their interests in Technocom,
beneficially own 14.57% and 5.03%, respectively, of the ordinary shares of
Technocom. Under the put and call option agreement with Plicom, Plicom has the
right, commencing June 30, 1999 and continuing until June 30, 2019, to require
the Company to acquire its remaining holding in Technocom, and the Company has
the right to require Plicom to sell such holding, for a purchase price of $17.5
million. Under its put and call option agreement with Elite, Elite has: (i) the
right, commencing June 30, 1998 and continuing until June 30, 2019, to require
the Company to acquire 2 of its remaining shares in Technocom, and the Company
has the right to require Elite to sell such shares, for a purchase price of $1
million or, at Elite's option, that number of shares of Common Stock which
results from dividing $1 million by the lower of $5.85 and the average closing
price of such shares over the preceding ten trading days; and (ii) the further
right, commencing June 30, 1999 and continuing until June 30, 2019, to require
the Company to acquire its 8 remaining shares in Technocom, and the Company has
the right to require Elite to sell such shares, for a purchase price based on
the Company's valuation of Technocom, provided that such purchase price shall
not be less than $6,689,655 nor more than $9,620,689. The existence of these
agreements could adversely affect the Company's ability to dispose of its shares
of Technocom.
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Management of Growth. The Company is at a relatively early stage of
development and has experienced, and may continue to experience, rapid growth
resulting from the continued development of PeterStar, BECET, Technocom and its
other operating businesses. The Company's future growth will require the Company
to manage its expanding operations and to adapt its operational systems to
respond to changes in the business environment. The expansion of the Company's
operations has placed and will continue to place significant demands on the
Company and its management to improve the Company's operational, financial and
management information systems, to develop further the management skills of the
Company's managers and supervisors and to continue to train, motivate and
effectively manage the Company's employees. The failure of the Company to manage
its growth effectively could have a material adverse effect on the Company.
RISKS INVOLVING PETERSTAR COMPANY LIMITED AND BALTIC COMMUNICATIONS LIMITED
Limited Operating History. PeterStar was formed in May 1992 and started
operating a modern digital telephone exchange network in St. Petersburg in
February 1993. BCL, which was acquired by the Company in April 1996, was also
formed in 1992 to provide international direct dial and private line services
for foreign companies in St. Petersburg. While both PeterStar and BCL generated
profits in the years ended December 31, 1996 and 1997, in view of their limited
operating history there can be no assurance that PeterStar or BCL will be able
to generate sufficient revenues or control their costs enough to remain
profitable in the future.
Telecommunications Licenses. PeterStar's business is dependent on the
maintenance of its principal telecommunications license which permits it to
operate a public telephone system in the Russian Federation for a term expiring
in November 2004. Other licenses that have been issued to PeterStar include a
dedicated network license (expiring September 2001), a data communications
license (expiring May 2001), a telematics license (expiring May 2001) and a
videoconferencing license (expiring June 2001). The main PeterStar license,
governing the provision of public telecommunications services, sets the number
of lines which PeterStar may have in St. Petersburg and the surrounding region
at 106,000, and requires that capacity equal to 74,200 lines be introduced by
June 1999. However, management of PeterStar believes that the maximum and
minimum number of lines are not strict requirements but are instead designed to
provide general guidance as to the number of lines intended to be included on
the system. As of December 31, 1997, PeterStar had 114,774 lines, of which
85,948 were provided to cellular operators. PeterStar does not believe that its
license would be terminated or re-negotiated, that it would be forced to reduce
the number of its subscribers, or that other penalties would be imposed, by
reason of its exceeding its 106,000 line ceiling, but there can be no assurance
that the RFCTI would not take a different position. The dedicated network
license permits PeterStar to provide long distance and international telephone
transmission services to dedicated network operators (such as BCL) in St.
Petersburg and the surrounding region for a term expiring in September 2001.
This license therefore enables PeterStar to offer its clients the potential cost
efficiencies and synergies which come from working with affiliated companies, as
well as allowing PeterStar and BCL to explore ways to work together to provide
integrated solutions to customer needs. The dedicated network license sets the
number of lines which PeterStar may have at no less than 30,000 and requires
that capacity equal to 21,000 lines be introduced by September 1999. Once again,
management of PeterStar believes that these maximum and minimum number of lines
are not strict requirements but are instead designed to provide general guidance
as to the number of lines intended to be included on the system. There can be no
assurance that the RFCTI would not interpret the provisions of the licenses
differently, which in turn could result in the revocation of the licenses or
their renegotiation on terms unfavorable to PeterStar.
BCL's primary license permits it to provide long distance and international
telephone, facsimile and data transmission services to private networks in St.
Petersburg and the surrounding region for a term expiring on December 31, 2003.
Management believes that, so long as it is being actively utilized, BCL's
license will be renewed at the end of its current term. The license limits the
number of subscribers to 100,000 and requires that 70,000 of these be in place
by January 2001. Management of BCL believes that the maximum and minimum line
numbers are not strict requirements but are instead designed to provide general
guidance as to the number of lines intended to be included on the system. As of
December 31, 1997, BCL had approximately 1,200 lines. BCL has no reason to
believe that its license would be terminated if it either exceeded 100,000
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lines or failed to have 70,000 lines in place by January 2001, but there can be
no assurance that the RFCTI would not interpret the license provisions
differently, which in turn could result in the revocation of its license or its
renegotiation on terms unfavorable to BCL.
No assurance can be given that either PeterStar or BCL will be able to
maintain its licenses, that the terms will not be interpreted, altered or
renegotiated to its disadvantage or that they will be renewed upon expiration.
See "-- Country Risks -- Legal Risks." The loss of, or a substantial limitation
upon the terms of, either PeterStar's or BCL's licenses could have a material
adverse effect on the Company.
Dependence on Interconnect Parties. PeterStar is dependent on PTS, SPMMTS
and other operators for the completion of most of its calls. The PeterStar
network is linked to the PTS network, which gives PeterStar access to PTS's
large local subscriber base. PeterStar is required by the terms of its license
to route all long distance and international calls through the public network.
PeterStar has been able to negotiate favorable tariffs for interconnection fees
and carrier charges with both PTS and SPMMTS. PeterStar's current interconnect
agreements with SPMMTS and PTS expire in November and December 1998,
respectively. The agreements provide for automatic extensions at the end of
their term unless otherwise terminated by either party. The interconnection fees
and carrier charges payable under the interconnect agreements are subject to
renegotiation between the parties from time to time. There can be no assurance,
however, that PeterStar will continue to have access to the PTS network or that
PeterStar will continue to receive such favorable tariffs. The loss of access to
such network or increases in such tariffs could have a material adverse effect
upon the Company.
Dependence on PTS Facilities. PeterStar is also dependent on PTS'
buildings, ducts and tunnels in order to house its exchanges and to reach its
customers. To date, PeterStar has not been required to pay rent to PTS to house
its exchanges in PTS buildings, nor has it paid rentals for ducts or tunnels.
Although PTS is required to provide certain of these facilities under the terms
of PeterStar's foundation documents, the presently unforeseen loss of access to
these facilities or the availability of access only on unfavorable terms could
have a material adverse effect upon the Company. PeterStar anticipates that it
will have to pay a local line rental charge to PTS commencing in 1998. The exact
fee, and the timing of the fee, has not yet been determined.
Expansion of Direct Dial Services. PeterStar has recently commenced
several projects designed to expand its direct dial services in St. Petersburg
and Northwest Russia. PeterStar has agreed with PTS to undertake an
infrastructure project centering on the replacement of analog exchanges with
digital exchanges for certain parts of the network on Vassilievski Island, a
city district in St. Petersburg. This project will require the conversion of
approximately 30,000 business and residential lines that are currently operated
by PTS, after which such lines become a part of the PeterStar network. In
addition, PeterStar plans to further enhance its transit network capabilities in
order to provide continued support to the cellular and other network providers
in terminating traffic in St. Petersburg and to the national and international
gateway. PeterStar also expects to increase its operating presence in Northwest
Russia through the targeted development of digital infrastructure to connect
business customers and develop operational relationships with the regional
telephone companies. These projects represent a major expansion of PeterStar's
operations which will require substantial capital and special management efforts
if they are to be carried into effect successfully. See "-- Capital
Requirements."
Pressure to Provide Residential Service. The Vassilievski Island project
also represents part of a continuing effort on the part of PTS to deal with
unanswered demand for improved residential service in St. Petersburg. The local
calling element of residential service is presently provided free of charge
(other than connection fees and line rental charges), and there has been
considerable political resistance to the introduction of time-based charges for
local calls. Even after calling charges have been introduced, it is likely to
remain a low margin business for the foreseeable future. Even though PTS has now
been privatized, the Company does not believe that the pressures on PTS to
improve residential service have lessened. Although the Company believes that
PeterStar has, following long and detailed negotiations with PTS, fulfilled its
commitment to the residential customers, there can be no assurance that PTS will
not continue to try to involve PeterStar in this effort, or that PTS' continued
support for PeterStar's access to the business market may be linked to
PeterStar's further commitment to develop the residential market in St.
Petersburg.
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RISKS INVOLVING BECET INTERNATIONAL
Limited Operating History. BECET was formed in January 1994 and commenced
commercial operations in September 1994. Although BECET generated profits for
the years ended December 31, 1996 and 1997, there can be no assurance that BECET
will be able to generate sufficient revenues or control its costs sufficiently
to remain profitable in the future.
Telecommunications License. BECET's business is dependent on the 15-year
renewable license issued in February 1994 for the creation and operation of
cellular communications networks in Kazakhstan for local, long distance and
international calling, using the 800 MHZ frequency band and "AMPS" technology.
Under the terms of the license BECET was required to provide cellular services
to Almaty and ten to twelve additional regional centers by the end of 1996, a
condition which has been met. The license specifies that BECET is to be the
exclusive provider of cellular service in Kazakhstan for the first five years of
the license term. The exclusivity provision of BECET's license has recently been
the subject of scrutiny by various governmental agencies in Kazakhstan, and
questions have been raised as to its validity. In order to put the matter to
rest, BECET has been discussing with the KMOC substituting a new license with
revised terms for its existing license. While those terms are not finally
negotiated, they would likely include eliminating the exclusivity provision
(which terminates in any event in February 1999). See "-- Telecommunications
Licenses -- BECET International." Management of BECET believes that a resolution
of the kind envisaged would put to rest the issues that have been raised
regarding BECET's existing license and assure BECET a suitable environment in
which to continue the development of its business. Management also believes
that, by virtue of its cost structure and its market penetration to date, it is
in a good position to compete with any parties who are hereafter licensed to
operate cellular networks in Kazakhstan, even those which may enjoy the backing
of the KMOC or other agencies of the government of Kazakhstan. However, there
can be no assurance that efforts to limit the scope of its license or otherwise
revise its terms in a way which could be detrimental to BECET will not continue,
or that BECET will in fact be able to compete successfully with any new
licensees. See "-- Country Risks -- Legal Risks" and "-- Telecommunications
License."
Network Expansion. BECET has engaged in a significant expansion of its
cellular network, from its initial base of operations in Almaty to a total of 12
cities throughout Kazakhstan as of December 31, 1997. The timing of such
expansion was dictated by the terms of the license, so that in some regions it
occurred at a time when economic activity in those regions was still at a
sufficiently low level as to raise a question as to whether, and if so, when,
cellular service in such regions will be commercially viable. Furthermore,
because of the distances involved, the difficulty of hiring, training and
supervising staff at remote locations and the underdeveloped nature of the
business infrastructure, such as banks and professional advisers in many of the
proposed locations for expansion, the establishment and provision of cellular
service will present significant challenges to the management of BECET, and
there can be no assurance that these challenges will be met successfully in all
cases. In addition, further network development is planned on a targeted basis
to address key market sectors. Failure to manage the BECET network, and any
future expansion of the network, successfully could have a material adverse
effect on the Company.
Sale of Stake in Kazakhtelekom. Since its formation, BECET has been 50%
owned, directly or indirectly, by the government of Kazakhstan. BECET believes
that the attitude of the government towards its operations has generally been
favorable and that this has derived in some part from the government's interest
in BECET. Currently, the government's 50% interest in BECET is held through
Kazakhtelekom, which until May 1997 was owned 100% by the government. In May
1997, the Kazakh government announced that it had sold a 40% interest in
Kazakhtelekom to Daewoo. However, in March 1998, it was reported that Daewoo had
sold a portion of its stake (reported to be approximately 10%) to an unnamed
third party. The report did not indicate whether Daewoo proposed to sell or
retain the remainder of its stake in Kazakhtelekom. Both of these transactions
create considerable uncertainty as to the government's attitude towards
Kazakhtelekom. There is also a question as to Daewoo's intentions with respect
to the remainder of their stake. In addition, the KMOC recently issued a revised
license to Kazakhtelekom specifically naming it as the exclusive national
network operator in Kazakhstan, and giving it a wide range of powers to carry
out this function. The Company has not yet fully assessed what impact these
matters may or will have on BECET and its business. There can be no assurance
that the government's favorable attitude towards BECET will continue to the same
degree. Any
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significant change in the government's attitude toward BECET could have a
material adverse effect on the Company.
Dependence on Interconnect Parties. Under the terms of its license, BECET
is entitled to interconnection free of charge to networks operated by
Kazakhtelekom, the public switched telephone network operator, for the
completion of its local, long distance and international calls. The loss of, or
any significant limitation on, its access to such network could have a material
adverse effect on the Company. Further, under its revised license, Kazakhtelekom
was directed to assess interconnection charges for connection to its network,
and to levy such charges on a basis which will yield it a profit. Kazakhtelekom
may try to use this authority to endeavor to assess interconnection charges on
BECET, notwithstanding the fact that its license exempts it from payment of such
charges. The imposition of such interconnection charges would impact BECET's
profitability, perhaps materially.
RISKS INVOLVING TECHNOCOM LIMITED AND TELEPORT-TP
Limited Operating History. Technocom was formed in January 1992. Until
1995, its principal business was Teleport-TP, which commenced operations in late
1993. In view of their limited operating history, there can be no assurance that
they will generate sufficient revenues or control their costs sufficiently to
become and remain profitable in the future. Nor can there be any assurance that
Technocom's other businesses, all of which have only just commenced operations
or are still in the planning stage, will become or remain profitable.
Telecommunications Licenses. Teleport-TP holds four licenses from the
RFCTI with respect to its operations. Two licenses expire in 2004, one in 2002
and one in 2001. One of the licenses, expiring in November 2004, limits the
number of subscribers under such license to 18,050 (15,000 within Moscow's city
limits) and requires that 12,635 be in place by November 1997. Another license,
expiring in October 2004, limits the number of subscribers to 1,700 and requires
that 1,190 be in place by October 28, 1997. The third license, expiring in
January 2002, provides that the installed subscriber capacity of Teleport-TP's
data network must permit the connection of at least 70,000 subscribers by
December 2000 and at least 100,000 subscribers by the expiration of the term of
the license, but it does not impose any limit on the number of subscribers. The
fourth license, expiring in 2001, provides that the total installed capacity of
Teleport-TP's long distance network should be at least 100,000 numbers with at
least 70,000 numbers operational by May 2000. Management of Teleport-TP believes
that the subscriber numbers are not strict requirements but are instead designed
to provide general guidance as to the number of subscribers intended to be
included on the system. Management further believes that, so long as a license
is being actively utilized, such license will not be terminated nor other
sanctions imposed if Teleport-TP failed to have the minimum number of
subscribers in place by the specified date or if it exceeded the maximum number
of subscribers permitted by the license, but there can be no assurance that the
RFCTI would not take a different position, which in turn could result in the
revocation of the license or its renegotiation on terms unfavorable to
Teleport-TP. The loss of, or the failure to obtain renewal of, or any
substantial limitation upon the terms of, any of Teleport-TP's licenses could
have a material adverse effect on the Company.
No assurance can be given that Teleport-TP will be able to maintain its
licenses, that the terms will not be interpreted, altered or renegotiated to its
disadvantage or that they will be renewed upon expiration. See "-- Country
Risks -- Legal Risks." The loss of, or a substantial limitation upon the terms
of, Teleport-TP's licenses could have a material adverse effect on the Company.
Although Teleport-TP's failure to satisfy any of the conditions of the
foregoing licenses could result in the revocation of such licenses, which in
turn could have a material adverse effect upon Teleport-TP and the Company, the
management of Technocom believes that this would be unlikely to occur as long as
Teleport-TP is otherwise providing needed services to its customers. The Company
also knows of no reason why any of these licenses will not be renewed upon their
expiration; however, the expiration of these licenses without renewal, or their
renewal on less favorable terms, could have a material adverse impact upon the
Company.
Dependence on Rostelecom as Customer; Necessity to Further Develop Customer
Base. Rostelecom accounted for approximately 27% of Teleport-TP's total
revenues for the year ended December 31, 1997, as compared to 41% for the year
ended December 31, 1996. Teleport-TP will seek, through the installation of its
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long distance network facilities, to develop a substantial alternative customer
base in order to reduce its dependance on Rostelecom; however, there can be no
assurance that it will be able to do so successfully. Thus, for the immediate
future Rostelecom will likely remain Teleport-TP's single largest customer.
While the risk of Rostelecom taking action which could harm Teleport-TP should
be ameliorated because of the fact that Rostelecom itself owns 44% of
Teleport-TP, any significant negative change in the relationship with Rostelecom
could have a material adverse effect upon both Teleport-TP and Technocom. See
"-- Network Expansion." Additionally, while Rostelecom currently utilizes
approximately 900 circuits, it is only contractually committed to utilize, on a
long-term basis, 100 circuits. Until Teleport-TP is able to develop a broader
customer base, any significant cutback by Rostelecom in the number of circuits
it utilizes could have a material adverse impact on Teleport-TP and Technocom.
In addition, at this time it is unclear what impact the consolidation of
the Russian government's holdings in Sviazinvest and Rostelecom and the sale of
significant stakes in Sviazinvest to Russian and foreign investors will have on
the Russian telecommunications market in general and the Company and Technocom
in particular. See "-- Risks Involving the Company -- Auction of Stakes in
Sviazinvest."
Dependence on MGTS Facilities. Teleport-TP is dependent upon the
facilities of MGTS for the operation of its existing network in Moscow, since a
substantial part of the fiber optic cabling it uses is laid in the ducts of MGTS
pursuant to agreements under which Teleport-TP pays MGTS for the use of such
facilities. The agreements between Teleport-TP and MGTS are one year agreements
which are subject to automatic one year renewals unless MGTS provides a timely
notice of cancellation. The current agreements expire on December 31, 1998.
Technocom knows of no reason why MGTS would refuse to renew these agreements.
However, the failure on the part of MGTS to renew these agreements or to honor
their terms could have a material adverse effect on Teleport-TP.
Dependence on MTR-Sviaz Facilities. Teleport-TP is dependent upon the
facilities of MTR-Sviaz to terminate certain traffic to users on the MTR-Sviaz
network. MTR-Sviaz uses leased circuits from a number of providers, access to
the Teleport-TP fiber cable facilities and the Mosenergo internal communications
network to terminate its calls. Teleport-TP uses the MTR-Sviaz facilities to
locate its Internet gateway, from which links to Internet service providers
(ISPs) are provided via leased and dial-up lines on the public network.
Furthermore, Teleport-TP acts as the long distance gateway for subscribers to
the MTR-Sviaz network. Teleport-TP and MTR-Sviaz have developed a carrier
services agreement to formally set out the relationship between the operators.
In addition, like many major Russian companies, Mosenergo experiences
liquidity problems from time to time. While the relationship with Mosenergo has
the potential to be mutually beneficial as described above, the increased
dependence on the Mosenergo network may make Technocom more vulnerable to
Mosenergo's liquidity problems, both in terms of pressure for financial support
for the expansion of its network, and in its ability to achieve prompt
settlement of accounts.
Network Expansion. Technocom, through Teleport-TP, has commenced a major
program for the provision to cities and other locations throughout the Russian
Federation of satellite-based long distance and international telecommunications
service (the latter through Teleport-TP's international gateway in Moscow).
Installation of the first phase of the long distance network program commenced
in 1996, with 29 sites installed as of December 31, 1997. The Company currently
plans to install equipment in a total of 45 sites by the end of the first half
of 1998. This represents a major expansion of Teleport-TP's operations which
will require substantial capital and special management efforts if it is to be
carried into effect successfully. See "-- Risks Involving the Company -- Capital
Requirements."
Further expansion of the network program beyond the initial 45 sites will
be defined by customer demand and, therefore, has yet to be fully determined.
The ability of the Company to expand such a program further will also be heavily
dependent on the efforts of management, as well as the availability of
additional capital on favorable terms or internally generated cash. Failure on
the part of Teleport-TP to manage the development of this network successfully
could have a material adverse effect on the Company.
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Teleport-TP has experienced significant delays in its network roll-out
program. Factors in these delays have included: (i) logistical difficulties
installing sites during the winter season; (ii) unsuitable local site
conditions; (iii) administrative difficulties with local and regional
governmental authorities; (iv) technical interconnect difficulties with local
switching exchanges; and (v) availability of suitable human resources. In
particular, notwithstanding the licenses granted to Teleport-TP by the Former
MOC, and administered by its successor, the RFCTI, local and regional
governmental authorities have imposed, and may continue to attempt to impose,
licensing and other conditions with respect to Teleport-TP's operations in their
respective jurisdictions or areas of influence. The need on the part of
Teleport-TP to comply with such unanticipated local regulations has
significantly delayed, and may continue to delay, the implementation of the
network program. See "-- Country Risks -- Political Risks" and "-- Legal Risks."
For the program to be commercially successful, Teleport-TP will have to
identify commercially viable markets for its services in each of the locations
which it intends to serve. In many areas of the Russian Federation the economic
conditions are still very weak and growth rates uncertain, and hence the ability
of a particular region to be, or to become within the short term, a successful
market for the network may be difficult to gauge. The results of operations will
be directly affected by Teleport-TP's success in identifying economically viable
locations for the development of its network.
Furthermore Teleport-TP has had, and in all likelihood will continue to
have, to form alliances with suitable regional partners. There can be no
assurance that the arrangements made so far, or any future arrangements, will
prove to be commercially viable.
Finally, Teleport-TP anticipates significant competition from other
companies seeking to serve the Russian long distance telephone market. While
Rostelecom, the principal long distance carrier in the Russian Federation,
appears to be supportive of Teleport-TP's development program, any decision by
Rostelecom to compete directly with Teleport-TP or to impede the implementation
of Teleport-TP's network could have a material adverse effect upon the program
itself and upon the Company. See "-- Dependence upon Rostelecom as Customer;
Necessity to Further Develop Customer Base." In addition, at this time, it is
unclear what impact the consolidation of the Russian government's
telecommunications holdings (including Rostelecom) in Sviazinvest and the
auctions of significant stakes in Sviazinvest will have on the Russian
telecommunications market in general and the Company in particular. See
"-- Risks Involving the Company -- Auction of Stakes in Sviazinvest."
ITEM 2. PROPERTIES
Executive Offices and Representative Office. As a result of the
Continuance, the Company has closed its executive offices in Toronto, where the
Company previously leased approximately 500 square feet of office space on a
month-to-month basis. The Company has established an executive office in New
York, New York, consisting of approximately 6,000 square feet of office space,
which it has leased through December 31, 1999.
The Representative Office of PLD is co-located with the premises of BCL in
St. Petersburg.
PLD Management Services Limited. PLD Management Services Limited, a wholly
owned English subsidiary of the Company, maintains an office in London, England
where it leases approximately 2,400 square feet of office space pursuant to a
long-term lease. In connection with the Continuance, the Company has moved many
of the functions performed by this office to the United States during 1997,
although the Company anticipates continuing to have an operational support
facility in England for the foreseeable future.
PeterStar Company Limited. PeterStar's principal office, which it leases
from PTS, is located on Vassilievski Island, St. Petersburg, Russia. Its
principal switches are also located at this site. PeterStar also occupies other
space in St. Petersburg which is used to house other switching and transmission
equipment.
Baltic Communications Limited. BCL's principal office, which it leases on
a commercial basis, is located in the Admiralteiski district of St. Petersburg,
Russia. BCL's commercial and technical facilities are located at this location.
Technocom Limited. Technocom uses Teleport-TP's office space and does not
own any real property. Teleport-TP leases premises, which also house its
administrative functions, at VVC. Teleport-TP's core
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network, comprising the switching facilities and the four Intelsat and Eutelsat
earth stations, are also located at VVC.
BECET International. BECET leases space for its administrative offices in
a Kazakhtelekom exchange building located in Almaty. It also leases space from
Kazakhtelekom for its switches, cell sites and associated equipment in
Kazakhstan, and leases other space in cities in Kazakhstan where it has
operations for customer service centers, although BECET has purchased its
facilities in Taraz. BECET is considering the purchase of a building in Almaty
so as to permit the consolidation of a number of operations housed in different
locations throughout the city.
The Company believes that its offices and the various facilities used by
PeterStar, BECET, Technocom and Teleport-TP are suitable and adequate for their
respective current businesses and operations.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor its subsidiaries are parties to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "PLDI" (as of March 6, 1997). Prior to this date it was quoted under
the symbol "PLDIF." The Company's Common Stock is also listed on The Toronto
Stock Exchange under the symbol "PLD." It is also quoted on SEAQ International
and traded on the Berlin and Frankfurt Stock Exchanges. Prior to the Continuance
of the Company in Delaware on February 28, 1997, the Company's Common Stock was
referred to as "Common Shares." The Common Shares began trading on The Toronto
Stock Exchange on September 28, 1987 and on the Nasdaq National Market on
February 18, 1993. The Company's principal market, based on the percentage of
trading volume, is the Nasdaq National Market.
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The following table sets forth the high and low closing prices for the
Company's Common Stock, as reported by Nasdaq, for each full quarterly period
within the two most recent fiscal years. The prices below represent prices
between dealers, without adjustment for retail mark-ups, mark-downs or
commissions, and may not reflect actual transactions.
<TABLE>
<CAPTION>
CLOSING PRICES
-----------------
HIGH LOW
------ -------
<S> <C> <C>
1996
1st Quarter..................................... $6.375 $4.625
2nd Quarter..................................... $9.000 $4.500
3rd Quarter..................................... $8.500 $6.125
4th Quarter..................................... $8.125 $5.50
1997
1st Quarter..................................... $8.000 $5.625
2nd Quarter..................................... $5.875 $4.4375
3rd Quarter..................................... $9.250 $4.875
4th Quarter..................................... $9.750 $5.250
</TABLE>
On March 25, 1998, the closing sale price for a share of Common Stock as
reported on the Nasdaq National Market was $8.00. As of March 27, 1998, there
were 314 holders of record of the Company's Common Stock.
The Company did not declare dividends on its Common Stock in 1997 and does
not intend to declare dividends on its Common Stock in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
During the year ended December 31, 1997, the following issuances of
unregistered securities of the Company were made:
(a) On November 26, 1997, the Company issued $12.32 million in Series A
Notes and $3.1 million in Series B Notes, to The Travelers Parties. The Series A
Notes and the Series B Notes were issued to a limited number of institutional
investors in reliance upon Section 4(2) of the Securities Act of 1933 as a
transaction not involving a public offering. No commissions were paid to any
underwriter, broker or dealer in connection with such issuance. The net proceeds
from the issuance of the Series A Notes and the Series B Notes were used in
connection with the Company's acquisition of additional interests in Technocom.
See "Business -- Acquisition of Additional Interests in Technocom."
The Series B Notes come due on September 30, 1998, and the Series A Notes
come due on December 31, 1998. Both the Series A Notes and the Series B Notes
are secured by the Company's inventory and accounts receivable. In addition, the
Series B Notes are secured by 28 of the Technocom shares acquired. In addition
to issuing the Series A and Series B Notes, the Company also issued to the
Travelers Parties a total of 423,000 warrants to purchase Common Stock at $8.625
at any time up to December 31, 2008, and may become obligated to issue
additional warrants to the Travelers Parties in the event that certain
amortization payments are not made, or if the Series A or Series B Notes are not
paid in full at their maturity.
(b) In partial consideration for the acquisition of additional interests in
Technocom from Elite, on November 26, 1997, the Company issued, at the direction
of Elite, an aggregate of 1,316,240 shares of Common Stock to P.S. Marketing &
Consulting Services Limited, a Gibraltar company. The shares of Common Stock
were issued to a single institutional investor in reliance upon Section 4(2) of
the Securities Act of 1933 as a transaction not involving a public offering. No
commissions were paid to any underwriter, broker or dealer in connection with
such issuance.
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ITEM 6. SELECTED FINANCIAL DATA
The following summary consolidated financial and operating data was derived
from, and should be read in conjunction with, the audited Consolidated Financial
Statements of the Company and the related notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
contained elsewhere herein. Prior to the Continuance the Company's audited
Consolidated Financial Statements were prepared in accordance with Canadian
GAAP, which differ in certain respects from U.S. GAAP. See Note 15 to the
Company's audited Consolidated Financial Statements. As a result of the
Continuance, the consolidated financial data presented below for the fiscal
years 1994 and 1993 have been restated in accordance with U.S. GAAP.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues................. $114,424 $ 61,966 $ 29,120 $ 8,526 $ 2,308
Operating expenses................. 102,406 59,099 38,266 17,248 7,606
-------- -------- -------- ------- --------
Operating income/(loss)............ 12,018 2,867 (9,146) (8,722) (5,298)
-------- -------- -------- ------- --------
Loss from continuing operations
before income taxes and minority
interest........................ (3,428) (6,271) (13,440) (9,491) (5,264)
Income taxes....................... 7,739 3,669 1,490 -- --
Loss from continuing operations
before minority interest........ (11,167) (9,940) (14,930) (9,491) (5,264)
Minority interest.................. 9,399 2,521 551 -- --
-------- -------- -------- ------- --------
Loss from continuing operations.... (20,566) (12,461) (15,481) (9,491) (5,264)
Discontinued operations............ -- -- -- -- (5,138)
-------- -------- -------- ------- --------
Loss for the year.................. $(20,566) $(12,461) $(15,481) $(9,491) $(10,402)
======== ======== ======== ======= ========
Loss per common share(1)........... $ (0.64) $ (0.39) $ (0.49) $ (0.78) $ (1.33)
======== ======== ======== ======= ========
Weighted average number of shares
outstanding..................... 32,061 31,579 31,315 12,663 8,155
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(2)....... $ 17,256 $ 40,674 $ 15,676 $ 56,710 $ 948
Non-cash working
capital/(deficiency)............ (18,642) (26,440) (22,001) (17,706) (5,121)
Escrow funds....................... 33,868 40,984 -- -- --
Property and equipment, net........ 134,998 93,039 45,357 21,718 6,306
Telecommunications licenses........ 78,837 72,310 49,583 54,099 18,337
Investments and other assets....... 32,801 39,052 29,293 18,925 2,223
Investment in Teleport-TP.......... -- -- 23,564 15,699 --
Total assets....................... 335,586 306,357 178,092 171,760 28,700
Shareholders' equity............... 127,231 137,954 135,832 147,470 11,448
</TABLE>
- ---------------
(1) In 1993, loss per common share includes a loss from discontinued operations
of $(0.63).
(2) The December 31, 1996 and December 31, 1995 balances includes cash of $9.0
million and $6.1 million, respectively, held on deposit as collateral to
secure bank indebtedness of the same amount.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except as otherwise indicated, all references to 1995, 1996 and 1997 refer
to the fiscal year ended on December 31 of those years respectively.
INTRODUCTION
Basis of Presentation. Effective February 28, 1997 PLD Telekom Inc. was
continued as a Delaware corporation. As a result, the consolidated financial
statements for 1995, 1996 and 1997 have been prepared in accordance with
accounting principles generally accepted in the United States (U.S. GAAP). Prior
to 1996, the audited consolidated financial statements were prepared in
accordance with Canadian GAAP, with a reconciliation to U.S. GAAP. EBITDA, which
is used as a measure of operating performance, is defined as follows: earnings
before taxes and minority interest plus interest (interest expense less interest
income) plus depreciation and amortization.
Principal Operations and Future Activities. The Company's key interests at
December 31, 1997 include a 60% equity interest in PeterStar, which provides
telecommunication services in St. Petersburg, Russia; a 50% equity interest in
BECET, which provides cellular services in Kazakstan; and an 80.4% equity
interest in Technocom which, through its 49.33% equity interest in Teleport-TP,
operates an international teleport in Moscow, fiber optic networks in Moscow and
its environs and a satellite-based long distance network across Russia. Cable &
Wireless is the Company's principal shareholder at December 31, 1997. The
consolidation of financial information in the 1997 financial statements differs
from 1996 by reflecting the Company's acquisition of an additional 29.65%
interest in Technocom effective December 31, 1997. The consolidation of
financial information in the 1996 financial statements differs from 1995 by
reflecting (i) the Company's acquisition of 100% of the outstanding shares of
BCL in April 1996; and (ii) the acquisition by Technocom of a controlling voting
interest in Teleport-TP effective December 31, 1996.
The Company's telecommunications businesses are developing rapidly in an
emerging economy which, by its nature, has an uncertain economic, political and
regulatory environment. The general risks of operating businesses in the former
Soviet Union include the possibility for rapid change in government policies,
economic conditions, the tax regime and foreign currency regulations. In
addition, Teleport-TP's satellite-based long distance network is at an early
stage of its development and operations.
Ultimate recoverability of the Company's investments in PeterStar, BECET
and Teleport-TP is dependent upon each of these subsidiaries achieving and
maintaining profitability, which is dependent to a certain extent on the
stabilization of the economies of the former Soviet Union, the ability to
maintain the necessary telecommunications licenses and the ability to obtain
adequate financing to meet capital commitments.
Effect of change from Canadian GAAP to U.S. GAAP. The effect of the
restatement of prior year comparatives from Canada to U.S. GAAP is explained in
Note 15 to the consolidated financial statements. However, the main differences
may be summarized as follows: (i) under Canadian GAAP, the Convertible Notes
issued in connection with the June 1996 Placement are a compound financial
instrument and the debt and equity elements are separately accounted for. Under
U.S. GAAP, the Convertible Notes are accounted for as a single debt instrument
under the "Long-term debt" caption; and (ii) U.S. GAAP does not permit the
capitalization of pre-operating costs. Therefore, in anticipation of the change
to U.S. GAAP, effective December 31, 1996 the Company changed its Canadian GAAP
policy with respect to pre-operating costs to be in accordance with U.S. GAAP.
As a result, all such costs were retroactively expensed.
Accounting Standards. Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income," and Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosure about Segments of an
Enterprise and Related Information," were issued in June 1997. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. This Statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. The Company has not determined the
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impact of SFAS 130 on its financial statements. SFAS 131 establishes standards
for the way public companies report information about operating segments in
annual financial statements and requires that those companies report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company is
required to adopt both new standards in the first quarter of 1998.
Management Fees. Certain of the Company's subsidiaries pay management fees
to their shareholders, including the Company. The figures presented for the
subsidiaries reflect all payments of such fees -- ie, management fees are
included in operating expenses in the same way as other expenses of the
subsidiary. Profitability measures -- EBITDA, operating profit and net
income -- are therefore quoted after accounting for such payments.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 VERSUS YEAR ENDED DECEMBER 31, 1996
PLD Telekom Inc. -- Consolidated
In 1997, the Company reported a loss of $20.6 million, or $0.64 per share,
on total revenues of $118.0 million, including operating revenues of $114.4
million. This compares with a loss in 1996 of $12.5 million, or $0.39 per share,
on total revenues of $66.8 million (operating revenues of $62.0 million). EBITDA
of $30.3 million compared with $12.1 million in 1996.
The loss of $20.6 million in 1997 incorporates a profit contribution from
PeterStar of $16.5 million (after income taxes of $3.2 million), a profit
contribution from BECET of $7.2 million (after income taxes of $3.6 million), a
profit contribution from BCL of $0.5 million (after income taxes of $0.4
million), corporate interest and other income of $3.1 million, a corporate
foreign exchange gain of $0.1 million and a corporate gain on the disposal of an
investment of $1.0 million, offset by a net loss of $4.7 million incurred in
Technocom, corporate general and administrative costs of $8.3 million, interest
on corporate bank indebtedness and long-term debt of $16.7 million, corporate
amortization and depreciation charges of $8.5 million, corporate taxes of $0.9
million and minority interest charges of $10.0 million relating to PeterStar,
BECET and Technocom.
Operating revenues. Consolidated operating revenues increased by 85% from
$62.0 million in 1996 to $114.4 million in 1997, principally as a result of
strong growth in PeterStar and BECET, and the consolidation of a full year's
revenues from BCL and Teleport-TP in 1997. Operating revenues from PeterStar
increased in 1997 to $54.5 million from $32.5 million in 1996 due mainly to a
continued rapid increase in line penetration from 52,005 at December 31, 1996 to
114,774 at December 31, 1997. BECET contributed operating revenues of $30.0
million, as compared to $19.1 million in 1996. This increase is attributable to
the growth in BECET's subscriber base from 6,957 at December 31, 1996 to 11,120
at December 31, 1997. Technocom contributed operating revenues of $21.2 million
in 1997, compared to $4.4 million in 1996, largely as a result of the
consolidation of Teleport-TP. BCL contributed operating revenues of $7.6 million
for the Company in its first full year as an operating subsidiary of the Company
compared with part year revenues of $5.1 million in 1996. Yellow Pages
contributed $1.0 million in operating revenues in 1997 compared to $0.8 million
in 1996.
Direct costs. Direct costs, including the direct costs of sales of all of
the Company's subsidiaries, increased 81% in 1997 to $39.2 million. As a
percentage of revenues, direct costs reduced marginally to 34% from 35% in 1996.
General and administrative costs. General and administrative costs include
the day-to-day expenses in all five subsidiary operations as well as corporate
expenses. Consolidated general and administrative expenses increased 56% from
$24.8 million in 1996 to $38.7 million in 1997, reflecting the continued growth
in the scale and extent of the operating businesses and the full year
consolidation of BCL and Teleport-TP. As a percentage of operating revenues,
these costs continued a downward trend, falling from 62% in 1995 to 40% in 1996
to 34% in 1997.
Depreciation. Depreciation increased 100% from $5.2 million in 1996 to
$10.4 million in 1997, reflecting 1997 capital expenditures within the operating
businesses of $43.0 million as the build-out of the PeterStar,
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BECET and Teleport-TP networks progressed. In 1996, $43.2 million was invested
in these companies' networks.
Amortization. Upon the acquisition by the Company of its interests in
PeterStar, BECET and Technocom (incorporating Teleport-TP), the differential
between the purchase price and the fair value of the net assets acquired was
allocated to the telecommunications licenses held by these entities. These
licenses, which expire in 2004, 2009 and 2004 respectively, are being amortized
on a straight line basis over the appropriate terms. In this respect, in 1997,
the Company incurred total non-cash amortization charges of $7.4 million,
including $2.6 million relating to the telecommunications licenses of PeterStar,
$2.1 million relating to the telecommunications license of BECET and $2.7
million relating to the telecommunications licenses of Teleport-TP. The Company
also incurred amortization charges of $0.2 million relating to goodwill
associated with the acquisition of Yellow Pages and $1.2 million relating to
deferred financing costs associated with the senior discount and convertible
subordinated note financing undertaken in 1996. In 1996, the Company incurred
amortization charges of $4.7 million relating to the telecommunications licenses
of PeterStar and BECET, together with $0.2 million relating to goodwill
associated with Yellow Pages and $0.7 million relating to deferred financing
costs. In addition, included in Technocom's share of the 1996 results of its
equity investments were amortization charges of $2.5 million relating to the
telecommunications licenses of Teleport-TP.
Interest expense. Interest expense of $17.8 million consisted of interest
on bank indebtedness and short-term borrowings of $1.3 million and interest on
long-term debt of $16.5 million. Interest on the Senior Notes and the
Convertible Notes resulted in total interest charges on long-term debt of $16.5
million for the full year in 1997 compared to $8.7 million in 1996. Of this
amount, $2.4 million related to the Convertible Notes and was paid during the
year. The balance of $14.1 million was added to the accreted value of the Senior
Notes on the Company's balance sheet.
Interest and other income. Interest and other income in 1997 of $3.6
million compared with $4.9 million in 1996. Interest earned on the Company's
escrow account (funds from which may be used to acquire telecommunications
equipment or telecommunications companies in Russia and Kazakhstan) totaled $2.2
million in 1997 compared with $1.3 million earned for the partial year in 1996.
Escrowed funds are invested in short-term reverse repurchase agreements secured
by U.S. treasury bonds. Interest earned at the subsidiary level totaled $1.0
million for the year.
Gain on disposal of investments and property and equipment. Gain on
disposals of investments in 1997 related to the $1.0 million earned on the
Company's sale of its 10.4% interest in SPMMTS for gross proceeds of $17.2
million in June 1997, offset by a loss on disposal of equipment of $0.3 million
at BCL.
PeterStar Company Limited
PeterStar reported net income of $16.5 million and an operating profit of
$20.5 million on operating revenues of $54.5 million for the year ended December
31, 1997, compared to net income of $5.9 million and an operating profit of $8.0
million on operating revenues of $32.5 million for the year ended December 31,
1996. EBITDA grew to $24.1 million for the year ended December 31, 1997,
representing 44% of revenues, compared to EBITDA of $10.3 million, representing
31% of revenues in 1996.
Revenues. Call revenues for the year ended December 31, 1997 ($31.5
million) were 47% higher than the call revenues in the year ended December 31,
1996 ($21.5 million), reflecting increases in subscriber lines installed and
transit traffic carried during the period. Total subscriber lines increased by
121%, to 114,774 at December 31, 1997 from 52,005 at December 31, 1996. Directly
connected customers (i.e. business and residential lines) increased to 28,826
from 14,792, or 95%, over the same period. Lines to cellular operators increased
by 131% to 85,948 lines at December 31, 1997 from 37,213 lines at December 31,
1996.
Revenues from line rentals increased by 92%, reflecting the increase in
installed lines, both fixed and cellular. Similarly, installation fees grew at a
rate of 118% over the year ended December 31, 1996, reflecting the increased
number of lines put into service.
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Call revenues accounted for 58% of operating revenues for the year ended
December 31, 1997 compared to 66% in 1996, installation fees accounted for 22%
of total revenues for the year ended December 31, 1997 compared to 17% in 1996
and line rentals accounted for 20% of total revenues for the year ended December
31, 1997 compared to 17% in 1996.
Of PeterStar's total network traffic in 1997, 87% was local compared with
89% in 1996 and 9% was long distance in 1997 compared with 7% in 1996.
International traffic was unchanged in 1997 at 4% of total network traffic.
These changing traffic patterns have reduced revenue per line to $654 in 1997
from $885 in 1996, while recurring revenue per line (calling charges and line
rentals) were $520 per line compared to $736 in 1996. By the end of 1997,
Russian businesses accounted for 70% of PeterStar's customers and 45% of its
revenues. These trends are expected to continue as Russian companies and
individuals increasingly constitute PeterStar's customer base.
PeterStar expects line growth for both fixed and cellular services to
continue as the market expands for high quality digital telecommunications
services. PeterStar believes that its focus on the introduction of data services
such as frame relay and ATM services will increase revenues and improve its
competitive positioning.
Gross Profit. Gross profit increased 86% to $38.6 million for the year
ended December 31, 1997 from $20.7 million in 1996. The gross margin of 71% is
significantly higher than the margin of 64% in 1996 due to discounted outpayment
charges on higher traffic volumes, although continuing competition, plus the
possibility that PTS may start to levy access charges in 1998, is expected to
put pressure on margins in the future.
Operating expenses. Operating expenses increased 43% to $18.2 million for
the year ended December 31, 1997 from $12.7 million in 1996. Operating expenses
represented 33% of revenues in 1997 compared to 39% in 1996, as revenue
generation grew faster than costs. In particular, staff costs and depreciation
each accounted for 22% of total operating expenses for the year ended December
31, 1997, compared to 30% and 21%, respectively, for the same period in 1996.
Staff costs increases were directly related to the growth in PeterStar's
business during the year, with overall staff levels increasing from 220 in 1996
to 310 at the end of 1997. The biggest increases in staffing were in the sales
and marketing and technical departments. Staffing is expected to increase to
approximately 400 employees in 1998. Depreciation is expected to increase in
1998 as a result of $25 million in planned capital expenditures.
BECET International
BECET recorded net income of $7.2 million and an operating profit of $10.9
million on operating revenues of $30.0 million for the year ended December 31,
1997, compared to net income of $4.5 million and operating income of $6.0
million on operating revenues of $19.1 million for the year ended December 31,
1996. EBITDA grew to $13.9 million for the year ended December 31, 1997,
compared to EBITDA of $7.8 million for the same period in 1996.
Revenues. Call revenues for the year ended December 31, 1997 ($18.9
million) were 60% higher than the call revenues for the same period in 1996
($11.8 million), reflecting a substantial increase in subscribers during the
period, from 6,957 at December 31, 1996 to 11,120 at December 31, 1997.
Subscription fees increased during the year by 53% to $3.8 million, connection
fees increased by 5% to $1.7 million and equipment sales increased by 45% to
$4.7 million. Other revenues of $1.0 million increased fivefold during the year.
Call revenues accounted for 63% of operating revenues for the year ended
December 31, 1997, up marginally from 62% in 1996, subscription fees accounted
for 13% of total revenues for the year ended December 31, 1997 -- unchanged from
1996, connection fees accounted for 6% of total revenues for the year ended
December 31, 1997 compared with 8% in 1996, while equipment sales represented
16% of revenues, as against 17% in 1996.
Local and incoming traffic during 1997 accounted for 75% of total traffic
compared with 76% during 1996, mobile to mobile traffic accounted for 11% of
total traffic compared with 9% in 1996, while long distance traffic in 1997
accounted for 7% of total traffic compared with 6% during 1996, and
international traffic
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accounted for only 7% of total traffic compared with 9% during 1996. BECET's
customer base increasingly consists of Kazak companies and individuals, who tend
not to use its higher priced long distance and international services. This has
had an effect upon per subscriber revenues -- total revenue per subscriber for
the year ended December 31, 1997 was $3,382 against $3,886 per subscriber for
1996, while recurring revenue per subscriber also reduced from $2,900 in 1996 to
$2,666 per subscriber in 1997. The reductions in total per subscriber and
recurring per line revenues also stem from the different calling patterns of
these classes of customers who generally use as much as 38% less airtime as the
foreign business customers. BECET expects both of these trends to continue;
however, BECET expects to offset the effects of these factors by continuing to
expand its overall customer base, through, among other things, the introduction
of pre-paid cellular service during 1998.
Gross Profit. Gross profit increased 69% to $23.1 million for the year
ended December 31, 1997 from $13.7 million in 1996. Gross margin showed
continued improvement at 77% of operating revenues compared to the 72% margin
realized in 1996, primarily due to the greater calling volumes and reduced
dependence on revenues from equipment sales.
Operating Expenses. Operating expenses increased 60% to $12.3 million for
the year ended December 31, 1997 from $7.7 million in 1996, reflecting the
opening of an additional 4 operating sites and the increase in staffing from 307
at the end of 1996 to 426 at December 31, 1997. Operating expenses were
relatively unchanged at 41% of revenues in 1997 compared to 40% in 1996.
Depreciation accounted for 11% of total revenues for the year ended December 31,
1997, compared to 10% for the same period in 1996, in each case reflecting the
considerable capital investment in BECET over the past two years. Depreciation
is expected to increase in 1998 as BECET deploys an additional $8.2 million of
capital investment.
Technocom Limited
Technocom recorded a net loss of $4.7 million and an operating loss of $4.3
million on operating revenues of $21.2 million for the year ended December 31,
1997, compared to a net loss of $0.2 million and an operating loss of $0.7
million on operating revenues of $4.4 million for the year ended December 31,
1996. EBITDA showed a loss of $1.6 million for the year ended December 31, 1997,
compared to an EBITDA loss of $0.6 million in 1996. In 1997, the results of
Technocom's principal asset, Teleport-TP, were consolidated with those of
Technocom as a result of its acquisition of an additional 7.5% voting interest
(12.5% voting interest) in Teleport-TP, late in 1996. In 1996, Technocom's
investment in Teleport-TP was accounted for using the equity method.
Technocom's 1997 revenues of $21.2 million consisted of $16.9 million in
telecommunications revenues generated by Teleport-TP, $2.0 million in finance
lease income from MTR-Sviaz and $2.3 million in other income.
Technocom's consolidated net loss of $4.7 million consisted of a net loss
of $2.8 million within Teleport-TP (including finance lease interest expense), a
$1.2 million loss within Technocom's statutory accounts, a $0.2 million loss
within Technopark (55% owned by Technocom) and a $0.3 million loss within SCS
(100% owned by Technocom), amortization charges of $0.3 million, and share of
losses from equity investments of $0.5 million offset by a minority interest
credit of $0.6 million.
The net loss of $2.8 million at Teleport-TP, which is 49.3% owned by
Technocom but consolidated with Technocom's results based on voting control of
56%, consisted of $16.9 million in revenues offset by direct costs of $11.8
million, operating expenses of $6.5 million and finance lease interest of $1.4
million.
The $1.2 million loss within Technocom's statutory accounts relates to a
gross margin on revenues, including finance lease income, of $3.4 million and
interest and other income of $1.0 million offset by selling, general and
administrative expenses of $3.1 million, taxes of $1.2 million and interest
expense of $1.1 million.
Share of losses from equity investments of $0.5 million consists of
Technocom's 49% share of losses from MTR-Sviaz of $0.9 million, offset by
Technocom's 50% share of net income from Rosh Telecom of $0.4 million.
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In 1996, Technocom's primary revenue stream was from the leasing of
telecommunications equipment to Teleport-TP and MTR-Sviaz, which generated lease
income of $1.4 million. Technocom also earned revenues from a number of other
telecommunications projects and the provision of marketing services to
Teleport-TP, in total amounting to $3.0 million.
Direct costs of $2.1 million in 1996 related to the provision of these
marketing services to Teleport-TP. Operating expenses of $3.0 million included
$2.1 million of general and administrative expenses and $0.3 million relating to
an investment write-off.
Interest income of $1.3 million was generated in 1996.
Presented below is a comparison of Teleport-TP's result of operations in
1997 and 1996.
Teleport-TP generated a 1997 net loss of $2.8 million, operating loss of
$1.4 million and EBITDA of $0.9 million on revenues of $16.9 million, compared
with a net loss of $0.1 million, an operating profit of $0.1 million and EBITDA
of $1.4 million on revenues of $11.1 million for the year ended December 31,
1996.
Revenues. Teleport-TP generated revenues from three sources in 1997:
international leased circuits, occasional TV broadcasting, and direct dial
telephony services. Overall revenues for the year ended December 31, 1997
increased 52% to $16.9 million from $11.1 million for the year ended December
31, 1996, primarily reflecting the increase in international incoming traffic.
Revenue from international circuits of $5.3 million amounted to 31.5% of
total revenue for the year ended December 31, 1997, as compared with 42% of
total revenue in 1996. Revenue from this source increased marginally as circuits
are leased for a fixed sum for a term of years, and revenue growth can generally
only be achieved by increasing the number of circuits leased. Revenues of $3.4
million from national circuits accounted for 20% of revenues in 1997, a
significant increase from 1996. Revenues from the provision of international
television broadcasting services and other income amounted to $3.3 million or
19.5% of total revenues, up from $0.8 million (6% of total revenues) in 1996.
Other international direct dial services generated $4.9 million or 28.8% of
total Teleport-TP revenues, compared to 52% of revenues in 1996. The Company had
anticipated that Teleport-TP's long distance services would be a more
significant contributor to revenues in 1997, but continued logistical delays in
installing remote earth stations delayed the start up of many sites until very
late in 1997. The Company continues to expect that these services will provide
steady revenue growth during 1998 and beyond as the various sites planned become
operational. Teleport-TP expects to complete the installation of the first 45
sites on the network by mid-1998.
Gross profit. Teleport-TP's gross profit increased 12.5% to $5.1 million
for the year ended December 31, 1997 from $4.6 million in 1996. The gross margin
decreased to 30.4% from 41% in 1996, primarily due to costs associated with the
build-out and operation of the satellite network and lower margins earned on the
network's national traffic which commenced in 1997.
Operating expenses. Operating expenses increased 48% to $6.6 million for
the year ended December 31, 1997 from $4.4 million in 1996. General and
administrative costs increased 35% to $3.5 million for the year ended December
31, 1997, compared with $2.6 million in 1996, reflective of increased personnel
and other costs relating to the development of the long distance network.
Depreciation of assets under capital lease was $2.2 million for the year ended
December 31, 1997, compared with $1.0 million in 1996, and is expected to
increase further in 1998 as Teleport-TP acquires an additional $10 million in
equipment related to the build-out of its long distance network. The Company
also expects Teleport-TP to increase its operating expenses in 1997 as it
further develops its long distance services.
Interest. Lease interest expense increased from $0.5 million in 1996 to
$1.4 million in 1997 resulting from an increase in rentals payable under
equipment leases between Technocom and Teleport-TP.
Baltic Communications Limited
The Company acquired BCL on April 1, 1996, and accordingly only the nine
months ended December 31, 1996 were consolidated in the Company's 1996 financial
statements. BCL recorded operating income of $1.1 million and net income of $0.5
million on revenues of $7.6 million for the full year in 1997 compared to
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operating and net income of $0.7 million on revenues of $5.1 million for the
nine months ended December 31, 1996. EBITDA of $1.7 million in 1997 compared
with $1.2 million in the nine months ended December 31, 1996.
Revenues. Call revenues accounted for 79% of total revenues for the year
ended December 31, 1997, primarily driven by international call minutes. Call
revenues accounted for 81% of 1996 revenues. Line rentals accounted for 14% of
total revenue in 1997 compared to 12% in 1996. The balance of revenues,
consisting of installations and equipment sales, accounted for 7% of revenues in
1997 compared to 7% of revenues in 1996.
Gross profit. Gross profit of $4.7 million (61% of revenues) compared with
gross profit of $3.0 million (59% of revenues) generated in the nine months
ended December 31, 1996.
Operating expenses. Operating expenses totaled $3.9 million (51% of
revenues) in 1997 compared to $2.3 million (46% of revenues) incurred in the
nine months ended December 31, 1996. Staff costs and depreciation accounted for
49% and 21% of total operating costs in 1997 compared to 45% and 22%
respectively of total operating costs for the nine months ended December 31,
1996.
St. Petersburg Yellow Pages
Yellow Pages recorded a 25% increase in revenues to $1.0 million in 1997 as
a result of a 19% increase in the number of companies placing advertisements in
the directory during the year. Gross profits increased 40% to $0.7 million in
1997 (70% of sales), from $0.5 million in 1996 (63% of sales), reflecting both
revenue growth and increased operating leverage. A net loss of $3,000 in 1997
compared to a net profit of $33,000 in 1996.
YEAR ENDED DECEMBER 31, 1996 VERSUS YEAR ENDED DECEMBER 31, 1995
PLD Telekom Inc. -- Consolidated
In 1996, the Company reported a net loss of $12.5 million, or $0.39 per
share, on total revenues of $66.8 million, including operating revenues of $62.0
million. This compared to a net loss in 1995 of $15.5 million, or $0.49 per
share, on total revenues of $31.2 million (operating revenues of $29.1 million).
The loss of $12.5 million in 1996 incorporated a profit contribution from
PeterStar of $5.9 million (after profits tax of $1.8 million), a profit
contribution from BECET of $4.5 million (after profits tax of $1.5 million), a
profit contribution from BCL of $0.7 million (after profits tax of $0.2
million), and corporate interest and other income of $2.8 million, offset by
corporate general and administrative costs of $6.3 million, interest on
corporate bank indebtedness and long-term debt of $9.5 million, amortization
charges of $5.6 million, a share of the loss from equity investments of $2.7
million (including amortization of licenses of $2.5 million) and minority
interest charges of $2.5 million relating primarily to PeterStar and BECET.
Operating revenues. Consolidated operating revenues increased by 113% from
$29.1 million in 1995 to $62.0 million in 1996, principally as a result of
strong growth in PeterStar and BECET and the addition of BCL to the portfolio
with effect from April 1, 1996. Operating revenues from PeterStar grew 118% in
1996, to $32.5 million from $14.9 million in 1995, due mainly to a continued
rapid increase in line penetration from 21,528 at December 31, 1995 to 52,005 at
December 31, 1996. BECET contributed operating revenues of $19.1 million, as
compared to $9.3 million in 1995. This increase was attributable to the growth
in BECET's subscriber base from 2,882 at December 31, 1995 to 6,957 at December
31, 1996. Technocom contributed operating revenues of $4.4 million in both 1996
and 1995 from its leasing of telecommunications equipment and from
telecommunications projects. BCL contributed operating revenues of $5.1 million
for the Company, and Yellow Pages contributed $0.8 million for the full year.
Direct costs. Direct costs were 35% of operating revenues in 1996 compared
to 36% of operating revenues in 1995, and include the direct costs of sales of
PeterStar, BECET, Technocom, BCL and Yellow Pages.
General and administrative costs. Consolidated general and administrative
expenses increased 36% from $18.2 million in 1995 to $24.8 million in 1996,
reflecting the continued growth in the scale and extent of
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the operating businesses and the acquisition of BCL. As a percentage of
operating revenues these costs exhibited a downward trend, falling from 62% in
1995 to 40% in 1996. At the corporate level, general and administrative overhead
increased to $6.3 million in 1996 from $5.1 million in 1995.
Depreciation. Depreciation increased 36% from $3.8 million in 1995 to $5.2
million in 1996, reflecting 1996 capital expenditures within the operating
businesses of $43.2 million as the build-out of the PeterStar and BECET networks
progressed.
Amortization. In 1996, the Company incurred total non-cash amortization
charges of $5.6 million, including $2.6 million relating to the
telecommunications licenses of PeterStar, and $2.1 million relating to the
telecommunications license of BECET. In addition, it incurred charges of $0.2
million relating to goodwill associated with the acquisition of Yellow Pages and
$0.7 million relating to deferred financing costs. As well as the $5.6 million
of amortization noted above, the Company's share of the results of its equity
investments -- Teleport-TP, MTR-Sviaz and Rosh Telecom -- which were accounted
for on an equity basis, included amortization of $2.5 million relating to the
telecommunications licenses of Teleport-TP. Total amortization charges in 1995
were $6.2 million principally relating to the PeterStar, BECET and Teleport-TP
telecommunications licenses.
Interest expense. On June 12, 1996, the Company completed a $149.5 million
private placement consisting of (i) 123,000 units consisting of $123 million
aggregate principal amount at stated maturity of Senior Notes together with
Placement Warrants to purchase a total of 4,182,000 shares of Common Stock; and
(ii) $26.5 million aggregate principal amount of 9% convertible notes. The
purchase/conversion prices respectively on the Warrants and the convertible
notes are $6.60 and $6.90 per share of Common Stock.
These debt instruments represented entirely new indebtedness of the Company
and resulted in an interest charge on long-term debt in 1996 of $8.7 million as
against zero expense in 1995. Prior to the completion of this offering the
Company had a $22.5 million bank facility with a Canadian chartered bank (CIBC),
guaranteed by Cable & Wireless, which resulted in corporate interest charges of
$0.7 million in 1996, as compared with $0.5 million in 1995, and which together
with interest expenses relating to certain indebtedness of Technocom yields
total interest expense on bank indebtedness of $1.2 million in 1996 ($1.0
million in 1995).
Interest and other income. Under the terms of the debt offering, $46.0
million was deposited into an escrow account, for subsequent disbursement into
telecommunications equipment or telecommunications companies in Russia and
Kazakstan. All funds which had yet to be disbursed were invested throughout the
period in short-term reverse repurchase agreements secured by U.S. treasury
bonds. These investments, together with interest earned on other cash deposits
and miscellaneous other income, produced total interest and other income at the
corporate level of $2.8 million, compared with $0.4 million in 1995. The bulk of
the remainder of the $4.9 million accrued in Technocom.
PeterStar Company Limited
PeterStar had net income of $5.9 million and an operating profit of $8.0
million on operating revenues of $32.5 million for the year ended December 31,
1996, compared to a net loss of $1.0 million and an operating profit of $0.1
million on operating revenues of $14.9 million for the year ended December 31,
1995. EBITDA grew to $10.3 million for the year ended December 31, 1996,
representing 31% of revenues, compared to EBITDA of $2.4 million, representing
16% of revenues, for the same period in 1995.
Revenues. Call revenues for the year ended December 31, 1996 ($21.5
million) were 149% higher than the call revenues in the year ended December 31,
1995 ($8.6 million), reflecting increases in subscriber lines installed and
transit traffic carried during the period. Total subscriber lines increased by
142%, to 52,005 at December 31, 1996 from 21,528 at December 31, 1995. Directly
connected customers (i.e. business and residential lines) increased to 14,792
from 6,869, or 115%, over the same period. Lines to cellular operators increased
by 153%, to 37,213 lines at December 31, 1996 from 14,659 lines at December 31,
1995.
Revenues from line rentals increased by 298%, reflecting the increase in
installed lines, both fixed and cellular. Conversely, installation fees grew
only at a rate of 29% over the year ended December 31, 1995,
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reflecting a reduction in the level of fees implemented by PeterStar during 1996
and the fact that installation fees on cellular lines are substantially lower
than on fixed lines.
Call revenues accounted for 66% of operating revenues for the year ended
December 31, 1996 compared to 58% in 1995, installation fees accounted for 17%
of operating revenues for the year ended December 31, 1996 compared to 28% in
1995 and line rentals accounted for 17% of operating revenues for the year ended
December 31, 1996 compared to 9% in 1995. (In addition, in 1995 other income
represented a further 5% of operating revenues.)
PeterStar experienced in 1996 a shift in its customer base, from foreign
companies which used the higher priced international and long distance services
to a predominantly Russian business and residential market for which local
calling is the principal usage. Thus, 89% of PeterStar's total network traffic
in 1996 was local compared with 84% in 1995, 7% of traffic was long distance in
1996 compared with 9% in 1995, and only 4% of traffic was international in 1996
compared with 7% in 1995. Accordingly, total revenue per line for the year ended
December 31, 1996 was $885 as against $1,163 per line for 1995, while recurring
revenue per line (calling charges and line rentals) were $736 per line as
against $783 in 1995.
Gross profit. Gross profit increased 115% to $20.7 million for the year
ended December 31, 1996 from $9.6 million in 1995. The gross margin of 64% was
slightly lower than the margin of 65% in 1995, with lower tariffs on
international traffic being offset by a reduction in the level of payments due
to the carriers of this traffic and an increase in local traffic where
PeterStar, under the terms of its arrangements with PTS, does not pay carrier
charges.
Tariffs. During 1996 there was continuing pressure on international rates
(part of a global trend in the telecommunications industry). PeterStar also
reduced tariffs on certain other routes, in response to competition.
Operating expenses. Operating expenses increased 32% to $12.7 million for
the year ended December 31, 1996 from $9.6 million in 1995. Operating expenses
represented 39% of revenues in 1996 compared to 64% in 1995, as revenue
generation grew faster than costs. In particular, staff costs and depreciation
accounted for 30% and 21%, respectively , of total operating expenses for the
year ended December 31, 1996, compared to 45% and 28%, respectively, for the
same period in 1995. The slower growth in staff costs reflected the fact that
personnel during 1996 only increased to 232 from 226 at the end of 1995, while
depreciation was lower because all capital investments in PeterStar were made in
the latter half of the year.
BECET International
BECET recorded net income of $4.5 million and an operating profit of $6.0
million on operating revenues of $19.1 million for the year ended December 31,
1996, compared to a net loss of $0.2 million and an operating loss of $0.5
million on revenues of $9.3 million for the year ended December 31, 1995. EBITDA
grew to $7.8 million for the year ended December 31, 1996, compared to EBITDA of
$0.6 million for the same period in 1995.
Revenues. Call revenues for the year ended December 31, 1996 ($11.8
million) were 137% higher than the call revenues for the same period in 1995
($5.0 million), reflecting a substantial increase in subscribers during the
period. Total subscribers increased from 2,882 at December 31, 1995 to 6,957 at
December 31, 1996. Subscription fees increased by 166%, connection fees
increased by 35% and equipment sales increased by 57% over 1995.
Call revenues accounted for 62% of operating revenue for the year ended
December 31, 1996 compared to 53% in 1995, subscription fees accounted for 13%
of total revenues for the year ended December 31, 1996 compared to 11% in 1995,
connection fees accounted for 8% of total revenues for the year ended December
31, 1996 compared with 13% in 1995, while equipment sales represented 17% of
revenues, as against 23% in 1995.
Local and incoming traffic during 1996 accounted for 76% of total traffic
compared with 75% during 1995, mobile to mobile traffic accounted for 9% of
total traffic compared with 6% in 1995, while long distance traffic in 1996
accounted for 6% of total traffic compared with 7% during 1995, and
international traffic
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accounted for only 9% of total traffic compared with 12% during 1995. Total
revenue per subscriber for the year ended December 31, 1996 was $3,886 against
$5,513 per subscriber for 1995, while recurring revenue per subscriber also
reduced from $3,490 in 1995 to $2,900 per subscriber in 1996 reflective of
BECET's customer base shifting to Kazakh companies and individuals, who tended
not to use its higher priced long distance and international services. The
reductions in total per subscriber and recurring per line revenues also stemmed
from the different calling patterns of these classes of customers who generally
used as much as 40% less airtime than the foreign business customers.
Gross Profit. Gross profit increased 123% to $13.7 million for the year
ended December 31, 1996 from $6.2 million in 1995. The gross margin of 72% was
an improvement from the 66% margin realized in 1995, primarily due to the
greater calling volumes and reduced dependence on revenues from equipment sales.
Operating Expenses. Operating expenses increased 15% to $7.7 million for
the year ended December 31, 1996 from $6.7 million in 1995, reflecting the
opening of an additional eight operating sites and the increase in staffing from
220 at the end of 1995 to 307 at December 31, 1996. Operating expenses
represented 40% of revenues in 1996 compared to 72% in 1995, the difference
representing both BECET's increasing realization of economies of scale and
substantial growth in revenue generation. Depreciation accounted for 10% of
total revenues for the year ended December 31, 1996, compared to 12% for the
same period in 1995, in each case reflecting the considerable capital investment
in the BECET network.
Technocom Limited
Technocom recorded a net loss of $0.2 million and an operating loss of $0.7
million on operating revenues of $4.4 million for the year ended December 31,
1996, compared to net income of $1.1 million and an operating profit $1.1
million on operating revenues of $4.4 million for the year ended December 31,
1995. EBITDA showed a loss of $0.6 million for the year ended December 31, 1996,
compared to EBITDA of $1.1 million, for the same period in 1995.
Interest income of $1.3 million was generated in 1996, compared with $0.9
million in 1995.
Effective December 31, 1996, Technocom acquired an additional interest in
Teleport-TP which gave Technocom effective control over Teleport-TP. The
following is a discussion of Teleport-TP's results of operations in 1996 when
Teleport-TP was accounted for using the equity method.
Technocom's principal asset, Teleport-TP, in which it has a 49.3% interest
as at December 31, 1996, recorded a net loss of $0.1 million and an operating
profit of $0.1 million on revenues of $11.1 million for the year ended December
31, 1996, compared to a net loss of $0.1 million and an operating profit of $2.9
million on revenues of $7.1 million for the year ended December 31, 1995. EBITDA
decreased to $1.4 million for the twelve months ended December 31, 1996,
compared to EBITDA of $3.4 million for the same period in 1995.
Revenues. In 1996, Teleport-TP generated revenues from three sources:
international leased circuits, occasional TV broadcasting, and direct dial
telephony services. Revenues for the year ended December 31, 1996 increased 56%
to $11.1 million from $7.1 million for the year ended December 31, 1995,
primarily reflecting the increase in international incoming traffic. Revenues
from international circuits amounted to 42% of total revenue for the year ended
December 31, 1996, as compared with 58% of total revenue in 1995. Revenues
remained relatively stable because circuits are leased for a fixed sum for a
term of years, and revenue growth can generally only be achieved by increasing
the number of circuits leased. Revenues from the provision of international
television broadcasting services amounted to $0.75 million or 6% of total
revenues, down from $1.1 million (15% of total revenues) in 1995. Other
international direct dial services generated $5.7 million or 52% of total
Teleport-TP revenues.
Gross Profit. Teleport-TP gross profit decreased 8% to $4.6 million for
the year ended December 31, 1996 from $5.0 million in 1995. The gross margin
declined to 41% from 71% in 1995, primarily due to the greater dependence on
calling revenues rather than the higher margin leased circuit revenues.
Operating Expenses. Operating expenses increased 52% to $4.4 million for
the year ended December 31, 1996 from $2.9 million in 1995. General and
administrative costs increased 63% to $2.6 million for the
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year ended December 31, 1996, compared with $1.6 million in 1995 reflective of
increased personnel and other costs relating to the development of the long
distance network. Depreciation of assets under capital lease was $1.0 million
for the year ended December 31, 1996, compared with $0.6 million in 1995.
Interest. Lease interest expense decreased from $1.4 million in 1995 to
$0.5 million in 1996 resulting from a reduction in rentals payable under the of
equipment leases between Technocom and Teleport-TP.
Baltic Communications Limited
The Company acquired BCL on April 1, 1996, and therefore it has only been
consolidated for the nine months ended December 31, 1996. There is no comparable
information available for prior years. BCL recorded net income of $0.7 million
and an operating profit of $0.7 million on revenues of $5.1 million for the nine
months ended December 31, 1996. EBITDA of $1.2 million was also recorded for
this period.
Revenues. Call revenues accounted for 81% of total revenues for the year
ended December 31, 1996, primarily driven by international call minutes.
Installation fees accounted for 7% of total revenues with line rentals
accounting for the balance. The Company expects that BCL will continue to derive
most of its revenues from directly connected business customers and acting as a
transit gateway for other international operators.
Gross Profit. A gross profit of $3.0 million was generated for the nine
months ended December 31, 1996, a gross margin of 59%. The Company expects this
margin to reduce over time as a result of continuing pressure on international
rates.
Operating Expenses. Operating expenses of $2.3 million were incurred for
the nine months ended December 31, 1996, representing 46% of revenues. Staff
costs and depreciation account for 45% and 22% respectively of total operating
costs for the year ended December 31, 1996. The Company does not expect to see
any significant change to the operating costs in BCL in 1997.
Yellow Pages
Yellow Pages recorded an operating profit of $33,000 on revenues of $0.8
million for the year ended December 31, 1996, compared to an operating loss of
$29,000 on revenues of $0.5 million for the year ended December 31, 1995. Gross
profit increased 70% to $0.5 million in 1996, from $0.3 million in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's emergence as a key player in the telecommunications markets
of the C.I.S. has involved significant investment in telecommunications assets,
licenses and property and equipment, which have been financed through public and
private placements of equity stock, a private placement of long-term debt
instruments, shareholder loans, bank lines of credit and trade financing.
From time to time, the Company has had discussions with other
telecommunications entities concerning the establishment of possible
relationships or other transactions, including the taking of equity positions in
the Company or its subsidiaries. While no agreement has materialized to date
from any such discussions, the Company will continue to consider appropriate
opportunities.
Effective February 28, 1997, the Company continued from Ontario into
Delaware and, in connection therewith, moved its executive offices to the United
States. The benefits of this continuance are anticipated to include improved
access to the U.S. capital markets, reduced costs of financing and streamlining
of management and operations. No material adverse tax charges resulted from this
continuance.
PETERSTAR COMPANY LIMITED
By December 31, 1996, PeterStar had invested a total of $43.0 million in
property and equipment, related primarily to the construction of its fiber optic
ring around central St. Petersburg and the construction of a new digital
exchange on Vassilievski Island. In 1997, PeterStar invested a further $26.2
million on new switching equipment increasing transmission capacity, and
improving access to the long distance and international
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<PAGE> 80
gateway between PeterStar and SPMMTS. PeterStar expects to fund its 1998 capital
expenditures, estimated at approximately $25 million, from a combination of the
Company's escrow funds, bank and supplier financing and its own internal
cashflows.
BECET INTERNATIONAL
Total investment in the cellular telecommunications network and related
support infrastructure, such as customer service centers and administration
facilities, totaled $28.9 million by December 1996.
BECET had capital expenditures of approximately $4.3 million in 1997 and
anticipates an additional $8.2 million in 1998 in connection with further
investment in cities where the network currently operates. This continued
expansion in 1998 is expected to be entirely financed through BECET's own
internally generated cashflows.
TECHNOCOM LIMITED
Technocom is pursuing a number of new telecommunications opportunities
throughout the Russian Federation including its joint venture with Mosenergo,
the Moscow city power utility, called MTR-Sviaz. Technocom has thus far invested
approximately $5.2 million in MTR-Sviaz, principally through the acquisition of
telecommunications equipment and numbering capacity which it then leased to
MTR-Sviaz.
Technocom is also significantly involved in supporting the development by
Teleport-TP of a satellite-based long distance network. During 1996, Technocom
had capital expenditures of approximately $11.0 million related to the
Teleport-TP project. Funding was provided, in part, from the $20.0 million
contributed to Technocom by the Company out of the proceeds of the debt
placement in June 1996. Additional funding of approximately $10 million will be
required in 1998 and will be provided from a combination of sources including
supplier financing, Technocom's own internally generated cashflows, and proceeds
from the Company's escrow account.
PLD TELEKOM INC. -- CORPORATE
In connection with the continuance of the Company from Ontario to Delaware,
the Company closed its executive offices in Toronto, Canada on February 27, 1997
and subsequently established executive offices in New York, USA in the second
quarter of 1997. At the same time the Company reduced substantially the
activities carried out by its wholly owned subsidiary, PLDMS, from its offices
in London, England. The Company estimates that its total corporate overhead
costs, including management salaries, professional costs, investor relations
costs, regulatory fees and general office costs, will be $8.5 million in 1998
and expects to fund these by a combination of cash on hand, and management fees
and dividends to be paid by the Company's operating subsidiaries.
WORKING CAPITAL AND OTHER BALANCE SHEET ITEMS
At December 31, 1997, the Company had a working capital deficit (not
including funds held in escrow) of $1.4 million compared to a working capital
surplus of $14.2 million at December 31, 1996. The reduction in working capital
was primarily the result of the Company's acquisition of the additional 29.65%
interest in Technocom for gross consideration of $32.1 million. The acquisition,
which increased the Company's ownership in Technocom to 80.4%, was financed with
$12.32 million 12% Series A Senior Secured Revolving Credit Notes, $3.1 million
12% Series B Senior Revolving Credit Notes, both due in 1998, a $9.0 million
draw from escrow of the proceeds of the Senior Notes originally issued in June
1996 and the issuance of 1,316,240 shares of Common Stock from treasury.
The Company placed privately a total of $149.5 million in Senior and
Convertible Notes in June 1996. The proceeds, which amounted to $105.0 million
(net of discounts, commissions and expenses), were used to pay off the Company's
$22.5 million bank facility and to meet the Company's then outstanding $20.0
million commitment to Technocom, with the remainder being targeted for capital
investments in the existing operating units, the development of additional
products and services to be delivered over the Company's
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<PAGE> 81
networks, and general corporate purposes. Funds targeted for capital investment
or new products and services were required to be held in escrow.
The Senior Notes mature on June 1, 2004 with interest accreted at a rate of
14% per annum, compounding semi-annually, to an aggregate principal amount of
$123 million by December 31, 1998. Cash interest does not accrue on the Senior
Notes prior to December 31, 1998. Thereafter, interest will accrue at the rate
of 14% per annum and will be payable in cash, semi-annually, on June 1 and
December 1 of each year, commencing June 1, 1999.
The Convertible Notes, with a face value of $26.5 million, mature on June
1, 2006 with interest accruing at the rate of 9% per annum, payable in cash,
semi-annually, on June 1 and December 1 of each year.
At December 31, 1997, the funds being held in escrow, which are not
included in current assets, totaled $33.9 million compared to $41.0 million at
the end of 1996. The Company's ability to access these funds freely is
restricted since the funds in escrow can only be accessed after compliance with
a number of conditions, including ensuring that the funds are only used for
certain designated purposes and that certain other safeguards are in place. The
Company believes that the funds in escrow should be sufficient to implement the
business plans of its operating subsidiaries at least through 1998.
The indentures governing the release of the escrow funds have recently been
amended to broaden the range of transactions for which the Company may use the
escrow funds to make telecommunications assets available to its operating
subsidiaries. It is anticipated that $8 million will be released from escrow
shortly. The indentures have also been amended to revise certain covenants
relating to corporate indebtedness, the guarantee of subsidiary debt, and the
establishment of U.S. special purpose subsidiaries.
Under the terms of the Company's Senior Notes, the Company is required to
raise $20 million in a common share financing by May 31, 1998. Should the
Company not complete such an offering by May 31, 1998, the annual interest rate
on the Senior Notes will automatically increase to 14.5% until such time as an
offering in completed.
The obligation to raise $20 million in equity is also a requirement under
the terms of the Series A and B Senior Revolving Credit Notes issued in November
1997. Should the Company not raise $20 million in equity prior to May 31, 1998,
the interest rate on the 12% Series A and B Notes will increase to 15% per annum
for the period commencing on June 1, 1998 until maturity. Interest on both the
Series A and B Notes is payable monthly in arrears. The Series A Notes mature on
December 30, 1998 and the Series B Notes mature on September 30, 1998. The
Company is also required, under the terms of the Revolving Credit Notes, to
reduce the aggregate commitments of the Notes by $1 million on July 31, 1998 and
on the last day of each succeeding month.
In connection with the issuance of the Series A and B Notes, the Company
issued warrants to purchase a total of 423,000 shares of its Common Stock. In
addition, the Company will be obligated to issue additional warrants to the
holders of the Series A and B Notes should the Company not effect certain
"targeted reductions in commitment" as follows:
<TABLE>
<CAPTION>
COMMITMENT REDUCTION DATE TARGETED REDUCTION AMOUNT
- ------------------------- -------------------------
<S> <C>
July 31, 1998 $ 500,000
August 31, 1998 $ 500,000
September 30, 1998 $1,000,000
October 31, 1998 $1,500,000
November 30, 1998 $1,500,000
</TABLE>
The holders of the Series A Notes will receive 30,000 additional warrants
to purchase shares of the Company on each date on which such reduction was not
made. In the event that the Company has not made the "targeted reductions"
scheduled for July 31, 1998 and August 31, 1998, the holders of the Series B
Notes will receive 16,000 additional warrants to purchase shares of such common
stock. The exercise price of the above warrants is $8.625 per share, except
that, if the Series B Notes are not repaid in full by September 30,
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<PAGE> 82
1998, the exercise price of all warrants issued to the holders of the Series B
Notes becomes $0.01 per share, and, if the Series A Notes are not repaid in full
by December 31, 1998, the exercise price of all warrants issued to the holders
of the Series A Notes also becomes $0.01. The total number of warrants which
could be issued under these arrangements is 182,000. All of the warrants expire
on December 31, 2008.
In addition, if the Series B Notes are not repaid in full on September 30,
1998, then, commencing September 30, 1998 and on the last day of each succeeding
month until the Series B Notes have been repaid in full, the holders of the
Series B Notes shall receive 32,000 additional warrants to purchase shares of
the Company's stock at a price of $0.01 per share. If the Series A Notes are not
repaid in full on December 31, 1998, then, commencing December 31, 1998 and on
the last day of each succeeding month until the Series A Notes have been repaid
in full, the holders of the Series A Notes shall receive 32,000 additional
warrants to purchase shares of the Company's stock at a price of $0.01 per
share. All such warrants, referred to as "Default Warrants" will have an
expiration date ten years after their respective dates of issue.
The Company's consolidated balance sheet at December 31, 1997 reflects
total assets of $335.6 million, as compared to $306.4 million at December 31,
1996. Total assets at December 31, 1997 were comprised of $52.1 million in
current assets (including $17.3 million of cash and term deposits), $135.0
million in property and equipment, $78.8 million in telecommunications licenses
related to PeterStar, BECET and Teleport-TP, escrow funds of $33.9 million, and
other assets and the investments of $32.8 million including $11.1 million in
goodwill relating to the Company's acquisition of an additional 29.65% interest
in Technocom effective December 31, 1997. Long-term indebtedness of $133.5
million, as a percentage of total assets, was 39.8% at December 31, 1997. The
corresponding figures at December 31, 1996 were $108.0 million and 35.2%.
Shareholders' equity of $127.2 million at December 31, 1997 compared with
$138.0 million at the end of 1996 and consisted of $204.3 million in common
stock and additional paid-in capital, offset by the Company's deficit of $77.1
million. Capital stock increased during the year as a result of the issuance of
1,316,240 common shares, at an effective price of $5.85 per share, as part
consideration in respect of the Company's acquisition of the additional interest
in Technocom and the exercise throughout the year of 312,166 share options and
warrants at prices ranging between C$3.50 and US$6.50. The Company's ratio of
long-term indebtedness to equity at December 31, 1997 was 104.9% compared with
78.3% at December 31, 1996.
To the extent that: (i) actual cash flows from operations are below the
Company's estimates as a result of lower than expected revenues per line or
higher operating costs; or (ii) development costs of the build-out of the
PeterStar, BECET and Technocom/Teleport-TP networks exceed current estimates,
the Company may be required to seek additional debt or equity financing beyond
that required above.
YEAR 2000 ISSUE
The Year 2000 issue exists because many computer systems and applications,
particularly older systems and applications, use a two-digit, rather than a
four-digit, date field to designate a particular year. As a result, with the
century change, date-sensitive systems may recognize dates in the twenty-first
century (i.e., after 2000) as dates in the twentieth century (i.e., the
corresponding year commencing with the prefix 19--). Equally, such systems may
not recognize dates in the twenty-first century at all. All of this could lead
to system failures or miscalculations which could lead to disruption of
operations such as data being lost, an inability to process transactions,
incorrect data being generated and critical deadlines being overlooked. The
impact of these disruptions could be significant.
The Company has addressed the Year 2000 issue in the following ways.
First, the Company has contacted, and has required all of its operating
businesses to contact the manufacturers of equipment and producers of software
which they use in their businesses (or review "websites" or other materials
published by such parties relating to such equipment or software). Such survey
has indicated that, except in a few instances, all such equipment and software
is Year 2000 compliant. Where possible, steps are being taken to upgrade or
replace equipment which is not Year 2000 compliant. While there can be no
assurance that disruptions will not occur, the Company believes, based on this
survey and the fact
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that much of the equipment and software on which its businesses are for the most
part of recent vintage, that it should not encounter material problems in this
particular area.
While it does not appear that any of the parties from whom the Company or
any of its operating businesses have obtained goods or services in the past have
provided specific undertakings regarding Year 2000 compliance, and there is some
doubt whether existing warranties or other undertakings will in fact be
construed to cover Year 2000 compliance, starting in January 1998, all operating
businesses are also being required to use their best efforts to obtain specific
warranties of Year 2000 compliance from parties with which they contract for
products or services thereafter.
Additionally, such operating businesses have been required to review the
terms under which they have heretofore supplied products and/or services to
third parties. No case has been identified in which any operating business has
specifically guaranteed Year 2000 compliance, and the Company has instituted a
policy regarding the giving of such guarantees in the future in order to control
and limit possible exposure thereunder. Further, since none of the operating
businesses manufacture equipment or produce proprietary software for customers
other than in exceptional cases, virtually all such transactions involve the
re-sale or assignment of products and services supplied by others. Accordingly,
the Company believes that, to the extent that such products and services are
either warranted or shown to be Year 2000 compliant, its own exposure is
commensurately reduced.
The Company has investigated the possibility of obtaining insurance against
liability arising out of claims that products or services supplied are not Year
2000 compliant, but has determined that such insurance is not obtainable upon
terms which are sufficiently comprehensive and/or is only obtainable upon terms
which are uneconomical given the level of perceived risk, and accordingly has
elected not to pursue such insurance.
Based on all of the foregoing, the Company believes that it does not have
any material exposure to claims that the products or services it supplies are
not Year 2000 compliant, that the cost of ensuring that equipment and software
used in its operations and the operations of its operating businesses is likely
to be immaterial, and that the possible disruptions to all such operations
arising from Year 2000 problems is likely to be relatively minimal.
TAXATION
The Company and its subsidiaries are subject to a number of taxes in
different jurisdictions. The most significant taxes affecting the Company and
its subsidiaries are likely to be taxes in Russia and Kazakhstan (including
withholding taxes) and income taxes payable by the Company in the United States.
Withholding taxes could apply to distributions by the Company's operating
businesses in Russia and Kazakhstan and to distributions by intermediate level
companies in jurisdictions outside Russia, Kazakhstan, Canada and the United
States. The Company has attempted to mitigate the potential for withholding tax
liabilities by structuring its interests through a Cypriot holding company,
thereby taking advantage of the double taxation treaty between the Russian
Federation and Cyprus. As a result of the Continuance and its ability to take
advantage of the double taxation treaties between the United States and the
Russian Federation and Kazakhstan, respectively, the Company may elect to hold
its interests through one or more Delaware holding companies. Notwithstanding
this, obtaining the benefits of applicable tax treaties can be extremely
difficult due to the documentary and other requirements imposed by the Russian
and Kazakh authorities. For example, the Kazakh tax authorities require that an
exemption application be submitted in respect of every payment made, while at
the same time requiring non-standard certifications from the home country taxing
authority. In addition, a recent instruction issued by the Russian State Tax
Service mandates full withholding regardless of any treaty and requires the
recipient to seek to obtain a refund for withholding in excess of treaty
amounts. The need to comply with these provisions may negate or impair tax
planning initiatives undertaken by the Company to reduce its and its
subsidiaries' overall tax obligations.
In general, the Company's Russian and Kazakh operating businesses are faced
with a wide variety of taxes, including property taxes, advertising taxes, road
taxes, housing taxes, transport taxes and education taxes. In addition,
PeterStar, Technocom and BECET are subject to corporate profits taxes of 34%,
35% and
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30%, respectively. The tax systems in Russia and Kazakhstan have changed rapidly
in recent years and may undergo additional changes, which may have a material
adverse effect on the Company.
Technocom established a representative office in Moscow in October 1995 and
registered this office with the relevant Russian tax authorities. This resulted
in Technocom becoming subject to profits and other Russian taxes as of such
date. Inasmuch as Technocom operated to some extent in the Russian Federation
prior to this date, without clarifying its tax status with any Russian taxing
authority, it is also possible that tax officials may take the position that
Technocom may be subject to VAT and/or profits and other Russian taxes with
respect to the period before October 1995.
At December 31, 1997, the Company had operating loss carryforwards for U.S.
federal income tax purposes of approximately $26.3 million. In assessing the
realizability of the deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of the deferred tax assets is
dependent upon the generation of future taxable future income during the periods
in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments.
At December 31, 1996, the Company had operating loss carryforwards for
Canadian income tax purposes of approximately $36.0 million and allowable
capital loss carryforwards of approximately $19.0 million. Upon the Company's
emigration to the United States in February 1997, these losses do not carryover
for U.S. tax purposes.
CURRENCY CONTROLS
THE RUSSIAN FEDERATION
Exchange Controls. The Russian Federation currently has in place
relatively liberal policies regarding hard currency transfers by Russian
residents to non-residents. Payments in U.S. Dollars may generally be made
freely between Russian residents (which generally includes all Russian companies
and citizens resident in Russia) and non-residents (which generally includes
non-Russian companies even if they have a representative office or other
permanent establishment in Russia) for current currency transactions (generally
those where payment is made within 180 days of the provision of goods and
services). Payments in U.S. Dollars classified as movements of capital (which
generally includes direct investments, portfolio investments, acquisition of
real estate and payments made pursuant to loan, lease, sale of goods and
services agreements having terms of over 180 days) are subject to licensing by
the Central Bank. While PeterStar believes that it has applied for all the
necessary licenses, not all licenses have been received. Failure to apply for
the appropriate licenses, or to receive the outstanding licenses could result in
fines and penalties. Additionally, delays in the receipt of licenses will also
delay the time at which the Company can start to realize cashflows from the
leasing of assets to its operating subsidiaries in Russia. See "Business -- Risk
Factors -- Risks Involving the Company -- Currency Controls; Restrictions on
Repatriation of Payments; Prior Investments."
Payments between Russian residents must generally be made in Roubles.
Russian companies may exchange Roubles for U.S. Dollars if they can document
U.S. Dollar-denominated liabilities that are due and payable within specified
periods. Russian companies are required to convert 50% of most hard currency
earnings into Roubles, but (as noted in the preceding sentence) may be able to
reconvert such amounts into hard currency if they can document hard currency
denominated liabilities that are due and payable within a specified period.
Roubles may not be lawfully exported from, or converted into, other currencies
outside of Russia.
Availability of Hard Currency for Conversion Purposes. The ability of
foreign investors to convert Roubles into hard currency is also subject to the
availability of hard currency in the Russian currency markets. Although there is
an existing market within Russia for the conversion of Roubles into other
currencies, including the interbank currency exchange, over-the-counter and
currency futures markets, the development of this market is uncertain.
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Exchange Rates. Significant fluctuations in the value of the Rouble
against the U.S. Dollar and other hard currencies can also have a material
impact on the value of a foreign investor's Rouble dividend income or Rouble
proceeds from the sale of Rouble denominated securities. In recent years, the
Rouble has experienced a significant depreciation relative to the U.S. Dollar
and other hard currencies, although during 1996 and 1997 it achieved relative
stability vis-a-vis the U.S. Dollar and other hard currencies.
Repatriation. Although Russian law governing foreign investment guarantees
foreign investors the right to repatriate their earnings from Russian
investments, the Russian exchange control regime, including licensing
requirements administered by the Central Bank, may materially affect their
ability to do so and may increase the cost of such repatriation. See
"Business -- Risk Factors -- Risks Involving the Company -- Currency Controls;
Restrictions on Repatriation of Payments; Prior Investments."
KAZAKHSTAN
Exchange Controls. Kazakhstan currently has in place relatively liberal
policies governing hard currency transfers by Kazakh residents to non-residents.
Residents (which generally includes all Kazakh companies and citizens resident
in Kazakhstan) can use hard currency to pay non-residents (which generally
includes all non-Kazakh companies and their branch offices and representative
offices in Kazakhstan) for current currency transactions (generally those where
payment is made within 180 days of the provision of goods or services). Payments
in U.S. Dollars classified as movements of capital (which generally includes
direct investments, portfolio investments, payments with respect to real estate
and payments made after 180 days for goods and services) are subject to
licensing by the National Bank of Kazakhstan.
Payments between Kazakh residents must generally be made in Tenge. Kazakh
companies may exchange Tenge for U.S. Dollars if they can document U.S.
Dollar-denominated liabilities that are due and payable within specified
periods. The National Bank of Kazakhstan does not currently require the
conversion of hard currency earnings into Tenge. Tenge may not be lawfully
exported from Kazakhstan or converted into other currencies outside of
Kazakhstan.
Availability of Hard Currency for Conversion Purposes. The ability of
foreign investors to convert Tenge into hard currency is also subject to the
availability of hard currency in the Kazakh currency markets. Although there is
an existing market within Kazakhstan for the conversion of Tenge into other
currencies, including the interbank currency exchange and the over-the-counter
markets, the development of this market is uncertain.
Exchange Rates. Significant fluctuations in the value of the Tenge against
the U.S. Dollar and other hard currencies can also have a material impact on the
value of a foreign investor's Tenge dividend income or Tenge proceeds for the
sale of Tenge-denominated securities. Since January 1995, the Tenge has
experienced relative stability against the U.S. Dollar and other hard
currencies.
Repatriation. Kazakhstan's foreign investment legislation provides that
earnings from investments made by foreign investors may be freely repatriated
provided that all applicable fees and taxes have been paid. However, the
exchange control regime in Kazakhstan may materially affect an investor's
ability to do so and may increase the cost of such repatriation. See
"Business -- Risk Factors -- Risks Involving the Company -- Currency Controls;
Restrictions on Repatriation of Payments; Prior Investments."
INFLATION
Since the break-up of the Soviet Union, both the Russian and Kazakh
economies have been characterized by high rates of inflation. Although in 1996
and 1997, inflation in both countries decreased substantially, there is no
assurance that these trends will continue. In recent years, the devaluation of
the Rouble and Tenge has not kept pace with inflation. To the extent that the
Company's costs are denominated in the Rouble or the Tenge and devaluation of
these currencies does not fully offset inflation, the Company's local currency
costs will increase in hard currency terms. If the Company's operating
businesses are unable to increase prices in line with inflation, due to
competitive pressures or otherwise, the results of operations of the Company's
operating businesses may be adversely affected.
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EXCHANGE RATES
The following tables summarize the Rouble-U.S. Dollar and Tenge-U.S. Dollar
exchange rates since January 1994 in the case of the Rouble and since October
1994 in the case of the Tenge:
ROUBLE/U.S. DOLLAR EXCHANGE RATES(1)
<TABLE>
<CAPTION>
MONTH 1994 1995 1996 1997
- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C>
January..................................................... 1,247 3,550 4,640 5,636
February.................................................... 1,560 4,059 4,736 5,676
March....................................................... 1,688 4,400 4,830 5,726
April....................................................... 1,761 4,008 4,940 5,760
May......................................................... 1,841 5,130 5,031 5,773
June........................................................ 1,918 4,958 5,105 5,771
July........................................................ 1,988 4,539 5,189 5,798
August...................................................... 2,060 4,405 5,352 5,824
September................................................... 2,204 4,445 5,396 5,861
October..................................................... 2,643 4,495 5,455 5,887
November.................................................... 3,085 4,509 5,511 5,917
December.................................................... 3,249 4,578 5,550 5,997
</TABLE>
- ---------------
(1) Spot rate on the last business day of each month.
TENGE/U.S. DOLLAR EXCHANGE RATES(1)
<TABLE>
<CAPTION>
MONTH 1994 1995 1996 1997
- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C>
January..................................................... 55.6 65.5 75.8
February.................................................... 60.1 65.3 75.5
March....................................................... 60.8 66.0 75.3
April....................................................... 63.5 67.1 75.4
May......................................................... 64.3 66.9 75.5
June........................................................ 64.3 67.2 75.6
July........................................................ 63.2 67.5 75.5
August...................................................... 59.0 68.1 75.6
September................................................... 60.9 68.8 75.6
October..................................................... 50.0 61.7 69.5 75.6
November.................................................... 50.0 63.9 70.4 75.6
December.................................................... 50.0 59.6 73.1 76.2
</TABLE>
- ---------------
(1) Spot rate on the last business day of each month.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its subsidiaries
and supplementary data required by this item are attached to this report
beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and compliance with Section 16(a) of the
Securities Exchange Act of 1934, called for by this Item will be contained in
the Company's definitive proxy statement for the 1998 Annual Meeting of
Shareholders (the "Proxy Statement"), and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this Item will be contained in the Proxy
Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this Item will be contained in the Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this Item will be contained in the Proxy
Statement and is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. Financial Statements listed in the
accompanying Index to Financial Statements appearing on page F-1
are filed as part of this annual report on Form 10-K.
2. Exhibits. (see (c) below).
(b) Reports on Form 8-K
On December 16, 1997, the Company filed a Current Report on Form 8-K with
the Securities and Exchange Commission regarding the Company's acquisition of
additional interests in Technocom and the related financing transaction with the
Travelers Parties.
(c) Exhibits
The following is a list of exhibits filed as part of this Annual Report on
Form 10-K. Where so indicated by footnote, exhibits which were previously filed
are incorporated by reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2 Certificate of Domestication. (Exhibit 3.1)(9)
3.1 Certificate of Incorporation. (Exhibit 3.2)(9)
3.2 By-Laws. (Exhibit 3.3)(9)
4.1 Indenture dated as of May 31, 1996 among the Registrant, as
Issuer, NWE Capital (Cyprus) Limited, PLD Asset Leasing
Limited, PLD Capital Limited, Baltic Communications Limited
and Wireless Technology Corporations Limited as Guarantors,
and The Bank of New York, as Trustee, with respect to
$123,000,000 aggregate principal amount at stated maturity
of 14% Senior Discount Notes due 2004 (the "Senior Note
Indenture") (including exhibits B, C, D and K only).
(Exhibit 4.1)(10)
4.2 Indenture dated as of May 31, 1996 among the Registrant as
Issuer, NWE Capital (Cyprus) Limited, PLD Asset Leasing
Limited, PLD Capital Limited, Baltic Communications Limited
and Wireless Technology Corporations Limited as Guarantors,
and The Bank of New York, as Trustee, with respect to
$26,500,000 aggregate principal amount of 9% Convertible
Subordinated Notes due 2006 (the "Convertible Note
Indenture") (including exhibit B only). (Exhibit 4.2)(10)
4.3* First Supplemental Indenture, Amendment Agreement, Consent
and Waiver, dated as of March 20, 1998, among the
Registrant, as Issuer, NWE Capital (Cyprus) Limited, PLD
Asset Leasing Limited, PLD Capital Limited, Wireless
Technology Corporations Limited and Baltic Communications
Limited, as Guarantors, Clayton A. Waite and Apropos
Investments Ltd., as nominee shareholders, and The Bank of
New York, as Trustee.
4.4 Global Note representing 14% Senior Discounted Notes due
2004. (Exhibit 4.3)(10)
4.5 Global Note representing 9% Convertible Subordinated Notes
due 2006. (Exhibit 4.4)(10)
4.6 Warrant Agreement dated as of May 31, 1996 between the
Registrant and The Bank of New York as Warrant Agent.
(Exhibit 4.9)(10)
4.7 Warrant Certificate of the Registrant for 123,000 Warrants
exercisable on or after December 10, 1996 and on or before
June 12, 2006. (Exhibit 4.5)(10)
4.8 Smith Barney Warrant Agreement dated as of May 31, 1996
between the Registrant and The Bank of New York as Warrant
Agent. (Exhibit 4.10)(10)
4.9 Smith Barney Warrant Certificate of the Registrant for
100,000 Warrants exercisable as to 50,000 Common Shares on
or after June 12, 1996 and as to 50,000 Common Shares on or
after October 30, 1996 and on or before April 30, 2001.
(Exhibit 4.6)(10)
</TABLE>
86
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.10 Registration Rights Agreement dated as of May 31, 1996
between the Registrant and Smith Barney Inc. (Exhibit
4.7)(10)
4.11 Purchase Agreement dated May 24, 1996 between the Registrant
and Smith Barney Inc. (without exhibits). (Exhibit 4.8)(10)
4.12 Company Senior Note Escrow Account Agreement dated as of May
31, 1996 among The Bank of New York as Escrow Agent, as
Trustee under the Senior Note Indenture, as Trustee under
the Convertible Note Indenture and the Registrant. (Exhibit
4.11)(10)
4.13 Company Convertible Note Escrow Account Agreement dated as
of May 31, 1996 among The Bank of New York as Escrow Agent,
as Trustee under the Senior Note Indenture, as Trustee under
the Convertible Note Indenture and the Registrant. (Exhibit
4.12)(10)
4.14 Leasing Company Escrow Account Agreement (PLD Asset Leasing
Limited) dated as of May 31, 1996 among The Bank of New York
as Escrow Agent, as Trustee under the Senior Note Indenture,
as Trustee under the Convertible Note Indenture and PLD
Asset Leasing Limited. (Exhibit 4.13)(10)
4.15 Leasing Company Escrow Account Agreement (PLD Capital
Limited) dated as of May 31, 1996 among The Bank of New York
as Escrow Agent, as Trustee under the Senior Note Indenture,
as Trustee under the Convertible Note Indenture and PLD
Capital Limited. (Exhibit 4.14)(10)
4.16 Company Senior Note Security and Pledge Agreement dated as
of May 31, 1996 by the Registrant in favor of The Bank of
New York, as Trustee under the Senior Note Indenture, as
Trustee under the Convertible Note Indenture, and as
Collateral Agent. (Exhibit 4.15)(10)
4.17 Company Convertible Note Security and Pledge Agreement dated
as of May 31, 1996 by the Registrant in favor of The Bank of
New York, as Trustee under the Convertible Note Indenture,
as Trustee under the Convertible Note Indenture, and as
Collateral Agent. (Exhibit 4.16)(10)
4.18 Leasing Company Security and Pledge Agreement (PLD Asset
Leasing Limited) dated as of May 31, 1996 by PLD Asset
Leasing Limited in favor of The Bank of New York, as Trustee
under the Senior Note Indenture, as Trustee under the
Convertible Note Indenture, and as Collateral Agent.
(Exhibit 4.17)(10)
4.19 Leasing Company Security and Pledge Agreement (PLD Capital
Limited) dated as of May 31, 1996 by PLD Capital Limited in
favor of The Bank of New York, as Trustee under the Senior
Note Indenture, as Trustee under the Convertible Note
Indenture, and as Collateral Agent. (Exhibit 4.18)(10)
4.20 NWE Cyprus Senior Note Security and Pledge Agreement dated
as of May 31, 1996 by NWE Capital (Cyprus) Ltd. in favor of
The Bank of New York, as Trustee under the Senior Note
Indenture, as Trustee under the Convertible Note Indenture,
and as Collateral Agent. (Exhibit 4.19)(10)
4.21* Revolving Credit Agreement, dated as of November 26, 1997,
between the Registrant, The Travelers Insurance Company and
The Travelers Indemnity Company.
4.22* Form of 12% Series A Senior Secured Revolving Credit Note.
4.23* Form of 12% Series B Senior Secured Revolving Credit Note.
4.24* Warrant Agreement, dated as of November 26, 1997, between
the Registrant and The Bank of New York, as Warrant Agent.
4.25* Form of Series A Warrant Certificate.
4.26* Form of Series B Warrant Certificate.
4.27* Registration Rights Agreement, dated as of November 26,
1997, between the Registrant, The Travelers Insurance
Company and The Travelers Indemnity Company.
</TABLE>
87
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.28* Guaranty Agreement, dated as of November 26, 1997, made and
given by Wireless Technology Corporations Limited and Baltic
Communications Limited in favor of The Travelers Insurance
Company and The Travelers Indemnity Company.
4.29* Trust Agreement, dated as of November 26, 1997, between the
Registrant and The Bank of New York, as Trustee.
4.30* Security Agreement (Inventory and Receivables), dated as of
November 26, 1997, between the Registrant and The Bank of
New York, as Trustee.
4.31* Pledge Agreement, dated as of November 26, 1997, between the
Registrant and The Bank of New York, as Trustee.
10.1* PLD Telekom Inc. 1997 Equity Compensation Plan.
10.2* Service Agreement, dated August 1, 1997, between the
Registrant and James R.S. Hatt.
10.3* Employment Letter, effective June 1, 1997, between the
Registrant and John G. Davies.
10.4* Amendment, dated July 30, 1997, to Employment Letter between
the Registrant and John G. Davies.
10.5* Service Agreement, dated July 1, 1997, between the
Registrant and Simon Edwards.
10.6 Service Agreement, dated January 1, 1995, between PLD
Management Services Limited and Conor Carroll. (Exhibit
2(l))(8)
10.7* Amended and Restated Service Agreement, dated August 1,
1997, between the Registrant and Conor Carroll.
10.8* Service Agreement, dated November 26, 1997, between the
Registrant and Boris Antoniuk.
10.9* Consultancy Agreement, dated December 28, 1994, between
Technocom Limited and Elite International Limited.
10.10* Amendment, dated November 26, 1997, to the Consultancy
Agreement between Technocom Limited and Elite International
Limited.
10.11 Service Agreement between the Registrant and Newmark Capital
Limited dated as of January 1, 1995. (Exhibit 2(o))(8)
10.12 Purchase Agreement dated August 12, 1992, as amended,
between the Registrant and Dominion Capital. (Exhibit
2(o))(2)
10.13 Warrant to Purchase Common Shares dated October 2, 1992
between the Company and Dominion Capital Inc. (Exhibit
2(l))(2)
10.14 Warrant to Purchase Common Shares dated June 8, 1994 between
the Company and Dominion Capital Inc. (Exhibit 10.27)(4)
10.15 Warrant to Purchase Common Shares dated July 28, 1994
between the Company and Dominion Capital Inc. (Exhibit
10.28)(4)
10.16 Purchase Agreement dated November 17, 1992 between the
Registrant, The Emerging Markets Telecommunications Fund,
Inc., The Universal Global Fund and The Universal Emerging
Markets Fund. (Exhibit 2(r))(2)
10.17 Share Purchase Agreement dated as of November 5, 1993
between the Registrant and Navona Communications Corporation
Ltd. (Exhibit 3(a))(3)
10.18 Subscription Agreement dated as of March 3, 1994 between the
Registrant and Navona Communications Corporation Ltd.
(Exhibit 3(e))(3)
10.19 Variation Agreement dated as of March 25, 1994 between the
Registrant and Navona Communications Corporation Ltd.
(Exhibit 3(f))(3)
10.20 Variation Agreement dated as of March 29, 1994 between the
Registrant and Navona Communications Corporation Ltd.
(Exhibit 3(g))(3)
</TABLE>
88
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.21 Further Variation Agreement dated as of June 3, 1994 between
the Registrant and Navona Communications Corporation Ltd.
(Exhibit 3(h))(3)
10.22 Agreement to Purchase Warrants dated July 28, 1994 between
the Registrant and Cable & Wireless. (Exhibit 10.25)(4)
10.23 Option Agreement between Cable and Wireless plc and the
Registrant dated January 27, 1996. (Exhibit 2(b))(8)
10.24 Assignment of Receivables between Cable and Wireless plc and
NWE Capital (Cyprus) Limited dated February 2, 1996.
(Exhibit 2(d))(8)
10.25 Agreement dated May 31, 1992 between Tiller International
Limited and the Registrant. (Exhibit 2(m))(1)
10.26 Joint Venture Agreement dated as of December 31, 1993
between Wireless Technology Corporations Limited and
Kompania Besprovodnye Seti Sviazi. (Exhibit 3(b))(3)
10.27 Interconnection Agreement dated as of February 4, 1994
between the Ministry of Communications of the Republic of
Kazakhstan and BECET International. (Exhibit 3(d))(3)
10.28* Amendment, dated February 28, 1996, to the Interconnection
Agreement between Kazakhtelekom and BECET International.
10.29 Cellular System Equipment Purchase Agreement dated as of May
4, 1994 between BECET International and Motorola Inc.
(Exhibit 3(k))(3)
10.30 Cellular System Installation & Optimization Agreement dated
as of May 4, 1994 between BECET International and Motorola
Inc. (Exhibit 3(l))(3)
10.31 Put and Call Letter Agreement dated as of June 3, 1994
between the Company and Monogram Telecommunications Limited.
(Exhibit 3(i))(3)
10.32 Subscription Agreement dated February 21, 1995 for
$3,000,000 convertible note issued to the Registrant by
Monogram. (Exhibit 2(a))(7)
10.33 Agreement for the Acquisition of Ninety Percent of the
Issued Share Capital of St. Petersburg Mayorality & Tiller
dated as of March 7, 1994 among the Registrant, Tiller
International Limited and Dian A/O. (Exhibit 3(j))(3)
10.34 Shareholders and Subscription Agreement dated as of November
3, 1994 between the Registrant, Bradenham Holdings Limited
and Strikeland Limited. (Exhibit 2.6)(5)
10.35 Purchase Agreement between Baltic Communications Limited and
the Registrant dated January 27, 1996. (Exhibit 2(a))(8)
10.36 Share Purchase Agreement dated April 26, 1995 between Lant
Investments Limited and the Registrant. (Exhibit 2(b))(7)
10.37 Escrow Agreement among the Registrant, Lant Investments
Limited and Montreal Trust Company of Canada. (Exhibit
2(c))(7)
10.38 Registration Rights Agreement dated as of April 26, 1995
between the Registrant and Lant Investments Limited.
(Exhibit 2(d))(7)
10.39 Side letter between the Registrant and Baltic Communications
Limited dated January 27, 1996. (Exhibit 2(c))(8)
10.40 Share Sale and Purchase Agreement dated November 2, 1994
between the Registrant and Plicom Limited. (Exhibit 2.3)(4)
10.41 Form of Subscription and Shareholder Agreement between the
Registrant, Plicom Limited, Elite International Limited and
Technocom Limited. (Exhibit 2.4)(6)
10.42* Amendment, dated November 26, 1997, to Subscription and
Shareholder Agreement between the Registrant, Plicom
Limited, Elite International Limited and Plicom Limited.
</TABLE>
89
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.43 Form of Deed of Covenant between the Registrant and Plicom
Limited. (Exhibit 2.5)(4)
10.44 Form of Put and Call Option Agreement dated November 4, 1994
between the Company and Plicom Limited. (Exhibit 10.20)(4)
10.45 Form of Put and Call Option Agreement dated November 4, 1994
between the Registrant and Elite International Limited.
(Exhibit 10.21)(4)
10.46* Amendment, dated November 26, 1997, to Put and Call Option
Agreement between the Registrant and Plicom Limited.
10.47* Amended and Restated Put and Call Option Agreement, dated
November 26, 1997, between the Registrant and Elite
International Limited.
10.48* Share Purchase Agreement, dated November 26, 1997, among the
Registrant, Technocom Limited, Plicom Limited and Mark
Klabin.
10.49* Share Purchase Agreement, dated November 26, 1997, among the
Registrant, Technocom Limited and Elite International
Limited.
10.50* Securities Sale and Purchase Agreement between the
Registrant and Redford Limited relating to SPMMTS.
10.51 Agreement for Lease dated as of April 27, 1994 between the
Registrant and The Scottish Life Assurance Company. (Exhibit
3(o))(3)
10.52* Sublease, dated June 4, 1997, between the Registrant and The
Seiko Corporation of America.
10.53 License Granted to BECET International for the Operation of
a Cellular Telecommunication System Providing Mobile
Radiocommunications Services dated as of February 4, 1994.
(Exhibit 3(c))(3)
10.54 License No. 2463 issued to MTR-Sviaz dated September 21,
1995 (Russian). (Exhibit 2(f))(8)
10.55 License No. 4904 issued by the RSCC to PeterStar Company
Limited for the provision of local, national and
international telecommunications services via a dedicated
network. (Exhibit 10.3)(10)
10.56 License No. 4274 issued by the RSCC to PeterStar Company
Limited for the provision of local and intercity telephone
communications services. (Exhibit 10.4)(10)
10.57 License No. N4199 issued by the RSCC to Teleport-TP for the
provision of local and international telephone
communications. (Exhibit 10.5)(10)
10.58 License No. N4207 issued by the RSCC to Teleport-TP for the
provision of international telecommunication services via
dedicated network. (Exhibit 10.6)(10)
10.59 License No. N4437 issued by the RSCC to Teleport-TP for the
provision of international leased lines and circuits for the
transmission of television signals. (Exhibit 10.7)(10)
10.60 License No. 3654 issued to Teleport-TP for providing data
transmission services. (Exhibit (2(e))(8)
21* List of Subsidiaries.
23.1* Consent of KPMG Peat Marwick LLP.
23.2* Consent of KPMG.
</TABLE>
- ---------------
* Filed herewith.
(1) Filed as an Exhibit to the Company's Annual Report on Form 20-F for the
year ended December 31, 1991.
(2) Filed as an Exhibit to the Company's Form 8 Amendment to Form 20-F for the
year ended December 31, 1991.
(3) Filed as an Exhibit to the Company's Annual Report on Form 20-F for the
year ended December 31, 1993.
(4) Filed as an Exhibit to the Company's Registration Statement on Form F-1
(File No. 33-86184).
90
<PAGE> 93
(5) Filed as an Exhibit to Pre-Effective Amendment No. 1 to the Company's
Registration Statement on Form F-1 (File No. 33-86184).
(6) Filed as an Exhibit to Pre-Effective Amendment No. 4 to the Company's
Registration Statement on Form F-1 (File No. 33-86184).
(7) Filed as an Exhibit to the Company's Annual Report on Form 20-F for the
year ended December 31, 1994.
(8) Filed as an Exhibit to the Company's Annual Report on Form 20-F for the
year ended December 31, 1995.
(9) Filed as an Exhibit to the Company's Current Report on Form 8-K dated March
7, 1997.
(10) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.
91
<PAGE> 94
PLD TELEKOM INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated balance sheets as of December 31, 1997 and
1996...................................................... F-4
Consolidated statements of operations for the years ended
December 31, 1997, 1996 and 1995.......................... F-5
Consolidated statements of shareholders' equity for the
years ended December 31, 1997, 1996 and 1995.............. F-6
Consolidated statements of cash flows for the years ended
December 31, 1997, 1996 and 1995.......................... F-7
Notes to consolidated financial statements.................. F-8
</TABLE>
FINANCIAL STATEMENT SCHEDULES:
All financial statement schedules are omitted as the required information
is not applicable or the information is presented in the consolidated financial
statements or related notes.
F-1
<PAGE> 95
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
PLD Telekom Inc.:
We have audited the accompanying consolidated balance sheet of PLD Telekom
Inc. as of December 31, 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1997, and the results of its operations and the changes in
its financial position for the year then ended in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
New York, NY
March 23, 1998
F-2
<PAGE> 96
AUDITORS' REPORT
Shareholders and Board of Directors
PLD Telekom Inc.:
We have audited the accompanying consolidated balance sheet of PLD Telekom
Inc. as of December 31, 1996 and the consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the two-year period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1996 and the results of its operations and the changes in its
financial position for each of the years in the two-year period ended December
31, 1996 in accordance with United States generally accepted accounting
principles.
KPMG
Chartered Accountants
Toronto, Canada
March 21, 1997
F-3
<PAGE> 97
PLD TELEKOM INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 7)........................ $ 17,256 $ 40,674
Trade receivables, net of allowance of $3,226 and $1,986,
respectively........................................... 17,078 10,528
Other receivables and prepaids............................ 8,615 3,522
Inventory................................................. 2,802 1,840
Due from related parties (note 13(c))..................... 6,320 4,408
-------- --------
Total current assets.............................. 52,071 60,972
Escrow funds (note 9)....................................... 33,868 40,984
Property and equipment, net (note 4)........................ 134,998 93,039
Telecommunications licenses (note 3), net of amortization of
$26,294 and $18,640, respectively......................... 78,837 72,310
Due from related parties (note 13(c))....................... 3,011 --
Other investments (note 5).................................. 7,036 24,094
Other assets (note 6)....................................... 25,765 14,958
-------- --------
Total assets...................................... $335,586 $306,357
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Bank indebtedness (note 7)................................ -- 15,829
Short-term borrowings (note 8)............................ 20,320 --
Accounts payable.......................................... 13,597 17,781
Accrued liabilities....................................... 5,750 3,126
Due to related parties (note 13(d))....................... 5,336 4,039
Deferred revenues......................................... 3,128 1,078
Customer deposits......................................... 3,070 1,644
Other current liabilities................................. 2,256 3,241
-------- --------
Total current liabilities......................... 53,457 46,738
-------- --------
Long-term debt (note 9)..................................... 133,516 107,954
Minority interest........................................... 21,382 13,711
Commitments and contingencies (note 14)
Shareholders' equity (notes 9 and 10):
Preferred stock, par value $.01 per share in 1997 and no
par value in 1996. Authorized 100,000,000 shares in
1997 and unlimited number of shares in 1996; issued and
outstanding 446,884 shares............................. 4 31
Common stock, par value $.01 per share in 1997 and no par
value in 1996. Authorized 100,000,000 shares in 1997
and unlimited number of shares in 1996; issued and
outstanding 33,324,290 shares in 1997 and 31,696,034
shares in 1996......................................... 333 180,878
Additional paid-in capital................................ 204,007 13,592
Accumulated deficit....................................... (77,113) (56,547)
-------- --------
Total shareholders' equity........................ 127,231 137,954
-------- --------
Total liabilities and shareholders' equity........ $335,586 $306,357
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 98
PLD TELEKOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Telecommunications (note 13(a))................... $ 112,468 $ 60,562 $ 27,686
Finance lease income.............................. 1,956 1,404 1,434
----------- ----------- -----------
114,424 61,966 29,120
Direct costs........................................ 39,186 21,709 10,382
----------- ----------- -----------
Gross profit.............................. 75,238 40,257 18,738
----------- ----------- -----------
Operating expenses:
General and administrative........................ 38,716 24,791 18,168
Depreciation...................................... 10,433 5,226 3,837
Amortization...................................... 7,867 4,883 4,659
Taxes other than income taxes..................... 6,204 2,490 1,220
----------- ----------- -----------
Total operating expenses.................. 63,220 37,390 27,884
----------- ----------- -----------
Operating income/(loss)................... 12,018 2,867 (9,146)
Other income/(expense):
Share of loss from equity investments, after
amortization of licenses of $2,477 and $1,528
in 1996 and 1995, respectively................. (537) (2,692) (1,555)
Interest and other income......................... 3,614 4,859 2,066
Interest expense.................................. (17,846) (9,973) (957)
Amortization of deferred financing costs.......... (1,152) (684) --
Foreign exchange loss............................. (274) (648) (443)
Gain/(loss) on disposal of investments and
property and equipment......................... 749 -- (915)
Provision for amounts due from a shareholder of
PeterStar (note 13(e))......................... -- -- (2,490)
----------- ----------- -----------
Loss before income taxes and minority
interest................................ (3,428) (6,271) (13,440)
Income taxes (note 11).............................. 7,739 3,669 1,490
----------- ----------- -----------
Loss before minority interest............. (11,167) (9,940) (14,930)
Minority interest................................... 9,399 2,521 551
----------- ----------- -----------
Net loss.................................. $ (20,566) $ (12,461) (15,481)
=========== =========== ===========
Net loss per common share:
Basic............................................. $ (0.64) $ (0.39) $ (0.49)
=========== =========== ===========
Diluted........................................... $ (0.64) $ (0.39) $ (0.49)
=========== =========== ===========
Weighted average common shares outstanding.......... 32,061,070 31,579,201 31,314,662
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 99
PLD TELEKOM INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
---------------- ----------------------
NUMBER NUMBER ADDITIONAL
OF OF PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ---------- --------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995.............. 446,884 $ 31 30,012,214 $ 173,034 -- (28,605) 144,460
Conversion of Series VIII preferred
shares................................ -- -- 1,110,000 4,886 -- -- 4,886
Issuance of shares for CPY Yellow Pages
Limited (note 3(f))................... -- -- 368,820 1,900 -- -- 1,900
Exercise of warrants and options........ -- -- 16,000 67 -- -- 67
Net loss for the year................... -- -- -- -- -- (15,481) (15,481)
------- ---- ---------- --------- ------- ------- -------
Balance at December 31, 1995............ 446,884 31 31,507,034 179,887 -- (44,086) 135,832
Exercise of options..................... -- -- 189,000 991 -- -- 991
Issuance of warrants (note 9)........... -- -- -- -- 13,592 -- 13,592
Net loss for the year................... -- -- -- -- -- (12,461) (12,461)
------- ---- ---------- --------- ------- ------- -------
Balance at December 31, 1996............ 446,884 31 31,696,034 180,878 13,592 (56,547) 137,954
Increase in par value from none to $.01
(note 10)............................. -- -- -- (180,561) 180,561 -- --
Change in par value of preferred stock
(note 10)............................. -- (27) -- -- 27 -- --
Common stock cancellations.............. -- -- (150) -- -- -- --
Exercise of options and warrants........ -- -- 312,166 3 1,736... -- 1,739
Issuance of shares (note 3(c)).......... -- -- 1,316,240 13 7,668 -- 7,681
Issuance of warrants (note 8(a))........ -- -- -- -- 423 -- 423
Net loss for the year................... -- -- -- -- -- (20,566) (20,566)
------- ---- ---------- --------- ------- ------- -------
Balance at December 31, 1997............ 446,884 $ 4 33,324,290 $ 333 204,007 (77,113) 127,231
======= ==== ========== ========= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 100
PLD TELEKOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(20,566) (12,461) (15,481)
Adjustments to reconcile net loss to net cash provided
by/(used in) operating activities:
Depreciation and amortization........................... 19,452 10,793 8,496
Accrued interest on senior discount notes............... 14,260 7,349 --
Minority interest....................................... 9,399 2,521 551
Gain on sale of SPMMTS.................................. (1,001) -- --
Deferred revenue........................................ 2,050 (898) 1,958
Share of loss of equity investments..................... 537 2,692 1,555
Other................................................... -- 300 1,543
Changes in operating assets and liabilities, net of
effects of acquisitions:
Increase in trade receivables......................... (6,550) (2,478) (1,681)
(Increase)/decrease in other receivables and
prepaids........................................... (5,093) 1,827 (1,909)
Increase in inventory................................. (962) (392) (608)
Change in amounts due from or to related parties...... 386 (4,743) (2,499)
Increase/(decrease) in accounts payable, accrued
liabilities, customer deposits, and other current
liabilities........................................ (1,119) 11,108 1,351
-------- ------- -------
Net cash provided by/(used in) operating
activities....................................... 10,793 15,618 (6,724)
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (38,990) (43,201) (31,538)
Proceeds from sale of SPMMTS.............................. 17,180 -- --
Escrow funds.............................................. 7,116 (40,984) --
Purchase of 30% investment in Technocom................... (25,608) -- --
Teleport-TP finance lease and advances.................... -- 3,916 (7,733)
Investments in Baltic Communications Limited, J.V.
Technopark Limited and Teleport-TP, net of cash
acquired................................................ -- (7,515) --
Other investments......................................... 181 (140) (3,000)
Other assets.............................................. (747) (267) (6,822)
-------- ------- -------
Net cash used in investing activities.............. (40,868) (88,191) (49,093)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term debt borrowings/(repayments)................... (10,929) (6,550) 22,379
Proceeds from issuance of 12% Revolving Credit Notes...... 15,420 -- --
Proceeds from issuance of 14% Senior Discount Notes....... -- 87,697 --
Proceeds from issuance of 9% Convertible Subordinated
Notes................................................... -- 26,500 --
Deferred financing costs.................................. -- (9,224) --
Proceeds from issuance of common stock.................... 1,739 991 67
Cash dividends paid to minority shareholders.............. (1,000) -- --
Loans from shareholders................................... -- (1,843) 405
Related company advances.................................. -- -- (815)
Due to equipment supplier................................. -- -- (4,384)
Recapitalization of PeterStar............................. 1,427 -- --
Other financing........................................... -- -- (2,869)
-------- ------- -------
Net cash provided by financing activities.......... 6,657 97,571 14,783
-------- ------- -------
(Decrease)/increase in cash and cash equivalents... (23,418) 24,998 (41,034)
Cash and cash equivalents at beginning of year.............. 40,674 15,676 56,710
-------- ------- -------
Cash and cash equivalents at end of year.................... $ 17,256 40,674 15,676
======== ======= =======
Supplementary disclosures:
Noncash investing and financing activities:
Supplier financing...................................... $ 11,302 -- --
======== ======= =======
Issuance of common stock for a portion of purchase price
of Technocom.......................................... $ 7,681 -- --
======== ======= =======
Interest paid............................................. $ 3,381 2,425 380
======== ======= =======
Income taxes paid......................................... $ 7,424 3,678 809
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 101
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) BUSINESS, OPERATIONS AND FUTURE ACTIVITIES
The Company was previously incorporated under the laws of Ontario, Canada
and on August 1, 1996 changed its name from Petersburg Long Distance Inc. to PLD
Telekom Inc. (PLD). Effective February 28, 1997, PLD was incorporated in the
United States as a Delaware corporation. Through its majority-owned and
controlled subsidiaries, the Company is a provider of local, long distance and
international telecommunications services in the former Soviet Union.
The Company's telecommunications businesses are at various stages of
development and are growing rapidly in an emerging economy which, by its nature,
has an uncertain economic, political and regulatory environment. The general
risks of operating businesses in the former Soviet Union include the possibility
for rapid change in government policies, economic conditions, the tax regime and
foreign currency regulations.
Ultimate recoverability of the Company's investments is dependent upon its
ability to achieve and maintain profitability, which is dependent to a certain
extent on the stabilization of the economies of the former Soviet Union, the
ability to maintain the necessary telecommunications licenses and the ability to
obtain adequate financing to meet capital commitments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are summarized as follows:
(a) Basis of Presentation
The accompanying consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States
(U.S. GAAP).
The consolidated financial statements include the accounts of the Company
and its majority-owned and controlled subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation. Investment in
affiliates in which the Company has significant influence, but does exercise
control, are accounted for under the equity method. Investments of the Company
over which significant influence is not exercised are carried under the cost
method.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. At December 31, 1997
and 1996, the Company's cash equivalents consist of term deposits of
approximately $7.2 million and $4.2 million, respectively.
(c) Investments
Management determines the appropriate classification of its investments at
the time of purchase and classifies them as trading, available-for-sale or
held-to-maturity in accordance with the provisions of Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities." At December 31, 1997 and 1996, the Company's
investments which are held in escrow consist of U.S. Treasury Bonds with a
carrying value of $33.9 million and $41.0 million, respectively, have been
classified as available-for-sale. In accordance with SFAS 115, the Company
carries their available-for-sale investments at fair value, with unrealized
gains and losses reported as a separate line item in shareholders' equity. Due
to the short maturity period (1997 -- maturing on January 7, 1998 and 1996 --
maturing on January 5, 1997), the carrying value of these investments
approximates its fair market value at December 31, 1997 and 1996.
(d) Revenue Recognition
The Company records telecommunication revenues as earned, at the time
services are provided.
(e) Inventory
Inventory is stated at the lower of average cost or net realizable value
and is composed of telephony products held for resale to customers.
F-8
<PAGE> 102
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(f) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Telecommunications equipment............................. 10 years
Buildings................................................ 28.5 years
Leasehold improvements................................... 10 years
Office furniture and equipment (including computer 3 - 5
equipment)............................................. years
</TABLE>
Interest cost incurred during the period of construction of property and
equipment is capitalized. The interest cost capitalized in 1997 amounted to
$927,791.
(g) Intangible Assets
Telecommunications licenses are being amortized on a straight-line basis
over the terms of the licenses.
Goodwill represents the excess of the purchase price over the fair values
of the net assets acquired and is being amortized on a straight-line basis over
periods ranging from ten to twenty years.
Deferred financing costs represent costs incurred to issue debt. Deferred
financing costs are capitalized and amortized over the term of the related debt.
(h) Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, escrow funds, trade and other receivables, amounts due
from or to related parties, bank indebtedness and accounts payable approximate
fair value due to their short maturities. The fair value of long-term debt is
based on discounted cash flow analysis.
(i) Reporting Currency and Foreign Currency Translation
The statutory accounts of the Company's consolidated subsidiaries are
maintained in accordance with local accounting regulations and are stated in
local currencies.
Local statements are adjusted to U.S. GAAP and then translated into U.S.
dollars in accordance with Statement of Financial Accounting Standards No. 52
(SFAS 52), "Foreign Currency Translation."
Under SFAS 52, the financial statements of foreign entities in highly
inflationary economies are measured in all cases using the U.S. dollar as the
functional currency. U.S. dollar transactions are shown at their historical
value. Monetary assets and liabilities denominated in local currencies are
translated into U.S. dollars at the prevailing period-end exchange rate. All
other assets and liabilities are translated at historical exchange rates.
Results of operations have been translated using the monthly average exchange
rates. Translation differences resulting from the use of these different rates
are included in the accompanying consolidated statements of operations.
(j) Income Taxes
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income or expense in the period it occurs.
(k) Net Loss Per Common Share
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share," on December 31, 1997. SFAS No.
128 establishes standards for computing and presenting earnings per share
("EPS") and supersedes Accounting Principles Board ("APB") Opinion No. 15,
"Earnings per Share." SFAS No. 128 also requires dual presentation of basic and
diluted EPS for
F-9
<PAGE> 103
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
complex capital structures on the face of the consolidated statements of
operations. Basic EPS is computed by dividing income or loss by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution from the exercise or conversion of securities into common
stock, such as stock options, at the beginning of the period being reported on.
Per share amounts for 1996 and 1995 have been retroactively restated to give
effect to SFAS 128 and were not different from EPS measured under APB No. 15.
Net loss and weighted average shares outstanding used for computing diluted
loss per common share were the same as that used for computing basic loss per
common share for each of the years ended December 31, 1995, 1996 and 1997.
The Company had potentially dilutive common stock equivalents of 1,293,000,
135,000 and 150,000 for the years ended December 31, 1997, 1996 and 1995,
respectively, which were not included in the computation of diluted net loss per
common share because they were antidilutive for the periods presented.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.
(m) Equity Compensation
Prior to January 1, 1996, the Company accounted for its equity compensation
plan in accordance with the provisions of APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. As such, compensation
expense was recorded on the date of grant only if the current market price of
the underlying stock exceeded the exercise price. On January 1, 1996, the
Company adopted SFAS 123, "Accounting for Stock-Based Compensation," which
permits entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, SFAS 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the
fair-value-based method, as defined in SFAS 123, had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure required by SFAS 123.
(n) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," on January 1, 1996. SFAS
121 requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
(o) Reclassifications
Certain reclassifications have been made to the prior year's financial
statements to conform to the current year's presentation.
(3) BUSINESSES AND ACQUISITIONS
The Company's key interests at December 31, 1997 include a 60% equity
interest in PeterStar Company Limited ("PeterStar"); a 50% equity interest in
BECET International ("BECET"); and an approximate 80% equity interest in
Technocom Limited ("Technocom"), which holds an approximate 49% equity interest
in
F-10
<PAGE> 104
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
Teleport-TP ("Teleport-TP"). The Company also owns 100% of Baltic Communications
Limited ("BCL") and 100% of CPY Yellow Pages Limited ("Yellow Pages").
(a) PeterStar
PeterStar is a joint stock company registered in 1992 under the laws of the
Russian Federation to provide international and domestic telecommunications
services for St. Petersburg. In November 1994, PeterStar was granted a new
license to provide these services for a further ten years. The license was
reissued in June 1996 and sets the maximum number of lines which PeterStar may
have at 106,000 and requires that 74,200 lines be introduced by June 1999. At
December 31, 1997, PeterStar had 114,774 lines in place.
In October 1992, the Company acquired a 50% interest in PeterStar for
consideration of $19.8 million. An additional 9% interest was acquired in March
1994 for consideration of $8.2 million and an additional 1% interest was
acquired in April 1996 for $1.8 million. All of the considerations have been
allocated to telecommunications licenses. The Company's interest in PeterStar is
owned by its wholly owned subsidiary, NWE Capital (Cyprus) Limited ("NWE
Cyprus"), a company incorporated in Cyprus.
(b) BECET
BECET provides cellular services pursuant to a 15-year license to operate a
cellular telephony system in Kazakhstan until February 2009. The Company's 50%
interest in BECET is owned by its wholly owned subsidiary, Wireless Technology
Corporations Limited ("WTC"), a company incorporated in the territory of the
British Virgin Islands, which in turn is owned by NWE Cyprus.
In connection with the acquisition of BECET, the Company was committed to
provide financing of up to $3.0 million to fund a number of special
telecommunications projects undertaken by the Ministry of Communications in
Kazakhstan. In 1995, the Company provided such financing in the form of a
convertible note (see note 5(b)).
(c) Technocom
The Company subscribed for preferred shares of Technocom, a company
incorporated in the Republic of Ireland, in the amount of $40.0 million, of
which $20.0 million was subscribed for on acquisition in 1994 and the remaining
$20.0 million was subscribed for in June 1996 from the proceeds of the financing
described in note 9. The preferred shares entitle the Company to the first $20.0
million of Technocom's dividend distributions. After receipt of such preference
dividends, all the preferred shares will be converted into a single ordinary
share of Technocom. The carrying value of the Company's investment in
Teleport-TP and minority interest were each increased by a total of $10.0
million in 1995/1996 to reflect the minority interest's ultimate share in the
preferred equity.
On November 26, 1997, PLD acquired an additional 59 ordinary shares of
Technocom increasing its ownership from 50.1% to 80.4%. The total consideration
for the acquisition was $32.5 million, plus acquisition costs of approximately
$840,000 and was allocated to telecommunications licenses, goodwill, and
purchase of minority interest in the amounts of $16.0 million, $11.1 million,
and $6.0 million, respectively. Approximately $24.8 million was paid in cash and
the remainder in shares of PLD common stock (1,316,240 shares of common stock
with a fair market value of $5.85 per share, which cannot be sold until the year
2000). The cash element of the transaction was funded with escrowed funds and
with the proceeds from the Company's 12% Revolving Credit Notes (see note 8).
In addition, the Company restructured certain "put and call" arrangements
with the other two shareholders of Technocom. Under these arrangements, as
originally structured, the remaining ordinary shares of Technocom held by these
shareholders (29 shares, or approximately 14.6% of the total ordinary shares
outstanding, and 10 shares, or approximately 5% of the total ordinary shares
outstanding) were to have been independently valued in 1999 and the Company had
the right to call, and the other two shareholders had the right to put, their
respective interests at the per share value established by the valuation.
F-11
<PAGE> 105
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
These arrangements were restructured as follows. In the case of the holder
of the 29 shares, while the date on which the put or call could be exercised did
not change, the valuation procedure was eliminated and the "put and call" price
for its interest was set at a fixed $17.5 million. In the case of the holder of
the 10 shares, 2 of its remaining 10 ordinary shares were made subject to a new
put and call arrangement which would come into effect in 1998, with the "put and
call" price to be $1 million or, at the holder's option, that number of shares
of common stock which results from dividing $1 million by the lower of $5.85 and
the average closing price of such shares over the preceding 10 trading days. The
remaining 8 ordinary shares continue to be subject to the existing put and call
arrangements in 1999, except that the valuation will be made by the Company and
the amount paid pursuant to the exercise of either the put or the call cannot
exceed $9.6 million or be less than $6.7 million.
On December 20, 1996, Technocom acquired 55.5% of the outstanding shares of
J.V. Technopark Limited ("Technopark") from the minority shareholders of
Technocom for $3.0 million. Technopark is incorporated in Russia and owns a 7.5%
equity interest in Teleport-TP and commercial property in Moscow. The
acquisition of Technopark has been accounted for using the purchase method.
(d) Teleport-TP
The Company currently controls 56% of the voting interests in Teleport-TP
through its ownership of Technocom (see note 3(c)), which has a 49.3% equity
interest in Teleport-TP. The Company originally acquired a 41.8% equity
investment in Teleport-TP through its acquisition of 50.8% of the outstanding
common stock of Technocom. In May 1996, Technocom acquired an additional 3.3%
indirect equity interest in Teleport-TP for cash consideration of $2.0 million,
substantially all of which was allocated to Teleport-TP's telecommunications
licenses. The additional interest was acquired through a company controlled by a
minority shareholder of Technocom.
Teleport-TP is a Russian joint stock company which holds four operating
licenses. The first license expires in November 2004 and authorizes Teleport-TP
to provide long distance and international telecommunications services to
private networks within Moscow and, to a limited extent, elsewhere in the
Russian Federation. Teleport-TP is required by the terms of the license to have
at least 10,500 subscribers (which is 70% of the maximum number of subscribers
permitted under the license) in place by October 1999. Under the terms of the
license agreement, there are no penalties should Teleport-TP not attain the
required number of lines.
The second license expires in October 2004 and permits the operation of
1,000 international leased circuits for the transmission of television and
telecommunications services. The third license, which expires in January 2002,
permits the provision of data services with interconnection to the public
network and requires capacity for 70,000 subscribers by December 2000. The
fourth license, which expires in May 2001, is an overlay license which permits
Teleport-TP to offer local, long distance and international voice and data
services which are interconnected to the public telephone network in 40 regions
across Russia.
F-12
<PAGE> 106
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
As a result of the acquisition of Technopark, the Company consolidated
Teleport-TP's balance sheet at December 31, 1996. The results of operations of
Teleport-TP have been included in the consolidated statements of operations from
January 1, 1997. The consolidation of Teleport-TP's balance sheet at December
31, 1996 is summarized as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Cash................................................. $ 70
Other current assets................................. 4,386
Current liabilities.................................. (1,526)
Equipment under capital lease, net................... 7,415
Other property, plant and equipment, net............. 622
Other assets......................................... 655
Capital lease obligation to Technocom................ (4,153)
Due to Technocom..................................... (3,468)
Due to related parties............................... (3,405)
Minority interest.................................... (411)
Telecommunications licenses, net of accumulated
amortization of $4,005............................. 25,595
-------
Carrying value of investment in Teleport-TP
prior to consolidation................... $25,780
=======
</TABLE>
Condensed financial information of Teleport-TP for the years ended December
31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Telecommunications revenues.............................. $11,104 $ 7,070
Cost of sales............................................ 6,534 2,083
------- -------
Gross profit................................... 4,570 4,987
------- -------
Operating expenses:
General and administrative............................. 2,617 1,606
Other taxes............................................ 592 --
Depreciation of assets under capital lease............. 1,016 570
Other depreciation and amortization.................... 200 762
------- -------
4,425 2,938
------- -------
Operating income............................... 145 2,049
Interest on capital lease................................ (531) (1,434)
Other interest and financing charges, net................ 251 (343)
------- -------
Earnings/(loss) before income taxes............ (135) 272
Income taxes............................................. -- (335)
------- -------
Net loss....................................... $ (135) $ (63)
Technocom's interest therein............................. (75) (27)
Amortization of excess purchase price.................... (2,477) (1,528)
------- -------
Share of Teleport-TP loss...................... $(2,552) $(1,555)
======= =======
</TABLE>
Teleport-TP's revenues for the years ended December 31, 1996 and 1995,
include sales to its minority shareholder of $4.6 million and $5.0 million,
respectively, making Teleport-TP to some extent economically dependent on its
minority shareholder.
Teleport-TP's cost of sales for the year ended December 31, 1996 includes
costs of $2.9 million charged by a company controlled by one of the minority
shareholders of Technocom.
F-13
<PAGE> 107
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
General and administrative expenses for the year ended December 31, 1996
include costs of $576,000 related to marketing services provided by a company
controlled by one of the minority shareholders of Technocom.
(e) BCL
Effective April 1, 1996, the Company acquired all of the outstanding shares
of BCL from Cable & Wireless and its Russian partners for cash consideration of
$3.0 million, plus acquisition costs of $253,000. BCL is a Russian joint stock
company which provides international direct dial, international pay phone and
private line services to a corporate customer base in St. Petersburg. BCL's
results of operations are included in the consolidated financial statements from
the date of acquisition.
The acquisition has been accounted for using the purchase method.
(f) Yellow Pages
On April 26, 1995 the Company, through NWE Cyprus, acquired all the
outstanding shares of Yellow Pages, a company incorporated in the Republic of
Cyprus, for consideration of 368,820 common shares of the Company valued at $1.9
million, plus acquisition costs of $244,000. Yellow Pages publishes a Yellow
Pages directory and owns a database of Russian and foreign businesses in St.
Petersburg. Yellow Pages' results of operations are included in the consolidated
financial statements from the date of acquisition.
The acquisition has been accounted for by the purchase method and
substantially all of the consideration was allocated to goodwill.
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Telecommunications equipment:
Installed............................................ $123,902 $ 80,291
Uninstalled.......................................... 10,396 3,677
Buildings.............................................. 5,434 3,194
Office furniture and equipment (including computer
equipment)........................................... 8,054 6,538
Leasehold improvements................................. 6,082 4,443
Advances to equipment suppliers........................ 4,252 7,999
-------- --------
Total property and equipment................. 158,120 106,142
Less: accumulated depreciation......................... (23,122) (13,103)
-------- --------
Property and equipment, net.................. $134,998 $ 93,039
======== ========
</TABLE>
Property and equipment includes telecommunications equipment with a cost of
$16.5 million which has been pledged under the terms of the long-term
installment agreements (see note 9).
F-14
<PAGE> 108
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(5) OTHER INVESTMENTS
Other investments at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
------ -------
(IN THOUSANDS)
<S> <C> <C>
Investment in St. Petersburg Intercity & International
Telephone, at cost...................................... $ -- $16,179
Investment in Monogram Finance Group Limited.............. 3,000 3,000
Equity investment in MTR-Sviaz............................ 3,128 4,588
Equity investment in Rosh Telecom......................... 542 327
Investment in Gorizont-RT, at cost........................ 224 --
Other investments, at cost................................ 142 --
------ -------
Total........................................... $7,036 $24,094
====== =======
</TABLE>
(a) Investment in St. Petersburg Intercity & International Telephone (SPMMTS)
The Company held a 10.4% equity interest (13.9% voting interest) in SPMMTS,
a privatized Russian company which operates the long distance and international
gateway in St. Petersburg.
In June 1997, the Company sold its investment in SPMMTS for proceeds of
$17.2 million. The gain of $1.0 million is included in gain on disposal of
investments and property and equipment on the consolidated statement of
operations.
(b) Investment in Monogram Finance Group Limited
During the year ended December 31, 1995, the Company advanced $3.0 million
to Monogram Finance Group Limited ("Monogram") in exchange for a convertible
promissory note due on February 20, 2000. The note is convertible into common
shares of Monogram at any time prior to February 20, 2000 at the then current
fair market price of the shares.
(c) Equity Investment in MTR-Sviaz
Technocom has a 49% equity interest in a Russian joint stock company,
MTR-Sviaz, which is a joint venture with Mosenergo, the Moscow city power
utility, to modernize and commercialize a portion of Mosenergo's internal
telecommunications network. MTR-Sviaz holds two operating licenses and commenced
operations in late 1996. The first license authorizes MTR-Sviaz to provide local
and long distance leased line services within the city and region of Moscow.
Under the second license, MTR-Sviaz is authorized to provide local telephone
services through interconnection (via the Mosenergo network) with the public
switched telephone network within the city and region of Moscow. During 1997 and
1996, Technocom leased telecommunications equipment and access rights with a net
book value of $4.7 million and $5.2 million, respectively, to MTR-Sviaz under
finance leases. For the years ended December 31, 1997 and 1996, the Company
recorded finance lease income of $2.0 million and $872,000, respectively,
related to these leases. At December 31, 1997 and 1996, the investment in
MTR-Sviaz is composed of a finance lease receivable of $4.5 million and $5.0
million, offset by the Company's share of losses of MTR-Sviaz of $1.4 million
and $427,000, respectively.
F-15
<PAGE> 109
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
Future minimum lease payments receivable from MTR-Sviaz, by year and in the
aggregate, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998........................................................ $2,530
1999........................................................ 2,530
2000........................................................ 1,704
2001........................................................ 547
2002........................................................ 547
Thereafter.................................................. 1,958
------
Total minimum lease payments...................... 9,816
Amounts representing interest............................... 5,324
------
Present value of minimum lease payments........... $4,492
======
</TABLE>
(6) OTHER ASSETS
Other assets at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Goodwill, net of accumulated amortization of $574 and
$359................................................... $12,709 1,796
Deferred financing costs, net of accumulated amortization
of $1,836 and $684..................................... 7,811 8,540
Deferred charges......................................... 861 700
Other.................................................... 4,384 3,922
------- -------
$25,765 $14,958
======= =======
</TABLE>
(7) CASH AND CASH EQUIVALENTS AND BANK INDEBTEDNESS
The Company's cash and cash equivalents at December 31, 1997 and 1996
consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents on deposit:
In Russia and Kazakhstan............................... $ 7,611 $ 5,210
Outside Russia and Kazakhstan.......................... 9,645 10,935
Term deposit (interest bearing), restricted to secure
bank loan of Technocom................................. -- 9,000
Term deposits (interest bearing), restricted to secure
overdraft balances and accounts payable of Technocom... -- 15,529
------- -------
$17,256 $40,674
======= =======
</TABLE>
As at December 31, 1997 and 1996, Technocom has overdraft balances of $-0-
and $6.8 million and demand bank loans of $-0- and $9.0 million (bearing
interest at 5.8125%). The demand bank loans were secured by term deposits in the
same amount held at the same bank.
Technocom has entered into bank guarantees in connection with certain of
its telecommunications equipment supplier financing agreements. The amount of
the guarantees reduces automatically in accordance with installments paid. The
amounts outstanding as of December 31, 1997 under these supplier financing
agreements secured by bank guarantees are approximately $3.6 million (see note
9).
F-16
<PAGE> 110
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(8) SHORT-TERM BORROWINGS
The Company's short-term borrowings at December 31, 1997 and 1996 consist
of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
12% Revolving Credit Notes............................... $15,420 --
Note payable............................................. 4,000 --
Bank loan facility....................................... 900 --
------- -------
$20,320 --
======= =======
</TABLE>
(a) 12% Revolving Credit Notes
In November 1997, the Company issued $12.4 million in Series A secured
revolving credit notes (the "Series A Notes"), and $3.1 million in Series B
revolving credit notes (the "Series B Notes"), to The Travelers Insurance
Company and The Travelers Indemnity Company (collectively, the "Travelers
Parties"). Both the Series A Notes and the Series B Notes are secured by the
Company's inventory and accounts receivable. In addition, the Series B Notes are
secured by 28 of the 59 Technocom ordinary shares acquired (see note 3(c)).
Both the Series A and B Notes bear interest at an annual rate of 12%,
payable monthly in cash. This interest rate increases to 15% if the Company has
not raised $20 million in additional equity by May 31, 1998. The Series A and
Series B Notes are required to be amortized starting in July 1998. The Series B
Notes, whose original principal amount is $3.1 million, are due in full on
September 30, 1998, and the Series A Notes, in the original principal amount of
$12.3 million, are due in full on December 31, 1998. In addition to issuing the
Series A and Series B Notes, the Company also issued to the Travelers Parties a
total of 423,000 warrants to purchase Common Stock at $8.625 at any time up to
December 31, 2008 (the "Travelers Warrants"). These warrants have been valued at
$423,000 and will be amortized over the term of the revolving credit notes.
The Company may become obligated to issue additional warrants to the
holders in the event that certain amortization payments are not made in
accordance with the agreement or if the Notes are not paid in full at maturity.
Additionally, in the event that the Notes are not paid in full at maturity, all
warrants issued and issuable carry an exercise price of $.01 per share.
(b) Note Payable
Note payable at December 31, 1997 consists of a promissory note issued to
Scientific Atlantic, Inc. ("Scientific Atlantic") on June 10, 1997. The
promissory note, in settlement of equipment and services, is due on June 10,
1998. This note was discounted to West Merchant Bank at a rate of approximately
7.84%. The Company's weighted average interest rate for the note payable is
approximately 8.45%.
(c) Bank Loan Facility
In December 1997, PeterStar entered into a $2.0 million, one-year loan
facility with BNP Dresdner Bank for the purchase of telecommunications
equipment. Interest is charged on borrowed amounts at three-month LIBOR plus
2.5% per annum.
The amount borrowed on the loan facility at December 31, 1997 was $900,000.
F-17
<PAGE> 111
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(9) LONG-TERM DEBT
The Company's long-term debt at December 31, 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
14% Senior Discount Notes.............................. $ 95,714 $ 81,454
9% Convertible Subordinated Notes...................... 26,500 26,500
Supplier financing..................................... 11,302 --
-------- --------
Total............................................. $133,516 $107,954
======== ========
</TABLE>
(a) 14% Senior Discount Notes and 9% Convertible Subordinated Notes.
On June 12, 1996, the Company completed a $149.5 million private placement
consisting of (i) 123,000 Units consisting of $123.0 million 14% Senior Discount
Notes ("Senior Notes") due 2004 and ten-year Warrants to purchase a total of
4,182,000 shares of common stock at a price of $6.60 per share; and (ii) $26.5
million 9% Convertible Subordinated Notes ("Convertible Notes") due 2006,
convertible into common stock of the Company at a price of $6.90 per share.
The 123,000 Units were issued at a discount for gross proceeds of $87.7
million, of which $13.6 million was allocated to the Warrants and $74.1 million
was allocated to the Senior Notes for accounting purposes. The Senior Notes have
a zero coupon until December 1, 1998. After such date, the notes require
semi-annual cash interest payments on June 1 and December 1. The difference
between the carrying value and the principal amount of $123.0 million is being
charged to earnings on an effective yield basis which, together with cash
interest payments, results in an effective yield of 16.8%.
The Convertible Notes require semi-annual cash interest payments on June 1
and December 1.
The terms of the Senior Notes require the Company to raise additional
equity of at least $20.0 million by May 31, 1998. Failure to raise additional
equity will cause the interest rate on the Senior Notes to increase to 14.5%.
The Company is party to a Registration Rights Agreement pursuant to which
the Senior Notes were to have been exchanged for registered securities and the
Convertible Notes registered for the shelf by October 1996. Failure to cause the
registration to become effective results in additional interest payable at a
rate of $0.01 per week per $1,000 of accreted value of the Senior Notes and
principal amount of the Convertible Notes, increasing by $0.01 per week for each
90-day period that the securities are not registered. Additional interest ceases
to accrue when the required registration statements become effective.
All, or a portion, of the Senior Notes are redeemable at the option of the
Company after June 13, 2001 at 108% of the principal amount plus accrued and
unpaid interest, reducing to 104% for the year commencing June 1, 2002 and 100%
on or after June 1, 2003.
The Convertible Notes are redeemable at the option of the Company on or
after June 1, 2000 under certain conditions at a redemption price equal to the
principal amount plus accrued and unpaid interest.
The Senior Notes and the Convertible Notes were issued under the terms of
Indentures dated May 31, 1996. Pursuant to the Indentures, the Company has
pledged its investments in NWE Cyprus (which holds the Company's interests in
PeterStar, WTC, and Yellow Pages), WTC (which holds the Company's interest in
BECET), BCL, a wholly-owned special purpose leasing subsidiary incorporated in
Cyprus, and the Company's investment in preferred stock of Technocom. In
addition, each of these subsidiaries (except Technocom) have guaranteed the
Senior Notes and the Convertible Notes.
A portion of the net proceeds of $105.0 million (after agent's commission
and expenses) was used to meet the Company's $20.0 million commitment to
Technocom (see note 3(c)) and to repay a revolving credit facility in the amount
of $22.5 million. Under the terms of the Indentures, $46.0 million was deposited
into an escrow account which is invested in eligible cash equivalents, as
defined by the Indentures. The escrow funds
F-18
<PAGE> 112
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
are also pledged as security for the Company's obligations under the Indentures.
Escrow funds may be disbursed for purposes of making qualifying investments of
up to $9.0 million in telecommunications companies operating in Russia or
Kazakhstan, or for purposes of investing in telecommunications equipment through
the Company's special purpose leasing subsidiary, which then leases that
equipment to the Company's operating subsidiaries. Investments in leases are
also pledged as security under the Indentures and all payments received under
the terms of the leases are required to be deposited into a separate escrow
account, to be used to purchase additional telecommunications equipment for
lease. On or after November 30, 1998, the Company must also maintain sufficient
funds in the escrow accounts to meet the next interest payment due on both the
Senior Notes and Convertible Notes.
In 1997, the Company made the determination to solicit the holders of the
Senior Notes and the Convertible Notes with a view to making certain amendments
to the Indentures governing such Notes, intended to give the Company more
flexibility in conducting its business and also to clarify certain provisions of
those Indentures, in both cases based upon the Company's experience in operating
under the terms of the Indentures since they were first executed in June 1996.
Under each of the Indentures, the consents of holders of not less than a
majority in principal amount at stated maturity of each of the Senior Notes and
the Convertible Notes are required to authorize their amendment.
On March 4, 1998, the Company mailed to the holders of record on March 3,
1998 of the Senior Notes and the Convertible Notes a consent solicitation
statement (the "Consent Solicitation"). Pursuant to the Consent Solicitation,
the Company offered to each holder of the Senior Notes who consented to the
amendment of the Senior Note Indenture, a five-year warrant to purchase 1.8
shares of Common Stock at a price of $6.90 per share for each $1,000 in unpaid
principal amount at stated maturity of the Senior Notes held by such holder, and
to each holder of the Convertible Notes who consented to the amendment of the
Convertible Note Indenture a five-year warrant to purchase 2 shares of Common
Stock at a price of $6.90 per share for each $1,000 in unpaid principal amount
of the Convertible Notes held by such holder.
As of close of business on March 18, 1998, when the solicitation period
ended, parties holding 100% in principal amount at stated maturity of the Senior
Notes and 85.7% in principal amount at stated maturity of the Convertible Notes
had consented to the amendments. Pursuant to such consents, The Bank of New
York, as trustee under the Indentures, the Company and certain other parties
executed a supplemental indenture bringing the amendments to the Indentures and
certain related documents into effect.
At December 31, 1997 and 1996, the fair value of the Convertible Notes and
Senior Notes approximates their carrying value.
(b) Supplier Financing
Amounts payable under the terms of the long-term installment purchase
agreements are as follows (see notes 4 and 7):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------------
(IN THOUSANDS)
<S> <C>
1999........................... $ 4,616
2000........................... 3,864
2001........................... 2,795
2002........................... 2,361
Thereafter..................... --
-------
$13,636
Less: amounts representing
interest..................... 2,334
-------
$11,302
=======
</TABLE>
The above amounts have been calculated using interest rates of 8.0% to
8.5%.
F-19
<PAGE> 113
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(10) SHAREHOLDERS' EQUITY
(a) Common Stock
On February 28, 1997, as a result of the Company's continuance as a
Delaware corporation, the authorized capital stock was changed from an unlimited
number of common shares without nominal or par value to 100,000,000 common
shares with a par value of $.01 per share. As a result of the change in the par
value, the Common Stock was decreased by $180.6 million and additional paid-in
capital was increased by the same amount.
(b) Preferred Stock
The Company had the following preferred shares issued and outstanding at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
NUMBER OF
SHARES 1997 1996
--------- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Series II......................................... 405,217 $ 4 $--
Series III........................................ 41,667 -- 31
--- ---
$ 4 $31
=== ===
</TABLE>
In addition, the capital stock was also changed from an unlimited number of
preferred shares issuable in series to 100,000,000 preferred shares with par
value of $.01 per share issuable in series. As a result of the change in par
value, the preferred stock has been reflected at its par value in the 1997
consolidated financial statements.
The Series II and III preferred shares, issued at a price of Cdn.$1 (US
$0.74) per share, are redeemable at the option of the Company at Cdn.$1 per
share. The shares do not pay dividends and holders thereof do not have voting
rights.
(c) Shares Reserved
In addition to stock options outstanding (see note 12), the Company has
reserved 4,182,000 common shares for issuance on exercise of outstanding
Warrants and 3,840,580 common shares on conversion of outstanding Convertible
Notes (see note 9). In addition, at December 31, 1997, the Company has 500,000
Warrants outstanding to purchase common shares of the Company at a
weighted-average exercise price of $8.11, of which 250,000 Warrants at an
exercise price of Cdn.$11.31 were granted to Cable & Wireless in 1994 and
100,000 Warrants at an exercise price of US$4.70 were granted in 1996 to the
agent in relation to the debt financing described in note 9. Warrants expire
five years after the date of grant.
In connection with the issuance of the Series A and Series B Notes (see
note 8(a)), the Company issued to the Travelers Parties a total of 423,000
warrants to purchase Common Stock at $8.625 at any time up to December 31, 2008
and may become obligated to issue additional warrants to the Travelers Parties
in the event that certain amortization payments are not made, or if the Series A
or Series B Notes are not paid in full at their maturity.
At the end of March of 1998, in connection with the Consent Solicitation
(see note 9(a)), the Company will issue a total of 123,000 five-year warrants to
purchase 1.8 shares of Common Stock at $6.90 per share to the holders of the
Senior Notes, and a total of 22,700 five-year warrants to purchase 2 shares of
Common Stock at a price of $6.90 per share to the holders of the Convertible
Notes.
F-20
<PAGE> 114
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(11) INCOME TAXES
The geographic components of loss before income taxes and minority interest
are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States.............................. $(35,163) $ -- $ --
Canada..................................... -- (20,829) (16,747)
Russia and Kazakhstan...................... 31,735 14,558 3,307
-------- -------- --------
$ (3,428) $ (6,271) $(13,440)
======== ======== ========
</TABLE>
The provision for income taxes, which relates substantially to current
income taxes in the Company's Russian and Kazak businesses, differs from the
United States (34% -- February 28, 1997 onwards) and Canadian (44% -- January 1,
1995 to February 27, 1997) Federal and state/provincial statutory tax rates as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory
rates....................................... $(1,166) $(2,760) $(5,913)
Add/(deduct) the tax effect of:
Non-deductible amortization of licenses and
goodwill................................. 2,561 3,238 2,720
Other non-deductible expenses............... 2,273 1,753 1,010
Concessions on capital expenditures......... (3,854) (1,000) --
Differences in Russian and Kazak statutory
tax rates................................ (210) (1,696) (350)
Change in valuation allowance related to
deferred tax assets...................... 8,135 4,134 4,023
------- ------- -------
Provision for income tax............ $ 7,739 $ 3,669 $ 1,490
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Share issue costs.................................... $ -- $ 2,150
Operating loss carryforwards......................... 8,929 16,200
Capital loss carryforwards........................... -- 8,400
Expenses not yet deducted for Russian and
Kazak tax purposes................................ 18,646 3,760
-------- --------
27,575 30,510
Less: valuation allowance.............................. (8,246) (29,350)
-------- --------
Net deferred tax assets...................... 19,329 1,160
Deferred tax liabilities:
Debt issue costs............................. (1,160) (1,160)
Expenses not currently deducted for book
purposes................................... (705) --
Tax on revenues not yet realized for Russian
tax purposes............................... (17,464) --
-------- --------
Deferred tax liabilities............................... (19,329) (1,160)
-------- --------
$ -- $ --
======== ========
</TABLE>
At December 31, 1997, the Company had operating loss carryforwards for
United States (U.S.) federal income tax purposes of approximately $26.3 million.
In assessing the realizability of the deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will
F-21
<PAGE> 115
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
not be realized. The ultimate realization of the deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments.
At December 31, 1996, the Company had operating loss carryforwards for
Canadian income tax purposes of approximately $36.0 million and allowable
capital loss carryforwards of approximately $19.0 million. Upon the Company's
emigration to the United States in February 1997, the Company was deemed to
dispose of all its assets at fair value. As a result, a substantial portion of
the operating and capital loss carryforwards were utilized. Remaining losses do
not carry over for U.S. tax purposes.
(12) EQUITY COMPENSATION PLAN
The Company has an Equity Compensation Plan (the "Plan"), which was
approved by the shareholders at the Annual Meeting in June of 1997. The Plan
amends and supersedes in its entirety the PLD Telekom Inc. Stock Option Plan
(the "Prior Plan"). No further grants will be made under the Prior Plan
following the adoption of the Plan and grantees under the Prior Plan have the
option of continuing to have existing grants covered by the terms of the Prior
Plan, or having these grants instead covered by the terms of the Plan.
Pursuant to the Plan, the Company's Board of Directors may grant stock
options, stock appreciation rights, restricted stock and performance units to
directors, officers and key employees of, and certain consultants and advisors
to, the Company and its subsidiaries. The Plan is administered by a committee of
the Board of Directors of the Company consisting solely of "outside directors"
and to date awards under the Plan have been limited to stock options.
The exercise price of each option is generally equal to the fair market
value of the shares of PLD's common stock on the date of grant. The maximum term
for which options are exercisable is ten years. Options shall become exercisable
in accordance with such terms and conditions, consistent with the Plan, as may
be determined by the committee. However, stock options granted to Non-Employee
Directors are immediately exercisable.
The per share weighted-average fair value of stock options granted during
1997, 1996 and 1995 was $2.51, $2.11 and $2.31, respectively, on the date of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: 1997 -- risk-free interest rate of 6.5%, expected
life of six years and expected volatility of 40%; 1996 -- risk-free interest
rate of 6.5%, expected life of five years and expected volatility of 30%;
1995 -- risk-free interest rate of 6.3%, expected life of five years and
expected volatility of 30%.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Company determined compensation cost based on
the fair value at the date of grant for its stock options under SFAS 123, the
Company's loss would have been increased to $22.9 million ($0.71 per share),
$13.6 million ($0.43 per share) and $16.0 million ($0.51 per share) for the
years ended December 31, 1997, 1996 and 1995, respectively. The pro forma loss
for the year reflects only options granted in 1997, 1996 and 1995. Therefore,
the full impact of calculating compensation cost for stock options under SFAS
123 is not reflected in the pro forma loss for the year because compensation
cost is reflected over the options' vesting period and compensation cost for
options granted prior to January 1, 1995 is not considered.
F-22
<PAGE> 116
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
Changes in stock options outstanding are as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICES
---------------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994............. 774,500 $7.83
Granted...................................... 610,000 $5.96
Exercised.................................... (16,000) $4.07
Canceled..................................... (387,000) $8.57
--------- -----
Outstanding at December 31, 1995............. 981,500 $6.61
Granted...................................... 1,010,000 $7.38
Exercised.................................... (189,000) $5.25
Canceled..................................... (120,000) $5.93
--------- -----
Outstanding at December 31, 1996............. 1,682,500 $7.25
Granted...................................... 1,405,000 $5.27
Exercised.................................... (302,166) $5.68
Canceled..................................... (15,000) $5.25
--------- -----
Outstanding at December 31, 1997............. 2,770,334 $6.41
========= =====
</TABLE>
At December 31, 1996 and 1995, the number of options exercisable was
382,500 and 371,500 and the weighted-average exercise price of those options was
$7.92 and $7.55, respectively.
The following table summarizes information about the stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- ------------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED-
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE AT CONTRACTUAL EXERCISE AT EXERCISE
PRICES 12/31/97 LIFE PRICE 12/31/97 PRICE
-------- ----------- ----------- --------- ----------- ---------
<C> <C> <S> <C> <C> <C>
$ 5.06 - 6.00 1,453,334 8.4 years $ 5.30 688,332 $ 5.45
6.10 - 6.69 526,500 3.3 6.28 308,499 6.27
7.77 - 8.02 643,000 3.3 7.99 251,000 7.99
10.12 - 11.38 147,500 1.0 10.92 147,500 10.92
--------- ---------
2,770,334 1,395,331
========= =========
</TABLE>
(13) RELATED PARTY TRANSACTIONS
(a) PeterStar has entered into a barter agreement with an indirect minority
shareholder under which the two parties have exchanged services valued at $3.4
million and $3.0 million during 1997 and 1996, respectively. The amounts are
recorded in the consolidated statements of operations as telecommunications
revenues and direct costs.
(b) Direct costs for the years ended December 31, 1997, 1996 and 1995
include $4.2 million, $3.3 million and $1.8 million, respectively, paid to the
other shareholder of BECET in relation to the carriage of traffic over the
public telephone network.
(c) Amounts due from related parties at December 31, 1997 include $2.5
million principal and interest due from MTR-Sviaz in relation to a finance lease
(see note 5(c)), $1.6 million and $3.0 million due from a minority shareholder
of PeterStar under short-term and long-term loans, respectively, and $2.2
million due from a company controlled by a minority shareholder of Technocom for
telecommunications services.
Amounts due from related parties at December 31, 1996 include $1.1 million
principal and interest due from MTR-Sviaz in relation to a finance lease (see
note 5(c)), $600,000 due from a minority shareholder of PeterStar under a
short-term loan and $2.5 million due from a company controlled by a minority
shareholder of Technocom for telecommunications services.
F-23
<PAGE> 117
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(d) Amounts due to related parties at December 31, 1997 include a loan due
to the minority shareholder of Teleport-TP in the amount of $477,000, trade
payables of Teleport-TP in the amount of $3.2 million due to a company
controlled by one of the minority shareholders of Technocom, carrier charges of
$817,000 due to the other shareholder of BECET, a loan due to a company
controlled by a minority shareholder of Technocom in the amount of $336,000, due
to MTR-Sviaz for telephone services and connection charges in the amount of
$292,000, and an amount due to a company controlled by one of the minority
shareholders of Technocom for equipment received from them in the amount of
$204,000.
Amounts due to related parties at December 31, 1996 include a loan due to
the minority shareholder of Teleport-TP in the amount of $477,000, trade
payables of Teleport-TP in the amount of $2.9 million due to a company
controlled by one of the minority shareholders of Technocom, carrier charges of
$234,000 due to the other shareholder of BECET and a loan due to a company
controlled by a minority shareholder of Technocom in the amount of $336,000.
(e) The Company has guaranteed telephone billing system lease payments of a
shareholder of PeterStar totaling $2.5 million. Lease payments of $124,000 are
due quarterly until July 1998. At December 31, 1995, full provision was made for
all amounts paid to date under the guarantee and for all future amounts. The
balances of $373,000 and $871,000 remaining under the lease as of December 31,
1997 and 1996 are included in other current liabilities.
(f) General and administrative expenses for the years ended December 31,
1997 and 1996 include consulting fees of $1.7 million and $300,000,
respectively, charged by a minority shareholder of PeterStar.
(g) See also notes 3(c), (d), (e) and 5(c).
(14) COMMITMENTS AND CONTINGENCIES
(a) Intercompany
The Company paid certain costs on behalf of, and made certain loans to,
PeterStar, resulting in an intercompany balance of approximately $27.0 million
at December 31, 1996. During 1997, an agreement was reached with the minority
shareholders to recapitalize PeterStar. The recapitalization of PeterStar in an
amount of $13.8 million was completed during September 1997, with such funds
being used to repay an equal amount of these advances. Negotiations with the
minority shareholders of PeterStar as to the repayment of the remaining
intercompany balance due to the Company were concluded in March 1998 and
resulted in a further reduction of approximately $5.3 million in PeterStar's
liability. The effect of this settlement was to increase minority interest
expense by approximately $2.1 million in 1997.
(b) Currency Licenses
Under applicable Russian currency control regulations, the Company's
Russian subsidiaries are required to have certain licenses from the Central Bank
of Russia to enable them to make payments of and accept receipts of hard
currency. While PeterStar and BCL have or have applied for all the necessary
licenses, failure to receive the remaining licenses could result in fines and
penalties, which the Company does not believe will be material.
(c) Russian Taxation
Certain of the Company's Russian subsidiaries have accrued profits and
other taxes based on interpretations of the law which may ultimately be disputed
by the Russian taxation authorities. The exposure to additional profits and
other taxes, fines and penalties is not determinable. However, the Company does
not believe this would have a material adverse effect on the financial position
or results of operations of the Company.
F-24
<PAGE> 118
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(d) Purchase Commitments
At December 31, 1997, Technocom and PeterStar have commitments of
approximately $943,000 and $11.4 million, respectively, related to the
acquisition of telecommunications equipment. The PeterStar supply contract
provides for financing of the entire amount over approximately five years.
(e) Line Rental
While it has not had to do so historically, PeterStar anticipates that it
will have to begin paying local line rental charges to the Petersburg Telephone
System in 1998. The exact fee, and the date from which charges will be levied,
have yet to be determined, but the Company does not believe that such payments
will have a material adverse effect on the Company's financial position or
results of operations.
(f) Transponder Capacity
Teleport-TP currently utilizes capacity on three Intelsat satellites for
the provision of its international and domestic long distance services, pursuant
to a fifteen year contract signed with Intelsat in January 1993. The agreement
requires quarterly payments of $616,500 for the remainder of its term.
(15) CANADIAN ACCOUNTING PRINCIPLES
These consolidated financial statements have been prepared in accordance
with U.S. GAAP which, in the case of the Company, conform with Canadian GAAP,
except as follows:
(a) Net loss for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net loss for the year, as reported......... $(20,566) $(12,461) $(15,481)
Noncash interest on Convertible Notes...... (508) (252) --
-------- -------- --------
Net loss for the year under Canadian
GAAP..................................... $(21,074) $(12,713) $(15,481)
======== ======== ========
</TABLE>
Under Canadian GAAP, the Convertible Notes are a compound financial
instrument and the debt and equity elements of the instrument are separately
accounted for. For Canadian GAAP purposes, $13.9 million of the Convertible
Notes were classified as equity and $12.6 million were classified as debt on
issuance. Additional interest expense is charged to the consolidated statements
of operations to accrete the debt portion to the principal amount of $26.5
million at maturity which, together with cash interest payments, results in an
effective yield of 22.3%. Accordingly, long-term debt at December 31, 1997 and
1996 would amount to $120.3 million and $94.3 million, respectively, and
shareholders' equity would amount to $140.4 million and $151.6 million,
respectively, under Canadian GAAP.
Effective December 31, 1996, the Company changed its Canadian GAAP policy
with respect to pre-operating costs. Such costs may not be capitalized under
U.S. GAAP and, therefore, all such costs have been retroactively expensed for
Canadian GAAP purposes. The change in accounting policy decreased the Canadian
GAAP loss in 1995 by $636,000. The deficit at December 31, 1995 was increased by
$2.2 million.
F-25
<PAGE> 119
PLD TELEKOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
(b) The following non-cash investing and financing activities would be
included in the consolidated statements of cash flows under Canadian GAAP.
<TABLE>
<CAPTION>
1997 1996 1995
-------- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Investing:
Investment in Yellow Pages.................... $ -- -- (1,900)
Investment in BECET........................... -- -- --
Capital expenditures.......................... (11,302) -- --
Investments in Technocom...................... (7,681) -- --
Financing:
Issue of common shares........................ 7,681 -- 6,786
Conversion of preferred shares................ -- -- (4,886)
Supplier financing............................ 11,302 -- --
Recapitalization of PeterStar................. 4,012 -- --
Due from related party........................ (4,012) -- --
</TABLE>
(16) CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for the
years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues............................ $23,891 $26,389 $29,534 $34,610
Operating income.............................. 2,481 2,634 2,872 4,031
Interest and other income..................... 1,394 1,260 625 335
Interest expense.............................. (4,269) (4,120) (4,457) (5,000)
Income taxes.................................. 1,074 2,366 2,048 2,251
Minority interest............................. 1,766 1,457 1,391 4,785
Net loss for the period....................... (4,342) (3,725) (5,377) (7,122)
======= ======= ======= =======
Net loss per common share..................... $ (0.14) $ (0.12) $ (0.17) $ (0.22)
======= ======= ======= =======
</TABLE>
Minority interest for the fourth quarter of 1997 includes $2.1 million in
connection with the settlement reached with the minority shareholders of
PeterStar (see note 14(a)).
<TABLE>
<CAPTION>
1996 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues............................ $10,184 $13,478 $17,011 $21,293
Operating income (loss)....................... (987) 1,897 1,782 175
Interest and other income..................... 855 1,075 1,263 1,666
Interest expense.............................. (296) (1,683) (3,861) (4,133)
Income taxes.................................. 828 526 1,764 551
Minority interest............................. 97 434 1,118 872
Net loss for the period....................... (1,623) (808) (4,758) (5,272)
======= ======= ======= =======
Net loss per common share..................... $ (0.05) $ (0.03) $ (0.15) $ (0.16)
======= ======= ======= =======
</TABLE>
Operating revenues and direct costs in the fourth quarter of 1996 include
$3.0 million in connection with a barter agreement with an indirect minority
shareholder of PeterStar (see note 13(a)).
F-26
<PAGE> 120
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in New York, New York
on March 31, 1998.
PLD TELEKOM INC.
By: /s/ JAMES R. S. HATT
------------------------------------
James R. S. Hatt
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BORIS ANTONIUK Director March 31, 1998
- ---------------------------------------------------
Boris Antoniuk
/s/ EDWARD CHARLES DILLEY Director March 31, 1998
- ---------------------------------------------------
Edward Charles Dilley
/s/ SIMON EDWARDS Director and Chief Financial March 31, 1998
- --------------------------------------------------- Officer (Principal Financial
Simon Edwards Officer)
/s/ JAMES R.S. HATT Director, President and Chief March 31, 1998
- --------------------------------------------------- Executive Officer (Principal
James R.S. Hatt Executive Officer)
/s/ GORDON HUMPHREY Director March 31, 1998
- ---------------------------------------------------
Gordon Humphrey
/s/ GENNADY KUDRIATSEV Director March 31, 1998
- ---------------------------------------------------
Gennady Kudriatsev
/s/ VLADIMIR KVINT Director March 31, 1998
- ---------------------------------------------------
Vladimir Kvint
/s/ JULIAN RAWLE Director March 31, 1998
- ---------------------------------------------------
Julian Rawle
/s/ ROBERT SMITH Director March 31, 1998
- ---------------------------------------------------
Robert Smith
/s/ DAVID STOVEL Director March 31, 1998
- ---------------------------------------------------
David Stovel
</TABLE>
<PAGE> 121
EXHIBIT INDEX
4.3 First Supplemental Indenture, Amendment Agreement, Consent and
Waiver, dated as of March 20, 1998.
4.21 Revolving Credit Agreement, dated as of November 26, 1997,
between the Registrant, The Travelers Insurance Company and
The Travelers Indemnity Company.
4.22 Form of 12% Series A Senior Secured Revolving Credit Note
(included as Exhibit A-1 to the Revolving Credit Agreement).
4.23 Form of 12% Series B Senior Secured Revolving Credit Note
(included as Exhibit A-2 to the Revolving Credit Agreement).
4.24 Warrant Agreement, dated as of November 26, 1997, between the
Registrant and The Bank of New York, as Warrant Agent.
4.25 Form of Series A Warrant Certificate (included as Exhibit A-1
to the Warrant Agreement).
4.26 Form of Series B Warrant Certificate (included as Exhibit A-2
to the Warrant Agreement).
4.27 Registration Rights Agreement, dated as of November 26, 1997,
between the Registrant, The Travelers Insurance Company and
The Travelers Indemnity Company.
4.28 Guaranty Agreement, dated as of November 26, 1997, made and
given by Wireless Technology Corporations Limited and Baltic
Communications Limited in favor of The Travelers Insurance
Company and The Travelers Indemnity Company.
4.29 Trust Agreement, dated as of November 26, 1997, between the
Registrant and The Bank of New York, as Trustee.
4.30 Security Agreement (Inventory and Receivables), dated as of
November 26, 1997, between the Registrant and The Bank of New
York, as Trustee.
4.31 Pledge Agreement, dated as of November 26, 1997, between the
Registrant and The Bank of New York, as Trustee.
10.1 PLD Telekom Inc. 1997 Equity Compensation Plan.
10.2 Service Agreement, dated August 1, 1997, between the
Registrant and James R.S. Hatt.
<PAGE> 122
10.3 Employment Letter, effective June 1, 1997, between the
Registrant and John G. Davies.
10.4 Amendment, dated July 30, 1997, to Employment Letter between
the Registrant and John G. Davies.
10.5 Service Agreement, dated July 1, 1997, between the Registrant
and Simon Edwards.
10.7 Amended and Restated Service Agreement, dated August 1, 1997,
between the Registrant and Conor Carroll.
10.8 Service Agreement, dated November 26, 1997, between the
Registrant and Boris Antoniuk.
10.9 Consultancy Agreement, dated December 28, 1994, between
Technocom Limited and Elite International Limited.
10.10 Amendment, dated November 26, 1997, to the Consultancy
Agreement between Technocom Limited and Elite International
Limited.
10.28 Amendment, dated February 28, 1996, to the Interconnection
Agreement between Kazakhtelekom and BECET International.
10.42 Amendment, dated November 26, 1997, to Subscription and
Shareholder Agreement between the Registrant, Plicom Limited,
Elite International Limited and Plicom Limited.
10.46 Amendment, dated November 26, 1997, to Put and Call Option
Agreement between the Registrant and Plicom Limited.
10.47 Amended and Restated Put and Call Option Agreement, dated
November 26, 1997, between the Registrant and Elite
International Limited
10.48 Share Purchase Agreement, dated November 26, 1997, among the
Registrant, Technocom Limited, Plicom Limited and Mark Klabin.
10.49 Share Purchase Agreement, dated November 26, 1997, among the
Registrant, Technocom Limited and Elite International Limited.
10.50 Securities Sale and Purchase Agreement between the Registrant
and Redford Limited relating to SPMMTS.
10.52 Sublease, dated June 4, 1997, between the Registrant and The
Seiko Corporation of America.
<PAGE> 123
21 List of Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG.
<PAGE> 1
EXHIBIT 4.3
FIRST SUPPLEMENTAL INDENTURE,
AMENDMENT AGREEMENT, CONSENT AND WAIVER
FIRST SUPPLEMENTAL INDENTURE, AMENDMENT AGREEMENT, CONSENT AND WAIVER,
dated as of March 20, 1998, among (i) PLD TELEKOM INC. (formerly known as
Petersburg Long Distance Inc.), a Delaware corporation (formerly an Ontario
company, that became a Delaware corporate pursuant to Section 388 of the General
Corporation Law of the State of Delaware pursuant to a Certificate of
Domestication filed in Delaware on February 28, 1997) (the "Company"), as
issuer, (ii) NWE CAPITAL (CYPRUS) LIMITED, a Cypriot corporation ("NWE Cyprus"),
PLD ASSET LEASING LIMITED, a Cypriot corporation ("PLD Leasing"), PLD CAPITAL
LIMITED, a Cypriot corporation ("PLD Capital"), WIRELESS TECHNOLOGY CORPORATIONS
LIMITED, a British Virgin Islands corporation ("WTC"), and BALTIC COMMUNICATIONS
LIMITED, a Russian joint stock company of the closed type ("BCL"), as
Guarantors, (iii) CLAYTON WAITE, shareholder of NWE Cyprus as nominee of the
Company, and APROPOS INVESTMENTS LTD., shareholder of PLD Leasing and PLD
Capital as nominee of the Company, and (iv) THE BANK OF NEW YORK, a New York
banking corporation ("BONY"), as trustee under the Indentures (as defined
below), as collateral agent under the Company Senior Note Security Agreement,
the PLD Leasing Security Agreement and the PLD Capital Security Agreement (as
each term is defined below), as escrow agent under the PLD Leasing Escrow
Account Agreement and the PLD Capital Escrow Account Agreement (as each term is
defined below) and as collateral agent or escrow agent under the Other
Collateral Documents (as defined below).
RECITALS
WHEREAS, the Company, NWE Cyprus, PLD Leasing, PLD Capital, WTC, BCL
and BONY, as trustee thereunder (the "Senior Note Trustee"), have entered into
the Indenture (the "Senior Note Indenture"), dated as of May 31, 1996, pursuant
to which the Company issued $123,000,000 in principal amount at Stated Maturity
of its 14% Senior Discount Notes due 2004 (the "Senior Notes"; capitalized terms
used herein without definition have the respective meanings defined in the
Senior Note Indenture as in effect on the date hereof);
WHEREAS, the Company, NWE Cyprus, PLD Leasing, PLD Capital, WTC, BCL
and BONY, as trustee thereunder (the "Convertible Note Trustee"), have entered
into the Indenture (the "Convertible Note Indenture"; together with the Senior
Note Indenture, collectively the "Indentures"), dated as of May 31, 1996,
pursuant to which the Company issued $26,500,000 in principal amount at Stated
Maturity of its 9% Convertible Subordinated Notes due 2006 (the "Convertible
Notes");
WHEREAS, the Company and BONY in its capacities as Senior Note Trustee
and Convertible Note Trustee and as collateral agent thereunder (the "Senior
Note Collateral Agent")
<PAGE> 2
have entered into the Company Senior Note Security and Pledge Agreement (the
"Company Senior Note Security Agreement"), dated as of May 31, 1996;
WHEREAS, PLD Leasing and BONY in its capacities as Senior Note Trustee
and Convertible Note Trustee and as collateral agent thereunder (the "PLD
Leasing Collateral Agent") have entered into the Leasing Company Security and
Pledge Agreement (PLD Leasing Limited) (the "PLD Leasing Security Agreement"),
dated as of May 31, 1996;
WHEREAS, PLD Capital and BONY in its capacities as Senior Note Trustee
and Convertible Note Trustee and as collateral agent thereunder (the "PLD
Capital Collateral Agent") have entered into the Leasing Company Security and
Pledge Agreement (PLD Capital Limited) (the "PLD Capital Security Agreement"),
dated as of May 31, 1996;
WHEREAS, PLD Leasing and BONY in its capacities as Senior Note Trustee
and Convertible Note Trustee and as escrow agent thereunder (the "PLD Leasing
Escrow Agent") have entered into the Leasing Company Escrow Account Agreement
(PLD Asset Leasing Limited) (the "PLD Leasing Escrow Account Agreement"), dated
as of May 31, 1996;
WHEREAS, PLD Capital and BONY in its capacities as Senior Note Trustee
and Convertible Note Trustee and as escrow agent thereunder (the "PLD Capital
Escrow Agent") have entered into the Leasing Company Escrow Account Agreement
(PLD Capital Limited) (the "PLD Capital Escrow Account Agreement"), dated as of
May 31, 1996 (collectively, the Indentures, the Company Senior Note Security
Agreement, the PLD Leasing Security Agreement, the PLD Capital Security
Agreement, the PLD Leasing Escrow Account Agreement and the PLD Capital Escrow
Account Agreement are referred to herein as the "Amended Documents");
WHEREAS, BONY in its capacities as Senior Note Trustee and Convertible
Note Trustee and as collateral agent or escrow agent thereunder has entered into
the NWE Cyprus Senior Note Security Agreement, the Company Senior Note Escrow
Account Agreement, the Company Convertible Note Security Agreement (as defined
in the Convertible Note Indenture) and the Company Convertible Note Escrow
Account Agreement (as defined in the Convertible Note Indenture; the agreements
referred to in this paragraph being herein collectively called the "Other
Collateral Documents");
WHEREAS, the parties desire to amend each of the Amended Documents,
among other things, (i) to broaden the range of transactions by which the
Company may cause Telecommunications Assets to be imported into Russia and
Kazakstan, (ii) to permit funds retained in the Company Senior Note Escrow
Account to be used (a) to collateralize letters of credit required in connection
with the purchase of Telecommunications Assets, (b) to pay certain installation
and other costs associated with the purchase of Telecommunications Assets and
(c) to pay for certain purchases of Telecommunications Assets by Technocom,
(iii) to make certain modifications to the Amended Documents that are
appropriate as a result of the Company having
-2-
<PAGE> 3
ceased to be an Ontario company and its continuance as a Delaware corporation,
(iv) to permit (a) Leasing Companies to be formed under the laws of one of the
United States of America and (b) the transfer of certain assets of PLD Leasing
to a Leasing Company thus formed and (v) to modify certain provisions of the
Senior Note Indenture relating to Indebtedness;
WHEREAS, Section 9.2 of the Senior Note Indenture provides that the
parties thereto may amend or supplement the Senior Note Indenture with the
written consent of the holder or holders of at least the requisite percentage in
aggregate principal amount at Stated Maturity of the outstanding Senior Notes;
WHEREAS, Section 9.2 of the Convertible Note Indenture provides that
the parties thereto may amend or supplement the Convertible Note Indenture with
the written consent of the holder or holders of at least the requisite
percentage in aggregate principal amount at Stated Maturity of the outstanding
Convertible Notes;
WHEREAS, the Amended Documents other than the Indentures provide that
any amendment thereof shall be effective only if made in compliance with all of
the terms and provisions of the Indentures;
WHEREAS, all acts and things prescribed by the Indentures, by law and
by the Certificate of Incorporation and the Bylaws of the Company, of the
Guarantors and of BONY necessary to make this First Supplemental Indenture,
Amendment Agreement, Consent and Waiver a valid instrument legally binding on
the Company, the Guarantors and BONY in the several capacities in which it is a
party hereto, in accordance with its terms, have been duly done and performed;
WHEREAS, the written consents to the amendments, supplements and
waivers to the Amended Documents have been obtained from the holders of not less
than the requisite percentage in aggregate principal amount of each of the
outstanding Senior Notes and Convertible Notes; and
WHEREAS, all conditions precedent to amend or supplement the Indentures
have been met;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Effect of this First Supplemental Indenture, Amendment
Agreement, Consent and Waiver. This First Supplemental Indenture, Amendment
Agreement, Consent and Waiver is supplemental to the Amended Documents and does
and shall be deemed to form a part of, and shall be construed in connection with
and as part of, the respective Amended Documents for any and all purposes.
Except as specifically modified herein, the Amended Documents, the Other
Collateral Documents, the Senior Notes and the Convertible Notes are in all
respects ratified and confirmed and shall remain in full force and effect in
accordance with their terms.
-3-
<PAGE> 4
SECTION 2. Amendments to the Amended Documents. Each of the Amended
Documents (including any schedules thereto) are hereby amended by deleting the
words "Telecommunications Asset Lease" and "Telecommunications Asset Leases"
wherever such words appear and substituting in their place, respectively, the
words "Telecommunications Asset
Agreement" and "Telecommunications Asset Agreements".
SECTION 3. Additional Amendments to Both Indentures.
(A) The definitions of the terms "Aggregate Unused Proceeds" and "Five
Year Date" in Article I of both Indentures are hereby deleted.
(B) The definition of the term "Asset Sale" in Article I of both
Indentures is hereby amended by deleting the word "and" immediately preceding
clause (vi) thereof and inserting a comma in its place and adding new clause
(vii) reading as follows:
and (vii) a Disposition by PLD Leasing pursuant to Section 8 of the
First Supplemental Indenture of all of its assets to a newly-formed
Leasing Company formed under the laws of one of the United States of
America.
(C) The first sentence of the definition of the term "Leasing Company"
in Article I of both Indentures is hereby amended in its entirety to read as
follows:
"Leasing Company" means a special purpose corporation formed
under the laws of Cyprus or of one of the United States of America
which is a Guarantor and a Wholly-Owned Restricted Subsidiary organized
for the limited purpose of (i) acquiring Telecommunications Assets and
leasing or selling them pursuant to Telecommunications Asset Agreements
to Restricted Subsidiaries in transactions in which the monetary
consideration for such Telecommunications Assets is paid immediately or
is payable over time by such Restricted Subsidiaries and/or (ii) making
Qualified Investments permitted by this Indenture.
(D) The definition of "Permitted Liens" in Article I of both Indentures
is hereby amended by revising clauses (xvi) and (xvii), each in its entirety, to
read as follows:
(xvi) Liens in favor of a Restricted Subsidiary which is a lessor or
seller of Telecommunications Assets under a Telecommunications Asset
Agreement securing a sublease or re-sale of such Telecommunications
Assets to another Restricted Subsidiary; (xvii) Liens securing
reimbursement obligations with respect to bona fide letters of credit
that encumber documents and other Property (including, without
limitation, the proceeds of funds withdrawn from the Company Senior
Note Escrow Account) relating to such letters of credit and the
products and proceeds thereof, provided that such reimbursement
obligations secured by funds withdrawn from the Company Senior Note
Escrow
-4-
<PAGE> 5
Agreement shall not be otherwise secured with Property of the Company
or any Restricted Subsidiary;
by deleting the word "and" at the end of clause (xvii) thereto, deleting the
period and inserting a semicolon at the end of clause (xviii) thereto and adding
a new clause (xix) thereto reading as follows:
and (xix) Liens securing the Indebtedness referred to in clause (xiv)
of Section 4.9(b) hereto.
(E) Article I of both Indentures is hereby amended by adding new
definitions in alphabetical order reading as follows:
"First Supplemental Indenture" means the First Supplemental
Indenture, Amendment Agreement, Consent and Waiver, dated as of March
20, 1998, among the Company, the Guarantors, Clayton Waite, Apropos
Investments Ltd. and The Bank of New York, as Senior Note Trustee,
Convertible Note Trustee and collateral agent or escrow agent under
certain Collateral Documents.
"Teleport" means Teleport-TP, a Russian joint stock company of
the closed type.
(F) Section 2.7 of both Indentures is amended by deleting "either" and
"made prior to the day following the Five Year Date or is" in the proviso to the
third paragraph thereof.
(G) Subsection (b) of Section 2.13 of both Indentures is hereby
deleted, and subsection (c) thereof is hereby amended by changing the letter
"(c)" at the beginning thereof to "(b)".
(H) Section 4.8(b)(iii) of both Indentures is hereby amended by adding
the words "or sold in a transaction in which the monetary consideration therefor
is paid immediately or is payable over time" after the word "leased" appearing
in the fifth line thereof.
(I) Sections 4.23(a) of the Senior Note Indenture and 4.15(a) of the
Convertible Note Indenture, respectively, each is hereby amended to read as
follows:
(a) Each Leasing Company shall at all times remain a special
purpose corporation formed under the laws of Cyprus or of one of the
United States of America which is a Guarantor and a Wholly-Owned
Restricted Subsidiary with corporate organizational documents
containing the provisions set forth in Schedule 1.1(b) attached hereto.
Any newly-formed Leasing Company formed under the laws of one of the
United States of America to which assets owned by PLD Leasing are
transferred pursuant to Section 8 of the First Supplemental Indenture
shall become a party to this Indenture as a Guarantor and shall execute
a security agreement substantially in the form of a Leasing
-5-
<PAGE> 6
Company Security Agreement and an escrow agreement substantially in the
form of a Leasing Company Escrow Account Agreement, which shall create
Liens on all Collateral subject thereto having the same perfection and
priority as the Liens created, respectively, by the Leasing Company
Security Agreement and the Leasing Company Escrow Account Agreement to
which PLD Leasing is a party, and the Company shall comply with the
provisions of this Indenture and Section 8 of the First Supplemental
Indenture relating to the Capital Stock of such newly-formed Leasing
Company and any Intercompany Notes issued by it. Following such
transfer, PLD Leasing shall be wound up as promptly as practicable
under applicable law.
(J) Section 11.1 of both Indentures is hereby amended by adding a new
sentence immediately after the fourth sentence thereof reading as follows:
Without limiting the generality of the foregoing, in the event that
Telecommunications Assets that constitute Collateral and are owned by
an Operating Company become immovable property (within the meaning of
the Russian Civil Code), the Company and each Guarantor will cause the
ownership of such Telecommunications Assets by such Operating Company
and the security interest therein held by the relevant Leasing Company
to be registered with the relevant City Bureau for the Registration of
Transactions with Immovable Property and Ownership Title of Immovable
Property (or any governmental agency succeeding to its functions).
(K) Clauses (ii) and (iii) of Section 11.4(c) of the Senior Note
Indenture and Section 11.8(c) of the Convertible Note Indenture, respectively,
each is hereby amended in its entirety to read as follows:
(ii) the applicable Leasing Company utilizes such funds
(except for funds to be utilized for Qualified Investments to the
extent permitted by this Indenture) to purchase, or to collateralize a
bona fide letter of credit in favor of the supplier thereof in
connection with the purchase of, Telecommunications Assets and in
connection therewith to pay associated freight, insurance, export and
import license, customs, value added tax, installation and software
license (provided such license relates to software required to operate
such Telecommunications Assets) costs required to be paid under, or in
order to implement the contract(s) for the purchase of, such
Telecommunications Assets ("Associated Soft Costs") contemporaneously
with such purchase of Capital Stock or intercompany loan, as
applicable, from a supplier located in the United States, Canada,
Western Europe (including Scandinavia), Israel, Japan, Taiwan and South
Korea, provided that the amount of such funds utilized to pay for
Associated Soft Costs shall not be greater than 15% of the purchase
price of the related Telecommunications Assets, and provided, further,
that any funds utilized to collateralize such a letter of credit and
not used to reimburse the issuer thereof shall, upon release of such
funds, promptly be deposited in the Company Senior Note Escrow Account;
-6-
<PAGE> 7
(iii) the applicable Leasing Company contemporaneously enters
into a Telecommunications Asset Agreement covering such
Telecommunications Assets with a Restricted Subsidiary or a Qualified
Joint Venture requiring such Restricted Subsidiary or Qualified Joint
Venture to pay for such Telecommunications Assets and Associated Soft
Costs;
(L) Subsections (c)(v) and (e)(x)(v) in Section 11.4 of the Senior Note
Indenture and Section 11.8 of the Convertible Note Indenture, respectively, are
each hereby amended by adding the words "or buyer in a transaction in which the
monetary consideration therefor is paid immediately or is payable over time"
after the word "lessee" appearing in the second lines thereof.
(M) Section 11.4(c) of the Senior Note Indenture and Section 11.8(c) of
the Convertible Note Indenture, respectively, each is hereby amended by adding
to clause (x) of the penultimate sentence thereof, after the word "above" and
before the words "in form", the following:
and, in the case of a Telecommunications Asset Agreement that is an
installment sale agreement, to the effect that the Restricted
Subsidiary or Qualified Joint Venture that is a party thereto has no
provisions in its charter restricting its corporate power and authority
and has obtained all necessary corporate approvals to enter into and
perform such Telecommunications Asset Agreement,
, by adding a parenthetical clause after the word "Trustee" at the end of such
clause (x) reading as follows:
(and where the opinion involves a Qualified Joint Venture, counsel
providing the Opinion of Counsel may rely, where necessary, on a legal
opinion of counsel of the Qualified Joint Venture)
and by adding a new sentence at the end thereof reading as follows:
In the event that a license from the Central Bank of the Russian
Federation is or becomes required by law or interpretation thereof
having the force of law in respect of any such Telecommunications Asset
Agreement, the Company promptly shall obtain such license or cause such
license to be obtained.
(N) Section 11.4(g) of the Senior Note Indenture and Section 11.8(g) of
the Convertible Note Indenture, respectively, are each hereby amended by adding
the words "or buyer in a transaction in which the monetary consideration
therefor is paid immediately or is payable over time" after the word "lessee"
appearing in the third, sixth and eleventh lines thereof and by deleting the
word "Leases" in the fourth line thereof and inserting in its place the word
"Agreements".
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<PAGE> 8
(O) Sections 1, 2, 4 and 5 of Schedule 1.1(b) to both Indentures (as
hereby renumbered) are each hereby amended by inserting "or Certificate of
Incorporation" after "Memorandum of Association" and "or bylaws" after "Articles
of Association" in the first sentence thereof.
(P) Clause (a) of Section 1 of Schedule 1.1(b) to both Indentures is
hereby amended by adding "or selling in a transaction in which the monetary
consideration therefor is paid immediately or is payable over time" after the
word "leasing" in the third line thereof.
(Q) The second of the two sections of Schedule 1.1(b) to both
Indentures numbered "4" is hereby renumbered "5", and the definition of the term
"Telecommunications Asset Lease" appearing in Section 5 of both such Schedules
1.1(b) (as hereby renumbered) is hereby amended in its entirety to read as
follows:
"Telecommunications Asset Agreement" means a lease or
installment sale agreement where title is transferred to the buyer
pursuant to which Telecommunications Assets that consist of equipment
and rights acquired in connection with the lease or sale thereof
(including, without limitation, software licenses) are leased or sold
in a transaction in which the monetary consideration for such
Telecommunications Assets is paid immediately or is payable over time
by the company to a Restricted Subsidiary or Qualified Joint Venture in
the Russian Federation and Kazakstan, provided that if the lessor or
seller does not retain title to such Telecommunications Assets until
payment of the full amount of the lease payments or purchase price due
from the lessee or buyer, such Telecommunications Assets are subject to
all necessary pledges, assignments, mortgages, trusts, liens or other
security interests which are valid and perfected so as to create a
first priority security interest under Russian or Kazak law, as
applicable.
SECTION 4. Additional Amendments to the Senior Note Indenture.
(A) The definition of "Technocom" in Article I of the Senior Note
Indenture is hereby amended in its entirety to read as follows:
"Technocom" means Technocom Limited, an Irish company and a
Restricted Subsidiary, provided that, in the event of any Disposition
of all of Technocom's assets and liabilities as contemplated in clause
(iv) of the definition of "Asset Sale" set forth in this Article I,
"Technocom" shall mean the transferee in such Disposition.
(B) The definition of the term "Telecommunications Asset Lease" in the
Senior Note Indenture is hereby amended in its entirety to read as follows:
"Telecommunications Asset Agreement" means a lease or
installment sale agreement where title is transferred to the buyer
pursuant to which a Leasing Company
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leases or sells, in a transaction in which the monetary consideration
therefor is paid immediately or is payable over time,
Telecommunications Assets that consist of equipment and rights acquired
in connection with the lease or sale thereof (including, without
limitation, software licenses) to a Restricted Subsidiary or Qualified
Joint Venture in the Russian Federation and Kazakstan, which lease or
installment sale agreement will be Collateral, provided that if the
lessor or seller does not retain title to such Telecommunications
Assets until payment of the full amount of the lease payments or
purchase price due from the lessee or buyer, such Telecommunications
Assets are subject to all necessary pledges, assignments, mortgages,
trusts, liens or other security interests which are valid and perfected
so as to create a first priority security interest under Russian or
Kazak law, as applicable.
(C) The definition of the term "Permitted Investment" in the Senior
Note Indenture is hereby amended by revising clause (viii) thereof in its
entirety to read as follows:
(viii) Investments by Restricted Subsidiaries which are lessees or
buyers of Telecommunications Assets under Telecommunications Assets
Agreements in transactions in which the monetary consideration for such
Telecommunications Assets is paid immediately or is payable over time,
provided that such Investments shall be made as a sublease or
installment sale of the Telecommunications Assets subject to the
Telecommunications Asset Agreement to which such Restricted Subsidiary
is party as lessee or buyer,
(D) The definition of the term "Revolving Credit Facilities" in the
Senior Note Indenture is hereby amended in its entirety to read as follows:
"Revolving Credit Facilities" means credit facilities pursuant
to which the borrower can increase or decrease at its option its
borrowings under such facilities up to a specified maximum by making
drawdowns and repayments and further drawdowns from time to time during
the term of the facilities and for which the only liens are Liens on
Receivables and Inventories to secure Indebtedness permitted to be
incurred under clause (i) of Section 4.9(b) hereof; provided that a
credit facility shall not be a Revolving Credit Facility for the
purposes hereof where the purpose to which the borrowings are applied
is limited directly or indirectly by the terms of such facility.
(E) Section 3.7 of the Senior Note Indenture is hereby amended by
deleting ", being the date following the Five Year Date" in the first sentence
thereof.
(F) Section 4.8(c) of the Senior Note Indenture is hereby amended (i)
by deleting (a) "Subject to the limitations set out in Section 4.8(d) below" at
the beginning thereof, (b) "Section 4.8(d) of" in the first proviso to the first
sentence, (c) "subject to the limitations of Section 4.8(d) below" at the end of
the penultimate sentence thereof and (d) "Subject to the limitations set out in
Section 4.8(d) below," at the beginning of the last sentence thereof, and (ii)
by capitalizing the
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<PAGE> 10
letters "I" and "T" in the words "if" and "the" immediately following the text
so deleted, respectively, from the beginning and from the last sentence of such
Section 4.8(c).
(G) Section 4.8(d) of the Senior Note Indenture is hereby deleted in
its entirety and in its place there is hereby inserted the following:
(d) [Intentionally not used]
(H) Section 4.8 (e) of the Senior Note Indenture is hereby amended by
deleting "Subject to the provisions of Section 4.8(d) above," at the beginning
thereof and by capitalizing the letter "W" in the word "within" immediately
following the text so deleted.
(I) Section 4.8(i) of the Senior Note Indenture is hereby amended by
deleting the last sentence thereof.
(J) Section 4.9(b) of the Senior Note Indenture is hereby amended by
revising clauses (i), (v) and (x) thereof, each in its entirety, to read,
respectively, as follows:
(i) the incurrence by the Company of Indebtedness under
Revolving Credit Facilities in an aggregate principal amount, together
with any Indebtedness then outstanding which was permitted to be
incurred pursuant to clauses (x) and (xiv) below, not to exceed
$25,000,000 at any one time outstanding, provided that such
Indebtedness of the Company shall not be secured by Liens other than
the Liens permitted by clause (vii) of the definition of "Permitted
Liens" set forth in Article I hereof;
and
(v) Indebtedness of a Restricted Subsidiary constituting a
sublease or installment sale to such Restricted Subsidiary from another
Restricted Subsidiary of Telecommunications Assets leased or sold to
such other Restricted Subsidiary pursuant to a Telecommunications Asset
Agreement;
and
(x) Indebtedness of Restricted Subsidiaries other than the
Leasing Companies or NWE Cyprus in an aggregate principal amount not to
exceed $15,000,000 at any one time outstanding, provided that the
aggregate principal amount of all such Indebtedness at any time
outstanding, together with Indebtedness then outstanding which was
permitted to be incurred pursuant to clause (i) above and clause (xiv)
below, shall not exceed $25,000,000;
by deleting the word "and" at the end of clause (xi) thereto, deleting the
period and inserting a semicolon at the end of clause (xii) thereof and by
adding new clauses (xiii), (xiv) and (xv) thereto reading as follows:
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(xiii) the incurrence of Indebtedness representing
reimbursement obligations to issuers of bona fide letters of credit
permitted by Section 11.4(c)(ii) hereof;
(xiv) the incurrence by the Company of Indebtedness under the
Revolving Credit Note and Warrant Agreement, dated as of November 26,
1997, with The Travelers Insurance Company and The Travelers Indemnity
Company, including all guarantees given in connection therewith,
provided that such agreement is not changed or amended in any way
except to conform the covenants thereof (and the related definitions of
terms used therein) to the corresponding covenants (and related
definitions) of this Indenture and the Convertible Note Indenture; and
(xv) Indebtedness of the Company or any Restricted Subsidiary
constituting a guarantee of Indebtedness permitted to be incurred
pursuant to clause (x) or (xi) above, provided that (A) any such
guarantee by the Company shall not, for purposes only of clause (i)
above, constitute "Indebtedness", and (B) any such guarantee by a
Restricted Subsidiary (other than any guarantee referred to in clause
(xiv) above) shall constitute "Indebtedness", including for the
purposes of clause (i) above, and provided, further, that no such
guarantee of Indebtedness incurred pursuant to clause (x) or (xi) above
shall be secured by a Lien on Property of the Company or any Restricted
Subsidiary.
(K) Section 4.10 of the Senior Note Indenture is hereby amended by
deleting subsection (b) thereof in its entirety, deleting "(a)" at the beginning
of subsection (a) thereof, deleting all of the language following the word
"Company" in the third line thereof and inserting in place thereof the
following:
other than the Notes or the Convertible Notes or except as expressly
required by the Revolving Credit Note and Warrant Agreement referred to
in clause (xiv) of Section 4.9 hereof.
(L) Section 4.23 of the Senior Note Indenture is hereby amended by
adding a new subsection (c) thereto reading as follows:
(c) Following any Disposition contemplated by the foregoing
subsection (a) of this Section 4.23 and compliance by the Company with
the terms thereof, the Trustee will release from the Lien of the
Company Senior Note Security Agreement any Capital Stock or
Intercompany Note issued by PLD Leasing that is subject to such Lien.
(M) Section 10.1(a) of the Senior Note Indenture is hereby amended by
deleting the following from the first sentence thereof:
, together with each Restricted Subsidiary of the Company which in
accordance with Section 4.10 is required in the future to guarantee the
obligations of the Company and the
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<PAGE> 12
Guarantors under the Notes, the Guarantees, the Collateral Documents
and the Convertible Note Collateral Documents upon execution of a
supplemental indenture,
(N) Section 10.5(a) of the Senior Note Indenture is hereby amended by
deleting "is required pursuant to Section 4.10(a) hereof to become a Guarantor"
in the first sentence thereof and inserting in place thereof "that becomes a
Guarantor (as defined in Section 1.1 hereof)".
(O) Section 10.6(b) of the Senior Note Indenture is hereby amended by
inserting after the words "Section 4.10 hereof" in the first sentence thereof
"(prior to the amendment thereof by the First Supplemental Indenture)".
(P) Clause (iv) of Section 11.4(c) of the Senior Note Indenture is
hereby amended in its entirety to read as follows:
(iv) Liens on such Telecommunications Assets and
Telecommunications Asset Agreement have been or are contemporaneously
granted or assigned to the Trustee or a collateral agent for the
benefit of the Trustee and the equal and ratable benefit of the Holders
to secure the Notes, the Guarantees and the other obligations of the
Company and the Guarantors under this Indenture and the other
Collateral Documents and to secure any applicable Intercompany Note
and, so long as the Convertible Notes remain outstanding for the
benefit of the Convertible Note Trustee and the Holders of the
Convertible Notes, to secure the Convertible Notes and the guarantees
under the Convertible Note Indenture and the other obligations of the
Company or the Guarantors under the Convertible Note Indenture and the
Convertible Note Collateral Documents;
(Q) Section 11.4(i) of the Senior Note Indenture is hereby amended by
deleting the word "and" before clause (i) thereof and adding immediately before
the proviso at the end thereof a new clause (j) reading as follows:
and (j) upon the transfer of assets of PLD Leasing as contemplated by
Section 4.23(a) of this Indenture and Section 4.15(a) of the
Convertible Note Indenture;
SECTION 5. Additional Amendments to the Convertible Note Indenture.
(A) The definition of "Technocom" in Article I of the Convertible Note
Indenture is hereby amended in its entirety to read as follows:
"Technocom" means Technocom Limited, an Irish company and a
Restricted Subsidiary, provided that, in the event of any Disposition
of all of Technocom's assets and liabilities as contemplated in clause
(iv) of the definition of "Asset Sale" set forth in this Article I,
"Technocom" shall mean the transferee in such Disposition.
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(B) The definition of the term "Telecommunications Asset Lease" in
Article I of the Convertible Note Indenture is hereby amended in its entirety to
read as follows:
"Telecommunications Asset Agreement" means a lease or
installment sale agreement where title is transferred to the buyer
pursuant to which a Leasing Company leases or sells, in a transaction
in which the monetary consideration therefor is paid immediately or is
payable over time, Telecommunications Assets that consist of equipment
and rights acquired in connection with the lease or sale thereof
(including, without limitation, software licenses) to a Restricted
Subsidiary or Qualified Joint Venture in the Russian Federation and
Kazakstan, provided that if the lessor or seller does not retain title
to such Telecommunications Assets until payment of the full amount of
the lease payments or purchase price due from the lessee or buyer, such
Telecommunications Assets are subject to all necessary pledges,
assignments, trusts, liens or other security interests which are valid
and perfected so as to create a first priority security interest under
Russian or Kazak law, as applicable.
(C) The definition of the term "Revolving Credit Facilities" in Article
I of the Convertible Note Indenture is hereby deleted.
(D) Section 4.8(c) of the Convertible Note Indenture is hereby amended
by deleting (i) "Subject to the limitations set out in Section 4.8(d) below," at
the beginning thereof, (ii) "as is permitted to be so applied pursuant to
Section 4.8(d) of the Senior Note Indenture" in the first proviso to the first
sentence, (iii) "subject to the limitations of Section 4.8(d) below" at the end
of the penultimate sentence thereof and (iv) "and to the limitations set out in
Section 4.8(d) below," in the last sentence thereof, and by capitalizing the
letter "I" in the word "if" immediately following the first such deletion.
(E) Section 4.8(d) of the Convertible Note Indenture is hereby deleted
in its entirety and in its place there is hereby inserted the following:
(d) [Intentionally not used]
(F) Section 4.8 (e) of the Convertible Note Indenture is hereby amended
by deleting "Subject to the provisions of Section 4.8(d) above," at the
beginning thereof and by capitalizing the letter "W" in the word "within"
immediately following the text so deleted.
(G) Section 4.8(f) of the Convertible Note Indenture is hereby amended
by deleting ", under Section 4.8(d) hereof" in the second line thereof.
(H) Section 4.8(i) of the Convertible Note Indenture is hereby amended
by deleting the last sentence thereof.
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(I) Section 4.9 of the Convertible Note Indenture is hereby amended by
deleting subsection (b) thereof in its entirety, deleting "(a)" at the beginning
of subsection (a) thereof, deleting all of the language following the word
"Company" in the third line thereof and inserting in place thereof the
following:
other than the Notes or the Convertible Notes or except as expressly
required by the Revolving Credit Note and Warrant Agreement, dated as
of November 26, 1997, between the Company and The Travelers Insurance
Company and The Travelers Indemnity Company.
(J) Section 4.14 of the Convertible Note Indenture is hereby amended by
deleting "commencing on the date following the Five Year Date" in subsection (a)
thereof and deleting "(unless such Termination of Trading occurs prior to the
Five Year Date, then on or before the 15th day after the Five Year Date)" in
subsection (b) thereof.
(K) Section 5.1 of the Convertible Note Indenture is hereby amended by
deleting the semicolon at the end of clause (d) of the first paragraph thereof
and inserting in its place a period and by deleting the following at the end of
the such paragraph:
provided that, notwithstanding any other provision of this Article V,
the Company shall not engage in any amalgamation, consolidation,
merger, sale or transfer on or prior to the Five Year Date which would
result in the Holder of a Note not being entitled to convert such Note
into any "Substituted Properties" as a result of the provision
contained in Section 13.12;
(L) Section 10.1(a) of the Convertible Note Indenture is hereby amended
by deleting the following from the first sentence thereof:
, together with each Restricted Subsidiary of the Company which in
accordance with Section 4.9 is required in the future to guarantee the
obligations of the Company and the Guarantors under the Notes, the
Indenture and the Collateral Documents and the Senior Note Collateral
Documents upon execution of a supplemental indenture,
(M) Section 10.5(a) of the Convertible Note Indenture is hereby amended
by deleting "is required pursuant to Section 4.9(a) hereof to become a
Guarantor" in the first sentence thereof and inserting in place thereof "that
becomes a Guarantor (as defined in Section 1.1 hereof)".
(N) Section 10.6(b) of the Convertible Note Indenture is hereby amended
by inserting after the words "Section 4.9 hereof" in the first sentence thereof
"(prior to the amendment thereof by the First Supplemental Indenture)".
(O) Clause (iv) of Section 11.8(c) of the Convertible Note Indenture is
hereby amended in its entirety to read as follows:
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(iv) Liens on such Telecommunications Assets and such
Telecommunications Asset Agreement have been or are contemporaneously
granted or assigned to the Trustee or a collateral agent for the
benefit of the Trustee and the equal and ratable benefit of the Holders
to secure the Notes, the Guarantees and the other obligations of the
Company and the Guarantors under this Indenture and the other
Collateral Documents and to secure any applicable Intercompany Note,
(P) Section 13.12 of the Convertible Note Indenture is hereby deleted.
SECTION 6. Additional Amendments to the PLD Leasing Security Agreement
and the PLD Capital Security Agreement.
(A) Section 11 of each of the PLD Leasing Security Agreement, the PLD
Capital Security Agreement and the form of Leasing Company Security and Pledge
Agreement attached as Exhibit I to the Senior Note Indenture is hereby amended
by deleting the word "leased" appearing in the seventh line thereof.
(B) Section 12(a)(ii) of each of the PLD Leasing Security Agreement,
the PLD Capital Security Agreement and the form of Leasing Company Security and
Pledge Agreement attached as Exhibit I to the Senior Note Indenture is hereby
amended by adding the words "or buyer in a transaction in which the monetary
consideration therefor is paid immediately or is payable over time" after the
word "lessee" appearing in the fourth line thereof.
SECTION 7. Use by Technocom of Escrowed Funds. The withdrawal of
$8,000,000 of the net proceeds of the Senior Notes retained in the Company
Senior Note Escrow Account to make a loan to Technocom evidenced by a promissory
note (the "Technocom Note") that (x) is in the form of Exhibit A to this First
Supplemental Indenture, Amendment Agreement, Consent and Waiver and (y) is
secured by the Lien described in clause (D) below, which shall constitute
Collateral, is hereby consented to if the following conditions are satisfied,
and the Senior Note Trustee shall have received an Officers' Certificate of the
Company and Technocom to such effect:
(A) no Default or Event of Default has occurred and is continuing;
(B) Technocom is utilizing such funds to make payments due under
existing contracts, or contracts (including amendments to or extensions of
existing contracts) to be entered into, for the purchase of Telecommunications
Assets;
(C) such Telecommunications Assets are leased or sold by Technocom to
Teleport pursuant to agreement under which the monetary consideration therefor
is paid immediately or is payable over time;
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(D) first priority Liens on (i) the Technocom Note have been or are
contemporaneously granted to the Senior Note Trustee or a collateral agent for
the benefit of the Senior Note Trustee and the equal and ratable benefit of the
Holders to secure the Senior Notes, the Guarantees and the other obligations of
the Company and the Guarantors under the Senior Note Indenture and the other
Senior Note Collateral Documents and, so long as the Convertible Notes remain
outstanding, for the benefit of the Convertible Note Trustee and the Holders of
the Convertible Notes, to secure the Convertible Notes and the guarantees under
the Convertible Note Indenture and the other obligations of the Company or the
Guarantors under the Convertible Note Indenture and the Convertible Note
Collateral Documents and (ii) such Telecommunications Asset Agreement have been
or are contemporaneously granted to the Company to secure the Technocom Note;
(E) Teleport has all licenses, registrations and permits necessary to
operate the Telecommunications Assets subject to such Telecommunications Asset
Agreement and the Telecommunications Business for which such Telecommunications
Assets are intended to be utilized; and
(F) appropriate Collateral Documents have been executed and delivered
and properly recorded, registered and filed to the extent necessary to make
effective the first priority Lien intended to be created therein and have been
delivered to the Senior Note Trustee or the collateral agent.
The Company shall also deliver to the Senior Note Trustee (i) an Opinion of
Counsel covering clauses (D), (E) and (F) above and, to the knowledge of counsel
rendering such Opinion of Counsel without investigation, clause (A) above, in
form and substance reasonably satisfactory to the Senior Note Trustee (provided
that the opinion covering clause (A) above shall be given by Morgan, Lewis &
Bockius LLP), and (ii) such other documents as may be required by the Collateral
Documents to be delivered to the Senior Note Trustee or a collateral agent by
the Company. If the foregoing conditions are satisfied, the funds representing
the net proceeds of the Notes in the Company Senior Note Escrow Account may be
withdrawn and utilized by Technocom to purchase the applicable
Telecommunications Assets.
SECTION 8. Transfer of Assets of PLD Leasing. The transfer of all of
the assets of PLD Leasing (the "Transferred Assets") is hereby consented to if
the following conditions are satisfied, and the Senior Note Trustee shall have
received an Officers' Certificate of the Company to such effect:
(A) no Default or Event of Default has occurred and is continuing;
(B) PLD Leasing and the company to which it is transferring the
Transferred Assets (the "Transferee") shall have entered into an assignment and
assumption agreement pursuant to which PLD Leasing shall assign and transfer to
the Transferee the Transferred Assets and the Transferee shall have assumed any
liabilities of PLD Leasing related to the Transferred Assets,
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<PAGE> 17
provided that such transfer shall not adversely affect the perfection or
priority of any Lien on the Transferred Assets in favor of the Trustee or a
collateral agent for the Trustee;
(C) the Transferee shall have entered into Collateral Documents
substantially in the form of the Collateral Documents to which PLD Leasing is a
party;
(D) first priority Liens on all capital stock of the Transferee, on all
Intercompany Notes issued by the Transferee in favor of the Company and on the
Transferred Assets, have been or are contemporaneously granted to the Senior
Note Trustee or a collateral agent for the benefit of the Senior Note Trustee
and the equal and ratable benefit of the Holders to secure the Senior Notes, the
Guarantees and the other obligations of the Company and the Guarantors under the
Senior Note Indenture and the other Senior Note Collateral Documents and, so
long as the Convertible Notes remain outstanding, for the benefit of the
Convertible Note Trustee and the Holders of the Convertible Notes, to secure the
Convertible Notes and the guarantees under the Convertible Note Indenture and
the other obligations of the Company or the Guarantors under the Convertible
Note Indenture and the Convertible Note Collateral Documents; and
(E) PeterStar has all licenses, registrations and permits necessary to
operate the Telecommunications Assets included in the Transferred Assets and the
Telecommunications Business for which such Telecommunications Assets are
intended to be utilized; and
(F) appropriate Collateral Documents have been executed and delivered
and properly recorded, registered and filed to the extent necessary to make
effective the first priority Lien intended to be created therein and have been
delivered to the Senior Note Trustee or the collateral agent.
The Company shall also deliver to the Senior Note Trustee (i) an Opinion of
Counsel covering clauses (D), (E) and (F) above and, to the knowledge of counsel
rendering such Opinion of Counsel without investigation, clause (A) above, in
form and substance reasonably satisfactory to the Senior Note Trustee (provided
that the opinion covering clause (A) above shall be given by Morgan, Lewis &
Bockius LLP), and (ii) such other documents as may be required by the Collateral
Documents to be delivered to the Senior Note Trustee or a collateral agent by
the Company. The Company hereby undertakes that, promptly following the
completion of the transfer referred to above, the Company shall cause PLD
Leasing to be wound up.
SECTION 9. Preliminary Agreement with PeterStar. The termination of the
Preliminary Agreement dated October 7, 1996, between PeterStar and PLD Leasing
relating to certain Telecommunications Assets and the related Equipment Lease
dated as of October 1, 1996 between such parties (collectively, the "PeterStar
Agreements") and the simultaneous execution of an agreement converting the
PeterStar Agreements into a Telecommunications Asset Agreement in the form of an
installment sale agreement where title is transferred to PeterStar covering such
Telecommunications Assets, is hereby consented to if the following conditions
are
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satisfied, and the Senior Note Trustee shall have received an Officers'
Certificate of the Company to such effect:
(A) no Default or Event of Default has occurred and is continuing;
(B) first priority Liens on such Telecommunications Asset Agreement
have been or are contemporaneously granted to the Senior Note Trustee or a
collateral agent for the benefit of the Senior Note Trustee and the equal and
ratable benefit of the Holders to secure the Senior Notes, the Guarantees and
the other obligations of the Company and the Guarantors under the Senior Note
Indenture and the other Senior Note Collateral Documents and, so long as the
Convertible Notes remain outstanding, for the benefit of the Convertible Note
Trustee and the Holders of the Convertible Notes, to secure the Convertible
Notes and the guarantees under the Convertible Note Indenture and the other
obligations of the Company or the Guarantors under the Convertible Note
Indenture and the Convertible Note Collateral Documents;
(C) PeterStar has or has applied for all licenses, registrations and
permits necessary to operate the Telecommunications Assets subject to such
Telecommunications Asset Agreement and the Telecommunications Business for which
such Telecommunications Assets are intended to be utilized; and
(D) appropriate Collateral Documents have been executed and delivered
and properly recorded, registered and filed to the extent necessary to make
effective the first priority Lien intended to be created therein and have been
delivered to the Senior Note Trustee or the collateral agent.
The Company shall also deliver to the Senior Note Trustee (i) an Opinion of
Counsel covering clauses (B), (C) and (D) above and, to the knowledge of counsel
rendering such Opinion of Counsel without investigation, clause (A) above, in
form and substance reasonably satisfactory to the Senior Note Trustee (provided
that the opinion covering clause (A) above shall be given by Morgan, Lewis &
Bockius LLP), and (ii) such other documents as may be required by the Collateral
Documents to be delivered to the Senior Note Trustee or a collateral agent by
the Company.
SECTION 10. Special Registration Payment. In addition to and not in
limitation of the Company's obligation to pay Special Interest in the
circumstances contemplated in the Registration Rights Amendment and the Notes,
in the event that (i) Amendment No. 1 on Form S-4 to the Registration Statement
on Form S-10 filed on August 9, 1996 with respect to the Senior Notes and
Amendment No. 1 on Form S-3 to the Registration Statement on Form F-10 filed on
August 9, 1996 are not both filed with the Commission on or prior to April 3,
1998 (hereinafter referred to as the "Filing Covenant"), or (ii) if both such
Registration Statements are not declared effective by the Commission on or
before May 15, 1998 (or, if the Commission shall have reviewed and commented on
any such Registration Statement, on or prior to a date which is 60 days
following the date on which the first such comments with respect to such
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Registration Statement are received by the Company) (hereinafter referred to as
the "Effectiveness Covenant"), then the Company shall pay the holders of the
Senior Notes and the Convertible Notes their pro rata shares (based on the
unpaid accreted principal amount of the Senior Notes and the unpaid amount of
the Convertible Notes, collectively, the "Aggregate Unpaid Principal") on the
business day immediately following the Company's default with respect to either
the Filing Covenant or the Effectiveness Covenant and, so long as the Company
shall remain in default thereunder, on the corresponding date in each third
month thereafter, the sum of 1% of the then Aggregate Unpaid Principal (the
"Special Fee"); provided that, in the event that the Company shall be in default
simultaneously with respect to the Filing Covenant and the Effectiveness
Covenant, and/or with respect to both Registration Statements, the Company shall
only be obligated to pay one Special Fee in respect of all such defaults.
SECTION 11. Trustee. Except as otherwise expressly provided herein and
in the Indentures, no duties, responsibilities or liabilities are assumed, or
shall be construed to be assumed, by BONY in the several capacities in which it
is a party hereto by reason of this First Supplemental Indenture, Amendment
Agreement, Consent and Waiver. This First Supplemental Indenture, Amendment
Agreement, Consent and Waiver is executed and accepted by BONY in the several
capacities in which it is a party hereto subject to all the terms and conditions
set forth in the Amended Documents with the same force and effect as if those
terms and conditions were repeated at length herein and made applicable to BONY,
in such capacities, with respect hereto.
SECTION 12. APPLICABLE LAW. THIS FIRST SUPPLEMENTAL INDENTURE,
AMENDMENT AGREEMENT, CONSENT AND WAIVER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 13. Counterparts. The parties may sign any number of
counterparts or copies of this First Supplemental Indenture, Amendment
Agreement, Consent and Waiver. Each signed counterpart or copy shall be an
original, but all of such executed counterparts or copies together shall
represent the same agreement.
SECTION 14. Severability. In case one or more of the provisions in this
First Supplemental Indenture, Amendment Agreement, Consent and Waiver shall be
held invalid, illegal or unenforceable, in any respect for any reason, the
validity, illegality and enforceability of any such provision in every other
respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent provided by law.
SECTION 15. Headings. The headings, the language preceding the text of
the amendments and the sections in this First Supplemental Indenture, Amendment
Agreement, Consent and Waiver have been inserted for convenience of reference
only, are not considered a part hereof and in no way modify or restrict any of
the terms or provisions hereof.
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<PAGE> 20
IN WITNESS WHEREOF, the parties hereby have caused this First
Supplemental Indenture, Amendment Agreement, Consent and Waiver to be duly
executed as of the date first written above.
PLD TELEKOM INC. (formerly known as
Petersburg Long Distance Inc.)
By: E. Clive Anderson
Senior Vice President
By: Clayton A. Waite
V.P. -- Administration
NWE CAPITAL (CYPRUS) LIMITED
By: Clayton A. Waite
Director
PLD ASSET LEASING LIMITED
By: E. Clive Anderson
Authorized Representative
PLD CAPITAL LIMITED
By: E. Clive Anderson
Authorized Representative
WIRELESS TECHNOLOGY CORPORATIONS
LIMITED
By: E. Clive Anderson
Authorized Representative
BALTIC COMMUNICATIONS LIMITED
By: E. Clive Anderson
Authorized Representative
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<PAGE> 21
CLAYTON WAITE
Signed by: Clayton A. Waite
APROPOS INVESTMENTS LTD.
By: E. Clive Anderson
Authorized Representative
THE BANK OF NEW YORK, as Senior Note
Trustee, Convertible Note Trustee,
Senior Note Collateral Agent, PLD
Leasing Collateral Agent, PLD Capital
Collateral Agent, PLD Leasing Escrow
Agent, PLD Capital Escrow Agent and
collateral agent or escrow agent under
the Other Collateral Documents
By: Thomas E. Tabor
Assistant Vice President
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<PAGE> 22
EXHIBIT A TO FIRST SUPPLEMENTAL INDENTURE,
AMENDMENT AGREEMENT, CONSENT AND WAIVER
TECHNOCOM NOTE
U.S.$8,000,000.00 ______________, 1998
FOR VALUE RECEIVED, and intending to be legally bound,
TECHNOCOM LIMITED, an Irish company having certificate number 183622 ("Payor"),
hereby promises to pay to the order of PLD TELEKOM INC., a Delaware corporation
("Payee"), at the office of Payee at 680 Fifth Avenue, New York, New York,
U.S.A., or at such other place as the holder hereof shall from time to time
designate in writing, on _____________, 2001 (the "Maturity Date"), the
principal amount of EIGHT MILLION U.S. DOLLARS (U.S.$8,000,000.00), in lawful
money of the United States of America, together with interest on the outstanding
principal balance hereof, in like money, determined in the manner set forth
below.
Interest shall accrue on the outstanding principal balance
hereof, at a rate equal to fourteen percent (14%) per annum, and shall be
payable annually in arrears on the anniversary of the issue date set forth above
in each year until the principal amount hereof has been paid in full.
If any installment of interest or principal is not paid when
due, in addition to any other rights or remedies which Payee may have in respect
thereof, Payor shall be obligated to pay Payee on demand an amount equal to five
percent (5%) of the amount due.
In addition to any other amounts which may be payable
hereunder, Payor shall also pay to Payee on demand all costs and expenses
(including lawyers' fees and expenses) incurred in the enforcement of Payor's
obligations hereunder and/or the collection of the amounts due hereunder.
The amounts due hereunder may be prepaid in whole or in part
at any time and from time to time without premium or penalty. Any such
prepayment will be applied against the payment(s) due hereunder in the reverse
order in which they fall due.
All payments due hereunder shall be made net of any
withholding taxes or other similar taxes or charges that are applicable. In the
event that any payment hereunder is subject to
<PAGE> 23
withholding taxes or other similar taxes or charges, Payor shall increase the
amount of such payment by such additional amount as is required, after taking
into account the payment of such taxes or charges (and any additional taxes
imposed on Payee as a result of receiving such additional amount), so as to
enable Payee to receive an amount equal to the amount it would have received as
payment from Payor had no such taxes or charges been required.
The obligations of Payor hereunder are secured by a security
interest in the interest of Payor in certain equipment supplied by
Scientific-Atlanta, Inc. and its rights under a certain lease of such equipment
to Teleport-TP.
Payor hereby covenants and agrees with the holder hereof that,
until such time as its obligations hereunder are discharged in full, it will
not, without the prior written consent of Payee:
1. transfer, convey, sell, lease or otherwise dispose of, in one
transaction or a series of related transactions, (i) any shares of any
subsidiary of Payor, or (ii) any assets of Payor or any subsidiary whose fair
market value exceeds U.S.$1,000,000, other than in either case to Payee or
another subsidiary of Payee (hereinafter referred to as a "Permitted
Subsidiary");
2. incur any indebtedness for borrowed money other than (i) to Payee or
any Permitted Subsidiary, (ii) in connection with the lease or purchase of
property or assets to be used in the business of Payor, or (iii) in connection
with the refinancing of indebtedness outstanding on the date hereof or of
indebtedness permitted hereby and incurred after the date hereof;
3. guarantee the indebtedness of any other party other than Payee or any
Permitted Subsidiary;
4. create, assume or permit to exist any pledges over or other liens on
any of its assets other than to secure any indebtedness or guarantee which is
permitted under paragraphs 2 or 3 above;
5. enter into any sale and leaseback transaction;
6. issue any preferred shares other than to Payee or any Permitted
Subsidiary;
7. except as set forth in 9. below, restrict its ability to pay dividends
on its shares;
8. enter into any transaction of any kind with any of its directors,
officers or employees, or any other person who has the power to direct the
management or policies of Payor, or any party (other than Payee or any Permitted
Subsidiary) which owns 10% or more of its shares, other than normal employment
arrangements; or
-2-
<PAGE> 24
9. make any distribution on its shares (other than pro rata to all
holders), purchase or redeem any of its shares, prepay any indebtedness, or make
any form of investment (other than in equipment or other property in the
ordinary course of business); or
10. engage directly or indirectly in any business other than the
telecommunications business.
Payor shall be in default hereunder upon the occurrence of any
of the following events (each, an "Event of Default"):
(a) Payor fails to pay principal or interest (or any
installment thereof), or any other amount due hereunder, on the due date
thereof, and (other than in respect of any payment due on the Maturity Date)
such default continues for a period of fifteen (15) days;
(b) Payor defaults with respect to any other covenant or
agreement contained herein and fails to correct such default within ten (10)
days after written notice from Payor, specifying the nature of the default;
(c) Payor defaults with respect to the payment of any other
indebtedness, or payment of such indebtedness is accelerated by the holders
thereof, and in either case the unpaid principal amount of such indebtedness
exceeds U.S.$1,000,000;
(d) the entry by a court of competent jurisdiction of one or
more final judgements against Payor or any subsidiary of Payor in an uninsured
or unindemnified amount in excess of U.S.$1,000,000 which is not discharged,
stayed or satisfied within sixty (60) days;
(e) the commencement by or against Payor or any subsidiary of
any proceeding under any bankruptcy, insolvency or other law for the
liquidation, winding up, reorganization, or rehabilitation of such entity , or
for a composition with its creditors;
(f) the appointment of a custodian, receiver, liquidator,
trustee or similar official for Payor or any subsidiary, or any substantial part
of the assets of Payor or any subsidiary; and
(g) the nationalization or expropriation by any governmental
authority, whether or not pursuant to applicable law, for a period likely to
exceed thirty (30) days, of all or a substantial part of the assets of Payor or
any subsidiary.
Upon the occurrence of an Event of Default, Payee may by
written notice to Payor declare all amounts due under this Note to be
immediately due and payable and, upon such declaration, all amounts due
hereunder shall become and be immediately due and payable. In addition, Payee
shall be entitled to exercise all other rights and remedies which it may have in
respect of such Event of Default, whether pursuant to this Note, applicable law
or otherwise,
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<PAGE> 25
including in respect of any collateral upon which the obligations of Payor
hereunder may be secured.
The terms and conditions contained herein shall bind Payor and
its successors and assigns, and the benefits hereof shall inure to Payee and the
successors and assigns of Payee.
Payee shall be permitted at any time to assign any or all of
its rights, powers, privileges and benefits hereunder to any other party,
whether absolutely or by way of collateral.
Payor waives presentment for payment, demand, notice of
nonpayment, notice of protest, protest, and notice of dishonor of this Note, and
all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note.
If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due from the Payor hereunder in U.S. Dollars into
another currency, the Payor agrees, to the fullest extent that it may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Payee could purchase U.S. Dollars
with such other currency at Citibank N.A., New York, New York, U.S.A., on the
New York business day preceding that on which final judgment is given. Any
amount received or recovered in a currency other than U.S. Dollars (whether as a
result of a judgment or order of a court of any jurisdiction, or the enforcement
thereof, in the winding-up or dissolution of the Payor or otherwise) by the
Payee in respect of any sum expressed to be due to it from the Payor shall only
constitute discharge of the Payor to the extent of the U.S. Dollar amount which
the Payee is able to purchase with the amount so received or recovered in such
other currency on the date of such receipt or recovery; provided that if it is
not practicable to make such purchase on such date, such purchase shall be made
on the first date on which is practicable to do so. If the amount of U.S.
Dollars so purchased is less than the U.S. Dollar amount expressed to be due to
the Payee hereunder, to the extent permitted by applicable law the Payor shall
indemnify the Payee against any loss sustained by it as a result and, in any
event, the Payor shall indemnify the Payee against the cost of making any such
purchase. For the purposes of this paragraph, it shall be sufficient for the
Payee to certify that it would have suffered a loss had an actual purchase of
U.S. Dollars been made with the amount so received in such other currency on the
date of receipt or recovery (or, if a purchase of U.S. Dollars on such date had
not been practicable, on the first date on which it would have been
practicable). To the extent permitted by applicable law, the indemnities granted
by this paragraph constitute a separate and independent obligation from the
other obligations of the Payor hereunder and shall give rise to a separate and
independent cause of action in favor of the Payee.
THIS NOTE AND ALL OF THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, U.S.A. PAYOR HEREBY CONSENTS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, U.S.A. IN ANY ACTION OR
PROCEEDING WHICH
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<PAGE> 26
MAY BE BROUGHT AGAINST IT UNDER OR IN CONNECTION WITH THIS NOTE OR TO ENFORCE
ANY COVENANT OR AGREEMENT CONTAINED HEREIN OR ANY LIABILITY OR OBLIGATION
HEREUNDER, AND IN THE EVENT ANY SUCH ACTION OR PROCEEDING SHALL BE BROUGHT,
PAYOR AGREES NOT TO RAISE ANY OBJECTION TO SUCH JURISDICTION. PAYOR FURTHER
APPOINTS CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NY 10019, U.S.A., AS
ITS AGENT FOR SERVICE OF PROCESS AND OTHER PLEADINGS IN ANY SUCH ACTION OR
PROCEEDING. AT THE OPTION OF THE PAYEE, EXERCISABLE BY NOTICE TO THE PAYOR, ANY
CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS NOTE, OR THE BREACH
HEREOF, SHALL BE SETTLED BY ARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION
ASSOCIATION IN NEW YORK CITY UNDER ITS COMMERCIAL ARBITRATION RULES, AND
JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION THEREOF.
IN WITNESS WHEREOF, Payor has duly executed this Note as of
the date set forth at the commencement hereof.
TECHNOCOM LIMITED
By:_________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 4.21
[COMPOSITE CONFORMED COPY]
PLD TELEKOM INC.
================================================================================
$12,400,000 12% Series A Senior Secured Revolving Credit Notes due 1998
$3,100,000 12% Series B Senior Revolving Credit Notes due 1998
Warrants for the Purchase of Common Stock
REVOLVING CREDIT NOTE AND WARRANT AGREEMENT
Dated as of November 26, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
1. THE REVOLVING CREDIT NOTES AND THE WARRANTS.......................................... 1
1.1. Authorization and Description of Notes and Warrants......................... 1
1.2. Subsidiary Guaranty; Security for Notes..................................... 4
2. ISSUANCE OF NOTES AND WARRANTS; LOAN COMMITMENTS..................................... 5
3. CLOSING; EFFECTIVENESS OF LOAN COMMITMENTS........................................... 5
4. CONDITIONS TO CLOSING................................................................ 6
4.1. Proceedings and Documents................................................... 6
4.2. Representations and Warranties.............................................. 7
4.3. Performance; No Default..................................................... 7
4.4. Compliance and Secretary's Certificates..................................... 7
4.5. Opinions of Counsel......................................................... 8
4.6. Absence of Certain Events................................................... 8
4.7. Approvals................................................................... 8
4.8. Acquisition of Technocom Shares............................................. 9
4.9. Warrant Agreement; Deposit of Additional Warrant Certificates;
Reservation of Common Stock................................................. 9
4.10. Registration Agreement...................................................... 10
4.11. Subsidiary Guaranty......................................................... 10
4.12. Trust Agreement............................................................. 10
4.13. Pledge Agreement; Share Mortgage and Share Transfer Form.................... 10
4.14. Security Agreement.......................................................... 11
4.15. Delivery of Pledged Shares and Registration in Share Registry;
Recordation; Taxes, etc..................................................... 11
4.16. Placement Fee............................................................... 11
4.17. Notice of Borrowing......................................................... 11
4.18. Existing Senior Note Indenture; Existing Convertible Note Indenture......... 12
4.19. Technocom Organizational Documents, etc..................................... 12
4.20. Issuance of Other Notes and Warrants........................................ 12
4.21. Payment of Special Counsel Fees............................................. 13
4.22. Private Placement Number.................................................... 13
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................ 13
5.1. Organization; Power and Authority........................................... 13
5.2. Authorization, etc.......................................................... 13
5.3. Disclosure.................................................................. 14
</TABLE>
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<TABLE>
<S> <C> <C>
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates............ 14
5.5. Capital Stock............................................................... 15
5.6. Share Purchase Agreements................................................... 16
5.7. Consummation of Acquisition................................................. 16
5.8. Financial Statements........................................................ 16
5.9. Compliance with Laws, Other Instruments, etc................................ 17
5.10. Governmental Authorizations, etc............................................ 17
5.11. Litigation; Observance of Agreements, Statutes and Orders................... 17
5.12. Taxes....................................................................... 18
5.13. Title to Property; Leases................................................... 18
5.14. Licenses, Permits, etc...................................................... 18
5.15. Compliance with ERISA....................................................... 19
5.16. Private Offering by the Company............................................. 20
5.17. Use of Proceeds; Margin Regulations......................................... 20
5.18. Existing Indebtedness; Future Liens......................................... 21
5.19. Foreign Assets Control Regulations, etc..................................... 21
5.20. Status under Certain Statutes............................................... 21
5.21. Existing Senior Note Indenture and Existing Convertible Note Indenture...... 21
5.22. Technocom Organizational Documents, etc..................................... 22
5.23. Chief Executive Office...................................................... 22
6. REPRESENTATIONS OF THE LENDER........................................................ 22
6.1. Purchase for Investment..................................................... 22
6.2. Source of Funds............................................................. 23
7. INFORMATION AS TO COMPANY............................................................ 23
7.1. Financial and Business Information.......................................... 23
7.2. Officer's Certificate....................................................... 26
7.3. Inspection.................................................................. 26
8. SERIES A AND SERIES B REVOLVING CREDIT FACILITIES.................................... 27
8.1. Revolving Credit Commitments and Making of Revolving Credit Loans........... 27
8.2. Optional Repayments......................................................... 29
8.3. Optional and Mandatory Reduction and Termination of Commitments............. 29
8.4. Mandatory Repayments........................................................ 31
8.5. Notice of Repayments or Termination......................................... 32
8.6. Allocation of Reductions in Commitments and Repayments and
Repayments.................................................................. 32
8.7. Maturity; Surrender, etc.................................................... 32
8.8. Purchase of Notes........................................................... 33
8.9. Commitment Fees............................................................. 33
8.10. Books and Records........................................................... 33
8.11. Illegality.................................................................. 33
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
9. COVENANTS............................................................................ 34
9.1. Compliance with Law......................................................... 34
9.2. Books and Records........................................................... 34
9.3. Payment of Notes............................................................ 34
9.4. Maintenance of Office....................................................... 34
9.5. Corporate Existence......................................................... 35
9.6. Maintenance of Property..................................................... 35
9.7. Payment of Taxes and Other Claims........................................... 35
9.8. Commitment Termination and Repayment at the Option of Holders upon a
Change of Control........................................................... 36
9.9. Limitation on Asset Sales................................................... 36
9.10. Limitation on Indebtedness.................................................. 39
9.11. Limitation on Issuances of Guarantees by Restricted Subsidiaries............ 41
9.12. Limitation on Liens......................................................... 41
9.13. Limitation on Sale and Leaseback Transactions............................... 42
9.14. Restricted Payments......................................................... 42
9.15. Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries..................................................... 45
9.16. Limitation on Issuance and Sale of Preferred Stock of Restricted
Subsidiaries................................................................ 46
9.17. Transactions with Affiliates................................................ 46
9.18. Restricted and Unrestricted Subsidiaries.................................... 47
9.19. Limitations on Line of Business............................................. 48
9.20. Limitation on Sales of Telecommunications Asset Leases or Qualified
Investments................................................................. 48
9.21. Payment of Additional Amounts............................................... 49
9.22. Leasing Companies and NWE Cyprus............................................ 51
9.23. Technocom................................................................... 51
9.24. Collateral Agents........................................................... 52
9.25. WTC......................................................................... 52
9.26. Release of Additional Warrant Certificates from Escrow...................... 52
9.27. Default Warrants............................................................ 53
9.28. Application of Notes Upon Exercise of Warrants.............................. 53
9.29. Agreement to Effect Certain Amendments...................................... 54
9.30. Future Subsidiaries to Become Guarantors.................................... 54
9.31. Restriction on Certain Payments by the Company.............................. 54
10. CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER................................. 55
10.1. Merger, Consolidation, Sale of Assets, Etc.................................. 55
10.2. Successor Corporation Substituted........................................... 56
11. EVENTS OF DEFAULT.................................................................... 57
</TABLE>
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<TABLE>
<S> <C> <C>
12. REMEDIES ON DEFAULT, ETC............................................................. 59
12.1. Acceleration................................................................ 59
12.2. Other Remedies.............................................................. 60
12.3. Rescission.................................................................. 60
12.4. No Waivers or Election of Remedies, Expenses, etc........................... 60
13. DEFINITIONS AND CONSTRUCTION......................................................... 61
13.1. Defined Terms............................................................... 61
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................................ 89
14.1. Registration of Notes....................................................... 89
14.2. Transfer and Exchange of Notes.............................................. 89
14.3. Replacement of Notes........................................................ 90
15. PAYMENTS ON NOTES.................................................................... 90
15.1. Place of Payment............................................................ 90
15.2. Home Office Payment......................................................... 91
16. EXPENSES, ETC........................................................................ 91
16.1. Transaction Expenses........................................................ 91
16.2. Survival.................................................................... 92
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT............................................................................ 92
18. AMENDMENT AND WAIVER................................................................. 92
18.1. Requirements................................................................ 92
18.2. Solicitation of Holders of Notes............................................ 93
18.3. Binding Effect, etc......................................................... 93
18.4. Notes held by Company, etc.................................................. 93
19. NOTICES.............................................................................. 94
20. REPRODUCTION OF DOCUMENTS............................................................ 94
21. SUBSTITUTION OF LENDER............................................................... 95
22. MISCELLANEOUS........................................................................ 95
22.1. Successors and Assigns...................................................... 95
22.2. Payments Due on Non-Business Days........................................... 95
22.3. Severability................................................................ 95
22.4. Construction................................................................ 96
22.5. Counterparts................................................................ 96
</TABLE>
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<TABLE>
<S> <C> <C>
22.6. Governing Law............................................................... 96
</TABLE>
SCHEDULE I -- Information Relating To Lenders
SCHEDULE II -- Subsidiaries of the Company and
Ownership of Subsidiary Stock
SCHEDULE III -- Schedule of Financial Statements and other Information
delivered to Lenders
SCHEDULE IV -- Existing Indebtedness and Liens
EXHIBIT A-1 -- Form of Series A Revolving Credit Notes
EXHIBIT A-2 -- Form of Series B Revolving Credit Notes
EXHIBIT B -- Form of Warrant Agreement
EXHIBIT C -- Form of Subsidiary Guaranty
EXHIBIT D -- Form of Trust Agreement
EXHIBIT E-1 -- Form of Pledge Agreement
EXHIBIT E-2 -- Form of Share Mortgage
EXHIBIT F -- Form of Security Agreement
EXHIBIT G -- Form of Registration Agreement
EXHIBIT H-1 -- Subject Matter of Opinion of Special Counsel and Irish
Counsel for the Company
EXHIBIT H-2 -- Subject Matter of Opinion of Counsel to the Trustee
EXHIBIT I -- Form of Borrowing Notice
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<PAGE> 7
PLD TELEKOM INC.
680 FIFTH AVENUE, 24TH FLOOR
NEW YORK, NEW YORK 10019
$12,400,000 12% Series A Senior Secured Revolving Credit Notes due 1998
$3,100,000 12% Series B Senior Revolving Credit Notes due 1998
Warrants for the Purchase of Common Stock
as of November 26, 1997
TO EACH OF THE LENDERS NAMED ON THE
SIGNATURE PAGE OF THIS AGREEMENT:
Ladies and Gentlemen:
PLD TELEKOM INC., a Delaware corporation (the "COMPANY"), agrees
with you as follows:
1. THE REVOLVING CREDIT NOTES AND THE WARRANTS.
1.1. AUTHORIZATION AND DESCRIPTION OF NOTES AND WARRANTS.
The Company has authorized the issue and delivery on the Closing
Date of:
(a) $12,400,000 aggregate principal amount of its 12% Series A
Senior Secured Revolving Credit Notes due 1998 (the "SERIES A NOTES", such
term to include any such notes issued in substitution therefor pursuant to
SECTION 14), which Series A Notes shall evidence the obligation of the
Company to repay Series A Revolving Credit Loans made to the Company from
time to time pursuant to this Agreement, and each of which shall (i) be
dated the date of issue, (ii) bear interest on the principal amount
outstanding thereunder from time to time at the rate of 12% per annum
(computed on the basis of the actual number of days elapsed in a year of
360 days, and which rate is subject to adjustment as provided in the final
paragraph of this SECTION 1.1), payable monthly on the last day of each
month (commencing with November 30, 1997) and at maturity and bear
interest on any overdue principal (including any overdue required or
optional repayment of principal) and (to the extent legally enforceable)
on any overdue installment of interest at the applicable Default Rate
after the date due (whether by acceleration or otherwise) until paid, such
overdue interest to be payable monthly as aforesaid or, at the option of
the registered holder of such Note, on demand, (iii) mature and be payable
in full on December 31, 1998, and (iv) be substantially in the form set
<PAGE> 8
forth in EXHIBIT A-1, with such changes therefrom, if any, as may be
approved by you and the Company;
(b) $3,100,000 aggregate principal amount of its 12% Series B
Senior Revolving Credit Notes due 1998 (the "SERIES B NOTES", such term to
include any such notes issued in substitution therefor pursuant to SECTION
14), which Series B Notes shall evidence the obligation of the Company to
repay Series B Revolving Credit Loans made to the Company from time to
time pursuant to this Agreement, and each of which shall (i) be dated the
date of issue, (ii) bear interest on the principal amount outstanding
thereunder from time to time at the rate of 12% per annum (computed on the
basis of the actual number of days elapsed in a year of 360 days, and
which rate is subject to adjustment as provided in the final paragraph of
this SECTION 1.1), payable monthly on the last day of each month
(commencing with November 30, 1997) and at maturity and bear interest on
any overdue principal (including any overdue required or optional
repayment of principal) and (to the extent legally enforceable) on any
overdue installment of interest at the applicable Default Rate after the
date due (whether by acceleration or otherwise) until paid, such overdue
interest to be payable monthly as aforesaid or, at the option of the
registered holder of such Note, on demand, (iii) mature and be payable in
full on September 30, 1998, and (iv) be substantially in the form set
forth in EXHIBIT A-2, with such changes therefrom, if any, as may be
approved by you and the Company;
(c) its common stock purchase warrants (together with all warrants
issued in substitution therefor in accordance with the terms of the
Warrant Agreement hereinafter referred to, the "SERIES A WARRANTS"), for
the purchase of an aggregate of 315,000 shares of the Company's Common
Stock, at an initial purchase price (subject to adjustment as provided in
the Warrant Agreement hereinafter referred to) of $8.625 per share, at any
time or from time to time prior to 5:00 P.M., New York City time, on
December 31, 2008, such Series A Warrants to be issuable pursuant to a
Warrant Agreement, substantially in the form of EXHIBIT B (the "WARRANT
AGREEMENT"), to be entered into by the Company and The Bank of New York,
as Warrant Agent (the "WARRANT AGENT"), and to be evidenced by one or more
warrant certificates (each, a "SERIES A WARRANT CERTIFICATE"), each of
which shall be substantially in the form set forth in Exhibit A to the
Warrant Agreement;
(d) its common stock purchase warrants (together with all warrants
issued in substitution therefor in accordance with the terms of the
Warrant Agreement, the "SERIES B WARRANTS"), for the purchase of an
aggregate of 108,000 shares of the Company's Common Stock, at an initial
purchase price (subject to adjustment as provided in the Warrant
Agreement) of $8.625 per share, at any time or from time to time prior to
5:00 P.M., New York City time, on December 31, 2008, such Series B
Warrants to be issuable pursuant to the Warrant Agreement
2
<PAGE> 9
and to be evidenced by one or more warrant certificates (each, a "SERIES B
WARRANT CERTIFICATE"), each of which shall be substantially in the form
set forth in Exhibit B to the Warrant Agreement; and;
(e) its common stock purchase warrants (together with all warrants
issued in substitution therefor in accordance with the terms of the
Warrant Agreement, the "ADDITIONAL WARRANTS"), for the purchase of an
aggregate of 182,000 shares of the Company's Common Stock, at an initial
purchase price (subject to adjustment as provided in the Warrant
Agreement) of $8.625 per share, at any time or from time to time prior to
5:00 P.M., New York City time, on December 31, 2008, such Additional
Warrants to be issuable pursuant to the Warrant Agreement and to be
evidenced by one or more warrant certificates (each, an "ADDITIONAL
WARRANT CERTIFICATE"), each of which shall be substantially in the form
set forth in Exhibit A or Exhibit B to the Warrant Agreement, as
applicable.
In addition, the Company has authorized the issuance and delivery, under the
circumstances set forth in Section 2(c) of the Warrant Agreement, of (x) on
September 30, 1998 and on the last day of each calendar month thereafter until
the Series B Notes are paid in full, its common stock purchase warrants for the
purchase of 32,000 shares of the Company's Common Stock and (y) on December 31,
1998 and on the last day of each calendar month thereafter until the Series A
Notes are paid in full, its common stock purchase warrants for the purchase of
70,000 shares of the Company's Common Stock (such warrants described in
subclauses (x) and (y) issued on the respective dates specified in such
subclauses, together with all warrants issued in substitution therefor in
accordance with the terms of the Warrant Agreement, the "DEFAULT WARRANTS"), in
any such case at an initial purchase price of $0.01 per share, at any time or
from time to time prior to 5:00 P.M., New York City time on that date which
occurs ten (10) years from the date of issuance thereof, such Default Warrants
to be issuable pursuant to the Warrant Agreement and to be evidenced by one or
more warrant certificates (each, a "DEFAULT WARRANT CERTIFICATE"), each of which
shall be substantially in the form set forth in Exhibit C to the Warrant
Agreement.
The Series A Notes and the Series B Notes are herein referred to
collectively as the "NOTES" and each of the Series A Notes and the Series B
Notes are herein referred to separately as a "SERIES" of Notes. The Series A
Warrants and the Series B Warrants are herein collectively referred to as the
"INITIAL WARRANTS", and each of the Series A Warrants and the Series B Warrants
are herein referred to separately as a "SERIES" of Initial Warrants. The Initial
Warrants, the Additional Warrants and the Default Warrants are herein referred
to collectively as the "WARRANTS", and the Series A Warrant Certificates, the
Series B Warrant Certificates, the Additional Warrant Certificates and the
Default Warrant Certificates are herein referred to collectively as the "WARRANT
CERTIFICATES". Certain capitalized terms used in this Agreement are defined in
SECTION 13.1; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
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Notwithstanding the provisions of subclause (ii) of each of clauses
(a) and (b) of the first paragraph of this SECTION 1.1 setting forth the
interest rate to be borne by the principal amount outstanding from time to time
under the Series A Notes and the Series B Notes, respectively, in the event that
the Company shall not have (x) received on or prior to May 31, 1998, net cash
proceeds aggregating at least $20,000,000 from an Equity Issuance and (y)
delivered to each holder of Notes an Officers' Certificate certifying to such
effect, the interest rate borne by the principal amount outstanding from time to
time under the Series A Notes and the Series B Notes shall be increased from 12%
to 15% per annum for the period commencing June 1, 1998 until maturity, such
interest to be computed and payable as otherwise provided in each of such
subclauses (ii), as applicable.
1.2. SUBSIDIARY GUARANTY; SECURITY FOR NOTES.
(a) The Notes shall be entitled to the benefit of the Guaranty
Agreement, substantially in the form of EXHIBIT C (the "SUBSIDIARY GUARANTY"),
to be entered into by the Subsidiary Guarantors and dated as of the date hereof,
providing for the guaranty of the obligations of the Company under this
Agreement, the Trust Agreement, the Security Documents and the Notes by the
Subsidiary Guarantors party thereto.
(b) The Series A Notes shall be entitled to the benefits of
certain security to be held by The Bank of New York or its successor at the time
acting not in its individual capacity but solely as trustee (the "TRUSTEE")
under the Trust Agreement, substantially in the form of EXHIBIT D (the "TRUST
AGREEMENT"), to be entered into by the Company with the Trustee and dated as of
the date hereof, and consisting of the Property granted as collateral under, and
all rights of the Trustee under or in respect of, (i) the Pledge Agreement,
substantially in the form of EXHIBIT E-1 (the "PLEDGE AGREEMENT"), to be entered
into by the Company and the Trustee and dated as of the date hereof, and (ii)
the Agreement Accompanying Legal Mortgage of Shares, substantially in the form
of EXHIBIT E-2 (the "SHARE MORTGAGE"), to be dated as of the date hereof and
entered into by the Company and Anglo Irish Bank Corporation PLC, in its
capacity as collateral agent for the Trustee (in such capacity, the "COLLATERAL
AGENT") under an Agency Agreement, dated as of the date hereof (the "AGENCY
AGREEMENT"), among the Trustee, the Collateral Agent and the Company, and the
Series A Notes and the Series B Notes shall be entitled to the benefits of
certain security to be held by the Trustee under the Trust Agreement consisting
of the Property granted as collateral under, and all rights of the Trustee under
or in respect of, the Security Agreement (Inventory and Receivables),
substantially in the form of EXHIBIT F (the "SECURITY AGREEMENT"), to be entered
into by the Company and the Trustee and dated as of the date hereof. The Trust
Agreement, the Pledge Agreement, the Share Mortgage, the Share Transfer Form (as
hereinafter defined) and the Security Agreement are hereinafter referred to
collectively as the "SECURITY DOCUMENTS".
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2. ISSUANCE OF NOTES AND WARRANTS; LOAN COMMITMENTS.
Subject to the terms and conditions of this Agreement, in reliance
on the representations and warranties of the Company contained herein and in the
Security Documents and otherwise made in writing by or behalf of the Company,
and against issuance and delivery to you by the Company of (i) Notes of the
Series and in the principal amount set forth opposite your name on SCHEDULE I,
and (ii) Initial Warrants of the Series and for the purchase of the number of
shares of Common Stock shown opposite your name on SCHEDULE I, you agree to
make, from time to time during the Series A Availability Period, Series A
Revolving Credit Loans to the Company in an aggregate principal amount at any
one time outstanding not to exceed your Commitment Percentage of the Total
Series A Commitment, and from time to time during the Series B Availability
Period, Series B Revolving Credit Loans to the Company in an aggregate principal
amount at any one time outstanding not to exceed your Commitment Percentage of
the Total Series B Commitment. Contemporaneously with the execution and delivery
to you by the Company of a counterpart of this Agreement, the Company is
executing and delivering a counterpart hereof to each of the other institutional
investors named in SCHEDULE I (the "OTHER LENDERS"), providing for the issuance
and delivery to each of the Other Lenders of (i) Notes of the Series and in the
principal amount set forth opposite its name in SCHEDULE I and (ii) Initial
Warrants of the Series and for the purchase of the number of shares of Common
Stock set forth opposite its name on SCHEDULE I and the commitment of each Other
Lender to make Revolving Credit Loans in accordance with the provisions of this
Agreement. The respective commitments of you and the Other Lenders (you and the
Other Lenders being hereinafter sometimes referred to collectively as the
"LENDERS") to make Revolving Credit Loans are to be separate agreements made by
the Company and the Lenders. The obligations of the Lenders hereunder shall be
several and not joint, and this Agreement shall for all purposes be construed
and deemed to be a separate agreement between the Company, on the one hand, and
each of the Lenders, on the other, the Lenders acting severally and not jointly,
with the same effect as though a separate agreement with each such Lender to the
effect herein provided were hereby entered into between the Company and each
such Lender.
3. CLOSING; EFFECTIVENESS OF LOAN COMMITMENTS.
The commitment of you and each Other Lender to make Revolving Credit
Loans shall become effective and available for borrowings by the Company, and
the Notes evidencing any Revolving Credit Loans disbursed to the Company
hereunder on the date of such effectiveness, together with the Initial Warrants
and the Additional Warrants to be issued by the Company in connection therewith,
shall be issued and delivered by the Company, at a closing (the "CLOSING") to
occur at the offices of Coudert Brothers, The Grace Building, 1114 Avenue of the
Americas, New York, New York 10036, at 10:00 A.M., New York City time on
November 26, 1997 or on such subsequent date as may be agreed upon by the
Company and you and the Other Lenders (the "CLOSING DATE"). At the Closing the
Company will deliver to you:
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(i) one Series A Note in the principal amount of your Series A
Commitment and one or more Warrant Certificates evidencing the Series A
Warrants to be issued to you (as you may request), each dated the Closing
Date and registered in your name (or in the name of your nominee), against
disbursement of the Series A Revolving Credit Loans to be disbursed by you
on the Closing Date, provided that the Company shall have specified the
aggregate principal amount of such Series A Revolving Credit Loans by
written notice delivered to you at least two Business Days prior to the
date of the Closing; and
(ii) one Series B Note in the principal amount of your Series B
Commitment and one or more Warrant Certificates evidencing the Series B
Warrants to be issued to you (as you may request), each dated the Closing
Date and registered in your name (or in the name of your nominee), against
disbursement of the Series B Revolving Credit Loans to be disbursed by you
on the Closing Date, provided that the Company shall have specified the
aggregate principal amount of such Series B Revolving Credit Loans by
written notice delivered to you at least two Business Days prior to the
date of the Closing.
Each Revolving Credit Loan shall be disbursed to the Company or to its order by
wire transfer of immediately available funds in the amount thereof, for the
account of the Company to account number 40730577 at Citibank, N.A., New York,
New York, ABA No. 021000089 or as may be otherwise specified by the Company to
the Lenders in the Notice of Borrowing substantially in the form of EXHIBIT I
delivered in respect of such Revolving Credit Loan pursuant to SECTION 8.1. If
at the Closing the Company shall fail to tender such Notes or Initial Warrants
to you as provided above in this SECTION 3, or any of the conditions specified
in SECTION 4 shall not have been fulfilled to your satisfaction or waived by
you, you shall, at your election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights you may have by reason of
such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to make the initial Revolving Credit Loans to be
made by you hereunder on the Closing Date, and the effectiveness on and after
the Closing Date of your obligation to make Revolving Credit Loans to the
Company from time to time after the Closing Date, is subject to the fulfillment
to your satisfaction or the waiver by you, prior to or at the Closing, of the
following conditions:
4.1. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement, the Warrant Agreement, the
Registration Agreement, the Security Documents and the Subsidiary Guaranty and
all documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you
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and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
4.2. REPRESENTATIONS AND WARRANTIES.
All representations and warranties of the Company contained in this
Agreement, the Warrant Agreement, the Registration Agreement or any Security
Document or otherwise made by or on behalf of the Company in writing in
connection with the transactions contemplated hereby shall be true and correct
when made and as of the time of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing Date.
4.3. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements
and conditions contained in this Agreement, the Warrant Agreement, the
Registration Agreement or any Security Document, and each Subsidiary Guarantor
shall have performed and complied with all agreements and conditions contained
in the Subsidiary Guaranty, required to be performed or complied with by it
prior to or at the Closing (including, without limitation, the delivery by the
Company to the Trustee or its designee of certificates evidencing the Pledged
Shares), and after giving effect to the issue and delivery of the Notes (and the
application of the proceeds of the initial Revolving Credit Loans as
contemplated by SECTION 5.17), no Default or Event of Default shall have
occurred and be continuing.
4.4. COMPLIANCE AND SECRETARY'S CERTIFICATES.
(a) Officer's Certificate. The Company shall have delivered to you
an Officer's Certificate, dated the Closing Date, certifying that the conditions
specified in SECTIONS 4.2 AND 4.3 have been fulfilled.
(b) Company Secretary's Certificate. The Company shall have
delivered to you a certificate of its Secretary or Assistant Secretary, dated
the Closing Date, certifying as to the copies attached thereto of (x) its
certificate of incorporation and bylaws, (y) the resolutions of its Board of
Directors authorizing the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Security Documents, the Notes, the Warrant Agreement and the Warrants, and (z)
the incumbency of the Person or Persons authorized to execute and deliver this
Agreement, the Security Documents, the Notes, the Warrant Agreement, the Warrant
Certificates and the Registration Agreement on behalf of the Company.
(c) Subsidiary Guarantors' Secretary's Certificate. Each
Subsidiary Guarantor shall have delivered to you a certificate of its secretary
(in the case of WTC) or acting general director (in the case of BCL), dated the
Closing Date, certifying as to the
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copies attached thereto of (x) the articles of incorporation and bylaws of such
Subsidiary Guarantor, (y) the resolutions of its board of directors authorizing
the execution and delivery by such Subsidiary Guarantor of, and the performance
by such Subsidiary Guarantor of its obligations under, the Subsidiary Guaranty,
and (z) the incumbency of the Person or Persons authorized to execute and
deliver the Subsidiary Guaranty on behalf of such Subsidiary Guarantor.
4.5. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory
to you, dated the Closing Date (a) from (i) Morgan, Lewis & Bockius LLP, special
counsel for the Company, (ii) in-house counsel to the Company and (iii) A & L
Goodbody, special Irish counsel for the Company, together covering the matters
set forth in EXHIBIT H-1 and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request
(and the Company hereby instructs such counsel to deliver such opinion to you),
(b) from Emmet, Marvin & Martin, special counsel to the Trustee, covering the
matters set forth in EXHIBIT H-2 and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably request,
and (c) from Coudert Brothers, your special counsel in connection with such
transactions, covering such matters incident to such transactions as you may
reasonably request.
4.6. ABSENCE OF CERTAIN EVENTS.
There shall not have occurred any Material Adverse Change in the
Business or Condition of the Company and its Restricted Subsidiaries taken as a
whole from that reflected in the most recent audited financial statements of the
Company and its Subsidiaries referred to in item 4 of SCHEDULE III. Since the
date of the most recent audited financial statements of the Company and its
Subsidiaries, neither the Company nor any Restricted Subsidiary shall have
consolidated or merged with or into, or participated in a share exchange with,
any Person, or sold, leased or otherwise disposed of any Property other than in
the ordinary course of business and other than sales or other dispositions of
Property which shall not have had a Material Adverse Effect.
4.7. APPROVALS.
All actions, approvals, consents, waivers, exemptions, orders,
authorizations, registrations, declarations, filings and recordings
(collectively, "APPROVALS"), if any, which are required to be taken, given,
obtained, filed or recorded, as the case may be, by or from or with (a) any
Governmental Authority, (b) any trustee or holder of any indebtedness,
obligation or securities of the Company or any of its Subsidiaries (including,
without limitation, the Existing Senior Notes and the Existing Convertible
Notes) or (c) any other Person, in connection with the legal and valid execution
and delivery by the Company of this Agreement, the Warrant Agreement, the
Registration Agreement and the Security Documents and by the Subsidiary
Guarantors of the Subsidiary Guaranty and the
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consummation of the transactions contemplated hereby and thereby and the
issuance and delivery by the Company of the Notes and the Warrants and the
making by the Company of the borrowings contemplated hereby, shall have been
duly taken, given, obtained, filed or recorded, as the case may be, and all such
Approvals shall be final, subsisting and in full force and effect on the Closing
Date, and shall not be subject to any further proceedings or appeals or any
conditions subsequent not approved by you. Certified copies or other appropriate
evidence of all such Approvals, in form, scope and substance satisfactory to you
and your special counsel, shall have been delivered or made available to you and
your special counsel at your request.
4.8. ACQUISITION OF TECHNOCOM SHARES.
(a) The Company and each of the Selling Shareholders shall have
duly authorized, executed and delivered an agreement (each, a "SHARE PURCHASE
AGREEMENT" and together the "SHARE PURCHASE AGREEMENTS") providing for the sale
by the Selling Shareholders to the Company of an aggregate of 59 of the issued
and outstanding ordinary shares of Technocom (the "TECHNOCOM SHARES"), and you
and your special counsel shall have received a complete and correct copy of each
thereof, and the terms and provisions of each thereof shall be satisfactory to
you.
(b) Concurrently with the Closing, the acquisition by the Company
of the Technocom Shares pursuant to the Share Purchase Agreements (the
"ACQUISITION") shall have been duly consummated in accordance with the
respective terms thereof; and such documents and other evidence as you shall
require to evidence such Acquisition shall have been delivered to you. The
Company shall have good and marketable title to the Technocom Shares, free and
clear of all Liens other than (i) with respect to the Pledged Shares, the Lien
of the Pledge Agreement, and (ii) with respect to the Technocom Shares other
than the Pledged Shares, the Liens of the Existing Senior Note Indenture and the
Existing Senior Note Collateral Documents and the Existing Convertible Note
Indenture and the Existing Convertible Note Collateral Documents. The
Acquisition shall have been accomplished in compliance with all applicable laws
and governmental rules and regulations and all agreements or instruments to
which the Company or Technocom is a party, and such certificates, documents and
other evidence as you shall reasonably request concerning such compliance and
complete and correct copies of all documents delivered at the closing of the
Acquisition shall have been delivered to you and your special counsel.
4.9. WARRANT AGREEMENT; DEPOSIT OF ADDITIONAL WARRANT CERTIFICATES; RESERVATION
OF COMMON STOCK.
(a) The Warrant Agreement shall have been duly authorized,
executed and delivered by the Company and the Warrant Agent and shall be in full
force and effect and the Warrant Agent, you and your special counsel shall have
each received an original fully executed counterpart thereof.
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(b) The Company shall have deposited Warrant Certificates
evidencing the Additional Warrants with the Trustee as contemplated by Section 5
of the Trust Agreement.
(c) The number of shares of Common Stock initially issuable upon
the exercise of the Initial Warrants and the Additional Warrants and reserved
for issuance upon the exercise of the Default Warrants shall have been duly
authorized and reserved for issuance upon such exercise.
4.10. REGISTRATION AGREEMENT.
The Company shall have duly authorized, executed and delivered the
Registration Rights Agreement, dated as of the date hereof and substantially in
the form of EXHIBIT G (the "REGISTRATION AGREEMENT"), the Registration Agreement
shall be in full force and effect and you and your special counsel shall have
received an original fully executed counterpart thereof.
4.11. SUBSIDIARY GUARANTY.
Each Subsidiary Guarantor shall have duly authorized, executed and
delivered the Subsidiary Guaranty, the Subsidiary Guaranty shall be in full
force and effect, and you and your special counsel shall have each received an
original fully executed counterpart thereof.
4.12. TRUST AGREEMENT.
The Company and the Trustee shall have duly authorized, executed and
delivered the Trust Agreement, the Trust Agreement shall be in full force and
effect, and the Trustee, you and your special counsel shall have received an
original fully executed counterpart thereof.
4.13. PLEDGE AGREEMENT; SHARE MORTGAGE AND SHARE TRANSFER FORM.
(a) The Company shall have duly authorized, executed and delivered
the Pledge Agreement, the Pledge Agreement shall be in full force and effect,
you and the Trustee shall have received a fully executed counterpart thereof,
and no term or condition thereof shall have been amended, modified or waived
except with your prior written consent.
(b) The Agency Agreement, dated as of the date hereof and
substantially in the form of Exhibit A to the Trust Agreement (the "AGENCY
AGREEMENT") shall have been duly authorized, executed and delivered by the
Trustee, the Company and the Collateral Agent and shall be in full force and
effect. The Company and the Collateral Agent shall have duly authorized,
executed and delivered the Share Mortgage, the Share
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Mortgage shall be in full force and effect, you, the Trustee and the Collateral
Agent shall have received a fully executed counterpart thereof, and no term or
condition thereof shall have been amended, modified or waived except in
accordance with the provisions thereof. The Company shall have duly executed and
delivered a Share Transfer Form (the "SHARE TRANSFER FORM") in respect of the
transfer of 28 ordinary shares of IR pound sterling 1 each in the capital of
Technocom to the Collateral Agent, the Share Transfer Form shall be in full
force and effect and the Collateral Agent, the Trustee and you and your special
counsel shall have received an original (or, in the case of all such Persons
other than the Collateral Agent, a copy of an original) fully executed
counterpart thereof.
4.14. SECURITY AGREEMENT.
The Company and the Trustee shall have duly authorized, executed and
delivered the Security Agreement, the Security Agreement shall be in full force
and effect, and the Trustee, you and your special counsel shall have received an
original fully executed counterpart thereof.
4.15. DELIVERY OF PLEDGED SHARES AND REGISTRATION IN SHARE REGISTRY;
RECORDATION; TAXES, ETC.
The Company shall have delivered to the Trustee or its designee
stock certificates representing the Pledged Shares, registered in the name of
the Company, accompanied by undated stock powers duly executed in blank, and the
Collateral Agent shall have been registered in the Share Register of Technocom
as the registered owner of 28 ordinary shares of IR pound sterling1 each in the
capital of Technocom. The Pledge Agreement and the Security Agreement and/or
prior notices, statements or other instruments in respect thereof, including,
without limitation, financing statements on Form UCC-1, shall have been duly
recorded, published, registered and filed in such manner and in such places as
are required by law to establish, perfect and preserve and protect the security
interests of the Trustee in the rights and Property covered by the Pledge
Agreement and the Security Agreement; and all taxes, fees, and other charges in
connection with the execution, delivery, recording, publishing, registration and
filing of such instruments and the offer, issue and delivery of the Notes and
the Warrants (and the Warrant Certificates evidencing the Warrants) and the
making by the Lenders of the Revolving Credit Loans shall have been paid in
full.
4.16. PLACEMENT FEE.
The Company shall have paid to you and each Other Lender your and
such Other Lender's pro rata share (based on your respective Commitment
Percentages) of the aggregate placement fee in the amount of $290,625 payable on
the Closing Date.
4.17. NOTICE OF BORROWING.
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On or prior to the second Business Day prior to the Closing Date,
the Company shall have delivered to each Lender a borrowing notice in the form
of EXHIBIT I specifying the aggregate amount of and the respective Series of
Revolving Credit Loans to be made on the Closing Date and the portion of each
such Series of Revolving Credit Loans to be made by such Lender.
4.18. EXISTING SENIOR NOTE INDENTURE; EXISTING CONVERTIBLE NOTE INDENTURE.
You and your special counsel shall each have received a complete and
correct copy of the Existing Senior Note Indenture and the Existing Convertible
Note Indenture and all respective amendments thereto.
4.19. TECHNOCOM ORGANIZATIONAL DOCUMENTS, ETC.
You and your special counsel shall each have received complete and
correct copies of:
(i) the Memorandum of Association and Articles of Association and
other constitutive documents of Technocom, together with a certified copy
of a written resolution of the shareholders of Technocom amending Articles
11 and 32 of such Articles of Association and approving the transfer of
the Pledged Shares pursuant to the Share Mortgage and further transfers
thereof by the Collateral Agent upon a foreclosure under the Share
Mortgage;
(ii) all agreements with respect to the Technocom Capital Stock,
including the Technocom Shareholder Agreement and the Technocom Put
Agreements and all respective amendments thereto; and
(iii) a waiver executed by each of the Selling Shareholders waiving
any and all preemptive rights, rights of first refusal, requirements of
consent and other similar rights that such Selling Shareholder may have
with respect to the transfer of the Pledged Shares from the Company to the
Collateral Agent pursuant to the Share Mortgage and any further transfer
by the Collateral Agent upon a foreclosure under the Share Mortgage.
All of the documents and agreements delivered pursuant to this SECTION 4.18
shall be satisfactory to you in substance.
4.20. ISSUANCE OF OTHER NOTES AND WARRANTS.
Contemporaneously with the Closing, the Company shall issue and
deliver to the Other Lenders the Notes and the Initial Warrants to be issued and
delivered to them as specified in SCHEDULE I and each Other Lender shall have
made a Series A Revolving Credit Loan and a Series B Revolving Credit Loan to
the Company in the amount of such
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Other Lender's Commitment Percentage of Series A Revolving Credit Loans and
Series B Revolving Credit Loans being made to the Company on the Closing Date.
4.21. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of SECTION 16.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in SECTION 4.5 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.22. PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes
and the Warrants.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the Property it purports to own or hold under lease, to transact the
business it transacts and currently proposes to transact, to execute and deliver
this Agreement, the Warrant Agreement, the Registration Agreement, the Security
Documents, the Notes and the Warrants and to perform the provisions hereof and
thereof.
5.2. AUTHORIZATION, ETC.
This Agreement, the Warrant Agreement, the Registration Agreement,
the Security Documents, the Notes and the Warrants have been duly authorized by
all necessary corporate action on the part of the Company, and assuming due
authorization, execution, delivery and performance by each other party thereto,
each of this Agreement, the Warrant Agreement, the Registration Agreement and
each Security Document constitutes, and upon execution and delivery thereof each
Note and each Warrant will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, reorganization,
moratorium or other similar laws from time to time
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in effect affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
5.3. DISCLOSURE.
The Company has delivered to you and each Other Lender the financial
information and other materials described on SCHEDULE III. The materials
described in item 12 on SCHEDULE III fairly describe, in all material respects,
the general nature of the business and principal Property of the Company and its
Subsidiaries. This Agreement, the documents listed on SCHEDULE III and the
certificates delivered to you by or on behalf of the Company pursuant to this
Agreement, taken as a whole, do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading in light of the circumstances under which they were made, it
being understood that, for purposes of this SECTION 5.3, any statement contained
in such documents shall be deemed modified or superseded to the extent that a
later statement contained in any such documents modifies or replaces such
statement, whether or not such later statement so states. Since the date of most
recent audited financial statements of the Company referred to in SCHEDULE III,
there has been no change in the financial condition, operations, business,
Property or prospects of the Company or any Subsidiary except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. Other than matters generally affecting the economy,
there is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the documents
listed on SCHEDULE III or the certificates delivered to you by or on behalf of
the Company pursuant to this Agreement.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) SCHEDULE II contains complete and correct lists of (i) the
Company's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its Capital Stock or similar equity interests outstanding owned by
the Company and each other Subsidiary, (ii) the Company's Affiliates, other than
Subsidiaries, and (iii) the Company's directors and senior officers.
(b) All of the outstanding shares of Capital Stock or similar
equity interests of each Subsidiary shown in SCHEDULE II as being owned by the
Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien, except as specified in SCHEDULE II.
(c) Each Subsidiary identified in SCHEDULE II is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal
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entity and is in good standing in each jurisdiction in which such qualification
is required by law, other than those jurisdictions as to which the failure to be
so qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each such Subsidiary
has the corporate or other power and authority to own or hold under lease the
Property it purports to own or hold under lease and to transact the business it
transacts and currently proposes to transact.
(d) Except as set forth in the "Risk Factors" section of the
Company's 10-K for the period ended December 31, 1996, no Subsidiary is a party
to, or otherwise subject to, any legal restriction or any agreement (other than
this Agreement and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of Capital Stock or similar equity
interests of such Subsidiary.
5.5. CAPITAL STOCK.
At the time of the Closing and after giving effect to the
transactions contemplated by this Agreement and the Warrant Agreement, the
authorized Capital Stock of the Company will consist of : (a) 100,000,000 shares
of Common Stock, of which 32,008,050 shares will be issued and outstanding
2,775,334 shares will be reserved by the Company for issuance upon the exercise
of options or warrants outstanding on the date hereof or option or similar
rights granted subsequent to the date hereof pursuant to the Company's Equity
Compensation Plan in effect on the date hereof, 423,000 shares will be reserved
by the Company for issuance by the Company upon exercise of the Initial
Warrants, 182,000 shares will be reserved by the Company for issuance by the
Company upon exercise of the Additional Warrants, 1,000,000 shares will be
reserved by the Company for issuance by the Company upon exercise of the Default
Warrants, 4,682,000 shares will be reserved by the Company for issuance by the
Company upon exercise of the Existing Warrants, and 3,840,580 shares will be
reserved by the Company for issuance upon conversion of the Existing Convertible
Notes; and (b) 100,000,000 shares of Preferred Stock, par value $.01 per share,
of which 446,884 shares will be issued and outstanding. All such authorized
Capital Stock has been duly and validly authorized, and all such outstanding
shares are, and all such shares to be issued will be, duly and validly issued
and outstanding, and are, or upon issuance will be, fully paid and
non-assessable. Neither the Company nor any of its Subsidiaries (x) has
outstanding any stock or securities convertible into or exchangeable for any
shares of its Capital Stock, or any rights (preemptive or otherwise) or warrants
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any of its Capital
Stock, other than, with respect to the Company, the Existing Warrants, the
Existing Convertible Notes and options and warrants outstanding on the date
hereof or options or similar rights granted subsequent to the date hereof
pursuant to the Company's stock option plans in effect as the date hereof, or
(y) is subject to any obligation (contingent or
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<PAGE> 22
otherwise) to repurchase or otherwise acquire any shares of its Capital Stock or
any convertible securities, rights or warrants, or options of the type described
in the foregoing subclause (x), other than, with respect to Technocom, the
Technocom Put Agreements. The Company is not a party to, and after due inquiry,
has no knowledge of, any agreement restricting the transfer of any shares of its
Capital Stock.
5.6. SHARE PURCHASE AGREEMENTS.
The Company has furnished you and your special counsel with complete
and correct copies of the Share Purchase Agreements (including the Exhibits and
Schedules thereto). The Company has the requisite legal right, power and
authority to enter into the Share Purchase Agreements and to carry out the
transactions contemplated thereby. The Company has, by all necessary corporate
action (all action of shareholders, if any, being required therefor having been
duly taken), duly authorized the execution and delivery of the Share Purchase
Agreements and the performance of its obligations thereunder. The Company shall
have, on or prior to the Closing Date, duly performed and complied with all
material agreements and conditions contained in the Share Purchase Agreements
which are required to be performed and complied with by it thereunder other than
payment of the purchase price for the Technocom Shares. Each Share Purchase
Agreement constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms. Each Share
Purchase Agreement is in full force and effect without any known default
existing thereunder, and neither Share Purchase Agreement has been amended or
modified, and no material term or provision thereof has been waived, except in
accordance with the terms thereof. To the best knowledge of Holdings and the
Company, each of the Selling Shareholders has duly performed and complied with
all material agreements and conditions contained in the Share Purchase Agreement
to which it is a party required to be performed or complied with by it
thereunder on or prior to the date hereof.
5.7. CONSUMMATION OF ACQUISITION.
Concurrently with the Closing on the Closing Date, the Acquisition
will be duly consummated in accordance with the terms of the Share Purchase
Agreements and in compliance in all material respects with all applicable laws,
ordinances, rules and regulations of any Governmental Authority, and the Company
will become the owner, beneficially and of record, of the Technocom Shares, free
and clear of any Lien other than, with respect to the Pledged Shares, the Lien
of the Pledge Agreement and the Share Mortgage, and with respect to the other
Technocom Shares, the Lien of the Existing Senior Note Indenture and the
Existing Senior Note Collateral Documents.
5.8. FINANCIAL STATEMENTS.
The Company has delivered to each Lender copies of the financial
statements of the Company and its Subsidiaries as items nos. 1 through 7 listed
on SCHEDULE
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III. All of said financial statements (including in each case the related
schedules and notes) are true, complete and correct in all material respects and
fairly present in all material respects the consolidated financial position of
the Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with
Canadian GAAP or GAAP, as applicable, consistently applied throughout the
periods involved except as set forth in the notes thereto (except for, in the
case of any interim financial statements, to normal year-end adjustments and the
absence of footnotes).
5.9. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of the Share
Purchase Agreements, this Agreement, the Warrant Agreement, the Registration
Agreement, the Security Documents, the Notes and the Warrants will not (i)
contravene, result in any breach of, or constitute a default under, or result in
the creation of any Lien (other than Liens in favor of the Trustee pursuant to
the Pledge Agreement and the Security Agreement) in respect of any Property of
the Company or any Subsidiary under the corporate charter or bylaws of the
Company or any Subsidiary or any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, or other agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective Property is bound or affected, (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority applicable to the Company or any Subsidiary or (iii)
violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
5.10. GOVERNMENTAL AUTHORIZATIONS, ETC.
No Approval by, from or with any Governmental Authority is required
in connection with the execution, delivery or performance by the Company of the
Share Purchase Agreement, this Agreement, the Warrant Agreement, the
Registration Agreement, the Security Documents, the Notes or the Warrants, other
than filings required in connection with the establishment and perfection of the
security interests intended to be created pursuant to the Security Documents.
5.11. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any Property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
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(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.12. TAXES.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their Property, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not individually
or in the aggregate Material or (ii) the amount, applicability or validity of
which is currently being contested in good faith by appropriate proceedings and
with respect to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Company knows of no
basis for any other tax or assessment that could reasonably be expected to have
a Material Adverse Effect. The charges, accruals and reserves on the books of
the Company and its Subsidiaries in respect of federal, state or other taxes for
all fiscal periods are adequate.
5.13. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective Property that individually or in the aggregate are Material,
including all such Property reflected in the most recent audited balance sheet
referred to in SECTION 5.8 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
SECTION 9.12 of this Agreement. All leases that individually or in the aggregate
are Material are valid and subsisting and are in full force and effect in all
material respects.
5.14. LICENSES, PERMITS, ETC.
(a) The Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others.
(b) To the best knowledge of the Company, no product of the
Company or its Subsidiaries infringes in any material respect any license,
permit, franchise, authorization, patent, copyright, service mark, trademark,
trade name or other right owned by any other Person.
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(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by the Company or any of its Subsidiaries.
5.15. COMPLIANCE WITH ERISA.
(a) Except to the extent that any such event or events, considered
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect:
(i) No Termination Event has occurred, and no event or condition
has occurred or exists as a result of which any Termination Event could
reasonably be expected to occur, with respect to any Plan. No accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of
the Code), whether or not waived, has occurred with respect to any Plan.
The present value of all accrued benefits under each Plan (based on those
assumptions used to fund such Plan, which assumptions are reasonable) did
not, as of the most recent valuation date, which for any such Plan was not
earlier than twelve months prior to the date as of which this
representation is made, exceed the then current value of the assets of
such Plan allocable to such benefits.
(ii) No Company Group Member has incurred, or is reasonably
expected to incur, any withdrawal liability to any Multiemployer Plan. No
Company Group Member has received any notification that any Multiemployer
Plan is in reorganization (as defined in Section 4241 of ERISA), is
insolvent (as defined in Section 4245 of ERISA) or has been terminated,
within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or insolvent or to be
terminated.
(iii) No prohibited transaction (within the meaning of Section 406
of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred which has subjected or could subject any
Company Group Member to any liability under Section 406, 409, 502(i) or
502(l) of ERISA or Section 4975 of the Code, or under any agreement or
other instrument pursuant to which such Company Group Member has agreed or
is required to indemnify any Person against any such liability. No Company
Group Member has incurred, or is reasonably expected to incur, any
liability to the PBGC (other than for insurance premiums, which have been
paid when due).
(iv) No Company Group Member has failed to make full payment on or
before the due date thereof of any amount which such Company Group Member
is or was required under the terms of any Plan to have paid as
contributions to such Plan as of the date hereof.
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(v) No Lien imposed under the Code or ERISA on the assets of any
Company Group Member exists or is reasonably likely to arise on account of
any Plan.
(vi) No welfare plan (as defined in Section 3(1) of ERISA and
subject thereto) maintained by any Company Group Member provides medical
or death benefits with respect to current or former employees beyond their
termination of employment (other than coverage mandated by law). No such
plan to which Sections 601-609 of ERISA and Section 4980B of the Code
apply has been administered other than in compliance with such sections.
(b) Neither the execution and delivery of this Agreement nor the
issuance of the Notes as herein contemplated will involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975 of the Code. The
representation by the Company in the preceding sentence is made in reliance upon
and subject to the accuracy of your representation in SECTION 6.2.
(c) Each pension plan maintained by the Company or any Subsidiary
which is not subject to ERISA complies in all material respects with all
statutes and governmental rules and regulations applicable to it, and the
Company and each Subsidiary has satisfied their respective funding obligations
as required by applicable law for all such plans, except to the extent any
non-compliance therewith or non satisfaction thereof could not, considered
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.16. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or the Warrants or any similar securities for sale to, or solicited any
offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any Person other than you, the Other Lenders and not more
than 10 other Institutional Investors, each of which has been offered the Notes
and the Warrants at a private sale for investment. Neither the Company nor
anyone acting on its behalf has taken, or will take, any action that would
subject the issuance or delivery of the Notes or the Warrants to the
registration requirements of Section 5 of the Securities Act.
5.17. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the Series A Revolving Credit
Loans made on the Closing Date to the purchase of 28 of the ordinary shares of
Technocom and will apply the proceeds of the Series B Revolving Credit Loans
made on the Closing Date for its general corporate purposes, provided that in no
event shall the Company apply all or any portion of the proceeds of the Series B
Revolving Credit Loans
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to the purchase of the Technocom Shares. No part of the proceeds from the
Revolving Credit Loans made hereunder will be used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12 CFR
207), or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of said Board (12 CFR 224) or to involve any broker or dealer in a violation
of Regulation T of said Board (12 CFR 220). Margin stock does not constitute
more than 5% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 5% of the value of such assets. As used in this
Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have
the meanings assigned to them in said Regulation G.
5.18. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) SCHEDULE IV sets forth a complete and correct list of all
outstanding indebtedness for money borrowed and guarantees of the Company and
its Subsidiaries as of the date hereof and as of the Closing Date, identifying
the obligor and setting forth the amount, interest rate, maturity date and a
brief description of any security therefor. Neither the Company nor any
Subsidiary is in default and no waiver of default is currently in effect in the
payment of any principal or interest on any such indebtedness for money borrowed
or guarantee, and except where the existence of such event or condition could
not reasonably be expected to have a Material Adverse Effect, no event or
condition exists with respect to any such indebtedness for money borrowed or
guarantees that would permit (or that with notice or the lapse of time, or both,
would permit) one or more Persons to cause such indebtedness for money borrowed
or guarantees to become due and payable before its stated maturity or before its
regularly scheduled dates of payment.
(b) Neither the Company nor any Subsidiary has agreed or consented
to cause or permit in the future (upon the happening of a contingency or
otherwise) any of its Property, whether now owned or hereafter acquired, to be
subject to a Lien not permitted by SECTION 9.12.
5.19. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the issuance of the Notes by the Company hereunder nor its
use of the proceeds of the Revolving Credit Loans will violate the Trading with
the Enemy Act, as amended, or any of the foreign assets control regulations of
the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating thereto.
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5.20. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation
under the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.21. EXISTING SENIOR NOTE INDENTURE AND EXISTING CONVERTIBLE NOTE INDENTURE.
The Company has delivered to you and your special counsel true and
correct copies of the Existing Senior Note Indenture and the Existing
Convertible Note Indenture and all amendments to each thereof, respectively.
There exist no events of default and no material defaults under the Existing
Senior Note Indenture or the Existing Convertible Note Indenture nor any basis
under the Existing Senior Note Indenture or the Existing Convertible Note
Indenture for the exercise by any holders of the Existing Senior Notes or the
Existing Convertible Notes of any rights of acceleration, cancellation or
rescission.
5.22. TECHNOCOM ORGANIZATIONAL DOCUMENTS, ETC.
The Company has delivered to you and your special counsel true and
correct copies of (i) the Memorandum of Association and Articles of Association
and other constitutive documents of Technocom and (ii) all agreements with
respect to the Technocom Capital Stock, including the Technocom Shareholder
Agreement and all amendments thereto and the Technocom Put Agreements and all
amendments thereto. The pledge of the Pledged Shares pursuant to the Pledge
Agreement and the pledge and transfer of the Pledged Share pursuant to the Share
Mortgage and the Share Transfer Form, and any transfer by the Trustee or the
Collateral Agent of the Pledged Shares in connection with the exercise of
remedies under the Pledge Agreement or the Share Mortgage, will not contravene,
result in any breach of, or constitute a default under, the Memorandum of
Association and Articles of Association or other constitutive documents of
Technocom or any other agreement to which Technocom is a party or by which
Technocom or any of its Capital Stock may be bound.
5.23. CHIEF EXECUTIVE OFFICE.
The Company's chief executive office on the date hereof is located
at the address set forth at the beginning of this Agreement.
6. REPRESENTATIONS OF THE LENDER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are acquiring the Notes and the Warrants
being acquired by you for your own account or for one or more separate accounts
maintained by
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you or for the account of any of your affiliates or of one or more pension or
trust funds for investment and not with a view to the distribution thereof,
provided that the disposition of your or their Property shall at all times be
within your or their control. You understand that the Notes and the Warrants and
the Warrant Shares have not been registered under the Securities Act or any
state securities laws and may be resold only if registered pursuant to the
provisions of the Securities Act and such state securities laws or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to and will not register the Notes or the Warrants or,
except as contemplated by the Registration Agreement, the Warrant Shares.
6.2. SOURCE OF FUNDS.
(a) You represent to the Company that (i) the funds to be used by
you to make the Revolving Credit Loans to be made by you on the Closing Date
constitute assets of your insurance company general account (as defined in
Section V(e) of Prohibited Transaction Class Exemption ("PTCE") 95-60) and (ii)
no employee benefit plan or employee benefit plans maintained by a single
employer (including an "affiliate" thereof, as defined in Section V(a) of PTCE
95-60) or employee organization hold an interest or interests either as
contractholders or as the beneficial owners of contracts in such general
account, the reserves and liabilities for which exceed 10% of the sum of all
reserves and liabilities of such general account plus the surplus of such
Lender, such reserves and liabilities and such surplus in each case being
calculated in accordance with the applicable provisions of PTCE 95-60.
(b) As used in this Section, the term "employee benefit plan"
shall have the meaning assigned to such term in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements -- within 45 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of operations, shareholders'
equity and changes in financial position of the Company and its
Subsidiaries for
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such quarter and (in the case of the second and third quarters) for
the portion of the fiscal year ending with such quarter,
setting forth in comparative form the figures for the corresponding
periods in the previous fiscal year, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and certified by a
Senior Financial Officer as fairly presenting, in all material respects,
the financial position of the companies being reported on and their
results of operations and cash flows, except for the absence of footnotes
and changes resulting from year-end adjustments, provided that delivery
within the time period specified above of the Company's Quarterly Report
on Form 10-Q prepared in compliance with the requirements therefor and
filed with the Commission shall be deemed to satisfy the requirements of
this SECTION 7.1(a);
(b) Annual Statements -- within 90 days after the end of each
fiscal year of the Company, duplicate copies of
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year, and
(ii) consolidated statements of operations, shareholders'
equity and changes in financial position of the Company and its
Subsidiaries for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, prepared in accordance with GAAP, and accompanied
(A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all material
respects, the financial position of the companies being reported
upon and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion in the
circumstances, and
(B) a certificate of such accountants stating that in making
the examination necessary for certification of such financial
statements pursuant to the preceding subclause (A) nothing has come
to their attention which would lead them to believe that the Company
or any of its Restricted Subsidiaries has violated any provisions of
SECTIONS 9.3, 9.7, 9.8, 9.9, 9.10 OR 9.15, 10.1 OR 10.2 of this
Agreement or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to
24
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any Person for any failure to obtain knowledge of any such
violation, and it being further understood that such statement may
not be provided to the extent contrary to the then current
recommendations of the accountants' governing body;
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Commission, together with the
accountant's certificate described in subclause (B) above, shall be deemed
to satisfy the requirements of this SECTION 7.1(b);
(c) Audit Reports, etc. -- promptly (and in any event within five
Business Days) after receipt thereof, copies of all management letters and
reports submitted to the Company or any of its Subsidiaries by independent
certified public accountants in connection with any annual, interim or
special audit of the Company or any Subsidiary made by such accountants;
(d) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary to public securities
holders generally, and (ii) each regular or periodic report, each
registration statement (without exhibits except as expressly requested by
such holder), and each prospectus and all amendments thereto filed by the
Company or any Subsidiary with the Commission and of all press releases
and other statements made available generally by the Company or any
Subsidiary to the public concerning developments that are Material;
(e) Notice of Default or Event of Default -- immediately (and in
any event within 2 Business Days) after a Responsible Officer becoming
aware of the existence of any Default or Event of Default or that any
Person has given any notice or taken any action with respect to a claimed
Default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
SECTION 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(f) ERISA Matters -- promptly, and in any event within five
Business Days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or any Company Group Member proposes to
take with respect thereto:
(i) the occurrence of any Termination Event; or
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(ii) receipt with respect to any Multiemployer Plan of notice
as prescribed in ERISA of any withdrawal liability assessed against
any Company Group Member or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within
the meaning of Title IV of ERISA); or
(iii) the occurrence of a prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) for
which a statutory or administrative exemption is not available or a
breach of fiduciary responsibility in connection with which any
Company Group Member could reasonably be subject to any material
liability under Section 406, 409, 502(i) or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which such Company Group Member has agreed or is
required to indemnify any Person against any such liability; or
(iv) a material adverse change in the funding status of any
Plan;
(g) Notices with respect to Existing Senior Note Indenture and
Existing Convertible Note Indenture -- promptly upon the delivery thereof
to the holders of the Existing Senior Notes and the Existing Convertible
Notes, respectively, copies of all notices delivered by the Company to
such holders; and promptly upon the execution and delivery thereof, true,
complete and correct copies of all amendments and modifications to and
waivers under the Existing Senior Note Indenture and the Existing
Convertible Note Indenture, respectively;
(h) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any federal, state or foreign Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect; and
(i) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations, affairs,
financial condition, assets or Property of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to SECTION 7.1(a) or SECTION 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer containing a statement that such
officer has reviewed the relevant terms
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hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Company and its Restricted
Subsidiaries from the beginning of the quarterly or annual period covered by the
statements then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Company shall have taken or proposes to
take with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists,
at the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Wholly-Owned Restricted Subsidiaries and, subject to the terms of any
agreements with other shareholders thereof, its other Restricted
Subsidiaries, with the Company's officers, and its independent public
accountants, and to visit the other offices and Property of the Company
and each Restricted Subsidiary, all at such reasonable times during normal
business hours and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at
the expense of the Company, to visit and inspect any of the offices or
Property of the Company or any Restricted Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company
and its Restricted Subsidiaries), all at such times and as often as may be
requested.
8. SERIES A AND SERIES B REVOLVING CREDIT FACILITIES.
8.1. REVOLVING CREDIT COMMITMENTS AND MAKING OF REVOLVING CREDIT LOANS.
(a) Subject to the terms and conditions hereof, you and the Other
Lenders hereby establish for the benefit of the Company a revolving credit
facility pursuant to which, during the Series A Availability Period, the
Company may borrow (and repay and reborrow) an aggregate principal amount
at any one time outstanding not in excess of the Total Series A Commitment
as in effect from time to time. At any time and from time to time during
the Series A Availability Period, subject to the terms, provisions and
limitations hereof, the Company may borrow (and repay and reborrow) from
each holder
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of Series A Notes an aggregate principal amount at any one time
outstanding not in excess of such holder's Commitment Percentage of the
Total Series A Commitment (each such holder's obligation to lend such
amount being hereinafter referred to as such holder's "SERIES A
COMMITMENT" and such obligations of all such holders being hereinafter
collectively referred to as the "SERIES A COMMITMENTS"). All amounts
outstanding under the revolving credit facility established under this
SECTION 8.1(a) shall become due and payable, and the Series A Commitment
of each holder of Series A Notes shall automatically and permanently
terminate, on the Series A Maturity Date. The obligations of each holder
of Series A Notes under this SECTION 8.1(a) are joint, and not several.
Each such borrowing by the Company under this SECTION 8.1(a) (each, a
"SERIES A REVOLVING CREDIT LOAN" and collectively the "SERIES A REVOLVING
CREDIT LOANS") shall be made pro rata from the holders of the Series A
Notes in accordance with their respective Commitment Percentages of the
Total Series A Commitment. The Series A Revolving Credit Loans made by
each Lender shall be evidenced by a Series A Note, duly executed by the
Company, dated the Closing Date, and registered in the name of such Lender
or its nominee in a principal amount equal to such Lender's Series A
Commitment, and shall bear interest in accordance with the terms
applicable to such Series A Note as set forth therein and in clause (a) of
SECTION 1.1.
(b) Subject to the terms and conditions hereof, you and the Other
Lenders hereby establish for the benefit of the Company a revolving credit
facility pursuant to which, during the Series B Availability Period, the Company
may borrow (and repay and reborrow) an aggregate principal amount at any one
time outstanding not in excess of the Total Series B Commitment as in effect
from time to time. At any time and from time to time during the Series B
Availability Period, subject to the terms, provisions and limitations hereof,
the Company may borrow (and repay and reborrow) from each holder of Series B
Notes an aggregate principal amount at any one time outstanding not in excess of
such holder's Commitment Percentage of the Total Series B Commitment (each such
holder's obligation to lend such amount being hereinafter referred to as such
holder's "SERIES B COMMITMENT" and such obligations of all such holders being
hereinafter collectively referred to as the "SERIES B COMMITMENTS"). All amounts
outstanding under the revolving credit facility established under this SECTION
8.1(b) shall become due and payable, and the Series B Commitment of each holder
of Series B Notes shall automatically and permanently terminate, on the Series B
Maturity Date. The obligations of each holder of Series B Notes under this
SECTION 8.1(b) are joint, and not several. Each such borrowing by the Company
under this SECTION 8.1(b) (each, a "SERIES B REVOLVING CREDIT LOAN" and
collectively the "SERIES B REVOLVING CREDIT LOANS") shall be made pro rata from
the holders of the Series B Notes in accordance with their respective Commitment
Percentages of the Total Series B Commitment. The Series B Revolving Credit
Loans made by each Lender shall be evidenced by a Series B Note, duly executed
by the Company, dated the Closing Date, and registered in the name of such
Lender or its nominee in a principal amount equal to such Lender's Series B
Commitment, and shall bear interest in accordance with the terms applicable to
such Series B Note as set forth therein and in clause (b) of SECTION 1.1.
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(c) Each Series of Revolving Credit Loans shall be made in such
amount (in an integral amount of $100,000 and a minimum of $300,000 or such
lesser amount as may be equal to the remaining amount available under the Total
Series A Commitment or the Total Series B Commitment, as applicable) and on such
date as the Company shall specify in a notice substantially in the form of the
Officer's Certificate set forth in EXHIBIT I delivered to each holder of Notes
in accordance with the provisions of SECTION 19 not less than two (2) nor more
than ten (10) Business Days prior to the date so specified; provided however
that, notwithstanding any provision of this Agreement to the contrary, you shall
be under no obligation to make any Revolving Credit Loan of either Series on any
day:
(i) to the extent that after giving effect to such Revolving Credit Loan
of such Series and the other Revolving Credit Loans of such Series
requested concurrently therewith, outstanding Revolving Credit Loans
of such Series shall exceed the Total Commitment of such Series on
such day;
(ii) if, at the time thereof or after giving effect to such Revolving
Credit Loan and the other Revolving Credit Loans requested
concurrently therewith, there shall exist a Default or Event of
Default or there shall have occurred any event or circumstance
having a Material Adverse Effect; or
(iii) if in the calendar month in which such Revolving Credit Loan is to
be made, you shall have previously made two Revolving Credit Loans.
Each such notice shall be irrevocable and binding on the Company.
(d) The Revolving Credit Loans shall be made by transfer of
immediately available funds to the Company's account specified in SECTION 3.
8.2. OPTIONAL REPAYMENTS.
At any time or from time to time after the Closing Date, the Company
may, at its option, upon notice as set forth in SECTION 8.5, repay without
premium all or any part (in any integral multiple of $100,000 and a minimum of
$300,000 or such lesser amount as shall then be outstanding) of the Revolving
Credit Loans then outstanding, provided that, until the Series B Revolving
Credit Loans have been paid in full (and the Series B Commitments of all holders
of Series B Notes have been terminated), all optional repayments of Revolving
Credit Loans shall be applied, first, to the repayment of outstanding Series B
Revolving Credit Loans, and second, after all Series B Revolving Credit Loans
have been paid in full, to the repayment of outstanding Series A Revolving
Credit Loans.
8.3. OPTIONAL AND MANDATORY REDUCTION AND TERMINATION OF COMMITMENTS.
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(a) The Series A Commitments shall automatically terminate on the
last day of the Series A Availability Period. The Series B Commitments shall
automatically terminate on the last day of the Series B Availability Period.
(b) On July 31, 1998 and on the last day of each month thereafter,
the Commitments shall be permanently reduced by $1,000,000, provided that until
the Series B Commitments of all holders of Series B Notes shall have been
reduced to zero and terminated (and all Series B Revolving Credit Loans shall
have been paid in full), any such mandatory reduction of Commitments shall be
allocated, first, to the reduction of Series B Commitments, and second, after
the Series B Commitments of all holders of Series B Notes shall have been
reduced to zero and terminated (and all Series B Revolving Credit Loans have
been paid in full), to the reduction of Series A Commitments.
(c) Subject to the final sentence of this SECTION 8.3(c), upon at
least three Business Days' prior notice (which shall be irrevocable) to the
holders of the Notes, the Company may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Commitments of
either Series of Revolving Credit Loans ratably among the holders of the Notes
of such Series. Each such partial reduction of the Commitments of either Series
of Revolving Credit Loans shall be in integral multiples of $100,000 and a
minimum of $300,000 or such lesser amount as shall then be outstanding. Until
the Series B Commitments of all holders of Series B Notes shall have been
reduced to zero and terminated (and all Series B Revolving Credit Loans shall
have been paid in full), any optional reduction of Commitments made pursuant to
this SECTION 8.3(c) shall be allocated, first, to the reduction of Series B
Commitments, and second, after the Series B Commitments of all holders of Series
B Notes shall have been reduced to zero and terminated (and all Series B
Revolving Credit Loans have been paid in full), to the reduction of Series A
Commitments.
(d) The Company shall, within 15 days after the consummation of an
Asset Sale the subject of which is assets which do not constitute Existing
Senior Notes Collateral, Telecommunication Assets subject to a Telecommunication
Asset Lease or Existing Convertible Note Collateral, give notice of such Asset
Sale to the holders of the Notes, identifying the Net Cash Proceeds from such
Asset Sale. On the thirtieth (30th) day following the consummation of such Asset
Sale, the Commitments shall be permanently reduced in an amount equal to the Net
Cash Proceeds from such Asset Sale, such reduction of Commitments to be
allocated, first, to the reduction of Series B Commitments, and second, after
the Series B Commitments of all holders of Series B Notes shall have been
reduced to zero and terminated (and all Series B Revolving Credit Loans have
been paid in full), to the reduction of Series A Commitments. If the amount of
such required reduction in the Commitments of either Series exceeds the unused
portion of such Commitments at such time, such excess shall be paid by the
Company in repayment of Revolving Credit Loans of such Series in accordance with
SECTION 8.4.
(e) In the event that the Company shall not have received, on or
prior to May 31, 1998, net cash proceeds aggregating at least $20,000,000 from
an Equity
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Issuance, then on the fifteenth day after the end of each month, commencing with
the month ending July 31, 1998, (i) the Company shall deliver to the holders of
the Notes an Officers' Certificate setting forth (x) a statement of the amount
of cash on hand of the Company as of the end of such month, after deducting
therefrom the Required Reserves (as defined below) applicable to such month (the
"AVAILABLE CASH") together with (y) a reasonably detailed calculation of the
amount of such Available Cash that either has been applied by the Company since
the end of such month or which the Company reasonably anticipates will be
required to be applied by it during the remaining portion of the then-current
month to the payment of operating expenses, taxes (or required reserves
therefor) or interest or required principal payments in respect of the
Indebtedness for borrowed money of the Company, provided such Indebtedness for
borrowed money constitutes the Existing Indebtness (the aggregate amount so
applied or required to be applied during the then-current month being referred
to herein as the "REQUIRED DEDUCTIONS"), and (ii) the Commitments shall be
permanently reduced in an amount equal to the excess of the Available Cash set
forth in such Officers' Certificate over the Required Deductions set forth in
such Officers' Certificate, such reduction of Commitments to be allocated,
first, to the reduction of Series B Commitments, and second, after the Series B
Commitments of all holders of Series B Notes shall have been reduced to zero and
terminated (and all Series B Revolving Credit Loans have been paid in full), to
the reduction of Series A Commitments. If the amount of such required reduction
in the Commitments of either Series exceeds the unused portion of such
Commitments at such time, such excess shall be paid by the Company in repayment
of Revolving Credit Loans of such Series in accordance with SECTION 8.4. The
"REQUIRED RESERVES" applicable to any month shall mean (i) with respect to the
month ending July 31, 1998, $11,000,000, and (ii) with respect to each month
thereafter, the Required Reserves for the immediately preceding month minus
$1,000,000.
(f) The Company shall give the holders of the Notes at least 3
Business Days' prior written notice of the receipt by the Company of net cash
proceeds from an Equity Issuance. On the date of receipt by the Company of net
cash proceeds from an Equity Issuance, the Commitments shall be permanently
reduced by an amount equal to the amount of such net cash proceeds. If the
amount of such required reduction in the Commitments of either Series exceeds
the unused portion of such Commitments at such time, such excess shall be paid
by the Company in repayment of Revolving Credit Loans of such Series in
accordance with SECTION 8.4, such reduction of Commitments to be allocated,
first, to the reduction of Series B Commitments, and second, after the Series B
Commitments of all holders of Series B Notes shall have been reduced to zero and
terminated (and all Series B Revolving Credit Loans have been paid in full), to
the reduction of Series A Commitments. If the amount of such required reduction
in the Commitments of either Series exceeds the unused portion of such
Commitments at such time, such excess shall be paid by the Company in prepayment
of the Revolving Credit Loans of such Series in accordance with SECTION 8.4.
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(g) In the event that any holder of Notes shall have delivered a
Commitment Termination Election Notice to the Company in accordance with SECTION
9.8, then, on the Commitment Termination Date, such holder's Commitments shall
be permanently reduced to zero and terminated, and such holder's Revolving
Credit Loans shall be paid in full as provided in SECTION 9.8 and in accordance
with SECTION 8.4.
(h) In connection with any reduction or termination of any
Commitments of either Series pursuant to this SECTION 8.3, the Total Commitment
shall be reduced or terminated to the same extent and the Company shall pay to
each holder of Notes the Commitment Fees, if any, on the amount of the Total
Commitment so reduced or terminated which are accrued and unpaid to the date of
such reduction or termination, such payment to be made in accordance with the
provisions of SECTION 8.9.
8.4. MANDATORY REPAYMENTS.
On the date of any termination or reduction of the Commitments of
either Series pursuant to SECTION 8.3, the Company shall repay so much of the
outstanding Revolving Credit Loans of such Series as shall be necessary in order
to cause the aggregate principal amount of outstanding Revolving Credit Loans of
such Series not to exceed the Commitments of such Series after giving effect to
such termination or reduction.
8.5. NOTICE OF REPAYMENTS OR TERMINATION.
The Company will give each holder of Notes written notice of each
repayment under SECTION 8.2 and each optional termination or reduction of
Commitments under SECTION 8.3(c) not less than 3 Business Days nor more than 10
Business Days prior to the date fixed for such repayment or reduction or
termination. Each such notice shall specify (a) the date fixed for repayment or
reduction or termination, as applicable, and (b) in the case of any repayment,
(i) the aggregate principal amount of the Revolving Credit Loans being repaid on
such date and the principal amount of Revolving Credit Loans made by such holder
to be so repaid, (ii) the aggregate amount of the accrued interest to be paid on
the repayment date with respect to such principal amount being repaid and (iii)
the amount of such accrued interest to be paid to such holder in connection
therewith.
8.6. ALLOCATION OF REDUCTIONS IN COMMITMENTS AND REPAYMENTS AND REPAYMENTS.
In the case of each reduction in the Commitments of either Series
(other than pursuant to SECTION 8.3(g)) and the repayment of Revolving Credit
Loans of either Series, the principal amount of such reduction or repayment
shall be allocated among all the Notes of such Series at the time outstanding
based on the Commitment Percentage of each holder of Notes of such Series. No
reduction of Commitments or repayment of Revolving Credit Loans shall affect the
mandatory Commitment reductions required pursuant to SECTION 8.3(b), provided,
however that the Company may allocate any reduction of Commitments
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(and repayment of Revolving Credit Loans) pursuant to SECTION 8.3(c), (f) OR (g)
toward the Commitment reduction required by SECTION 8.3(b).
8.7. MATURITY; SURRENDER, ETC.
In the case of each repayment of Revolving Credit Loans pursuant to
this SECTION 8, the principal amount to be repaid shall mature and become due
and payable on the date fixed for such repayment, together with interest on such
principal amount accrued to such date and Additional Amounts, if any, payable
with respect thereto. From and after such date, unless the Company shall fail to
pay such principal amount when so due and payable, together with the interest,
as aforesaid, interest on such principal amount shall cease to accrue. If the
Revolving Credit Loans of either Series made by any holder of Notes shall have
been repaid in full and the Commitment of such holder to make Revolving Credit
Loans of such Series shall have terminated, the Note evidencing such Revolving
Credit Loans shall be surrendered to the Company and canceled and shall not be
reissued, and no Note shall be issued in lieu of any principal amount of such
Note or of any Note evidencing Revolving Credit Loans which shall have been
subject to permanent reduction.
8.8. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or repayment of the Notes in
accordance with the terms of this Agreement and the Notes. The Company will
promptly cancel all Notes acquired by it or any Affiliate pursuant to any
payment, repayment or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
8.9. COMMITMENT FEES.
The Company agrees to pay each Lender, on the last day of each month
commencing with November 30, 1997, a commitment fee on the average daily unused
amount of such Lender's Commitment Percentage of the Total Commitment, during
the month ending on (and including) such date, equal to 4.00% per annum. The
"unused amount" of a Lender's Commitment Percentage of the Total Commitment on
any date means the amount of such Lender's Commitment Percentage of the Total
Commitment on such date, minus the sum of the aggregate principal amount of such
Lender's outstanding Revolving Credit Loans on such date.
8.10. BOOKS AND RECORDS.
The holders of the Notes are hereby irrevocably authorized by the
Company to maintain records evidencing the dates and the amounts of the
Revolving Credit Loans and of each payment and repayment made by the Company
with respect thereto (whether
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in respect of the principal thereof and/or the interest or fees accrued thereon)
and the applicable rate or rates and amounts of interest accrued thereon and of
all other related transactions. In the absence of manifest error, such records
shall constitute final, binding and conclusive evidence of the same. No failure
on the part of any holder of the Notes to maintain any such records shall in any
way affect any Revolving Credit Loan made by such holder or the rights or
obligations of such holder or of the Company with respect thereto. Each holder
of the Notes shall, upon request (but not more frequently than once during any
calendar month), furnish to the Company a statement of the amounts and dates of
each Revolving Credit Loan made by such holder, the amount of and date on which
each payment and repayment was made in respect thereof and the amount (and the
applicable rate or rates) of interest accrued thereon. In the absence of
manifest error, such statement shall be deemed final, binding and conclusive
upon the Company of its contents unless the Company shall notify such holder in
writing of its objection to any portion of such statement within 45 days of the
date on which such statement was furnished to the Company.
8.11. ILLEGALITY.
Notwithstanding any other provision of this Agreement, if because of
the adoption of or any change in any law or regulation of any jurisdiction to
which you are subject, you shall no longer be permitted to make Revolving Credit
Loans hereunder or the making of such Revolving Credit Loans shall subject you
to any tax, penalty or liability to which you were not subject on the Closing
Date, your obligation to make Revolving Credit Loans hereunder shall, upon
notice to the Company, be suspended until such time as the circumstances causing
such suspension no longer exist.
9. COVENANTS.
The Company covenants that, so long as any of the Notes are
outstanding or your commitment to make Revolving Credit Loans shall not have
terminated:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective Property or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
9.2. BOOKS AND RECORDS.
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The Company will keep proper books of record and account in which
entries that are true and correct in all material respects will be made of all
its material business dealings and transactions in accordance with GAAP applied
on a consistent basis, and maintain a system of accounting established and
administered in accordance with GAAP, and set aside on its books from its
earnings for each fiscal year all proper reserves, accruals and provisions
which, in accordance with GAAP, should be set aside from such earnings in
connection with its business.
9.3. PAYMENT OF NOTES.
The Company shall promptly pay the principal of, interest (including
Additional Amounts, if any) on, Commitment Fees and any other amounts in respect
of, the Notes on the dates and in the manner provided in the Notes and in this
Agreement.
9.4. MAINTENANCE OF OFFICE.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Notes may be presented or surrendered for
payment, where Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the Notes and
this Agreement may be served. The Company shall give prompt written notice to
the holders of the Notes and the Trustee of the location, and any change in the
location, of such office or agency. Such office shall first be maintained at the
address set forth at the head of this Agreement.
9.5. CORPORATE EXISTENCE.
Subject to the provisions of SECTION 10 hereof, the Company shall do
or cause to be done all things necessary to preserve and keep in full force and
effect the corporate existence, rights (charter and statutory) and franchises of
the Company and each of its Restricted Subsidiaries; provided that the Company
and any such Restricted Subsidiary other than Technocom, a Leasing Company or
NWE Cyprus shall not be required to preserve the corporate existence of any such
Restricted Subsidiary other than Technocom, a Leasing Company or NWE Cyprus or
any such right or franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the holders of the Notes.
9.6. MAINTENANCE OF PROPERTY.
The Company shall cause all Property used in the conduct of its
business or the business of any of its Restricted Subsidiaries to be maintained
and kept in good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as, in the judgment of the
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Company, may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided
that nothing in this SECTION 9.6 shall prevent the Company from discontinuing
the operation or maintenance of any of such Property if such discontinuance is,
in the judgment of the Company, desirable in the conduct of its business or the
business of any of its Restricted Subsidiaries and not disadvantageous in any
material respect to the holders of the Notes.
9.7. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon the Company or any of its
Restricted Subsidiaries or upon the income, profits or Property of the Company
or any of its Restricted Subsidiaries and (b) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon the
Property of the Company or any of its Restricted Subsidiaries; provided that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings upon
stay of execution or the enforcement thereof and for which adequate reserves in
accordance with GAAP or other appropriate provision has been made.
9.8. COMMITMENT TERMINATION AND REPAYMENT AT THE OPTION OF HOLDERS UPON A
CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each holder of
Notes shall have the right to terminate its Commitments and require the Company
to prepay all outstanding Revolving Credit Loans made by such holder in full,
pursuant to an irrevocable and unconditional offer made by the Company described
in SECTION 9.8(b) hereof (the "COMMITMENT TERMINATION OFFER"), any such
repayment to be made in cash at a repayment amount (the "COMMITMENT TERMINATION
REPAYMENT AMOUNT") equal to 100% of the aggregate principal amount outstanding
of such Revolving Credit Loans on the Commitment Termination Date plus accrued
and unpaid interest, if any, and Additional Amounts, if any, and accrued and
unpaid Commitment Fees owing to such holder, if any, to the Commitment
Termination Date.
(b) Within 30 calendar days of the date of any Change of Control,
the Company shall send to each holder of Notes by first class mail, postage
prepaid, a notice prepared by the Company:
(i) stating that a Change of Control has occurred and a Commitment
Termination Offer is being made pursuant to this SECTION 9.8, and that,
with respect to each holder of Notes from whom the Company receives a
Commitment Termination Election Notice delivered pursuant to, and as such
term is defined in, SECTION 9.8(c) below, the Commitments of such holder
will be terminated, and the
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outstanding Revolving Credit Loans made by such holder will be prepaid, on
the Commitment Termination Date; and
(ii) setting forth the Commitment Termination Repayment Amount, and
the date on which the Commitments are to be terminated (and outstanding
Revolving Credit Loans are to be prepaid) pursuant to the Commitment
Termination Offer (the "COMMITMENT TERMINATION DATE"), which date shall be
a date occurring no earlier than 30 calendar days nor later than 40
calendar days subsequent to the date such notice is mailed.
(c) Within 20 calendar days following the receipt by any holder of
Notes of a Commitment Termination Offer, each such holder shall have the right
at its option, exercisable by the giving of notice to the Company (a "COMMITMENT
TERMINATION ELECTION NOTICE"), to elect to accept the Commitment Termination
Offer. On the Commitment Termination Date, the Commitments of each holder of
Notes from which the Company has received a Commitment Termination Election
Notice will be automatically terminated, and the Company will prepay all
outstanding Revolving Credit Loans made by such holder, such repayment to be
made at the Commitment Termination Repayment Amount.
9.9. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries, directly or indirectly to, consummate any Asset Sale,
unless:
(i) no Event of Default shall have occurred and be continuing or
shall occur as a consequence thereof;
(ii) the Company or such Restricted Subsidiary, as the case may be,
receives net consideration at the time of such Asset Sale at least equal
to the Fair Market Value (as evidenced by a Board Resolution delivered to
the holders of the Notes) of the Property or assets sold or otherwise
disposed of;
(iii) at least 75 percent of the consideration received in respect
of such Asset Sale by the Company or such Restricted Subsidiary, as the
case may be, for such Property or assets consists of Cash Proceeds; and
(iv) the Company or such Restricted Subsidiary, as the case may be,
uses the Net Cash Proceeds from such Asset Sale in the manner set forth in
SECTION 9.9(b) hereof.
To the extent that the assets which are the subject of any Asset
Sale constitute Existing Senior Note Collateral, all proceeds thereof shall, to
the extent permitted by law, be subject to a perfected Lien in favor of the
Existing Senior Note
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Trustee or a collateral agent for the benefit of the Existing Senior Note
Trustee and the equal and ratable benefit of the holders of the Existing Senior
Notes and for the benefit of the Existing Convertible Note Trustee and the equal
and ratable benefit of the holders of the Existing Convertible Notes, which Lien
shall have the same priority as the Lien on the Existing Senior Note Collateral
which was the subject of such Asset Sale, and all Net Cash Proceeds from such an
Asset Sale shall be deposited in the Company Existing Senior Note Escrow Account
or a Leasing Company Escrow Account, if applicable. To the extent that assets
which are the subject of any Asset Sale constitute Telecommunications Assets
subject to a Telecommunications Assets Lease which is Existing Senior Note
Collateral, all proceeds thereof shall, to the extent permitted by applicable
law, be subject to a perfected Lien in favor of the Existing Senior Note Trustee
or a collateral agent for the benefit of the Existing Senior Note Trustee and
for the equal and ratable benefit of the holders of the Existing Senior Notes
and for the benefit of the Existing Convertible Note Trustee and the equal and
ratable benefit of the holders of the Existing Convertible Notes, which Lien
shall have the same priority as the Lien on such Telecommunications Asset Leases
governing the Telecommunications Assets which were the subject of such Asset
Sale, and all Net Cash Proceeds from such an Asset Sale of Telecommunications
Assets must be deposited in the applicable Leasing Company Escrow Account. To
the extent that assets which are the subject of any Asset Sale constitute
Existing Convertible Note Collateral, all proceeds thereof shall, to the extent
permitted by applicable law, be subject to a perfected Lien in favor of the
Existing Convertible Note Trustee or a collateral agent for the benefit of the
Existing Convertible Note Trustee and the equal and ratable benefit of the
holders of Existing Convertible Notes and for the benefit of the Existing Senior
Note Trustee and the equal and ratable benefit of the holders of Existing Senior
Notes, which Lien shall have the same priority as the Lien on the Existing
Convertible Note Collateral which was the subject of such Asset Sale, and all
Net Cash Proceeds from such an Asset Sale of Existing Convertible Note
Collateral must be deposited in the Company Existing Convertible Note Escrow
Account, unless the Existing Convertible Notes are no longer outstanding and the
Existing Convertible Note Indenture has been satisfied and discharged, in which
case such Net Cash Proceeds shall be deposited in the Company Existing Senior
Note Escrow Account.
(b) To the extent that assets subject to an Asset Sale consist of
Collateral other than a Telecommunications Asset Lease or Telecommunications
Assets subject to a Telecommunications Asset Lease, the Company shall have the
option, within 365 days of such Asset Sale, to reinvest the Net Cash Proceeds
(or any portion thereof) from such Asset Sale in another asset or business in
the same or similar lines of business as the Company and its Restricted
Subsidiaries (the "REPLACEMENT ASSETS") (or enter into a binding agreement to
reinvest such Net Cash Proceeds (or any portion thereof) prior to the end of
such 365-day period, provided that such reinvestment is completed within 90 days
after the end of such 365-day period); provided that such Replacement Assets are
subject to a Lien in favor of the Existing Senior Note Trustee or a collateral
agent for the benefit of the Existing Senior Note Trustee and for the equal and
ratable benefit of the holders of the Existing Senior Notes and for the benefit
of the Existing Convertible Note Trustee and
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the equal and ratable benefit of holders of Existing Convertible Notes, which
Lien has the same priority as had the Lien on such Existing Senior Note
Collateral, which was the subject of such Asset Sale.
(i) To the extent that assets subject to an Asset Sale consist of
Existing Convertible Note Collateral, the Company shall have the option,
within 365 days of such Asset Sale, to reinvest the Net Cash Proceeds (or
any portion thereof) from such Asset Sale in Replacement Assets (or enter
into a binding agreement to reinvest such Net Cash Proceeds (or any
portion thereof) prior to the end of such 365-day period, provided that
such reinvestment is completed within 90 days after the end of such
365-day period); provided that such Replacement Assets are subject to a
Lien in favor of the Existing Convertible Note Trustee or a collateral
agent for the benefit of the Existing Convertible Note Trustee and for the
equal and ratable benefit of the Holders of Existing Convertible Notes and
for the benefit of the Existing Senior Note Trustee and the equal and
ratable benefit of holders of the Existing Senior Notes, which Lien has
the same priority as had the Lien on such Existing Convertible Note
Collateral, which was the subject of such Asset Sale.
(ii) To the extent that assets subject to an Asset Sale constitute
Telecommunications Assets subject to a Telecommunications Asset Lease, the
Company shall have the option, within 365 days of such Asset Sale, to
cause the applicable Leasing Company to reinvest the Net Cash Proceeds
from such Asset Sale (or any portion thereof) in Telecommunications Assets
to be leased pursuant to a new Telecommunications Asset Lease
("REPLACEMENT TELECOMMUNICATION ASSETS") (or enter into, or cause the
applicable Leasing Company to enter into, a binding agreement to reinvest
such Net Cash Proceeds (or any portion thereof) prior to the end of such
365-day period, provided that such reinvestment is completed within 90
days after the end of such 365-day period), and with respect to any
proceeds of insurance paid on account of the loss of or damage to any such
Telecommunications Assets, or compensation or other proceeds for any such
Telecommunications Assets taken by condemnation, eminent domain or similar
proceedings, such Net Cash Proceeds are applied as provided above or
applied to reimburse the applicable Leasing Company for expenditures made,
and costs incurred, to repair, rebuild, replace or restore the
Telecommunications Assets subject to such loss, damage or taking.
(iii) To the extent that assets subject to an Asset Sale do not
constitute Existing Senior Note Collateral, Telecommunications Assets
subject to a Telecommunications Asset Lease or Existing Convertible Note
Collateral, the Company shall within 30 days of such Asset Sale
permanently reduce the Commitments by an amount equal to such Net Cash
Proceeds (or remaining Net Cash Proceeds) pursuant to SECTION 8.3(d).
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9.10. LIMITATION ON INDEBTEDNESS.
(a) The Company will not, and will not permit its Restricted
Subsidiaries to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) and the Company will not issue any Disqualified Stock or
permit any of its Restricted Subsidiaries to issue any Disqualified Stock;
provided that the Company and its Restricted Subsidiaries other than the Leasing
Companies or NWE Cyprus may incur Indebtedness or issue Disqualified Stock if,
after giving effect to such issuance or incurrence on a pro forma basis, the
Indebtedness to Operating Cash Flow Ratio of the Company does not exceed 5.0 to
1.0.
(b) The provisions of SECTION 9.10(a) will not apply to:
(i) the incurrence by the Company and its Restricted Subsidiaries
other than the Leasing Companies or NWE Cyprus of Indebtedness under the
Revolving Credit Facilities (including this Agreement), provided that the
aggregate principal amount of Indebtedness at any time outstanding under
or in respect of such Revolving Credit Facilities (including without
limitation, the Revolving Credit Loans), together with any Indebtedness
then outstanding which was permitted to be incurred pursuant to clause (x)
below, shall not exceed $25,000,000;
(ii) the incurrence of the Existing Indebtedness;
(iii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness owing to any of its Restricted
Subsidiaries, provided that any such Indebtedness is junior and
subordinate to the Notes and the Guarantees, if applicable, and such
Indebtedness is held at all times by the Company or a Restricted
Subsidiary of the Company;
(iv) Indebtedness of any Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary of the Company, provided that such
intercompany Indebtedness is evidenced by an Intercompany Note or by a
Telecommunications Asset Lease;
(v) Indebtedness of a Restricted Subsidiary constituting a
sublease by the lessee of Telecommunications Assets subject to a
Telecommunications Asset Lease to a Restricted Subsidiary of such lessee;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries other than the Leasing Companies or NWE Cyprus of Interest
Hedging Obligations with respect to any floating rate Indebtedness that is
permitted by the covenant described in this SECTION 9.10(b);
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(vii) the incurrence by the Company of any Exchange Rate
Obligations, provided that such Exchange Rate Obligations were entered
into in connection with transactions in the ordinary course of business or
the incurrence of Indebtedness that is permitted by this SECTION 9.10(b);
(viii) [intentionally not used]
(ix) Indebtedness in respect of performance, surety or appeal bonds
provided by the Company in the ordinary course of business;
(x) Indebtedness of Restricted Subsidiaries other than the Leasing
Companies or NWE Cyprus in an aggregate principal amount not to exceed
$15,000,000 at any one time outstanding, provided that the aggregate
principal amount of all such Indebtedness at any time outstanding,
together with Indebtedness of Restricted Subsidiaries then outstanding
which was permitted to be incurred pursuant to clause (i) above, shall not
exceed $25,000,000;
(xi) International Vendor Indebtedness not to exceed an aggregate
principal amount of $40,000,000 at any one time outstanding, provided that
the Leasing Companies and NWE Cyprus may not incur any International
Vendor Indebtedness; and
(xii) the incurrence by the Company or any of its Restricted
Subsidiaries of Refinancing Indebtedness issued in exchange for, or the
proceeds of which are used to refinance, repurchase, replace, refund or
defease ("Refinance" and correlatively, "Refinanced" and "Refinancing")
Indebtedness permitted pursuant to clause (ii) of this SECTION 9.10(b),
provided that (A) the amount of such Refinancing Indebtedness shall not
exceed the principal amount of, premium, if any, and accrued interest (and
Additional Amounts and Special Interest (as such terms are defined in the
Existing Senior Note Indenture) on the Existing Senior Notes) on the
Indebtedness so Refinanced (or if such Indebtedness was issued with
original issue discount, the original issue price plus amortization of the
original issue discount at the time of the repayment of such Indebtedness)
plus the fees, expenses and costs of such Refinancing and reasonable
repayment premiums, if any, in connection therewith, (B) such Refinancing
Indebtedness shall have a Stated Maturity no earlier than the Indebtedness
being Refinanced, (C) such Refinancing Indebtedness shall have an Average
Life equal to or greater than the Average Life of the Indebtedness being
Refinanced, (D) if the Indebtedness being Refinanced is subordinated in
right of payment to the Notes or the Guarantees, as applicable, such
Refinancing Indebtedness shall be subordinated in right of payment to the
Notes or the Guarantees, as applicable, on terms at least as favorable to
the holders of Notes as those contained in the documentation governing the
Indebtedness being so Refinanced, and (E) no Restricted Subsidiary shall
incur Refinancing Indebtedness to Refinance
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Indebtedness of the Company or another Restricted Subsidiary.
9.11. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES.
(a) The Company will not permit any Restricted Subsidiary which is
not a Subsidiary Guarantor on the Closing Date to guarantee, directly or
indirectly, any Indebtedness of the Company ("GUARANTEED INDEBTEDNESS") unless
(i) such Restricted Subsidiary simultaneously executes and delivers a Joinder
Agreement pursuant to which such Restricted Subsidiary becomes a party to the
Subsidiary Guaranty and (ii) such Restricted Subsidiary waives and will not in
any manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Guarantee. If the Guaranteed Indebtedness is pari passu
with the Notes or its Guarantee, then the guarantee of such Guaranteed
Indebtedness shall be pari passu with or subordinated to such Guarantee; and if
the Guaranteed Indebtedness is subordinated to the Notes or its Guarantee, then
the guarantee of such Guaranteed Indebtedness shall be subordinated to such
Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes or such Guarantee.
(b) Notwithstanding the provisions of SECTION 9.11(a) hereof, any
Guarantee by a Restricted Subsidiary other than WTC, BCL or a future
Wholly-Owned Restricted Subsidiary of the Company shall provide by its terms
that it shall be automatically and unconditionally released and discharged upon
the release or discharge of the guarantee which resulted in the creation of such
Restricted Subsidiary's Guarantee, except a discharge or release by, or as a
result of, payment under such guarantee.
9.12. LIMITATION ON LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any Liens of any kind other than Permitted Liens on or with
respect to any of its Property or assets now owned or hereafter acquired, or any
interest therein or any income or profits therefrom, without effectively
providing that the Notes and/or the Guarantees, as applicable, shall be secured
equally and ratably with (and provided that the Notes and/or the Guarantees, as
applicable, shall be secured prior to any secured obligation that is
subordinated in right of payment to the Notes and/or the Guarantees, as
applicable) the obligations so secured for so long as such obligations are so
secured.
9.13. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into, assume, guarantee or
otherwise become liable with respect to any Sale and Leaseback Transaction,
unless (i) the Company or such Restricted
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Subsidiary, as the case may be, receives consideration at the time of such Sale
and Leaseback Transaction at least equal to the Fair Market Value (as evidenced
by a Board Resolution delivered to the holders of the Notes) of the Property or
assets subject to such transaction; (ii) the Attributable Indebtedness of the
Company or such Restricted Subsidiary with respect thereto is included as
Indebtedness and would be permitted by SECTION 9.10 hereof, and any Liens
granted thereby would be permitted by SECTION 9.12 hereof; and (iii) the Net
Cash Proceeds from such transaction are applied in accordance with SECTION 9.9
as if such proceeds resulted from an Asset Sale.
9.14. RESTRICTED PAYMENTS.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment
unless, at the time of and after giving effect to such proposed Restricted
Payment (i) no Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; (ii) after giving effect, on a pro
forma basis, to such Restricted Payment and the incurrence of any Indebtedness
the net proceeds of which are used to finance such Restricted Payment, the
Company could incur at least $1.00 of additional Indebtedness pursuant to
SECTION 9.10(a) hereof; and (iii) after giving effect to such Restricted Payment
on a pro forma basis, the aggregate amount expended or declared for all
Restricted Payments after the Issue Date does not exceed the sum of (A) 50% of
the Consolidated Net Income of the Company (or, if Consolidated Net Income shall
be deficit, minus 100% of such deficit) for the period (taken as one accounting
period) beginning on the last day of the fiscal quarter immediately preceding
the Issue Date and ending on the last day of the fiscal quarter immediately
preceding the date of such Restricted Payment, plus (B) 100% of the aggregate
Net Cash Proceeds received by the Company subsequent to the Issue Date from the
issuance or sale (other than to a Subsidiary) of shares of its Qualified Stock,
including Qualified Stock issued upon the exercise of options, warrants or
rights to purchase Qualified Stock, plus (C) 100% of the amount of any
Indebtedness of the Company or any of its Restricted Subsidiaries (as expressed
on the face of a balance sheet in accordance with GAAP), or the carrying value
of any Disqualified Stock, which has been converted into, exchanged for or
satisfied by the issuance of shares of Qualified Stock of the Company subsequent
to the Issue Date, less the amount of any cash, or the value of any other
Property distributed by the Company or its Restricted Subsidiaries upon such
conversion, exchange or satisfaction, plus (D) 100% of the net reduction in
Investments, subsequent to the Issue Date, in any Person, resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of Property (but only to the extent such interest,
dividends, repayments or other transfers of Property are not included in the
calculation of Consolidated Net Income), in each case to the Company or any
Restricted Subsidiary from any Person (including, without limitation, from
Unrestricted Subsidiaries) or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments" set forth in SECTION 13.1 hereof), not to exceed in the case of
any Person the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Person
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and in each such case which was treated as a Restricted Payment, minus (E) 100%
of the amount of Investments made or dividends paid pursuant to clauses (v),
(vi) and (vii) of SECTION 9.14(b) below subsequent to the Issue Date.
(b) The provisions of SECTION 9.14(a) shall not prevent the
Company from
(i) paying a dividend on its Capital Stock at any time within 60
days after the declaration thereof if, on the declaration date, the
Company could have paid such dividend in compliance with the provisions of
SECTION 9.14(a) hereof;
(ii) retiring (A) any Capital Stock of the Company or any
Restricted Subsidiary of the Company or (B) Indebtedness of the Company
that is subordinate to the Notes or (C) Indebtedness of a Restricted
Subsidiary of the Company, in exchange for, or out of the proceeds of the
substantially concurrent sale of, Qualified Stock of the Company;
(iii) so long as no Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof, retiring any
Indebtedness of the Company subordinated in right of payment to the Notes
in exchange for, or out of the proceeds of, the substantially concurrent
incurrence of Indebtedness of the Company (other than Indebtedness to a
Subsidiary of the Company), provided that such new Indebtedness (A) is
subordinated in right of payment to the Notes at least to the same extent
as, (B) has an Average Life at least as long as, and (C) has no scheduled
principal payments due in any amount earlier than, any equivalent amount
of principal under the Indebtedness so retired;
(iv) so long as no Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof, retiring any
Indebtedness of a Restricted Subsidiary of the Company in exchange for, or
out of the proceeds of, the substantially concurrent incurrence of
Indebtedness of the Company or any Restricted Subsidiary that is permitted
under SECTION 9.10 hereof and that (A) is not secured by any assets of the
Company or any Restricted Subsidiary to a greater extent than the retired
Indebtedness was so secured, (B) has an Average Life at least as long as
the retired Indebtedness and (C) is subordinated in right of payment to
the Notes or the Guarantees, as applicable, at least to the same extent as
the retired Indebtedness;
(v) so long as no Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof, making loans to
members of management of the Company as required pursuant to employment
agreements with such members, in an aggregate principal amount not to
exceed $500,000, provided that any repayment of such loans (but only to
the extent such payments
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are not included in the calculation of Consolidated Net Income of the
Company) shall reduce the amount of such Investments;
(vi) so long as no Default or Event of Default shall have occurred
and be continuing or shall occur as a consequence thereof, making
Investments in Qualified Joint Ventures in an aggregate amount not to
exceed $5,000,000, provided that any repayment of loans or advances,
return of capital or other transfer of Property (but only to the extent
such distributions are not included in the calculation of Consolidated Net
Income of the Company) shall reduce the amount of such Investments;
(vii) paying dividends to minority stockholders or partners of a
Restricted Subsidiary (other than to a Person who is otherwise an
Affiliate), provided that the Company or the Restricted Subsidiary that is
the stockholder or partner of such non-Wholly Owned Restricted Subsidiary
shall receive pro rata dividends at the same time and in the same form and
composition of consideration as the dividends paid to the minority
stockholders or partners; and
(viii) so long as no Default or Event of Default has occurred, (x)
the Company may redeem Existing Senior Notes pursuant to the terms of the
Existing Senior Note Indenture or repurchase Existing Senior Notes
pursuant to a "Change in Control Offer" (as defined in the Existing Senior
Note Indenture) or a "Asset Sale Offer" (as defined in the Existing Senior
Note Indenture) and (y) the Company may redeem Existing Convertible Notes
pursuant to the terms of the Existing Convertible Note Indenture or
repurchase Existing Convertible Notes pursuant to a "Change of Control
Offer" (as defined in the Existing Convertible Note Indenture), a
"Convertible Note Asset Sale Offer" (as defined in the Existing
Convertible Note Indenture) or a repurchase offer pursuant to Section 4.14
of the Existing Convertible Note Indenture.
(c) Not later than the date of making any Restricted Payment, any
Investment made pursuant to clause (vi) of SECTION 9.14(b), any dividend made
pursuant to clause (vii) of SECTION 9.14(b) and any redemption or repurchase
made pursuant to clause (viii) of SECTION 9.14(b), the Company shall deliver to
the holders of the Notes an Officers' Certificate stating that such Restricted
Payment, dividend, Investment or redemption is permitted and setting forth the
basis upon which any required calculations were computed, which calculations may
be based upon the Company's or applicable Restricted Subsidiary's latest
available financial statements.
9.15. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, cause or suffer to exist or become effective or
enter into an
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encumbrance or restriction (other than pursuant to law or regulation) on the
ability of any Restricted Subsidiary (i) to pay dividends or make any other
distributions in respect of its Capital Stock or pay any Indebtedness or other
obligation owed to the Company or any Restricted Subsidiary of the Company; (ii)
to make loans or advances to the Company or any Restricted Subsidiary of the
Company; or (iii) to transfer any of its Property or assets to the Company or
any other Restricted Subsidiary of the Company, except:
(a) any encumbrance or restriction existing as of the Issue Date
pursuant to this Agreement, the Existing Senior Note Indenture, the Existing
Senior Note Collateral Documents, the Existing Convertible Note Indenture or the
Existing Convertible Note Collateral Documents, the Telecommunications Asset
Leases, the Intercompany Notes and the related collateral documents, an
agreement relating to the Revolving Credit Facilities or the Existing
Indebtedness or any existing agreement listed on SCHEDULE V attached hereto;
(b) any encumbrance or restriction pursuant to an agreement
relating to an acquisition of assets or Property, so long as the encumbrances or
restrictions in any such agreement related solely to the assets or Property so
acquired (and are not or were not created in anticipation of or in connection
with the acquisition thereof);
(c) any encumbrances or restrictions relating to any Indebtedness
of any Restricted Subsidiary existing on the date on which such Restricted
Subsidiary is acquired by the Company or any Restricted Subsidiary (other than
Indebtedness incurred by such Restricted Subsidiary in connection with or in
anticipation of its acquisition), provided that the EBITDA of such Restricted
Subsidiary is not taken into account in determining whether such acquisition is
permitted by the terms of this Agreement;
(d) any encumbrance or restriction pursuant to an agreement
effecting a permitted Refinancing of Indebtedness issued pursuant to an
agreement referred to in the foregoing clauses (a) through (c), so long as the
encumbrances and restrictions contained in any such Refinancing agreement are
not materially more restrictive than the encumbrances and restriction contained
in such agreements;
(e) customary provisions restricting subletting or assignment of
any lease of the Company or any Restricted Subsidiary or customary provisions in
certain agreements that restrict the assignment of such agreement or any rights
thereunder;
(f) any temporary encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock of, or
Property and assets of, such Restricted Subsidiary; and
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(g) any restriction on the sale or other disposition of assets or
Property securing Indebtedness as a result of a Permitted Lien on such assets or
Property permitted pursuant to SECTION 9.12 hereof.
9.16. LIMITATION ON ISSUANCE AND SALE OF PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES.
The Company (i) shall not permit any Restricted Subsidiary to issue
any Preferred Stock other than to the Company or a Restricted Subsidiary
(provided that the Leasing Companies and NWE Cyprus may not issue Preferred
Stock to a Restricted Subsidiary) and (ii) shall not permit any Person other
than the Company or a Restricted Subsidiary to own any Preferred Stock of any
Restricted Subsidiary, except for (a) a sale of 100% of the Capital Stock of a
Restricted Subsidiary sold in a transaction not prohibited by SECTION 9.9
hereof, (b) Preferred Stock of a Restricted Subsidiary issued and outstanding on
the Issue Date and held by Persons other than the Company or any Restricted
Subsidiary, (c) Capital Stock of a Restricted Subsidiary issued and outstanding
prior to the time that such Person becomes a Restricted Subsidiary so long as
such Capital Stock was not issued in contemplation of such Person's becoming a
Restricted Subsidiary or otherwise being acquired by the Company and (d) any
Disqualified Stock permitted to be issued under SECTION 9.10 hereof.
9.17. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, sell, lease, transfer, or otherwise
dispose of, any of its Property or assets to, or purchase any Property or assets
from, or enter into any contract, agreement, understanding, loan, advance or
guarantee with or for the benefit of, any Affiliate (each of the foregoing, an
"AFFILIATE TRANSACTION"), unless (a) such Affiliate Transaction complies with
the other covenants of this Agreement, (b) such Affiliate Transaction is on
terms that are no less favorable to the Company or such Restricted Subsidiary
than those that would have been obtained in a comparable arm's-length
transaction by the Company or such Restricted Subsidiary with a Person that is
not an Affiliate and (c) the Company delivers to the holders of the Notes (i)
with respect to any Affiliate Transaction involving aggregate payments in excess
of $5,000,000, a Board Resolution certifying that such Affiliate Transaction
complies with clause (a) above and that such Affiliate Transaction has been
approved by a majority of the disinterested directors who have determined that
such Affiliate Transaction is in the best interests of the Company or such
Restricted Subsidiary and (ii) with respect to any Affiliate Transaction
involving aggregate payments in excess of $25,000,000, an opinion as to the
fairness from a financial point of view to the Company or such Restricted
Subsidiary issued by an investment banking firm of national standing, or in the
case of a transaction involving a sale or transfer of assets subject to
valuation such as real estate, an appraisal prepared by a nationally recognized
appraisal firm, together with an Officers' Certificate to the effect that such
opinion complies with this clause (ii); provided that the following shall not be
deemed Affiliate Transactions:
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(i) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business and
consistent with industry practice;
(ii) any agreement or arrangement with respect to the compensation
of a director of the Company or any Restricted Subsidiary approved by the
Board of Directors and consistent with industry practice;
(iii) transactions between or among the Company, its Wholly-Owned
Restricted Subsidiaries or its majority-owned Restricted Subsidiaries (so
long as no minority interest is owned by a Person which is otherwise an
Affiliate, provided that the indirect beneficial ownership interest of
Cable & Wireless in PeterStar will not be deemed to be such a minority
interest so long as Cable & Wireless does not directly or indirectly own
beneficially more than 11% of PeterStar);
(iv) transactions constituting Restricted Payments permitted by
SECTION 9.14 hereof; and
(v) transactions pursuant to contracts existing on the Issue Date
and listed on SCHEDULE VI attached hereto; and
(vi) loans and advances to employees and officers of the Company or
a Restricted Subsidiary in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary,
provided that the aggregate principal amount of all such loans and
advances shall not exceed $500,000 at any one time outstanding.
9.18. RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
(a) The Company may designate a Subsidiary (including a newly
formed or newly acquired Subsidiary) of the Company or any of its Restricted
Subsidiaries, other than the Leasing Companies, NWE Cyprus, WTC and Technocom,
as an Unrestricted Subsidiary, provided that (i) no portion of the Indebtedness
or any other obligation (contingent or otherwise) of such Subsidiary (x) is
guaranteed by the Company or any Restricted Subsidiary, (y) is recourse to or
obligates the Company or any Restricted Subsidiary in any way or (z) subjects
any Property or assets of the Company or any Restricted Subsidiary, directly or
indirectly, contingent or otherwise, to the satisfaction thereof, (ii) such
Subsidiary does not have any obligations which, if in default, would result in a
cross default on Indebtedness of the Company or a Restricted Subsidiary (other
than Indebtedness to the Company or a Restricted Subsidiary) and (iii) such
Subsidiary has total assets of $50,000 or less or such designation is effective
immediately upon such Person's becoming a Subsidiary. Notwithstanding the
foregoing, no Subsidiary may be designated an Unrestricted Subsidiary if such
Subsidiary, directly or indirectly, held Capital Stock of a Restricted
Subsidiary. Unless so designated as an Unrestricted
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Subsidiary, any Person that becomes a Subsidiary of the Company or any of its
Restricted Subsidiaries shall be classified as a Restricted Subsidiary thereof.
Except for Restricted Subsidiaries having total assets of $50,000 or less, no
Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.
(b) The Company will not, and will not permit any of its
Restricted Subsidiaries to, take any action or enter into any transaction or
series of transactions that would result in a Person (other than a newly formed
Subsidiary having no outstanding Indebtedness (other than Indebtedness to the
Company or a Restricted Subsidiary) at the date of determination) becoming a
Restricted Subsidiary (whether through an acquisition, the redesignation of an
Unrestricted Subsidiary or otherwise) unless, after giving effect to such
action, transaction or series of transactions on a pro forma basis, (i) the
Company could incur at least $1.00 of additional Indebtedness pursuant to
SECTION 9.10(a) hereof and (ii) no Default or Event of Default would occur.
(c) Subject to SECTION 9.18(b) hereof, an Unrestricted Subsidiary
may be redesignated as a Restricted Subsidiary. The designation of a Subsidiary
as an Unrestricted Subsidiary or the designation of an Unrestricted Subsidiary
as a Restricted Subsidiary in compliance with SECTION 9.18(b) hereof shall be
made by the Board of Directors pursuant to a Board Resolution delivered to the
Trustee and shall be effective as of the date specified in such Board
Resolution, which shall not be prior to the date such Board Resolution is
delivered to the holders of the Notes.
9.19. LIMITATIONS ON LINE OF BUSINESS.
Neither the Company nor any of its Restricted Subsidiaries will
directly or indirectly engage to any substantial extent in any lines or lines of
business activity other than the Telecommunications Business.
9.20. LIMITATION ON SALES OF TELECOMMUNICATIONS ASSET LEASES OR QUALIFIED
INVESTMENTS.
The Leasing Companies will not directly or indirectly transfer,
convey, sell, lease or make any other disposition (including, without
limitation, dispositions pursuant to any consolidation or merger) of a
Telecommunications Asset Lease or any Qualified Investments.
9.21. PAYMENT OF ADDITIONAL AMOUNTS.
(a) Except to the extent required by law, any and all payments of,
or in respect of, any Note and any issuance of Warrants shall be made free and
clear of and without deduction for or on account of any and all present or
future taxes, levies, imposts, deductions, charges or withholdings and all
liabilities with respect thereto imposed by the United States with respect to
payments made by the Company or imposed by Russia or the
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British Virgin Islands with respect to payments made by a Subsidiary Guarantor
or imposed by any jurisdiction from or through which payments under the Notes
are or are caused to be made ("TAXES"). If the Company or any Subsidiary
Guarantor shall be required by law to withhold or deduct any Taxes from or in
respect of any sum payable under a Note or pursuant to a Guarantee or in respect
of any issuance of Warrants, the sum payable by the Company or such Subsidiary
Guarantor, as the case may be, thereunder shall be increased by the amount
("ADDITIONAL AMOUNTS") necessary so that after making all required withholdings
and deductions, the holder shall receive an amount equal to the sum that it
would have received had no such withholdings and deductions been made; provided
that any such sum shall not be paid in respect of any Taxes (i) resulting from
the holder or beneficial owner of a Note carrying on business or being deemed to
carry on business in or through the relevant taxing jurisdiction or any
political subdivision thereof or having any other connection with the relevant
taxing jurisdiction or any political subdivision thereof or any taxing authority
therein other than the mere holding or owning of such Note, being a beneficiary
of the Guarantees, the receipt of any income or payments in respect of such Note
or the Guarantees or the enforcement of such Note or the Guarantees, or (ii)
that would not have been imposed but for the presentation (where presentation is
required) of a Note for payment more than 180 days after the date such payment
became due and payable or was duly provided for, whichever occurs later, or
(iii) that would not have been imposed but for a failure by the holder of a Note
to comply with any applicable certification, information, documentation or other
reporting requirements if such compliance is required by applicable law and
requested in writing by the Company or a Subsidiary Guarantor as a precondition
to relief or exemption from such Tax ("EXCLUDED TAXES"). The Company or the
Subsidiary Guarantors, as applicable, will also (i) make such withholding or
deduction and (ii) remit the full amount deducted or withheld to the relevant
authority in accordance with applicable law, and, in any such case, the Company
will furnish to each holder of a Note on whose behalf an amount was so remitted,
within 30 calendar days after the date the payment of any Taxes (other than
Excluded Taxes) is due pursuant to applicable law, certified copies of tax
receipts (or other satisfactory documentation) evidencing such payment by the
Company or the Subsidiary Guarantors, as applicable. The Company will, upon
written request of each holder of Notes, reimburse each such holder for the
amount of (i) any Taxes (other than Excluded Taxes) so levied or imposed and
paid by such holder as a result of payments or issuances of Warrants made under
or with respect to any Notes, and (ii) any Taxes (other than Excluded Taxes) so
levied or imposed with respect to any reimbursement under the foregoing clause
(i) so that the net amount received by such holder after such reimbursement will
not be less than the full amount which such holder would have received if Taxes
(other than Excluded Taxes) on such reimbursement had not been imposed. If a
holder of a Note shall become aware that it is entitled to receive a refund or
other tax credit or benefit in respect of any Taxes (other than Excluded Taxes),
it shall promptly notify the Company thereof and, in the case of a refund, shall
within 30 days after receipt of a request by the Company, apply for such refund
at the Company's expense. If a holder of a Note receives a refund or other Tax
credit or benefit in respect of any Taxes (other than Excluded Taxes) for which
such holder has received payment from the Company
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hereunder, it shall promptly notify the Company thereof and shall promptly repay
such refund to the Company or, in the case of a Tax credit or other benefit
shall repay the amount of the Tax credit or benefit received promptly following
the date on which such Tax credit or the benefit is offset against such party's
tax liability, in each case to the Company. All determinations as to the amount
and timing of the receipt or realization of any Tax refund or Tax benefit shall
be made by the relevant holder in its sole good faith discretion, it being
understood and agreed that (x) the Company shall have no right to inspect or
examine any Tax returns of such holder or any records or documents relating
thereto and (y) such holder shall have no obligation to disclose to the Company
or any other person the basis of calculation of any such Tax refund or Tax
benefit. Any Taxes that are imposed on a holder as a result of a disallowance or
reduction (including through the expiration of any Tax credit carryovers of such
holder that would not otherwise have expired) of any Tax benefit as to which
such holder has made a payment to the Company hereunder shall be treated as a
Tax for which the Company is obligated to indemnify such Tax Indemnitee on
demand and on an after-Tax basis without any exclusions or defenses, provided
that such repayment shall not exceed the amount previously paid to the Company.
Notwithstanding the foregoing, no payment shall be required to be made to the
Company at any time while an Event of Default shall have occurred and be
continuing or prior to the time when the Company shall have made all payments
and indemnities theretofore required and then due and payable hereunder or under
any Note.
(b) The Company or the Subsidiary Guarantors will pay any stamp,
issue, registration, documentary or other similar taxes and duties, including
interest and penalties, in respect of the creation, issue and offering of the
Notes or the issuance of the Warrants or the exercise thereof. The Company and
the Subsidiary Guarantors will also pay and indemnify the holders of the Notes
and the Trustee from and against all court fees and taxes or other taxes and
duties, including interest and penalties, paid by any of them in any
jurisdiction in connection with any action permitted to be taken by the Trustee
or the Collateral Agent or the holders of the Notes to create the Liens on the
Collateral and to enforce the obligations of the Company or the Subsidiary
Guarantors under the Notes, this Agreement, the Guarantees or the Security
Documents.
(c) Each holder that is organized under the laws of a jurisdiction
other than the United States, any State thereof or the District of Columbia (a
"NON-U.S. HOLDER") shall, if legally able to do so, deliver to the Company two
copies of either U.S. Internal Revenue Service Form 1001 (claiming entitlement
to a complete exception from or a reduced rate of U.S. federal withholding tax)
or Form 4224, or, in the case of a Non-U.S. Holder claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest," a Form W-8, and any subsequent versions
thereof or successors thereto (and, if such Non-U.S. Holder delivered a Form
W-8, a certificate representing that such Non-U.S. Holder is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Company and is not a controlled foreign corporation related to the Company
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such
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Non-U.S. Holder claiming complete exemption from U.S. withholding tax on
payments by the Company under this Agreement. Such forms shall be delivered by
each Non-U.S. Holder on or before the date it becomes a party to this Agreement.
In addition, each Non-U.S. Holder shall, if legally able to do so, deliver such
forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Holder and each Non-U.S. Holder shall, if legally
able to do so, deliver such other forms as may be required in order to confirm
or establish the entitlement of such Holder to a continued complete exemption
from a reduced rate of U.S. federal withholding tax with respect to payments
under this Agreement.
(d) The Company shall not be required to indemnify any Non-U.S.
Holder or to pay any additional amounts to any Non-U.S. Holder to the extent
that (i) the obligation to withhold amounts existed on the date such Non-U.S.
Holder became a party to this Agreement or (ii) the obligation to withhold
amounts would not have been imposed but for a failure by such Non-U.S. Holder to
comply with the provisions of paragraph (c) above.
9.22. LEASING COMPANIES AND NWE CYPRUS.
(a) Each Leasing Company shall at all times remain a special
purpose Cypriot corporation which is a Guarantor and a Wholly-Owned Restricted
Subsidiary with corporate organizational documents containing the provisions set
forth on SCHEDULE VII attached hereto.
(b) NWE Cyprus shall at all times remain a Cypriot corporation and
a Wholly-Owned Subsidiary.
9.23. TECHNOCOM.
Technocom may not, in any transaction or series of related
transactions, consolidate with, or merge with or into, any other Person or
otherwise change its domicile into any other jurisdiction (through a sale of
assets or otherwise) unless Technocom or such Person, as the case may be,
continues to be owned in an identical proportion and manner as Technocom is now
owned immediately prior to such consolidation or merger or change of domicile,
the preferential $20,000,000 dividend and liquidation, dissolution or winding-up
rights of the Technocom Preferred Stock are not changed, there is no class of
Capital Stock authorized having rights superior to the Technocom Preferred Stock
after giving effect to such transaction or transactions, and such consolidation,
merger, or other change of domicile does not adversely affect the perfection or
priority of (i) the Lien in favor of the Trustee on the Pledged Shares created
by the Pledge Agreement or (ii) the Liens in the Technocom Preferred Stock.
9.24. COLLATERAL AGENTS.
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In the event that any collateral agent appointed on or before the
Closing Date or thereafter in respect of one or more jurisdictions resigns or is
terminated without the contemporaneous appointment of a new collateral agent in
such jurisdiction or jurisdictions, the Company shall procure or cause to be
procured, within 45 days after the Trustee has given notice to the Company of
such resignation or termination, a recognized financial institution, with
capital of not less than $10,000,000, in such jurisdiction or jurisdictions,
which the Trustee may lawfully appoint as a collateral agent in respect of
Collateral.
9.25. WTC.
Provided no Default or Event of Default has occurred and is
continuing or would occur as a result of the following transaction, WTC may
consolidate with or merge with NWE Cyprus or transfer all or substantially all
of its assets to NWE Cyprus in connection with a winding-up or liquidation of
WTC.
9.26. RELEASE OF ADDITIONAL WARRANT CERTIFICATES FROM ESCROW.
The Warrant Certificates evidencing the Additional Warrants (the
"ADDITIONAL WARRANT CERTIFICATES") issued and delivered to the Trustee, and
provisionally registered in the name of the Trustee for retention by the Trustee
in the Additional Warrant Escrow referred to in Section 5 of the Trust
Agreement, shall be subject to release from the Additional Warrant Escrow and
delivery by the Trustee to the Trustee for registration of transfer and issuance
to the holders of the Series A Notes and the Series B Notes in accordance with
the following provisions and the provisions of said Section 5 of the Trust
Agreement. On the Escrow Release Date (as defined in the Trust Agreement) next
following each date (a "COMMITMENT REDUCTION DATE") specified in the Commitment
Reduction Schedule set forth below, unless on or prior to such Commitment
Reduction Date the Company shall have (i) permanently reduced the Commitments
(exclusive of mandatory reductions of the Commitments made in compliance with
SECTION 8.3(b)) by an amount at least equal to the amount set forth opposite
such date in such Commitment Reduction Schedule (such amount being referred to
as the "TARGETED REDUCTION AMOUNT" applicable to such Commitment Reduction Date)
and made all repayments, if any, of outstanding Revolving Credit Loans required
in connection with such reduction under SECTION 8.4 and (ii) furnished to the
Trustee (with a copy to each holder of a Note) an Officers' Certificate
confirming that the Company has permanently reduced the Commitments by such
Targeted Reduction Amount and made all repayments, if any, of outstanding
Revolving Credit Loans required in connection with such reduction under SECTION
8.4 and otherwise conforming to the requirements with respect to such Officers'
Certificate set forth in Section 5(c) of the Trust Agreement, there shall be
released from the Additional Warrant Escrow and delivered by the Trustee (x) to
the holders of the Series A Notes outstanding on such Escrow Release Date,
Additional Warrant Certificates evidencing Additional Warrants for 30,000 shares
of the Company's Common Stock and (y) in the case of the Escrow Release Dates
following the Commitment Reduction Dates
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of July 31, 1998 and August 31, 1998 only, to the holders of the Series B Notes
outstanding on such Escrow Release Date, Additional Warrant Certificates
evidencing Additional Warrants for 16,000 shares of the Company's Common Stock:
Commitment Reduction Schedule
-----------------------------
<TABLE>
<CAPTION>
Commitment Reduction Date Targeted Reduction Amount
------------------------- -------------------------
<S> <C> <C>
July 31, 1998 $ 500,000
August 31, 1998 500,000
September 30, 1998 1,000,000
October 31, 1998 1,500,000
November 30, 1998 1,500,000
</TABLE>
Any permanent reductions of the Commitments made by the Company other than
mandatory reductions of the Commitments required pursuant to SECTION 8.3(b) may
be credited (without duplication) against the Targeted Reduction Amount
applicable to any one or more Commitment Reduction Dates in such manner as the
Company shall request by written notice delivered to the holders of the Notes
and the Trustee (and any such reduction so credited shall be treated for
purposes of clause (i) of the preceding sentence as if made on such Commitment
Reduction Date).
9.27. DEFAULT WARRANTS.
(a) If the outstanding Series B Revolving Credit Loans, and all
accrued and unpaid interest, Additional Amounts, if any, and fees thereon are
not paid in full on or prior to September 30, 1998, then commencing on September
30, 1998 and on the last day of each calendar month thereafter until such time
as the outstanding Series B Revolving Credit Loans shall have been so paid in
full, the Company will deliver or cause to be delivered to the holders of the
Series B Notes Warrant Certificates evidencing Default Warrants for 32,000
shares of the Company's Common Stock.
(b) If the outstanding Series A Revolving Credit Loans, and all
accrued and unpaid interest, Additional Amounts, if any, and fees thereon are
not paid in full on or prior to December 31, 1998, then commencing on December
31, 1998 and on the last day of each calendar month thereafter until such time
as the outstanding Series A Revolving Credit Loans shall been so paid in full,
the Company will deliver or cause to be delivered to the holders of the Series A
Notes Warrant Certificates evidencing Default Warrants for 70,000 shares of the
Company's Common Stock.
9.28. APPLICATION OF NOTES UPON EXERCISE OF WARRANTS.
So long as any Person shall be the holder of a Note and a Warrant
Certificate, the Company agrees that, as contemplated by Section 8 of the
Warrant
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Agreement, upon exercise of the Warrant evidenced by such Warrant Certificate,
such Person may at its option surrender such Note to the Company at the
principal office of the Warrant Agent, together with written instructions to
apply all or any part of the outstanding Revolving Credit Loans evidenced by
such Note, together with all accrued and unpaid interest on the amount to be so
applied through and including the date of such application, against the exercise
price payable pursuant to such Warrant Certificate. Upon receipt by the Company
of written instructions specifying that less than the entire unpaid principal
amount of the Revolving Credit Loans evidenced by any Note is to be so applied,
the principal amount so specified shall be credited, as of the date of such
exercise, against the repayments of principal required pursuant to SECTION 8.4
to be made in respect of the outstanding Revolving Credit Loans evidenced by
such Note in connection with the mandatory reductions of the Commitments
required to be made pursuant to SECTION 8.3(b) in the inverse order of the dates
of such mandatory reductions. Upon any such partial application of any
outstanding Revolving Credit Loans, together with all accrued and unpaid
interest on the amount so applied through and including the date of application,
the Company shall return such Note to such holder.
9.29. AGREEMENT TO EFFECT CERTAIN AMENDMENTS.
If the Company shall amend the Existing Senior Note Indenture as in
effect on the date hereof pursuant to amendments substantially similar to those
contemplated by Sections 2, 3 and 4 of the 10/3/97 draft of the First
Supplemental Indenture, Amendment Agreement, Consent and Waiver (the "DRAFT
AMENDMENT"), and shall provide the holders of the Notes with an executed copy of
the final form of such amendment to the Existing Senior Note Indenture (the
"FINAL AMENDMENT"), which Final Amendment shall not reflect any substantive
changes or additions to the amendments that would be effected by the Draft
Amendment and that are not acceptable to the holders of the Notes, then those
covenants contained in SECTION 9 of this Agreement (and the related definitions
of terms used therein) that correspond to the Existing Senior Note Indenture
covenants (and related definitions) and that are amended by the Final Amendment
shall be deemed amended, mutatis mutandis, such amendments to this Agreement to
be effective as of the effective date of the amendments effected by the Final
Amendment.
9.30. FUTURE SUBSIDIARIES TO BECOME GUARANTORS.
Promptly upon any Person becoming a Wholly-Owned Restricted
Subsidiary of the Company after the date hereof, the Company will cause such
Person to become a party to the Subsidiary Guaranty by executing and delivering
a Joinder Agreement in the form attached thereto as Exhibit A.
9.31. RESTRICTION ON CERTAIN PAYMENTS BY THE COMPANY.
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In the event that the Company shall not have received, on or prior
to May 31, 1998, net cash proceeds aggregating at least $20,000,000 from an
Equity Issuance, the Company shall not, at any time on or after May 31, 1998:
(i) make any unscheduled payment in respect of principal or
interest on or other amounts owing in respect of outstanding Indebtedness
for borrowed money of the Company other than the Revolving Credit Loans;
(ii) make any Restricted Payment; or
(iii) other than with funds subject to the Liens of the Existing
Senior Note Collateral Documents, make any payment in respect of capital
expenditures or make any payment to any Subsidiary, by way or contribution
or otherwise, the proceeds of which are applied by such Subsidiary to the
making of capital or similar expenditures.
10. CONSOLIDATION, MERGER, CONVEYANCE, LEASE OR TRANSFER.
10.1. MERGER, CONSOLIDATION, SALE OF ASSETS, ETC.
(a) The Company shall not, in any transaction or series of related
transactions, consolidate with, or merge with or into, any other Person or
permit any other Person to merge with or into the Company (other than a merger
of a Restricted Subsidiary of the Company into the Company in which the Company
is the continuing corporation), or sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of the Property and assets of the
Company and its Restricted Subsidiaries taken as a whole to any other Person,
unless:
(b) either (i) the Company shall be the continuing corporation or
(ii) the corporation (if other than the Company) formed by such consolidation or
into which the Company is merged, or the Person which acquires, by sale,
assignment, conveyance, transfer, lease or disposition, all or substantially all
of the Property and assets of the Company and its Restricted Subsidiaries taken
as a whole (any such corporation or Person being the "SURVIVING ENTITY") shall
be a corporation organized and validly existing under the laws of the United
States of America, any political subdivision thereof, any state thereof or the
District of Columbia, or the United Kingdom or Bermuda and shall expressly
assume, pursuant to a written agreement satisfactory in form, scope and
substance to each holder of Notes, the due and punctual payment of the principal
of (and premium, if any) and interest and Additional Amounts, if any, and
Commitment Fees, if any, on all the Notes and the performance of every covenant
and obligation in this Agreement, the Warrant Agreement and the Security
Documents on the part of the Company to be performed or observed;
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(c) immediately after giving effect to such transaction or series
of related transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of related transactions), no Default or
Event of Default shall have occurred and be continuing or would result
therefrom;
(d) immediately after giving effect to such transaction or series
of related transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Company (or the
Surviving Entity, if the Company is not continuing) would be permitted to incur
$1.00 of additional Indebtedness under SECTION 9.10(a) hereof;
(e) immediately after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), the Company (or the
Surviving Entity, if the Company is not continuing) shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction; and
(f) the Company (or the Surviving Entity, if the Company is not
continuing) would not be subject to any materially adverse tax effect as a
result of such transaction or series of transactions.
In connection with any consolidation, merger, conveyance, lease or
other disposition contemplated by this SECTION 10.1, the Company shall deliver,
or cause to be delivered, to the Trustee, in form reasonably satisfactory to
each holder of Notes, an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance, lease or disposition and
any assumption agreement in respect thereto comply with this SECTION 10.1 and
that all conditions precedent herein provided for relating to such transaction
have been complied with, and covering such other matters relating thereto, to
the Surviving Entity, such assumption and such agreement as such holder may
reasonably request.
10.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation with, or merger by the Company with or into,
any other corporation, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the Property and assets of the
Company and its Restricted Subsidiaries taken as a whole in accordance with
SECTION 10.1 hereof, the successor corporation formed by such consolidation or
into which the Company is merged, or the Person to which such sale, conveyance,
assignment, transfer, lease, conveyance or other disposition is made, shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Agreement with the same effect as if such successor
Person has been named as the Company herein; and thereafter except in the case
of a lease
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the predecessor corporation shall be relieved of all obligations and covenants
under this Agreement and the Notes, except for the obligation to pay the
principal of (and premium, if any) and interest (including Additional Amounts,
if any, and Commitment Fees, if any) on the Notes.
In case of any such consolidation, merger, sale, transfer,
conveyance or other disposal, such changes in phraseology and form (but not in
substance) may be made in the Notes thereafter to be issued or the Guarantees to
be endorsed thereon as may be appropriate.
For all purposes of this Agreement and the Notes, Subsidiaries of
any Surviving Entity will, upon such transaction or series of transactions,
become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant
to this Agreement and all Indebtedness, and all Liens on Property or assets, of
the Surviving Entity and its Restricted Subsidiaries immediately prior to such
transaction or series of transactions shall be deemed to have been incurred upon
such transaction or series of transactions.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or come about or be
effected by operation of law or judicial or governmental or administrative
action or otherwise):
(a) the Company defaults in the payment of any principal of any
Revolving Credit Loan when the same becomes due and payable, whether at
maturity or at a date fixed for repayment or by declaration or otherwise;
or
(b) the Company defaults in the payment of any interest (or
Additional Amounts or Commitment Fees, if any) on any Revolving Credit
Loan for more than five (5) Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or compliance with
any term contained in SECTIONS 9.8, 9.9, 9.10, 9.13, 9.14, 9.24, 10.1 OR
10.2; or
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this SECTION 11) or in the Warrant Agreement, the
Registration Agreement or any Security Document and such default is not
remedied within 45 days after the Company received written notice of such
default from the holder or holders of Notes having Commitment Percentages
aggregating at least 25%; or
(e) any representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this Agreement or in
any Security
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Document or in any writing furnished in connection with the transactions
contemplated hereby or pursuant hereto proves to have been false or
incorrect in any material respect on the date as of which made; or
(f) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Indebtedness having
an aggregate principal amount outstanding exceeding $10,000,000 beyond any
period of grace provided with respect thereto, or (ii) the Company or any
Restricted Subsidiary is in default in the performance of or compliance
with any term of any evidence of any Indebtedness having an aggregate
principal amount outstanding exceeding $10,000,000 or of any mortgage,
indenture or other agreement relating thereto or any other condition
exists, if the effect of any such default or condition is to cause or to
permit such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition
(other than the passage of time or the right of the holder of Indebtedness
to convert such Indebtedness into equity interests), (x) the Company or
any Restricted Subsidiary has become obligated to purchase or repay
Indebtedness before its regular maturity or before its regularly scheduled
dates of payment having an aggregate principal amount outstanding
exceeding $10,000,000, or (y) one or more Persons have the right to
require the Company or any Restricted Subsidiary so to purchase or repay
such Indebtedness; or
(g) the Company or any Restricted Subsidiary (i) admits in writing
its inability to pay, its debts as they become due, (ii) files, or
consents by answer or otherwise to the filing against it of, a petition
for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to
any substantial part of its Property, (v) is adjudicated as insolvent or
to be liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Restricted Subsidiaries, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its Property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Restricted Subsidiaries, or any
such petition
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shall be filed against the Company or any of its Restricted Subsidiaries
and such petition shall not be dismissed within 60 days; or
(i) any of the Security Documents or the Warrant Agreement or the
Registration Agreement, at any time and for any reason, shall not be or
shall cease to be valid, binding and enforceable against the Company or a
permitted Surviving Entity, or the Company shall contest or deny the
validity or enforceability of any of the Security Documents or the Warrant
Agreement or the Registration Agreement or shall disaffirm or repudiate
any of its obligations thereunder, or the Notes (or any of them) shall
fail to be secured by perfected security interests in the Collateral; or
(j) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against one or more of
the Company or any Restricted Subsidiaries and which judgments are not (i)
fully covered by insurance and with respect to which the carriers thereof
have not declined coverage or (ii) within 60 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged within
60 days after the expiration of such stay; or
(k) any assets of the Company or any of its Restricted
Subsidiaries shall be nationalized, expropriated, declared forfeit or
otherwise permanently taken by governmental action (the "SEIZED ASSETS"),
and the book value of such Seized Assets (less the book value of the
expropriation proceeds) shall constitute more than 15% of the book value,
on a consolidated basis, of all of the Company's assets minus current
assets as they are reported on the Company's most recent quarterly
consolidated balance sheet.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described
in paragraph (g) or (h) of SECTION 11 (other than an Event of Default described
in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause (vi) encompasses such clause (i)) has
occurred, the Revolving Credit Commitments shall terminate and all the Notes
then outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
any holder or holders of Notes having Commitment Percentages of more than 50%
may at any time at its or their option, by written notice or notices to the
Company, terminate the Revolving Credit Commitments and declare all the
Revolving Credit Loans then outstanding to be immediately due and payable.
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(c) If any Event of Default described in paragraph (a) or (b) of
SECTION 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by written notice or notices to the Company, terminate its or
their Revolving Credit Commitments and declare all the Revolving Credit Loans
then outstanding made by it or them to be immediately due and payable.
Upon any Revolving Credit Loans becoming due and payable under this
SECTION 12.1, whether automatically or by declaration, such Revolving Credit
Loans will forthwith mature and the entire unpaid principal amount of such
Revolving Credit Loans, plus all accrued and unpaid interest thereon, plus
Additional Amounts, if any, and all unpaid Commitment Fees with respect thereto,
if any, shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing,
and irrespective of whether any Revolving Credit Loans have become or have been
declared immediately due and payable under SECTION 12.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
12.3. RESCISSION.
At any time after any Revolving Credit Loans have been declared due
and payable pursuant to clause (b) of SECTION 12.1, the holders of Notes having
Commitment Percentages of not less than 66 2/3% by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Revolving Credit Loans, all
principal of and Additional Amounts, if any, and all unpaid Commitment Fees with
respect thereto, if any, on any Revolving Credit Loans that are due and payable
and are unpaid other than by reason of such declaration, and all interest on
such overdue principal and (to the extent permitted by applicable law) any
overdue interest in respect of the Revolving Credit Loans, at the applicable
Default Rate, (b) all Events of Default and Defaults, other than non-payment of
amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to SECTION 18, and (c) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this SECTION 12.3 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.
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12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right, power
or remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under SECTION 16, the
Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all reasonable costs and expenses of such holder
incurred in any enforcement or collection under this SECTION 12, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
13. DEFINITIONS AND CONSTRUCTION.
13.1. DEFINED TERMS.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person,
but excluding Indebtedness which is extinguished, retired or repaid in
connection with such other Person merging with or into or becoming a Subsidiary
of such specified Person.
"ACQUISITION" has the meaning set forth in SECTION 4.8(b).
"ADDITIONAL AMOUNTS" has the meaning set forth in SECTION 9.21
hereof.
"ADDITIONAL WARRANT CERTIFICATE" has the meaning set forth in
SECTION 1.1(d).
"ADDITIONAL WARRANT ESCROW" has the meaning set forth in Section 5
of the Trust Agreement.
"ADDITIONAL WARRANTS" has the meaning set forth in SECTION 1.1(e).
"AFFILIATE" means, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person; provided that each Unrestricted Subsidiary shall be deemed to be an
Affiliate of the Company and of each other Subsidiary of the Company; provided
that, except for purposes
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of SECTIONS 8.8 OR 18.4 hereof, neither the Company nor any of its Wholly-Owned
Restricted Subsidiaries shall be deemed to be Affiliates of each other. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "under common control with," and "controlled by"), and
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of Voting Stock, by
agreement or otherwise; provided, further, that beneficial ownership of 10% or
more of the Voting Stock of a Person (on a fully diluted basis) shall be deemed
to be control.
"AFFILIATE TRANSACTION" has the meaning set forth in SECTION 9.17.
"AGENCY AGREEMENT" has the meaning set forth in SECTION 1.2(b).
"APPROVALS" has the meaning set forth in SECTION 4.7.
"ASSET SALE" means, with respect to any Person, any transfer,
conveyance, sale, lease or other disposition (including, without limitation,
dispositions pursuant to any consolidation, amalgamation or merger) by such
Person or any of its Restricted Subsidiaries to any Person other than to such
Person or a Restricted Subsidiary of such Person, in one transaction, or a
series of related transactions (each hereinafter referred to as a
"DISPOSITION"), of (a) Capital Stock of or other equity interests in any
Restricted Subsidiary (other than directors' qualifying shares), (b) all or
substantially all of the assets of any division or line of business of such
Person or of any of the Restricted Subsidiaries or (c) Property or assets of
such Person or any of its Restricted Subsidiaries, the Fair Market Value of
which exceeds $1,000,000, other than (i) a Disposition of Property in the
ordinary course of business consistent with industry practice, (ii) a
Disposition of Eligible Cash Equivalents, (iii) a Disposition that constitutes a
Restricted Payment permitted under SECTION 9.14 hereof, (iv) a Disposition by
Technocom of all of its assets and liabilities to a newly-formed corporation
organized in a jurisdiction other than Ireland formed to acquire such assets and
owned in a substantially identical proportion and manner (and the preferential
$20,000,000 dividend and liquidation, dissolution or winding-up rights of the
Technocom Preferred Stock are not changed) as Technocom is owned immediately
prior to such Disposition and such Disposition does not adversely affect the
perfection or priority of (x) the Lien in the Pledged Shares pursuant to the
Pledge Agreement or (y) the Liens in the Technocom Preferred Stock, (v) a
Disposition by WTC of its interest in BECET to NWE Cyprus, in connection with a
winding-up or liquidation of WTC, and (vi) a Disposition by the Company in
connection with a transaction permitted pursuant to SECTION 10.
"ATTRIBUTABLE INDEBTEDNESS" means, with respect to any Sale and
Leaseback Transaction of any Person, as at the time of determination, the
greater of (i) the capitalized amount in respect of such transaction that would
appear on the balance sheet of such Person in accordance with GAAP and (ii) the
present value (discounted at a rate
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consistent with accounting guidelines, as determined in good faith by such
Person) of the payments during the remaining term of the lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended) or until the earliest date on which the lessee may
terminate such lease without penalty or upon payment of a penalty (in which case
the rental payments shall include such penalty) .
"AVAILABLE CASH" has the meaning set forth in SECTION 8.3(e).
"AVERAGE LIFE" means, as of any date, with respect to any debt
security or Disqualified Stock, the quotient obtained by dividing (i) the sum of
the products of (x) the number of years from such date to the dates of each
scheduled principal payment or redemption payment (including any sinking fund or
mandatory redemption payment requirements) of such debt security or Disqualified
Stock multiplied in each case by (y) the amount of such principal or redemption
payment, by (ii) the sum of all such principal or redemption payments.
"BCL" means Baltic Communication Limited, a Russian joint stock
company of the closed type.
"BECET" means BECET International, a Kazak joint stock company of
the closed type.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"BOARD RESOLUTION" means a duly adopted resolution of the Board of
Directors in full force and effect at the time of determination and certified as
such.
"BUSINESS OR CONDITION" of any Person, means the business,
operations, assets, Property, earnings, condition (financial or other), or
reasonably foreseeable prospects of such Person, provided that such term, when
used without reference to any particular Person, shall mean the Business and
Condition of the Company and its Restricted Subsidiaries taken as a whole.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in The City of New York
are authorized or obligated by law, executive order or regulation to close.
"CABLE & WIRELESS" means Cable and Wireless plc, an English
corporation.
"CANADIAN GAAP" means generally accepted accounting principles in
Canada from time to time approved by the Canadian Institute of Chartered
Accountants, or any successor institute, applicable on the date on which the
applicable determination is being made.
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"CAPITAL LEASE OBLIGATION" of any Person means the obligation to pay
rent or other payment amounts under a lease of (or other Indebtedness
arrangement conveying the right to use) real or personal Property of such Person
which is required to be classified and accounted for as a capital lease or a
liability on the face of a balance sheet of such Person in accordance with GAAP
and the stated maturity thereof shall be the date of the last payment of rent or
any amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"CAPITAL STOCK" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than Indebtedness convertible into an
equity interest), warrants or options to acquire an equity interest in such
Person.
"CASH PROCEEDS" means, with respect to any Asset Sale or issuance or
sale of Capital Stock by any Person, the aggregate consideration received in
respect of such sale or issuance by such Person in the form of cash or Eligible
Cash Equivalents; provided that with regard to an Asset Sale, any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto) of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Existing
Senior Notes, the Existing Senior Guarantees, the Existing Convertible Notes and
the guarantees under the Existing Convertible Note Indenture) which are assumed
by the transferee of any such assets and from which the Company and such
Restricted Subsidiary are completely released shall be deemed Cash Proceeds.
"CHANGE OF CONTROL" shall be deemed to occur if (i) the sale,
conveyance, transfer or lease, whether direct or indirect, of all or
substantially all of the assets of the Company or the Company and the Restricted
Subsidiaries taken as a whole to any "Person" or "group" (within the meaning of
Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to
either of the foregoing, including any group acting for the purpose of
acquiring, holding or disposing of securities within the meaning of Rule
13d-5(b)(i) under the Exchange Act) (other than any Wholly-Owned Restricted
Subsidiary of the Company) shall have occurred; (ii) any "Person" or "group"
(within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any
successor provision to either of the foregoing, including any group acting for
the purpose of acquiring, holding or disposing of securities within the meaning
of Rule 13d-5(b)(i) under the Exchange Act), other than any Permitted Holder,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)
of more than 50% of the total voting power of all classes of the Voting Stock of
the Company and/or warrants or options to acquire such Voting Stock, calculated
on a fully diluted basis, and such voting power percentage is greater than or
equal to the total voting power percentage then beneficially owned by the
Permitted Holders in the aggregate; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election or appointment by such board or whose nomination for election by the
shareholders of the Company was approved by a vote of a
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majority of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
"CLOSING" has the meaning set forth in SECTION 3.
"CLOSING DATE" has the meaning set forth in SECTION 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COLLATERAL" means all "Collateral" referred to in the Security
Documents and all other Property or assets that become subject to a Lien in
favor of the Trustee or a collateral agent for the benefit of the Trustee.
"COLLATERAL AGENT" has the meaning set forth in SECTION 1.2(b).
"COMMISSION" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange Act,
and any other similar or successor agency of the federal government
administering the Securities Act and the Exchange Act.
"COMMITMENT" means, with respect to each holder of Notes, the Series
A Commitment and the Series B Commitment of such holder.
"COMMITMENT FEES" means the fees payable pursuant to SECTION 8.9.
"COMMITMENT PERCENTAGE" of any holder of Notes means the percentage
specified as such opposite such holder's name on SCHEDULE I.
"COMMITMENT REDUCTION DATE"has the meaning set forth in SECTION
9.26.
"COMMITMENT REDUCTION SCHEDULE" has the meaning set forth in SECTION
9.26.
"COMMITMENTS" means, collectively, the Series A Commitments and the
Series B Commitments of all holders of Notes.
"COMMITMENT TERMINATION DATE" has the meaning set forth in SECTION
9.8(b)(ii) hereof.
"COMMITMENT TERMINATION ELECTION NOTICE" has the meaning set forth
in SECTION 9.8(c) hereof.
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"COMMITMENT TERMINATION OFFER" has the meaning set forth in SECTION
9.8(a) hereof.
"COMMITMENT TERMINATION REPAYMENT AMOUNT" has the meaning set forth
in SECTION 9.8(a) hereof.
"COMMON STOCK" means, with respect to any Person, Capital Stock of
such Person that does not rank prior, as to the payment of dividends or as to
the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding-up of such Person, to shares of Capital Stock of any
other class of such Person.
"COMPANY" means the party named as such in the opening paragraph of
this Agreement unless and until a successor replaces it pursuant to the
applicable provisions hereof and, thereafter, means such successor.
"COMPANY EXISTING SENIOR NOTE ESCROW ACCOUNT AGREEMENT" means the
Company Senior Note Escrow Account Agreement among the Company, the Trustee, the
Existing Convertible Note Trustee, the Existing Convertible Note Trustee and the
escrow agent named therein.
"COMPANY EXISTING SENIOR NOTE ESCROW ACCOUNT" means the escrow
account established under the Company Existing Senior Note Escrow Account
Agreement.
"COMPANY EXISTING SENIOR NOTE SECURITY AGREEMENT" means the Company
Senior Note Security and Pledge Agreement among the Company, the Trustee and the
collateral agent named therein.
"COMPANY GROUP MEMBER" means the Company, each Subsidiary of the
Company, if any, and each of their respective predecessors and (a) each
corporation that is or was at any time a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as the Company
or any Subsidiary of the Company, if any, or any of their respective
predecessors, (b) each trade or business, whether or not incorporated, that is
or was at any time under common control (within the meaning of Section 414(c) of
the Code) with the Company or any Subsidiary of the Company, if any, or any of
their respective predecessors, and (c) each trade or business, whether or not
incorporated, that is or was at any time a member of the same affiliated service
group (within the meaning of Section 414(m) and (o) of the Code) as the Company
or any Subsidiary of the Company, if any, or any of their respective
predecessors.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person
for any period, without duplication (A) the sum of (i) the aggregate amount of
cash and non-cash interest expense (including capitalized interest) of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP in respect of Indebtedness
(including, without limitation, (v) any amortization of
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debt discount, (w) net costs associated with Interest Hedging Obligations
(including any amortization of discounts), (x) the interest portion of any
deferred payment obligation calculated in accordance with the effective interest
method, (y) all accrued interest and (z) all commissions, discounts and other
fees and charges owed with respect to letters of credit, bankers' acceptances or
similar facilities) paid or accrued, or scheduled to be paid or accrued, during
such period; (ii) dividends or distributions with respect to Preferred Stock or
Disqualified Stock of such Person (and of its Restricted Subsidiaries if paid to
a Person other than such Person or its Restricted Subsidiaries) declared and
payable in cash; (iii) the portion of any rental obligation of such Person or
its Restricted Subsidiaries in respect of any Capital Lease Obligation allocable
to interest expense in accordance with GAAP; (iv) the portion of any rental
obligation of such Person or its Restricted Subsidiaries in respect of any Sale
and Leaseback Transaction allocable to interest expense (determined as if such
were treated as a Capital Lease Obligation); and (v) to the extent any
Indebtedness of any other Person is guaranteed by such Person or any of its
Restricted Subsidiaries, the aggregate amount of interest paid, accrued or
scheduled to be paid or accrued by such other Person during such period
attributable to any such Indebtedness, less (B) to the extent included in (A)
above, amortization or write-off of deferred financing costs of such Person and
its Restricted Subsidiaries during such period and any charge related to any
premium or penalty paid in connection with redeeming or retiring any
Indebtedness of such Person and its Restricted Subsidiaries prior to its stated
maturity; in the case of both (A) and (B) above, after elimination of
intercompany accounts among such Person and its Restricted Subsidiaries and as
determined in accordance with GAAP. For purposes of clause (ii) above, dividend
requirements attributable to any Preferred Stock or Disqualified Stock shall be
deemed to be an amount equal to the amount of dividend requirements on such
Preferred Stock or Disqualified Stock times a fraction, the numerator of which
is the amount of such dividend requirements, and the denominator of which is one
minus the applicable combined federal, state, local and foreign income tax rate
of the Company and its Restricted Subsidiaries (expressed as a decimal), on a
consolidated basis, for the fiscal year immediately preceding the date of the
transaction giving rise to the need to calculate Consolidated Interest Expense.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the
aggregate net income (or net loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis determined in accordance
with GAAP; provided that there shall be excluded therefrom, without duplication,
(i) all items classified as extraordinary, unusual or nonrecurring, (ii) for any
Person (the "Other Person") in which the Person in question or any of its
Restricted Subsidiaries has less than a 100% interest which interest does not
cause the net income of such Other Person to be consolidated into the net income
of the Person in question in accordance with GAAP) any net income of such Other
Person, except to the extent of the amount of dividends or other distributions
actually paid to such Person or its Restricted Subsidiaries by such Other Person
during such period, (iii) the net income of any Person acquired by such Person
or any of its Restricted Subsidiaries in a pooling-of-interests transaction for
any period prior to the date of the related acquisition, (iv) any gain or loss,
net of taxes, realized on the termination of any employee pension
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benefit plan, (v) net gains (but not net losses) in respect of Asset Sales by
such Person or its Restricted Subsidiaries, (vi) the net income (but not net
loss) of any Restricted Subsidiary of such Person to the extent that the payment
of dividends or other distributions to such Person is restricted by the terms of
its charter or any agreement, instrument, contract, judgment, order, decree,
statute, rule, governmental regulation or otherwise, except for any dividends or
distributions actually paid by such Restricted Subsidiary to such Person, and
(vii) with regard to a non-Wholly-Owned Restricted Subsidiary, any aggregate net
income (or loss) in excess of such Person's or such Restricted Subsidiary's pro
rata share of such non-Wholly-Owned Restricted Subsidiary's net income (or
loss).
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries, as
determined on a consolidated basis in accordance with GAAP, less amounts
attributable to Disqualified Stock of such Person.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee
at which at any particular time its corporate trust business shall be
principally administered, which office is, at the date of execution of this
Agreement, located at 101 Barclay Street, Floor 21W, New York, New York 10286,
Attention: Corporate Trust Department.
"DEFAULT" means any event, act or condition, the occurrence of which
is, or after notice or the passage of time or both would be, an Event of
Default.
"DEFAULT RATE" with respect to any Note for any period of
determination means the interest rate borne by such Note during such period plus
2%.
"DEFAULT WARRANT CERTIFICATE" has the meaning set forth in SECTION
1.1.
"DEFAULT WARRANTS" has the meaning set forth in SECTION 1.1(f).
"DISPOSITION" has the meaning set forth in the definition of "ASSET
SALE" in this SECTION 13.1.
"DISQUALIFIED STOCK" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, or otherwise, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof or is exchangeable for
Indebtedness at any time, in whole or in part, on or prior to the date on which
the Notes mature.
"DOMINION RESOURCES" means Dominion Resources Inc.
"DRAFT AMENDMENT" has the meaning set forth in SECTION 9.29.
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"EBITDA" means, with respect to any Person for any period, the sum
for such Person for such period of Consolidated Net Income plus, to the extent
reflected in the income statement of such Person for such period from which
Consolidated Net Income is determined, without duplication, (i) Consolidated
Interest Expense, (ii) income tax expense of such Person and its consolidated
Subsidiaries, (iii) depreciation expense, (iv) amortization expense, (v) any
non-cash expense related to the issuance to employees of such Person of options
to purchase Capital Stock of such Person and (vi) any charge related to any
premium or penalty paid in connection with redeeming or retiring any
Indebtedness prior to its Stated Maturity and minus, to the extent reflected in
such income statement, any non-cash credits that had the effect of increasing
Consolidated Net Income of such Person for such period.
"ELIGIBLE CASH EQUIVALENTS" means (i) securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits,
certificates of deposit, or Eurodollar deposits of any commercial bank organized
in the United States having capital and surplus in excess of $500,000,000 or a
commercial bank organized under the laws of any other country that is a member
of the Organization for Economic Cooperation and Development ("OECD") and has
total assets in excess of $500,000,000 with a maturity date not more than one
year from the date of acquisition, (iii) repurchase obligations with a term of
not more than seven days for underlying securities of the types described in
clause (i) above entered into with any bank meeting the qualifications specified
in clause (ii) above, (iv) direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing, or subject to tender at the option of the
holder thereof, within ninety days after the date of acquisition thereof and, at
the time of acquisition having a rating of A or better from Standard & Poor's or
A-2 or better from Moody's, (v) commercial paper issued by the parent
corporation of any commercial bank organized in the United States having capital
and surplus in excess of $500,000,000 or a commercial bank organized under the
laws of any other country that is a member of the OECD and has total assets in
excess of $500,000,000 and commercial paper issued by non-bank issuers rated A-1
by Standard & Poor's or P-1 by Moody's and in each case maturing within 270 days
after the date of acquisition, (vi) overnight bank deposits and bankers'
acceptances at any commercial bank organized in the United States having capital
and surplus in excess of $500,000,000 or a commercial bank organized under the
laws of any other country that is a member of the OECD and has total assets in
excess of $500,000,000, (vii) deposits available for withdrawal on demand with a
commercial bank organized in the United States having capital and surplus in
excess of $500,000,000 or a commercial bank organized under the laws of any
other country that is a member of the OECD and has total assets in excess of
$500,000,000, (viii) investments in money market funds substantially all of
whose assets comprise securities of the types described in clauses (i) through
(vi), and (ix) with respect to a Restricted Subsidiary conducting operations in
the Russian Federation or Kazakstan, demand deposits, certificates of deposit
and bank promissory notes denominated in Russian Roubles or Kazak Tenge, as the
case may be,
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and used for ordinary course of business operations by such Restricted
Subsidiary solely in the jurisdiction where such Restricted Subsidiary does
business.
"ENVIRONMENTAL LAWS" means any and all federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"EQUITY ISSUANCE" means the issuance by the Company after the
Closing Date of any of its Capital Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE RATE OBLIGATION" means, with respect to any Person, any
currency swap agreements, forward exchange rate agreements, foreign currency
futures or options, exchange rate collar agreements, exchange rate insurance and
other agreements or arrangements, or combination thereof, designed to provide
protection against fluctuations in currency exchange rates.
"EXCLUDED TAXES" has the meaning set forth in SECTION 9.21.
"EXISTING CONVERTIBLE NOTE COLLATERAL" means all "collateral"
referred to in the Existing Convertible Note Collateral Documents and all other
Property or assets that become subject to a Lien in favor of the Existing
Convertible Note Trustee or a collateral agent for the benefit of the Existing
Convertible Note Trustee and the holders of the Existing Convertible Notes and,
if the Existing Senior Notes are outstanding and the Existing Senior Note
Indenture so requires, for the benefit of the Existing Senior Note Trustee and
the holders of the Existing Senior Notes, but Existing Convertible Note
Collateral shall not include the Existing Senior Note Collateral.
"EXISTING CONVERTIBLE NOTE COLLATERAL DOCUMENTS" means the Company
Existing Convertible Note Security and Pledge Agreement among the Company, the
Existing Convertible Note Trustee, the Trustee and the collateral agent named
therein, the Company Existing Convertible Note Escrow Account Agreement among
the Company, the Existing Convertible Note Trustee, the Trustee and the escrow
agent named therein, and/or
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any other document creating a Lien that secures the Existing Convertible Notes
other than the Existing Senior Note Collateral Documents, all as such documents
are defined in or otherwise described in the Existing Convertible Note
Indenture.
"EXISTING CONVERTIBLE NOTE GUARANTORS" means NWE Cyprus, PLD
Leasing, PLD Capital, WTC and BCL.
"EXISTING CONVERTIBLE NOTE INDENTURE" means the Indenture, dated the
date hereof, among the Company, the Existing Convertible Note Guarantors and The
Bank of New York, as trustee thereunder, relating to the Existing Convertible
Notes, as amended and supplemented from time to time.
"EXISTING CONVERTIBLE NOTE TRUSTEE" means The Bank of New York, as
trustee under the Existing Convertible Note Indenture and any successor
appointed in accordance with the terms thereof.
"EXISTING CONVERTIBLE NOTES" means the 9% Convertible Subordinated
Notes due 2006 of the Company issued pursuant to the Existing Convertible Note
Indenture.
"EXISTING INDEBTEDNESS" means Indebtedness outstanding on the
Closing Date and disclosed in SCHEDULE IV attached hereto.
"EXISTING SENIOR NOTE COLLATERAL" means all "collateral" referred to
in the Existing Senior Note Collateral Documents and all other Property or
assets that become subject to a Lien in favor of the Existing Senior Note
Trustee or a collateral agent for the benefit of the Existing Senior Note
Trustee and the holders of the Existing Senior Notes and, if the Existing
Convertible Notes are outstanding and the Existing Convertible Note Indenture so
requires, for the benefit of the Existing Convertible Note Trustee and the
holders of the Existing Convertible Notes, but Existing Senior Note Collateral
shall not include Existing Convertible Note Collateral.
"EXISTING SENIOR NOTE COLLATERAL DOCUMENTS" means the Company Senior
Note Security Agreement, the Company Senior Note Escrow Account Agreement, the
Leasing Company Security Agreements, the Leasing Company Escrow Account
Agreements, the NWE Cyprus Senior Notes Security Agreement and/or any other
document creating a Lien that secures the Existing Senior Notes other than the
Existing Convertible Note Collateral Documents.
"EXISTING SENIOR NOTE GUARANTEES" means the guaranties of the
Existing Senior Note Guarantors pursuant to Article X of the Existing Senior
Note Indenture.
"EXISTING SENIOR NOTE GUARANTORS" means NWE Cyprus, PLD Leasing, PLD
Capital, WTC and BCL, any other Leasing Company, any Person that becomes a
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Wholly-Owned Subsidiary of the Company after the Issue Date and any other
Subsidiaries that guarantee any Indebtedness of the Company or any Existing
Senior Note Guarantor.
"EXISTING SENIOR NOTE INDENTURE" means the Indenture, dated as of
May 31, 1996, among the Company, the Existing Senior Note Guarantors and The
Bank of New York, as trustee thereunder, relating to the Existing Senior Notes,
as amended and supplemented from time to time.
"EXISTING SENIOR NOTE TRUSTEE" means The Bank of New York, as
trustee under the Existing Senior Note Indenture and any successor appointed in
accordance with the terms thereof.
"EXISTING SENIOR NOTES" means the 14% Senior Discount Notes due 2004
of the Company issued pursuant to the Existing Senior Note Indenture.
"EXISTING WARRANTS" means the warrants for the purchase of shares of
Common Stock of the Company issued by the Company pursuant to the warrant
agreement, dated as of May 31, 1996, between the Company and the warrant agent
named therein. .
"FAIR MARKET VALUE" means, with respect to any asset or Property,
the net sale value that would be obtained in an arm's-length transaction between
an informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy, as determined in good faith by the
Board of Directors of the Company or a Restricted Subsidiary, as applicable.
"FINAL AMENDMENT" has the meaning set forth in SECTION 9.29.
"GAAP" means United States generally accepted accounting principles,
consistently applied, as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States, that are applicable to the circumstances as of the date of
determination; provided that, except as otherwise specifically provided, all
calculations made for purposes of determining compliance with the terms of the
provisions of this Agreement shall utilize GAAP as in effect on the Issue Date.
"GOVERNMENTAL AUTHORITY" means (a) the government of the United
States of America or any State or other political subdivision thereof, or any
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any Property of the Company or
any Subsidiary, or (b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
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"GUARANTEE" means any direct or indirect obligation, contingent or
otherwise, of a Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person in any manner (and
"guaranteed", "guaranteeing" and "guarantor" shall have meanings correlative to
the foregoing).
"GUARANTEED INDEBTEDNESS" has the meaning set forth in SECTION 9.11
hereof.
"GUARANTEE" means a guarantee of a Subsidiary Guarantor pursuant to
the Subsidiary Guaranty.
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
SECTION 14.1.
"INCUR" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or obligation on the balance sheet of such Person (and
"incurrence", "incurred", "incurrable" and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness. Indebtedness otherwise
incurred by a Person before it becomes a Restricted Subsidiary of the Company
shall be deemed to have been incurred at the time at which it becomes a
Restricted Subsidiary.
"INDEBTEDNESS" means at any time (without duplication), with respect
to any Person, whether recourse is to all or a portion of the assets of such
Person, and whether or not contingent, (i) any obligation of such Person for
money borrowed, (ii) any obligation of such Person evidenced by bonds,
debentures, notes, guarantees or other similar instruments, including, without
limitation, any such obligations incurred in connection with the acquisition of
Property, assets or businesses, excluding trade accounts payable made in the
ordinary course of business, (iii) any reimbursement obligation of such Person
with respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of such Person, (iv) any obligation of such Person issued
or assumed as the deferred purchase price of Property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business, which in either case are not more than 60 days overdue or which are
being contested in good faith), (v) any Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Disqualified Stock of
such Person and, to the extent held by other Persons, the maximum fixed
redemption or repurchase price of Disqualified Stock of such Person's Restricted
Subsidiaries, at the time of determination, (vii) the notional amount of any
Interest Hedging Obligations or Exchange Rate Obligations of such Person at the
time of determination, (viii) any Attributable Indebtedness with respect to any
Sale and Leaseback
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Transaction to which such Person is a party and (ix) any obligation of the type
referred to in clauses (i) through (viii) of this definition of another Person
and all dividends and distributions of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise. For purposes of the preceding
sentence, the maximum fixed repurchase price of any Disqualified Stock that does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Stock as if such Disqualified Stock were repurchased
on any date on which Indebtedness shall be required to be determined pursuant
hereto; provided that if such Disqualified Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of such Disqualified
Stock. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability of any guarantees at such date; provided that
for purposes of calculating the amount of the Existing Senior Notes outstanding
at any date, such amount shall be the Accreted Value thereof (as defined in the
Existing Senior Note Indenture) as of such date unless cash interest has
commenced to accrue pursuant to the terms of the Existing Senior Notes, in which
case the amount of the Existing Senior Notes outstanding will be determined
pursuant to the terms of the Existing Senior Notes and will not include any
accrued and unpaid cash interest which would otherwise be included in Accreted
Value because of clause (iii) of the definition thereof.
"INDEBTEDNESS TO OPERATING CASH FLOW RATIO" means, as at any date of
determination, the ratio of (i) the aggregate amount of Indebtedness of the
Company and its Restricted Subsidiaries on a consolidated basis as of the date
of determination to (ii) the aggregate amount of EBITDA of the Company and its
Restricted Subsidiaries for the four preceding fiscal quarters for which
financial information is available immediately prior to the date of
determination; provided that any Indebtedness incurred or retired by the Company
or any of its Restricted Subsidiaries during the fiscal quarter in which the
date of determination occurs shall be calculated as if such Indebtedness was so
incurred or retired on the first day of the fiscal quarter in which the date of
determination occurs; and provided, further, that (x) if the transaction giving
rise to the need to calculate the Indebtedness to Operating Cash Flow Ratio
would have the effect of increasing or decreasing Indebtedness or EBITDA in the
future, Indebtedness or EBITDA shall be calculated on a pro forma basis as if
such transaction had occurred on the first day of such four fiscal quarter
period preceding the date of determination, and (y) if during such four fiscal
quarter period, the Company or any of its Restricted Subsidiaries shall have
engaged in any Asset Sale, EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive), or increased by an amount equal to the EBITDA
(if negative), directly attributable to the assets which are the subject of such
Asset Sale and any related retirement of Indebtedness as if such Asset Sale and
related retirement of Indebtedness had occurred on the first day of such four
fiscal quarter period or (z) if during such four fiscal quarter period the
Company or any of its Restricted Subsidiaries shall have acquired any material
assets outside the ordinary course of business, EBITDA shall be calculated on a
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pro forma basis as if such asset acquisition and related financing had occurred
on the first day of such four fiscal quarter period.
"INITIAL WARRANTS" has the meaning set forth in SECTION 1.1.
"INSTITUTIONAL INVESTOR" means (a) any original Lender hereunder,
(b) any holder of a Note having a Commitment Percentage in excess of 5%, and (c)
any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
"INTERCOMPANY NOTES" means a promissory note representing
Indebtedness of a Restricted Subsidiary owing to the Company or a Restricted
Subsidiary, which, if representing a loan of net proceeds of the Existing Senior
Notes to a Leasing Company, shall have substantially the same Maturity as the
Existing Senior Notes and substantially the same interest payment dates, the
same interest rate and substantially the same covenants as are contained in the
Existing Senior Note Indenture and the Existing Senior Note Collateral Documents
and shall be secured by the applicable Telecommunications Asset Leases and by
the applicable Qualified Investments.
"INTEREST HEDGING OBLIGATION" means, with respect to any Person, an
obligation of such Person pursuant to any interest rate swap agreement, interest
rate cap, collar or floor agreement or other similar agreement or arrangement
designed to protect against or manage such Person's or any of its Restricted
Subsidiaries' exposure to fluctuations in interest rates.
"INTERNATIONAL VENDOR INDEBTEDNESS" means Indebtedness of the
Company or any Restricted Subsidiary other than the Leasing Companies or NWE
Cyprus incurred or assumed in connection with the purchase within 180 days of
such incurrence or assumption of Property or assets to be used in the business
of such Person or any of its Restricted Subsidiaries in the Russian Federation
or Kazakstan; provided that the net cash proceeds from the issuance of such
Indebtedness do not exceed 100% of the lesser of the cost or Fair Market Value
of the Property or assets constructed or acquired.
"INVENTORY" means, with respect to any Person, all present or future
inventory in which a Person has any interest, including goods, wares and
merchandise held for sale or lease or leased or furnished or to be leased or
furnished under a contract of service and all of a Person's present and future
raw materials, work in process, finished goods, parts, components, assemblies,
and packing and shipping materials, wherever located, and documents of title
representing any of the above.
"INVESTMENT" in any Person means any direct, indirect or contingent
(i) advance or loan to, guarantee of any Indebtedness of, or extension of credit
or capital contribution to, such Person, (ii) the acquisition of any shares of
Capital Stock, bonds,
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notes, debentures or other securities of such Person, or (iii) the acquisition,
by purchase or otherwise, of all or substantially all of the business, assets or
stock or other evidence of beneficial ownership of such Person; provided that
Investments shall exclude accounts receivable and other extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices. The amount of an Investment shall be the original cost of such
Investment, plus the cost of all additions thereto and minus the amount of any
portion of such Investment repaid to such Person in cash as a repayment of
principal or a return of capital, as the case may be, but without any other
adjustments for increases or decrease in value, or write-ups, write-downs or
write-offs with respect to such Investment. In determining the amount of any
Investment involving a transfer of any Property other than cash, such Property
shall be valued at its Fair Market Value at the time of such transfer.
"ISSUE DATE" means the date on which the Existing Senior Notes were
first authenticated and delivered under the Existing Senior Note Indenture,
being June 12, 1996.
"JOINDER AGREEMENT" means a joinder agreement in the form attached
as Exhibit A to the Subsidiary Guaranty.
"JOINT VENTURE" means a Telecommunications Company of which less
than 50 percent of the Voting Stock is held by the Company, provided that the
Telecommunications Business of such Person is principally conducted in the
Russian Federation and/or Kazakstan.
"LEASING COMPANY" means a special purpose Cypriot corporation which
is an Existing Senior Note Guarantor and a Wholly-Owned Restricted Subsidiary
organized for the limited purpose of acquiring Telecommunications Assets and
leasing such Telecommunications Assets to Restricted Subsidiaries pursuant to
Telecommunications Asset Leases and/or making Qualified Investments permitted by
this Agreement. Each Leasing Company will have corporate organizational
documents containing the provisions set forth on SCHEDULE VII attached hereto.
Each Leasing Company must execute a Leasing Company Security Agreement and a
Leasing Company Escrow Account Agreement.
"LEASING COMPANY ESCROW ACCOUNT" means an escrow account established
pursuant to a Leasing Company Escrow Account Agreement.
"LEASING COMPANY ESCROW ACCOUNT AGREEMENT" means a Leasing Company
Escrow Account Agreement among the Leasing Company party thereto, the Trustee
and the escrow agent named therein in the form attached as Exhibit H to the
Existing Senior Note Indenture.
"LEASING COMPANY SECURITY AGREEMENT" means a Leasing Company
Security and Pledge Agreement among the Leasing Company party thereto, the
Trustee,
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the Existing Convertible Note Trustee and the collateral agent named therein, in
the form attached as Exhibit I to the Existing Senior Note Indenture.
"LENDERS" has the meaning set forth in SECTION 2.
"LIEN" means, with respect to any Property or other asset, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien (statutory or other), charge, easement,
encumbrance, preference, priority or other security or similar agreement or
preferential arrangement of any nature whatsoever on or with respect to such
Property or other asset (including, without limitation, any conditional sale or
title retention agreement having substantially the same economic effect as any
of the foregoing).
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, Property, or prospects of the Company and
its Subsidiaries taken as a whole; "MATERIALLY" shall have a correlative
meaning.
"MATURITY" means, when used with respect to an Existing Senior Note,
the date on which the principal of such Existing Senior Note becomes due and
payable as provided therein or in the Existing Senior Note Indenture, whether at
Stated Maturity, on the Change of Control Payment Date or purchase date
established pursuant to the terms of the Existing Senior Note Indenture with
regard to a Existing Senior Note Change of Control Offer or an Existing Senior
Note Asset Sale Offer, as applicable, or by declaration of acceleration, call
for redemption or otherwise.
"MATERIAL ADVERSE CHANGE; MATERIAL ADVERSE EFFECT; MATERIALLY
ADVERSE" in, on or to, as appropriate, any Person, means a material adverse
change in such Person's Business or Condition, a material adverse effect on such
Person's Business or Condition or an event which is materially adverse to such
Person's Business or Condition; provided that (a) any such term, when used
without reference to a particular Person, shall mean such change in, effect on
or event materially adverse to the Company and (b) any material impairment of
the ability of the Company to pay the principal of or interest on the Notes in
accordance with the terms thereof and hereof, any material impairment of the
ability of the Company to perform its other obligations under the Notes, this
Agreement, the Warrant Agreement or the Security Documents, or any circumstance
or occurrence which would impair the enforceability as against the Company of
this Agreement, the Warrant Agreement, the Security Documents or the Notes, or
which would materially and adversely affect the value of the Collateral, or
which could materially and adversely affect the enforceability and priority of
any Security Document, shall in any case be deemed to have resulted in a
material adverse change in, to have a material adverse effect on, and to be
materially adverse to, the Company's Business or Condition.
"MOODY'S" means Moody's Investors Service, Inc., or, if Moody's
Investors Service, Inc. shall cease rating the specified debt securities and
such ratings
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business with respect thereto shall have been transferred to a successor Person,
such successor Person; provided that if Moody's Investors Service, Inc. ceases
rating the specified debt securities and its ratings business with respect
thereto shall not have been transferred to any successor Person or such
successor Person is Standard & Poor's, then "Moody's" shall mean any other
nationally recognized rating agency (other than Standard & Poor's) that rates
the specified debt securities selected by the Trustee.
"MULTIEMPLOYER PLAN" means a plan defined as such in Section 3 (37)
of ERISA and subject thereto to which any Company Group Member is making or
incurring an obligation to make, or has made or incurred an obligation to make,
contributions.
"MULTIPLE EMPLOYER PLAN" means a Plan to which any Company Group
Member, and at least one employer other than a Company Group Member, is making
or incurring an obligation to make contributions or has made or incurred an
obligation to make contributions.
"NAVONA" means Navona Communications Corporation, Ltd., a
wholly-owned indirect Subsidiary of Cable & Wireless.
"NET CASH PROCEEDS" means, with respect to the sale of any Property
or assets by any Person or any of its Restricted Subsidiaries, Cash Proceeds
(other than any liabilities assumed by the transferee constituting Cash Proceeds
referred to in the proviso contained in the definition of "Cash Proceeds" set
forth in this SECTION 13.1) received, net of (i) all reasonable out-of-pocket
expenses of such Person or such Restricted Subsidiary incurred in connection
with such sale, including, without limitation, all legal, title and recording
tax expenses, commissions and other fees and expenses incurred (but excluding
any finder's fee or broker's fee payable to any Affiliate of such Person) and
all federal, state, foreign and local taxes arising in connection with such sale
that are paid or required to be accrued as a liability under GAAP by such Person
or its Restricted Subsidiaries, (ii) all payments made or required to be made by
such Person or its Restricted Subsidiaries on any Indebtedness which is secured
by such Property or other assets in accordance with the terms of any Lien upon
or with respect to such Property or other assets or which must, by the terms of
such Lien, or in order to obtain a necessary consent to such transaction or by
applicable law, be repaid in connection with such sale and (iii) all
contractually required distributions and other payments made to minority
interest holders (but excluding distributions and payments to Affiliates of such
Person) in Restricted Subsidiaries of such Person as a result of such
transaction; provided that, in the event that any consideration for a
transaction (which would otherwise constitute Net Cash Proceeds) is required to
be held in escrow pending determination of whether a purchase price adjustment
will be made, such consideration (or any portion thereof) shall become Net Cash
Proceeds only at such time as it is released to such Person or its Restricted
Subsidiaries from escrow; provided, further, that any non-cash consideration
received in connection with any transaction, which is subsequently converted to
cash, shall be deemed to be Net Cash Proceeds at such time, and shall thereafter
be applied in accordance with this Agreement.
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"NON-U.S. HOLDER" has the meaning set forth in SECTION 9.21.
"NOTES" has the meaning set forth in SECTION 1.1.
"NWE CYPRUS EXISTING SENIOR NOTE SECURITY AGREEMENT" means the NWE
Cyprus Senior Note Security and Pledge Agreement among NWE Cyprus, the Trustee,
the Existing Convertible Note Trustee and the collateral agent named therein,
relating to the pledge of the Capital Stock of WTC, in the form attached as
Exhibit J to the Existing Senior Note Indenture.
"NWE CYPRUS" means NWE Capital (Cyprus) Limited, a Cypriot
corporation and Wholly-Owned Subsidiary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman
of the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
Chief Operating Officer, the President or a Vice President, and by the Chief
Financial Officer, the Chief Accounting Officer, the Secretary or an Assistant
Secretary of the Company, a Subsidiary Guarantor or a Restricted Subsidiary, as
applicable, and delivered to the holders of the Notes (and, if applicable, the
Trustee), which shall comply with this Agreement.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be
counsel for the Company (including inside counsel of the Company), and who shall
be acceptable to the holders of the Notes.
"OTHER LENDERS" has the meaning set forth in SECTION 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"PERMITTED HOLDERS" means Cable & Wireless, Navona and Dominion
Resources and their respective Affiliates (other than the Company and the
Restricted Subsidiaries).
"PERMITTED INVESTMENTS" means (i) Eligible Cash Equivalents; (ii)
Investments in Property used in the ordinary course of business; (iii)
Investments in any Wholly-Owned Restricted Subsidiary or any Person as a result
of which such Person becomes a Wholly-Owned Restricted Subsidiary, provided that
the aggregate amount of Investments in non-Existing Senior Note Guarantor
Wholly-Owned Subsidiaries shall be $1,000,000, reduced by any repayments of
loans or advances, return of capital or other distributions of Property but only
to the extent that such repayments, returns or distributions are not included in
the calculation of Consolidated Net Income of the Company); (iv) Investments
pursuant to certain agreements or obligations of the Company or a Restricted
Subsidiary, in effect on the Issue Date, to make such Investments, and disclosed
on Schedule 1.1(c) attached to the Existing Senior Note Indenture; (v)
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Investments in the Leasing Companies of funds constituting the net proceeds of
the Existing Senior Notes; (vi) Investments in Restricted Subsidiaries and
Qualified Joint Ventures by the Leasing Companies; provided that such
Investments shall be made as Telecommunications Asset Leases; (vii) Qualified
Investments, if (a) such Qualified Investments are made with no more than
$9,000,000 of net proceeds of the Notes contained in the Company Existing Senior
Note Escrow Account or in Leasing Company Escrow Accounts, and are otherwise
made in compliance with the applicable conditions contained in Section 11.4 of
the Existing Senior Note Indenture, (b) such Qualified Investments are made with
funds in the Leasing Company Escrow Accounts or, if applicable, the Company
Existing Senior Note Escrow Account not representing net proceeds of the Notes
in compliance with the applicable conditions contained in Section 11.4 of the
Existing Senior Note Indenture, provided that the aggregate amount of Qualified
Investments constituting Capital Stock or other equity pursuant to this clause
(b) shall be $9,000,000 reduced by any return of capital or other distributions
of Property but only to the extent that such returns or distributions are not
included in the calculation of Consolidated Net Income of the Company, (c) such
Qualified Investments are made directly by the Company with the proceeds of
distributions, dividends or payments by Technocom to the Company or loans by
Technocom to the Company, or are utilized by the Company to make an intercompany
loan to a Leasing Company evidenced by an Intercompany Note (which Leasing
Company thereupon shall make such Qualified Investments with the proceeds of
such Investment by the Company so long as such Qualified Investments are made in
compliance with the terms of the Existing Convertible Note Indenture, provided,
that the aggregate amount of Qualified Investments constituting Capital Stock or
other equity that pursuant to this clause (c) shall be $5,000,000 reduced by any
return of capital or other distribution of Property but only to the extent that
such returns or distributions are not included in the calculation of
Consolidated Net Income of the Company, (d) such Qualified Investment is Capital
Stock of a Restricted Subsidiary, which Investment has the effect of increasing
the percentage of ownership interest of the Company or a Restricted Subsidiary
in Capital Stock of such Restricted Subsidiary, or (e) such Qualified Investment
is in a Person that as a result of such Qualified Investment becomes a
Restricted Subsidiary of the Company; (viii) Investments by Restricted
Subsidiaries which are lessees under Telecommunications Asset Leases, provided
that such Investments shall be made as a sublease of the Telecommunications
Assets subject to the Telecommunications Asset Leases to which such Restricted
Subsidiary is a party as lessee; (ix) Investments in Restricted Subsidiaries,
provided that such Investments in excess of an aggregate principal amount of
$5,000,000 shall be made as loans evidenced by Intercompany Notes or such
Investments are Technocom Preferred Stock and are made with funds constituting
proceeds of the Existing Senior Notes; (x) Investments in prepaid expenses,
negotiable instruments held for collection and lease, utility and workers'
compensation, performance and other similar deposits; (xi) Interest Hedging
Obligations with respect to any floating rate Indebtedness that is permitted by
the terms of this Agreement to be outstanding, (xii) Exchange Rate Obligations,
provided that such Exchange Rate Obligations were entered into in connection
with transactions in the ordinary course of business or the incurrence of
Indebtedness that is permitted by the terms
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of this Agreement to be outstanding; (xiii) bonds, notes, debentures or other
debt securities received as a result of Asset Sales permitted under SECTION 9.9
hereof, and (xiv) Investments in existence on the Issue Date.
"PERMITTED LIENS" means (i) Liens created by the Security Documents
or that otherwise secure the payment of the Notes, the Guarantees and other
obligations under this Agreement and the Security Documents; (ii) Liens on
Property or assets of a Person existing at the time such Person is merged into
or consolidated with the Company or any Restricted Subsidiary of the Company or
becomes a Restricted Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
secure any Property or assets of the Company or any of its Restricted
Subsidiaries other than the Property or assets subject to the Liens prior to
such merger or consolidation; (iii) Liens on Property or assets existing at the
time of acquisition thereof by the Company or any Restricted Subsidiary,
provided that such Liens were not given in contemplation of such acquisition;
(iv) Liens to secure the payment of all or a part of the purchase price or
construction cost of Property or assets acquired or constructed in the ordinary
course of business after the Issue Date, provided that the Indebtedness secured
by such Liens shall not exceed the lesser of 80% of the cost or Fair Market
Value of the Property or assets acquired or constructed and such Liens shall not
extend to any other Property or assets; (v) Liens incurred or deposits made to
secure the performance of tenders, bids, leases not constituting Capitalized
Lease Obligations, statutory or regulatory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the ordinary
course of business consistent with industry practice; (vi) Liens existing as of
the Closing Date and disclosed in SCHEDULE IV attached hereto and any additional
Liens under the Existing Senior Note Indenture and the Existing Senior Note
Collateral Documents or under the Existing Convertible Note Indenture and the
Existing Convertible Note Collateral Documents which may arise after the Closing
Date; (vii) Liens on Receivables and Inventory of the Company and its Restricted
Subsidiaries to secure Indebtedness permitted to be incurred under clause (i) of
SECTION 9.10(b) hereof; (viii) any Lien on Property of the Company in favor of
the United States of America or any state thereof, or any instrumentality of
either, to secure certain payments pursuant to any contract or statute; (ix) any
Lien for taxes or assessments or other governmental charges or levies not then
due and payable (or which, if due and payable, are being contested in good faith
and for which adequate reserves are being maintained, to the extent required by
GAAP); (x) easements, rights-of-way, licenses and other similar restrictions on
the use of Property or minor imperfections of title that, in the aggregate, are
not material in amount and do not in any case materially detract from the
Property subject thereto or interfere with the ordinary conduct of the business
of the Company or its Restricted Subsidiaries; (xi) any Lien to secure
obligations under workmen's compensation laws or similar legislation, including
any Lien with respect to judgments which are not currently dischargeable; (xii)
any statutory warehousemen's, materialmen's or other similar Liens for sums not
then due and payable (or which, if due and payable, are being contested in good
faith and with respect to which adequate reserves are being maintained, to the
extent required by GAAP); (xiii) Liens to secure any International Vendor
Indebtedness, provided that such Liens do
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not extend to any Property or assets other than the Property or assets the
acquisition of which was financed by such Indebtedness; (xiv) Liens in favor of
the Company or any Wholly-Owned Restricted Subsidiary, including Liens securing
the Intercompany Notes and the Telecommunications Asset Leases; (xv) Liens in
favor of Technocom securing any leases by Technocom of Telecommunications Assets
to its Restricted Subsidiaries; (xvi) Liens in favor of a Restricted Subsidiary
which is a lessee under a Telecommunications Asset Lease securing a sublease of
such Telecommunications Assets to its Restricted Subsidiary, (xvii) Liens
securing reimbursement obligations with respect to letters of credit that
encumber documents and other Property relating to such letters of credit and the
products and proceeds thereof; and (xviii) Liens to secure any permitted
extension, renewal, refinancing or refunding (or successive extensions,
renewals, refinancings or refundings), in whole or in part, of any Indebtedness
secured by Liens referred to in the foregoing clauses (ii) and (iii), provided
that such Liens do not extend to any other Property or assets and the principal
amount of the Indebtedness secured by such Liens is not increased.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PETERSTAR" means PeterStar Company Limited, a Russian joint stock
company of the closed typed organized under the laws of the Russian Federation
and a Restricted Subsidiary.
"PLAN" means any employee pension benefit plan (as defined in
Section 3(2) of ERISA and subject thereto) maintained or contributed to at any
time by any Company Group Member.
"PLD CAPITAL" means PLD Capital Limited, a Cypriot corporation.
"PLD LEASING" means PLD Asset leasing Limited, a Cypriot
corporation.
"PLEDGE AGREEMENT" has the meaning set forth in SECTION 1.2(b).
"PLEDGED SHARES" means the up to 28 ordinary shares of Technocom
that are to be purchased with the proceeds of the Series A Revolving Credit
Loans made on the Closing Date and upon such purchase become subject to the Lien
of the Pledge Agreement, and any and all dividends, distributions, payments and
proceeds thereof, as more particularly defined in the Pledge Agreement.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
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"PROPERTY" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, excluding Capital Stock in any other Person.
"QUALIFIED INVESTMENT" means an Investment in a Telecommunications
Company primarily engaged or proposing to engage in the Telecommunications
Business in the Russian Federation or Kazakstan.
"QUALIFIED JOINT VENTURE" means a Joint Venture in which the Company
owns directly or indirectly Voting Stock thereof on the Issue Date, which Joint
Ventures are disclosed in Schedule 1.1(e) attached to the Existing Senior Note
Indenture, and any future Joint Venture in which the Company owns 20% or more of
the Voting Stock thereof.
"QUALIFIED STOCK" of any Person means a class of Capital Stock other
than Disqualified Stock.
"RECEIVABLES" means, with respect to any Person, all of the
following Property and interests in Property of such Person, whether now
existing or existing in the future or hereafter acquired or arising: (i)
accounts, (ii) accounts receivable, including, without limitation, all rights to
payment created by or arising from sales of goods, leases of goods or the
rendition of services no matter how evidenced, whether or not earned by
performance, (iii) all unpaid seller's or lessor's rights including, without
limitation, rescission, replevin, reclamation and stoppage in transit, relating
to any of the foregoing or arising therefrom, (iv) all rights to any goods or
merchandise represented by any of the foregoing after creation of the foregoing,
including, without limitation, returned or repossessed goods, (v) all reserves
and credit balances with respect to any such accounts receivable or account
debtors, (vi) all letters of credit, security or guarantees for any of the
foregoing, (vii) all insurance policies or reports relating to any of the
foregoing, (viii) all collection or deposit accounts relating to any of the
foregoing, (ix) all proceeds of any of the foregoing, and (x) all books and
records relating to any of the foregoing.
"REFINANCE" has the meaning set forth in SECTION 9.10(b)(xii)
hereof. The terms "Refinanced" and "Refinancing" shall have correlative
meanings.
"REFINANCING INDEBTEDNESS" means any Indebtedness incurred in
connection with the Refinancing of other Indebtedness.
"REGISTRATION AGREEMENT" has the meaning set forth in SECTION 4.10
hereof.
"REPLACEMENT ASSETS" has the meaning set forth in SECTION 9.9(b)
hereof.
"REPLACEMENT TELECOMMUNICATION ASSETS" has the meaning set forth in
SECTION 9.9(b)(ii) hereof.
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"REPORTABLE EVENT" means any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder.
"REQUIRED DEDUCTIONS" has the meaning set forth in SECTION 8.3(e)
hereof.
"REQUIRED HOLDERS" means, at any time, the holders of Notes having
Commitment Percentages aggregating more than 50% (without regard to Series),
exclusive of Notes then owned by the Company or any of its Affiliates.
"REQUIRED RESERVES" has the meaning set forth in SECTION 8.3(e)
hereof.
"RESPONSIBLE OFFICER" means the President, any Vice-President, the
General Counsel, any Senior Financial Officer and any other officer of the
Company with responsibility for the administration of the relevant portion of
this Agreement.
"RESTRICTED PAYMENT" means (i) a dividend or other distribution
declared or paid on the Capital Stock of the Company or to the Company's
stockholders (in their capacity as such), or declared or paid to any Person
other than to the Company or any Restricted Subsidiary of the Company on the
Capital Stock of any Restricted Subsidiary of the Company, in each case, other
than dividends, distributions or payments made solely in Qualified Stock of the
Company or such Restricted Subsidiary, (ii) a payment made by the Company or any
of its Restricted Subsidiaries (other than to the Company or any Restricted
Subsidiary of the Company) to purchase, redeem, acquire or retire any Capital
Stock of the Company or of a Restricted Subsidiary of the Company, (iii) a
payment made by the Company or any of its Restricted Subsidiaries (other than a
payment made solely in Qualified Stock of the Company) to redeem, repurchase,
defease (including an in-substance or legal defeasance) or otherwise acquire or
retire for value (including pursuant to mandatory repurchase covenants), prior
to any scheduled maturity, scheduled sinking fund or mandatory redemption
payment, Indebtedness of the Company or such Restricted Subsidiary which is
subordinate (whether pursuant to its terms or by operation of law) in right of
payment to the Notes, or the Guarantees, as applicable) or which was scheduled
to mature on or after the maturity of the Existing Senior Notes or (iv) an
Investment in any Person, including an Unrestricted Subsidiary or the
designation of a Subsidiary as an Unrestricted Subsidiary, other than a
Permitted Investment.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has
not been classified as an "Unrestricted Subsidiary."
"REVOLVING CREDIT FACILITIES" means revolving credit agreements to
which the Company and the Restricted Subsidiaries are or become parties, and all
related amendments, notes, collateral documents, guarantees, instruments and
other agreements executed in connection therewith, as the same may be amended,
modified, supplemented, restated, renewed, extended, refinanced, substituted or
replaced from time to time.
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"REVOLVING CREDIT LOANS" means, collectively, the Series A Revolving
Credit Loans and the Series B Revolving Credit Loans; each of the Series A
Revolving Credit Loans and the Series B Revolving Credit Loans are sometimes
herein referred to separately as a "SERIES" of Revolving Credit Loans.
"SALE AND LEASEBACK TRANSACTION" means, with respect to any Person,
any direct or indirect arrangement pursuant to which Property is sold or
transferred by such Person or a Restricted Subsidiary of such Person and is
thereafter leased back from the purchaser or transferee thereof by such Person
or one of its Restricted Subsidiaries.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SECURITY AGREEMENT" has the meaning set forth in SECTION 1.2(b).
"SECURITY DOCUMENTS" has the meaning set forth in SECTION 1.2(b).
"SELLING SHAREHOLDERS" means Plicom Limited, an Irish company, and
Elite International Limited, an Irish company.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SERIES A AVAILABILITY PERIOD" means the period from and including
the Closing Date to but excluding the earlier of (a) the date five Business Days
prior to the Series A Maturity Date and (b) the termination of the Series A
Commitments of the Lenders in accordance with the terms hereof.
"SERIES A COMMITMENT" of each holder of Series A Notes has the
meaning set forth in SECTION 8.1(a).
"SERIES A MATURITY DATE" means December 31, 1998.
"SERIES A NOTES" has the meaning set forth in SECTION 1.1(a).
"SERIES A REVOLVING CREDIT LOAN" and "SERIES A REVOLVING CREDIT
LOANS" have the respective meanings set forth in SECTION 8.1(a).
"SERIES A WARRANT CERTIFICATE" has the meaning set forth in SECTION
1.1(c).
"SERIES A WARRANTS" has the meaning set forth in SECTION 1.1(c).
"SERIES B AVAILABILITY PERIOD" means the period from and including
the Closing Date to but including the earlier of (a) the date five Business Days
prior to the
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Series B Maturity Date and (b) the termination of the Series B Commitments of
the Lenders in accordance with the terms hereof.
"SERIES B COMMITMENT" of each holder of Series B Notes has the
meaning set forth in SECTION 8.1(b).
"SERIES B MATURITY DATE" means September 30, 1998.
"SERIES B NOTES" has the meaning set forth in SECTION 1.1(b).
"SERIES B REVOLVING CREDIT LOAN" and "SERIES B REVOLVING CREDIT
LOANS" has the meaning set forth in SECTION 8.1(b).
"SERIES B WARRANT CERTIFICATE" has the meaning set forth in SECTION
1.1(d).
"SERIES B WARRANTS" has the meaning set forth in SECTION 1.1(d).
"SHARE MORTGAGE" has the meaning set forth in SECTION 1.2(b).
"SHARE PURCHASE AGREEMENT" and "SHARE PURCHASE AGREEMENTS" have the
respective meanings set forth in SECTION 4.8.
"SHARE TRANSFER FORM" has the meaning set forth in SECTION 4.13(b).
"SIGNIFICANT RESTRICTED SUBSIDIARY" means a Restricted Subsidiary
that is a "significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X
under the Securities Act and the Exchange Act.
"STANDARD & POOR'S" means Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or if Standard & Poor's Ratings Group shall cease
rating the specified debt securities and such ratings ceases with respect
thereto shall have been transferred to a successor Person, such successor
Person, provided that if Standard & Poor's Ratings Group ceases rating the
specified debt securities and its ratings business with respect thereto shall
not have been transferred to any successor Person or such successor Person is
Moody's, then "Standard & Poor's" shall mean any other materially recognized
rating agency selected by the Trustee.
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred), and, when used with respect
to any installment of interest on such security, the fixed date on which such
installment of interest is due and payable.
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"SUBSIDIARY" means, with respect to any Person, (i) any corporation
more than 50% of the outstanding shares of Voting Stock of which is owned,
directly or indirectly, by such Person, or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries of such
Person, (ii) any general partnership, joint venture or similar entity, more than
50% of the outstanding partnership or similar interests of which are owned,
directly or indirectly, by such Person, or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries of such
Person, or (iii) any limited partnership of which such Person or any Subsidiary
of such Person is a general partner, and BECET, provided that the Company owns
directly or indirectly 50% of the then outstanding shares of Voting Stock of
BECET.
"SUBSIDIARY GUARANTY" has the meaning set forth in SECTION 1.2(a).
"SUBSIDIARY GUARANTORS" means WTC, BCL and any Person that becomes a
Wholly-Owned Restricted Subsidiary of the Company after the Closing Date and any
other Subsidiary (other than any Leasing Company and NWE Cyprus) that guarantees
any Indebtedness of the Company or any Subsidiary Guarantor.
"SURVIVING ENTITY" has the meaning set forth in SECTION 10.1.
"TAXES" has the meaning set forth in SECTION 9.21.
"TECHNOCOM" means Technocom Limited, an Irish corporation and a
Restricted Subsidiary, including any transferee in a Disposition contemplated in
clause (iv) of the definition of "Asset Sale" set forth in this SECTION 13.1.
"TECHNOCOM PREFERRED STOCK" means all Preferred Stock of Technocom
owned directly or indirectly by the Company.
"TECHNOCOM PUT AGREEMENTS" means [TO COME].
"TECHNOCOM SHARES" has the meaning specified in SECTION 4.8.
"TECHNOCOM SHAREHOLDER AGREEMENT" means the Subscription and
Shareholder Agreement relating to Technocom Limited dated December 28, 1994
among the Company, Plicom Limited, Elite International Limited, Technocom, Mark
Klabin and Boris Antoniuk, as amended.
"TELECOMMUNICATIONS ASSET LEASE" means a lease by a Leasing Company
of Telecommunications Assets to Restricted Subsidiaries and Qualified Joint
Ventures in the Russian Federation and Kazakstan, which leases will be Existing
Senior Note Collateral.
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"TELECOMMUNICATIONS ASSETS" means, with respect to any Person,
assets (including, without limitation, rights of way, trademarks and licenses to
use copyrighted material), that are utilized by such Person, directly or
indirectly, in a Telecommunications Business. For purposes of determining a
Telecommunications Company but not for purposes of determining whether Property
or assets may be subject to a Telecommunications Asset Lease, Telecommunications
Assets shall also include stock, joint venture or partnership interests in
another Person, provided that substantially all of the assets of such other
Person consist of Telecommunications Assets, and provided, further, that if such
stock, joint venture or partnership interests are held by the Company or a
Restricted Subsidiary, such other Person either is, or immediately following the
relevant transaction shall become, a Restricted Subsidiary of the Company
pursuant to this Agreement. The determination of what constitutes
Telecommunication Assets shall be made by the Board of Directors of the Company
and evidenced by a Board Resolution delivered to the Trustee.
"TELECOMMUNICATIONS BUSINESS" means the business of (i)
transmitting, or providing services relating to the transmission of, voice,
video or data through owned or leased transmission facilities, (ii) creating,
developing or marketing communications related network equipment, software and
other devices for use in (i) above or (iii) evaluating, participating or
pursuing any other activity or opportunity that is related to those specified in
(i) or (ii) above and includes, without limitation, any business which the
Company and its Restricted Subsidiaries were currently engaged on the Issue
Date.
"TELECOMMUNICATIONS COMPANY" means any Person substantially all of
the assets of which consist of Telecommunications Assets.
"TERMINATION EVENT" means (a) with respect to any Plan, the
occurrence of a Reportable Event or an event described in Section 4062(e) of
ERISA, or (b) the withdrawal of any Company Group Member from a Multiple
Employer Plan during a plan year in which it was a substantial employer (as such
term has the meaning set forth in Section 4001(a)(2) of ERISA), or the
termination of a Multiple Employer Plan, or (c) the distribution of a notice of
intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2)
or 4041A of ERISA or the treatment of a Plan amendment as a termination under
Section 4041 or 4041A of ERISA, or (d) the institution of proceedings to
terminate a Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA,
or (e) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or Multiemployer Plan or (f) the complete or partial
withdrawal of any Company Group Member from a Multiemployer Plan.
"THIS AGREEMENT" has the meaning set forth in SECTION 18.3.
"TOTAL SERIES A COMMITMENT" means $12,400,000, as such amount may be
reduced from time to time as provided in this Agreement.
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"TOTAL SERIES B COMMITMENT" means $3,100,000, as such amount may be
reduced from time to time as provided in this Agreement.
"TOTAL COMMITMENT" means, at any date of determination, the sum of
the Total Series A Commitment plus the Total Series B Commitment.
"TRUST AGREEMENT" has the meaning set forth in SECTION 1.2(b).
"TRUSTEE" has the meaning set forth in SECTION 1.2(b).
"UNFUNDED CURRENT LIABILITY" of any Plan subject to the provisions
of Title IV of ERISA or Sections 302 of ERISA or 412 of the Code means the
amount, if any, by which the present value of the accrued benefits under such
Plan (based on those assumptions used to fund such Plan) as of the close of its
most recent plan year exceeds the then current value of the assets of such Plan
allocable to such benefits.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company that
the Company has classified as an "Unrestricted Subsidiary," and that has not
been reclassified as a Restricted Subsidiary, pursuant to the terms of this
Agreement.
"VOTING STOCK" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or at the times that such class of Capital Stock has
voting power by reason of the happening of any contingency) to vote in the
election of members of the board of directors or comparable body of such Person.
"WARRANT" has the meaning set forth in SECTION 1.1.
"WARRANT AGENT" has the meaning set forth in SECTION 1.1(c).
"WARRANT AGREEMENT" has the meaning set forth in SECTION 1.1(c).
"WARRANT CERTIFICATES" has the meaning set forth in SECTION 1.1.
"WARRANT SHARES" means the shares of Common Stock of the Company
issuable upon exercise of the Warrants.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted
Subsidiary, all of the outstanding Capital Stock (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
"WTC" means Wireless Technology Corporations Limited, a British
Virgin Islands corporation.
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14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
14.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, within 5 Business Days, at the Company's expense (except as
provided below), one or more new Notes (as requested by the holder thereof) in
exchange therefor, of the same Series and in an aggregate principal amount equal
to the unpaid principal amount of the surrendered Note. Each such new Note shall
be payable to such Person as such holder may request and shall be substantially
in the form of the Note of such Series set forth in EXHIBIT A-1 OR A-2, as
applicable. Each such new Note shall be dated and bear interest from the date to
which interest shall have been paid on the surrendered Note or dated the date of
the surrendered Note if no interest shall have been paid thereon. The Company
may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $1,000,000, provided that, if
necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $1,000,000. Any
transferee, by its acceptance of a Note registered in its name (or the name of
its nominee), shall be bound by all agreements of the Lenders contained in this
Agreement (including, without limitation, the agreement to make Revolving Credit
Loans from time to time in accordance with SECTION 8) and shall be deemed to
have made the representations set forth in SECTIONS 6.1 AND 6.2 or shall provide
a representation reasonably acceptable to the Company to the effect that the
purchase by or assignment to such transferee of such Note does not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
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14.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the ownership of and the loss, theft, destruction or mutilation of any
Note (which evidence shall be, in the case of an Institutional Investor, notice
from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company (provided that if the holder of
such Note is, or is a nominee for, an original Lender or another holder of
a Note with a minimum net worth of at least $50,000,000, such Person's own
unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, within 5 Business
Days, in lieu thereof, a new Note, dated and bearing interest from the date to
which interest shall have been paid on such lost, stolen, destroyed or mutilated
Note or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
15. PAYMENTS ON NOTES.
15.1. PLACE OF PAYMENT.
Subject to SECTION 15.2, payments of principal, interest, Additional
Amounts, if any, and Commitment Fees, if any, becoming due and payable in
respect of the Notes shall be made in New York, New York at the principal office
of The Chase Manhattan Bank, N.A. in such jurisdiction. The Company may at any
time, by notice to each holder of a Note, change the place of payments in
respect of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
15.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in SECTION 15.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
interest, Additional Amounts (if any) and Commitment Fees (if any) by the method
and at the address specified for such purpose below your name in SCHEDULE I, or
by such other method or at such other address as you shall have from time to
time specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or repayment in full of any Note, you shall
surrender such Note for cancellation, reasonably promptly after any such
request, to the Company
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at its principal executive office or at the place of payment most recently
designated by the Company pursuant to SECTION 15.1. Prior to any sale or other
disposition of any Note held by you or your nominee you will, at your election,
either endorse thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Note to the Company in
exchange for a new Note or Notes pursuant to SECTION 14.2. The Company will
afford the benefits of this SECTION 15.2 to any Institutional Investor that is
the direct or indirect transferee of any Note purchased by you under this
Agreement and that has made the same agreement relating to such Note as you have
made in this SECTION 15.2.
16. EXPENSES, ETC.
16.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all reasonable costs and expenses (including reasonable
attorneys' fees of one special counsel and local Irish counsel) incurred by you
and each Other Lender or holder of a Note in connection with the preparation of,
and in connection with any amendments, waivers or consents under or in respect
of, this Agreement, the Warrant Agreement, the Registration Agreement, the
Warrants, the Security Documents or the Notes (whether or not such amendment,
waiver or consent becomes effective), including, without limitation: (a) the
reasonable costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under this Agreement, the
Warrant Agreement, the Registration Agreement, the Warrants, the Security
Documents or the Notes or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement, the
Warrant Agreement, the Registration Agreement, the Warrants, the Security
Documents or the Notes, or by reason of being a holder of any Note or Warrant,
and (b) the costs and expenses, including financial advisors' fees, incurred in
connection with the insolvency or bankruptcy or restructuring of the Company or
any Restricted Subsidiary or in connection with any work-out or restructuring of
the transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note or Warrant harmless from, all
claims in respect of any fees, costs or expenses if any, of brokers and finders
(other than fees, costs or expenses to which you become subject with respect to
any Person retained by you or on the basis of any act or statement made by you
or any Person retained by you).
16.2. SURVIVAL.
The obligations of the Company under this SECTION 16 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
93
<PAGE> 100
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the making by you of any Revolving
Credit Loan or the transfer by you of any Note or portion thereof or interest
therein and the payment of any Note, and may be relied upon by any subsequent
holder of a Note, regardless of any investigation made at any time by or on
behalf of you or any other holder of a Note. Subject to the preceding sentence,
this Agreement, the Warrant Agreement, the Registration Agreement, the Warrants,
the Security Documents and the Notes embody the entire agreement and
understanding between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
18. AMENDMENT AND WAIVER.
18.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of SECTION 1, 2, 3, 4, 5, 6, 21 or 22 hereof, or any defined term (as
it is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of SECTION 12 relating to acceleration or rescission, change the
amount or time of any repayment or payment of principal of, or change the rate
or change the time of payment or method of computation of interest on the Notes,
(ii) change the percentage of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver, or (iii) amend
any of SECTIONS 8, 11(a), 11(b), 12 or 18.
18.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Company will provide each holder of the
Notes (irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this SECTION 18 to each holder of outstanding Notes promptly
94
<PAGE> 101
following the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Notes then outstanding
even if such holder did not consent to such waiver or amendment.
18.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this SECTION 18
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of the Company or of any holder of such Note. As used
herein, the term "THIS AGREEMENT" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
18.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
19. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
95
<PAGE> 102
(i) if to you or your nominee, to you or it at the address
specified for such communications in SCHEDULE I, or at such other address
as you or it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of Chief Financial Officer (with a
copy to Morgan, Lewis & Bockius LLP, at 101 Park Avenue, New York, New
York 10178, Attention: H. Franklin Bloomer, Jr.), or at such other address
as the Company shall have specified to the holder of each Note in writing.
Notices under this SECTION 19 will be deemed given only when actually received.
20. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may hereafter
be executed, (b) documents received by you at the Closing (except the Notes and
the Warrant Certificate themselves), and (c) financial statements, certificates
and other information previously or hereafter furnished to you, may be
reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This SECTION 20 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
21. SUBSTITUTION OF LENDER.
You shall have the right to substitute any one of your Affiliates as
the lender of the Revolving Credit Loans you have agreed to provide hereunder,
by written notice to the Company, which notice shall be signed by both you and
such Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in SECTION 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this SECTION 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate,
96
<PAGE> 103
upon receipt by the Company of notice of such transfer, wherever the word "you"
is used in this Agreement (other than in this SECTION 21), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to you, and you
shall have all the rights of an original holder of the Notes under this
Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or interest on or Additional
Amounts (if any) or Commitment Fees (if any) in respect of any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
97
<PAGE> 104
22.5. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of New
York excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
98
<PAGE> 105
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
PLD TELEKOM INC.
By /s/ E. Clive Anderson
-------------------------------------
Name: E. Clive Anderson
Title: Senior Vice President
The foregoing is hereby
agreed to as of the
date thereof.
THE TRAVELERS INSURANCE COMPANY
By /s/ Craig H. Farnsworth
-------------------------------------
Name: Craig H. Farnsworth
Title: Second Vice President
THE TRAVELERS INDEMNITY COMPANY
By /s/ Craig H. Farnsworth
-------------------------------------
Name: Craig H. Farnsworth
Title: Second Vice President
99
<PAGE> 106
INFORMATION RELATING TO LENDERS
<TABLE>
<CAPTION>
====================================================================================================================================
Principal Amount of Principal Amount of
Series A Notes and Series B Notes and
Series A Revolving Series B Revolving
Credit Commitment; Credit Commitment;
Number of Shares of Number of Shares of
Common Stock Common Stock
Initially Purchasable Initially Purchasable
Upon Exercise of Upon Exercise of Commitment
Name and Address of Lender Series A Warrants Series B Warrants Percentage
-------------------------- ----------------- ----------------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THE TRAVELERS INSURANCE COMPANY $7,560,000; $1,890,000 61%
192,150 shares 65,880 shares
- ------------------------------------------------------------------------------------------------------------------------------------
Notes to be registered in the name of "TRAL & CO."
- ------------------------------------------------------------------------------------------------------------------------------------
(1) All payments on account of the Notes shall be made in immediately
available funds at the opening of business on the due date by
Federal funds wire transfer to:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, MY 10081
ABA No. 021000021
For credit to: The Travelers Insurance Company --
Consolidated Private Placement
Account No. 910-2-587434
with sufficient information to identify the source and
application of such funds
</TABLE>
SCHEDULE I
<PAGE> 107
<TABLE>
<CAPTION>
====================================================================================================================================
Principal Amount of Principal Amount of
Series A Notes and Series B Notes and
Series A Revolving Series B Revolving
Credit Commitment; Credit Commitment;
Number of Shares of Number of Shares of
Common Stock Common Stock
Initially Purchasable Initially Purchasable
Upon Exercise of Upon Exercise of Commitment
Name and Address of Lender Series A Warrants Series B Warrants Percentage
-------------------------- ----------------- ----------------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(2) All notices with respect to such payments should be
directed to:
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183-2030
Attention: Securities Department --Cashier
Fax: (860) 277-2299
- ------------------------------------------------------------------------------------------------------------------------------------
(3) All other communications should be directed to:
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183-2030
Attention: Securities Department -- Private
Placements
Fax: (860) 954-5243
Tax I.D. No. 06-0566090
</TABLE>
2
<PAGE> 108
<TABLE>
<CAPTION>
====================================================================================================================================
Principal Amount of Principal Amount of
Series A Notes and Series B Notes and
Series A Revolving Series B Revolving
Credit Commitment; Credit Commitment;
Number of Shares of Number of Shares of
Common Stock Common Stock
Initially Purchasable Initially Purchasable
Upon Exercise of Upon Exercise of Commitment
Name and Address of Lender Series A Warrants Series B Warrants Percentage
-------------------------- ----------------- ----------------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
THE TRAVELERS INDEMNITY COMPANY $4,840,000; $1,210,000; 39%
122,850 shares 42,120 shares
- ------------------------------------------------------------------------------------------------------------------------------------
Notes to be registered in the name of "TRAL & CO."
- ------------------------------------------------------------------------------------------------------------------------------------
(1) All payments on account of the Notes shall be made in
immediately available funds at the opening of business
on the due date by Federal funds wire transfer to:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, MY 10081
ABA No. 021000021
For credit to: The Travelers Insurance Company --
Consolidated Private Placement
Account No. 910-2-587434
with sufficient information to identify the source and
application of such funds
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 109
<TABLE>
<CAPTION>
====================================================================================================================================
Principal Amount of Principal Amount of
Series A Notes and Series B Notes and
Series A Revolving Series B Revolving
Credit Commitment; Credit Commitment;
Number of Shares of Number of Shares of
Common Stock Common Stock
Initially Purchasable Initially Purchasable
Upon Exercise of Upon Exercise of Commitment
Name and Address of Lender Series A Warrants Series B Warrants Percentage
-------------------------- ----------------- ----------------- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
(2) All notices with respect to such payments should be directed to:
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183-2030
Attention: Securities Department --Cashier
Fax: (860) 277-2299
(3) All other communications should be directed to:
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183-2030
Attention: Securities Department -- Private
Placements
Fax: (860) 954-5243
Tax I.D. No. 06-0566050
</TABLE>
4
<PAGE> 110
EXHIBIT A-1
[FORM OF SERIES A REVOLVING CREDIT NOTE]
PLD TELEKOM INC.
12% SERIES A SENIOR SECURED REVOLVING CREDIT NOTE DUE 1998
No. [_____] [Date]
$[_______] Private Placement No. 69340T A*1
FOR VALUE RECEIVED, the undersigned, PLD TELEKOM INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to [ ], or registered assigns, on December
31, 1998 the principal sum of [ ] DOLLARS, or, if less, the aggregate principal
amount outstanding of Series A Revolving Credit Loans (as defined in the
Revolving Credit Agreement referred to below) made by the holder hereof to the
Company pursuant to the Revolving Credit Agreement referred to below, with
interest (computed on the basis of the actual number of days elapsed over a
360-day year) (a) on the unpaid balance thereof at the rate of 12% per annum,
payable monthly on the last day of each month after the date hereof, until the
principal hereof shall have become due and payable; provided, however that in
the event that the Company shall not have satisfied certain conditions relating
to an Equity Issuance (as defined in the Revolving Credit Agreement referred to
below) as more fully described in the final paragraph of SECTION 1.1 of the
Revolving Credit Agreement referred to below, the interest rate borne by this
Note shall be increased from 12% to 15% per annum for the period commencing June
1, 1998 until maturity, such interest to be computed and payable as otherwise
heretofore provided, and (b) to the extent permitted by law, on any overdue
payment (including any overdue repayment) of principal, any overdue payment of
interest and any overdue payment of any Additional Amounts or Commitment Fees
(as such terms are defined in the Revolving Credit Agreement referred to below)
at a rate equal to 2% over the applicable interest rate determined as provided
in the preceding subclause (a), payable monthly as aforesaid or, at the option
of the registered holder hereof, on demand.
Payments of principal of, interest on and any Additional Amounts and
Commitment Fees with respect to this Note are to be made in lawful money of the
United States of America at the principal office in New York, New York of The
Chase Manhattan Bank, N.A. or at such other place as the Company shall have
designated by written notice to the holder of this Note as provided in the
Revolving Credit Agreement referred to below.
This Note is one of the duly authorized 12% Series A Senior Secured
Revolving Credit Notes due 1998 (herein called the "Notes") issued pursuant to
the Revolving Credit and Warrant Agreement, dated as of November 26, 1997 (as
from time to time amended, the "Revolving Credit Agreement"), between the
Company and the respective Lenders named therein and is entitled to the benefits
thereof. All of the terms, conditions and covenants of the Revolving Credit
Agreement are expressly made a part of this Note by reference in the same manner
and with the same effect as if set forth herein.
<PAGE> 111
This Note is a registered Note and, as provided in the Revolving
Credit Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary. Any transferee of this Note, by its acceptance hereof, agrees to
be bound by all the terms, conditions and covenants of the Revolving Credit
Agreement applicable to a holder of a Note or a Series A Note (as defined in the
Revolving Credit Agreement), as applicable.
The Notes are guaranteed by the Subsidiary Guarantors (as defined in
the Revolving Credit Agreement) pursuant to a Guaranty Agreement, dated as of
November 26, 1997 by the Subsidiary Guarantors for the benefit of the holders
from time to time of the Notes, and are also entitled to the benefits of certain
security held by The Bank of New York or its successor at the time acting as
trustee (the "TRUSTEE") under a Trust Agreement, dated as of November 26, 1997
(the "TRUST AGREEMENT"), between the Company and the Trustee, such security
consisting of the Collateral referred to therein granted by the Company to the
Trustee pursuant to the Security Documents referred to therein, pursuant to
which the Company has granted to the Trustee security interests in such
Collateral. Reference is made to such Trust Agreement and such Security
Documents for a description of the nature and extent of the security afforded
thereby and the rights of the Trustee and the holders of the Notes in respect
thereof. The registered holder of this Note may inspect such Trust Agreement and
such Security Documents at the principal office of the Trustee upon request.
As provided in the Revolving Credit Agreement, the Series A
Revolving Credit Loans evidenced by this Note are subject to optional repayments
and mandatory repayments, in whole and in part, all as specified in the
Revolving Credit Agreement.
If an Event of Default, as defined in the Revolving Credit
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price and with the
effect provided in the Revolving Credit Agreement.
This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New
York, excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
PLD TELEKOM INC.
By_________________________
[TITLE]
-2-
<PAGE> 112
EXHIBIT A-2
[FORM OF SERIES B REVOLVING CREDIT NOTE]
PLD TELEKOM INC.
12% SERIES B SENIOR REVOLVING CREDIT NOTE DUE 1998
No. [_____] [Date]
$[_______] Private Placement No. 69340T A@9
FOR VALUE RECEIVED, the undersigned, PLD TELEKOM INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to [ ], or registered assigns, on September
30, 1998 the principal sum of [ ] DOLLARS, or, if less, the aggregate principal
amount outstanding of Series B Revolving Credit Loans (as defined in the
Revolving Credit Agreement referred to below) made by the holder hereof to the
Company pursuant to the Revolving Credit Agreement referred to below, with
interest (computed on the basis of the actual number of days elapsed over a
360-day year) (a) on the unpaid balance thereof at the rate of 12% per annum,
payable monthly on the last day of each month after the date hereof, until the
principal hereof shall have become due and payable; provided, however that in
the event that the Company shall not have satisfied certain conditions relating
to an Equity Issuance (as defined in the Revolving Credit Agreement referred to
below) as more fully described in the final paragraph of SECTION 1.1 of the
Revolving Credit Agreement referred to below, the interest rate borne by this
Note shall be increased from 12% to 15% per annum for the period commencing June
1, 1998 until maturity, such interest to be computed and payable as otherwise
heretofore provided, and (b) to the extent permitted by law, on any overdue
payment (including any overdue repayment) of principal, any overdue payment of
interest and any overdue payment of Additional Amounts or Commitment Fees (as
such terms are defined in the Revolving Credit Agreement referred to below) at a
rate equal to 2% over the applicable interest rate determined as provided in the
preceding subclause (a), payable monthly as aforesaid or, at the option of the
registered holder hereof, on demand.
Payments of principal of, interest on and any Additional Amounts and
Commitment Fees with respect to this Note are to be made in lawful money of the
United States of America at the principal office in New York, New York of The
Chase Manhattan Bank, N.A. or at such other place as the Company shall have
designated by written notice to the holder of this Note as provided in the
Revolving Credit Agreement referred to below.
This Note is one of the duly authorized 12% Series B Senior
Revolving Credit Notes due 1998 (herein called the "Notes") issued pursuant to
the Revolving Credit and Warrant Agreement, dated as of November 26, 1997 (as
from time to time amended, the "Revolving Credit Agreement"), between the
Company and the respective Lenders named therein and is entitled to the benefits
thereof. All of the terms, conditions and covenants of the Revolving Credit
Agreement are expressly made a part of this Note by reference in the same manner
and with the same effect as if set forth herein
<PAGE> 113
This Note is a registered Note and, as provided in the Revolving
Credit Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary. Any transferee of this Note, by its acceptance hereof, agrees to
be bound by all the terms, conditions and covenants of the Revolving Credit
Agreement applicable to a holder of a Note or a Series B Note (as defined in the
Revolving Credit Agreement), as applicable.
The Notes are guaranteed by the Subsidiary Guarantors (as defined in
the Revolving Credit Agreement) pursuant to a Guaranty Agreement, dated as of
November 26, 1997 by the Subsidiary Guarantors for the benefit of the holders
from time to time of the Notes, and are also entitled to the benefits of certain
security held by The Bank of New York or its successor at the time acting as
trustee (the "TRUSTEE") under a Trust Agreement, dated as of November 26, 1997
(the "TRUST AGREEMENT"), between the Company and the Trustee, such security
consisting of the Collateral referred to therein granted by the Company to the
Trustee pursuant to the Security Documents referred to therein, pursuant to
which the Company has granted to the Trustee security interests in such
Collateral. Reference is made to such Trust Agreement and such Security
Documents for a description of the nature and extent of the security afforded
thereby and the rights of the Trustee and the holders of the Notes in respect
thereof. The registered holder of this Note may inspect such Trust Agreement and
such Security Documents at the principal office of the Trustee upon request.
As provided in the Revolving Credit Agreement, the Series B
Revolving Credit Loans evidenced by this Note are subject to optional repayments
and mandatory repayments, in whole and in part, all as specified in the
Revolving Credit Agreement.
If an Event of Default, as defined in the Revolving Credit
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price and with the
effect provided in the Revolving Credit Agreement.
This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New
York, excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
PLD TELEKOM INC.
By_________________________
[Title]
-2-
<PAGE> 114
EXHIBIT H-1
to
Revolving Credit Agreement
Description of Closing Opinion to be delivered by Company's Special and
Irish Counsel
The closing opinions of (i) Morgan, Lewis & Bockius, LLP, special
counsel to the Company, to be delivered pursuant to Section 4.5(a) of the
Revolving Credit Agreement, (ii) in-house counsel to the Company and (iii) A & L
Goodbody, special Irish counsel to the Company, to be delivered pursuant to
Section 4.5(b) of the Revolving Credit Agreement, shall be dated the Closing
Date and addressed to the Lenders and the Trustee, shall be satisfactory in form
and substance to the Lenders, and together shall be to the effects that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing and has a legal corporate existence under
the laws of the State of Delaware and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
2. The Company has all requisite power and authority to own
or hold under lease the Property it purports to own or hold under lease,
to carry on its business as now conducted and as proposed to be conducted,
to enter into the Revolving Credit Agreement, the Notes, the Trust
Agreement, the Pledge Agreement, the Share Pledge, the Security Agreement,
the Warrant Agreement, the Warrants and the Registration Agreement (all
such documents being referred to herein as the "Company Documents") and to
consummate the transactions contemplated by, and perform its obligations
under, the Company Documents, including the issuance and delivery of the
Notes and the Warrants and the issuance of the Common Stock of the Company
issuable upon exercise of the Warrants.
3. The execution and delivery by the Company of the Company
Documents, and the performance by the Company of the transactions
contemplated thereby, have been duly authorized by all necessary corporate
action on the part of the Company (all action on the part of its
shareholders in connection therewith having been duly taken).
<PAGE> 115
4. Each of the Company Documents has been duly executed and
delivered on behalf of the Company by a duly authorized officer of the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time
in effect affecting the enforcement of creditors' rights generally, (b)
the application of general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law),
and (c) applicable state laws which may affect the availability of certain
of the remedies provided for in the Security Documents, which laws do not
in the opinion of such counsel, make the remedies provided for therein
inadequate for the ultimate practical realization of the benefits and
security intended to be afforded thereby. The Notes are entitled to the
benefits and security of the Trust Agreement, the Security Agreement, the
Pledge Agreement and the Share Mortgage.
5. Neither the execution or delivery by the Company of the
Company Documents, nor the performance by the Company of its obligations
thereunder nor the consummation by the Company of the transactions
contemplated thereby, will result in any breach of or be in conflict with
or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in a
loss of any benefit to which the Company is entitled under, or result in
(or require) the creation of any lien (other than the liens in favor or
for the benefit of the Trustee under the Security Documents) in respect of
any property of the Company under (a) the Company's articles of
incorporation or by-laws or (b) any existing statute, law, rule or
regulation, (c) the Existing Senior Note Indenture or the Existing
Convertible Note Indenture or any other credit or loan agreement,
indenture, mortgage, or other document or instrument evidencing or
governing the terms of indebtedness of the Company for borrowed money, (d)
any other agreement, instrument or license known to such counsel to which
the Company is a party or by which it or any of its properties is bound,
or (e) any order, judgment or decree known to such counsel of any court or
arbitrator or Governmental Body which is binding on the Company or any of
its Properties.
6. No order, consent, approval or authorization of, or
registration, filing or declaration with, or the taking of any other
action in respect of, any regulatory commission, board or other
administrative or governmental agency or arbitration body is required, (a)
for or in connection with the valid execution and delivery by the Company
of or the performance by the Company of its obligations under the Company
Documents or the consummation by the Company of the transactions
contemplated thereby or (b) as a condition to the legality, validity or
enforceability as against the Company of the Company Documents.
7. To the best knowledge of such counsel, there is no suit,
proceeding or investigation pending or threatened in any court or by or
before any regulatory
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<PAGE> 116
commission, board or other administrative or governmental agency or
arbitration body against the Company which questions the validity of the
Company Documents or which, if adversely determined, would have a Material
Adverse Effect.
8. It is not necessary in connection with the offer,
issuance and delivery of the Notes, the Initial Warrants and the
Additional Warrants on the date hereof under the circumstances
contemplated by the Revolving Credit Agreement to register such Notes,
Initial Warrants or Additional Warrants under the Securities Act or to
qualify an indenture in respect of the Notes under the Trust Indenture Act
of 1939, as amended.
9. The authorization, issuance and delivery of the Notes
and the Warrants and the borrowing of the Revolving Credit Loans evidenced
by the Notes on the Closing Date, in the manner contemplated by the
Revolving Credit Agreement, will not involve any violation of Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System.
10. The Company is not an "investment company" or a person
directly or indirectly "controlled" by or "acting on behalf of" an
"investment company", within the meaning of the Investment Company Act of
1940, as amended. The Company is not a "public-utility company" or a
"holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
11. The Security Agreement creates in favor of the Trustee a
valid security interest in the right, title and interest of the Company in
all personal property that is included in the "Collateral" (as defined in
the Security Agreement) and in respect of which a security interest may be
created under the Uniform Commercial Code as currently in effect in the
State of New York (the "New York UCC") (the "Security Agreement
Collateral").
12. Under Article 9 of the New York UCC ("Article 9 of the
New York UCC"), a security interest in the Security Agreement Collateral,
to the extent that a security interest may be created therein under
Article 9 of the New York UCC (the "UCC Collateral"), other than (a) UCC
Collateral in the form of instruments and money (perfection of which must
be accomplished by possession) and (b) UCC Collateral comprising
investment securities, in which a security interest can be perfected only
by possession or other action taken pursuant to Article 8 of the Uniform
Commercial Code of the State of New York is perfected by the filing of
financing statements under Article 9 of the New York UCC.
13. The financing statements executed by the Company and
naming the Company as debtor and the Trustee as secured party, as filed on
______________, 1997 in the offices of the Secretary of State of the State
of New York and the City Registrar in
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<PAGE> 117
New York County, New York, as more specifically described in Annex I to
such opinion (the "Financing Statements"), comply in all respects with
applicable provisions of Article 9 of the New York UCC and are in
appropriate form for filing under Article 9 of the New York UCC, and the
descriptions therein of the UCC Collateral covered by the Security
Agreement are sufficient to perfect the security interest created by the
Security Agreement in such UCC Collateral to the extent such security
interest may be perfected by filing a financing statement under Article 9
of the New York UCC. All filings in the State of New York necessary under
Article 9 of the New York UCC to perfect such security interests in the
UCC Collateral have been made and no other recording or filing of any
document or instrument is necessary under Article 9 of the New York UCC in
order to establish, preserve, perfect and protect the Trustee's security
interests in the UCC Collateral, except that continuation statements with
respect to the Financing Statements must be filed prior to each successive
fifth anniversary of the date of original filing thereof.
14. The security interest of the Trustee in that portion of
the UCC Collateral consisting of instruments and money located in the
State of New York (the "Possessory Collateral") shall be a perfected
security interest under Article 9 of the New York UCC upon delivery
thereof to the Trustee.
15. Except for the payment of filing fees in connection with
the filing of the Financing Statements, there are no recording,
documentary stamp, or other taxes or fees that must be paid in connection
with the execution, delivery, recordation or filing of any of the Company
Documents, the Financing Statements or any other document contemplated by
the Company Documents.
16. At the time of the Closing and after giving effect to
the transactions contemplated by this Agreement and the Warrant Agreement,
the authorized Capital Stock of the Company will consist of : (a)
100,000,000 shares of Common Stock, of which [__________] shares will be
issued and outstanding (plus shares issued upon the exercise of options or
warrants outstanding on the date hereof or options or similar rights
granted subsequent to the date hereof pursuant to the Company's Equity
Compensation Plan in effect on the date hereof), 423,000 shares will be
reserved by the Company for issuance by the Company upon exercise of the
Initial Warrants, 182,000 shares will be reserved by the Company for
issuance by the Company upon exercise of the Additional Warrants, [_____]
shares will be reserved by the Company for issuance by the Company upon
exercise of the Default Warrants, [_________] shares will be reserved by
the Company for issuance by the Company upon exercise of the Existing
Warrants, and [_________] shares will be reserved by the Company for
issuance upon conversion of the Existing Convertible Notes; and (b)
100,000,000 shares of Preferred Stock, par value $.01 per share, of which
[_______] shares will be issued and outstanding. All such authorized
Capital Stock has been duly and validly authorized, and all such
outstanding shares are, and all such shares to be issued will be, duly and
validly issued and outstanding, and are, or upon issuance will be, fully
paid and non-assessable. The Company (x) does not have outstanding any
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<PAGE> 118
stock or securities convertible into or exchangeable for any shares of its
Capital Stock, or any rights (preemptive or otherwise) or warrants to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any of its
Capital Stock, other than the Existing Warrants, the Existing Convertible
Notes and options and warrants outstanding on the date hereof or options
or similar rights granted subsequent to the date hereof pursuant to the
Company's stock option plans in effect on the date hereof, and (y) is not
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire any shares of its Capital Stock or any convertible
securities, rights or warrants, or options of the type described in the
foregoing subclause (x). The Company is not a party to any agreement
restricting the transfer of any shares of its Capital Stock. The Company
has filed, pursuant to Section 12 of the Exchange Act, a registration
statement relating to the Common Stock. The Company is not required to
file, nor has it filed, pursuant to Section 12 of such Act, a registration
statement relating to any other class of debt of equity securities.
17. The Pledge Agreement creates in favor of the Trustee a
valid security interest in the right, title and interest of the Company in
the Pledged Shares under the New York UCC. Upon the Trustee taking
possession of the certificates representing the Pledged Shares, the
security interest created by the Pledge Agreement will be perfected to the
extent a security interest therein may be perfected under the New York UCC
and, subject to the terms of the Pledge Agreement, such security interest
will remain perfected thereafter for so long as possession of such
certificates is retained by the Trustee.
18. Technocom is a company duly incorporated and validly
existing under the laws of Ireland.
19. The Share Mortgage creates a legal, valid and binding
obligation in a form capable of enforcement against the Company under the
laws of Ireland in the Courts of Ireland in accordance with its terms.
20. The Share Transfer Form and the Share Mortgage create in
favor of the Collateral Agent a first priority interest in the Pledged
Shares.
21. It is not necessary or advisable under the laws of
Ireland in order to ensure validity and enforceability and priority of the
obligations and rights of the Company under the Share Mortgage that it be
filed, registered, recorded or notarized in any public office or elsewhere
or that any other instrument relating thereto be signed, delivered, filed,
registered, or recorded other than the requirement for the Company to file
a Form 8E with the Irish Registrar of Companies within 21 days of
execution of the Share Mortgage.
22. The submission by the parties to the Legal Mortgage to
the exclusive jurisdiction of the Irish Courts will be upheld by the Irish
Courts.
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<PAGE> 119
23. No consent, approval, authorization or order of any
court, regulatory body, administrative agency, governmental body,
arbitration tribunal, board of directors of Technocom or shareholder of
Technocom is required for the Share Mortgage [save that on the exercise of
the power of sale upon foreclosure the approval of the board of directors
of Technocom must be obtained to the transfer of the ordinary shares to a
third party]. However, pursuant to the Written Resolution the board of
directors of Technocom have no right to refuse to register any transfer
executed pursuant to the Share Mortgage.
24. The holders of the remaining ordinary shares of
Technocom, which together with the Shares constitute the entire issued
ordinary share capital of Technocom, have waived their rights of
preemption they have in respect of the transfer of the Share to the
Collateral Agent pursuant to the Share Mortgage.
25. The Company is the registered owner of 160 ordinary
shares of IR pound sterling 1 each in the capital of Technocom
representing ____% of the issued ordinary share capital of Technocom.
-6-
<PAGE> 120
EXHIBIT I
to
Revolving Credit Agreement
NOTICE OF BORROWING
To Each Person Named on
Attached Schedule
The undersigned, PLD Telekom Inc. (the "Company"), refers to the
Revolving Credit Agreement, dated as of November 26, 1997 (as amended from time
to time, the "Revolving Credit Agreement", the terms defined therein being used
herein as therein defined), between the Company and you, and hereby gives you
notice, irrevocably, pursuant to Section 8.1(c) of the Revolving Credit
Agreement, that the undersigned hereby requests that you make Revolving Credit
Loans under the Revolving Credit Agreement, and in that connection sets forth
below the information relating to such Revolving Credit Loans (the "Proposed
Borrowing"):
(i) The Business Day of the Proposed Borrowing is __________,
19__;1
(ii) The aggregate principal amount of the Proposed Borrowing of
Series A Revolving Credit Loans is $____________.
(iii) The aggregate principal amount of the Proposed Borrowing of
Series B Revolving Credit Loans is $_____________.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in the Revolving
Credit Agreement are and will be true and correct in all material
respects, both before and after giving effect to the Proposed Borrowing
and to the application of the proceeds thereof, as though made on such
date (it being understood and agreed that any representation or warranty
which by its terms is made as of a specified date shall be required to be
true and correct in all material respects only as of such specified date);
- --------
1 Shall be a Business Day at least two Business Days after the date hereof.
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<PAGE> 121
(B) after giving effect to the Proposed Borrowing, outstanding
Series A Revolving Credit Loans shall not exceed the Available Series A
Revolving Commitment and outstanding Series of Revolving Credit Loans
shall not exceed the Available Series B Revolving Commitment; and
(C) no Default or Event of Default, and no event or condition
having a Material Adverse Effect, has occurred and is continuing, or would
result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
PLD TELEKOM INC.
By_________________________________
Name:
Title:
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<PAGE> 122
SCHEDULE OF ADDRESSEES
The Travelers Insurance Company
The Travelers Indemnity Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department -- Private Placements
Fax: (860) 954-5243
-3-
<PAGE> 1
EXHIBIT 4.22
[FORM OF SERIES A REVOLVING CREDIT NOTE]
PLD TELEKOM INC.
12% SERIES A SENIOR SECURED REVOLVING CREDIT NOTE DUE 1998
No. [_____] [Date]
$[_______] Private Placement No. 69340T A*1
FOR VALUE RECEIVED, the undersigned, PLD TELEKOM INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to [ ], or registered assigns, on December
31, 1998 the principal sum of [ ] DOLLARS, or, if less, the aggregate principal
amount outstanding of Series A Revolving Credit Loans (as defined in the
Revolving Credit Agreement referred to below) made by the holder hereof to the
Company pursuant to the Revolving Credit Agreement referred to below, with
interest (computed on the basis of the actual number of days elapsed over a
360-day year) (a) on the unpaid balance thereof at the rate of 12% per annum,
payable monthly on the last day of each month after the date hereof, until the
principal hereof shall have become due and payable; provided, however that in
the event that the Company shall not have satisfied certain conditions relating
to an Equity Issuance (as defined in the Revolving Credit Agreement referred to
below) as more fully described in the final paragraph of SECTION 1.1 of the
Revolving Credit Agreement referred to below, the interest rate borne by this
Note shall be increased from 12% to 15% per annum for the period commencing June
1, 1998 until maturity, such interest to be computed and payable as otherwise
heretofore provided, and (b) to the extent permitted by law, on any overdue
payment (including any overdue repayment) of principal, any overdue payment of
interest and any overdue payment of any Additional Amounts or Commitment Fees
(as such terms are defined in the Revolving Credit Agreement referred to below)
at a rate equal to 2% over the applicable interest rate determined as provided
in the preceding subclause (a), payable monthly as aforesaid or, at the option
of the registered holder hereof, on demand.
Payments of principal of, interest on and any Additional Amounts and
Commitment Fees with respect to this Note are to be made in lawful money of the
United States of America at the principal office in New York, New York of The
Chase Manhattan Bank, N.A. or at such other place as the Company shall have
designated by written notice to the holder of this Note as provided in the
Revolving Credit Agreement referred to below.
This Note is one of the duly authorized 12% Series A Senior Secured
Revolving Credit Notes due 1998 (herein called the "Notes") issued pursuant to
the Revolving Credit and Warrant Agreement, dated as of November 26, 1997 (as
from time to time amended, the "Revolving Credit Agreement"), between the
Company and the respective Lenders named therein and is entitled to the benefits
thereof. All of the terms, conditions and covenants of the Revolving Credit
Agreement are expressly made a part of this Note by reference in the same manner
and with the same effect as if set forth herein.
<PAGE> 2
This Note is a registered Note and, as provided in the Revolving
Credit Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary. Any transferee of this Note, by its acceptance hereof, agrees to
be bound by all the terms, conditions and covenants of the Revolving Credit
Agreement applicable to a holder of a Note or a Series A Note (as defined in the
Revolving Credit Agreement), as applicable.
The Notes are guaranteed by the Subsidiary Guarantors (as defined in
the Revolving Credit Agreement) pursuant to a Guaranty Agreement, dated as of
November 26, 1997 by the Subsidiary Guarantors for the benefit of the holders
from time to time of the Notes, and are also entitled to the benefits of certain
security held by The Bank of New York or its successor at the time acting as
trustee (the "TRUSTEE") under a Trust Agreement, dated as of November 26, 1997
(the "TRUST AGREEMENT"), between the Company and the Trustee, such security
consisting of the Collateral referred to therein granted by the Company to the
Trustee pursuant to the Security Documents referred to therein, pursuant to
which the Company has granted to the Trustee security interests in such
Collateral. Reference is made to such Trust Agreement and such Security
Documents for a description of the nature and extent of the security afforded
thereby and the rights of the Trustee and the holders of the Notes in respect
thereof. The registered holder of this Note may inspect such Trust Agreement and
such Security Documents at the principal office of the Trustee upon request.
As provided in the Revolving Credit Agreement, the Series A
Revolving Credit Loans evidenced by this Note are subject to optional repayments
and mandatory repayments, in whole and in part, all as specified in the
Revolving Credit Agreement.
If an Event of Default, as defined in the Revolving Credit
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price and with the
effect provided in the Revolving Credit Agreement.
This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New
York, excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
PLD TELEKOM INC.
By_________________________
[TITLE]
-2-
<PAGE> 1
EXHIBIT 4.23
[FORM OF SERIES B REVOLVING CREDIT NOTE]
PLD TELEKOM INC.
12% SERIES B SENIOR REVOLVING CREDIT NOTE DUE 1998
No. [_____] [Date]
$[_______] Private Placement No. 69340T A@9
FOR VALUE RECEIVED, the undersigned, PLD TELEKOM INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Delaware, hereby promises to pay to [ ], or registered assigns, on September
30, 1998 the principal sum of [ ] DOLLARS, or, if less, the aggregate principal
amount outstanding of Series B Revolving Credit Loans (as defined in the
Revolving Credit Agreement referred to below) made by the holder hereof to the
Company pursuant to the Revolving Credit Agreement referred to below, with
interest (computed on the basis of the actual number of days elapsed over a
360-day year) (a) on the unpaid balance thereof at the rate of 12% per annum,
payable monthly on the last day of each month after the date hereof, until the
principal hereof shall have become due and payable; provided, however that in
the event that the Company shall not have satisfied certain conditions relating
to an Equity Issuance (as defined in the Revolving Credit Agreement referred to
below) as more fully described in the final paragraph of SECTION 1.1 of the
Revolving Credit Agreement referred to below, the interest rate borne by this
Note shall be increased from 12% to 15% per annum for the period commencing June
1, 1998 until maturity, such interest to be computed and payable as otherwise
heretofore provided, and (b) to the extent permitted by law, on any overdue
payment (including any overdue repayment) of principal, any overdue payment of
interest and any overdue payment of Additional Amounts or Commitment Fees (as
such terms are defined in the Revolving Credit Agreement referred to below) at a
rate equal to 2% over the applicable interest rate determined as provided in the
preceding subclause (a), payable monthly as aforesaid or, at the option of the
registered holder hereof, on demand.
Payments of principal of, interest on and any Additional Amounts and
Commitment Fees with respect to this Note are to be made in lawful money of the
United States of America at the principal office in New York, New York of The
Chase Manhattan Bank, N.A. or at such other place as the Company shall have
designated by written notice to the holder of this Note as provided in the
Revolving Credit Agreement referred to below.
This Note is one of the duly authorized 12% Series B Senior
Revolving Credit Notes due 1998 (herein called the "Notes") issued pursuant to
the Revolving Credit and Warrant Agreement, dated as of November 26, 1997 (as
from time to time amended, the "Revolving Credit Agreement"), between the
Company and the respective Lenders named therein and is entitled to the benefits
thereof. All of the terms, conditions and covenants of the Revolving Credit
Agreement are expressly made a part of this Note by reference in the same manner
and with the same effect as if set forth herein
<PAGE> 2
This Note is a registered Note and, as provided in the Revolving
Credit Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary. Any transferee of this Note, by its acceptance hereof, agrees to
be bound by all the terms, conditions and covenants of the Revolving Credit
Agreement applicable to a holder of a Note or a Series B Note (as defined in the
Revolving Credit Agreement), as applicable.
The Notes are guaranteed by the Subsidiary Guarantors (as defined in
the Revolving Credit Agreement) pursuant to a Guaranty Agreement, dated as of
November 26, 1997 by the Subsidiary Guarantors for the benefit of the holders
from time to time of the Notes, and are also entitled to the benefits of certain
security held by The Bank of New York or its successor at the time acting as
trustee (the "TRUSTEE") under a Trust Agreement, dated as of November 26, 1997
(the "TRUST AGREEMENT"), between the Company and the Trustee, such security
consisting of the Collateral referred to therein granted by the Company to the
Trustee pursuant to the Security Documents referred to therein, pursuant to
which the Company has granted to the Trustee security interests in such
Collateral. Reference is made to such Trust Agreement and such Security
Documents for a description of the nature and extent of the security afforded
thereby and the rights of the Trustee and the holders of the Notes in respect
thereof. The registered holder of this Note may inspect such Trust Agreement and
such Security Documents at the principal office of the Trustee upon request.
As provided in the Revolving Credit Agreement, the Series B
Revolving Credit Loans evidenced by this Note are subject to optional repayments
and mandatory repayments, in whole and in part, all as specified in the
Revolving Credit Agreement.
If an Event of Default, as defined in the Revolving Credit
Agreement, occurs and is continuing, the principal of this Note may be declared
or otherwise become due and payable in the manner, at the price and with the
effect provided in the Revolving Credit Agreement.
This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of New
York, excluding choice-of-law principles of the law of such State that would
require the application of the laws of a jurisdiction other than such State.
PLD TELEKOM INC.
By_________________________
[Title]
-2-
<PAGE> 1
EXHIBIT 4.24
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
Dated as of November 26, 1997
between
PLD TELEKOM INC.
and
THE BANK OF NEW YORK,
as Warrant Agent
- --------------------------------------------------------------------------------
<PAGE> 2
WARRANT AGREEMENT
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. Appointment of Warrant Agent, etc.......................................... 2
SECTION 2. Issuance of Warrants....................................................... 2
(a) Initial Warrants........................................................... 2
(b) Additional Warrants........................................................ 2
(c) Default Warrants........................................................... 3
SECTION 2A. Reset of Exercise Price of Initial Warrants................................ 3
(a) Series A Warrants.......................................................... 3
(b) Series B Warrants.......................................................... 3
SECTION 3. Warrant Certificates....................................................... 4
SECTION 4. Execution of Warrant Certificates.......................................... 4
SECTION 5. Restrictions on Transfer................................................... 5
(a) Transfers of Warrants...................................................... 5
(b) Transfers of Common Shares................................................. 6
SECTION 6. Registration and Countersignature.......................................... 6
SECTION 7. Transfer and Exchange...................................................... 6
(a) Registration of Transfers and Exchanges.................................... 6
(b) Special Transfer Provisions................................................ 7
SECTION 8. Terms of Warrants; Exercise of Warrants.................................... 8
SECTION 9. Reports.................................................................... 10
SECTION 10. Payment of Taxes........................................................... 11
SECTION 11. Mutilated or Missing Warrant Certificates.................................. 11
SECTION 12. Reservation of Warrant Shares.............................................. 11
SECTION 13. Obtaining Stock Exchange Listings.......................................... 12
SECTION 14. Consolidation.............................................................. 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 15. Adjustment of Exercise Price......................................... 13
SECTION 16. [INTENTIONALLY NOT USED] ........................................... 21
SECTION 17. Fractional Interests................................................. 21
SECTION 18. Notices to Warrant Holders........................................... 22
SECTION 19. Warrant Agent........................................................ 23
SECTION 20. Merger, Consolidation or Change of Name of Warrant Agent............. 25
SECTION 21. Change of Warrant Agent.............................................. 26
SECTION 22. Notices to the Company and Warrant Agent............................. 26
SECTION 23. Supplements and Amendments........................................... 27
SECTION 24. Successors........................................................... 27
SECTION 25. Termination.......................................................... 27
SECTION 26. Governing Law; Jurisdiction.......................................... 28
SECTION 27. Benefits of This Agreement........................................... 28
SECTION 28. Counterparts......................................................... 28
SECTION 29. Further Assurances................................................... 29
</TABLE>
EXHIBIT A-1 Form of Series A Warrant Certificate
EXHIBIT A-2 Form of Series B Warrant Certificate
EXHIBIT A-3 Form of Default Warrant Certificates
EXHIBIT B Form of Warrant Shares Legend
- ----------
* This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or
provisions.
ii
<PAGE> 4
WARRANT AGREEMENT ("this Agreement") dated as of November 26, 1997
between PLD Telekom Inc., (the "Company"), and The Bank of New York, a New York
banking corporation, as Warrant Agent (the "Warrant Agent").
R E C I T A L S:
A. The Company has entered into a Revolving Credit Note and Warrant
Agreement, dated as of the date hereof (the "Revolving Credit Agreement"), with
The Travelers Insurance Company and The Travelers Indemnity Company
(collectively, the "Lenders") providing, among other things, for (i) the
commitment of the Lenders to make Series A Revolving Credit Loans from time to
time to the Company in an aggregate principal amount not exceeding $12,400,000
(the "Series A Revolving Credit Loans") and Series B Revolving Credit Loans from
time to time to the Company in an aggregate principal amount not exceeding
$3,100,000 (the "Series B Revolving Credit Loans" and, together with the Series
A Revolving Credit Loans, the "Revolving Credit Loans"), (ii) the issuance and
delivery by the Company to the Lenders of the Company's 12% Series A Revolving
Credit Notes due December 31, 1998 in the aggregate principal amount of
$12,400,000 to evidence the obligation of the Company to repay Series A
Revolving Credit Loans from time to time outstanding in accordance therewith
(such notes, including all notes issued in substitution or exchange therefor
pursuant to the Revolving Credit Agreement, being referred to herein as the
"Series A Notes") and its 12% Series B Revolving Credit Notes due September 30,
1998 in the aggregate principal amount of $3,100,000 to evidence the obligation
of the Company to repay Series B Revolving Credit Loans from time to time
outstanding in accordance therewith (such notes, including all notes issued in
substitution or exchange therefor pursuant to the Revolving Credit Agreement,
being referred to herein as the "Series B Notes " and, together with the Series
A Notes, the "Notes"), and (iii) the issuance by the Company to the Lenders of
the Company's (x) warrants (the "Series A Warrants") to purchase up to an
aggregate of 315,000 shares of common stock, par value $0.01 per share of the
Company (the "Common Shares") and (y) warrants (the "Series B Warrants" and,
together with the Series A Warrants, the "Initial Warrants") to purchase up to
an aggregate of 108,000 Common Shares. Each Initial Warrant entitles the holder
thereof, upon exercise, to purchase one (1) fully-paid and nonassessable Common
Share at an initial exercise price per share of $8.625 and with an expiration
date of December 31, 2008. The Notes will be entitled to the benefit of the
terms of, and the collateral held by The Bank of New York, as trustee (together
with its successors as trustee, the "Trustee"), pursuant to the terms of, a
Trust Agreement, dated as of the date hereof (the "Trust Agreement"), by and
between the Company and the Trustee.
B. Pursuant to the Revolving Credit Agreement, (i) the Company has
agreed to deposit in escrow with the Trustee the Company's warrants (the
"Additional Warrants") to purchase up to an aggregate of 182,000 Common Shares
of which (x) up to 150,000 Additional Warrants are issuable to holders of Series
A Notes and (y) up to 32,000 Additional Warrants are issuable to holders of
Series B Notes, in each case with an initial exercise price of $8.625, and with
an expiration date of December 31, 2008, and (ii) the Additional Warrants are
required to be released
<PAGE> 5
from escrow and delivered to holders of Notes to the extent, in the manner and
under the circumstances provided in Section 5 of the Trust Agreement.
C. Pursuant to the Revolving Credit Agreement, the Company has also
agreed to issue and deliver to the holders of the Series A Notes and the Series
B Notes certain warrants of the Company ("Default Warrants", and, together with
the Initial Warrants and the Additional Warrants, the "Warrants") to purchase
certain numbers of Common Shares, at an exercise price of $.01 and with an
expiration date on the date ten years from the date of issuance of such Default
Warrants, to the extent and under the circumstances provided in Section 2(c)
hereof (the initial exercise price for any Warrants, as reset pursuant to
Section 2A hereof, is herein called, in respect of such Warrants, the "Exercise
Price" therefor).
D. The Exercise Price for the Warrants is subject to resetting in
certain circumstances as provided in Section 2A hereof, and such Exercise Price
and the number of Common Shares issuable upon exercise of the Warrants are both
subject to adjustment under certain circumstances as provided in Section 15
hereof. The Common Shares issuable upon exercise of the Warrants are referred to
herein as "Warrant Shares".
E. The Warrants shall bear the legend (the "Warrant Legend") set forth
on the appropriate form of Warrant Certificate annexed hereto, subject, however,
to the terms of this Agreement. Unless registered under the Securities Act of
1933, as amended (the "Securities Act"), and any applicable state securities
laws, the Warrant Shares shall bear the legend set forth in Exhibit B attached
hereto (the "Warrant Shares Legend").
F. The Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent, etc. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment. Concurrently with the execution and delivery
hereof, the Company has furnished to the Warrant Agent true and correct copies
of the Revolving Credit Agreement and the Trust Agreement.
SECTION 2. Issuance of Warrants.
(a) Initial Warrants. The Initial Warrants shall be originally issued in
connection with the issuance of the Notes and shall be separately transferable
from the Notes immediately upon issuance.
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<PAGE> 6
(b) Additional Warrants. Concurrently with the execution and delivery
hereof, the Company has deposited the Additional Warrants, registered in the
name of the Trustee, with the Trustee for possible future delivery to holders of
Notes as herein and in the Trust Agreement and the Revolving Credit Agreement
provided. As promptly as practicable following each delivery of Warrant
Certificates to the Warrant Agent by the Trustee in accordance with Section 5(d)
of the Trust Agreement, accompanied by a written statement setting forth the
names of the holders of Notes in which such Additional Warrant Certificates are
to be registered pursuant to Section 5 of the Trust Agreement and their
respective addresses and directing the Warrant Agent to register the transfer of
such Warrant Certificates to such holders, the Warrant Agent will, without
further act on the part of the Company, the Trustee or any such holder and
notwithstanding any provision of this Warrant Agreement to the contrary, effect
such registration of transfer to such holders and issue new Additional Warrant
Certificates of the same tenor to such holders in accordance with Section 7.
Upon such issuance, such new Additional Warrant Certificates shall be delivered
by reputable overnight courier by the Warrant Agent to the respective addresses
specified for such holders in the written statement received from the Trustee
requesting such registration of transfer.
(c) Default Warrants. If the Series B Notes (including all accrued and
unpaid interest and fees thereon) are not paid in full on or prior to September
30, 1998, then commencing on September 30, 1998 and on the last day of each
calendar month thereafter until such time as the Series B Notes shall have been
so paid in full, the Company will deliver to the holders of the Series B Notes
Default Warrants for 32,000 Common Shares. If the Series A Notes (including all
accrued and unpaid interest and fees thereon) are not paid in full on or prior
to December 31, 1998, then commencing on December 31, 1998 and on the last day
of each calendar month thereafter until such time as the Series A Notes shall
have been so paid in full, the Company will deliver to the holders of the Series
A Notes Default Warrants for 70,000 Common Shares.
SECTION 2A. Reset of Exercise Price of Initial Warrants.
(a) Series A Warrants. If the Series A Notes are not repaid in full by
December 31, 1998, or upon the earlier occurrence of an Event of Default (as
defined in the Revolving Credit Agreement) either (i) described in clause (a) or
clause (b) of Section 11 of the Revolving Credit Agreement or (ii) described in
clause (c) of Section 11 of the Revolving Credit Agreement and resulting from a
default by the Company under Section 9.8, 9.9, 9.10 or 10.1 of the Revolving
Credit Agreement, the Exercise Price of the Series A Warrants will be reset to
become $.01.
(b) Series B Warrants. If the Series B Notes are not repaid in full by
September 30, 1998, or upon the earlier occurrence of an Event of Default (as
defined in the Revolving Credit Agreement) either (i) described in clause (a) or
clause (b) of Section 11 of the Revolving Credit Agreement or (ii) described in
clause (c) of Section 11 of the Revolving Credit Agreement and resulting from a
default by the Company under Section 9.8, 9.9, 9.10 or 10.1 of the Revolving
Credit Agreement, the Exercise Price of the Series B Warrants will be reset to
become $.01.
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<PAGE> 7
(c) Additional Warrants. If the Exercise Price of Series A Warrants
shall at any time be required to be reset in accordance with clause (a) of this
Section, the Exercise Price of all Additional Warrants then or theretofore
delivered to holders of Series A Notes pursuant to the Trust Agreement shall be
concurrently reset, and the Exercise Price of all Additional Warrants which
shall thereafter be required to be delivered to holders of Series A Notes
pursuant thereto shall be reset simultaneously with such delivery, to become, in
each case, $.01. If the Exercise Price of Series B Warrants shall at any time be
required to be reset in accordance with clause (b) of this Section, the Exercise
Price of all Additional Warrants then or theretofore delivered to holders of
Series B Notes pursuant to the Trust Agreement shall be concurrently reset, and
the Exercise Price of all Additional Warrants which shall thereafter be required
to be delivered to holders of Series B Notes pursuant thereto shall be reset
simultaneously with such delivery, to become, in each case, $.01.
SECTION 3. Warrant Certificates.
(a) The certificates evidencing the Series A Warrants (the "Series A
Warrant Certificates") shall be substantially in the form annexed hereto as
Exhibit A-1.
(b) The certificates evidencing the Series B Warrants (the "Series B
Warrant Certificates") shall be substantially in the form annexed hereto as
Exhibit A-2.
(c) The certificates representing the Additional Warrants (the
"Additional Warrant Certificates") shall be substantially in the form annexed
hereto as Exhibit A-1 (in the case of Warrant Certificates issued to the holders
of Series A Notes) or Exhibit A-2 (in the case of Warrant Certificates issued to
the holders of Series B Notes).
(d) The certificates representing the Default Warrants (the "Default
Warrant Certificates", and, together with the Series A Warrant Certificates,
Series B Warrant Certificates and Additional Warrant Certificates, the "Warrant
Certificates") shall be substantially in the form annexed hereto as Exhibit A-3.
SECTION 4. Execution of Warrant Certificates. Warrant Certificates shall
be signed on behalf of the Company by any two of the following officers: its
Chairman of the Board, Chief Executive Officer, Chief Financial Officer,
President, any Vice President, Secretary or an Assistant Secretary, under its
corporate seal. Each such signature upon the Warrant Certificates may be in the
form of a facsimile signature of the present or any future Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, President or any Vice
President and Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been Chairman
of the Board, Chief Executive Officer, Chief Financial Officer, President, any
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be countersigned and delivered or
disposed of he or she
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<PAGE> 8
shall have ceased to hold such office. The seal of the Company may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Agreement any
such person was not such officer.
Warrant Certificates shall be dated the date of countersignature by the
Warrant Agent.
In the event that there is a reset of the Exercise Price of the Series A
Warrants or the Series B Warrants or the Additional Warrants pursuant to Section
2A hereof, the Company may instruct the Warrant Agent to issue new Series A
Warrant Certificates or Series B Warrant Certificates or Additional Warrant
Certificates, as the case may be, with the new Exercise Price in replacement of
the applicable Warrant Certificates issued prior to the date of any such
resetting.
SECTION 5. Restrictions on Transfer.
(a) Transfers of Warrants. Notwithstanding the provisions of Section 7
hereof, the registered holder of a Warrant Certificate containing a Warrant
Legend may surrender such Warrant Certificate accompanied by a written
instrument or instruments of transfer in form satisfactory to the Warrant Agent,
duly executed by the registered holder or holders thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney to the
Warrant Agent, at its address specified in Section 22 hereof (the "Warrant Agent
Office") for the exchange of such Warrant Certificate containing a Warrant
Legend, in whole or in part, for a new Warrant Certificate or Certificates. In
connection with the foregoing, each Warrant Certificate will bear a legend in
substantially the following form:
THE WARRANTS REPRESENTED HEREBY AND THE COMMON SHARES (THE "COMMON
SHARES") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
ACCORDINGLY, NO WARRANT HOLDER SHALL BE ENTITLED TO EXERCISE SUCH
HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE, (I) A
REGISTRATION STATEMENT UNDER THE ACT COVERING THE OFFER AND SALE OF THE
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<PAGE> 9
COMMON SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT (THE "WARRANT
SHARES") HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER SUSPENDING THE
EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC
OR (II) THE OFFER AND SALE OF THE WARRANT SHARES TO THE WARRANT HOLDERS
ARE EXEMPT FROM REGISTRATION UNDER THE ACT AND THE WARRANT HOLDER, IF SO
REQUESTED BY THE COMPANY, HAS DELIVERED TO THE COMPANY AN OPINION OF
COUNSEL TO SUCH EFFECT.
(b) Transfers of Common Shares. Except as otherwise permitted under
Section 7(b), each certificate for Common Shares issued upon the exercise of any
Warrant, and each certificate issued upon the direct or indirect transfer of any
such Common Shares, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND
MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE SECURITIES ACT, EXCEPT UNDER CIRCUMSTANCES
WHERE NEITHER SUCH REGISTRATION NOR SUCH AN EXEMPTION IS REQUIRED BY
LAW.
SECTION 6. Registration and Countersignature. The Warrant Agent, on
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board,
Chief Executive Officer, Chief Financial Officer, President, a Senior Vice
President or Secretary of the Company, initially countersign and deliver Initial
Warrant Certificates and Additional Warrant Certificates entitling the holders
thereof to purchase not more than the number of Warrant Shares referred to above
in, as the case may be, Recital A or Recital B and shall countersign and deliver
Warrant Certificates as otherwise provided in this Agreement. Such written
instructions shall specify the amount of the Warrants to be countersigned and
the date of countersignature.
The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
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<PAGE> 10
SECTION 7. Transfer and Exchange.
(a) Registration of Transfers and Exchanges. In accordance with this
Section 7, the Warrant Agent shall from time to time register the transfer of
any outstanding Warrant Certificates upon the records to be maintained by it for
that purpose, upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, duly executed
by the registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate of the same tenor shall be
issued to the transferee(s) and the surrendered Warrant Certificate shall be
canceled by the Warrant Agent. Canceled Warrant Certificates shall thereafter be
disposed of by the Warrant Agent in a manner consistent with the Warrant Agent's
customary procedure and in accordance with applicable law.
Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Warrant Agent at its office, for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be canceled by the Warrant Agent. Such canceled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
consistent with the Warrant Agent's customary procedure and in accordance with
applicable law.
No service charge shall be made for any transfer or exchange of Warrant
Certificates or any issuance of Warrant Certificates, but the Company may
require payment of a sum sufficient to cover any stamp or other governmental
charge or tax that may be imposed in connection with any such transfer or
exchange.
The Warrant Agent is hereby authorized to countersign, in accordance
with the provisions of this Section 7 and Section 5, the new Warrant
Certificates required pursuant to the provisions of this Section 7.
(b) Special Transfer Provisions.
(i) Transfers to QIBs. The Warrant Agent shall register the
transfer of any Warrant being transferred if such transfer is being made by a
proposed transferor who has checked the box provided for on the form of Warrant
stating, or has otherwise advised the Company and the Warrant Agent in writing,
that the sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of Warrant
stating, or has otherwise advised the Company and the Warrant Agent in writing,
that it is purchasing the Warrant for its own account or an account with respect
to which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the sale to
it is being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that the
transferor is relying
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<PAGE> 11
upon its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) Transfers of Additional Warrants to Lenders. Notwithstanding
any provision of this Section 7 to the contrary, the Warrant Agent will register
the transfer to any Lender or any other institutional investor which is the
holder of a Note of any Warrant evidenced by an Additional Warrant Certificate
delivered to the Warrant Agent by the Trustee for the purpose as contemplated by
Section 5(d) of the Trust Agreement which Additional Warrant Certificate is
accompanied by the written statement of the Trustee described in the second
sentence of said Section 5(d).
(iii) Warrant Legend. Upon the transfer, exchange or replacement
of Warrant Certificates not bearing the Warrant Legend, the Warrant Agent shall
deliver Warrant Certificates that do not bear the Warrant Legend. Upon the
transfer, exchange or replacement of Warrant Certificates bearing the Warrant
Legend, the Warrant Agent shall deliver only Warrant Certificates that bear the
Warrant Legend unless there is delivered to the Warrant Agent an opinion of
counsel reasonably satisfactory to the Company and the Warrant Agent to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(iv) General. The provisions hereof shall be qualified in their
entirety by any applicable securities laws of the United States and any other
applicable jurisdiction and by the procedures of any applicable clearing agency,
in each case as in effect from time to time, and all such laws and clearing
procedures shall be deemed to be incorporated herein by reference. By its
acceptance of any Warrant Certificate bearing the Warrant Legend, each holder of
such a Warrant Certificate shall be deemed to acknowledge the restrictions on
transfer of such Warrant Certificate set forth in this Warrant Agreement and in
the Warrant Legend and agrees that it will transfer such Warrant Certificate
only as provided in this Warrant Agreement. The Warrant Agent shall not register
a transfer of any Warrant Certificate unless such transfer complies with the
restrictions on transfer of such Warrant Certificate set forth in this Warrant
Agreement. In connection with any transfer of Warrant Certificates, each Warrant
holder agrees by its acceptance of the Warrant Certificates to furnish the
Warrant Agent or the Company such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided that
the Warrant Agent shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.
SECTION 8. Terms of Warrants; Exercise of Warrants. Subject to the terms
of this Agreement, each Warrant holder shall have the right, which may be
exercised at any time from the date of original issuance thereof and on or prior
to the close of business on (i) in the case of the Series A Warrants, the Series
B Warrants and the Additional Warrants, December 31, 2008,
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<PAGE> 12
and (ii) in the case of Default Warrants, if any, a date ten years following the
issue date thereof (in each case, the "Expiration Date") to exercise each
Warrant and receive from the Company the number of fully-paid and nonassessable
Warrant Shares which the holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price then in effect for
such Warrant; provided that no Warrant holder shall be entitled to exercise such
holder's Warrants at any time unless, at the time of exercise, (A) a
registration statement under the Securities Act covering the offer and sale of
the Warrant Shares has been filed with, and declared effective by, the
Securities and Exchange Commission (the "SEC"), and no stop order suspending the
effectiveness of such registration statement has been issued by the SEC or (B)
the offer and sale of the Warrant Shares to the Warrant holder are exempt from
registration under the Securities Act and the holder of the Warrants, if so
requested by the Company, has delivered to the Company an opinion of counsel
reasonably satisfactory to the Company and the Warrant Agent to such effect.
Each Warrant, when exercised, will entitle the holder thereof to purchase one
(1) fully-paid and nonassessable Common Share at the Exercise Price then in
effect for such Warrant. The Exercise Price and the number of shares are both
subject to adjustment under certain circumstances as provided in Section 2A and
Section 15. Each Warrant not exercised prior to the applicable Expiration Date
shall become void and all rights thereunder and all rights in respect thereof
under this Agreement shall cease as of such time.
A Warrant may be exercised at any time on or after the date of original
issuance thereof upon surrender to the Company at the principal office of the
Warrant Agent of the Warrant Certificate or Certificates to be exercised with
the form of election to purchase on the reverse thereof duly filled in and
signed, which signature shall be guaranteed by an "eligible guarantor" as
defined in the regulations promulgated under the Exchange Act, and upon payment
to the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as herein provided, for each Warrant then exercised. Upon exercise of
any Warrants by a holder of any Note, such holder may, at its option, surrender
such Note to the Company, together with written instructions from such holder to
apply all or any part of the unpaid principal amount of such Note or Notes plus
accrued and unpaid interest on the amount so applied through the date of such
application against the cash payment required upon such exercise, in which case
the Company will accept such specified principal amount plus accrued and unpaid
interest thereon through the date of such application in satisfaction of a like
amount of such payment. Upon any partial application of the unpaid principal of
a Note plus accrued and unpaid interest thereon, the Company, at its expense,
shall forthwith issue and deliver to or upon the order of the holder thereof a
new Note or Notes in principal amount equal to the unpaid principal amount of
such surrendered Note which has not been applied against such payment, such new
Note or Notes to be dated and to bear interest on such unpaid principal amount
from the date to which such interest has been paid on such surrendered Note.
Subject to the provisions of Section 9 hereof, upon such surrender of
Warrants and payment of the Exercise Price therefor, the Company shall issue and
cause to be delivered with all reasonable dispatch to or upon the written order
of the Warrant holder and in such name or
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<PAGE> 13
names as the Warrant holder may designate, a certificate or certificates for the
number of whole Warrant Shares issuable upon the exercise of such Warrants
together with any cash which may be payable as provided in Section 17 hereof;
provided that if any consolidation, merger or lease or sale of assets is
proposed to be effected by the Company as described in Section 14 hereof, or a
tender offer or an exchange offer for Common Shares of the Company shall be
made, upon such surrender of Warrants and payment of the Exercise Price as
aforesaid, the Company shall, as soon as possible, but in any event not later
than two Business Days thereafter, issue and cause to be delivered to the
registered holder thereof or any person so designated to be named therein the
full number of Warrant Shares issuable upon the exercise of such Warrants in the
manner described in this sentence together with any cash which may be payable as
provided in Section 17 hereof. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the aggregate Exercise Price
therefor.
The Warrants shall be exercisable at any time on or after the date of
original issuance thereof at the election of the holders thereof, either in full
or from time to time in part (in whole shares) and, in the event that a Warrant
Certificate is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the Expiration Date, a new
Warrant Certificate evidencing the remaining Warrant or Warrants will be issued,
and the Warrant Agent is hereby irrevocably authorized to countersign and to
deliver the required new Warrant Certificate or Certificates pursuant to the
provisions of this Section and of Section 4 hereof, and the Company, whenever
required by the Warrant Agent, will supply the Warrant Agent with Warrant
Certificates duly executed on behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be
disposed of by the Company in accordance with applicable law. The Warrant Agent
shall account promptly to the Company with respect to Warrants exercised and
concurrently pay to the Company all monies received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and the Trust
Agreement and any notices given or received hereunder available for inspection
by the Warrant holders during normal business hours at its office. The Company
shall supply the Warrant Agent from time to time with such number of copies of
this Agreement as the Warrant Agent may request.
SECTION 9. Reports. So long as any of the Warrants remain outstanding,
the Company shall cause copies of all quarterly and annual financial reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) that the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act ("SEC Reports") to be filed with the Warrant Agent and mailed to
the holders of Warrants, in each case, within 15 days after filing with the SEC.
If the Company
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<PAGE> 14
is not subject to the requirements of Section 13 or 15(d) of the Exchange Act,
the Company shall nevertheless continue to cause reports, comparable to those
that it would be required to file pursuant to Section 13 or 15(d) of the
Exchange Act if it were then subject to the requirements of either such Section,
to be so filed with the SEC for public availability (unless the SEC will not
accept such a filing) and with the Warrant Agent and mailed to the holders of
Warrants, in each case, within the same time periods as would have applied
(including under the preceding sentence) had the Company then been subject to
the requirements of Section 13 or 15(d) of the Exchange Act. The Company shall
make available to investors and prospective investors of the Warrants
information that satisfies the requirements of Rule 144A(d)(4) under the
Securities Act.
SECTION 10. Payment of Taxes. No service charge shall be made to any
holder of a Warrant for any exercise, exchange or registration of transfer of
Warrant Certificates, and the Company will pay all documentary stamp taxes
attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants; provided that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for Warrant Shares in a name other
than that of the registered holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 11. Mutilated or Missing Warrant Certificates. If any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue and the Warrant Agent may countersign, in exchange
and substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity and security therefor, if requested, also
satisfactory to them; provided that, (i) a written statement signed on behalf of
the Trustee, or on behalf of a Lender or another institutional investor which is
the registered holder of a Warrant, to the effect that a Warrant Certificate has
been lost, stolen, destroyed or mutilated shall in any event constitute
sufficient evidence thereof and (ii) in the case of any Warrant Certificate held
by the Trustee or by any Lender or other institutional investor with a minimum
net worth of at least $50,000,000, an unsecured indemnity agreement of the
Trustee or such Lender or other institutional investor shall constitute
sufficient indemnity and security. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and (in
the case of applicants other than the Trustee, any Lender or any other
institutional investor which is the registered holder of a Warrant) pay such
other reasonable charges as the Company or the Warrant Agent may prescribe.
SECTION 12. Reservation of Warrant Shares. In respect of the Initial
Warrants and the Additional Warrants, the Company will at all times reserve and
keep available, free of preemptive
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<PAGE> 15
rights and free from all taxes, liens, charges and security interests with
respect to the issuance thereof, out of the aggregate of its authorized but
unissued Common Shares, for the purpose of enabling it to satisfy any obligation
to issue Warrant Shares upon exercise of the Initial Warrants and the Additional
Warrants, the maximum number of Common Shares which may then be deliverable upon
the exercise of all outstanding Initial Warrants and Additional Warrants. In
respect of Default Warrants, the Company will initially reserve 1,000,000 Common
Shares, and agrees to authorize additional Common Shares as needed in order to
satisfy its obligations as set forth in Section 2(c) hereof.
The Company will keep a copy of this Agreement on file with the transfer
agent for the Common Shares (the "Transfer Agent") and with every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from the
Company or from such Transfer Agent the stock certificates required to honor
outstanding Warrants upon exercise thereof in accordance with the terms of this
Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available to
the Warrant Agent any cash which may be payable as provided in Section 17
hereof. The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto transmitted to each holder pursuant
to Section 18 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 15 hereof to reduce the applicable Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take all corporate action
necessary, in the opinion of its counsel (which may be counsel employed by the
Company), in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the applicable Exercise Price as so adjusted.
The Company covenants that all Warrant Shares will be, upon payment of
the Exercise Price therefor and issuance thereof, duly and validly issued,
fully-paid, nonassessable, free of preemptive rights and free from all taxes,
liens, charges and security interests with respect to the issuance thereof.
SECTION 13. Obtaining Stock Exchange Listings. The Company shall from
time to time take all action necessary so that the Warrant Shares, immediately
upon their issuance upon the exercise of Warrants, will be listed on the
principal securities exchanges and interdealer quotation systems and markets, if
any, on which any Common Shares are then listed or quoted.
SECTION 14. Consolidation. In the event the Company consolidates with,
merges with or into, or sells all or substantially all of its property and
assets to another Person, each Warrant thereafter shall entitle the holder
thereof to receive upon exercise thereof the number of shares of capital stock
or other securities or property which the holder of a Common Share is entitled
to receive upon completion of such consolidation, merger or sale of assets. If
the Company merges
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<PAGE> 16
or consolidates with, or sells all or substantially all of its property and
assets to, another Person and, in connection therewith, consideration to the
holders of Common Shares in exchange for their shares is payable solely in cash,
or in the event of the dissolution, liquidation or winding-up of the Company,
then the holders of the Warrants will be entitled to receive distributions on an
equal basis with the holders of Common Shares or other securities issuable upon
exercise of the warrants, as if the Warrants had been exercised immediately
prior to such event, less the applicable Exercise Price. Upon receipt of the
full amount of such payment, if any, by the holders of any Warrants, such
Warrants will expire and the rights of the holders thereof will cease.
In case of any such merger, consolidation or sale of assets, the
surviving or acquiring Person, and in the event of any dissolution, liquidation
or winding-up of the Company, the Company, shall deposit promptly with the
Warrant Agent the funds or other consideration, if any, necessary to pay the
holders of the Warrants. After such funds and the surrendered Warrant
Certificate are received, the Warrant Agent shall make payment by delivering a
check in such amount as is appropriate (or, in the case of consideration other
than cash, shall transfer such other consideration as is appropriate) to such
Person or Persons as it may be directed in writing by the holders surrendering
such Warrants.
SECTION 15. Adjustment of Exercise Price.
(a) In case the Company shall make a dividend or other distribution on
the Common Shares exclusively in Common Shares (other than a distribution
referred to in paragraph (c) of this Section), the Exercise Price applicable to
any particular Warrant and in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Exercise Price by a fraction of which the numerator shall be the number of
shares of Common Shares outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. In case
the Company shall make a dividend or other distribution on the Common Shares in
shares of its capital stock other than Common Shares, and such dividend or
distribution would not otherwise require reduction of the Exercise Price
applicable to any particular Warrant pursuant to paragraph (d), then such
Exercise Price and the number and kind of shares of capital stock of the Company
issuable upon the exercise of such Warrant (as in effect immediately prior to
such dividend or distribution) shall be proportionately adjusted so that the
holder of any such Warrant thereafter exercised may receive the aggregate number
and kind of shares of capital stock of the Company that such holder would have
owned immediately following such dividend or distribution if such Warrant had
been exercised immediately prior thereto. For the purpose of this paragraph (a),
the number of Common Shares at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable in respect
of scrip certificates issued in lieu of fractions of Common
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<PAGE> 17
Shares. The Company shall not pay any dividend or make any distribution on
Common Shares held in the treasury of the Company.
(b) Subject to the last sentence of paragraph (g) of this Section, in
case the Company shall make a dividend or other distribution on the Common
Shares consisting exclusively of, or shall otherwise issue to all holders of the
Common Shares, rights, options or warrants entitling the holders thereof to
subscribe for or purchase Common Shares or securities convertible into or
exchangeable for Common Shares at a price per share (determined on an
as-converted or as-exercised basis if the rights, options or warrants pertain
to securities convertible into or exchangeable for Common Shares) less than the
Current Market Price (determined as provided in paragraph (h) of this Section)
on the date fixed for the determination of shareholders entitled to receive such
rights, options or warrants, the Exercise Price applicable to any particular
Warrant and in effect at the opening of business on the day following the date
fixed for such determination shall be reduced by multiplying such Exercise Price
by a fraction of which the numerator shall be the number of Common Shares
outstanding at the close of business on the date fixed for such determination
plus the number of Common Shares which the aggregate of the offering price
(including the minimum consideration payable upon exercise or exchange of
securities convertible into or exchangeable for Common Shares) of the total
number of Common Shares so offered for subscription or purchase would purchase
at such Current Market Price and the denominator shall be the number of Common
Shares outstanding at the close of business on the date fixed for such
determination plus the number of Common Shares so offered for subscription or
purchase, such reduction to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph (b), the number of Common Shares at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of Common Shares. The Company shall not issue any rights, options or
warrants in respect of Common Shares held in the treasury of the Company.
(c) In case outstanding Common Shares shall be subdivided into a greater
number of Common Shares, the Exercise Price applicable to any particular Warrant
and in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding Common Shares shall be combined into a smaller
number of Common Shares, the Exercise Price applicable to any particular Warrant
and in effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such subdivision
or combination becomes effective.
(d) (i) Subject to the last sentence of this paragraph (d)(i) and the
last sentence of paragraph (g) of this Section, in case the Company shall, by
dividend or otherwise, distribute to all holders of the Common Shares evidences
of its indebtedness, shares of any class of its capital stock, cash or other
assets (including securities, but excluding any rights, options or warrants
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<PAGE> 18
referred to in paragraph (b) of this Section, excluding any dividend or
distribution paid exclusively in cash out of consolidated current or retained
earnings as shown on the books of the Company prepared in accordance with GAAP
(other than any Extraordinary Cash Dividend (as hereinafter defined)) and
excluding any dividend or distribution referred to in paragraph (a) or (c) of
this Section), the Exercise Price applicable to any particular Warrant shall be
reduced by multiplying such Exercise Price as in effect immediately prior to the
close of business on the date fixed for the determination of shareholders
entitled to such distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in paragraph (h) of this Section)
on such date less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors) on such date of the portion of the evidences of
indebtedness, shares of capital stock, cash and other assets to be distributed
applicable to one Common Share and the denominator shall be such Current Market
Price, such reduction to become effective immediately prior to the opening of
business on the day following such date. If the Board of Directors determines
the fair market value of any distribution for purposes of this paragraph (d)(i)
by reference to the actual or when- issued trading market for any securities
comprising part or all of such distribution, it must in doing so consider the
prices in such market over the same period used in computing the Current Market
Price pursuant to paragraph (h) of this Section, to the extent possible. For
purposes of this paragraph (d)(i), an "Extraordinary Cash Dividend" shall be
that portion, if any, of the aggregate amount of all cash dividends paid in any
fiscal year which exceed $25,000,000. For purposes of this paragraph (d), any
dividend or distribution that includes Common Shares, rights, options or
warrants to subscribe for or purchase Common Shares or securities convertible
into or exchangeable for Common Shares shall be deemed to be (x) a dividend or
distribution of the evidences of indebtedness, cash, assets or shares of capital
stock other than such Common Shares, such rights, options or warrants or such
convertible or exchangeable securities (making any Exercise Price reduction
required by this paragraph (d)(i)) immediately followed by (y) in the case of
such Common Shares or such rights, options or warrants, a dividend or
distribution thereof (making any further Exercise Price reduction required by
paragraph (a) and (b) of this Section, except any Common Shares included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of
paragraph (a) of this Section), or (z) in the case of such convertible or
exchangeable securities, a dividend or distribution of the number of Common
Shares as would then be issuable upon the exercise or exchange thereof, whether
or not the exercise or exchange of such securities is subject to any conditions
(making any further Exercise Price reduction required by paragraph (a) of this
Section, except the shares deemed to constitute such dividend or distribution
shall not be deemed "outstanding at the close of business on the date fixed for
such determination" within the meaning of paragraph (a) of this Section).
(ii) In case the Company shall issue Common Shares for a
consideration per share less than the Current Market Price (determined as
provided in paragraph (h) of this Section), the Exercise Price applicable to any
particular Warrant shall be reduced by multiplying such Exercise Price in effect
immediately prior to the close of business on the date on which the Company
fixes the offering price of such additional shares by a fraction of which the
numerator
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<PAGE> 19
shall be the number of Common Shares outstanding at the close of business on the
date fixed for such determination plus a fraction equal to the aggregate
consideration received by the Company from the issuance of such additional
Common Shares over the Current Market Price on the date on which the Company
fixes the offering price of such additional shares (determined as provided in
paragraph (h) of this Section), and the denominator of which shall be the number
of Common Shares outstanding immediately after giving effect to such issuance.
The reduction in such Exercise Price provided for in the preceding sentence
shall not apply to (A) securities issued in transactions described in paragraphs
(a), (b), (c), (d)(i), (d)(iii) or (f) of this Section or pursuant to the
exercise or exchange of any such securities (to the extent applicable); (B) the
exercise or exchange of securities (including options) convertible or
exchangeable for Common Shares outstanding on the date of this Warrant
Agreement, or issuable pursuant to binding agreements in effect on the date of
this Warrant Agreement; (C) Common Shares issued and issuable upon the exercise
of options issued to the Company's directors, officers and employees under bona
fide employee benefit plans adopted by the Board of Directors and approved by
the holders of Common Shares when required by law or otherwise where such
issuances have been approved by the Board of Directors (but only to the extent
that the aggregate number of shares excluded hereby and issued after the date of
this Warrant Agreement shall not exceed 1% of the Common Shares outstanding at
the time of issuance of the Notes); (D) Common Shares issued to shareholders of
any person that merges into the Company in proportion to their stock holdings of
such person immediately prior to such merger, upon such merger; (E) Common
Shares issued in a bona fide underwritten public offering; (F) Common Shares
issued in a bona fide private placement through a placement agent that is a
member firm of the National Association of Securities Dealers, Inc. (except to
the extent that any discount from the Current Market Price (determined as
provided in paragraph (h) of this Section) attributable to restrictions on
transferability of the Common Shares, as determined in good faith by the Board
of Directors and described in a resolution thereof which shall be filed with the
Warrant Agent, shall exceed 20%), or issuable pursuant to a binding agreement in
effect on the date of this Warrant Agreement; or (G) Common Shares issued as a
dividend on any securities outstanding on the date of this Warrant Agreement
required to be made pursuant to the certificate of designation pertaining to
such securities in effect at the time such securities were issued.
(iii) In case the Company shall issue any securities convertible
into or exchangeable for Common Shares for a consideration per Common Share
(including the minimum consideration per share payable upon exercise or exchange
of any securities convertible into or exchangeable for Common Shares) of Common
Shares initially deliverable upon exercise or exchange of such securities less
than the Current Market Price (determined as provided in paragraph (h) of this
Section), the Exercise Price applicable in respect of any particular Warrant
shall be reduced by multiplying such Exercise Price as in effect immediately
prior to the close of business on the date on which the Company fixes the
offering price of such additional shares by a fraction of which the numerator
shall be the number of Common Shares outstanding immediately prior to the
issuance of such securities plus a fraction equal to the aggregate consideration
received for the issuance of such securities (including the minimum
consideration per share
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<PAGE> 20
payable upon exercise or exchange of any securities convertible into or
exchangeable for Common Shares) over the Current Market Price on the date on
which the Company fixes the offering price of such additional shares (determined
as provided in paragraph (h) of this Section) and the denominator of which shall
be the number of shares outstanding immediately prior to the issuance of such
securities plus the maximum number of shares deliverable upon exercise of or in
exchange for such securities at the initial exercise or exchange rate. The
reduction in the Exercise Price provided for in the preceding sentence shall not
apply to (A) securities issued in transactions described in paragraphs (a), (b),
(d)(i) or (d)(ii) of this Section; (B) convertible securities issued to
shareholders of any person that merges into the Company, or with a Subsidiary of
the Company, in proportion to their stock holdings of such person immediately
prior to such merger, upon such merger; (C) convertible securities issued in a
bona fide underwritten public offering; (D) convertible securities issued in a
bona fide private placement through a placement agent that is a member firm of
the National Association of Securities Dealers, Inc. (except to the extent that
any discount from the Current Market Price (determined as provided in paragraph
(h) of this Section) attributable to restrictions on transferability of Common
Shares issuable upon exercise, as determined in good faith by the Board of
Directors and described in a resolution thereof which shall be filed with the
Warrant Agent, shall exceed 20% of the then Current Market Price, or issuable
pursuant to a binding agreement in effect on the date of this Warrant Agreement;
or (E) stock options issued to the Company's directors, officers or employees.
(e) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of the Common Shares cash (excluding any cash that is
distributed as part of a distribution referred to in paragraph (d)(i) of this
Section or in connection with a transaction to which Section 14 applies) in an
aggregate amount that, together with (i) the aggregate amount of any other
distributions to all holders of the Common Shares made exclusively in cash
within the 12 months preceding the date fixed for the determination of
shareholders entitled to such distribution and in respect of which no Exercise
Price adjustment pursuant to paragraph (d)(i) or this paragraph (e) has been
made previously and (ii) the aggregate of any cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) as of such
date of determination of consideration payable in respect of any tender offer by
the Company or a Subsidiary for all or any portion of the Common Shares, and any
purchase by the Company of Common Shares in the open market, consummated within
the 12 months preceding such date of determination and in respect of which no
Exercise Price adjustment pursuant to paragraph (f) of this Section has been
made previously, exceeds 12.5% of the product of the Current Market Price
(determined as provided in paragraph (h) of this Section) on such date of
determination times the number of Common Shares outstanding on such date, the
Exercise Price applicable in respect of any particular Warrant shall be reduced
by multiplying such Exercise Price as in effect immediately prior to the close
of business on such date of determination by a fraction of which the numerator
shall be the Current Market Price (determined as provided in paragraph (h) of
this Section) on such date less the amount of cash to be distributed at such
time applicable to one Common Share and the
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<PAGE> 21
denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day after such
date.
(f) In case a tender or exchange offer made by the Company or any
subsidiary for all or any portion of the Common Shares shall be consummated, or
in case the Company shall purchase Common Shares in the open market, the
Exercise Price applicable in respect of any particular Warrant shall be reduced
by multiplying such Exercise Price as in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the product of (x)
the Current Market Price (determined as provided in paragraph (h) of this
Section) multiplied by (y) the number of Common Shares outstanding (including
any tendered or exchanged shares) at the Expiration Time and the denominator
shall be the sum of (A) the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders upon consummation of such tender
or exchange offer, or upon such purchase, and (B) the product of such Current
Market Price times such number of outstanding shares at the Expiration Time
minus the number of shares accepted for payment in such tender or exchange
offer, or so purchased (the "Purchased Shares"). For the purpose of this
paragraph, "Expiration Time" means either the last time that tenders may be made
pursuant to a tender offer or exchanges may be made pursuant to an exchange
offer, or the time of an agreement to purchase shares in the open market, as the
case may be. Any reduction in the Exercise Price pursuant to this paragraph
shall be made immediately following the close of business on the last trading
day used to compute Current Market Price; provided, that, such reduction shall
be deemed to have become effective immediately prior to the opening of business
on the day following the Expiration Time. To the extent that a Holder exercises
Warrants prior to the conclusion of the period for which Current Market Price is
to be calculated, any adjustment in the number of Common Shares issuable upon
exercise of such Warrant shall inure to the benefit of the holder of record of
such Warrant at the close of business on the first Trading Day following the
Expiration Time.
(g) The reclassification of Common Shares into securities which include
securities other than Common Shares (other than any reclassification upon a
consolidation or merger to which Section 14 applies) shall be deemed to involve
(i) a distribution of such securities other than Common Shares to all holders of
Common Shares (and the effective date of such reclassification shall be deemed
to be "the date fixed for the determination of shareholders entitled to such
distribution" within the meaning of paragraph (d)(i) of this Section), and (ii)
a subdivision or combination, as the case may be, of the number of Common Shares
outstanding prior to such reclassification into the number of Common Shares
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section). Rights,
options or warrants issued by the Company to all holders of the Common Shares
entitling the holders thereof to subscribe for or purchase Common Shares (either
initially or under certain circumstances), which rights, options or warrants (A)
are deemed to be transferred with such Common Shares, (B) are not exercisable
and (C) are
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<PAGE> 22
also issued in respect of future issuances of Common Shares, in each case in
clauses (A) through (C) until or upon the occurrence of a specified event or
events ("Trigger Event"), shall for purposes of this Section 15 not be deemed
issued until the occurrence of the earliest Trigger Event.
(h) For the purpose of any computation under this paragraph and
paragraphs (b), (d) and (e) of this Section, the current market price per share
of Common Shares (the "Current Market Price") on any date shall be deemed to be
the average of the daily Closing Prices for the 30 consecutive trading days
commencing 45 trading days before the date in question. For the purpose of any
computation under paragraph (f) of this Section, the Current Market Price on any
date shall be deemed to be the average of the daily closing prices for the five
consecutive trading days commencing on the first trading day immediately
following the expiration time. Notwithstanding anything to the contrary
contained in this paragraph, (i) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the applicable Exercise Price pursuant to paragraph (a), (b), (c), (d) or (e)
above occurs on or after the 15th trading day prior to the date in question and
prior to the "ex" date for the issuance or distribution requiring such
computation, the closing price for each trading day prior to the "ex" date for
such other event shall be adjusted by multiplying such closing price by the same
fraction by which such Exercise Price is so required to be adjusted as a result
of such other event, (ii) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the applicable Exercise Price pursuant to paragraph (a), (b), (c), (d), (e)
or (f) above occurs on or after the "ex" date for the issuance or distribution
requiring such computation and on or prior to the date in question, the closing
price for each trading day on and after the "ex" date for such other event shall
be adjusted by multiplying such closing price by the reciprocal of the fraction
by which such Exercise Price is so required to be adjusted as a result of such
other event, and (iii) if the "ex" date for the issuance or distribution
requiring such computation is on or prior to the date in question, after taking
into account any adjustment required pursuant to clause (ii) of this proviso,
the closing price for each trading day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value on
the date in question (as determined by the Board of Directors in a manner
consistent with any determination of such value for the purposes of paragraph
(d) or (e) of this Section, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the evidences of
indebtedness, shares of Capital Stock or assets being distributed applicable to
one share of common stock of the Company, no par value ("Common Stock"), as of
the close of business on the day before such "ex" date.
(i) (i) If any event shall occur as to which the other provisions of
this Section 15 are not strictly applicable but the failure to make any
adjustment would have the effect of depriving holders of the benefit of all or a
portion of the exercise rights in respect of any Warrant in accordance with the
essential intent and principles of this Section 15, then, in each such case, the
Company shall appoint an Independent Financial Expert, which shall give its
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in this
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<PAGE> 23
Section 15 necessary to preserve, without dilution, such exercise rights. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
holders and shall make the adjustments described therein. As used herein, an
"Independent Financial Expert" is a firm (A) which does not, and whose
directors, officers and employees or affiliates do not have a direct or indirect
financial interest in the Company and (B) which, in the judgment of the Board of
Directors, is otherwise independent and qualified to perform the task for which
it is to be engaged.
(ii) The Company will not, by amendment of its certificate of
incorporation or bylaws or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holders thereof
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (A) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully-paid
and nonassessable Common Shares on the exercise of the Warrants from time to
time outstanding and (B) will not take any action which results in any
adjustment of the Exercise Price applicable in respect of any Warrant if the
total number of Common Shares issuable after the action upon the exercise of all
of the Warrants would exceed the total number of Common Shares then authorized
by the Company's certificate of incorporation and available for the purposes of
issue upon such exercise.
(j) The Company may, but shall not be obligated to, make such reductions
in the Exercise Price, in addition to those required by paragraphs (a), (b),
(c), (d), (e), (f) and (g) of this Section, as it considers to be advisable in
order that any event treated for United States federal income tax purposes as a
dividend of stock or stock rights shall not be taxable to the recipients or if
that is not possible, to diminish any income taxes that are otherwise payable
because of such event.
(k) No adjustment in the Exercise Price applicable to any Warrant shall
be required unless such adjustment (plus any other adjustments not previously
made by reason of this paragraph (k)) would require an increase or decrease of
at least 1% in such Exercise Price; provided, however, that any adjustments
which by reason of this paragraph (k) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(l) In any case in which this Section 15 shall require that an
adjustment in the applicable Exercise Price be made effective as of or
immediately after a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the Common Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Common Shares and other capital stock of the Company, if any, issuable upon such
exercise on the basis of such Exercise Price prior to such adjustment and (ii)
paying to such holder any amount in cash in lieu of a fractional share pursuant
to Section 17 hereof; provided that the Company shall deliver to such
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<PAGE> 24
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional Common Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(m) (i) No adjustment need be made for a transaction referred to in
subsections (a), (b), (c), (e) or (f) of this Section 15 if all holders of
Warrants are to participate in the transaction on a basis and with notice that
the Board of Directors determines to be fair and appropriate in light of the
basis and notice on which holders of Common Shares of the Company participate in
the transaction.
(ii) No adjustment need be made for (x) a transaction referred to
in subsections (b), (d)(ii) or (d)(iii) of this Section 15 if the below market
portion of such issuances, taken together with the below market portion of all
other below market issuances and with the above market portion of all above
market tender or exchange offers described in clause (y) of this paragraph made
on and after the date of this Warrant Agreement, is less than 2.0% of the Total
Market Capitalization of the Company (determined by reference to the sum of the
percentages of Total Market Capitalization of the Company attributable to each
such transaction on the date thereof) and (y) a transaction referred to in
subsection (f) of this Section 15 if the above market portion of such tender or
exchange offers, taken together with the above market portion of all other above
market tender or exchange offers and with the below market portion of all below
market issuances described in clause (x) of this paragraph made on or after the
date of this Warrant Agreement, is less than 2.0% of the Total Market
Capitalization of the Company (determined by reference to the sum of the
percentages of Total Market Capitalization of the Company attributable to each
such transaction on the date thereof). For purposes hereof, the "Total Market
Capitalization" of any person means, as of any day of determination, the sum of
(A) the consolidated indebtedness of such person and its Subsidiaries on such
day, plus (B) the product of (1) the aggregate number of outstanding primary
shares of Common Stock of such person on such day (which shall not include any
option or warrants on, or securities convertible or exchangeable into, shares of
Common Stock of such person other than, in the case of the Company, any share of
preferred stock of the Company, that, as of the day of determination, cannot,
pursuant to the terms thereof as in effect on the date hereof, be required to be
redeemed by the Company in cash), and (2) the average Closing Price of such
Common Stock over the 20 consecutive Trading Days immediately preceding such
day, plus (C) the liquidation value of any outstanding shares of preferred stock
of such person on such day. If no such Closing Price exists with respect to
shares of any such class, the value of such shares for purposes of clause (b) of
the preceding sentence shall be determined by the Company's Board of Directors
in good faith and evidenced by a written opinion as to such value issued by an
Independent Financial Expert.
(iii) No adjustment need be made for a change in the par value,
or from par value to no par value, or from no par value to par value, of the
Common Shares.
SECTION 16. [INTENTIONALLY NOT USED]
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<PAGE> 25
SECTION 17. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 17,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall notify the Warrant Agent in writing of the amount to be paid in
lieu of the fraction of a Warrant Share and concurrently pay or provide to the
Warrant Agent for payment to the Warrant holder an amount in cash equal to the
product of (i) such fraction of a Warrant Share multiplied by (ii) the
difference of the current market price of a Common Share on the trading day
immediately preceding the date the Warrant is presented for exercise over the
Exercise Price of such Warrant, computed to the nearest whole cent.
SECTION 18. Notices to Warrant Holders.
(a) Whenever the Exercise Price applicable to any Warrant is adjusted as
herein provided:
(i) The Company shall compute such adjusted Exercise Price in
accordance with Section 15 and shall prepare a certificate signed by the
Treasurer or Chief Financial Officer of the Company setting forth such adjusted
Exercise Price and showing in reasonable detail the facts upon which such
adjustment is based,and such certificate shall forthwith be filed (with a copy
to the Trustee) at each office or agency maintained for the purpose of exercise
of Warrants pursuant to this Agreement; and
(ii) a notice stating that such Exercise Price has been adjusted
and setting forth such adjusted Exercise Price shall forthwith be prepared, and
as soon as practicable after it is prepared, such notice shall be furnished by
the Company to the Trustee and mailed by the Company at its expense to all
registered holders at their last addresses as they shall appear in the Warrant
register.
(b) In case:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Shares payable (A) otherwise than exclusively in
cash or (B) exclusively in cash in an amount that would require an Exercise
Price adjustment pursuant to paragraph (e) of Section 15; or
(ii) the Company shall authorize the granting to the holders of
its Common Shares of rights, options or warrants to subscribe for or purchase
any shares of Capital Shares of any class or of any other rights (excluding
shares of Capital Shares or options for Capital Shares issued pursuant to a
benefit plan for employees, officers or directors of the Company); or
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<PAGE> 26
(iii) of any reclassification of the Common Shares of the Company
(other than a subdivision or combination of the outstanding shares of such
Common Shares), or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) the Company or any subsidiary shall commence a tender or
exchange offer (other than an exchange offer contemplated by clause (iii) above)
for all or a portion of the outstanding shares of Common Shares (or shall amend
any such tender or exchange offer to change the maximum number of shares being
sought or the amount or type of consideration being offered (including by
exchange) therefor);
then the Company shall cause to be filed at each office or agency maintained
pursuant to this Agreement, and shall cause to be mailed to all registered
holders of Warrants at their last addresses as they shall appear in the Warrant
register, at least 21 days (or 11 days in any case specified in clause (i), (ii)
or (v) above) prior to the applicable record, effective or expiration date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or granting of rights,
options or warrants, or, if a record is not to be taken, the date as of which
the holders of its Common Shares of record who will be entitled to such
dividend, distribution, rights, options or warrants are to be determined, (y)
the date on which such reclassification, consolidation, merger, share exchange,
sale, transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of its Common
Shares of record shall be entitled to exchange their Common Shares, for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up, or (z) the date on which such tender or exchange offer (other
than an exchange offer contemplated by clause (y) above) commenced, the date on
which such tender or exchange offer is scheduled to expire unless extended, the
consideration offered and the other material terms thereof (or the material
terms of any amendment thereto). Neither the failure to give any such notice nor
any defect therein shall affect the legality or validity of any action described
in clauses (b)(i) through (b)(v) of this Section 18.
SECTION 19. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound.
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company. The Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it.
- 23 -
<PAGE> 27
The Warrant Agent assumes no responsibility with respect to the distribution of
the Warrant Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant
Certificate in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties. The Warrant Agent shall not be bound by any notice or
demand, or any waiver, modification, termination or revision of this Agreement
or any of the terms hereof, unless evidenced by a writing between the Company
and the Warrant Agent.
(e) The Company agrees to pay to the Warrant Agent such compensation
from time to time as agreed between the Company and the Warrant Agent for all
services rendered by the Warrant Agent hereunder and in connection with the
execution of this Agreement, to reimburse the Warrant Agent for all expenses,
taxes (including withholding taxes and the reasonable fees and expenses of its
counsel and agents) and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the execution, delivery and performance
of its responsibilities under this Agreement and to indemnify the Warrant Agent
and its directors, officers and agents and save them harmless against any and
all liabilities, including judgments, costs and counsel fees, for anything done
or omitted by the Warrant Agent and its directors, officers and agents in the
execution, delivery and performance of its responsibilities under this Agreement
except as a result of its gross negligence or bad faith. The provisions of this
Section 19(e) shall survive termination of this Agreement and the resignation or
removal of the Warrant Agent.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any
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<PAGE> 28
of the Warrant Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding instituted
by the Warrant Agent shall be brought in its name as Warrant Agent and any
recovery of judgment shall be for the ratable benefit of the registered holders
of the Warrants, as their respective rights or interests may appear.
(g) Except as required by law, the Warrant Agent, and any stockholder,
director, officer or employee of the Warrant Agent, may buy, sell or deal in any
of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own gross negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of any Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully-paid and nonassessable, and makes no representation with respect
thereto.
SECTION 20. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided that such corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 21 hereof. To the extent practicable, the Warrant Agent shall provide
prior written notice to the Company of any such merger, consolidation,
succession or similar change with respect to the Warrant Agent; provided,
however, that the failure to deliver such notice will not affect the rights of
any of the parties hereto. In case at the time such successor to the Warrant
Agent shall succeed to the agency created by this Agreement, and in case at that
time any of the Warrant Certificates shall
- 25 -
<PAGE> 29
have been countersigned but not delivered, any such successor to the Warrant
Agent may adopt the countersignature of the original Warrant Agent; and in case
at that time any of the Warrant Certificates shall not have been countersigned,
any successor to the Warrant Agent may countersign such Warrant Certificates
either in the name of the predecessor Warrant Agent or in the name of the
successor to the Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force and effect provided in the Warrant Certificates and in
this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 21. Change of Warrant Agent. If the Warrant Agent shall become
incapable of acting as Warrant Agent or shall resign as provided below, the
Company shall appoint a successor to such Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after it has been
notified in writing of such incapacity by the Warrant Agent or by the registered
holders of a majority of the then-outstanding Warrants, then the registered
holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to such Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company. The holders of a majority of the unexercised Warrants shall be entitled
at any time to remove the Warrant Agent and appoint a successor to such Warrant
Agent. Such successor to the Warrant Agent need not be approved by the Company
or the former Warrant Agent. After appointment the successor to the Warrant
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
but the former Warrant Agent shall deliver and transfer to the successor to the
Warrant Agent any property at the time held by it hereunder and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Failure to give any notice provided for in this Section 21, however, or
any defect therein, shall not affect the legality or validity of the appointment
of a successor to the Warrant Agent.
The Warrant Agent may resign at any time and be discharged from the
obligations hereby created by so notifying the Company in writing at least 30
days in advance of the proposed effective date of its resignation. If no
successor Warrant Agent accepts the engagement hereunder by such time, the
Company shall act as Warrant Agent.
SECTION 22. Notices to the Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the registered holder of any Warrant Certificate to or on the Company shall
be sufficiently given or made when
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<PAGE> 30
and if deposited in the mail, first class or registered, postage prepaid,
addressed (until another address is filed in writing by the Company with the
Warrant Agent), as follows:
PLD Telekom Inc.
680 Fifth Avenue
24th Floor
New York, New York 10019
Attention: Vice President, Administration
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: H. Franklin Bloomer, Jr., Esq.
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant Certificate to the Warrant Agent shall
be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Corporate Trust Department
Fax: (212) 815-5915
Notice may also be given by facsimile transmission (effective when
receipt is acknowledged) (effective at the time of delivery) or by overnight
delivery service (effective the next business day).
SECTION 23. Supplements and Amendments. The Company and the Warrant
Agent may from time to time, supplement or amend this Agreement without the
consent of any holders of Warrant Certificates in order to cure any ambiguity or
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
materially adversely affect the interests of the holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of holders shall require the written consent of
registered holders of a majority of the then outstanding Warrants. The consent
of each holder of a Warrant affected shall be required for any amendment
pursuant to which the Exercise Price applicable in respect of such Warrant would
be increased or the
- 27 -
<PAGE> 31
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than in accordance with Section 15 or 17 hereof). In executing
any amendment or supplement, the Warrant Agent shall be entitled to receive an
opinion of counsel to the effect that such amendment or supplement is authorized
and permitted by this Agreement.
SECTION 24. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
(without limiting Section 28 hereof) and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 25. Termination. This Agreement shall terminate at 5:00 p.m.,
New York, New York time on December 31, 2008; provided, however, that if no
Default Warrants have become issuable in accordance with the terms hereof, this
Agreement shall terminate on the earlier of the date on which all Initial
Warrants and Additional Warrants have been exercised and January 1, 2009;
provided, further, that (a) if the Company shall become obligated to issue any
Default Warrants pursuant to the Revolving Credit Agreement or Section 2(c)
hereof, this Agreement shall not in any event terminate for so long as the
Company shall remain so obligated, and (b) if the Company shall have issued any
Default Warrants pursuant to the Revolving Credit Agreement or Section 2(c)
hereof, this Agreement shall terminate on the earlier of (i) 5:00 p.m., New
York, New York time, on the date which is the tenth anniversary of the latest
date of issuance of any such Default Warrant and (ii) the date on which all
Warrants have been exercised. The provisions of Section 19 hereof shall survive
any such termination.
SECTION 26. Governing Law; Jurisdiction. This Agreement and each Warrant
Certificate shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed in the
State of New York. The Company irrevocably consents to the jurisdiction of any
United States or State Court located in the State of New York in any suit or
proceeding based on or arising under this Agreement or the Warrant Certificates
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in any such court. The Company irrevocably waives the defense of
an inconvenient forum to the maintenance of such suit or proceeding. The Company
hereby agrees that if it ceases to have an office located in the State of New
York, it will promptly designate and appoint CT Corporation System, 1633
Broadway, New York, NY 10019 as an agent upon whom process may be served in any
suit or proceeding based on or arising under this Agreement and notify the
holders of the Warrants of such appointment. The Company further agrees that
service of process upon the Company, or upon an agent appointed pursuant to the
preceding sentence accompanied with written notice of said service to the
Company, as the case may be, mailed by first class mail shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the Warrant Agent's or any Warrant
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
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<PAGE> 32
SECTION 27. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of the Warrant Certificates.
SECTION 28. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 29. Further Assurances. From time to time on and after the date
hereof, the Company shall deliver or cause to be delivered to the Warrant Agent
such further documents and instruments and shall do and cause to be done such
further acts as the Warrant Agent shall reasonably request (it being understood
that the Warrant Agent shall have no obligation to make such request) to carry
out more effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected hereunder.
- 29 -
<PAGE> 33
IN WITNESS WHEREOF, the parties here to have caused this Agreement to be
duly executed, as of the day and year first above written.
PLD TELEKOM INC.
By: /s/ E. Clive Anderson
------------------------------------
Name: E. Clive Anderson
Title: Senior Vice President
THE BANK OF NEW YORK
By: /s/ Ming J. Shiang
------------------------------------
------------------------------------
Name: Ming J. Shiang
Title: Assistant Vice President
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<PAGE> 34
EXHIBIT A-1
FORM OF SERIES A WARRANT CERTIFICATE
EXERCISABLE ON OR AFTER NOVEMBER 26, 1997
AND ON OR BEFORE DECEMBER 31, 2008
No. WA-[ ]
Private Placement Number 69340T 2* 0
Series A Warrant Certificate
PLD TELEKOM INC.
This Series A Warrant Certificate ("this Warrant Certificate")
certifies that _______________, or registered assigns, is the registered holder
of _______ warrants expiring December 31, 2008 (the "Warrants") to purchase
Common Shares (the "Common Shares"), of PLD Telekom Inc., a Delaware corporation
("the Company"). Each Warrant entitles the holder upon exercise to receive from
the Company, at any time on or after 9:00 a.m., New York, New York time on
November 26, 1997 and on or prior to the close of business on December 31, 2008
(the "Expiration Date"), one (1) fully paid and nonassessable Common Share (each
a "Warrant Share") at the initial exercise price (the "Exercise Price") of
$8.625 per share payable either in the form of cash or certified check, official
bank check or bank cashier's check payable to the order of the Company or as
otherwise provided in the Warrant Agreement referred to herein, upon surrender
of this Warrant Certificate and payment of the aggregate Exercise Price at the
office or agency of the Warrant Agent, but only subject to the conditions set
forth herein and in the Warrant Agreement. The Exercise Price is subject to
being reset, and the Exercise Price and, in some cases, the number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment, upon
the occurrence of certain events set forth in the Warrant Agreement. All
capitalized terms not defined herein shall have the meaning assigned to such
terms in the Warrant Agreement.
No Warrant may be exercised after 5:00 pm., New York, New York
time on the Expiration Date and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth following the signature page hereof and such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Warrant Certificate shall not be valid unless countersigned
by the Warrant Agent, as such term is used in the Warrant Agreement.
<PAGE> 35
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, PLD Telekom Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary,
each by a facsimile of his signature, and has caused a facsimile of its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: November __, 1997
PLD TELEKOM INC.
By:____________________________
Chief Executive Officer
By:_____________________________
Secretary
(seal)
Countersigned:
The Bank of New York as Warrant Agent
By:___________________________________
Authorized Signatory
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<PAGE> 36
THE WARRANTS REPRESENTED HEREBY AND, AS OF THE DATE THIS WARRANT
CERTIFICATE WAS ORIGINALLY ISSUED, THE COMMON SHARES PURCHASABLE UPON
THEIR EXERCISE, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
(B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES.
THE COMMON SHARES (THE "COMMON SHARES") FOR WHICH THIS WARRANT IS
EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY, NO WARRANT HOLDER SHALL BE
ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE
TIME OF EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE ACT COVERING
THE OFFER AND SALE OF THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF
THIS WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO
STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT
HAS BEEN ISSUED BY THE SEC OR (II) THE OFFER AND SALE OF THE WARRANT
SHARES TO THE WARRANT HOLDERS ARE EXEMPT FROM REGISTRATION UNDER THE ACT
AND THE WARRANT HOLDER, IF SO REQUESTED BY THE COMPANY, HAS DELIVERED TO
THE COMPANY AN OPINION OF COUNSEL TO SUCH EFFECT.
TRANSFERS OF THE WARRANTS REPRESENTED HEREBY SHALL BE MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE WARRANT
AGREEMENT.
By accepting a Warrant Certificate bearing the legend above, each
holder shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the Warrant
Agent) as fully and effectively as if such holder had signed the same.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring on the Expiration Date, entitling the
holder upon exercise to receive Common Shares of the Company (the "Common
Shares"), and are issued or to be issued pursuant
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<PAGE> 37
to a Warrant Agreement, dated as of November 26, 1997 (the "Warrant Agreement"),
duly executed and delivered by the Company to The Bank of New York, as Warrant
Agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.
Warrants may be exercised at any time on or after 9:00 a.m., New
York, New York time on November 26, 1997 and on or prior to the close of
business on the Expiration Date. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereon properly completed and
executed, together with payment of the Exercise Price in the form of cash or
certified or official bank check or official bank cashier's check payable to the
order of the Company or as otherwise provided in the Warrant Agreement, at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or such holder's assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be reset or otherwise adjusted. If the Exercise Price is
adjusted, the Warrant Agreement generally provides that the number of Common
Shares issuable upon the exercise of each Warrant shall be adjusted. No
fractions of a Common Share will be issued upon the exercise of any Warrant, but
the Company will pay the cash value thereof determined as provided in the
Warrant Agreement.
The Holder of this Warrant Certificate is entitled to the
registration rights as provided in the Registration Rights Agreement, dated as
of November 26, 1997, among the Company, certain institutional investors
identified therein and the Warrant Agent, relating to registration of the
Warrants evidenced hereby and the Common Shares issuable upon exercise of the
Warrants.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by a legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant Agree-
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<PAGE> 38
ment, without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
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<PAGE> 39
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ Common Shares and
herewith tenders payment for such shares to the order of PLD Telekom Inc. in the
amount of $____ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________, whose address is
______________________ and that such shares be delivered to ________________
whose address is ___________.
If said number of shares is less than all of the Common Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
_________________, whose address is ______________, and that such Warrant
Certificate be delivered to _______________, whose address is
___________________.
Date: ____________
Your Signature:___________________
(Sign exactly as your name appears on the face of this Warrant):
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sells, assigns and transfers unto
Name:_______________________________________________
Taxpayer Identification No.:________________________
Address:____________________________________________
the within Warrant Certificate and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________________ attorney to
transfer the Warrants evidenced by said Warrant Certificate (the "Warrants") on
the books of the Company with full power of substitution in the premises.
In connection with any transfer of the Warrants occurring prior
to the date which is the earlier of (i) the date of an effective Registration or
(ii) two years after the later of the original issuance of the Warrants or the
last date on which the Warrants were held by an affiliate
<PAGE> 40
of the Company, the undersigned confirms, that without utilizing any general
solicitation or general advertising:
Check One
(a) [ ] the Warrants are being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
(b) [ ] the Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Warrant
Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 7(b) of the Warrant Agreement shall
have been satisfied.
Date:___________________ ______________________________________
NOTICE: The signature to
this assignment must correspond with
the name as written upon the face of
the within-mentioned instrument in
every particular, without alteration
or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:__________________ ________________________________________
(To be executed by an executive officer)
<PAGE> 41
EXHIBIT A-2
FORM OF SERIES B WARRANT CERTIFICATE
EXERCISABLE ON OR AFTER NOVEMBER 26, 1997
AND ON OR BEFORE DECEMBER 31, 2008
No. WB-[ ]
Private Placement Number 69340T 3* 9
Series B Warrant Certificate
PLD TELEKOM INC.
This Series B Warrant Certificate ("this Warrant Certificate")
certifies that _______________, or registered assigns, is the registered holder
of _______ warrants expiring December 31, 2008 (the "Warrants") to purchase
Common Shares (the "Common Shares"), of PLD Telekom Inc., a Delaware corporation
("the Company"). Each Warrant entitles the holder upon exercise to receive from
the Company, at any time on or after 9:00 a.m., New York, New York time on
November 26, 1997 and on or prior to the close of business on December 31, 2008
(the "Expiration Date"), one (1) fully paid and nonassessable Common Share (each
a "Warrant Share") at the initial exercise price (the "Exercise Price") of
$8.625 per share payable either in the form of cash or certified check, official
bank check or bank cashier's check payable to the order of the Company or as
otherwise provided in the Warrant Agreement referred to herein, upon surrender
of this Warrant Certificate and payment of the aggregate Exercise Price at the
office or agency of the Warrant Agent, but only subject to the conditions set
forth herein and in the Warrant Agreement. The Exercise Price is subject to
being reset, and the Exercise Price and, in some cases, the number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment, upon
the occurrence of certain events set forth in the Warrant Agreement. All
capitalized terms not defined herein shall have the meaning assigned to such
terms in the Warrant Agreement.
No Warrant may be exercised after 5:00 pm., New York, New York
time on the Expiration Date and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth after the signature page hereof and such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
This Warrant Certificate shall not be valid unless countersigned
by the Warrant Agent, as such term is used in the Warrant Agreement.
<PAGE> 42
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, PLD Telekom Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary,
each by a facsimile of his signature, and has caused a facsimile of its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: November __, 1997
PLD TELEKOM INC.
By:____________________________
Chief Executive Officer
By:_____________________________
Secretary
(seal)
Countersigned:
The Bank of New York as Warrant Agent
By:___________________________________
Authorized Signatory
-2-
<PAGE> 43
THE WARRANTS REPRESENTED HEREBY AND, AS OF THE DATE THIS WARRANT
CERTIFICATE WAS ORIGINALLY ISSUED, THE COMMON SHARES PURCHASABLE
UPON THEIR EXERCISE, HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, OR (2) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES.
THE COMMON SHARES (THE "COMMON SHARES") FOR WHICH THIS WARRANT IS
EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
ACCORDINGLY, NO WARRANT HOLDER SHALL BE ENTITLED TO EXERCISE SUCH
HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE,
(I) A REGISTRATION STATEMENT UNDER THE ACT COVERING THE OFFER AND
SALE OF THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC OR (II) THE
OFFER AND SALE OF THE WARRANT SHARES TO THE WARRANT HOLDERS ARE
EXEMPT FROM REGISTRATION UNDER THE ACT AND THE WARRANT HOLDER, IF
SO REQUESTED BY THE COMPANY, HAS DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL TO SUCH EFFECT.
TRANSFERS OF THE WARRANTS REPRESENTED HEREBY SHALL BE
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
WARRANT AGREEMENT.
By accepting a Warrant Certificate bearing the legend above, each
holder shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the Warrant
Agent) as fully and effectively as if such holder had signed the same.
-3-
<PAGE> 44
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring on the Expiration Date, entitling the
holder upon exercise to receive Common Shares of the Company (the "Common
Shares"), and are issued or to be issued pursuant to a Warrant Agreement, dated
as of November 26, 1997 (the "Warrant Agreement"), duly executed and delivered
by the Company to The Bank of New York, as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants.
Warrants may be exercised at any time on or after 9:00 a.m., New
York, New York time on November 26, 1997 and on or prior to the close of
business on the Expiration Date. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereafter properly completed and
executed, together with payment of the Exercise Price in the form of cash or
certified or official bank check or official bank cashier's check payable to the
order of the Company or as otherwise provided in the Warrant Agreement, at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or such holder's assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be reset or otherwise adjusted. If the Exercise Price is
adjusted, the Warrant Agreement generally provides that the number of Common
Shares issuable upon the exercise of each Warrant shall be adjusted. No
fractions of a Common Share will be issued upon the exercise of any Warrant, but
the Company will pay the cash value thereof determined as provided in the
Warrant Agreement.
The Holder of this Warrant Certificate is entitled to the
registration rights as provided in the Registration Rights Agreement, dated as
of November 26, 1997, among the Company, certain institutional investors
identified therein and the Warrant Agent, relating to registration of the
Warrants evidenced hereby and the Common Shares issuable upon exercise of the
Warrants.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by a legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
-4-
<PAGE> 45
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
-5-
<PAGE> 46
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ Common Shares and
herewith tenders payment for such shares to the order of PLD Telekom Inc. in the
amount of $____ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________, whose address is
______________________ and that such shares be delivered to ________________
whose address is ___________.
If said number of shares is less than all of the Common Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
_________________, whose address is ______________, and that such Warrant
Certificate be delivered to _______________, whose address is
___________________.
Date: ____________
Your Signature:___________________
(Sign exactly as your name appears on the face of this Warrant):
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sells, assigns and transfers unto
Name:__________________________________________________
Taxpayer Identification No.:___________________________
Address:_______________________________________________
the within Warrant Certificate and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________________ attorney to
transfer the Warrants evidenced by said Warrant Certificate (the "Warrants") on
the books of the Company with full power of substitution in the premises.
In connection with any transfer of the Warrants occurring prior
to the date which is the earlier of (i) the date of an effective Registration or
(ii) two years after the later of the original issuance of the Warrants or the
last date on which the Warrants were held by an affiliate
<PAGE> 47
of the Company, the undersigned confirms, that without utilizing any general
solicitation or general advertising:
Check One
(a) [ ] the Warrants are being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
(b) [ ] the Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Warrant
Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 7(b) of the Warrant Agreement shall
have been satisfied.
Date:____________________ ______________________________________
NOTICE: The signature to
this assignment must correspond with
the name as written upon the face of
the within-mentioned instrument in
every particular, without alteration
or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:___________________ ________________________________________
(To be executed by an executive officer)
<PAGE> 48
EXHIBIT A-3
FORM OF DEFAULT WARRANT CERTIFICATE
EXERCISABLE ON OR AFTER NOVEMBER 26, 1997
AND ON OR BEFORE [ * ]
No. WD-[ ]
Private Placement Number 69340T 4* 8
Default Warrant Certificate
PLD TELEKOM INC.
This Default Warrant Certificate ("this Warrant Certificate")
certifies that _______________, or registered assigns, is the registered holder
of _______ warrants expiring [ * ] (the "Warrants") to purchase Common Shares
(the "Common Shares"), of PLD Telekom Inc., a Delaware corporation ("the
Company"). Each Warrant entitles the holder upon exercise to receive from the
Company, at any time on or after 9:00 a.m., New York, New York time on November
26, 1997 and on or prior to the close of business on [ * ] (the "Expiration
Date"), one (1) fully paid and nonassessable Common Share (each a "Warrant
Share") at the initial exercise price (the "Exercise Price") of $0.01 per share
payable either in the form of cash or certified check, official bank check or
bank cashier's check payable to the order of the Company or as otherwise
provided in the Warrant Agreement referred to herein, upon surrender of this
Warrant Certificate and payment of the aggregate Exercise Price at the office or
agency of the Warrant Agent, but only subject to the conditions set forth herein
and in the Warrant Agreement. The Exercise Price is subject to being reset, and
the Exercise Price and, in some cases, the number of Warrant Shares issuable
upon exercise of the Warrants are subject to adjustment, upon the occurrence of
certain events set forth in the Warrant Agreement. All capitalized terms not
defined herein shall have the meaning assigned to such terms in the Warrant
Agreement.
No Warrant may be exercised after 5:00 pm., New York, New York
time on the Expiration Date and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth after the signature page hereof and such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
- --------
* Insert date which is tenth anniversary of date of issuance.
<PAGE> 49
This Warrant Certificate shall not be valid unless countersigned
by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, PLD Telekom Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary,
each by a facsimile of his signature, and has caused a facsimile of its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: November __, 1997
PLD TELEKOM INC.
By:_____________________________
Chief Executive Officer
By:_____________________________
Secretary
(seal)
Countersigned:
The Bank of New York as Warrant Agent
By:___________________________________
Authorized Signatory
-2-
<PAGE> 50
THE WARRANTS REPRESENTED HEREBY AND, AS OF THE DATE THIS WARRANT
CERTIFICATE WAS ORIGINALLY ISSUED, THE COMMON SHARES PURCHASABLE
UPON THEIR EXERCISE, HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, OR (2) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES.
THE COMMON SHARES (THE "COMMON SHARES") FOR WHICH THIS WARRANT IS
EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
ACCORDINGLY, NO WARRANT HOLDER SHALL BE ENTITLED TO EXERCISE SUCH
HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE,
(I) A REGISTRATION STATEMENT UNDER THE ACT COVERING THE OFFER AND
SALE OF THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC OR (II) THE
OFFER AND SALE OF THE WARRANT SHARES TO THE WARRANT HOLDERS ARE
EXEMPT FROM REGISTRATION UNDER THE ACT AND THE WARRANT HOLDER, IF
SO REQUESTED BY THE COMPANY, HAS DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL TO SUCH EFFECT.
TRANSFERS OF THE WARRANTS REPRESENTED HEREBY SHALL BE
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
WARRANT AGREEMENT.
By accepting a Warrant Certificate bearing the legend above, each
holder shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the Warrant
Agent) as fully and effectively as if such holder had signed the same.
-3-
<PAGE> 51
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring on the Expiration Date, entitling the
holder upon exercise to receive Common Shares of the Company (the "Common
Shares"), and are issued or to be issued pursuant to a Warrant Agreement, dated
as of November 26, 1997 (the "Warrant Agreement"), duly executed and delivered
by the Company to The Bank of New York, as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants.
Warrants may be exercised at any time on or after 9:00 a.m., New
York, New York time on November 26, 1997 and on or prior to the close of
business on the Expiration Date. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereafter properly completed and
executed, together with payment of the Exercise Price in the form of cash or
certified or official bank check or official bank cashier's check payable to the
order of the Company or as otherwise provided in the Warrant Agreement, at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or such holder's assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be reset or otherwise adjusted. If the Exercise Price is
adjusted, the Warrant Agreement generally provides that the number of Common
Shares issuable upon the exercise of each Warrant shall be adjusted. No
fractions of a Common Share will be issued upon the exercise of any Warrant, but
the Company will pay the cash value thereof determined as provided in the
Warrant Agreement.
The Holder of this Warrant Certificate is entitled to the
registration rights as provided in the Registration Rights Agreement, dated as
of November 26, 1997, among the Company, certain institutional investors
identified therein and the Warrant Agent, relating to registration of the
Warrants evidenced hereby and the Common Shares issuable upon exercise of the
Warrants.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by a legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
-4-
<PAGE> 52
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
-5-
<PAGE> 53
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ Common Shares and
herewith tenders payment for such shares to the order of PLD Telekom Inc. in the
amount of $____ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________, whose address is
______________________ and that such shares be delivered to ________________
whose address is ___________.
If said number of shares is less than all of the Common Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
_________________, whose address is ______________, and that such Warrant
Certificate be delivered to _______________, whose address is
___________________.
Date: ____________
Your Signature:___________________
(Sign exactly as your name appears on the face of this Warrant):
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sells, assigns and transfers unto
Name:___________________________________________________
Taxpayer Identification No.:____________________________
Address:________________________________________________
the within Warrant Certificate and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________________ attorney to
transfer the Warrants evidenced by said Warrant Certificate (the "Warrants") on
the books of the Company with full power of substitution in the premises.
In connection with any transfer of the Warrants occurring prior
to the date which is the earlier of (i) the date of an effective Registration or
(ii) two years after the later of the original issuance of the Warrants or the
last date on which the Warrants were held by an affiliate
<PAGE> 54
of the Company, the undersigned confirms, that without utilizing any general
solicitation or general advertising:
Check One
(a) [ ] the Warrants are being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
(b) [ ] the Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Warrant
Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 7(b) of the Warrant Agreement shall
have been satisfied.
Date:_____________________ ______________________________________
NOTICE: The signature to
this assignment must correspond with
the name as written upon the face of
the within-mentioned instrument in
every particular, without alteration
or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:____________________ ________________________________________
(To be executed by an executive officer)
<PAGE> 55
EXHIBIT B
FORM OF WARRANT SHARES LEGEND
"THE SHARES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR
(2) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND THE
PROVINCES OF CANADA".
<PAGE> 1
EXHIBIT 4.25
FORM OF SERIES A WARRANT CERTIFICATE
EXERCISABLE ON OR AFTER NOVEMBER 26, 1997
AND ON OR BEFORE DECEMBER 31, 2008
No. WA-[ ]
Private Placement Number 69340T 2* 0
Series A Warrant Certificate
PLD TELEKOM INC.
This Series A Warrant Certificate ("this Warrant Certificate")
certifies that _______________, or registered assigns, is the registered holder
of _______ warrants expiring December 31, 2008 (the "Warrants") to purchase
Common Shares (the "Common Shares"), of PLD Telekom Inc., a Delaware corporation
("the Company"). Each Warrant entitles the holder upon exercise to receive from
the Company, at any time on or after 9:00 a.m., New York, New York time on
November 26, 1997 and on or prior to the close of business on December 31, 2008
(the "Expiration Date"), one (1) fully paid and nonassessable Common Share (each
a "Warrant Share") at the initial exercise price (the "Exercise Price") of
$8.625 per share payable either in the form of cash or certified check, official
bank check or bank cashier's check payable to the order of the Company or as
otherwise provided in the Warrant Agreement referred to herein, upon surrender
of this Warrant Certificate and payment of the aggregate Exercise Price at the
office or agency of the Warrant Agent, but only subject to the conditions set
forth herein and in the Warrant Agreement. The Exercise Price is subject to
being reset, and the Exercise Price and, in some cases, the number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment, upon
the occurrence of certain events set forth in the Warrant Agreement. All
capitalized terms not defined herein shall have the meaning assigned to such
terms in the Warrant Agreement.
No Warrant may be exercised after 5:00 pm., New York, New York
time on the Expiration Date and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth following the signature page hereof and such
further provisions shall for all purposes have the same effect as though fully
set forth at this place.
This Warrant Certificate shall not be valid unless countersigned
by the Warrant Agent, as such term is used in the Warrant Agreement.
<PAGE> 2
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, PLD Telekom Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary,
each by a facsimile of his signature, and has caused a facsimile of its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: November __, 1997
PLD TELEKOM INC.
By:____________________________
Chief Executive Officer
By:_____________________________
Secretary
(seal)
Countersigned:
The Bank of New York as Warrant Agent
By:___________________________________
Authorized Signatory
-2-
<PAGE> 3
THE WARRANTS REPRESENTED HEREBY AND, AS OF THE DATE THIS WARRANT
CERTIFICATE WAS ORIGINALLY ISSUED, THE COMMON SHARES PURCHASABLE UPON
THEIR EXERCISE, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
(B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES.
THE COMMON SHARES (THE "COMMON SHARES") FOR WHICH THIS WARRANT IS
EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS. ACCORDINGLY, NO WARRANT HOLDER SHALL BE
ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE
TIME OF EXERCISE, (I) A REGISTRATION STATEMENT UNDER THE ACT COVERING
THE OFFER AND SALE OF THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF
THIS WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO
STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT
HAS BEEN ISSUED BY THE SEC OR (II) THE OFFER AND SALE OF THE WARRANT
SHARES TO THE WARRANT HOLDERS ARE EXEMPT FROM REGISTRATION UNDER THE ACT
AND THE WARRANT HOLDER, IF SO REQUESTED BY THE COMPANY, HAS DELIVERED TO
THE COMPANY AN OPINION OF COUNSEL TO SUCH EFFECT.
TRANSFERS OF THE WARRANTS REPRESENTED HEREBY SHALL BE MADE
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE WARRANT
AGREEMENT.
By accepting a Warrant Certificate bearing the legend above, each
holder shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the Warrant
Agent) as fully and effectively as if such holder had signed the same.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring on the Expiration Date, entitling the
holder upon exercise to receive Common Shares of the Company (the "Common
Shares"), and are issued or to be issued pursuant
-3-
<PAGE> 4
to a Warrant Agreement, dated as of November 26, 1997 (the "Warrant Agreement"),
duly executed and delivered by the Company to The Bank of New York, as Warrant
Agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.
Warrants may be exercised at any time on or after 9:00 a.m., New
York, New York time on November 26, 1997 and on or prior to the close of
business on the Expiration Date. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereon properly completed and
executed, together with payment of the Exercise Price in the form of cash or
certified or official bank check or official bank cashier's check payable to the
order of the Company or as otherwise provided in the Warrant Agreement, at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or such holder's assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be reset or otherwise adjusted. If the Exercise Price is
adjusted, the Warrant Agreement generally provides that the number of Common
Shares issuable upon the exercise of each Warrant shall be adjusted. No
fractions of a Common Share will be issued upon the exercise of any Warrant, but
the Company will pay the cash value thereof determined as provided in the
Warrant Agreement.
The Holder of this Warrant Certificate is entitled to the
registration rights as provided in the Registration Rights Agreement, dated as
of November 26, 1997, among the Company, certain institutional investors
identified therein and the Warrant Agent, relating to registration of the
Warrants evidenced hereby and the Common Shares issuable upon exercise of the
Warrants.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by a legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant Agree-
-4-
<PAGE> 5
ment, without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
-5-
<PAGE> 6
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ Common Shares and
herewith tenders payment for such shares to the order of PLD Telekom Inc. in the
amount of $____ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________, whose address is
______________________ and that such shares be delivered to ________________
whose address is ___________.
If said number of shares is less than all of the Common Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
_________________, whose address is ______________, and that such Warrant
Certificate be delivered to _______________, whose address is
___________________.
Date: ____________
Your Signature:___________________
(Sign exactly as your name appears on the face of this Warrant):
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sells, assigns and transfers unto
Name:_______________________________________________
Taxpayer Identification No.:________________________
Address:____________________________________________
the within Warrant Certificate and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________________ attorney to
transfer the Warrants evidenced by said Warrant Certificate (the "Warrants") on
the books of the Company with full power of substitution in the premises.
In connection with any transfer of the Warrants occurring prior
to the date which is the earlier of (i) the date of an effective Registration or
(ii) two years after the later of the original issuance of the Warrants or the
last date on which the Warrants were held by an affiliate
<PAGE> 7
of the Company, the undersigned confirms, that without utilizing any general
solicitation or general advertising:
Check One
(a) [ ] the Warrants are being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
(b) [ ] the Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Warrant
Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 7(b) of the Warrant Agreement shall
have been satisfied.
Date:___________________ ______________________________________
NOTICE: The signature to
this assignment must correspond with
the name as written upon the face of
the within-mentioned instrument in
every particular, without alteration
or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:__________________ ________________________________________
(To be executed by an executive officer)
<PAGE> 1
EXHIBIT 4.26
FORM OF SERIES B WARRANT CERTIFICATE
EXERCISABLE ON OR AFTER NOVEMBER 26, 1997
AND ON OR BEFORE DECEMBER 31, 2008
No. WB-[ ]
Private Placement Number 69340T 3* 9
Series B Warrant Certificate
PLD TELEKOM INC.
This Series B Warrant Certificate ("this Warrant Certificate")
certifies that _______________, or registered assigns, is the registered holder
of _______ warrants expiring December 31, 2008 (the "Warrants") to purchase
Common Shares (the "Common Shares"), of PLD Telekom Inc., a Delaware corporation
("the Company"). Each Warrant entitles the holder upon exercise to receive from
the Company, at any time on or after 9:00 a.m., New York, New York time on
November 26, 1997 and on or prior to the close of business on December 31, 2008
(the "Expiration Date"), one (1) fully paid and nonassessable Common Share (each
a "Warrant Share") at the initial exercise price (the "Exercise Price") of
$8.625 per share payable either in the form of cash or certified check, official
bank check or bank cashier's check payable to the order of the Company or as
otherwise provided in the Warrant Agreement referred to herein, upon surrender
of this Warrant Certificate and payment of the aggregate Exercise Price at the
office or agency of the Warrant Agent, but only subject to the conditions set
forth herein and in the Warrant Agreement. The Exercise Price is subject to
being reset, and the Exercise Price and, in some cases, the number of Warrant
Shares issuable upon exercise of the Warrants are subject to adjustment, upon
the occurrence of certain events set forth in the Warrant Agreement. All
capitalized terms not defined herein shall have the meaning assigned to such
terms in the Warrant Agreement.
No Warrant may be exercised after 5:00 pm., New York, New York
time on the Expiration Date and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth after the signature page hereof and such further
provisions shall for all purposes have the same effect as though fully set forth
at this place.
This Warrant Certificate shall not be valid unless countersigned
by the Warrant Agent, as such term is used in the Warrant Agreement.
<PAGE> 2
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, PLD Telekom Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary,
each by a facsimile of his signature, and has caused a facsimile of its
corporate seal to be affixed hereunto or imprinted hereon.
Dated: November __, 1997
PLD TELEKOM INC.
By:____________________________
Chief Executive Officer
By:_____________________________
Secretary
(seal)
Countersigned:
The Bank of New York as Warrant Agent
By:___________________________________
Authorized Signatory
-2-
<PAGE> 3
THE WARRANTS REPRESENTED HEREBY AND, AS OF THE DATE THIS WARRANT
CERTIFICATE WAS ORIGINALLY ISSUED, THE COMMON SHARES PURCHASABLE
UPON THEIR EXERCISE, HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A") IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, OR (2) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES.
THE COMMON SHARES (THE "COMMON SHARES") FOR WHICH THIS WARRANT IS
EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
ABSENT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
ACCORDINGLY, NO WARRANT HOLDER SHALL BE ENTITLED TO EXERCISE SUCH
HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE TIME OF EXERCISE,
(I) A REGISTRATION STATEMENT UNDER THE ACT COVERING THE OFFER AND
SALE OF THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"),
AND NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH
REGISTRATION STATEMENT HAS BEEN ISSUED BY THE SEC OR (II) THE
OFFER AND SALE OF THE WARRANT SHARES TO THE WARRANT HOLDERS ARE
EXEMPT FROM REGISTRATION UNDER THE ACT AND THE WARRANT HOLDER, IF
SO REQUESTED BY THE COMPANY, HAS DELIVERED TO THE COMPANY AN
OPINION OF COUNSEL TO SUCH EFFECT.
TRANSFERS OF THE WARRANTS REPRESENTED HEREBY SHALL BE
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
WARRANT AGREEMENT.
By accepting a Warrant Certificate bearing the legend above, each
holder shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the Warrant
Agent) as fully and effectively as if such holder had signed the same.
-3-
<PAGE> 4
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring on the Expiration Date, entitling the
holder upon exercise to receive Common Shares of the Company (the "Common
Shares"), and are issued or to be issued pursuant to a Warrant Agreement, dated
as of November 26, 1997 (the "Warrant Agreement"), duly executed and delivered
by the Company to The Bank of New York, as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants.
Warrants may be exercised at any time on or after 9:00 a.m., New
York, New York time on November 26, 1997 and on or prior to the close of
business on the Expiration Date. The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereafter properly completed and
executed, together with payment of the Exercise Price in the form of cash or
certified or official bank check or official bank cashier's check payable to the
order of the Company or as otherwise provided in the Warrant Agreement, at the
office of the Warrant Agent. In the event that upon any exercise of Warrants
evidenced hereby the number of Warrants exercised shall be less than the total
number of Warrants evidenced hereby, there shall be issued to the holder hereof
or such holder's assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be reset or otherwise adjusted. If the Exercise Price is
adjusted, the Warrant Agreement generally provides that the number of Common
Shares issuable upon the exercise of each Warrant shall be adjusted. No
fractions of a Common Share will be issued upon the exercise of any Warrant, but
the Company will pay the cash value thereof determined as provided in the
Warrant Agreement.
The Holder of this Warrant Certificate is entitled to the
registration rights as provided in the Registration Rights Agreement, dated as
of November 26, 1997, among the Company, certain institutional investors
identified therein and the Warrant Agent, relating to registration of the
Warrants evidenced hereby and the Common Shares issuable upon exercise of the
Warrants.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by a legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
-4-
<PAGE> 5
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
-5-
<PAGE> 6
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive __________ Common Shares and
herewith tenders payment for such shares to the order of PLD Telekom Inc. in the
amount of $____ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be
registered in the name of _____________________, whose address is
______________________ and that such shares be delivered to ________________
whose address is ___________.
If said number of shares is less than all of the Common Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
_________________, whose address is ______________, and that such Warrant
Certificate be delivered to _______________, whose address is
___________________.
Date: ____________
Your Signature:___________________
(Sign exactly as your name appears on the face of this Warrant):
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sells, assigns and transfers unto
Name:__________________________________________________
Taxpayer Identification No.:___________________________
Address:_______________________________________________
the within Warrant Certificate and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________________ attorney to
transfer the Warrants evidenced by said Warrant Certificate (the "Warrants") on
the books of the Company with full power of substitution in the premises.
In connection with any transfer of the Warrants occurring prior
to the date which is the earlier of (i) the date of an effective Registration or
(ii) two years after the later of the original issuance of the Warrants or the
last date on which the Warrants were held by an affiliate
<PAGE> 7
of the Company, the undersigned confirms, that without utilizing any general
solicitation or general advertising:
Check One
(a) [ ] the Warrants are being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
(b) [ ] the Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Warrant
Certificate and the Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 7(b) of the Warrant Agreement shall
have been satisfied.
Date:____________________ ______________________________________
NOTICE: The signature to
this assignment must correspond with
the name as written upon the face of
the within-mentioned instrument in
every particular, without alteration
or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Warrant for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:___________________ ________________________________________
(To be executed by an executive officer)
<PAGE> 1
EXHIBIT 4.27
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of November 26, 1997
between
PLD TELEKOM INC.
and
THE TRAVELERS INSURANCE COMPANY and
THE TRAVELERS INDEMNITY COMPANY
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 26, 1997 by and between PLD Telekom Inc. (the
"Company") and The Travelers Insurance Company and The Travelers Indemnity
Company (collectively, the "Lenders").
R E C I T A L S:
A. The Company has entered into a Revolving Credit Note and Warrant
Agreement dated as of the date hereof (the "Revolving Credit Agreement") with
the Lenders providing, among other things, for (i) the commitment of the Lenders
to make Series A Revolving Credit Loans from time to time to the Company in an
aggregate principal amount not exceeding $12,400,000 (the "Series A Revolving
Credit Loans") and Series B Revolving Credit Loans from time to time to the
Company in an aggregate principal amount not exceeding $3,100,000 (the "Series B
Revolving Credit Loans" and, together with the Series A Revolving Credit Loans,
the "Revolving Credit Loans"), (ii) the issuance and delivery by the Company to
the Lenders of the Company's 12% Series A Revolving Credit Notes due December
31, 1998 in the aggregate principal amount of $12,400,000 to evidence the
obligation of the Company to repay Series A Revolving Credit Loans from time to
time outstanding in accordance therewith (such notes, including all notes issued
in substitution or exchange therefor pursuant to the Revolving Credit Agreement,
being referred to herein as the "Series A Notes") and its 12% Series B Revolving
Credit Notes due September 30, 1998 in the aggregate principal amount of
$3,100,000 to evidence the obligation of the Company to repay Series B Revolving
Credit Loans from time to time outstanding in accordance therewith (such notes,
including all notes issued in substitution or exchange therefor pursuant to the
Revolving Credit Agreement, being referred to herein as the "Series B Notes "
and, together with the Series A Notes, the "Notes"), and (iii) the issuance by
the Company to the lenders of the Company's (A) warrants (the "Series A
Warrants") to purchase up to an aggregate of 315,000 shares of common stock, par
value $0.01 per share, of the Company (the "Common Shares") and (B) warrants
(the "Series B Warrants", together with the Series A Warrants, the "Initial
Warrants") to purchase up to an aggregate of 108,000 Common Shares. Each Initial
Warrant entitles the holder thereof, upon exercise, to purchase one (1)
fully-paid and nonassessable Common Share (an "Initial Warrant Share") at an
initial exercise price per share (the "Exercise Price") of $8.625. The Notes
will be entitled to the benefit of the terms of and the collateral held by The
Bank of New York, as trustee (together with its successors as trustee, the
"Trustee"), pursuant to the terms of a trust agreement dated as of the date
hereof (the "Trust Agreement") by and between the Company and the Trustee.
B. Pursuant to the Revolving Credit Agreement, (i) the Company has
agreed to deposit in escrow with the Trustee the Company's warrants (the
"Additional Warrants") to purchase up to an aggregate of 182,000 Common Shares
(the "Additional Warrant Shares") of which (A) up to 150,000 Additional Warrants
are issuable to holders of Series A Notes and (B) up to 32,000 Additional
Warrants are issuable to holders of Series B Notes, in each case with an initial
Exercise Price of $8.625 and (ii) the Additional Warrants are required to be
released from escrow and delivered to holders of Notes to the extent, in the
manner and under the circumstances provided in Section 5 of the Trust Agreement.
C. Pursuant to the Revolving Credit Agreement, the Company has also
agreed to issue and deliver to the holders of the Series A Notes and the Series
B Notes certain Company's
<PAGE> 3
warrants (the "Default Warrants", and, together with the Initial Warrants and
the Additional Warrants, the "Warrants") to purchase certain numbers of Common
Shares (the "Default Warrant Shares" and, together with the Initial Warrant
Shares and the Additional Warrant Shares, the "Warrant Shares"), in each case at
an Exercise Price of $.01 and with an expiration date on the date ten years from
the date of issuance of such Warrants, as set forth in Section 2(c) thereof.
D. Pursuant to a Warrant Agreement dated as of the date hereof (the
"Warrant Agreement") by and between the Company and The Bank of New York as
Warrant Agent (the "Warrant Agent"), the Exercise Price of the Warrants is
subject to resetting in certain circumstances as provided in Section 2A thereof,
and such Exercise Price and the number of shares issuable upon exercise of the
Warrants are both subject to adjustment under certain circumstances as provided
in Section 15 thereof.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
Act: The Securities Act of 1933, as amended.
Additional Warrants: As defined in Recital B of this Agreement.
Additional Warrant Shares: As defined in Recital B of this
Agreement.
Additional Warrant Shares Shelf Registration Statement: As
defined in Section 3(b) hereof.
Business Day: Any day except a Saturday, Sunday or other day in
the City of New York on which banks are authorized to close.
Closing Date: As defined in the Revolving Credit Agreement.
Commission: The Securities and Exchange Commission.
Default Warrants: As defined in Recital C of this Agreement.
Default Warrant Shares: As defined in Recital C of this
Agreement.
Default Warrant Shares Shelf Registration Statement: As defined
in Section 3(c) hereof.
Holders: As defined in Section 2 hereof.
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Indemnified Holder: As defined in Section 6(a) hereof.
Initial Warrants : As defined in Recital A of this Agreement.
Initial Warrant Shares: As defined in Recital A of this
Agreement.
Initial Warrant Shares Shelf Registration Statement: As defined
in Section 3(a) hereof.
NASD: National Association of Securities Dealers, Inc.
Notes: As defined in Recital A of this Agreement.
Person: An individual, partnership, corporation, limited
liability company, trust, unincorporated organization, or a government or agency
or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement
at the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement, term sheet, abbreviated term sheet,
supplement with pricing related information and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Registration Statement: Any registration statement of the Company
relating to the registration for resale of Transfer Restricted Warrant Shares
pursuant to a Shelf Registration Statement (i) which is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
Revolving Credit Agreement: As defined in Recital A of this
Agreement.
Shelf Registration Statement: The Initial Warrant Shares Shelf
Registration Statement, the Additional Warrant Shares Shelf Registration
Statement and the Default Warrant Shares Shelf Registration Statement, as
applicable.
Transfer Restricted Initial Warrant Shares: Each Initial Warrant
Share, until the earliest to occur of (a) the date on which such Initial Warrant
Share has been effectively registered under the Act and disposed of in
accordance with a Shelf Registration Statement and (b) the date on which such
Initial Warrant Share is distributed to the public pursuant to Rule 144 under
the Act.
Transfer Restricted Additional Warrant Shares: Each Additional
Warrant Share, until the earliest to occur of (a) the date on which such
Additional Warrant Share has been effectively registered under the Act and
disposed of in accordance with a Shelf Registration Statement and (b) the date
on which such Additional Warrant Share is distributed to the public pursuant to
Rule 144 under the Act.
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Transfer Restricted Default Warrant Shares: Each Default Warrant
Share, until the earliest to occur of (a) the date on which such Default Warrant
Share has been effectively registered under the Act and disposed of in
accordance with a Shelf Registration Statement and (b) the date on which such
Default Warrant Share is distributed to the public pursuant to Rule 144 under
the Act.
Transfer Restricted Warrant Shares: Together, Transfer Restricted
Initial Warrant Shares, Transfer Restricted Additional Warrant Shares and
Transfer Restricted Default Warrant Shares
Trust Agreement: As defined in Recital B of this Agreement.
Underwriter: Any underwriter, placement agent, selling broker,
dealer manager, qualified independent underwriter or similar securities industry
professional.
Underwritten Offering: An offering in which securities of the
Company are sold by the applicable Holders to an underwriter for reoffering to
the public.
Warrant Agent: As defined in Recital D of this Agreement.
Warrant Agreement: As defined in Recital D of this Agreement.
Warrants: As defined in Recital C of this Agreement.
Warrant Shares: As defined in Recital C of this Agreement.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Warrant
Shares (each, a "Holder") whenever such Person owns of record Transfer
Restricted Warrant Shares.
SECTION 3. DEMAND SHELF REGISTRATION
(a) Initial Warrant Shares Shelf Registration: At any time after
a majority of the Initial Warrants shall have been exercised, upon written
request of the holder or holders of not less than a majority of the Initial
Warrant Shares then outstanding that the Company effect the registration under
the Act of the Initial Warrant Shares, the Company will promptly (and in any
event within 90 days of the date of such request) cause to be filed a shelf
registration statement under the Act (the "Initial Warrant Shares Shelf
Registration Statement"), relating to all Initial Warrant Shares, the Holders of
which shall have provided the information required pursuant to Section 3(d)
hereof, and shall use its reasonable best efforts to cause such Initial Warrant
Shares Shelf Registration Statement to become effective under the Act on or
prior to 150 days after the date of such request. The Company shall use its best
efforts to keep the Initial Warrant Shares
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<PAGE> 6
Shelf Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 4(a) and (b) hereof to the extent
necessary to ensure that it is available for sales of Transfer Restricted
Initial Warrant Shares by the Holders thereof entitled to the benefit of this
Section 3(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time until the earlier of (A) two years after a majority
of all Initial Warrants have been exercised and (B) ten years after following
the date on which such Initial Warrant Shares Shelf Registration Statement
becomes effective under the Act.
(b) Additional Warrant Shares Shelf Registration. In the event
that any Additional Warrants shall have been released from escrow and delivered
to holders of Notes pursuant to the terms of the Trust Agreement, then, at any
time after a majority of the then-outstanding Additional Warrants shall have
been exercised, upon the written request of the holder or holders of not less
than a majority of the Additional Warrant Shares then outstanding that the
Company effect the registration under the Act of the Additional Warrant Shares,
the Company will promptly (and in any event within 90 days of the date of such
request) cause to be filed a shelf registration statement under the Act (the
"Additional Warrant Shares Shelf Registration Statement"), relating to all
Additional Warrant Shares, the Holders of which shall have provided the
information required pursuant to Section 3(d) hereof, and shall use its
reasonable best efforts to cause such Additional Warrant Shares Shelf
Registration Statement to become effective under the Act on or prior to 150 days
after the date of such request. The Company shall use its best efforts to keep
the Additional Warrant Shares Shelf Registration Statement continuously
effective, supplemented and amended as required by the provisions of Sections
4(a) and (b) hereof to the extent necessary to ensure that it is available for
sales of Transfer Restricted Additional Warrant Shares by the Holders thereof
entitled to the benefit of this Section 3(b), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, until the earlier
of (A) two years after a majority of the then-outstanding Additional Warrants
have been exercised and (B) ten years following the date on which such
Additional Warrant Shares Shelf Registration Statement becomes effective under
the Act.
(c) Default Warrant Shares Shelf Registration: In the event that
any Default Warrants shall have been issued and delivered to holders of Notes
pursuant to the terms of the Revolving Credit Agreement, then, at any time after
a majority of the Default Warrants shall have been exercised, upon the written
request of the holder or holders of not less than a majority of the Default
Warrant Shares then outstanding that the Company effect the registration under
the Act of the Default Warrant Shares, the Company will promptly (and in any
event within 90 days of the date of such request) cause to be filed a shelf
registration statement under the Act (the "Default Warrant Shares Shelf
Registration Statement"), relating to all Default Warrant Shares, the Holders of
which shall have provided the information required pursuant to Section 3(d)
hereof, and shall use its reasonable best efforts to cause such Default Warrant
Shares Shelf Registration Statement to become effective on or prior to 150 days
after the date of such request. The Company shall use its best efforts to keep
the Default Warrant Shares Shelf Registration Statement continuously effective,
supplemented and amended as required by the provisions of Sections 4(a) and (b)
hereof to the extent necessary to ensure that it is available for sales of
Transfer Restricted Default
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<PAGE> 7
Warrant Shares by the Holders thereof entitled to the benefit of this Section
3(c), and to ensure that it conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, until the earlier of (A) two years after a majority of the
then-outstanding Default Warrants have been exercised and (B) ten years
following the date on which such Default Warrant Shares Shelf Registration
Statement becomes effective under the Act.
(d) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statements. A Holder of Transfer Restricted Warrant
Shares may not include any of its Transfer Restricted Warrant Shares in any
Shelf Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 10 Business Days after
receipt of a request therefor, such information specified in Item 507 of
Regulation S-K under the Act, and any other similar information reasonably
requested by the Company, for use in connection with any Shelf Registration
Statement, Prospectus or preliminary Prospectus included therein. Each Holder as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.
(e) Limitation on Registration Rights. Notwithstanding anything
to the contrary contained herein, the Company shall be entitled to postpone for
a reasonable period of time (but in no event more than 120 days) the filing of
any Registration Statement otherwise required to be prepared and filed by it
hereunder if, at the time it receives a request for such registration, (i) the
Company reasonably determines, on the basis of written advice to such effect
from an investment banking firm representing the Company, that such registration
and the offering and sales thereunder by Holders would materially interfere with
any financing, acquisition, corporate reorganization or other material
transaction or development involving the Company or any of its Subsidiaries, and
promptly gives the Holders notice of such determination or (ii) the Company
would be required to undergo a special interim audit or to prepare and file with
the Securities and Exchange Commission sooner than would otherwise be required
pro forma or other financial statements.
(f) Single Registration Statement. The Company shall be entitled,
at its option and in its sole discretion, to include in any Registration
Statement required to be prepared and filed by it hereunder any other securities
of the Company, whether offered by the Company or any other Holder of Warrant
Shares or any other holder of Common Shares of the Company.
SECTION 4. REGISTRATION PROCEDURES
(a) General Provisions. In connection with any Registration
Statement and any related Prospectus provided for by this Agreement, the Company
shall:
(i) use its reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the respective
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<PAGE> 8
periods specified in Section 3 of this Agreement. Upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Warrant Shares during the period required by this Agreement,
the Company shall take appropriate action to correct any such
misstatement or omission and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
respective periods set forth in Section 3 hereof and otherwise to comply
with the applicable provisions of the Act and the rules and regulations
promulgated thereunder in respect of such amendments; and comply with
the provisions of the Act directly applicable to and required to be
complied with by the Company with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution
by the sellers thereof set forth in such Registration Statement or
supplement to the Prospectus;
(iii) advise the Underwriter(s) with respect to such
Registration Statement (the "Managing Underwriter(s)"), if any, and
selling holders named in any Registration Statement (the "Selling
Holders") promptly and, if requested by such Persons, confirm such
advice in writing, (A) when the Prospectus or any Prospectus supplement
or post-effective amendment has been filed, and, with respect to any
Shelf Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the Commission
for amendments to a Shelf Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of a Shelf Registration Statement under the
Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Warrant Shares for offering or
sale in any jurisdiction, or the initiation of any proceeding for any of
the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made
in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading or (E) of
the Company's reasonable determination that a post-effective amendment
to the Registration Statement would be appropriate. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Warrant
Shares under state securities or Blue Sky laws, the Company shall use
its reasonable best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
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<PAGE> 9
(iv) to the extent reasonably practicable, furnish to the
Lenders, each Selling Holder and each of the Managing Underwriter(s) in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Registration Statement or
Prospectus which documents will be subject to the review and comment of
such Holders and Managing Underwriter(s) in connection with such sale,
if any, for a period of three Business Days, and the Company will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus to which the
Selling Holders or the Managing Underwriter(s), if any, shall reasonably
object within three Business Days after the receipt thereof; provided,
however, that any document incorporated by reference in any such
Registration Statement or Prospectus shall be provided to the Lenders,
such Selling Holders and such Managing Underwriter(s) at the time that
such amendment or supplement is filed with the Commission;
(v) to the extent reasonably practicable, prior to the
filing of any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document to
the Selling Holders and to the Managing Underwriter(s) in connection
with such sale, if any, for a period of three Business Days, make the
Company's representatives available for discussion of such document and
other customary due diligence matters during such period, and include
such information in such document prior to the filing thereof as such
Selling Holders or Managing Underwriter(s), if any, reasonably may
request within three Business Days;
(vi) make available at reasonable times for inspection by
the Selling Holders, any Managing Underwriter(s) and any attorney or
accountant retained by such Selling Holders or any of such Managing
Underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Selling Holder, underwriter, attorney or
accountant in connection with such Shelf Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness; provided, however, that such Selling
Holders, Managing Underwriter(s), attorneys or accountants agree to keep
confidential any records, information or documents that are designated
by the Company in writing as confidential and to use such information
obtained pursuant to this provision only in connection with the
transaction for which such information was obtained, and not for any
other purpose, unless (i) such records, information or documents (x) are
available to the public,(y) were already in such Selling Holders',
Managing Underwriter(s)', attorneys' or accountants' possession prior to
its receipt from the Company and they do not otherwise have any
obligation to keep such records, information or documents confidential
or (z) are obtained by such Selling Holders, Managing Underwriters,
attorneys or accountants from a third person who, insofar as is known to
such Selling Holders, Managing Underwriters, attorneys or accountants,
is not prohibited from transmitting the information to such Selling
Holders, Managing Underwriter(s), attorneys or accountants by a
contractual, legal or fiduciary obligation to the Company or a third
party, or (ii) disclosure of such records, information
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<PAGE> 10
or documents is required by court or administrative order after the
exhaustion of appeals thereafter or by any industry self-regulatory body
of the jurisdiction of which such Selling Holder is subject;
(vii) if requested by any Selling Holders or the Managing
Underwriter(s) in connection with such sale, if any, promptly include in
any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such Selling
Holders and Managing Underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Warrant Shares, information with respect to the number of Transfer
Restricted Warrant Shares being sold to such Managing Underwriter(s),
the purchase price being paid therefor and any other terms of the
offering of the Transfer Restricted Warrant Shares to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as legally required after the Company
is notified of the matters to be included in such Prospectus supplement
or post-effective amendment;
(viii) furnish to each Selling Holder and each of the
Managing Underwriter(s) in connection with such sale, if any, without
charge, at least one copy of the Registration Statement, as first filed
with the Commission, and of each amendment thereto, including all
documents incorporated therein by reference (in each case, without
exhibits thereto, unless requested);
(ix) deliver to each Selling Holder and each of the
Managing Underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the Selling Holders and each of the
Managing Underwriter(s), if any, in connection with the offering and the
sale of the Transfer Restricted Warrant Shares covered by the Prospectus
or any amendment or supplement thereto;
(x) use its best efforts to enter into such underwriting
agreements and other selling agreements as are customary in underwritten
offerings and take all such other reasonable actions in connection
therewith (including those reasonably requested by the Managing
Underwriter(s) or the Selling Holders who hold a majority of the
Transfer Restricted Warrant Shares included in such registration) in
order to expedite or facilitate the disposition of the Transfer
Restricted Warrant Shares pursuant to the Registration Statement,
provided that the Company shall have no liability for any compensation
or reimbursement of expenses due to any Underwriter or other party
assisting in the disposition of such Transfer Restricted Warrant Shares
or other expenses incurred by the Holder thereof in connection with such
disposition other than agreed upon expenses, and in such connection,
whether or not an underwriting agreement is entered into and whether or
not the registration is an Underwritten Offering, the Company shall: (i)
to the extent possible, make such representations and warranties to the
Selling Holders and the
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<PAGE> 11
Managing Underwriter(s), if any, with respect to the business of the
Company and its subsidiaries, and the Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings,
and confirm the same if and when reasonably requested; (ii) obtain
opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to the Managing Underwriter(s), if any, and the Selling
Holders of a majority in principal amount of the Transfer Restricted
Warrant Shares included in such Registration Statement), addressed to
each Selling Holder and each of the Managing Underwriter(s), if any,
covering the matters customarily covered in opinions requested in
underwritten offerings; (iii) to the extent permitted by the
professional standards governing the accounting profession at the time,
obtain "cold comfort" letters and updates thereof (which letters and
updates (in form, scope and substance) shall be reasonably satisfactory
to the Managing Underwriter(s), if any) from the independent certified
public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are requested to be, included in
the Registration Statement), addressed to each of the Managing
Underwriter(s), if any, and each Selling Holder, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings; and
(iv) deliver such other documents and certificates as may be reasonably
requested by the Selling Holders of a majority in number of the Transfer
Restricted Warrant Shares included in such Registration Statement or the
Managing Underwriter(s), if any, to evidence compliance with clause (i)
above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company pursuant to
this clause (x).
The above shall be done at each closing under such underwriting
or similar agreement, as and to the extent required thereunder, and if
at any time the representations and warranties of the Company
contemplated in (A)(1) above cease to be true and correct, the Company
shall so advise the Managing Underwriter(s), if any, and Selling Holders
promptly and if requested by such Persons, shall confirm such advice in
writing;
(xi) cooperate with the Selling Holders, the Managing
Underwriter(s), if any, and their respective counsel in connection with
the registration and qualification of the Transfer Restricted Warrant
Shares under the Blue Sky law of such jurisdictions as the Selling
Holders or Managing Underwriter(s) may request and do any and all other
acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Warrant
Shares covered by the applicable Registration Statement; provided,
however, that the Company shall not be required to register or qualify
as a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation in any jurisdiction where it is not now so subject;
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<PAGE> 12
(xii) in connection with any sale of Transfer Restricted
Warrant Shares that will result in such Warrant Shares no longer being
Transfer Restricted Warrant Shares, cooperate with the Selling Holders
and the Managing Underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Warrant Shares to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Warrant Shares in such
denominations and such names as the Holders or the Managing
Underwriter(s), if any, may request at least two Business Days prior to
such sale of Transfer Restricted Warrant Shares;
(xiii) use its reasonable best efforts to cause the
Transfer Restricted Warrant Shares covered by the Registration Statement
to be registered with or approved by such other regulatory agencies or
authorities as are necessary to enable the seller or sellers thereof or
the Managing Underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Warrant Shares, subject to the proviso
contained in clause (xi) above;
(xiv) if any fact or event contemplated by Section
4(a)(iii)(D) or (E) above shall exist or have occurred, use its
reasonable best efforts to prepare a supplement or post-effective
amendment to a Shelf Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Warrant Shares, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xv) provide CUSIP number(s) for all Transfer Restricted
Warrant Shares, not later than the effective date of a Registration
Statement covering such Transfer Restricted Warrant Shares, and provide
the Warrant Agent under the Warrant Agreement with printed certificates
for Warrant Shares, which are in a form eligible for deposit with the
Depository Trust Company;
(xvi) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") (other than Smith Barney Inc. or Salomon Brothers) that is
required to be retained in accordance with the rules and regulations of
the NASD , and use its best efforts to cause such Registration Statement
to become effective and approved by such regulatory agencies or
authorities as are necessary to enable the Holders selling Transfer
Restricted Warrant Shares to consummate the disposition of such Transfer
Restricted Warrant Shares;
(xvii) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the
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Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act); and
(xviii) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(b) Restrictions on Holders. Each Holder agrees by acquisition of
a Transfer Restricted Warrant Share that, upon receipt of any notice from the
Company of the existence of any fact of the kind described in Section
4(a)(iii)(C), (D) or (E) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Warrant Shares pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(a)(xiv) hereof, or
until it is advised in writing (the "Advice") by the Company that the use of the
Prospectus currently being used may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Warrant Shares that was current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time period
regarding the effectiveness of such Registration Statement set forth in Section
3 hereof shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section
4(a)(iii)(C), (D) or (E) hereof to and including the date when each Selling
Holder covered by such Registration Statement shall have received (x) the copies
of the supplemented or amended Prospectus contemplated by Section 4(a)(xiv)
hereof or (y) the Advice.
Each Holder further agrees that, upon receipt of notice from the
Company that the Company intends to make an offering to the public of its
securities, whether or not through an Underwriter, such Holder will forthwith
discontinue disposition of Transfer Restricted Warrants for such period (not to
exceed 120 days) as is required to complete such offering and for a further
period of 120 days after the completion of such offering.
SECTION 5. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made with the NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter" (other than Smith Barney Inc. or Salomon
Brothers) and its counsel, as may be required by the rules and regulations of
the NASD)); (ii) all fees and expenses of compliance with federal securities and
state Blue Sky or securities laws; (iii) all printing expenses of printing
(including printing certificates for Warrants and Warrant Shares and printing of
Prospectuses); (iv) all fees and disbursements of counsel for the Company; and
(v) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
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Notwithstanding anything in this Section 5 to the contrary, the Company shall
not be required to pay the fees and expenses of any holder of the Notes and/or
Warrants or of legal counsel for any such holder, or of any underwriter or of
legal counsel for any underwriter, other than a "qualified independent
underwriter" (acting solely in such capacity) as provided in clause (i) of the
preceding sentence.
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
SECTION 6. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder
and each person, if any, who controls such Holder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act (any person referred to above
being sometimes hereinafter referred to as an "Indemnified Holder"), against any
and all losses, liabilities, claims, damages and expenses whatsoever (including
but not limited to reasonable attorneys' fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or in any supplement thereto or amendment thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prospectus (as amended or
supplemented, if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading; provided, however, that
the Company will not be liable in any such case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense arises out of or
is based upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Indemnified Holder
or any underwriter expressly for use therein; provided, further, however, that
the indemnification provided for in this subsection shall not inure to the
benefit of any indemnified party with respect to any sale or disposition of
Transfer Restricted Warrant Shares by such Holder in violation of the provisions
of Section 4(b) hereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have, including, under this Agreement.
(b) Each Holder agrees to indemnify and hold harmless the Company
and each person, if any, who controls the Company within the meaning of Section
15 of the Act or Section
13
<PAGE> 15
20(a) of the Exchange Act, against any losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to attorneys' fees and any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented, if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, in each case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by such Holder (or its related Indemnified Holder)
expressly for use therein. This indemnity will be in addition to any liability
which such Holder may otherwise have, including, under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 6, except to the extent that it
has been prejudiced in any material respect by such failure, or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded, based upon
written advice of counsel, that representation by the same counsel of both the
indemnifying party and the indemnified parties could result in a conflict of
interest (in which case the indemnifying parties shall not have the right to
direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses of counsel shall be
borne by the indemnifying parties. The indemnifying party under subsection (a)
or (b) above shall
14
<PAGE> 16
only be liable for the legal expenses of one separate firm of attorneys for all
indemnified parties in each jurisdiction in which any claim or action is
brought; provided, however, that the indemnifying party shall be liable for
separate counsel for any indemnified party in a jurisdiction, if counsel to the
indemnified parties shall have concluded in writing that representation by one
counsel of both such indemnified party and the other indemnified parties could
result in a conflict of interest. Anything in this subsection to the contrary
notwithstanding, an indemnifying party shall not be liable for any settlement of
any claim or action effected without its written consent; provided, however,
that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in
which the indemnification provided for in this Section 6 is for any reason held
to be unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and each Holder shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than any Indemnified Holders, who may also be liable for contribution,
including persons who control the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) to which the Company and any
Holder may be subject, in such proportion as is appropriate to reflect the
relative benefits received by (i) the Company from the offering of the Notes and
(ii) any such Holder (and its related Indemnified Holder) from its sale of
Warrant Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in this Section 6, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and such Holder in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and any Holder shall be deemed to
be in the same proportion as (x) the total proceeds from the offering of Notes
(before deducting expenses) received by the Company and (y) the total proceeds
received by such Holder upon its sale of Transfer Restricted Warrant Shares
which otherwise would give rise to the indemnification obligation, respectively.
The relative fault of the Company and of any Holder shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or such Holder or its related
Indemnified Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 6, (i) no Holder or its related Indemnified Holders shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of its Transfer
Restricted Warrant Shares exceeds the amount of any damages which such Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section
15
<PAGE> 17
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person, if any, who controls any Holder within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as such Holder, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 6. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 6, notify such party
or parties from whom contribution may be sought, but the omission to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 6, except to the extent that it has been prejudiced in any material
respect by such failure, or otherwise. No party shall be liable for contribution
with respect to any action or claim settled without its written consent;
provided, however, that such written consent was not unreasonably withheld.
(e) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
SECTION 7. RULE 144 AND 144A
The Company covenants that it will file the reports required to
be filed by it (if so required) under the Exchange Act and the rules and
regulations thereunder in a timely manner and, if at any time the Company is not
required to file such reports, it will upon the request of any Holder of
Transfer Restricted Warrant Shares, use its best efforts to make publicly
available other information so long as necessary to permit sales pursuant to
Rule 144 and Rule 144A. The Company further covenants that it will take such
further action as any Holder of Transfer Restricted Warrant Shares may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Warrant Shares without registration under the
Securities Act pursuant to the exemptions provided by Rule 144 and Rule 144A.
Upon the request of any Holder of Transfer Restricted Warrant Shares, the
Company will deliver to such Holder a written statement as to whether the
Company has complied with such information and requirements.
SECTION 8. UNDERWRITTEN OFFERINGS
The Holders of Transfer Restricted Warrant Shares may elect to
sell their Transfer Restricted Warrant Shares pursuant to up to three
Underwritten Offerings; provided, however, that in no event shall any Holder
commence any such Underwritten Offering if (A) a period of less
16
<PAGE> 18
than 180 days has elapsed (i) since the consummation of the most recent
Underwritten Offering hereunder or (ii) since the consummation of any offering
of securities by the Company to the public, whether or not through an
Underwriter, or (B) the Company notifies such Holder that it intends to make
such an offering within the next 120 days. No Holder may participate in any
Underwritten Offering hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Warrant Shares on the basis provided in customary
underwriting arrangements entered into in connection therewith and (b) completes
and executes all reasonable questionnaires, powers of attorney, lock-up letters
and other documents required under the terms of such underwriting arrangements.
Nothing in this Agreement shall give any Holder any right to join in any
offering by the Company of its securities to the public.
SECTION 9. SELECTION OF UNDERWRITERS
In any Underwritten Offering, the Underwriters for the offering
will be selected by the Holders of a majority in number of the Transfer
Restricted Warrant Shares included in such offering; provided, that such
Underwriters must be reasonably satisfactory to the Company.
SECTION 10. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Revolving Credit Agreement, the
Trust Agreement or any Security Document referred to therein or granted by law,
including recovery of liquidated or other damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not on or after
the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof, provided that
nothing herein shall be deemed to prevent the Company from entering into
arrangements for the sale of its securities pursuant to normal and customary
arrangements therefor.
(c) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority in number of Transfer
Restricted Warrant Shares.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
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<PAGE> 19
(i) if to a Holder, at the address set forth on the
records of the Warrant Agent under the Warrant Agreement, with a copy to
the Warrant Agent under the Warrant Agreement;
(ii) if to the Company:
PLD Telekom Inc.
680 Fifth Avenue
24th Floor
New York, New York 10019
Facsimile No.: (212) 262-8870
Attention: Chief Financial Officer
Telephone No.: (212) 262-6060
With copies to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
Attention: H. Franklin Bloomer, Jr., Esq.
Telephone No.: (212) 309-6146
(or, in the case of any such recipient, to such other address or facsimile
number as it shall have specified in writing to the person sending such notice
or other communication).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, Holders and subsequent Holders of Transfer Restricted Warrant
Shares; provided, however, that this Agreement shall not inure to the benefit of
or be binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Warrant Shares directly
from such Holder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
18
<PAGE> 20
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Warrants and the Warrant Shares. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
PLD TELEKOM INC.
By: /s/ E. Clive Anderson
-----------------------------
Name: E. Clive Anderson
Title: Senior Vice President
THE TRAVELERS INSURANCE
COMPANY
By: /s/ Craig H. Farnsworth
-----------------------------
Name: Craig H. Farnsworth
Title: Second Vice President
THE TRAVELERS INDEMNITY
COMPANY
By: /s/ Craig H. Farnsworth
-----------------------------
Name: Craig H. Farnsworth
Title: Second Vice President
19
<PAGE> 1
EXHIBIT 4.28
- --------------------------------------------------------------------------------
WIRELESS TECHNOLOGY CORPORATIONS LIMITED
BALTIC COMMUNICATIONS LIMITED
and any other Guarantor party hereto from time to time
----------------------------
GUARANTY AGREEMENT
----------------------------
Dated as of November 26, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
GUARANTY AGREEMENT, dated as of November 26, 1997 ("this Guaranty
Agreement"), made and given by WIRELESS TECHNOLOGY CORPORATIONS LIMITED,
a British Virgin Islands corporation, and BALTIC COMMUNICATIONS LIMITED,
a Russian closed joint stock company (collectively, together with each
other subsidiary of the Company (as defined below) which becomes a party
hereto pursuant to a Joinder Agreement as described below, the
"Guarantors" and individually a "Guarantor") in favor of The Travelers
Insurance Company and The Travelers Indemnity Company (collectively, the
"Lenders") and of all other holders from time to time of the Notes
referred to below (such holders, together with the Lenders, being herein
sometimes referred to collectively as the "Noteholders" and individually
as a "Noteholder"); for the benefit of PLD TELEKOM INC., a Delaware
corporation (the "Company").
R E C I T A L S :
A. The Company has entered into the Revolving Credit Note and
Warrant Agreement, dated as of the date hereof (the "Revolving Credit
Agreement"), between the Company and the Lenders, providing, among other things,
for (i) the commitment of the Lenders to make Series A Revolving Credit Loans
from time to time to the Company in an aggregate principal amount not exceeding
$12,400,000 (the "Series A Revolving Credit Loans") and Series B Revolving
Credit Loans from time to time to the Company in an aggregate principal amount
not exceeding $3,100,000 (the "Series B Revolving Credit Loans" and, together
with the Series A Revolving Credit Loans, the "Revolving Credit Loans") and (ii)
the issuance and delivery by the Company to the Lenders of its 12% Series A
Revolving Credit Notes due December 31, 1998 in the aggregate principal amount
of $12,400,000 to evidence the obligation of the Company to repay Series A
Revolving Credit Loans from time to time outstanding in accordance therewith
(such notes, including all notes issued in substitution or exchange therefor
pursuant to the Revolving Credit Agreement, being referred to herein as the
"Series A Notes") and its 12% Series B Revolving Credit Notes due September 30,
1998 in the aggregate principal amount of $3,100,000 to evidence the obligation
of the Company to repay Series B Revolving Credit Loans from time to time
outstanding in accordance therewith (such notes, including all notes issued in
substitution or exchange therefor pursuant to the Revolving Credit Agreement,
being referred to herein as the "Series B Notes"). The Series A Notes and the
Series B Notes are collectively referred to herein as the "Notes"; the Notes,
the Revolving Credit Agreement and this Guaranty, and all other related
agreements and documents issued or delivered under or pursuant to the Revolving
Credit Agreement or this Guaranty Agreement, in each case as the same may be
amended or otherwise modified and in effect from time to time, are herein
sometimes referred to collectively as the "Revolving Credit Documents"; and all
other capitalized terms used and not otherwise defined herein shall have the
respective meanings attributed thereto in the Revolving Credit Agreement.
<PAGE> 3
B. The obligation of the Lenders to make the Revolving Credit
Loans under the Revolving Credit Agreement is conditioned, among other things,
on each of the Guarantors guaranteeing all of the Company's Obligations referred
to below.
C. Pursuant to the Revolving Credit Agreement, the Company is
obligated to cause (i) each Person that after the Closing Date shall become a
Wholly-Owned Restricted Subsidiary and (ii) each other Subsidiary, other than
the Leasing Companies or NWE Cyprus, which shall guarantee Indebtedness of the
Company or any other Guarantor to execute and deliver a joinder agreement in the
form attached hereto as Exhibit A (a "Joinder Agreement") and thereby to become
a Guarantor under and within the meaning of this Guaranty Agreement.
D. Each of the Guarantors is a Subsidiary of the Company.
NOW, THEREFORE, for and in consideration of the execution and
delivery by the Lenders of the Revolving Credit Agreement and in order to induce
the Lenders to make the Revolving Credit Loans to the Company from time to time
under the Revolving Credit Agreement, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the Guarantors hereby
agree as follows:
1. Guaranty of Payment. Each Guarantor hereby irrevocably and
unconditionally guarantees, jointly and severally, to the Noteholders, the
prompt payment in full when due (whether on a date fixed for repayment, at
stated maturity, by declaration, acceleration or otherwise) of the Company's
Obligations. For the purposes hereof the "Company's Obligations" means all
indebtedness, obligations and liabilities of the Company under the Revolving
Credit Documents, now existing or hereafter arising, due or to become due,
direct or indirect, absolute or contingent, howsoever evidenced, held or
acquired, as such indebtedness, obligations and liabilities may be modified,
extended, renewed or replaced from time to time, and including without
limitation, the obligation of the Company to pay the principal of and interest
on, and Additional Amounts, if any, and Commitment Fees, if any, owing in
respect of, the Notes, when and as due, whether at maturity, by acceleration,
upon one or more dates set for repayment or otherwise, in accordance with the
terms of the Revolving Credit Documents, and all other obligations from time to
time owing to the Noteholders, or any of them, under the Revolving Credit
Documents (including, without limitation, indemnities and expenses). The
guaranty of each Guarantor as set forth in this section is a guaranty of payment
and not of collection.
2. Limitation of Guarantor's Liability. Each Guarantor and, by
its acceptance of the Note held by it, each Noteholder, hereby confirms that it
is its intention that the guaranty by such Guarantor under this Guaranty
Agreement not constitute a fraudulent transfer or conveyance for purposes of the
United States Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any other bankruptcy, receivership,
insolvency, liquidation or other similar legislation or legal principles under
any applicable foreign law to the extent applicable to such guaranty. To
effectuate the foregoing intention, each such Guarantor and each Noteholder
hereby
2
<PAGE> 4
irrevocably agrees that the obligation of such Guarantor under this Guaranty
Agreement shall be limited to the lesser of (a) an amount equal to such
Guarantor's Adjusted Net Assets (as hereinafter defined) as of the date this
Guaranty Agreement is executed and delivered and (b) the maximum amount as will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contributions from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such Guarantor under this Guaranty Agreement, result in the
obligations of such Guarantor not constituting a fraudulent conveyance or
fraudulent transfer or not otherwise being void, voidable or unenforceable under
any bankruptcy, reorganization, receivership, insolvency, liquidation or other
similar legislation or legal principles under any applicable foreign law. As
used in this Section 2, "Adjusted Net Assets" of any Guarantor at any date means
the amount by which the fair value of the assets and Property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under
this Guaranty Agreement, of such Guarantor at such date.
3. Release of Collateral, Parties Liable, etc. Each of the
Guarantors agrees that the whole or any part of any and all security now or
hereafter held for the Company's Obligations may be exchanged, compromised,
released or surrendered from time to time; that neither the Noteholders nor any
of them nor any trustee or agent which shall at any time hold any such security
shall have any obligation to protect, perfect, secure or insure any Liens now or
hereafter held for the Company's Obligations or the properties subject thereto;
that the time or place of payment of the Company's Obligations may be changed or
extended, in whole or in part, to a time certain or otherwise, and may be
renewed or accelerated, in whole or in part; that the Company may be granted
indulgences generally; that any provisions of the Revolving Credit Documents or
any other documents executed in connection with this transaction may be
modified, amended or waived; that any party liable for the payment of the
Company's Obligations may be granted indulgences or released; and that any
deposit balance for the credit of the Company or any other party liable for the
payment of the Company's Obligations or liable upon any security therefor may be
released, in whole or in part, at, before and/or after the stated, extended or
accelerated maturity of the Company's Obligations, all without notice to or
further assent by the Guarantors, or any of them, who shall remain bound
thereon, notwithstanding any such exchange, compromise, surrender, extension,
renewal, acceleration, modification, indulgence or release.
4. Waiver of Rights. Each of the Guarantors expressly waives: (a)
notice of acceptance of this Guaranty Agreement by the Noteholders; (b)
presentment and demand for payment of any of the Company's Obligations; (c)
protest and notice of dishonor or of default to such Guarantor or to any other
party with respect to the Company's Obligations or with respect to any security
therefor; (d) notices of any Noteholder's or any trustee's or agent's for any
Noteholder obtaining, amending, substituting for, releasing, waiving or
modifying any security interests, liens or other encumbrances now or hereafter
securing the Company's Obligations, of the Noteholders' or any such trustee's or
agent's subordinating, compromising discharging or releasing such security
interests, liens or other
3
<PAGE> 5
encumbrances; (e) all other notices to which such Guarantor might otherwise be
entitled; (f) demand for payment under this Guaranty Agreement; and (g) any
right to assert against any Noteholder, as a defense, counterclaim, set-off or
cross-claim, any defense (legal or equitable), set-off, counterclaim or claim
which such Guarantor may now or hereafter have against any Noteholder or the
Company, but such waiver shall not prevent such Guarantor from asserting against
any Noteholder in a separate action, any claim, action, cause of action, or
demand that such Guarantor might have, whether or not arising out of this
Guaranty Agreement.
5. Primary Liability of Guarantors; Subrogation; Interest;
Acceleration. (a) Each of the Guarantors agrees that this Guaranty Agreement may
be enforced by the Noteholders upon the failure of the Company to pay or perform
punctually any of the Company's Obligations without the necessity at any time of
resorting to or exhausting any other security or collateral and without the
necessity at any time of having recourse to the Company under the Revolving
Credit Documents or any collateral now or hereafter securing the Company's
Obligations or otherwise, and each of the Guarantors hereby waives the right to
require the Noteholders to proceed against the Company or any other Person
(including a co-guarantor) or to require the Noteholders to pursue any other
remedy or enforce any other right. Each of the Guarantors further agrees that
nothing contained herein shall prevent the Noteholders or any trustee or agent
at the time empowered to act on their behalf from suing the Company with respect
to its obligations under the Revolving Credit Documents or foreclosing any
security interest in or lien on any collateral now or hereafter securing the
Company's Obligations or from exercising any other rights available to the
Noteholders or any such trustee or agent under the Revolving Credit Documents if
neither the Company nor the Guarantors timely performs the obligations of the
Company thereunder, and the exercise of any of the aforesaid rights and the
completion of any foreclosure proceedings shall not constitute a discharge of
any Guarantor's obligations hereunder; it being the purpose and intent of each
of the Guarantors that such Guarantor's obligations hereunder shall be absolute,
irrevocable, independent and unconditional under any and all circumstances.
Neither the obligations of any Guarantor under this Guaranty Agreement nor any
remedy for the enforcement thereof shall be impaired, modified, changed or
released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of the Company or any other Guarantor, by
reason of the Company's or any other Guarantor's bankruptcy or insolvency or by
reason of the invalidity or unenforceability of all or any portion of the
Company's Obligations. Each of the Guarantors acknowledges that the term
"Company's Obligations" as used herein includes any payments made by the Company
or any other Guarantor to the Noteholders and subsequently recovered by the
Company or a trustee for the Company pursuant to the Company's bankruptcy or
insolvency and that the guaranty of each of the Guarantors hereunder shall be
reinstated to the extent of such recovery.
(b) In the event any Guarantor shall at any time pay any sums on
account of any of the Company's Obligations, such Guarantor shall, to the extent
of such payment,
4
<PAGE> 6
be subrogated to the rights, privileges and powers of the Noteholders in respect
of such Company's Obligation, provided that each Guarantor hereby agrees that it
shall not seek to exercise any such rights of subrogation, any right of
reimbursement or indemnity whatsoever or any rights or recourse to any security
for any of the Company's Obligations unless and until all of the Company's
Obligations shall have been indefeasibly paid in full.
(c) As between each Guarantor, on the one hand, and the
Noteholders, on the other hand, the Company's Obligations may be declared to be
forthwith due and payable as provided in Section 12.1 of the Revolving Credit
Agreement (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Section 12.1) for all purposes of this
Guaranty Agreement notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing such obligations from becoming
automatically due and payable) as against the Company and, in the event of such
declaration (or in the event of any such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by the Company) shall forthwith become due and payable by the Guarantors for
purposes of this Guaranty Agreement and the obligations of the Guarantors
hereunder shall be deemed to have been accelerated with the same effect as if
the Notes had been accelerated in accordance with the terms thereof and of the
Revolving Credit Agreement.
(d) Each Guarantor acknowledges, consents and agrees that any
interest on the Company's Obligations which accrues after the commencement of
any bankruptcy, reorganization or insolvency proceeding against the Company, or,
if interest on any portion of the Company's Obligations ceases to accrue by
operation of law by reason of the commencement of any such proceeding, such
interest as would have accrued on any such portion of the Company's Obligations
if said proceeding had not been commenced, shall be included in the Company's
Obligations, it being the intent hereof that the amount of the Company's
Obligations guaranteed hereunder should be determined without regard to any rule
of law or order which may relieve the Company of any portion of the Company's
Obligations.
6. Attorneys' Fees and Costs of Collection. If at any time or
times hereafter the Noteholders or any trustee or agent acting on their behalf
employs counsel to pursue collection, to intervene, to sue for enforcement of
the terms hereof or of the Revolving Credit Agreement or any other of the
Revolving Credit Documents, or to file a petition, complaint, answer, motion or
other pleading in any suit or proceeding relating to this Guaranty Agreement or
the Revolving Credit Agreement or any other of the Revolving Credit Documents,
then in such event, all of the reasonable attorneys' fees relating thereto shall
be an additional liability of the Guarantors to the Noteholders hereunder,
payable on demand.
7. Term of Guaranty; Warranties. This Guaranty Agreement shall
continue in full force and effect until the Company's Obligations are fully and
indefeasibly paid, performed and discharged. This Guaranty Agreement covers the
Company's Obligations whether presently outstanding or arising subsequent to the
date hereof. Each
5
<PAGE> 7
Guarantor warrants and represents to the Noteholders (a) that such Guarantor is
an entity duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, (b) that such Guarantor has all powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, (c) that the execution and
delivery by such Guarantor of this Guaranty Agreement and the other Revolving
Credit Documents, if any, to which it is a party and the performance by such
Guarantor of its obligations hereunder and thereunder are within the corporate
power of such Guarantor, have been duly authorized by all necessary
organizational action, require no action by or in respect of, or filing with,
any governmental body, agency or official (except for any such action or filing
that has been taken and is in full force and effect) and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
any of the constitutional documents of such Guarantor or of any material
agreement, judgment, injunction, order, decree, or other material instrument
binding upon such Guarantor or result in the creation or imposition of any Lien
on any asset of such Guarantor and (d) that this Guaranty Agreement and the
other Revolving Credit Documents, if any, to which such Guarantor is a party
constitute valid, binding and enforceable agreements of such Guarantor and, when
executed and delivered, will constitute valid and binding obligations of such
Guarantor (except insofar as enforceability may be affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect).
8. Further Representations and Warranties. Each Guarantor agrees
that the Noteholders will have no obligation to investigate the financial
condition or affairs of the Company for the benefit of such Guarantor nor to
advise such Guarantor of any fact respecting, or any change in, the financial
condition or affairs of the Company which might come to the knowledge of any of
the Noteholders at any time, whether or not any of the Noteholders knows or
believes or has reason to know or believe that any such fact or change is
unknown to such Guarantor or might (or does) materially increase the risk of
such Guarantor as guarantor or might (or would) affect the willingness of such
Guarantor to continue as guarantor with respect to the Company's Obligations.
9. Additional Liability of Guarantors. If any Guarantor is or
becomes liable for any indebtedness owing by the Company to any of the
Noteholders by endorsement or otherwise other than under this Guaranty
Agreement, such liability shall not be in any manner impaired or reduced hereby
but shall have all and the same force and effect it would have had if this
Guaranty Agreement had not existed and such Guarantor's liability hereunder
shall not be in any manner impaired or reduced thereby.
10. Cumulative Rights. All rights of the Noteholders hereunder or
otherwise arising under any documents executed in connection with or as security
for the Company's Obligations are separate and cumulative and may be pursued
separately, successively or concurrently, or not pursued, without affecting or
limiting any other right of any of the Noteholders and without affecting or
impairing the liability of any of the Guarantors.
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<PAGE> 8
11. Usury. Notwithstanding any other provisions herein contained,
no provision of this Guaranty Agreement shall require or permit the collection
from any Guarantor of interest in excess of the maximum rate or amount that such
Guarantor may be required or permitted to pay pursuant to applicable law. In the
event any such interest is collected, it shall be applied in reduction of such
Guarantor's obligations hereunder, and the remainder of such excess collected
shall be returned to such Guarantor once such obligations have been fully
satisfied.
12. Successors and Assigns. This Guaranty Agreement shall be
binding on and enforceable against each Guarantor and its successors and
assigns; provided that, other than in connection with any such assignment or
transfer resulting from a merger or consolidation of such Guarantor or a
transfer of all or substantially of such Guarantor's assets permitted under the
Revolving Credit Agreement, as in effect from time to time, none of the
Guarantors may assign or transfer any of its obligations hereunder without the
prior written consent of Noteholders holding Commitment Percentages aggregating
more than 50%. This Guaranty Agreement is intended for and shall inure to the
benefit of the Noteholders and their respective successors and assigns. This
Guaranty Agreement shall be transferable and negotiable with the same force and
effect, and to the same extent, that the Company's Obligations are transferable
and negotiable, it being understood and stipulated that upon assignment or
transfer by any of the Noteholders of any of the Company's Obligations the legal
holder or owner of the Company's Obligations (or a part thereof or interest
therein thus transferred or assigned by any Noteholder) shall (except as
otherwise stipulated by any such Noteholder in its assignment) have and may
exercise all of the rights granted to such Noteholder under this Guaranty
Agreement to the extent of that part of or interest in the Company's Obligations
thus assigned or transferred to said Person. Each Guarantor expressly waives
notice of transfer or assignment of the Company's Obligations, or any part
hereof, or of the rights of any Noteholder thereunder. Failure to give any such
notice will not affect the liabilities of the Guarantors hereunder.
13. Application of Payments. As between the Guarantors and the
Noteholders, each of the Noteholders may apply any payments received by it from
any source against that portion of the Company's Obligations (principal,
interest, court costs, attorneys' fees or other) in such priority and fashion as
it may deem appropriate.
14. Modifications. Any term, covenant, agreement or condition of
this Guaranty may be amended or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by an instrument in writing duly executed by each Guarantor and Noteholders
holding all of the Notes at the time outstanding. Any amendment or waiver
effected in accordance with this Section shall apply equally to all Noteholders
and shall be binding upon them and upon each future holder of any Note and upon
each Guarantor whether or not any such Note shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to or affect
any obligation not expressly amended or waived or impair any right consequent
thereon.
7
<PAGE> 9
15. Notices. (a) Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telex, telecopy, graphic scanning or other
telegraphic communications equipment of the sending party, as follows:
(i) if to WTC, at c/o Orbis Services Limited, Tropic Isle
Building, P.O. Box 3443, Road Town, Tortola, British Virgin Islands, and
if to BCL, at Pochtamtskaya Ulitsa 15, Saint Petersburg, Russia 191186,
in either such case with a copy to each of PLD Telekom Inc., at 680
Fifth Avenue, 24th Floor, New York, New York 10019, Attention: Chief
Financial Officer, and Morgan, Lewis & Bockius LLP, at 101 Park Avenue,
New York, New York 10178, Attention:
H. Franklin Bloomer, Jr., Esq.;
(ii) if to the Lenders, at the respective addresses set forth
therefor in Schedule I to the Revolving Credit Agreement, or at such
other address as either such Lender shall have designated in writing to
the Guarantors; and
(iii) if to any other Noteholder, in the manner provided in the
Revolving Credit Agreement.
(b) All notices and other communications given to any party
hereto in accordance with the provisions of this Guaranty Agreement shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telex, telecopy, graphic scanning or other
telegraphic communications equipment of the sender, or on the date five (5)
Business Days after dispatch by certified or registered mail if mailed, in each
case delivered, sent or mailed (properly addressed) to such party as provided in
this Section 15 or at such other address or telex, telecopy or other number as
shall be designated by such party in a notice to each other party complying with
the terms of this Section 15.
16. Net Payments. Reference is hereby made to Section 9.21 of the
Revolving Credit Agreement, the terms of which are hereby incorporated by
reference, with each reference to a "Subsidiary Guarantor" contained in such
Section 9.21 being deemed to be a reference to a Guarantor hereunder, and each
reference to a "Guarantee" contained in such Section 9.21 being deemed to be a
reference to this Guaranty Agreement. Each Guarantor agrees that all payments
made by it hereunder in respect of the Company's Obligations are subject to the
terms and provisions of such Section 9.21 of the Revolving Credit Agreement, and
agrees to perform all of the obligations of a "Subsidiary Guarantor" contained
therein applicable to such payments.
17. Severability. In the event that any provision hereof shall be
deemed to be invalid by reason of the operation of any law or by reason of the
interpretation placed thereon by any court, this Guaranty Agreement shall be
construed as not containing such provision, but only as to such jurisdictions
where such law or interpretation is operative, and the invalidity of such
provision shall not affect the validity of any remaining provision
8
<PAGE> 10
hereof, and any and all other provisions hereof which are otherwise lawful and
valid shall remain in full force and effect.
18. Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial.
THIS GUARANTY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN NEW YORK. EACH GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS GUARANTY AGREEMENT MAY BE LITIGATED IN SUCH COURTS, AND EACH
GUARANTOR WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR
FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT. EACH GUARANTOR FURTHER
IRREVOCABLY CONSENTS THAT THE SERVICE OF PROCESS MAY BE MADE BY MAIL OR
MESSENGER DIRECTED TO IT AT ITS ADDRESS SET FORTH IN SECTION 14 HEREOF (OR
PURSUANT TO THE JOINDER AGREEMENT EXECUTED BY SUCH GUARANTOR AS CONTEMPLATED BY
THE REVOLVING CREDIT AGREEMENT). NOTHING CONTAINED IN THIS SECTION SHALL AFFECT
THE RIGHT OF ANY NOTEHOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY JURISDICTION
AGAINST ANY GUARANTOR OR TO ENFORCE A JUDGMENT OBTAINED IN THE COURTS OF ANY
OTHER JURISDICTION. EACH GUARANTOR ACKNOWLEDGES THAT THE TIME AND EXPENSE
REQUIRED FOR A TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH
TRIAL AND HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
19. Headings. The headings in this instrument are for convenience
of reference only and shall not limit or otherwise affect the meaning of any
provisions hereof.
20. Counterparts. This Guaranty Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each constituting an original, but all together constituting one and the same
instrument.
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<PAGE> 11
[The remainder of this page is intentionally left blank.]
10
<PAGE> 12
IN WITNESS WHEREOF, the Guarantors party hereto have caused this
Guaranty Agreement to be duly executed by their respective authorized officers
as of the date first above written.
WIRELESS TECHNOLOGY CORPORATIONS LIMITED
By /s/ E. Clive Anderson
------------------------------------------
Title: Attorney-in-Fact
BALTIC COMMUNICATIONS LIMITED
By /s/ E. Clive Anderson
------------------------------------------
Title: Authorized Representative
11
<PAGE> 13
EXHIBIT A
to
Guaranty Agreement
FORM OF JOINDER AGREEMENT
JOINDER AGREEMENT, dated as of ____________, ____ ("this
Agreement"), made and given by _______________, a ____________ (the
"Subsidiary"), which is a subsidiary of PLD Telekom Inc., a Delaware corporation
(the "Company"), in favor of the Noteholders referred to (and as that term is
defined) in that certain Guaranty Agreement, dated as of November 26, 1997 (as
the same may have been heretofore amended or otherwise modified, the "Guaranty
Agreement"), made and given originally by the subsidiaries of the Company
identified therein in favor of the Lenders (as defined therein) and of the
holders from time to time of (i) the Company's 12% Series A Revolving Credit
Notes due December 31, 1998 in the aggregate principal amount of $12,400,000
evidencing the obligation of the Company to repay Series A Revolving Credit
Loans made to the Company from time to time in accordance therewith and (ii) the
Company's 12% Series B Revolving Credit Notes due September 30, 1998 in the
aggregate principal amount of $3,100,000 evidencing the obligation of the
Company to repay Series B Revolving Credit Loans made to the Company from time
to time in accordance therewith. All of the defined terms in the Guaranty
Agreement are incorporated herein by reference and all such terms used and not
otherwise defined herein have the respective meanings when used herein as are
attributed thereto in the Guaranty Agreement (or by reference therein to the
Revolving Credit Agreement referred to therein).
The Company is required by Section 9.30 of the Revolving Credit
Agreement to cause the Subsidiary to become a "Guarantor" under and within the
meaning of the Guaranty Agreement. Accordingly, the Subsidiary hereby agrees
with and for the benefit of the Noteholders as follows:
1. The Subsidiary hereby acknowledges, agrees and confirms that,
by its execution of this Agreement, the Subsidiary will be deemed to be a party
to the Guaranty Agreement and a "Guarantor" for all purposes of the Guaranty
Agreement, and shall have all of the obligations of a Guarantor thereunder as if
it had executed the Guaranty Agreement. The Subsidiary hereby ratifies, as of
the date hereof, and agrees to be bound by, all of the terms, provisions and
conditions contained in the Guaranty Agreement, including, without limitation,
all of the undertakings and waivers set forth therein. Without limiting the
generality of the foregoing terms of this paragraph 1, the Subsidiary, subject
to the limitations set forth in Section 1 of the Guaranty Agreement, hereby
jointly and severally, together with the other Guarantors, guarantees to the
Noteholders, as provided in such Section 1 of the Guaranty Agreement, the prompt
payment in full when due (whether on a date fixed for repayment, at stated
maturity, by declaration, acceleration or otherwise) of the Company's
Obligations.
<PAGE> 14
2. The address of the Subsidiary for purposes of all notices and
other communications is __________________________________.
3. The Subsidiary hereby waives notice of acceptance by the
Noteholders, or any of them, of this Agreement.
4. This Agreement may be executed in any number of counterparts,
each constituting an original, but all together constituting one and the same
instrument.
IN WITNESS WHEREOF, the Subsidiary has caused this Agreement to
be duly executed by its authorized officer, as of the day and year first above
written.
[SUBSIDIARY]
By _______________________
Title:
2
<PAGE> 1
EXHIBIT 4.29
- --------------------------------------------------------------------------------
PLD TELEKOM INC.
and
THE BANK OF NEW YORK,
as Trustee
------------------------
TRUST AGREEMENT
------------------------
Dated as of November 26, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Revolving Credit Agreement, Notes and Warrants..................................... 1
2. Definitions........................................................................ 2
3. Collateral......................................................................... 2
4. Enforcement of Collateral by Trustee............................................... 3
5. Escrow and Release and Delivery of Additional Warrants............................. 5
6. Application of Monies by Trustee................................................... 8
7. Payments by Trustee, etc........................................................... 11
8. Certificates as to Issuance of and Payments of Interest on Notes, Reduction of
Commitments and Making of Revolving Credit Loans................................... 11
9. Notices, etc. under Security Documents............................................. 12
10. Amendments, etc. of Security Documents............................................. 12
11. Concerning the Trustee............................................................. 12
12. Trustee's Compensation, Expenses, Indemnification, etc............................. 16
13. Resignation, Removal and Replacement of Trustee.................................... 17
14. Successor Trustee by Merger, Consolidation, etc.................................... 17
15. Eligibility of Trustee............................................................. 18
16. Appointment of Additional Trustees................................................. 18
17. Investments........................................................................ 20
18. Further Assurances................................................................. 20
19. Termination; Reinstatement......................................................... 21
20. Notices, etc....................................................................... 22
21. Miscellaneous...................................................................... 22
SCHEDULE I Schedule of Additional Warrant Certificates
</TABLE>
i
<PAGE> 3
EXHIBIT A Form of Agency Agreement
ii
<PAGE> 4
TRUST AGREEMENT, dated as of November 26, 1997, between PLD
TELEKOM INC., a Delaware corporation (the "COMPANY"), and THE
BANK OF NEW YORK, a New York banking corporation, as trustee (the
"TRUSTEE")
1. REVOLVING CREDIT AGREEMENT, NOTES AND WARRANTS. This Agreement is
made pursuant to the Revolving Credit Note and Warrant Agreement, dated as of
the date hereof (said Revolving Credit Note and Warrant Agreement, as modified,
amended and supplemented from time to time in accordance with its terms, being
referred to herein as the "REVOLVING CREDIT AGREEMENT")., between the Company
and The Travelers Insurance Company and The Travelers Indemnity Company (the
"LENDERS"), an executed counterpart of which is being delivered to the Trustee
together herewith, providing for (a) the commitment of the Lenders to make
Series A Revolving Credit Loans from time to time to the Company in an aggregate
principal amount not exceeding $12,400,000 (the "SERIES A REVOLVING CREDIT
LOANS"); (b) the issuance and delivery by the Company to the Lenders of its 12%
Series A Revolving Credit Notes due December 31, 1998 in the aggregate principal
amount of $12,400,000 to evidence the obligation of the Company to repay Series
A Revolving Credit Loans from time to time outstanding in accordance with the
terms thereof (such notes, including all notes issued in substitution or
exchange therefor pursuant to the Revolving Credit Agreement, being referred to
herein as the "SERIES A NOTES"); (c) the commitment of the Lenders to make
Series B Revolving Credit Loans from time to time to the Company in an aggregate
principal amount not exceeding $3,100,000 (the "SERIES B REVOLVING CREDIT
LOANS"); (d) the issuance and delivery by the Company to the Lenders of its 12%
Series B Revolving Credit Notes due September 30, 1998 in the aggregate
principal amount of $3,100,000 to evidence the obligation of the Company to
repay Series B Revolving Credit Loans from time to time outstanding in
accordance with the terms thereof (such notes, including all notes issued in
substitution or exchange therefor pursuant to said Revolving Credit Note and
Warrant Agreement, being referred to herein as the "SERIES B NOTES"; the Series
A Notes and the Series B Notes being collectively referred to herein as the
"NOTES"); and (e) certain Common Stock warrants, including (i) Series A Warrants
for the purchase of an aggregate of 315,000 shares of Common Stock, (ii) Series
B Warrants for the purchase of an aggregate of 108,000 shares of Common Stock,
and (iii) Additional Warrants for the purchase of an aggregate of 182,000 shares
of Common Stock.
This Agreement is made for the purpose of setting forth the duties and
powers of the Trustee with respect to, the Collateral (as defined in Section 3
hereof) and the Additional Warrants, and is made for the benefit of the holders
of the Notes (A) to secure (1) the payment of the principal of, interest on, and
Additional Amounts (if any) and Commitment Fees (if any) owing with respect to,
the Notes, (2) the payment of all other indebtedness and obligations (including,
without limitation, indemnities and expenses) of the Company under the Revolving
Credit Agreement and the Security Documents (as defined in Section 3 hereof) and
(3) the due performance of and compliance by the Company with all the terms of
and other obligations of the Company under the Revolving Credit Agreement, the
Notes, this Agreement and such Security Documents; and (B) to provide for the
implementation of the provisions of the Revolving Credit
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<PAGE> 5
Agreement relating to the Additional Warrants.
2. DEFINITIONS. All terms used herein without definition shall have the
meanings therefor specified in the Revolving Credit Agreement, as originally
executed and delivered. The term "REQUISITE PERCENTAGE OF SERIES A HOLDERS"
shall mean the holders of at least a majority in principal amount of the Series
A Notes at the time outstanding (excluding the Series A Notes held or owned by
the Company or any Affiliate of the Company); provided that, in the case of any
action affecting the priority of any of the Series A Notes with respect to any
other Notes or depriving any holder of any of the Series A Notes of the benefit
of the Lien of the Pledge Documents to which such Series A Notes are entitled,
the term "REQUISITE PERCENTAGE OF SERIES A HOLDERS" shall mean the holders of
all of the Series A Notes at the time outstanding. The term "REQUISITE
PERCENTAGE OF ALL HOLDERS" shall mean the holders of at least a majority in
principal amount of the Series A Notes at the time outstanding and the holders
of at least a majority in principal amount of the Series B Notes at the time
outstanding (excluding in each case the Notes held or owned by the Company or
any Affiliate of the Company); provided that, in the case of any action
affecting the priority of any of the Notes with respect to any other Notes or
depriving any holder of any of the Notes of the benefit of the Lien of the
Security Documents to which such Notes are entitled, the term "REQUISITE
PERCENTAGE OF ALL HOLDERS" shall mean the holders of all of the Notes at the
time outstanding; and provided further that no action shall be taken to modify
any of the provisions of this sentence without the consent of the holders of all
of the Notes affected thereby. Unless otherwise specified, (a) references in
this Agreement to any agreement, instrument or other document shall be
considered as references to such agreement, instrument or document as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with its terms and, to the extent applicable, the terms of this
Agreement, and (b) references herein to a particular section, clause or other
subdivision, or to a particular schedule or other attachment, shall be
considered as references to that section, clause or other subdivision of, or to
that schedule or other attachment to, this Agreement.
3. COLLATERAL. (a) The Notes when issued will be entitled to the
benefits of certain security held or to be held by or for the benefit of the
Trustee, such security to consist of (i) the property held under the Security
Agreement (Inventory and Receivables), dated as of the date hereof (the
"SECURITY AGREEMENT (INVENTORY AND RECEIVABLES)" and, together with any and all
other instruments or agreements at any time entered into which purport to grant
to the Trustee a security interest in or a Lien on property to secure the Notes,
other than to secure exclusively the Series A Notes, the "COMMON SECURITY
DOCUMENTS"), between the Company and the Trustee, substantially in the form of
Exhibit F to the Revolving Credit Agreement, creating a perfected first priority
security interest in favor of the Trustee in the properties of the Company
described therein as subject to the security interest thereof, all as security
for the obligations secured thereby, including, without limitation, the Notes,
and (ii) all rights of the Trustee under the Common Security Documents or in
respect of such property and all rights of the Trustee therein hereunder (such
property and any additional property subject to any of the Common Security
Documents, together with all such rights, being referred to herein as the
"COMMON COLLATERAL").
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<PAGE> 6
(b) The Series A Notes when issued will also be entitled to the benefits
of certain additional security held or to be held by or for the benefit of the
Trustee, such security to consist of (i) the property held under both (x) the
Pledge Agreement, dated as of the date hereof (the "PLEDGE AGREEMENT"), from the
Company to the Trustee, substantially in the form of Exhibit E-1 to the
Revolving Credit Agreement, and (y) the Agreement Accompanying Legal Mortgage of
Shares, dated as of the date hereof (the "SHARE MORTGAGE"), between the Company
and Anglo Irish Bank Corporation plc, as collateral agent pursuant to the Agency
Agreement, dated as of the date hereof, between the Trustee, Anglo Irish Bank
Corporation plc and the Company, substantially in the form of Exhibit E-2 to the
Revolving Credit Agreement, which Pledge Agreement and Share Mortgage together
create a perfected first priority pledge and security interest in favor of the
Trustee in the properties of the Company described therein as subject to the
security interest thereof, all as security for the obligations secured thereby,
including, without limitation, the Series A Notes (the Share Mortgage, together
with the Pledge Agreement and any and all other instruments or agreements at any
time entered into which purport to grant to the Trustee a security interest in
or a Lien on property exclusively to secure the Series A Notes (and not the
Series B Notes), being referred to herein collectively as the "PLEDGE
DOCUMENTS"), and (ii) all rights of the Trustee under the Pledge Documents or in
respect of such property and all rights of the Trustee therein hereunder (such
property and any additional property subject to any of the Pledge Documents,
together with all such rights, being referred to herein as the "ADDITIONAL
SERIES A COLLATERAL"). The Security Agreement (Inventory and Receivables), the
Pledge Agreement and the Share Mortgage are referred to herein collectively as
the "SECURITY AGREEMENTS"; the Common Security Documents and the Pledge
Documents are referred to herein collectively as the "SECURITY DOCUMENTS"; and
the Common Collateral and the Additional Series A Collateral are referred to
herein collectively as the "COLLATERAL".
(c) The Company will deliver or cause to be delivered to the Trustee, at
the Closing, executed counterparts of the Security Agreements and all other
Security Documents to be executed on or prior to the Closing Date and, promptly
upon the execution and delivery thereof, executed counterparts of all other
Security Documents. The Trustee or a Foreign Collateral Agent shall keep all
Security Documents delivered to it, and all securities, instruments or other
property included in the Collateral and delivered into its physical possession,
at the principal corporate trust office of the Trustee, and shall permit the
holder of any Note to inspect the same upon reasonable request.
4. ENFORCEMENT OF COLLATERAL BY TRUSTEE. The Trustee, for the benefit of
the holders of all the Notes, shall from time to time take such action for the
protection and enforcement of its rights under this Agreement and the Security
Documents as may be necessary or appropriate in the interests of the holders of
the Notes, provided that:
(a) unless and until the Trustee shall have knowledge that an
Event of Default shall have occurred and be continuing, the Trustee
shall not be obligated to take any action under this Agreement or the
Security Documents except for the performance of such duties as are
specifically set forth herein or therein and except as may be set forth
from time to
3
<PAGE> 7
time in written instructions by a Requisite Percentage of All Holders in
accordance with this Agreement or any of the Security Documents
(provided that written instructions by a Requisite Percentage of Series
A Holders shall be sufficient in the case of instructions relating only
to the Pledge Documents, or any of them, or to Section 6(c) of this
Agreement), and in this connection the Trustee shall take such of the
following actions as may be specified in such instructions: (i) give
such notice or direction or exercise such right, remedy or power
hereunder or under the Security Documents as shall be specified in such
instructions and (ii) approve or consent to all matters expressly
required by the terms hereof or of any of the Security Documents to be
satisfactory to, in accordance with the opinion of, or consented to by
the Trustee, it being understood that without such written instructions,
the Trustee shall not consent to any such matter or approve any such
matter as satisfactory to, in accordance with the opinion of, or
consented to by the Trustee;
(b) the Trustee shall not be deemed to have knowledge of the
existence of any condition or event which constitutes an Event of
Default or a Default unless (i) any Trust Officer (as hereinafter
defined) shall have actual knowledge thereof or (ii) the Trustee shall
have been notified thereof in writing by the Company, the Lenders or the
holder or holders of at least 5% in principal amount of the Notes at the
time outstanding; as used herein, "TRUST OFFICER" shall mean (a) any
officer within the corporate trust department of the Trustee including
any vice president, assistant vice president, secretary, assistant
secretary, treasurer, assistant treasurer, trust officer or any other
officer of the Trustee who customarily performs functions similar to
those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because
of such Person's knowledge of and familiarity with the particular
subject and (b) who shall have direct responsibility for the
administration of this Agreement; and
(c) if and so long as the Trustee shall have knowledge that an
Event of Default shall have occurred and be continuing, the Trustee
shall exercise such rights, powers and remedies (whether vested in it by
this Agreement or any Security Document or by law or in equity or by
statute or otherwise) for the protection and enforcement of its rights
under this Agreement and the Security Documents as the Trustee in the
absence of written instructions from a Requisite Percentage of All
Holders (or, with respect to the Pledge Documents, or any one of them,
or to Section 6(c) of this Agreement, in the absence of written
instructions from a Requisite Percentage of Series A Holders) may
determine to be in the best interests of the holders of all the Notes
(or, with respect to the Pledge Documents, or any one of them, or to
Section 6(c) of this Agreement, the holders of the Series A Notes), or
as the Trustee may be directed in writing by a Requisite Percentage of
All Holders (or, in the case of directions relating solely to the Pledge
Documents, or any of them, or to Section 6(c) of this Agreement, as the
Trustee may be directed by a Requisite Percentage of Series A Holders),
and shall use the same degree of care and skill in such exercise as a
reasonably prudent individual would use under the circumstances in the
conduct of such individual's own affairs.
4
<PAGE> 8
5. ESCROW AND RELEASE AND DELIVERY OF ADDITIONAL WARRANTS. (a)
Concurrently with the execution and delivery hereof, the Company has delivered
or caused to be delivered to the Trustee (for retention by the Trustee in escrow
as provided in Section 5(b), subject to release from escrow and delivery to the
holders of the Notes entitled thereto as provided in Sections 5(c) and 5(d)) the
Warrant Certificates identified on Schedule I attached hereto by certificate
Nos. and the respective numbers of Additional Warrants evidenced thereby (the
"ADDITIONAL WARRANT CERTIFICATES", which term shall include any other Warrant
Certificates delivered to the Trustee as contemplated by the third sentence of
Section 5(d)). The Company represents and warrants, for the benefit of the
Trustee and the holders of the Notes, that (i) each of the Additional Warrant
Certificates has been, or upon delivery to the Trustee will be, duly executed by
the Company and countersigned and registered in the name of the Trustee by the
Warrant Agent, and has been, or upon delivery to the Trustee will be, duly
issued, all as provided in the Warrant Agreement, and (ii) upon release from
escrow and delivery to a holder of the Notes pursuant to Section 5(c), each
Additional Warrant Certificate shall evidence the number of Warrants specified
therein, entitling the holder thereof, upon exercise, to purchase an equivalent
number of fully paid and nonassessable shares of Common Stock of the Company at
the exercise price specified in such Additional Warrant Certificate (such number
of shares of Common Stock and such exercise price being subject to adjustment as
provided in the Warrant Agreement).
(b) The Additional Warrant Certificates will be held by the Trustee in
one of its vaults or in a similarly secure manner in accordance with the
Trustee's customary procedures until, in the case of any particular Additional
Warrant Certificate, the same is required to be released and delivered to a
holder of the Notes pursuant to Section 5(c) or 5(e) or to the Warrant Agent
pursuant to Section 5(e). The escrow created hereunder shall be known and
referred to as the "ADDITIONAL WARRANT ESCROW". Notwithstanding any provision
hereof or of the Additional Warrant Certificates to the contrary, the Additional
Warrants evidenced by an Additional Warrant Certificate shall not
(i) at any time or under any circumstance be exercisable by the
Trustee, or
(ii) be exercisable by any other Person unless and until such
Additional Warrant Certificate shall, pursuant to Section 5(c) or 5(e),
be released and be deliverable by the Trustee to a holder of the Notes,
and then only by such holder, or its registered assigns, in accordance
with the terms of such Additional Warrant Certificate and, to the extent
applicable, the terms of the Warrant Agreement.
(c) On each Escrow Release Date (as defined below), the Trustee shall
deliver Additional Warrant Certificates to the holders of the Notes in
accordance with the further provisions of this Section 5(c) and the provisions
of Section 5(d), unless, prior to the opening of business on such Escrow Release
Date, the Company shall have
(i) satisfied the Targeted Reduction Condition (as defined below)
applicable to the Commitment Reduction Date (as defined below)
immediately preceding such Escrow
5
<PAGE> 9
Release Date, and
(ii) furnished to the Trustee (with a copy to each holder of the
Notes) an Officers' Certificate (A) confirming that the Company has
satisfied such Targeted Reduction Condition, (B) describing by principal
amount and date each reduction of the Commitments effected by the
Company in connection with such satisfaction and each, if any, repayment
of outstanding Revolving Credit Loans required in connection with such
reduction in accordance with Section 8.4 of the Revolving Credit
Agreement, specifying in the case of each such reduction of the
Commitments the Section of the Revolving Credit Agreement pursuant to
which such reduction of the Commitments was effected, and (C) certifying
that no such reduction of the Commitments described in such Officers'
Certificate pursuant to the immediately foregoing subclause (B) has been
credited in satisfaction of the Targeted Reduction Condition applicable
to any prior Commitment Reduction Date.
If the conditions set forth in clauses (i) and (ii) of the preceding sentence
shall not have been satisfied in respect of such Escrow Release Date, Additional
Warrant Certificates evidencing the number of Additional Warrants set forth in
the following table opposite the description of such Escrow Release Date shall
be released from the Additional Warrant Escrow and the Trustee shall, in
accordance with the procedures specified in Section 5(d) hereof, surrender such
released Additional Warrant Certificates to the Warrant Agent for registration
of transfer and issuance, as indicated in said table, to the holders of the
Series A Notes or, in the case of the Escrow Release Date next following each of
July 31, 1998 and August 31, 1998, in part to the holders of the Series A Notes
and in part to the holders of the Series B Notes:
<TABLE>
<CAPTION>
Escrow Release Number of Number of Number of
Date next following Additional Additional Warrants Additional Warrants
Commitment Reduction Warrants Transferable to Holders Transferable to Holders
Date occurring on: Released of Series A Notes of Series B Notes
- ------------------ -------- ----------------- -----------------
<S> <C> <C> <C>
July 31, 1998 46,000 30,000 16,000
August 31, 1998 46,000 30,000 16,000
September 30, 1998 30,000 30,000 0
October 31, 1998 30,000 30,000 0
November 30, 1998 30,000 30,000 0
</TABLE>
For purposes hereof, (A) the term "ESCROW RELEASE DATE" shall mean, in relation
to each Commitment Reduction Date referred to in Section 9.26 of the Revolving
Credit Agreement, the Business Day next following such Commitment Reduction
Date, or, if such Commitment Reduction Date is not itself a Business Day, the
second Business Day next following such Commitment Reduction Date; and (B) the
"TARGETED REDUCTION CONDITION" applicable to a Commitment Reduction Date shall
be deemed satisfied if (and only if) on such Commitment
6
<PAGE> 10
Reduction Date, after giving effect to any credits to which the Company is
entitled in accordance with the last sentence of Section 9.26 of the Revolving
Credit Agreement in respect of the Targeted Reduction Amount applicable to such
Commitment Reduction Date (as specified in the Commitment Reduction Schedule set
forth in said Section 9.26), the Company shall have made a reduction of the
Commitments (exclusive of reductions of the Commitments made in compliance with
Section 8.3(b) of the Revolving Credit Agreement), at least equal to such
Targeted Reduction Amount and made all required repayments, if any, of
outstanding Revolving Credit Loans required in connection with such reduction in
accordance with Section 8.4 of the Revolving Credit Agreement.
(d) On each Escrow Release Date on which, in accordance with Section
5(c) or 5(e), Additional Warrant Certificates evidencing a specified number of
Additional Warrants are required to be issued to the holders of a particular
Series of Notes, such Additional Warrant Certificates shall be allocated among
such holders in such manner that there shall be issuable to each such holder an
Additional Warrant Certificate evidencing a number of Additional Warrants
(and/or fractions thereof) bearing the same proportion to such specified number
as the principal amount then outstanding of the Revolving Credit Loans of such
Series owing to such holder bears to the aggregate principal amount then
outstanding of all Revolving Credit Loans of such Series owing to all such
holders. On each such Escrow Release Date on which Additional Warrant
Certificates are required to be so issued, the Trustee will, to the extent
necessary, to effect such issuance, surrender to the Warrant Agent, pursuant to
Section 2(d) of the Warrant Agreement, Additional Warrant Certificates,
accompanied by a written statement setting forth the names of the holders of the
Notes in which such Additional Warrant Certificates are to be registered and
their respective addresses and the number of Additional Warrants (and/or
fractions thereof) to be evidenced by the Additional Warrant Certificate to be
issued to each such holder, and directing the Warrant Agent to register the
transfer of such Additional Warrant Certificates to such holders and to issue
new Additional Warrant Certificates of the same tenor to such holders in
accordance with Section 2(d) of the Warrant Agreement. In the event that, on any
such occasion, Additional Warrant Certificates then held by the Trustee and
available for the purpose shall not evidence the appropriate numbers of
Additional Warrants (and/or fractions thereof) to permit allocation among
holders of the Notes of a particular Series in accordance with the first
sentence of this Section 5(d), the Trustee to effect an exchange of Additional
Warrant Certificates pursuant to the Warrant Agreement for other Warrant
Certificates of like tenor representing the respective numbers of Warrants
(and/or fractions thereof) necessary to permit such allocation (and, in the
event the Additional Warrant Certificates surrendered by the Trustee to the
Warrant Agent for this purpose shall evidence a number of Additional Warrants in
excess of the aggregate number of Warrants evidenced by all such Warrant
Certificates received in exchange therefor for delivery to such holders, an
Additional Warrant Certificate, which shall be retained by the Trustee in the
Additional Warrant Escrow, registered in the name of the Trustee and evidencing
a number of Warrants equal to such excess). The Company will take all actions
which shall be required on its part, or which shall be reasonably requested by
the Trustee or any holder of the Notes, in order to facilitate the delivery of
Additional Warrants to the holders of the Notes in accordance with this Section
5. Notwithstanding any provision of the Warrant Agreement to the contrary, the
Company
7
<PAGE> 11
will not require the payment of any sum for or in respect of any stamp or other
governmental charge that may be imposed in connection with any transfer or
exchange contemplated by this Section 5, and the Company will pay and hold the
Trustee and the holders of the Notes harmless from and against all such stamp or
other governmental charges or taxes that may be so imposed; provided, however,
that the Company shall not be responsible for the payment of any such stamp or
other governmental charges or taxes in connection with any future transfer or
exchange of Additional Warrant Certificates issued to a holder of Notes in
accordance with the terms of this Section by such holder or any transferee
thereof.
(e) In the event that, prior to the opening of business on any Escrow
Release Date, the Company shall have satisfied the Targeted Reduction Condition
applicable to the Commitment Reduction Date immediately preceding such Escrow
Release Date and furnished to the Trustee an Officers' Certificate complying
with the requirements of clause (ii) of Section 5(c), Additional Warrant
Certificates evidencing the number of Additional Warrants that would otherwise
have been released from the Additional Warrant Escrow and surrendered to the
Warrant Agent for registration of transfer and issuance to the holders of the
Notes on such Escrow Release Date shall be released from the Additional Warrant
Escrow and delivered by the Trustee, upon the written request of the Company, to
the Warrant Agent for cancellation.
6. APPLICATION OF MONIES BY TRUSTEE. (a) The Trustee shall keep separate
accounts for (i) the monies collected or received by the Trustee hereunder or
under the Common Security Documents and relating to the Common Collateral and
(ii) the monies collected or received by the Trustee hereunder or under the
Pledge Documents and relating to the Additional Series A Collateral. All monies
collected or received by the Trustee hereunder (other than amounts due to the
Trustee for its own account) or under any Security Document or in respect of the
Collateral shall be held and applied pursuant to the provisions of this Section
6 and Section 17(b). All monies from time to time received pursuant to the
Security Documents by the Trustee, no provision for the application of which is
made herein or in any of the Security Documents, shall be retained by the
Trustee as additional security for the obligations secured by the Common
Collateral or the Additional Series A Collateral, as the case may be.
(b) If an Event of Default shall have occurred and be continuing, all
proceeds of any sale or collection provided for in any of the Common Security
Documents or otherwise received as or in respect of any Common Collateral, and
all other monies received by the Trustee under any Common Security Document or
under this Agreement and relating to the Common Collateral, and at the time held
by the Trustee, shall be applied in the following order:
FIRST: to the payment of all costs and expenses incurred by the
Trustee in connection with such sale, the delivery of the Common
Collateral or the collection of any such monies (including, without
limitation, reasonable attorneys' fees and expenses);
SECOND: to the payment of any fees and other amounts then due
and
8
<PAGE> 12
payable to the Trustee by the Company under Section 12 of this
Agreement;
THIRD: to the payment of all other indebtedness and obligations
secured by the Common Security Documents and at the time due and
payable, including, without limitation, all amounts of principal,
interest, Additional Amounts, if any, and Commitment Fees, if any, at
the time due and payable on the Notes or pursuant to the Revolving
Credit Agreement (whether at stated maturity, or by repayment,
declaration or otherwise), including interest, to the extent permitted
under applicable law, on any overdue amounts at the applicable Default
Rate, and in the event such proceeds and other monies shall be
insufficient to pay in full all such amounts so due and payable, then:
first, to the payment, on a pro rata basis, of all amounts
at the time due and payable by the Company to the holders of the
Notes pursuant to any indemnification or expense provisions of
the Revolving Credit Agreement, this Agreement or any Common
Security Document, or as shall be required to reimburse any such
holder for amounts expended or obligations incurred by such
holder pursuant to the provisions of Section 11(d) of this
Agreement or any indemnity provided by such holder as
contemplated thereby in respect of any action taken by the
Trustee in accordance with the request of a Requisite Percentage
of All Holders, without preference or priority of any such amount
over any other such amount or of any one such holder over any
other such holder, and
second, to the payment, on a pro rata basis, of all
amounts of interest, Additional Amounts and Commitment Fees at
the time due and payable on the Notes or pursuant to the
Revolving Credit Agreement, without preference or priority of any
amount of interest or Additional Amounts or Commitment Fees over
any other amount of interest or Additional Amounts or Commitment
Fees or of any Note over any other Note, and
third, to the payment, on a pro rata basis, of all amounts
of principal at the time due and payable in respect of the Notes,
without preference or priority of any amount of principal over
any other amount of principal or of any Note over any other Note,
and
fourth, to the payment of all other amounts at the time
due and payable by the Company to the holders of the Notes under
the Revolving Credit Agreement, the Notes, this Agreement or any
Common Security Document, without preference or priority of any
such amount over any other such amount, any and all such payments
to be made to the holders of the Notes entitled thereto, ratably,
in proportion to the respective unpaid
9
<PAGE> 13
amounts of the Notes at the time due and payable and held by
such holders; and
FOURTH: the balance, if any, to the Company or as it may direct,
if all conditions to the termination of this Agreement specified in
Section 19 shall have been fulfilled, but if any such condition shall
not have been fulfilled, to be held by the Trustee and thereafter
applied to any other payments required to be made in accordance with
subdivisions FIRST to THIRD, inclusive, of this Section 6(b).
(c) If an Event of Default shall have occurred and be continuing, all
proceeds of any sale or collection provided for in any of the Pledge Documents
or otherwise received as or in respect of any Additional Series A Collateral,
and all other monies received by the Trustee under any Pledge Document or this
Agreement and relating to the Additional Series A Collateral, and at the time
held by the Trustee, shall be applied in the following order:
FIRST: to the payment of all costs and expenses incurred by the
Trustee in connection with such sale, the delivery of Additional Series
A Collateral or the collection of any such monies (including, without
limitation, reasonable attorneys' fees and expenses);
SECOND: to the payment of any fees and other amounts then due
and payable to the Trustee by the Company under Section 12 of this
Agreement;
THIRD: to the payment of all other indebtedness and obligations
secured by the Pledge Documents and at the time due and payable,
including, without limitation, all amounts of principal, interest,
Additional Amounts, if any, and Commitment Fees, if any, at the time due
and payable on the Series A Notes or to the holders of the Series A
Notes pursuant to the Revolving Credit Agreement (whether at stated
maturity, or by repayment, declaration or otherwise), including
interest, to the extent permitted under applicable law, on any overdue
amounts at the applicable Default Rate, and in the event such proceeds
and other monies shall be insufficient to pay in full all such amounts
so due and payable, then:
first, to the payment, on a pro rata basis, of all amounts
at the time due and payable by the Company to the holders of the
Series A Notes pursuant to any indemnification or expense
provisions of the Revolving Credit Agreement, this Agreement or
any Pledge Document, or as shall be required to reimburse any
such holder for amounts expended or obligations incurred by such
holder pursuant to the provisions of Section 11(d) of this
Agreement or any indemnity provided by such holder as
contemplated thereby in respect of any action taken by the
Trustee in accordance with the request of a Requisite Percentage
of Series A Holders, without preference or priority of any such
amount over any other such amount or of any one
10
<PAGE> 14
such holder over any other such holder, and
second, to the payment, on a pro rata basis, of all
amounts of interest, Additional Amounts and Commitment Fees at
the time due and payable on the Series A Notes or to the holders
of the Series A Notes pursuant to the Revolving Credit
Agreement, without preference or priority of any amount of
interest or Additional Amounts or Commitment Fees over any other
amount of interest or Additional Amounts or Commitment Fees or
of any Series A Note over any other Series A Note, and
third, to the payment, on a pro rata basis, of all
amounts of principal at the time due and payable in respect of
the Series A Notes, without preference or priority of any amount
of principal over any other amount of principal or of any Series
A Note over any other Series A Note, and
fourth, to the payment of all other amounts at the time
due and payable by the Company to the holders of the Series A
Notes under the Revolving Credit Agreement, the Series A Notes,
this Agreement or any Pledge Document, without preference or
priority of any such amount over any other such amount, any and
all such payments to be made to the holders of the Series A
Notes entitled thereto, ratably, in proportion to the respective
unpaid amounts of the Series A Notes at the time due and payable
and held by such holders; and
FOURTH: the balance, if any, to the Company or as it may direct,
if all conditions to the termination of this Agreement specified in
Section 19 shall have been fulfilled, but if any such condition shall
not have been fulfilled, to be held by the Trustee and thereafter
applied to any other payments required to be made in accordance with
subdivisions FIRST to THIRD, inclusive, above, of this Section 6(c).
7. PAYMENTS BY TRUSTEE, ETC. All payments by the Trustee hereunder shall
be made (a) if to the Lenders or the nominee of the Lenders, or to any other
holder of a Note who is entitled to the benefits of an agreement with the
Company (a copy of which has been delivered to the Trustee) similar to that
contained in Section 15.2 of the Revolving Credit Agreement, in the manner
provided in such Section 15.2 or in such similar agreement, as the case may be,
or (b) if to any other holder of a Note, by check mailed and addressed to the
registered holder of such Note as set forth in the register kept by the Company
at its office maintained pursuant to Section 14.1 of the Revolving Credit
Agreement for the purpose of registration of the Notes, without presentment of
such Note or making any notation thereon.
8. CERTIFICATES AS TO ISSUANCE OF AND PAYMENTS OF INTEREST ON NOTES,
REDUCTION OF COMMITMENTS AND MAKING OF REVOLVING CREDIT LOANS. Upon the issuance
of any Note pursuant to the Revolving Credit Agreement or upon any substitution
of any such Note, the Company will
11
<PAGE> 15
deliver to the Trustee an Officers' Certificate specifying the date and unpaid
and outstanding principal amount of such Note and the name and address of the
holder thereof, and stating that such Note is being issued pursuant to the
Revolving Credit Agreement or in substitution of a previously issued Note (in
which case such certificate shall also identify such previously issued Note by
reference to the prior certificate covering the same) and that such Note is
entitled to the benefits of this Agreement and of the Common Collateral and, if
a Series A Note, the Additional Series A Collateral. Upon the making of
Revolving Credit Loans evidenced by any Note or any reduction of the Commitments
pursuant to the Revolving Credit Agreement, the Company will deliver to the
Trustee an Officers' Certificate specifying, in the case of the making of a
Revolving Credit Loan, the amount and Series thereof, and the principal amount
of Revolving Credit Loans outstanding evidenced by each Note, and, in the case
of any reduction of the Commitments, the amount of such reduction, the date of
such reduction, the aggregate principal amount and Series of the Commitments so
reduced on such date, the name of the holder of each Note affected by such
reduction, the Section of the Revolving Credit Agreement pursuant to which such
reduction was effected and the amount of all required repayments, if any, of
outstanding Revolving Credit Loans made in connection with such reduction in
accordance with Section 8.4 of the Revolving Credit Agreement. The Company will
also deliver to the Trustee promptly upon request and at least monthly following
the date of this Agreement similar Officers' Certificates confirming such data
as to all Revolving Credit Loans at the time outstanding and entitled to the
benefits of this Agreement and of the Collateral, and, in addition, setting
forth, as of the date of such Officers' Certificate, the name and address of
each holder of any Note, together with the principal amount of all the Notes
held by each respective holder and the principal amount of the outstanding
Revolving Credit Loans evidenced thereby.
9. NOTICES, ETC. UNDER SECURITY DOCUMENTS. The Trustee shall deliver to
each holder of any Note, promptly upon receipt thereof by the Trustee,
duplicates or copies of all notices, requests, Officers' Certificates and other
instruments received by the Trustee under or pursuant to this Agreement or the
Security Documents, in each case to the extent that the same shall not have been
furnished pursuant hereto or thereto to such holder.
10. AMENDMENTS, ETC. OF SECURITY DOCUMENTS. In any case where any
amendment, modification, cancellation or termination of any of the Security
Documents or the Warrant Agreement requires the agreement of the Trustee, or in
any case where any consent, waiver or approval under any of the Security
Documents or the Warrant Agreement requires the consent of the Trustee, the
Trustee shall agree to such amendment, modification, cancellation or
termination, or give such consent, waiver or approval, with (but only with) the
prior written consent of a Requisite Percentage of All Holders; provided that
the written consent of a Requisite Percentage of Series A Holders shall be
sufficient in the case of consents relating solely to the Pledge Documents, or
any of them.
11. CONCERNING THE TRUSTEE. The Trustee hereby accepts the trusts of
this Agreement, including, without limitation, its duties and obligations
contained in the Security Documents, for the benefit of the holders of the Notes
from time to time outstanding, but only upon the terms
12
<PAGE> 16
herein expressly set forth, including the following:
(a) The Trustee shall be under no liability with respect to any
action taken in accordance with a written request or consent given in
accordance with this Agreement, except that nothing contained in this
Agreement shall relieve the Trustee from liability for its own
negligence or willful misconduct in the performance of the duties and
obligations established for it hereunder and under the Security
Documents.
(b) The Trustee makes no representation and has no
responsibility as to the sufficiency or validity of this Agreement, the
Security Documents, the Revolving Credit Agreement, the Warrant
Agreement or the Additional Warrants, or any other agreement, instrument
or document related to the transactions contemplated thereby or to
ascertain or to inquire as to the performance of any of the terms of
this Agreement or the Security Documents by the Company or any other
party thereto (other than as to the due authorization, execution and
delivery by it of this Agreement and of each such instrument or
agreement contemplated hereby to which it is or is to be a party), or as
to the existence, sufficiency, validity or value of the Collateral, or
as to the validity, perfection, priority or enforceability of the Liens
of the Security Documents on any of the Collateral, whether impaired by
operation of law or by reason of any action or omission to act on its
part hereunder (except to the extent such action or omission constitutes
negligence, bad faith or willful misconduct on the part of the Trustee),
or as to the validity of the title of the Company to the Collateral, or
for insuring the Collateral or the payment of taxes, charges,
assessments or Liens on the Collateral or otherwise as to the
maintenance of the Collateral.
(c) Before the Trustee acts or refrains from acting pursuant to
this Agreement or any of the Security Documents, the Trustee may consult
with legal counsel of its selection, and shall not be liable for any
action taken, suffered or omitted in good faith in accordance with the
written advice or opinion of such counsel. The Trustee may perform its
powers and duties hereunder directly or through agents or attorneys and
shall not be liable for the negligence of any such agent or attorney
appointed by it with due care.
(d) The Trustee shall not be required to use or risk its own
funds or otherwise incur financial liability in the performance of any
of its obligations or duties or the exercise of any of its rights or
powers and shall not be required to take any action which in the
Trustee's reasonable judgment would involve it in expense or liability
(or, in the judgment of counsel appointed by the Trustee, would involve
a substantial risk of liability to the Trustee) unless furnished with
security and indemnity which it reasonably deems to be satisfactory,
provided that the unsecured indemnity of the Lenders shall in any event
be satisfactory for purposes hereof. The Company will indemnify and save
harmless the Trustee from and against any liability or damage it may
incur, in good faith and without negligence, in the exercise and
performance of any of its powers and duties hereunder, including,
without limitation, the payment of taxes of the Trustee, excluding
therefrom any taxes payable by the Trustee which are based on
compensation received by the Trustee for
13
<PAGE> 17
services rendered hereunder.
(e) In making any payment or in taking any other action
hereunder or under the Security Documents or any other agreement,
instrument or document in respect of any Note, the Trustee may rely upon
the most recent Officers' Certificate covering such Note delivered to it
pursuant to Section 8 unless it shall have received written notice of
any transfer of such Note or of the outstanding principal among of
Revolving Credit Loans evidenced thereby, and the Trustee shall be
protected in making any payment in respect of any Note believed by the
Trustee to be genuine.
(f) The Trustee shall be under no obligation to file any
financing or continuation statements or record any documents or
instruments in any public office at any time or to take any other action
to perfect, preserve or protect unimpaired the security afforded by the
Security Documents, provided that, subject to Section 11(d), the Trustee
shall be obligated to take such action, if any, as the Company, in
furtherance of its obligations pursuant to Section 18 hereof, or a
Requisite Percentage of All Holders may specifically request, in a
statement specifying the particulars of action to be taken to perfect,
preserve or protect unimpaired the security created by the Security
Documents, provided that the written request of a Requisite Percentage
of Series A Holders shall be sufficient in the case of a request
relating solely to the Pledge Documents or any of them.
(g) The Trustee may at any time request written instructions
from the holders of the Notes with respect to the interpretation of this
Agreement, the Security Documents or any other agreement, instrument or
document related to the transactions contemplated in the Revolving
Credit Agreement or of action to be taken or suffered or not taken
hereunder or thereunder and, notwithstanding any other provision hereof
or thereof, shall be entitled to withhold (and shall not be under any
liability to any Person for withholding) action hereunder or thereunder
until it shall have received such requested written instructions from a
Requisite Percentage of All Holders (except that written instructions
from a Requisite Percentage of Series A Holders shall be sufficient in
the case of instructions relating solely to the Pledge Documents, or any
of them, or Section 6(c) hereof), provided that if the Trustee shall not
have received any such written instructions within a reasonable time
(not in any event to exceed 30 days) after its request, the Trustee
shall not be liable to any Person by reason of its having thereafter in
good faith acted or refrained from acting.
(h) In the absence of bad faith on the part of the Trustee, the
Trustee may rely and shall be protected and incur no liability to anyone
in acting, or refraining from acting, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties.
(i) The Trustee shall not be liable with respect to any action
taken, suffered or
14
<PAGE> 18
omitted to be taken by it in good faith in accordance with the written
request of a Requisite Percentage of All Holders or, in the case of a
request relating solely to the Pledge Documents, or any of them, or
Section 6(c) hereof, the written request of a Requisite Percentage of
Series A Holders.
(j) The duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement and the
Security Documents, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth
in this Agreement and the Security Documents, and no implied covenants
or obligations shall be read into this Agreement or the Security
Documents against the Trustee.
(k) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless the Trustee was negligent
in ascertaining the pertinent facts.
(l) Whenever in the administration of the provisions of this
Agreement the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering or omitting any
action hereunder, such matter (unless other evidence in respect thereof
be herein specifically prescribed) may, in the absence of gross
negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate
delivered to the Trustee and such Officers' Certificate, in the absence
of gross negligence or bad faith on the part of the Trustee, shall be
full warrant to the Trustee for any action taken, suffered or omitted by
it under the provisions of this Agreement upon the faith thereof.
(m) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
note or other paper or document, unless requested in writing so to do by
the Lenders, or the holder or holders of at least 5% in aggregate
principal amount of the Notes at the time outstanding; provided that, in
the case of any of the foregoing which by any provision hereof or of any
Security Document are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to determine whether or not
they conform on their face to the requirements of this Agreement or such
Security Document, as applicable; and provided further that if the
payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security conferred upon it by the terms of this
Agreement, the Trustee may require reasonable security or indemnity
against such costs, expenses or liabilities as a condition to so
proceeding; and the reasonable expense for such investigation shall be
paid by the Company, or if paid by the Trustee, shall be repaid by the
Company upon demand.
(n) All monies received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which
they were received, but need not be
15
<PAGE> 19
segregated from other funds except as provided in Section 6(a) hereof
and to the extent required by law. Except as provided in Section 17, the
Trustee shall be under no liability for interest on any monies received
by it hereunder.
(o) Anything herein contained to the contrary notwithstanding,
(i) the Company shall remain liable under each of the Security Documents
to which it is a party to the extent set forth therein to perform all of
its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Trustee or the
holders of the Notes of any of their rights, remedies or powers
hereunder shall not release the Company from any of its duties or
obligations under the Revolving Credit Agreement or each of the Security
Documents to which it is a party and (iii) neither any of the holders of
the Notes nor the Trustee shall have any obligation or liability under
any of the Security Documents by reason of or arising out of this
Agreement, nor shall the holders of the Notes or the Trustee be
obligated to perform any of the obligations or duties of the Company
thereunder or, except as expressly provided herein with respect to the
Trustee, to take any action to collect or enforce any claim for payment
assigned hereunder or otherwise.
(p) Beyond the exercise of reasonable care in the custody
thereof, the Trustee shall have no duty as to any Collateral in its
possession or control, or in the possession or control of any agent or
bailee appointed or chosen with reasonable care by the Trustee, or any
income thereon, and the Trustee shall be deemed to have exercised
reasonable care in the custody of the Collateral in its possession if
the Collateral is accorded treatment substantially equal to that which
it accords its own property, and shall not be liable or responsible for
any loss or diminution in the value of any of the Collateral, by reason
of the act or omission of any carrier, forwarding agency or other agent
or bailee selected by the Trustee in good faith and with reasonable
care.
12. TRUSTEE'S COMPENSATION, EXPENSES, INDEMNIFICATION, ETC. The Company,
from time to time upon request, will pay the Trustee reasonable compensation for
its services hereunder and will pay or reimburse the Trustee for all its
reasonable expenses and disbursements under this Agreement and the Security
Documents, including, without limitation, the reasonable fees and disbursements
of its counsel and agents not regularly in its employ. The Company hereby
indemnifies and holds harmless the Trustee and all additional trustees and
co-trustees appointed in accordance with Section 16 (collectively, the
"Indemnitees"), and their respective successors and assigns, legal
representatives, agents and servants from and against any loss, claim, damage,
liability or obligation (including, without limitation, reasonable attorneys'
fees and expenses) which an Indemnitee may incur, in good faith and without
negligence, in the exercise and performance of any of its powers and duties
hereunder or in any way relating to or arising out of this Agreement, the
Security Documents, the Warrant Agreement, the Additional Warrants or the
Revolving Credit Agreement (whether or not also indemnified against by any other
Person), including, without limitation, the payment of any taxes in respect of
the issuance and sale of the Notes or the granting of security under the
Security Documents and the payment of any other taxes
16
<PAGE> 20
of the Indemnitee (but excluding therefrom any taxes payable by the Indemnitee
which are based upon compensation received by the Indemnitee for services
rendered hereunder). The Company shall also reimburse the Lenders and each other
holder of a Note upon demand for any indemnification obligation in respect of
which the Lenders or such holder of a Note shall become liable to the Trustee as
contemplated by Section 11(d) of this Agreement. Such indemnities shall survive
payment or any transfers of the Notes and any resignation, removal or
replacement of any Indemnitee. To secure the Company's payment obligations under
this Section 12, the Trustee for the benefit of the Indemnitees shall have a
lien prior to the Notes on all money or Property held or collected by the
Trustee hereunder other than the Additional Warrants and money or Property held
in trust to pay principal of, interest on, Additional Amounts, if any, and
Commitment Fees, if any, payable in respect of, the Notes.
13. RESIGNATION, REMOVAL AND REPLACEMENT OF TRUSTEE. The Trustee or any
successor Trustee may resign at any time by giving at least 60 calendar days'
prior written notice of resignation to the Company and each holder of any Notes
at the time outstanding, such resignation to be effective upon the appointment
and acceptance of appointment of a successor Trustee in accordance with the
further provisions of this Section 13. A Requisite Percentage of All Holders may
at any time remove the Trustee for or without cause by an instrument or
instruments in writing delivered to the Trustee and the Company. In case the
Trustee shall have given notice of its resignation or shall have been removed in
accordance with the preceding sentence, a Requisite Percentage of All Holders
may appoint a successor Trustee (eligible as provided in Section 15) by an
instrument or instruments in writing delivered to such successor Trustee, the
retiring Trustee and the Company. Until a new Trustee shall be so appointed by a
Requisite Percentage of All Holders, the Company shall appoint an interim
Trustee (eligible as provided in Section 15) to fill such vacancy by an
instrument or instruments executed by order of its Board of Directors and
delivered to such interim Trustee, the retiring Trustee and each holder of the
Notes at the time outstanding. Any interim Trustee so appointed by the Company
shall immediately and without further act be superseded upon the acceptance by
any successor Trustee appointed by a Requisite Percentage of All Holders. Upon
the appointment of any successor or interim Trustee pursuant to this Section 13,
such successor or interim Trustee shall, forthwith upon its acceptance of such
appointment, immediately and without further act succeed to all the rights and
obligations of the retiring Trustee hereunder and under the Security Documents
as if originally named herein and therein and the retiring Trustee, at the
expense of the Company, shall duly assign, transfer and deliver to such
successor or interim Trustee all the rights and monies at the time held by the
retiring Trustee under the Security Documents and hereunder and shall execute
and deliver such proper instruments as may be reasonably requested to evidence
such assignment, transfer and delivery.
14. SUCCESSOR TRUSTEE BY MERGER, CONSOLIDATION, ETC. Any corporation
into which the Trustee may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Trustee
is a party, or any state or national bank or trust company in any manner
succeeding to all or substantially all of the corporate trust business of the
Trustee, if eligible as provided in Section 15, shall automatically succeed to
all of the rights
17
<PAGE> 21
and obligations of the Trustee hereunder and under the Security Documents
without further action on the part of any of the parties hereto. Such surviving
or succeeding corporation (if other than the Trustee) shall forthwith deliver to
each holder of any Notes at the time outstanding and the Company written notice
of such succession to the rights and obligations of the Trustee hereunder and
under the Security Documents.
15. ELIGIBILITY OF TRUSTEE. The Trustee shall always be a state or
national bank or trust company in good standing, organized under the laws of the
United States of America or one of the States thereof, having capital and
surplus (as shown by its latest financial statement published to its
shareholders) aggregating at least $100,000,000 and having (or being the
wholly-owned subsidiary of a holding company having) a rating of at least A by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc. In the event
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 15, the Trustee shall resign immediately in the
manner and with the effect specified in Section 13.
16. APPOINTMENT OF ADDITIONAL TRUSTEES AND COLLATERAL AGENTS. (a)
Notwithstanding anything to the contrary contained herein, if, at any time or
times, in order to conform with any law of any jurisdiction in which the Company
shall then own or hold any property which is a part of the Collateral, the
Trustee shall be advised by counsel satisfactory to it that it is necessary or
prudent in the interest of the holders of the Notes so to do or shall be
instructed so to do by a Requisite Percentage of All Holders, the Trustee shall
execute and deliver any and all instruments and agreements necessary or proper
to appoint another trust company, bank or banking association, or one or more
persons, approved by the Trustee, either to act as co-trustee or co-trustees
hereunder or under any of the other Security Documents, jointly with the Trustee
originally appointed hereunder, or its successors, or to act as separate trustee
or trustees hereunder or under any of the Security Documents; and the trust
company, bank or banking association, or the person or persons so appointed,
shall be such co-trustee or co-trustees, or separate trustee or trustees, with
such powers, duties and discretion as shall be specified in said instruments or
agreements of appointment, executed as aforesaid. Such co-trustee or co-trustees
or separate trustee or separate trustees may at any time or times be removed by
the Trustee or by a Requisite Percentage of All Holders; and upon any such
removal, the Trustee may appoint a successor co-trustee or co-trustees or a
successor separate trustee or separate trustees pursuant to this Section 16.
(b) The rights, powers, duties and obligations conferred or imposed upon
the Trustee under this Agreement and the other Security Documents shall be
conferred and imposed upon and exercised or performed by the Trustee, or jointly
by the Trustee and any co-trustee or co-trustees or separate trustee or separate
trustees appointed pursuant to this Section 16, as provided herein or in the
instrument or agreement appointing such co-trustee or co-trustees or separate
trustee or separate trustees, except that all monies received pursuant to any
Security Document to be delivered to or held by the Trustee shall be so
delivered to or held by the Trustee only and except to the extent that under the
law of any jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or acts, in
which
18
<PAGE> 22
event such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or co-trustees, or separate trustee or separate
trustees.
(c) Each co-trustee or separate trustee appointed pursuant to the
provisions of this Section 16 may resign and may be removed and successors to
such trustee may be appointed in the same manner as the Trustee may resign or be
removed or a successor to the Trustee appointed as provided in Section 13, and
all of the provisions hereof with respect to the resignation or removal of the
Trustee or the appointment of a successor to the Trustee, and the effect
thereof, shall be deemed applicable to the resignation or removal of each
co-trustee or separate trustee appointed pursuant to the provisions of this
Section 16 or to the appointment of successors to such trustees, as the case may
be.
(d) The Trustee shall not be liable for the misconduct or negligence of
any co-trustee or separate trustee appointed with due care by the Trustee
pursuant to this Section 16.
(e) (i) In addition to and without limitation of the foregoing, the
Trustee shall have no duty to act outside of the United States in respect of any
Collateral located in a jurisdiction other than the United States ("FOREIGN
COLLATERAL") but shall, at the specific request of the Company, and provided
that the Company has provided appropriate opinions, appoint a qualified foreign
collateral agent (such qualified foreign collateral agent appointed in respect
of one or more items of the collateral who has signed an agency agreement with
the Trustee substantially in the form of Exhibit A hereto with such changes as
may be acceptable to the Trustee, a "FOREIGN COLLATERAL AGENT") in any such
jurisdiction and sign the Foreign Collateral Documents (as defined herein)
specified by the Company. Such Foreign Collateral Agent, the Trustee and the
Company shall, provided the same are reasonably acceptable to the Trustee, enter
into a collateral assignment, pledge agreement, mortgage or other security
agreement purporting to create a Lien or security interest in such item of
Foreign Collateral (each such assignment or agreement, a "FOREIGN COLLATERAL
DOCUMENT") pursuant to which such owner shall purport to grant to such Foreign
Collateral Agent a Lien or security interest for the benefit of the Trustee and
the equal and ratable benefit of the holders of the Notes.
(ii) The duties and responsibilities, and the rights and immunities, of
the Trustee with respect to any Foreign Collateral Agent and Foreign Collateral
with respect to which such Foreign Collateral Agent is acting are limited to
those required by this Section 16(e) as follows: (1) both before and after an
Event of Default, the Trustee shall have no duty to supervise or monitor such
Foreign Collateral Agent or its performance, and shall have no liability for any
acts or omissions of such Foreign Collateral Agent; provided that (x) if a Trust
Officer has actual knowledge of willful misconduct or gross negligence of such
Foreign Collateral Agent, the Trustee may replace such Foreign Collateral Agent
with a successor Foreign Collateral Agent which it may appoint and (y) the
Trustee shall satisfy itself that any instructions given by the Trustee to such
Foreign Collateral Agent have been carried out; (2) the Trustee shall give to
such Foreign Collateral Agent such instructions to make effective the Liens
granted by the Foreign Collateral Documents as shall be stated to be necessary
in the opinions of counsel furnished pursuant to Section 4.5 of the
19
<PAGE> 23
Revolving Credit Agreement with respect to the Foreign Collateral with respect
to which any such Foreign Collateral Agent is acting and the Liens granted
therein; (3) the Trustee shall give notice to such Foreign Collateral Agent of
any Event of Default of which a Trust Officer has actual knowledge; (4) the
Trustee may, but has no obligation to, request information from such Foreign
Collateral Agent with respect to realization on Foreign Collateral or an
alternative course of action after an Event of Default, shall evaluate any such
information supplied by such Foreign Collateral Agent and in its sole
discretion, subject, however, to the provisions of subclause (iv) below relating
to the Trustee's seeking direction from a Requisite Percentage of Series A
Holders or the right of a Requisite Percentage of Series A Holders to give
directions pursuant to the terms of Section 4(c) of this Agreement, shall
instruct such Foreign Collateral Agent either to realize on such Foreign
Collateral or to take such alternative course of action; and (5) the Trustee
shall commence an action, or take such other action as it deems appropriate, in
the event any Foreign Collateral Agent fails to follow instructions of the
Trustee or fails to provide information required to be provided to the Trustee
by such Foreign Collateral Agent; provided that, in any circumstance in which
this Section 16(e) requires that the Trustee determine that such Foreign
Collateral Agent has complied with instructions, the Trustee shall be entitled
to rely conclusively on a certificate of an appropriate officer of such Foreign
Collateral Agent to such effect.
(iii) In exercising its rights and duties under this Section 16(e), the
Trustee shall use the same degree of care and skill as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(iv) During the continuance of an Event of Default, the Trustee will
give no instructions to a Qualified Foreign Collateral Agent until a Requisite
Percentage of Series A Holders instruct the Trustee to act or give instructions
to such Qualified Foreign Collateral Agent to act.
17. INVESTMENTS. (a) Monies held by the Trustee pursuant to any
provision of this Agreement or any Security Document (i) shall not be invested
or reinvested except as provided in Section 17(b) and (ii) shall not bear
interest except as the Company and the Trustee may agree in writing.
(b) Unless an Event of Default shall have occurred and be
continuing, monies held by the Trustee hereunder shall be invested or reinvested
by the Trustee in accordance with the written request of the Company, signed by
its chief financial officer, in investments constituting Eligible Cash
Equivalents. The Trustee shall, promptly upon receipt of instructions so to do
by a Requisite Percentage of All Holders, sell any and all such investments upon
the occurrence of any Event of Default or at any time the proceeds thereof are
otherwise required to be applied in accordance with the provisions of Section 6.
If any such sale (or any payment at maturity) produces a net sum less than the
cost (including accrued interest paid as such) of the investment so sold (or
paid), the Trustee shall give written notice thereof to the Company and the
Company shall promptly pay the deficiency to the Trustee. All such investments,
all net earnings, if any, thereon and the net proceeds of the sale or payment
thereof, plus any such deficiency paid by the Company, shall be held by the
Trustee for the same purposes as the monies used to
20
<PAGE> 24
purchase such investments. Any and all securities and instruments held by the
Trustee shall, unless in bearer form, be registered and held in the name of the
Trustee or its nominee.
18. FURTHER ASSURANCES. The Company agrees to record and file, at its
own expense, financing statements (and continuation statements when applicable)
with respect to the Collateral now existing or hereafter created meeting the
requirements of applicable law in such manner and in such jurisdictions as are
necessary to perfect, and maintain perfected the security interests in the
Collateral intended to be created by the Security Documents, and to deliver
promptly a file stamped copy of each such financing statement or other evidence
of filing to the Trustee. The Trustee shall be under no obligation whatsoever to
file such financing or continuation statements or to make any other filing under
the UCC in connection with such sale and assignment. The Company at its expense
will execute, acknowledge and deliver all such agreements and instruments and
take all such action as the Trustee or a Requisite Percentage of All Holders
(or, to the extent relating solely to the Pledge Documents or the Additional
Series A Collateral, a Requisite Percentage of Series A Holders) from time to
time may request in order further to effectuate the purposes of this Agreement
and to carry out the terms hereof. Without limiting the foregoing, the Company
will do all acts and things, and will make, execute, acknowledge and deliver,
and file and record in the proper filing and recording places, all such
instruments (including, without limitation, mortgages, pledges, assignments,
security agreements, financing statements and continuation statements) required
or which may be requested by the Trustee, the Lenders or the holder or holders
of at least 5% in aggregate principal of the Notes at the time outstanding to
establish, perfect, maintain and continue the perfection and priority of the
security interests of the Trustee in the Collateral, and authorizes (to the
extent permitted by applicable law) the Trustee to execute and file in its name
any financing or continuation statements which the Company, the Trustee or a
Requisite Percentage of All Holders may determine to be necessary or advisable
to protect the Trustee's security interests with respect to the Collateral. The
Company represents and warrants that its address set forth in Section 20 is its
chief executive office and principal place of business and the office at which
its records with respect to this Agreement and the Security Documents and the
Collateral are kept. In the event the Company proposes to change its name, the
location of its chief executive office or its principal place of business or the
location of the office at which such records are kept, the Company will, at
least 30 days prior to any such proposed change, deliver to the Trustee written
notice of such proposed change.
19. TERMINATION; REINSTATEMENT. Upon receipt by the Trustee of evidence
from the holders of the Notes at the time outstanding of the payment (or
prepayment) in full, in cash, of the principal of, and interest on, and
Additional Amounts (if any) and Commitment Fees (if any) owing with respect to,
all the Notes in accordance with the terms thereof, and the payment, in cash (or
the making of provision satisfactory to the Trustee for the payment), of all
other sums payable under the Revolving Credit Agreement, the Security Documents
and this Agreement (including, without limitation, the reasonable compensation,
expenses and disbursements of the Trustee), this Agreement shall terminate and
the Trustee, at the request and expense of the Company, will execute and deliver
to the Company a proper instrument or instruments acknowledging the satisfaction
and termination of the Security Documents and of this Agreement, and will duly
21
<PAGE> 25
assign, transfer and deliver to the Company all of the rights, properties and
monies at the time held by the Trustee under the Security Documents and
hereunder. Notwithstanding any provision hereof or of any Security Document to
the contrary, in the event that all or any part of any payment or payments
theretofore applied to any of the indebtedness or obligations secured by any
Security Document is or must be rescinded or returned for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy, reorganization or
the like of the Company), such indebtedness and obligations, for the purpose of
this Agreement and each such Security Document, to the extent that such payment
is or must be so rescinded or returned, shall be deemed to have continued in
existence (regardless of whether (x) there shall have previously occurred any
Default or Event of Default, (y) any instrument or agreement evidencing such
indebtedness or obligation shall have been acquired by the Company or cancelled
or (z) this Agreement or any other Security Document shall have been terminated
pursuant to the preceding sentence or otherwise), and this Agreement and each
such Security Document shall continue to be effective or shall be reinstated, as
the case may be, without further act of any Person, as to such indebtedness and
obligations, all as though neither such payment nor such application thereof had
been made.
20. NOTICES, ETC. (a) All notices and other communications hereunder
shall be in writing (including telex, telecopier or similar writing) and shall
be effective (i) if given by telecopier, when transmitted and the appropriate
confirmation received, (ii) if given by certified mail, three Business Days
after being deposited in the mail, (iii) if given by first class mail, postage
prepaid, when received and (iv) if given by other means, when received or
personally delivered, addressed as set forth in Section 20(b).
(b) Communications shall be addressed as follows:
(i) if to the Company, at 680 Fifth Avenue, 24th Floor, New York,
New York 10019, Attention: President (with a copy to Morgan, Lewis &
Bockius LLP, at 101 Park Avenue, New York, New York 10178,
Attention: H. Franklin Bloomer, Jr.), or at such other address as the
Company shall have furnished in writing to the Trustee and each holder
of any Note at the time outstanding, or
(ii) if to the Trustee, at 101 Barclay Street, New York, New York
10286, Attention: Corporate Trust Department, or at such other address
as the Trustee shall have furnished in writing to the Company and each
holder of any Note at the time outstanding, or
(iii) if to the Lenders, at its address specified for the purpose
in Schedule I to the Revolving Credit Agreement, or at such other
address as the Lenders shall have furnished in writing to the Company
and the Trustee, or
(iv) if to any other holder of any Note, at such address as such
other holder shall have furnished to the Company in writing, or, until
any such other holder so furnishes to
22
<PAGE> 26
the Company an address, then to and at the address of the last holder of
such Note who has furnished an address to the Company and the Trustee.
21. MISCELLANEOUS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto, and, in addition, shall inure to the benefit of and be
enforceable by any holder at the time of any Note. This Agreement may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and by the Trustee upon the direction of a Requisite
Percentage of All Holders. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK. The headings in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect any of the terms hereof. This Agreement shall be executed in
any number of counterparts each of which shall be an original, but all of which
together shall constitute one instrument.
[The rest of this page is intentionally left blank.]
23
<PAGE> 27
[This page is intentionally left blank]
24
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
PLD TELEKOM INC.
By /s/ E. Clive Anderson
------------------------------------
Title: Senior Vice President
THE BANK OF NEW YORK,
as Trustee
By /s/ Ming J. Shiang
------------------------------------
Title: Assistant Vice President
25
<PAGE> 29
Schedule I
to
Trust Agreement
Description of Additional Warrant Certificates
Originally Delivered to Trustee
----------------------------------------------
<TABLE>
<CAPTION>
Registration No. Number of Warrants
of Warrant Certificate Evidenced by Warrant Certificate
---------------------- --------------------------------
<S> <C>
1 WA-3 18,300
2 WA-4 18,300
3 WA-5 18,300
4 WA-6 18,300
5 WA-7 18,300
6 WA-8 11,700
7 WA-9 11,700
8 WA-10 11,700
9 WA-11 11,700
10 WA-12 11,700
11 WB-3 9,760
12 WB-4 9,760
13 WB-5 6,240
14 WB-6 6,240
</TABLE>
<PAGE> 1
EXHIBIT 4.30
- --------------------------------------------------------------------------------
PLD TELEKOM INC.
and
THE BANK OF NEW YORK,
as Trustee
------------------------
SECURITY AGREEMENT (INVENTORY AND RECEIVABLES)
------------------------
Dated as of November 26, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
SECURITY AGREEMENT (INVENTORY AND RECEIVABLES) dated as of
November 26, 1997, entered into between PLD TELEKOM INC., a
Delaware corporation (the "Grantor") and THE BANK OF NEW YORK, a
New York banking corporation, as trustee (in such capacity, the
"Trustee") under the Trust Agreement (as hereinafter defined) for
the holders of the Notes (as hereinafter defined)
1. Revolving Credit Agreement, Notes and Trust Agreement. This Agreement
is made pursuant to (a) the Revolving Credit Note and Warrant Agreement, dated
as of the date hereof (the "Revolving Credit Agreement"), between the Grantor,
on the one hand, and The Travelers Insurance Company and The Travelers Indemnity
Company (collectively, the "Lenders"), on the other, providing, among other
things, for (i) the commitment of the Lenders to make Series A Revolving Credit
Loans from time to time to the Grantor in an aggregate principal amount not
exceeding $12,400,000 (the "Series A Revolving Credit Loans") and Series B
Revolving Credit Loans from time to time to the Grantor in an aggregate
principal amount not exceeding $3,100,000 (the "Series B Revolving Credit
Loans") and (ii) the issuance and delivery by the Grantor to the Lenders of its
12% Series A Revolving Credit Notes due December 31, 1998 in the aggregate
principal amount of $12,400,000 to evidence the obligation of the Grantor to
repay Series A Revolving Credit Loans from time to time outstanding in
accordance therewith (such notes, including all notes issued in substitution or
exchange therefor pursuant to the Revolving Credit Agreement, being referred to
herein as the "Series A Notes") and its 12% Series B Revolving Credit Notes due
September 30, 1998 in the aggregate principal amount of $3,100,000 to evidence
the obligation of the Grantor to repay Series B Revolving Credit Loans from time
to time outstanding in accordance therewith (such notes, including all notes
issued in substitution or exchange therefor pursuant to the Revolving Credit
Agreement, being referred to herein as the "Series B Notes") and (b) the Trust
Agreement, dated as of the date hereof (the "Trust Agreement"), between the
Grantor and the Trustee, pursuant to which the Trustee has agreed to hold
certain collateral, including the Collateral (as defined in Section 2 hereof)
for the benefit of, among others, the holders of the Series A Notes and the
Series B Notes. The Series A Revolving Credit Loans and the Series B Revolving
Credit Loans are herein sometimes collectively referred to as the "Revolving
Credit Loans"; the Series A Notes and the Series B Notes are herein sometimes
collectively referred to as the "Notes"; the holders of the Notes are herein
sometimes collectively referred to as the "Noteholders"; the Revolving Credit
Agreement, the Trust Agreement, this Agreement and the other Security Documents
(as defined in Section 3 of the Trust Agreement) and all other related
agreements and documents issued or delivered under or pursuant to the Revolving
Credit Agreement or this Agreement, in each case as the same may be amended or
otherwise modified and in effect from time to time, are herein sometimes
referred to collectively as the "Revolving Credit Documents".
<PAGE> 3
The obligation of the Lenders to make Revolving Credit Loans under the
Revolving Credit Agreement is conditioned on the execution and delivery by the
Grantor of a security agreement in the form hereof to secure (a) the due and
punctual payment by the Grantor of the principal of and interest on, and
Additional Amounts (if any) and Commitment Fees with respect to, the Notes, when
and as due, whether at maturity, by acceleration, upon one or more dates set for
repayment or otherwise, (b) the due and punctual payment of all other
indebtedness and all other monetary obligations (including, without limitation,
indemnities and expenses) of the Grantor under and in accordance with the
Revolving Credit Agreement, the Trust Agreement and the other Revolving Credit
Documents, and (c) the due and punctual performance of all other obligations
under the Revolving Credit Agreement, the Notes, the Trust Agreement, this
Agreement and the other Security Documents (all of the foregoing obligations
being collectively called the "Obligations").
2. Definitions. All capitalized terms used herein but not defined herein
shall have the meanings set forth in the Revolving Credit Agreement. As used
herein, the following terms shall have the following meanings:
"Collateral" shall mean all (i) Receivables, (ii) Documents,
(iii) Inventory and (iv) Proceeds.
"Documents" shall mean all instruments, files, records, ledger
sheets and documents covering or relating to any of the Collateral.
"Inventory" shall mean all present or future inventory in which
the Grantor has any interest, including goods, wares and merchandise held for
sale or lease or leased or furnished or to be leased or furnished under a
contract of service and all of the Grantor's present and future raw materials,
work in process, finished goods, parts, components, assemblies, and packing and
shipping materials, wherever located, and documents of title representing any of
the above.
"Lenders" shall have the meaning set forth in Section 1.
"Noteholders" shall have the meaning set forth in Section 1.
"Notes" shall have the meaning set forth in Section 1.
"Obligations" shall have the meaning set forth in Section 1.
"Proceeds" shall mean any consideration received from the sale,
exchange, lease or other disposition of any asset or property which constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any asset or property which constitutes Collateral, and shall
include, without limitation, all cash and negotiable instruments received or
held by any of the holders of the Notes
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<PAGE> 4
pursuant to any lockbox or similar arrangement relating to the payment of
Receivables and Inventory designated as contemplated by Section 15(a).
"Receivable Debtor" shall mean any person who is or who may
become obligated to the Grantor under, with respect to, or on account of, any
Receivable.
"Receivables" shall mean all of the following Property and
interests in Property of the Grantor, whether now existing or existing in the
future or hereafter acquired or arising: (i) accounts, (ii) accounts receivable,
including, without limitation, all rights to payment created by or arising from
sales of goods, leases of goods or the rendition of services no matter how
evidenced, whether or not earned by performance, including, without limitation,
any payment received by the Grantor from any of its Subsidiaries, directly or
indirectly, in respect of management, administration or any other services
performed for such Subsidiary by the Grantor, (iii) all unpaid seller's or
lessor's rights, including, without limitation, rescission, replevin,
reclamation and stoppage in transit, relating to any of the foregoing or arising
therefrom, (iv) all rights to any goods or merchandise represented by any of the
foregoing after creation of the foregoing, including, without limitation,
returned or repossessed goods, (v) all reserves and credit balances with respect
to any such accounts receivable or receivable debtors, (vi) all letters of
credit, security or guarantees for any of the foregoing, (vii) all insurance
policies or reports relating to any of the foregoing, (viii) all collection or
deposit accounts relating to any of the foregoing, (ix) all proceeds of any of
the foregoing, and (x) all books and records relating to any of the foregoing;
provided, however, that there shall be excluded from any of the foregoing
Existing Senior Note Collateral under the Existing Senior Note Collateral
Documents as in effect on the date hereof and Existing Convertible Note
Collateral under the Existing Convertible Note Collateral Documents as in effect
on the date hereof in either such case which, but for this proviso, would
constitute "Receivables" hereunder.
"Revolving Credit Agreement" shall have the meaning specified in
Section 1.
"Revolving Credit Documents" shall have the meaning specified in
Section 1.
"Revolving Credit Loans" shall have the meaning specified in
Section 1.
"Series A Notes" shall have the meaning specified in Section 1.
"Series B Notes" shall have the meaning specified in Section 1.
"Series A Revolving Credit Loans" shall have the meaning
specified in Section 1.
"Series B Revolving Credit Loans" shall have the meaning
specified in Section 1.
"Trust Agreement" shall have the meaning specified in Section 1.
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<PAGE> 5
3. Security Interest. As security for the payment or performance, as the
case may be, of the Obligations, the Grantor hereby creates and grants to the
Trustee, its successors and its assigns, for the benefit of the holders of the
Notes, their successors and their assigns, a security interest in the Collateral
(the "Security Interest"). Without limiting the foregoing, the Trustee is hereby
authorized, but not obligated, to file one or more financing statements,
continuation statements or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest without
the signature of the Grantor, naming the Grantor as debtor and the Trustee as
secured party.
The Grantor agrees at all times to keep accurate and complete accounting
records with respect to the Collateral, including, but not limited to, a record
of all payments and Proceeds received.
4. Further Assurances. The Grantor agrees, at its expense, to execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as are reasonably necessary or as the
Trustee or a Requisite Percentage of All Holders (as defined in the Trust
Agreement) may from time to time reasonably request for the better assuring and
preserving of the security interests and the rights and remedies created hereby,
including, without limitation, the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the security interests created hereby and the filing of any financing statements
or other documents in connection herewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Trustee, duly endorsed in a manner
reasonably satisfactory to the Trustee. The Grantor agrees promptly to notify
the Trustee of any change in its corporate name or in the location of its chief
executive office, its chief place of business or the office where it keeps its
records relating to the Inventory and Receivables owned by it. The Grantor
agrees promptly to notify the Trustee if any material portion of the Collateral
is damaged or destroyed.
5. Inspection and Verification. The Trustee and such persons as the
Trustee may reasonably designate shall have the right, upon reasonable notice to
the Grantor, at any reasonable time or times during the Grantor's usual business
hours, to inspect the Collateral, all records related thereto (and to make
extracts and copies from such records), and the premises upon which any of the
Collateral is located, to discuss the Grantor's relevant affairs with the
officers of the Grantor and its independent accountants and to verify under
reasonable procedures the validity, amount, quality, quantity, value, and
condition of or any other matter relating to, the Collateral, including, in the
case of Receivables or Collateral in the possession of a third person,
contacting Receivable Debtors or a third person possessing such Collateral for
the purpose of making such a verification.
6. Taxes; Encumbrances. The Trustee, acting upon the direction of a
Requisite Percentage of All Holders, shall discharge past due taxes, liens,
security interests or other encumbrances at any time levied or placed on the
Collateral and not permitted under the Revolving
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<PAGE> 6
Credit Agreement, and may pay for the maintenance and preservation of the
Collateral to the extent the Grantor fails to do so as required by the Revolving
Credit Agreement and solely to the extent that monies held by the Trustee on
behalf of the Noteholders under the Trust Agreement are available therefor, and
the Grantor agrees to reimburse the Trustee on demand for any payment made or
any expense incurred by it pursuant to the foregoing authorization; provided,
however, that nothing in this Section 6 shall be interpreted as excusing the
Grantor from the performance of any covenants or other promises with respect to
taxes, liens, security interests or other encumbrances and maintenance as set
forth herein or in the Revolving Credit Agreement.
7. Assignment of Security Interest. If at any time the Grantor shall
take and perfect a security interest in any property of a Receivable Debtor or
any other person to secure payment and performance of any Receivable, the
Grantor shall promptly assign such security interest to the Trustee. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the Receivable Debtor or other person granting the security interest.
8. Representations and Warranties. The Grantor represents and warrants
to the Trustee that:
(a) Title and Authority. The Grantor has rights in and good title
to the Collateral and has full power and authority to grant to the Trustee the
Security Interest in the Collateral pursuant hereto and to execute, deliver and
perform its obligations in accordance with the terms of this Agreement, without
the consent or approval of any other Person other than any consent or approval
which has been obtained.
(b) Filings. Fully executed Financing Statements containing a
description of the Collateral have been filed of record in every governmental,
municipal or other office in every jurisdiction in which any portion of the
Collateral is located, and other actions have been duly taken as necessary to
publish notice of, and protect the validity of, and to establish a valid, legal
and perfected security interest in favor of the Trustee in respect of the
collateral in which a security interest may be perfected by filing in the United
States and its territories and possessions, and no further or subsequent filing,
refiling, recording, re-recording, registration or re-registration is necessary
in any such jurisdiction, except as provided under applicable law with respect
to the filing of continuation statements under the Uniform Commercial Code.
(c) Validity of Security Interest. The Security Interest
constitutes a valid, legal and perfected first priority security interest in all
of the Collateral for payment and performance of the Obligations.
(d) Information Regarding Names. The Grantor has disclosed in
writing to the Trustee any trade names used to identify it in its business or in
the ownership of its properties.
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<PAGE> 7
(e) Absence of Other Liens. The Collateral is owned by the
Grantor free and clear of any mortgage, pledge, security interest, lien, charge
or other encumbrance of any nature whatsoever, except the security interest
created by this Agreement or any other Security Document.
(f) Description of Existing Inventory and Receivables. Attached
hereto as Schedule A is description of each item of Inventory and Receivables of
the Grantor as of the date hereof which has a value in excess of $50,000.
(g) Survival of Representations and Warranties. All
representations and warranties of the Grantor contained in this Agreement shall
survive the execution, delivery and performance of this Agreement until the
termination of this Agreement pursuant to Section 27(b).
9. Records of Receivables; Delivery of Requested Information. The
Grantor shall keep or cause to be kept records of Receivables which are accurate
in all material respects. The Grantor agrees to supply the Trustee with such
information regarding Inventory and Receivables as the Trustee may reasonably
request from time to time.
10. Documents of Title. The Grantor agrees immediately to deliver all
documents of title (as such term is defined in the Uniform Commercial Code) to
the Trustee or its designee upon the creation and issuance of such documents of
title to maintain a valid, legal and perfected security interest in favor of the
Trustee in respect of any and all Inventory. The Trustee agrees immediately to
deliver, or cause to be delivered, such documents of title to the Grantor or its
designee(s) upon the creation of Receivables relating to the Inventory covered
by such documents of title.
11. Protection of Security. The Grantor shall, at its own cost and
expense, take any and all actions necessary to defend title to the Collateral
against all persons and to defend the Security Interest of the Trustee in the
Collateral and the priority thereof, against any adverse mortgage, pledge,
security interest, lien, charge or other encumbrance of any nature whatsoever
not permitted under the Revolving Credit Agreement.
12. Continuing Obligations of the Grantor. The Grantor shall remain
liable to observe and perform all the conditions and obligations to be observed
and performed by it under each contract, agreement, interest or obligation
relating to the Collateral granted hereunder, all in accordance with the terms
and conditions thereof, and shall indemnify and hold harmless the Trustee from
any and all such liabilities.
13. Use and Disposition of Collateral. The Grantor shall make or permit
to be made no assignment, pledge or hypothecation of the Collateral, and shall
grant no other security interest in the Collateral. The Grantor shall not make
or permit to be made any transfer of the Collateral, and shall remain at all
times in possession thereof other than transfers to the Trustee pursuant to the
provisions hereof, except that so long as no Event of Default shall have
occurred and be
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<PAGE> 8
continuing, the Grantor may use and dispose of the Collateral (and Proceeds
therefrom) and collect or compromise the Receivables (and Proceeds therefrom) in
any lawful manner not inconsistent with the provisions of this Agreement and of
the Revolving Credit Agreement.
14. Limitation on Modifications of Receivables. The Grantor will not,
without the prior written consent of the Trustee (acting upon the direction of a
Requisite Percentage of All Holders), grant any extension of the time of payment
of any of the Receivables, compromise, compound or settle the same for less than
the full amount thereof, release, wholly or partly, any person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business; provided, however, that no such consent is
required with respect to Receivables which in aggregate constitute obligations
of $100,000 or less.
15. Collections; Trustee's Appointment as Attorney-in-Fact. (a) Except
as provided below, the Grantor shall have the right to collect all Receivables
in the ordinary course of its business; provided, however, that (i) during the
occurrence and continuation of an Event of Default, or (ii) upon the occurrence
of a Material Adverse Change in the Business or Condition of the Company and its
Restricted Subsidiaries, taken as a whole, since the Closing Date, the Grantor
agrees, if the Trustee shall so request, (A) to arrange for remittances on any
Receivables and sales of Inventory for cash and all prepayments, deposits and
other advance payments in respect of sales of Inventory designated by the
Trustee to be made directly to lockboxes or blocked accounts designated by the
Trustee or in such other manner as the Trustee may direct, and (B) promptly to
deposit all payments received by the Grantor on account of Receivables and sales
of Inventory for cash and all prepayments, deposits and other advance payments
in respect of sales of Inventory, whether in the form of cash, checks, notes,
drafts, bills of exchange, money orders or otherwise, in one or more accounts
designated by the Trustee in precisely the form received (but with any
endorsements of the Grantor necessary for deposit or collection), subject to
withdrawal by the Trustee only, as hereinafter provided, and until they are
deposited, shall be deemed to be held in trust by the Grantor for and as the
Trustee's property and shall not be commingled with the Grantor's other funds.
(b) The Grantor hereby irrevocably constitutes and appoints the
Trustee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Grantor without notice to or assent thereof, and
in the name of the Grantor or in its own name, from time to time, but only upon
the occurrence of any event referred to in clauses (i) or (ii) of Section 15(a),
for the purpose of carrying out the terms of this Agreement, for the use and
benefit of the Trustee and the holders of the Notes, to take any and all
appropriate action, in the Trustee's reasonable discretion, and to execute any
and all documents and instruments which may be reasonably necessary or desirable
in the judgment of the Trustee, and to do the following: (i) to receive,
endorse, assign and/or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences of payment relating to the Collateral or any
part thereof; (ii) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (iii) to sign the
name
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<PAGE> 9
of the Grantor on any invoice or bill of lading relating to any of the
Collateral; (iv) to send verifications of Receivables to any payor thereof; (v)
to commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
all or any of the Collateral or to enforce any rights in respect of any
Collateral; (vi) to settle, compromise, compound, adjust or defend any actions,
suits or proceedings relating to or pertaining to all or any of the Collateral;
(vii) to notify, or to require the Grantor to notify, the Receivable Debtors
obligated on any or all of the Receivables to make payment thereof directly to
the Trustee; and (viii) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement. The powers conferred on the Trustee hereunder are solely to protect
the Trustee's interests in the Collateral and shall not impose any duty upon the
Trustee to exercise any such powers. The Trustee shall be accountable only for
amounts that it actually receives as a result of the exercise of the rights and
powers hereunder and shall not be responsible to the Grantor for any act or
failure to act, except for its own negligence or willful misconduct. It is
understood and agreed that the appointment of the Trustee as the agent of the
Grantor for the purposes set forth above in this Section 15 is coupled with an
interest and is irrevocable. The provisions of this Section 15 shall in no event
relieve the Grantor of any of its obligations hereunder or under the Revolving
Credit Agreement with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Trustee or any Noteholder of any other or further
right which it may have on the date of this Agreement or hereafter, whether
hereunder or by law or otherwise.
16. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Grantor agrees to deliver each item of
Collateral to the Trustee on demand, and it is agreed that the Trustee shall
have the right to exercise any and all rights afforded to a secured party under
the Uniform Commercial Code or other applicable law. Without limiting the
generality of the foregoing, the Grantor agrees that the Trustee shall have the
right, subject to the mandatory requirements of current law, to sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Trustee shall deem appropriate. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of the Grantor, and the Grantor hereby waives (to
the extent permitted by law) all rights of redemption, stay and appraisal which
the Grantor now has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted.
The Trustee shall give the Grantor 10 days' written notice (which the
Grantor agrees is reasonable notice within the meaning of Section 9-504(3) of
the Uniform Commercial Code as in effect in New York) of the Trustee's intention
to make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Trustee may fix and state in the notice
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<PAGE> 10
(if any) of such sale. At any such sale, the Collateral, or portion thereof, to
be sold may be sold in one lot as an entirety or in separate parcels, as the
Trustee may (in its sole and absolute discre tion) determine. The Trustee shall
not be obligated to make any sale of any Collateral if it shall determine not to
do so, regardless of the fact that notice of sale of such Collateral shall have
been given. The Trustee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Trustee until the sale price is paid by the purchaser or purchasers thereof, but
the Trustee shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
public sale made pursuant to this Section 16, any Noteholder may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay or appraisal on the part of the Grantor (all said rights being also hereby
waived and released to the extent permitted by law), the Collateral or any part
thereof offered for sale and may make payment on account thereof by using any
claim then due and payable to such Noteholder from the Grantor as a credit
against the purchase price, and such Noteholder may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to the Grantor therefor. For purposes hereof, a written agreement
to purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Trustee shall be free to carry out such sale pursuant to such
agreement, and the Grantor shall not be entitled to the return of the Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Trustee shall have entered into such an agreement all Events of Default shall
have been remedied and the Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Trustee may proceed
by a suit or suits at law or in equity to foreclose the lien on the Security
Interest and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court- appointed receiver.
17. Application of Proceeds. The Trustee shall apply the proceeds of any
collection or sale of the Collateral as set forth in the Trust Agreement. The
Trustee shall have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Agreement. Upon any sale of
the Collateral by the Trustee (including, without limitation, pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Trustee or of the officer making the sale shall be a sufficient discharge to
the purchaser or purchasers of the Collateral so sold and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Trustee or such officer or be answerable in any
way for the misapplication thereof.
18. Place of Business. (a) The Grantor agrees not to establish, or
permit to be established, any location for the Collateral outside the State of
New York unless all filings under the Uniform Commercial Code or otherwise which
are required by the Revolving Credit
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<PAGE> 11
Agreement to be made with respect to the Collateral have been made and the
Trustee has a valid, legal and perfected first priority security interest in the
Collateral.
(b) The Grantor agrees, at such reasonable time or times as the
Trustee may request, promptly to prepare and deliver to the Trustee a duly
certified schedule or schedules in form satisfactory to the Trustee, showing the
identity, amount and location of any and all material Collateral.
(c) The Grantor confirms that its chief executive office is
located at 680 Fifth Avenue, 24th Floor, New York, New York 10019. The Grantor
agrees not to change, or permit to be changed, the location of its chief
executive office without giving 30 days' prior written notice to Trustee.
19. Security Interest Absolute. All rights of the Trustee hereunder, the
Security Interest, and all obligations of the Grantor hereunder, shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Revolving Credit Agreement, any agreement with respect to
any of the Obligations or any other agreement or instrument relating to any of
the foregoing, (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Revolving Credit Agreement or
any other agreement or instrument, (c) any exchange, release or non-perfection
of any other Collateral, or any release or amendment or waiver of or consent to
or departure from any guaranty, for all or any of the Obligations, or (d) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Grantor in respect of the Obligations or in respect of this
Agreement.
20. No Waiver. No failure on the part of the Trustee to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Trustee preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law. The
Trustee and the holders of the Notes shall not be deemed to have waived any
rights hereunder or under any other agreement or instrument unless such waiver
shall be in writing and signed by such parties.
21. Binding Agreement; Assignments. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns; provided,
however, that, except as otherwise permitted under the Revolving Credit
Agreement, the Grantor may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Trustee.
22. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
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<PAGE> 12
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
23. Notices. All communications and notices hereunder shalt be in
writing and given as provided in Section 20 of the Trust Agreement.
24. Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.
25. Section Headings. Section headings used herein are for convenience
only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
26. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
27. Modification and Termination. (a) In any case where any amendment,
modification, cancellation or termination of any of the Security Documents
requires the agreement of the Trustee, or in any case where any consent, waiver
or approval under any of the Security Documents requires the consent of the
Trustee, the Trustee shall agree to such amendment, modification, cancellation
or termination, or give such consent, waiver or approval, with (but only with)
the prior written consent of a Requisite Percentage of All Holders.
(b) This Agreement and the Security Interest shall terminate when
all the Obligations have been fully paid and when the Noteholders have no
further commitment to lend under the Revolving Credit Agreement, at which time
the Trustee shall execute and deliver to the Grantor all Uniform Commercial Code
termination statements and similar documents which the Grantor shall reasonably
request to evidence such termination.
28. Concerning the Trustee. The Trustee hereby enters into and accepts
this Agreement upon the terms set forth in Section 11 of the Trust Agreement
with the same effect and if those terms were repeated at length herein and made
applicable to the Trustee in respect of any action taken or omitted to be taken
by the Trustee hereunder.
[The rest of this page is intentionally left blank.]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement as of the day and year first above written.
PLD TELEKOM INC.
By /s/ E. Clive Anderson
-----------------------------
Title: Senior Vice President
THE BANK OF NEW YORK,
as Trustee
By /s/ Ming J. Shiang
-----------------------------
Title: Assistant Vice President
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<PAGE> 1
EXHIBIT 4.31
- --------------------------------------------------------------------------------
PLD TELEKOM INC.
and
THE BANK OF NEW YORK,
as Trustee
------------------------
PLEDGE AGREEMENT
------------------------
Dated as of November 26, 1997
------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Revolving Credit Agreement, Series A Notes and Trust Agreement..................... 1
2. Security Interest.................................................................. 2
3. Pledge of Shares................................................................... 2
4. Voting, etc. While No Default...................................................... 3
5. Dividends and Other Distributions.................................................. 3
6. Remedies in Case of Event of Default............................................... 3
7. Attorney-in-Fact, etc.............................................................. 3
8. Further Assurances, etc............................................................ 4
9. Termination........................................................................ 4
10. Notices............................................................................ 4
11. Miscellaneous...................................................................... 5
</TABLE>
Schedule A - Schedule of Pledged Shares
i
<PAGE> 3
PLEDGE AGREEMENT dated as of November 26, 1997, entered into
between PLD TELEKOM INC., a Delaware corporation (the "Pledgor")
and THE BANK OF NEW YORK, a New York banking corporation, as
trustee under the Trust Agreement referred to below (the
"Pledgee")
1. REVOLVING CREDIT AGREEMENT, SERIES A NOTES AND TRUST
AGREEMENT. This Agreement is made pursuant to (a) the Revolving Credit Note and
Warrant Agreement, dated as of the date hereof (the "Revolving Credit
Agreement"), between the Pledgor and The Travelers Insurance Company and The
Travelers Indemnity Company (collectively, the "Lenders"), providing, among
other things, for (i) the commitment of the Lenders to make Series A Revolving
Credit Loans from time to time to the Pledgor in an aggregate principal amount
not exceeding $12,400,000 (the "Series A Revolving Credit Loans") and (ii) the
issuance and delivery by the Pledgor to the Lenders of its 12% Series A
Revolving Credit Notes due December 31, 1998 in the aggregate principal amount
of $12,400,000 to evidence the obligation of the Pledgor to repay Series A
Revolving Credit Loans from time to time outstanding in accordance therewith
(such notes, including all notes issued in substitution or exchange therefor
pursuant to the Revolving Credit Agreement, being referred to herein as the
"Series A Notes"; and the Lenders and all other holders from time to time of the
Series A Notes being herein sometimes referred to collectively as the "Series A
Noteholders" and individually as a "Series A Noteholder") and (b) the Trust
Agreement, dated as of the date hereof (the "Trust Agreement"), between the
Pledgor and the Pledgee, pursuant to which the Pledgee has agreed to hold
certain collateral, including the Collateral (as defined in Section 2 hereof)
for the benefit of, among others, the Series A Noteholders. The Notes, the
Revolving Credit Agreement, the Trust Agreement, this Agreement and the other
Security Documents (as defined in Section 3 of the Trust Agreement) and all
other related agreements and documents issued or delivered under or pursuant to
the Revolving Credit Agreement or this Agreement, in each case as the same may
be amended or otherwise modified and in effect from time to time, are herein
sometimes referred to collectively as the "Revolving Credit Documents"; and
terms used and not otherwise defined herein shall have the respective meanings
when used herein as are attributed thereto in the Revolving Credit Agreement.
The obligation of the Lenders to make Series A Revolving Credit Loans
under the Revolving Credit Agreement is conditioned, among other things, on the
execution and delivery by the Pledgor of (a) this Agreement and (b) the Share
Mortgage referred to below to secure (i) the due and punctual payment by the
Pledgor of the principal of and interest on and Additional Amounts (if any) and
Commitment Fees (if any) owing with respect to the Series A Notes, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
repayment or otherwise, (ii) the due and punctual payment of all other
indebtedness and all other monetary obligations (including, without limitation,
indemnities and expenses) of the Pledgor to the holders of Series A Notes under
and in accordance with the Revolving Credit Agreement, the Trust Agreement and
the Security Documents, and (iii) the due and punctual performance of all other
obligations to the holders of Series A Notes under the Revolving Credit
Agreement, the Series A
<PAGE> 4
Notes, the Trust Agreement, this Agreement and such Security Documents (all of
the foregoing obligations being herein collectively called the "Obligations").
Because the Collateral (as defined below) which is the subject hereof is
located in Ireland, pursuant to Section 16(c) of the Trust Agreement, the
Pledgor has requested that the Pledgee appoint a foreign collateral agent in
respect of the Collateral and has agreed to enter into a collateral pledge
agreement with such foreign collateral agent pursuant to which the Pledgor shall
purport to grant to such foreign collateral agent a Lien or security interest in
the Collateral for the equal and ratable benefit of the holders of the Series A
Notes. Accordingly, the Company, the Pledgee and Anglo Irish Bank Corporation
plc, as collateral agent for the Pledgee (in such capacity, the "Collateral
Agent"), have executed and delivered an Agency Agreement, dated as of the date
hereof, and the Pledgor and the Collateral Agent are, contemporaneously with the
execution and delivery of this Agreement, entering into the Agreement
Accompanying Legal Mortgage of Shares, dated as of the date hereof and in the
form of Exhibit A hereto (the "Share Mortgage"), which purports to create a Lien
or security interest in the same Collateral which is the subject hereof.
2. SECURITY INTEREST. As used herein, the term "Shares" shall
mean all of the issued and outstanding shares of capital stock of Technocom
Limited, a company registered in Ireland with company number 183622
("Technocom"), at any time owned by the Pledgor. All Shares at any time pledged
or required to be pledged hereunder and under the Share Mortgage are herein
called the "Pledged Shares" and the Pledged Shares, together with all other
securities and property at any time pledged hereunder and under the Share
Mortgage or in which the Pledgee is granted a security interest hereunder
(whether or not specifically described herein) and under the Share Mortgage, and
all income therefrom and proceeds thereof, are herein sometimes referred to
collectively as the "Collateral".
3. PLEDGE OF SHARES. (a) The Pledgor hereby pledges to the
Pledgee, with full power to vote (subject only to Clause 8 of the Share
Mortgage), the Shares owned by the Pledgor on the date hereof and described in
Schedule A attached hereto (certificates therefor, accompanied by stock powers
duly executed in blank by the Pledgor, having been delivered to the Collateral
Agent concurrently with the execution and delivery of the Share Mortgage for
prompt transmittal by the Collateral Agent to the Pledgee), and hereby assigns,
transfers, sets over and delivers to the Pledgee, and grants to the Pledgee a
security interest in, all of the Pledgor's right, title and interest in and to
such Shares (and in and to such certificates), together with all income and
profits therefrom, all cash, shares, warrants, rights, options, other securities
or other property representing a dividend thereon or a distribution or return of
capital thereon or in respect thereof, or payable or distributable in respect
thereof by way of a stock split, spin-off, split-up, revision, reclassification,
combination of shares, other corporate rearrangement or other like change in
respect thereof, or by reason of any consolidation, merger, exchange of stock,
conveyance of assets or other corporate rearrangement, or otherwise distributed
or distributable thereon or in respect thereof or in exchange therefor by any
Person, all other income therefrom and proceeds thereof and all rights and
privileges pertaining thereto, to be held by the Pledgee upon the terms
2
<PAGE> 5
and conditions set forth in this Agreement, the Share Mortgageand the Trust
Agreement. The pledge and grant contained in this Section 2 is to be confirmed
by the pledge and grant contained in the Share Mortgage, which pledge and grant
is hereby incorporated herein.
(b) If the Pledgor shall acquire, by stock dividend or other
means as set forth in Clause 7.1 of the Share Mortgage, any additional Shares at
any time or from time to time on or after the date hereof, the Pledgor will
forthwith deliver to the Collateral Agent for prompt transmittal to the Pledgee
certificates therefor, accompanied by stock powers duly executed in blank by the
Pledgor, and will promptly thereafter deliver to the Pledgee and each Series A
Noteholder a written notice describing such Shares and certifying that the same
have been duly pledged with the Pledgee hereunder.
4. VOTING, ETC. WHILE NO DEFAULT. The terms and provisions of the
Share Mortgage regarding the voting rights of the Pledgor with respect to the
Pledged Shares are hereby confirmed and incorporated herein by reference,
mutatis mutandis; provided, however, that as long as no Event of Default has
occurred and is continuing, the Trustee agrees to direct the Collateral Agent as
to the exercise of voting and/or consensual rights as instructed by the Pledgor.
5. DIVIDENDS AND OTHER DISTRIBUTIONS. The terms and provisions of
the Share Mortgage regarding dividends and other distributions in respect of the
Pledged Shares are hereby confirmed and incorporated herein by reference,
mutatis mutandis; provided, however, that as long as no Event of Default has
occurred and is continuing, the Trustee agrees to direct the Collateral Agent to
pay cash dividends to the Pledgor.
6. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Collateral Agent shall be
entitled to exercise all of the rights, powers and remedies (whether vested in
it by the Share Mortgage, by law, in equity, by statute or otherwise) for
protection and enforcement of its rights in respect of the Collateral. The
rights and remedies for enforcement of the security created by the Share
Mortgage are hereby confirmed and incorporated herein by reference, mutatis
mutandis.
7. ATTORNEY-IN-FACT, ETC. Without limiting any rights or powers
granted by this Agreement to the Pledgee or granted in the Share Mortgage to the
Collateral Agent while no Event of Default has occurred and is continuing, the
Pledgee is hereby appointed the attorney-in-fact of the Pledgor, effective upon
the occurrence and during the continuance of any Event of Default, for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instruments that the Pledgee may reasonably deem necessary or
appropriate to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. So long as the
Pledgee shall be entitled under this Agreement to make collections in respect of
the Collateral, the Pledgee shall have the right and power to receive, endorse
and collect all checks made payable to or to the order of the Grantor
representing any dividend,
3
<PAGE> 6
payment or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same.
8. FURTHER ASSURANCES, ETC. The Pledgor, at its expense, will
duly execute, acknowledge and deliver all such instruments and take all such
action as the Pledgee or the Required Percentage of Series A Noteholders (as
defined in the Trust Agreement) may reasonably request in order further to
effectuate the purposes of this Agreement and to carry out the terms hereof
including, without limitation, but subject to Section 4, delivering to the
Pledgee irrevocable proxies in respect of the Pledged Stock in form satisfactory
to the Pledgee. The Pledgor, at its expense, will at all times cause this
Agreement (or a proper notice or statement in respect hereof) to be duly
recorded, published and filed and re-recorded, republished and refiled in such
manner and in such places, if any, and will pay or cause to be paid all such
recording, filing and other taxes, fees and charges, if any, and will comply
with all such statutes and regulations, if any, as may be required by law in
order to establish, perfect, preserve and protect the rights and security
interests of the Pledgee hereunder. The Pledgor hereby authorizes the Pledgee to
file financing statements and amendments thereto relative to all or any part of
the Collateral without the signature of the Pledgor where permitted by law.
9. TERMINATION. Upon the indefeasible payment (or repayment) in
full of the principal of, the premium, if any, and interest on and Additional
Amounts (if any) and Commitment Fees (if any) owing with respect to all the
Series A Notes in accordance with the terms of the Revolving Credit Agreement
and the Series A Notes and the payment and performance of all other Obligations
in accordance with the terms of the Revolving Credit Documents, this Agreement
shall terminate and the Pledgee, at the request and expense of the Pledgor, will
execute and deliver to the Pledgor a proper instrument or instruments
acknowledging the satisfaction and termination of this Agreement, and will duly
assign, transfer and deliver to the Pledgor and take such other action
reasonably requested to vest in the Pledgor title to (without recourse to, and
without representation or warranty of any kind by, the Pledgee or any Series A
Noteholder other than, in the case of the Pledgee, as to the absence of liens
created by it on the Collateral being so delivered) such of the Collateral as
has not yet theretofore been sold or otherwise applied or released pursuant to
this Agreement.
10. NOTICES. (a) All notices and other communications hereunder
shall be in writing (including telex, telecopier or similar writing) and shall
be effective (i) if given by telecopier, when transmitted and the appropriate
confirmation received, (ii) if given by certified mail, three Business Days
after being deposited in the mail, (iii) if given by first class mail, postage
prepaid, when received, (iv) if given by telex, upon receipt of the party
transmitting the telex of such party's callback code at the end of such telex
and (v) if given by other means, when received or personally delivered,
addressed as set forth in Section 10(b).
(b) The notices shall be addressed as follows:
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<PAGE> 7
(i) if to the Pledgor, at 680 Fifth Avenue, 24th Floor, New
York, New York 10019, Attention: President (with a copy to Morgan,
Lewis & Bockius LLP, at 101 Park Avenue, New York, New York 10178,
Attention: H. Franklin Bloomer, Jr.), or at such other address as
the Company shall have furnished in writing to the Pledgee and each
holder of any Series A Note at the time outstanding, or
(ii) if to the Pledgee, at 101 Barclay Street, New York,
New York 10286, Attention: Corporate Trust Department, or at such
other address as the Pledgee shall have furnished in writing to the
Company and each holder of any Series A Note at the time
outstanding, or
(iii) if to a Lender, at the address of such Lender specified
for notices to it in Schedule I to the Revolving Credit Agreement,
or at such other address as such Lender shall have furnished in
writing to the Company and the Pledgee, or
(iv) if to any other Series A Noteholder, at the address of such
Series A Noteholder as it appears on the Note Register maintained by
the Company pursuant to the Revolving Credit Agreement or at such
other address as such Series A Noteholder shall designate by notice
to the Pledgee and the Pledgor.
Any requirement of the Uniform Commercial Code (as in effect in any applicable
jurisdiction) for the giving of reasonable notice shall be met if such notice is
given as provided in this Section 10 at least ten days before the time of the
sale, disposition or other event giving rise to the required notice.
11. MISCELLANEOUS. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the party
against which enforcement of such waiver, alteration or amendment is sought
(which execution, in the case of the Pledgee, shall have been accomplished in
compliance with Section 10 of the Trust Agreement). This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the Pledgor and
the Pledgee and their respective successors and assigns, including in particular
any successor to the Pledgee at the time acting as the Pledgee under the Trust
Agreement; provided, however, that the Pledgor shall not assign or transfer its
rights hereunder without the prior written consent of the Pledgee. The Pledgee
hereby enters into and accepts this Agreement upon the terms and conditions set
forth in Section 13 of the Trust Agreement with the same force and effect as if
those terms and conditions were repeated at length herein and made applicable to
the Pledgee in respect of any action taken by the Pledgee hereunder. The table
of contents and subdivision headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms hereof.
Unless otherwise specified, any reference in this Agreement to a particular
section or other subdivision, or a particular schedule, shall be considered a
reference to that section or other subdivision of, or to that schedule to, this
Agreement. This Agreement may be executed in any number of counterparts, each of
which shall be an original and all of which, taken together, shall constitute
one and the same instrument, and any of the parties hereto may execute
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<PAGE> 8
this Agreement by signing any such counterpart. If any provision hereof is
invalid and unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Pledgee and the Series A Noteholders in order to carry out the intentions of the
parties hereto as nearly as may be possible, and the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdictions.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN SAID STATE.
[The rest of this page is intentionally left blank.]
6
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their duly authorized respective officers as of
the date first above written.
PLD TELEKOM INC.
By /s/ E. Clive Anderson
--------------------------------------
Title: Senior Vice President
THE BANK OF NEW YORK,
as Pledgee
By /s/ Ming J. Shiang
--------------------------------------
Title: Assistant Vice President
7
<PAGE> 10
SCHEDULE A
TO
PLEDGE AGREEMENT
SCHEDULE OF PLEDGED SHARES
<TABLE>
<CAPTION>
=====================================================================================================
NAME OF ISSUER DESCRIPTION OF SHARES NUMBER OF SHARES PLEDGED
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Technocom Limited Ordinary shares, 28 shares represented by
par value IR pound sterling 1 each Certificate No. ORD 15
=====================================================================================================
</TABLE>
1
<PAGE> 1
EXHIBIT 10.1
PLD TELEKOM INC.
EQUITY COMPENSATION PLAN
(including amendments adopted by the Board of Directors
effective as of June 6, 1997)
The purpose of the PLD Telekom Inc. Equity Compensation Plan (the
"Plan") is to provide (i) employees of PLD Telekom Inc. (the "Company") and
designated key employees of its subsidiaries, (ii) certain consultants and
advisors who perform services for the Company or its subsidiaries, and (iii)
non-employee members of the Board of Directors of the Company (the "Board"),
with the opportunity to receive grants of incentive stock options, nonqualified
stock options, stock appreciation rights, restricted stock and performance
units, to the extent and upon the terms hereinafter set forth. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefiting the Company's shareholders,
and will align the economic interests of the participants with those of the
shareholders.
The Plan amends and supersedes in its entirety the PLD Telekom Inc.
Stock Option Plan (the "Prior Plan"). No further grants shall be made under the
Prior Plan following the adoption of this Plan and grantees under the Prior
Plan shall have the option of continuing to have their existing grants covered
by the terms of the Prior Plan or (by so electing in writing) having their
grants covered by the terms of the Plan.
I. Administration
A. Committee. The Plan shall be administered and interpreted by
a committee appointed by the Board (the "Committee"). The Committee shall
consist of two or more persons appointed by the Board, all of whom shall be
"outside directors" as defined under section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code") and related Treasury regulations and may
be "non-employee directors" as defined under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Grants made to
Non-Employee Directors (as hereinafter defined in Section 4(a) below) shall be
made in accordance with Section 6 below.
B. Committee Authority. Except as provided in Section 6, the
Committee shall have the sole authority to (i) determine the individuals to
whom grants shall be made under the Plan, (ii) determine the type, size and
terms of the grants to be made to each such individual, (iii) determine the
time when the grants will be made and the duration of any applicable exercise
or restriction period, including the criteria for exercisability and the
acceleration of exercisability and (iv) deal with any other matters arising
under the Plan.
C. Committee Determination. The Committee shall have full power
and authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding
on all persons having any interest in the Plan or in any awards granted
hereunder. All powers of the Committee shall be executed in its sole
discretion, in the best interest of the Company, not as a
<PAGE> 2
fiduciary, and in keeping with the objectives of the Plan and need not be
uniform as to similarly situated individuals.
II. Grants.
Awards under the Plan may consist of grants of incentive stock options
as described in Section 5 ("Incentive Stock Options"), nonqualified stock
options as described in Section 5 and Section 6 ("Nonqualified Stock Options")
(Incentive Stock Options and Nonqualified Stock Options are collectively
referred to as "Options"), restricted stock as described in Section 7
(Restricted Stock"), stock appreciation rights as described in Section 8
("SARs"), and performance units as described in Section 9 ("Performance Units")
(hereinafter collectively referred to as "Grants"). All Grants shall be
subject to the terms and conditions set forth herein and to such other terms
and conditions consistent with this Plan as the Committee deems appropriate and
as are specified in writing by the Committee to the individual in a grant
instrument (the "Grant Instrument") or an amendment to the Grant Instrument.
The Committee shall approve the form and provisions of each Grant Instrument.
Grants under a particular Section of the Plan need not be uniform as among the
grantees.
III. Shares Subject to the Plan
A. Shares Authorized. Subject to the adjustment specified below,
(i) the maximum aggregate number of shares of the Company's Common Stock
(hereinafter, "Company Stock") that may be reserved for issuance or issued
under this Plan (after taking into account Company Stock underlying SARs or
which may be issued in respect of any Performance Units) shall not at any time
exceed fifteen percent (15%) of the total issued and outstanding shares of
Company Stock (provided, however, that, if the number of shares of Company
Stock outstanding is reduced, this shall not affect the number of shares
subject to then outstanding Grants"), (ii) the maximum aggregate number of
shares of Company Stock that may be subject to the Grant of Incentive Stock
Options under the Plan shall be 1,000,000, and (iii) the maximum aggregate
number of shares of Company Stock that shall be subject to the Grant of Options
under this Plan to any individual during any calendar year shall be 1,500,000
shares. Unless such reduction shall occur as a result of the operation of any
of the adjustments specified below, no reduction in the total number of issued
and outstanding shares of Common Stock shall have the effect of reducing the
number of shares of Common Stock which are then issued or reserved for issuance
under this Plan. The shares issued or reserved for issuance may be authorized
but unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market for purposes of
the Plan. If and to the extent Options or SARs granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered without
having been exercised or if any shares of Restricted Stock or Performance Units
are forfeited, the shares subject to such Grants shall again be available for
purposes of the Plan.
B. Adjustments. If there is any change in the number or kind of
shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any
2
<PAGE> 3
year, the number of shares covered by outstanding Grants, the kind of shares
issued under the Plan, and the price per share or the applicable market value
of such Grants shall be appropriately adjusted by the Committee to reflect any
increase or decrease in the number of, or change in the kind or value of,
issued shares of Company Stock to preclude, to the extent practicable, the
enlargement or dilution of rights and benefits under such Grants; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. If any questions shall at any time arise with respect to any
adjustment, such questions shall be conclusively determined by the Company's
auditors or, if they decline to so act, any other member of so-called "Big Six"
accounting firms that the Company may designate and who shall have access to
all appropriate records, and such determination shall be binding upon the
Company and the affected Grantee(s).
IV. Eligibility for Participation
A. Eligible Persons. All employees of the Company and designated
key employees of its subsidiaries (collectively, "Employees"), including
Employees who are officers or members of the Board, shall be eligible to
participate in the Plan. Members of the Board who are not Employees
("Non-Employee Directors") shall be eligible to receive Grants only under
Section 6 of the Plan. Consultants and advisors who perform services for the
Company or any of its subsidiaries ("Key Advisors") shall be eligible to
participate in the Plan only if the Key Advisors render services which are bona
fide and substantial and such services are not in connection with the offer or
sale of securities in a capital-raising transaction.
B. Selection of Grantees. The Committee shall select the
Employees and Key Advisors to receive Grants and shall determine the numbers of
shares of Company Stock subject to a particular Grant in such manner as the
Committee determines. Employees, Key Advisors and Non-Employee Directors who
receive Grants under this Plan shall hereinafter be referred to as "Grantees".
(c) Records. The Company shall maintain records of each Grant
made under the Plan, including a copy of the Grant Instrument and any other
details of the Grant not set forth therein. Upon request therefore from any
Grantee and at such other times as the Company shall determine, the Company
shall furnish each Grantee with a statement setting forth the details of his or
her Grants (which may be a copy of the Grant Instrument). Such statement shall
be deemed to have been accepted by the affected Grantee unless written notice
to the contrary is given to the Company within thirty (30) days after such
statement is given to such Grantee.
V. Granting of Options
A. Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each Grant of Options to
Employees and Key Advisors.
B. Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that
are intended to qualify as "incentive stock options" within the meaning of
section 422 of the Code or Nonqualified Stock Options that are not intended so
to qualify or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees, Nonqualified Stock
Options may be granted to Employees and Key Advisors and, pursuant to Section 6
of the Plan, to Non-Employee Directors.
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<PAGE> 4
(ii) The purchase price (the "Exercise Price") of Company
Stock subject to an Option shall be determined by the Committee and may be
equal to, greater than, or less than the Fair Market Value (as defined below)
of a share of Company Stock on the date the Option is granted; provided,
however, that (x) the Exercise Price of an Incentive Stock Option shall be
equal to, or greater than, the Fair Market Value of a share of Company Stock on
the date the Incentive Stock Option is granted and (y) an Incentive Stock
Option may not be granted to an Employee who, at the time of grant, owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the Company, unless (A) the
Exercise Price per share is not less than 110% of the Fair Market Value of
Company Stock on the date of grant and (B) the term of such Incentive Stock
Option is not more than five years.
(iii) So long as the Company Stock is publicly is publicly
traded, then the Fair Market Value per share shall be determined as follows:
(x) if the principal trading market for the Company Stock is a national
securities exchange or the Nasdaq national market, the last reported sale price
thereof on the relevant date or (if there were no trades on that date) the
latest preceding date upon which a sale was reported, or (y) if the Company
Stock is not principally traded on such exchange or market, the mean between
the last reported "bid" and "asked" prices of Company Stock on the relevant
date, as reported on Nasdaq or, if not so reported, as reported by the National
Daily Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock
ceases to be publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
C. Options Term. The Committee shall determine the term of each
Option. The term of any Option shall not exceed then years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who,
at the time of grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or any parent or
subsidiary of the Company, may not have a term that exceeds five years from the
date of grant.
D. Exercisability of Options. Options shall become exercisable
in accordance with such terms and conditions, consistent with the Plan, as may
be determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument. The Committee may accelerate the
exercisability of any or all outstanding Options at any time for any reason.
E. Termination of Employment, Disability or Death.
1. Except as provided below, an Option may only be
exercised while the Grantee is employed by the Company as an Employee, Key
Advisor or member of the Board. In the event that a Grantee ceases to be
employed by the Company for any reason other than a "disability", death, or
"termination for cause", any Option other than an Incentive Stock Option which
is otherwise exercisable by the Grantee shall terminate unless exercised within
one (1) year after the date on which the Grantee ceases to be employed by the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term, and any Incentive Stock Option shall terminate unless exercised by the
earlier of three (3) months after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be
specified by the Committee) but in any event no later than the date of
expiration of the Option term. Unless the
4
<PAGE> 5
terms of the Grant specify otherwise, any of the Grantee's Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by the Company shall terminate as of such date.
2. In the event the Grantee ceases to be employed by the
Company on account of a "termination for cause" by the Company, any Option held
by the Grantee shall terminate as of the date the Grantee ceases to be employed
by the Company, or upon such other date as may be determined by the Committee.
3. In the event the Grantee ceases to be employed by the
Company because the Grantee is "disabled", any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one (1) year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Unless the
terms of the Grant specify otherwise, any of the Grantee's Options which are
not otherwise exercisable as of the date on which the Grantee ceases to be
employed by the Company by reason of disability shall terminate as of the date
of cessation of employment.
4. If the Grantee dies while employed by the Company or
within a period of time following such Grantee's termination of employment
during which the Option continues to be exercisable by the Grantee pursuant to
this Section 5(e), such Option to the extent that it is otherwise exercisable
by the Grantee shall terminate unless exercised within two (2) years after the
Grantee's date of death, but in any event no later than the date of expiration
of the Option term. Unless the terms of the Grant specify otherwise, any of
the Grantee's Options that are not otherwise exercisable as of the date on
which the Grantee dies shall terminate as of the date of death.
5. For purposes of this Section 5(e) and Sections 6, 7,
8 and 9:
(A) the term "Company" shall mean the Company and its
subsidiary corporations.
(B) the term "employed by the Company" shall mean
employment or service as an Employee, Key Advisor or member of the
Board (so that, for purposes of exercising Options and SARs and
satisfying conditions with respect to Restricted Stock and Performance
Units, a Grantee shall not be considered to have terminated employment
or service until the Grantee ceases to be an Employee, Key Advisor and
member of the Board), unless the Committee determines otherwise.
(C) the term "disability" shall mean a Grantee's becoming
disabled within the meaning of section 22(e)(3) of the Code.
(D) the term "termination for cause" shall mean termination
of a Grantee's employment or other relationship with the Company in
connection with which the Committee has made a finding that the
Grantee has (i) materially breached his or her employment or service
contract with the Company, (ii) failed (after due warning) to comply
with announced Company policies, (iii) failed (after due warning) to
perform his or her duties in a diligent and competent manner, (iv)
engaged in fraud, embezzlement, theft or proven dishonesty in the
course of his or her employment or service, or (v) engaged in other
acts of disloyalty to the Company, including without limitation
disclosing trade secrets or confidential information of the Company
to persons not entitled to receive such information. In the event a
Grantee's employment is terminated for cause, in addition to the
immediate termination of all Grants, the Grantee shall automatically
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forfeit all shares underlying any exercised portion of an Option for
which the Company has not yet delivered the share certificates, upon
refund by the Company of the Exercise Price paid by the Grantee for
such shares.
F. Exercise of Options. A Grantee may exercise an Option that
has become exercisable, in whole or in part, by delivering a notice of exercise
to the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y)
with the approval of the Committee, by delivering shares of Company Stock owned
by the Grantee (including Company Stock acquired in connection with the
exercise of an Option, subject to such restrictions as the Committee deems
appropriate) and having a Fair Market Value on the date of exercise equal to
the Exercise Price or (z) by such other method as the Committee may approve,
including payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board. Shares of Company Stock used to
exercise an Option shall have been held by the Grantee for the requisite period
of time to avoid adverse accounting consequences to the Company with respect to
the Option. The Grantee shall pay the Exercise Price and the amount of any
withholding tax due (pursuant to Section 11) at the time of exercise. As of
the date the Company receives such payment, the Grantee (or any person claiming
through him, as the case may be) shall be entitled to be entered on the share
register of the Company as the holder of the number of shares of Company Stock
in respect of which the Option was exercised, and as promptly as possible
thereafter shall be delivered a certificate representing that number of shares.
G. Limits on Incentive Stock Options. Each Incentive Stock
Option shall provide that, if the aggregate Fair Market Value of the stock on
the date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year, under the
Plan or any other stock option plan of the Company or a parent or subsidiary,
exceeds $100,000, then the option, as to the excess, shall be treated as a
Nonqualified Stock Option. An Incentive Stock Option shall not be granted to
any person who is not an Employee of the Company or a subsidiary (within the
meaning of section 424(f) of the Code).
VI. Formula Option Grants to Non-Employee Directors
A Non-Employee Director shall be entitled to receive Nonqualified
Stock Options in accordance with this Section 6.
A. Initial Grant. Subject to the approval of the Board, each
Non-Employee Director who first becomes a member of the Board after the
effective date of this Plan as amended and restate, (as specified in Section
20) shall receive a grant of a Nonqualified Stock Option to purchase 10,000
shares of Company Stock on the date as of which he or she first becomes a
member of the Board.
B. Annual Grants. Subject to the approval of the Board, on each
date that the Company holds its annual meeting of shareholders, commencing with
the 1998 annual meeting, each Non-Employee Director who is in office
immediately after the annual election of directors (other than a director who
is first elected to the Board at such meeting) shall receive a grant of a
Nonqualified Stock Option to purchase 5,000 shares of Company Stock. The date
of grant of each such annual Grant shall be the date of the annual meeting of
the Company's shareholders.
C. Exercise Price. The Exercise Price per share of Company Stock
subject to an Option granted under this Section 6 shall be equal to the Fair
Market Value of a share of Company Stock on the date of grant.
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D. Option Term and Exercisability. The term of each Option
granted pursuant to this Section 6 shall be ten years or such shorter period as
shall be determined by the Board. Options granted under this Section 6 shall
be fully exercisable as of the date of grant.
E. Payment-of-Exercise Price.
1. The Exercise Price for an Option granted under this
Section 6 shall be paid in cash. The Grantee shall pay the Exercise Price and
the amount of any withholding tax due at the time of exercise. Shares of
Company Stock shall not be issued upon exercise of an Option until the Exercise
Price is fully paid and any required withholding is made.
2. A Grantee may exercise an Option granted under this
Section 6 by delivering to the Committee a notice of exercise as described
below, with accompanying payment of the Exercise Price in accordance with
Section 6(e)(i) above. The notice of exercise may instruct the Company to
deliver shares of Company Stock due upon the exercise of the Option to any
registered broker or dealer designated by the Committee in lieu of delivery to
the Grantee, and shall designate the account into which the shares are to be
deposited. With the approval of the Board, a Grantee may exercise an Option by
delivering shares of Company Stock owned by the Grantee as permitted under
Section 5(f).
F. Applicability of Plan Provisions. Except as otherwise
provided in this Section 6, Nonqualified Stock Options granted to Non-Employee
Directors shall be subject to the provisions of this Plan applicable to
Nonqualified Stock Options granted to other persons, provided however that (i)
if an event described in Section 3(b) occurs, appropriate adjustments, as
described in that Section, shall be made automatically, (ii) with respect to
the provisions of Section 5(e), the Committee shall not have discretion to
modify the terms of such provisions in the Grant Instrument, and (iii) in the
event of a Change of Control (as defined in Section 13), the provisions of
Section 14 shall apply to Options granted pursuant to this Section 6, except
that the Committee shall not have discretion under Section 14(c) to modify the
automatic provisions of that Section.
G. Administration. Except to the extent provided herein, the
provisions of this Section 6 are intended to operate automatically and not
require administration. To the extent that any administrative determinations
are required, any determinations with respect to the provisions of this Section
6 shall be made by the Board. If at any time there are not sufficient shares
available under the Plan to permit a Grant as described in this Section 6, the
Grant shall be reduced pro rata (to zero, if necessary) so as not to exceed the
number of shares then available under the Plan.
VII. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to an
Employee or Key Advisor under a Grant of Restricted Stock, upon such terms as
the Committee deems appropriate. The following provisions are applicable to
Restricted Stock:
A. General Requirements. Shares of Company Stock issued or
transferred pursuant to Restricted Stock Grants may be issued or transferred
for consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the
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D. Option Term and Exercisability. The term of each Option
granted pursuant to this Section 6 shall be ten years or such shorter period as
shall be determined by the Board. Options granted under this Section 6 shall
be fully exercisable as of the date of grant.
E. Payment-of Exercise Price.
1. The Exercise Price for an Option granted under this
Section 6 shall be paid in cash. The Grantee shall pay the Exercise Price and
the amount of any withholding tax due at the time of exercise. Shares of
Company Stock shall not be issued upon exercise of an Option until the Exercise
Price is fully paid and any required withholding is made.
2. A Grantee may exercise an Option granted under this
Section 6 by delivering to the Committee a notice of exercise as described
below, with accompanying payment of the Exercise Price in accordance with
Section 6(e)(i) above. The notice of exercise may instruct the Company to
deliver shares of Company Stock due upon the exercise of the Option to any
registered broker or dealer designated by the Committee in lieu of delivery to
the Grantee, and shall designate the account into which the shares are to be
deposited. With the approval of the Board, a Grantee may exercise an Option by
delivering shares of Company Stock owned by the Grantee as permitted under
Section 5(f).
F. Applicability of Plan Provisions. Except as otherwise
provided in this Section 6, Nonqualified Stock Options granted to Non-Employee
Directors shall be subject to the provisions of this Plan applicable to
Nonqualified Stock Options granted to other persons, provided however that (i)
if an event described in Section 3(b) occurs, appropriate adjustments, as
described in that Section, shall be made automatically, (ii) with respect to
the provisions of Section 5(e), the Committee shall not have discretion to
modify the terms of such provisions in the Grant Instrument, and (iii) in the
event of a Change of Control (as defined in Section 13), the provisions of
Section 14 shall apply to Options granted pursuant to this Section 6, except
that the Committee shall not have discretion under Section 14(c) to modify the
automatic provisions of that Section.
G. Administration. Except to the extent provided herein, the
provisions of this Section 6 are intended to operate automatically and not
require administration. To the extent that any administrative determinations
are required, any determinations with respect to the provisions of this Section
6 shall be made by the Board. If at any time there are not sufficient shares
available under the Plan to permit a Grant as described in this Section 6, the
Grant shall be reduced pro rata (to zero, if necessary) so as not to exceed the
number of shares then available under the Plan.
VII. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to an
Employee or Key Advisor under a Grant of Restricted Stock, upon such terms as
the Committee deems appropriate. The following provisions are applicable to
Restricted Stock:
A. General Requirements. Shares of Company Stock issued or
transferred pursuant to Restricted Stock Grants may be issued or transferred
for consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the
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Committee deems appropriate. The period of time during which the Restricted
Stock will remain subject to restrictions will be designated in the Grant
Instrument as the "Restriction Period."
B. Number of Shares. The Committee shall determine the number
of shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares.
C. Requirement of Employment. If the Grantee ceases to be
employed by the Company (as defined in Section 5(e) above) during a period
designated in the Grant Instrument as the Restriction Period, or if other
specified conditions are not met, the Restricted Stock Grant shall terminate as
to all shares covered by the Grant as to which the restrictions have not
lapsed, and those shares of Company Stock must be immediately returned to the
Company. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
D. Restrictions on Transfer and Legend on Stock Certificate.
During the Restriction Period, a Grantee may not sell, assign, transfer, pledge
or otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 12(a). Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when all restrictions
on such shares have lapsed. The Committee may determine that the Company will
not issue certificates for shares of Restricted Stock until all restrictions on
such shares have lapsed, or that the Company will retain possession of
certificates for such shares have lapsed, or that the Company will retain
possession of certificates for shares of Restricted Stock until all
restrictions on such shares have lapsed.
E. Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restricted Period, the Grantee shall have the
right to vote shares of Restricted Stock and to receive any dividends or other
distributions paid on such shares, subject to any restriction deemed
appropriate by the Committee.
F. Lapse of Restrictions. All restrictions imposed on Restricted
Stock shall lapse upon the expiration of the applicable Restriction Period and
the satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Restricted Stock Grants, that the restrictions
shall lapse without regard to any Restriction Period.
VII. Stock Appreciation Rights
A. General Requirements. The Committee may grant stock
appreciation rights ("SARs") to an Employee or Key Advisor separately or in
tandem with any Option (for all or a portion of the applicable Option). Tandem
SARs may be granted either at the time the Option is granted or at any time
thereafter while the Option remains outstanding; provided, however, that, in
the case of an Incentive Stock Option, SARs may be granted only at the time of
the Grant of the Incentive Stock Option. The Committee shall establish the
base amount of the SAR at the time the SAR is granted. Unless the Committee
determines otherwise, the base amount of each SAR shall be equal to the per
share Exercise Price of the related Option or, if there is no related Option,
the Fair Market Value of a share of Company Stock as of the date of Grant of
the SAR.
B. Tandem SARs. In the case of tandem SARs, the number of SARs
granted to a Grantee that shall be exercisable during a specified period shall
not exceed the number of shares of Company
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Stock that the Grantee may purchase upon the exercise of the related Option
during such period. Upon the exercise of an Option, the SARs relating to the
Company Stock covered by such Option shall terminate. Upon the exercise of
SARs, the related Option shall terminate to the extent of an equal number of
shares of Company Stock.
C. Exercisability. An SAR shall be exercisable during the period
specified by the Committee in the Grant Instrument and shall be subject to such
vesting and other restriction as may be specified in the Grant Instrument. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. SARs may only be exercised while the Grantee is
employed by the Company or during the applicable period after termination of
employment as described in Section 5(e). A tandem SAR shall be exercisable
only during the period when the Option to which it is related is also
exercisable.
D. Value of SARs. When a Grantee exercises SARs, the Grantee
shall receive in settlement of such SARs an amount equal to the value of the
stock appreciation for the number of SARs exercised, payable in cash. The
stock appreciation for an SAR is the amount by which the Fair Market Value of
the underlying Company Stock on the date of exercise of the SAR exceeds the
base amount of the SAR as described in Section (8)(a).
IX. Performance Units.
A. General Requirements. The Committee may grant performance
units ("Performance Units") to an Employee or Key Advisor. Each Performance
Unit shall represent the right of the Grantee to receive an amount based on the
value of the Performance Unit, if performance goals established by the
Committee are met. A Performance Unit shall be based on the Fair Market Value
of a share of Company Stock or on such other measurement base as the Committee
deems appropriate. The Committee shall determine the number of Performance
Units to be granted and the requirements applicable to such Units.
B. Performance Period and Performance Goals. When Performance
Units are granted, the Committee shall establish the performance period during
which performance shall be measured (the "Performance Period"), performance
goals applicable to the Units ("Performance Goals") and such other conditions
of the Grant as the Committee deems appropriate. Performance Goals may relate
to the financial performance of the Company or its operating units, the
performance of Company Stock, individual performance, or such other criteria as
the Committee deems appropriate.
C. Payment with respect to Performance Units. At the end of each
Performance Period, the Committee shall determine to what extent the
Performance Goals and other conditions of the Performance Units are met and the
amount, if any, to be paid with respect to the Performance Units. Payments
with respect to Performance Units shall be made in cash.
D. Requirement of Employment. If the Grantee ceases to be
employed by the Company (as defined in Section 5(e) above) during a Performance
Period, or if other conditions established by the Committee are not met, the
Grantee's Performance Units shall be forfeited. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems
appropriate.
10. Qualified Performance-Based Compensation
(a) Designation as Qualified Performance-Based Compensation. The
Committee may determine that Performance Units or Restricted Stock granted to an
Employee shall be considered
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"qualified performance-based compensation" under Section 162(m) of the Code.
The provisions of this Section 10 shall apply to Grants of Performance Units
and Restricted Stock that are to be considered "qualified performance-based
compensation" under Section 162(m) of the Code.
(b) Performance Goals. When Performance Units or Restricted Stock
that are to be considered "qualified performance-based compensation" are
granted, the Committee shall establish in writing (i) the objective performance
goals that must be met in order for restrictions on the Restricted Stock to
lapse or amounts to be paid under the Performance Units, (ii) the Performance
Period during which the performance goals must be met, (iii) the threshold,
target and maximum amounts that may be paid if the performance goals are met,
and (iv) any other conditions, including without limitation provisions relating
to death, disability, other termination of employment or Change of Control,
that the Committee deems appropriate and consistent with the Plan and Section
162(m) of the Code. The performance goals may relate to the Employee's
business unit or the performance of the Company and its subsidiaries as a
whole, or any combination of the foregoing. The Committee shall use
objectively determinable performance goals based on one or more of the
following criteria: stock price, earnings per share, net earnings, operating
earnings, return on assets, shareholder return, return on equity, growth in
assets, unit volume, sales, market share, or strategic business criteria
consisting of one or more objectives based on meeting specified revenue goals,
market penetration goals, geographic business expansion goals, cost targets or
goals relating to acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the Performance
Period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the Performance Period and (ii) the date on which 25% of the
Performance Period has been completed, or such other date as may be required or
permitted under applicable regulations under Section 162(m) of the Code. The
performance goals shall satisfy the requirements for "qualified
performance-based compensation", including the requirement that the achievement
of the goals be substantially uncertain at the time they are established and
that the goals be established in such a way that a third party with knowledge
of the relevant facts could determine whether and to what extent the
performance goals have been met. The Committee shall not have discretion to
increase the amount of compensation that is payable upon achievement of the
designated performance goals.
(d) Maximum Payment. If Restricted Stock, or Performance Units
measured with respect to the Fair Market Value of Company Stock, are granted,
not more than 750,000 shares of Company Stock may be granted to an Employee
under the Performance Units or Restricted Stock for any Performance Period. If
Performance Units are measured with respect to other criteria, the maximum
amount that may be paid to an Employee with respect to a Performance Period is
$5,000,000.
(e) Announcement of Grants. The Committee shall certify and
announce the results for each Performance Period to all Grantees immediately
following the announcement of the Company's financial results for the
Performance Period. If and to the extent that the Committee does not certify
that the performance goals have been met, the grants of Restricted Stock or
Performance Units for the Performance Period shall be forfeited.
11. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be
subject to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to
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deduct from all Grants paid in cash, or from other wages paid to the Grantee,
any federal, state or local taxes required by law to be withheld with respect
to such Grants. In the case of Options and other Grants paid in Company
Stock, the Company may require the Grantee or other person receiving such
shares to pay to the Company the amount of any such taxes that the Company is
required to withhold with respect to such Grants, or the Company may deduct
from other wages paid by the Company the amount of any withholding taxes due
with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a
Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option or Restricted Stock paid in Company Stock by having
shares withheld up to an amount that does not exceed the Grantee's applicable
marginal tax rate for federal (including FICA), state and local tax
liabilities. The election must be in a form and manner prescribed by the
Committee and shall be subject to the prior approval of the Committee. With
respect to Options granted to Non-Employee Directors, the approval of the Board
shall be required with respect to any election made under this Section 11(b).
12. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only
the Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Committee pursuant to a domestic
relations order (as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder). When a Grantee dies, the personal representative or other person
entitled to succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights. A Successor Grantee must furnish proof satisfactory to
the Company of his or her right to receive the Grant under the Grantee's will
or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, a Grantee may transfer Nonqualified Stock Options to his or her
spouse or children or grandchildren (natural or adopted), or one or more trusts
established for their benefit; provided that: (i) the maximum number of Options
transferred shall not exceed 50% of the total number of Options granted to him
at any time under the Plan; (ii) each transfer is an absolute transfer of
title, such that the transferor ceases to have any further dominion or control
over the Options transferred or to any Company Stock acquired as a result of
the exercise of any Options, waives all rights with respect to such Options or
Company Stock and retains no interest, whether by way of pledge or otherwise,
in such Options or Company Stock; (iii) written notice of any transfer is given
by the transferor and the transferee within thirty (30) days of the transfer,
together with the address to which notices and other communications from the
Company to the transferee relating to the Plan shall be sent; (iv) the
transferee acknowledges that the Options transferred may not be further
transferred or alienated by such transferee either by pledge, assignment or in
any other manner whatsoever and, during his or her lifetime, shall be vested
only in him or her, but shall thereafter enure to the benefit and be binding
upon the legal personal representatives of such transferee, provided that such
transferee shall be permitted to transfer any Company Stock acquired upon the
exercise of any Option so long as such transfer is otherwise permitted; (v)
the transferee undertakes to comply with and be bound by the terms of the Plan
as in effect on the date of the transfer, and any amendments thereto, and any
restatements thereof or successor plan thereto; (vi) the transferee
acknowledges that the Company has no obligation to register any Options
transferred or any Company Stock acquired as a result of the exercise of any
Options, or to take any other action to facilitate the transfer of such Options
or Company Stock, including complying with any conditions to permit transfers
pursuant to Rule 144 promulgated by the Securities and
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Exchange Commission; and (vii) the Grantee receives no consideration for the
transfer of any such Option.
13. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if:
(a) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) becomes a "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the voting power of the then
outstanding securities of the Company;
(b) the shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i)
the merger or consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation,
shares entitling such shareholders to 50% or more of all votes to which all
shareholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), or where the members of the Board,
immediately prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the surviving corporation, (ii) the sale or other disposition of all or
substantially all of the assets of the Company (other than to a wholly owned
subsidiary), or (iii) a liquidation or dissolution of the Company.
(c) after the date this Plan is approved by the shareholders of
the Company, directors are elected such that a majority of the members of the
Board shall have been members of the Board for less than two years, unless the
election or nomination for election of each new director who was not a director
at the beginning of such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.
14. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control, (i) the
Company shall provide each Grantee with outstanding Grants written notice of
such Change of Control, (ii) all outstanding Options and SARs shall
automatically accelerate and become fully exercisable, (iii) the restrictions
and conditions on all outstanding Restricted Stock shall immediately lapse, and
(iv) Grantees holding Performance Units shall receive a payment in settlement
of such Performance Units, in an amount determined by the Committee, based on
the Grantee's target payment for the Performance Period and the portion of the
Performance Period that precedes the Change of Control.
(b) Assumption of Grants. Upon a Change of Control where the
Company is not the surviving corporation (or survives only as a subsidiary of
another corporation), all outstanding Options and SARs that are not exercised
shall be assumed by, or replaced with comparable options or rights by, the
surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
Section 14(e) below, in the event of a Change of Control, the Committee may
require that Grantees surrender their outstanding Options and SARs in exchange
for a payment by the Company in cash in an amount equal to the amount by which
the then Fair Market Value of the shares of Company Stock subject to the
Grantee's unexercised
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Options and SARs exceeds the Exercise Price of the Options or the base amount
of the SARs, as applicable. Such surrender shall take place as of the date of
the Change of Control or such other date as the Committee may specify.
(d) Limitations. Notwithstanding anything in the Plan to the
contrary, in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Section 14 (c) above) that would make the Change of
Control ineligible for pooling of interests accounting treatment or that would
make the Change of Control ineligible for desired tax treatment if, in the
absence of such right, the Change of Control would qualify for such treatment
and the Company intends to use such treatment with respect to the Change of
Control.
(e) Committee. The Committee making the determinations under this
Section 14 following a Change of Control must be comprised of the same members
as those on the Committee immediately before the Change of Control. If the
Committee members do not meet this requirement, then, at the discretion of any
affected Grantee, the Committee shall be required to take the actions set forth
in Section 14(c) above, without regard to the provisions of Section 14(d)
above.
15. Limitations on Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection with any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition
of such shares of Company Stock as the Committee shall deem necessary or
advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such shares may be
legended to reflect any such restrictions. Certificates representing shares of
Company Stock issued or transferred under the Plan will be subject to such
stop-transfer orders and other restrictions as may be required by applicable
laws, regulations and interpretations, including any requirement that a legend
be placed thereon.
16. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any
time; provided, however, that the Board shall not amend the Plan without
shareholder approval if such approval is required by section 162(m) or section
422 of the Code, or if such amendment relates to Section 3(a) hereof.
(b) Termination of Plan. The Plan shall terminate on March 31,
2007, unless the Plan is terminated earlier by the Board or is extended by the
Board with the approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A
termination or amendment of the Plan that occurs after a Grant is made shall
not materially impair the rights of a Grantee unless the Grantee consents or
unless the Committee acts under Section 23(b). The termination of the Plan
shall not impair the power and authority of the Committee with respect to an
outstanding Grant. Whether or not the Plan has terminated, an outstanding
Grant may be terminated or amended under Section 23(b) or may be amended by
agreement of the Company and the Grantee consistent with the Plan.
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(d) Governing Document. The Plan shall be the controlling
document. No other statements, representations, explanatory materials or
examples, oral or written, may amend the Plan in any manner. The Plan shall be
binding upon and enforceable against the Company and its successors and
assigns.
17. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
18. Rights of Participants
Nothing in this Plan shall entitle any Employee, Non-Employee
Director, Key Advisor or other person to any claim or right to be granted a
Grant under this Plan, except as provided in Section 6. Neither this Plan nor
any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Company or any other
employment rights.
20. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Committee shall determine whether cash,
other awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
21. Headings
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
21. Effective Date of the Amended and Restated Plan. The Plan, as
amended and restated herein, shall become effective on the date that it is
approved by the Company's shareholders.
22. Notices
(a) Any payment, notice, statement, certificate or other
instrument required or permitted to be given to a Grantee or any person
claiming or deriving any rights through such Grantee shall be given by (i)
delivering it personally to such Grantee or the person claiming or deriving
rights through such Grantee, as the case may be, or (ii) mailing it postage
paid (provided that the postal service is then in operation) or delivering it
to the address which is maintained for the Grantee in the Company's records.
(b) Any payment, notice, statement, certificate or other
instrument required or permitted to be given to the Company shall be given by
mailing it postage paid (provided that the postal service is then in operation)
or delivering it to the Company at the following address:
PLD Telekom Inc.
1270 Avenue of the Americas
Suite 2218
New York, New York 10020
Attention: Benefits Administrator
14
<PAGE> 16
(c) Any payment, notice, statement, certificate or other
instrument referred to in Section 22(a) or Section 22(b), if delivered, shall
be deemed to have been given or delivered on the date on which it was delivered
or, if mailed (provided that the postal service is then in operation), shall be
deemed to have been given or delivered on the second business day following the
date on which it was mailed.
23. Miscellaneous
(a) Grants in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Grants to
employees thereof who become Employees of the Company, or for the other proper
corporate purposes, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another corporation
who becomes an Employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation involving the
Company or any of its subsidiaries in substitution for a stock option or
restricted stock grant made by such corporation. The terms and conditions of
the substitute grants may vary from the terms and conditions required by the
Plan and from those of the substituted stock incentives. The Committee shall
prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and
SARs and the obligations of the Company to issue or transfer shares of Company
Stock under Grants shall be subject to all applicable laws and to approvals by
any governmental or regulatory agency as may be required. With respect to
persons subject to section 16 of the Exchange Act, it is the intent of the
Company that the Plan and all transactions under the Plan comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act.
The Committee may revoke any Grant if it is contrary to law or modify a Grant
to bring it into compliance with any valid and mandatory government regulation.
The Committee may also adopt rules regarding the withholding of taxes on
payments to Grantees. The Committee may, in its sole discretion, agree to
limit its authority under this Section.
(c) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall
exclusively be governed by and determined in accordance with the law of the
State of New York.
15
<PAGE> 1
EXHIBIT 10.2
DATED AS OF AUGUST 1, 1997
AMENDED AND RESTATED
SERVICE AGREEMENT
PLD TELEKOM INC. (1)
JAMES R. S. HATT ESQ. (2)
<PAGE> 2
DATED AS OF August 1, 1997
PARTIES
(1) PLD TELEKOM INC., a corporation incorporated under the laws of the State
of Delaware, whose registered office is at c/o CT Corporation System,
Inc., 1209 Orange Street, Wilmington, Delaware ("the Company"); and
(2) JAMES R.S. HATT ESQ. of 130 East 65th Street, New York, New York ("the
Executive").
RECITALS
The Company and the Executive were parties to a Service Agreement dated as
of January 1, 1995 (the "First Agreement") and the Executive and PLD Management
Services Limited, an English company and a wholly-owned subsidiary of the
Company ("PLDMS"), were parties to a second Service Agreement also dated as of
January 1, 1995 (the "Second Agreement").
As a result of the Company's continuance to Delaware and the Executive's
transfer to the United States, the Second Agreement is being concluded by
agreement of the parties thereto effective as of the close of business on July
31, 1997 and the Company and the Executive are entering into this Amended and
Restated Service Agreement with a view to amending and restating the terms of
the First Agreement in their entirety, inter alia, to incorporate the salary and
other compensation and benefits previously being provided under the Second
Agreement, and to make various other changes to reflect the fact that the
Company is now a Delaware corporation.
INTERPRETATION
(3) In this Agreement, unless the context otherwise requires, the following
expressions have the meanings set out below:
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the Appointment the employment of the Executive pursuant to this
Agreement;
the Board the board of directors of the Company for the
time being (including any committee of the
Board);
the Commencement Date January 1, 1995;
Compensation
Committee a committee of the Board which determines the
annual sum (inclusive of any bonuses and other
remuneration) payable to the Executive and other
officers and of which a majority consists of
non-executive directors;
Confidential
Information all information which may be imparted in
confidence or be of a confidential nature relating
to the business or prospective business, plans or
internal affairs of the Company or any Group
Company and in particular all Know-how, Marketing
Information, trade secrets, unpublished
information relating to the Company's or any Group
Company's intellectual property and any other
confidential commercial, financial or technical
information relating to the business of the
Company or any Group Company or to any customer or
supplier, officer or employee of the Company or
Group Company or to any member or person
interested in the share capital of the Company or
any Group Company;
Documents documents, disks, memory, notebooks, tapes or any
other medium, whether or not eye-readable, on
which information may from time to time be
recorded;
the Effective Date August 1, 1997
<PAGE> 4
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Group Company any company which directly or indirectly
controls, is controlled by, or is under common
control with the Company, and references to the
"Group Companies" shall be construed
accordingly, provided that for greater certainty
"Group Company" shall include BECET
International and Teleport-TP;
Know-how information comprised in formulae,
specifications, designs, drawings, component
lists, software (or pre-cursor documents),
databases, manuals, instructions and catalogues
held in whatever form relating to the creation,
production or supply of any products or services
by the Company or any Group Company, or by or to
any of the suppliers, customers, partners or
joint ventures of such company;
Marketing Information information relating to the marketing or sales of
any products or services of the Company or any
Group Company, including lists of customers' and
suppliers' names, addresses and contacts, sales
targets and statistics, market share and pricing
statistics, marketing surveys, research and
reports;
Permitted Interest an interest in any class of shares or other
securities of any company which are traded on a
recognized investment exchange which amount to not
more than five percent of such class of issued
shares or securities and an interest in any units
of any authorized unit trust;
Termination Amount an amount equal to the amount arrived at by
multiplying by 2.0 (or such other amount as may be
agreed by the Board and the Executive) the
aggregate total of the amount payable to the
Executive under Clause 4.1 hereof at the rate in
force at
<PAGE> 5
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the date that the calculation falls to be made and
deducting therefrom any taxation or other
withholdings required by law; and
Termination Date the date of termination or expiration of the
Appointment howsoever occurring.
(4) The expressions "subsidiary" and "affiliate" have the meanings given to
them by the Delaware General Corporation Law or, in the absence thereof,
under Delaware law.
(5) References to Clauses and Parties are respectively to Clauses of and the
Parties to this Agreement.
(6) References to any enactment are to be construed as referring also to any
enactment or re-enactment thereof (whether before or after the date
hereof), and to any previous enactment which such enactment has replaced
(with or without amendment provided that the amendment does not change the
law as at the date hereof) and to any regulation or order made thereunder.
OPERATIVE PROVISIONS
1. JOB TITLE
The Company shall employ the Executive and the Executive shall serve the
Company as Chief Executive Officer.
2. PERIOD OF ENGAGEMENT
2.1 The Appointment commenced on the Commencement Date and the
amendments made hereby shall be effective as of the Effective Date.
Unless terminated earlier under Clause 9, the Appointment will
continue until terminated by either Party giving to the other not
less than six (6) months' notice in writing.
<PAGE> 6
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2.2 The Company (and any relevant Group Company) shall not be obliged to
provide work to the Executive at any time after notice of
termination of the Appointment shall have been given by either Party
and the Company may, in its discretion, take any one or more of the
following steps in respect of all or part of an unexpired period of
notice:
(a) require the Executive to comply with such conditions as it may
specify in relation to attending at, or remaining away from,
the place(s) of business of the Company and the Group
Companies; or
(b) withdraw any powers vested in, or duties assigned to, the
Executive.
2.3 Should the Company give notice of termination of the Appointment
other than pursuant to Clause 9.1 (and whether or not in accordance
with Clause 2.1), the Company shall forthwith upon giving such
notice pay to the Executive the Termination Amount. The Executive
shall have no obligation to mitigate in respect of such payment.
2.4 The Company reserves the right at its sole discretion, should the
Executive give notice of termination of the Appointment in
accordance with Clause 2.1, to terminate the Appointment with
immediate effect upon payment to the Executive of a lump sum by way
of six months' gross salary (defined as the amount payable under
Sections 4.1 and 4.2) in lieu of notice, which sum shall be deemed
to be accepted for all purposes by the Executive as satisfaction in
full of all claims in relation to the Appointment or otherwise.
3. DUTIES
3.1 During the term of the Appointment, the Executive shall have the
following duties and obligations:
(a) to serve the Company as Chief Executive Officer; in addition
to such other duties and responsibilities as may lawfully be
delegated to him by the Board
<PAGE> 7
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from time to time during the Appointment, he shall have
overall responsibility for the management and operation of
the businesses of all operating companies within the
Group, the maintenance of relationships with shareholders
and investment advisors and capital markets, the
overseeing of the treasury functions of the Company and
the Group Companies and the sufficiency of working capital
and ongoing commitments of the Company; and he shall
report to the Board and otherwise act in accordance with
the proper, reasonable and lawful directions given to him
from time to time by the Board;
(b) at all times to use all reasonable endeavors to promote the
interests and maintain the goodwill of the Company and any
other Group Company and not knowingly to do anything which is
materially prejudicial or detrimental to the Company or any
Group Company;
(c) to faithfully and diligently perform his duties and carry out
such powers and functions as may from time to time be vested
in him by or under the authority of the Board;
(d) to devote such time and attention as is necessary and the full
benefit of his knowledge, expertise and skills in the proper
performance of his duties (unless on holiday as permitted by
this Agreement or prevented by ill health or accident);
(e) to give (in writing if so requested) to the Board, or to such
person(s) as it may direct, such information and explanations
regarding the affairs of the Company or any other Group
Company or matters relating to the Appointment as the Board
may require; and
(f) to comply with any applicable code relating to dealings in
securities of the Company and with all lawful directions from
time to time given to the Executive by or under the authority
of the Board and, save as inconsistent
<PAGE> 8
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with the express terms of this Agreement, all applicable
rules and regulations from time to time laid down by the
Company concerning its employees.
3.2 Subject to the provisions of Clause 3.1, the Executive shall have
such powers and do such acts in the ordinary course of business
carried on by the Company as the Board may from time to time
delegate to the Executive.
3.3 The Executive acknowledges that the executive offices of the Company
are in New York City, New York, U.S.A. and that the Executive shall
attend and work at any of the Company's locations (whether within or
outside the United States, the Commonwealth of Independent States or
the United Kingdom) in the manner and on the occasions reasonably
required from time to time by the Board.
3.4 The Board may require the Executive to perform services for any
Group Company wherever situated and without further fees or
remuneration and any duties that he may have under this Agreement
will be deemed to extend to such Group Company.
3.5 The hours of work of the Executive are not fixed but are the usual
working hours of the Company and such additional hours as may be
necessary to enable him properly to discharge his duties.
3.6 The Executive shall:
(a) at the request and expense of the Company, submit annually to
a medical examination by a medical practitioner nominated by
the Company as part of a health screening program and for
insurance purposes; and
<PAGE> 9
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(b) authorize such medical practitioner to disclose to or
discuss with the Company's medical advisor any matters
arising from such examination; and the Company's medical
advisor may notify the Board of any serious matter if, in
his opinion, it might materially and adversely affect the
health of the Executive or the proper discharge of his
duties, provided that the Company shall not disclose to any
third party any matters arising from such examination
without the previous consent in writing of the Executive.
4. PAY AND EXPENSES
4.1 The Company shall pay to the Executive for the proper performance of
his duties under this Agreement for the balance of 1997 and
thereafter a salary at an annual rate of $390,000 (or such higher
rate as the Company may from time to time notify in writing to the
Executive).
4.2 Until the Termination Date, the Company shall pay to the Executive
(or as the Executive may otherwise direct) 10% of the Termination
Amount annually, in lieu of all pension, social and other benefits
whatsoever. Such amount shall be paid at the direction of the
Executive either in monthly installments or as an annual lump sum.
4.3 The salary payable to the Executive will:
(a) accrue from day to day and be payable by equal monthly
installments in arrears by not later than the last working day
of each month,
(b) notwithstanding anything to the contrary contained in the
Articles of Incorporation of the Company or equivalent
charter document of any other Group Company, be inclusive of
any other fees or remuneration of any description which the
Executive might be entitled to receive from the Company or
any Group Company or any other company or association in
which the Executive holds office as a nominee or
representative of the
<PAGE> 10
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Company or any Group Company (and the Executive shall, at
the discretion of the Board, either waive his right to any
such remuneration or account to the Company for the same
forthwith upon receipt);
(c) be paid by credit transfer to the account nominated by the
Executive from time to time; and
(d) be capable of set-off by the Company from time to time against
any liability of the Executive to the Company.
All payments to the Executive shall be subject to applicable source
deduction and withholding taxes.
4.4 From time to time (but not less frequently than April 30 of each
year of this Agreement) all compensation to the Executive (including
without limitation salary, bonuses and equity compensation
arrangements) shall be reviewed by the Compensation Committee.
Increases or awards are not automatic but will be based on such
factors as the Compensation Committee may consider relevant,
provided it is acknowledged that increases or awards are solely in
the discretion of such Committee and are not required under this
Agreement. Increases or awards shall to the extent applicable be
retroactive to the preceding January 1.
4.5 The Executive hereby authorizes the Company to deduct from any
remuneration accrued and due to him under the terms of this
Agreement (whether or not actually paid during the Appointment) or
from any pay in lieu of notice:
(a) any overpayment (whether of salary or expenses or otherwise)
or payment made to the Executive by mistake or through any
misrepresentation; and
(b) any debt owed by the Executive to the Company or any Group
Company.
<PAGE> 11
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Provided that in the case of a debt owed to any Group Company the
Company shall obtain for the benefit of the Executive a release of
such debt from such Group Company.
4.6 The Company shall repay to the Executive or (at the option of the
Executive) pay all reasonable travelling, hotel, accommodation and
other expenses properly incurred by the Executive in or about the
performance of the Executive's duties, subject to the Executive
having delivered to the Company such form(s) and vouchers or other
evidence of actual payment of such expenses as the Company may from
time to time require.
5. HOLIDAY
5.1 In addition to the usual public and bank holidays, the Executive
shall be entitled to 25 days' paid holiday in each holiday year (and
pro rata for part of each holiday year worked) to be taken at such
time or times as shall be agreed by the Board.
5.2 The holiday year runs from 1 January each year to the following 31
December. No holiday entitlement may be carried forward from one
holiday year to the next and no money will be paid in lieu of any
such untaken holiday entitlement.
5.3 Upon termination of the Appointment, other than pursuant to Clause
9.1, the Executive's entitlement to holiday will be calculated on
the basis of two days for each calendar month of service completed
during the holiday year in which termination occurs and the Company
shall make a payment in lieu of untaken holiday entitlement.
6. CONFIDENTIALITY
6.1 Neither during the continuance of the Appointment, other than in the
proper course of the Executive's duties and for the benefit of the
Company, nor after the Termination Date for any reason whatsoever,
shall the Executive:
<PAGE> 12
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(a) use, disclose or communicate to any person any Confidential
Information which he shall have come to know or have received
or obtained at any time (before or after the date of this
Agreement) by reason of or in connection with this
Appointment; or
(b) copy or reproduce in any form or by or on any media or device
or allow others access to or to copy or reproduce Documents
containing Confidential Information.
6.2 The Executive acknowledges that all Documents containing
Confidential Information at any time in his control or possession
are and shall at all times remain the absolute property of the
Company and the Executive undertakes, both during the Appointment
and after the Termination Date:
(a) to exercise due care and diligence to avoid any unauthorized
publication, disclosure or use of Confidential Information and
any Documents containing or referring to it;
(b) at the direction of the Board, to deliver up any Confidential
Information (including all copies of all Documents whether or
not lawfully made or obtained) or to delete Confidential
Information from any re-usable medium; and
(c) to do such things and sign such documents at the expense of
the Company as shall be reasonably necessary to give effect to
this Clause and/or to provide evidence that it has been
complied with.
6.3 The restrictions in Clause 6.1:
(a) will not restrict the Executive from disclosing (but only to
the proper recipient) any Confidential Information which the
Executive is required to disclose by law or any order of the
court or any relevant regulatory body (including any stock
exchange upon which the shares or other securities of
<PAGE> 13
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the Company are or are proposed to be traded), provided
that the Executive shall, unless obliged by law, have
given prior written notice to the Company of the
requirement and of the information to be disclosed and
allowed the Company an opportunity to comment on the
requirement before making the disclosure, and
(b) will not apply to Confidential Information which is or which
comes into the public domain otherwise than as a result of an
unauthorized disclosure by the Executive or any other person
who owes the Company an obligation of confidentiality in
relation to the information disclosed.
6.4 The Executive acknowledges that the restrictions set out in this
Clause 6 are without prejudice to any other duties of
confidentiality owed to the Company whether express or implied and
are to survive the termination of the Appointment (howsoever
arising).
7. FURTHER RESTRICTIONS
7.1 Unless agreed by the Board in advance, the Executive shall not (a)
during the Appointment carry on or be concerned, engaged or
interested directly or indirectly (whether as principal,
shareholder, partner, employee, officer, agent or otherwise) in any
trade or business other than that of the Company and shall not
engage in any other activity which the Company reasonably considers
may impair his ability to perform his duties under this Agreement;
and (b) for a period of equal to the greater of (i) twelve months
following the Termination Date and (ii) the period the Executive
receives remuneration hereunder following the Termination Date,
carry on or be concerned, engaged or interested directly or
indirectly (whether as principal, shareholder, partner, employee,
officer, agent or otherwise) in any trade or business which is in
competition with the business of the Company or any Group Company
carried on at the Termination Date in any country in which the
Company (or any entity in which the Company has a greater than 25%
economic
<PAGE> 14
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interest) operates; provided that the foregoing shall not apply to a
Permitted Interest.
7.2 The Executive shall not during the Appointment and for a period of
six months thereafter either on his own behalf or on behalf of any
person, firm or company:
(a) solicit or endeavor to entice away from the Company an actual
employee, or discourage from being employed by the Company any
person who, to the knowledge of the Executive, is an employee
or a prospective employee of the Company; or
(b) employ or procure another person to employ any such person.
7.3 The restrictions set out in this Clause 7 are without prejudice to
any other fiduciary duties owed to the Company whether express or
implied.
8. ABSENCE, ILLNESS AND INCAPACITY
8.1 If at any time the Executive is prevented by reason of ill-health,
accident or other incapacity from properly performing his duties he
shall promptly furnish to the Company, if required, evidence of such
incapacity in a form reasonably satisfactory to the Board.
8.2 The Company shall pay the Executive the amounts payable under
Clauses 4.1 and 4.2 for the first 180 days in aggregate in any
calendar year of absence due to illness or other incapacity of the
Executive, but shall not be required to pay the Executive any salary
or other remuneration for any further periods of such absence in any
calendar year, although it may at its discretion do so.
8.3 The Company shall provide long-term disability coverage which shall
provide for disability payments in an amount not less than 40% of
basic salary commencing after the Executive has been incapacitated
from properly performing his duties for a period of 180 days.
<PAGE> 15
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9. TERMINATION
9.1 The Company may at any time terminate the Appointment with immediate
effect (or any such longer period of notice as the Company shall see
fit) by giving the Executive written notice in any of the following
events:
(a) If the Executive at the time the notice is given is prevented
by reason of ill health or accident or other incapacity from
properly performing his duties and has been so prevented
(whether by the same or another reason) for at least a
continuous period of 180 days or for an aggregate period of at
least 180 days (whether or not, in either case, working days)
in the preceding twelve months:
(b) If the Executive shall have:
(i) been guilty of gross default or gross misconduct in
respect of his duties hereunder or otherwise as a
director or officer of the Company or any Group Company;
(ii) committed any material breach or non-observance or,
after having been given warning in writing, any
repeated or continued material breach or material
non-observance of any of his duties or any of his
express or implied obligations arising from the
Appointment or otherwise as a director or officer of
the Company or Group Company including refusing to
comply with any proper, reasonable and lawful
instructions given to him by the Board;
(iii) been guilty of conduct or permitted or suffered events
tending in the reasonable opinion of the Board to bring
themselves, the Company or any Group Company into
disrepute;
<PAGE> 16
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(iv) become prevented by any applicable law or regulation
from continuing as a director or officer of the Company
or performing any of his duties;
(v) committed any act of fraud or dishonesty (whether or not
connected with the Appointment) or committed any act
which, in the reasonable opinion of the Board,
materially and adversely affects his ability properly to
carry out his duties and which is likely to bring the
Company into disrepute;
(vi) become bankrupt or claimed the benefit of any Act for
the time being in force for the relief of insolvent
debtors or proposed or made any arrangement or
composition with their creditors;
(vii) been convicted of a felony or other crime involving
moral turpitude; or
(viii) become of unsound mind, as certified by a recognized
doctor of psychiatry.
9.2 Upon termination of the Appointment however arising:
(a) The Executive shall, without prejudice for any claim that
may arise out of the termination of this Appointment,
forthwith at the request of the Board resign as a director
of the Company and from all offices held by him in any Group
Company and from all other appointments or offices which he
holds as nominee or representative of the Company or any
Group Company and, if he fails so to do, the Company is
irrevocably authorized by the Executive to appoint some
person in his name and on his behalf to execute such
documents and to do such other things as are reasonably
necessary to give effect to such resignations; and
<PAGE> 17
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(b) The Executive (or, if he shall be dead, of unsound mind or
bankrupt), his personal representatives or such other
persons as shall be appointed to administer his estate and
affairs shall deliver up to the Company in accordance with
the directions of the Board all keys, security passes,
credit cards, Documents and other property belonging to or
relating to the businesses or affairs of the Company or any
Group Company, including all copies of all Documents
containing Confidential Information which may be in his
possession or under his control (or that of his personal
representatives or such other persons), and shall not retain
copies, extracts or notes of any of the same.
9.3 The Executive shall have no claim against the Company in respect of
the termination of the Appointment by reason of the merger,
consolidation, continuation, dissolution or liquidation or the sale
of all or substantially all of the assets of the Company provided
that the Executive shall have first been offered in writing a new
appointment with the successor or surviving company on terms no less
favorable to him than under this Agreement.
10. CHANGE OF CONTROL
10.1 If at any time there shall occur a "Change of Control" as that term
is defined in the Company's 1997 Equity Compensation Plan, the
Executive may at any time terminate this Agreement by giving to the
Company not less than three months notice in writing to that effect.
10.2 In the event of such termination, the Company shall pay the
Executive upon the expiration of such notice, the Termination Amount
but without any obligation to mitigate.
<PAGE> 18
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11. NOTICES
Notices by either party:
(a) must be in writing addressed:
(i) to the Company at its registered office for the time
being; and
(ii) to the Executive at the address set out in this
Agreement or such other address as may be notified to
the Company from time to time.
(b) will be effectively served:
(i) on the day of receipt, where any hand-delivered letter
or facsimile transmission is received on a business day
before or during normal working hours;
(ii) on the following business day, where any hand-delivered
letter or facsimile transmission is received either on a
business day after normal working hours or on any other
day; or
(iii) on the fifth business day following the day of posting
to an overseas address of any prepaid airmail letter.
12. INDEMNITY
12.1 The Company agrees, for the avoidance of doubt, that in addition to
the protection offered by the By-laws of the Company, insofar as it
is lawfully able, to indemnify the Executive for all proper and
reasonable costs and expenses of lawyers (including disbursements
and applicable taxes) incurred by the Executive in connection with
or in relation to any claim, action or proceedings brought by any
person arising out of any allegation against the Executive in
respect of any act
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or omission by him in the course of carrying out his duties under
this Agreement and in which the Executive is a defendant.
12.2 This indemnity will continue to apply for the period of the
Appointment and for a further period of six years after the
Executive's employment with the Company has come to an end provided
that the Executive:
(a) instructs lawyers approved in writing by the Company;
(b) acts in accordance with their advice;
(c) instructs the lawyers to provide copies of correspondence and
other documentation to the Company and authorizes them to
provide any information to the Company on request;
(d) has not been guilty of gross misconduct or any breach of
contract, or has not been the subject of any of the other
conditions or circumstances set out in Clause 9.1(b), pursuant
to which the Company is entitled summarily to terminate this
Agreement; and
(e) has not (after the expiry of the Appointment) acted in breach
of any of his continuing obligations under this Agreement or
any other agreement entered into by him with the Company.
13. GENERAL
13.1 This Agreement, which contains all the terms of the Appointment, is
in substitution for all contracts between the Company and any Group
Company and the Executive (whether written, oral or governed by a
course of dealings) dated prior to the date hereof which shall be
deemed to have terminated with effect from the Effective Date.
13.2 The waiver, express or implied, by either Party of any right under
this Agreement or any failure to perform or breach by the other
shall not constitute or be deemed a
<PAGE> 20
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waiver of any other right under this Agreement or of the same right
on another occasion.
13.3 No amendment, change or addition to the terms of this Agreement
shall be effective or binding on either Party unless reduced to
writing and executed by both Parties.
13.4 The Executive represents and warrants that, other than as notified
in writing to the Board, he is not a party to any agreement,
contract (whether of employment or otherwise) or understanding which
would in any way restrict or prohibit the Executive from undertaking
or performing any of the duties of the Appointment in accordance
with this Agreement.
13.5 The Executive undertakes not to disclose or communicate any terms of
the Appointment to any other employee of any Group Company or to any
third party (other than for the purpose of obtaining professional
advice or other than as required by applicable law, including the
securities laws and regulations of the United States).
13.6 Any provision of this Agreement which contemplates or is capable of
operation after the termination of the Appointment shall apply
notwithstanding termination of the Appointment howsoever arising.
13.7 This Agreement is governed by and is to be construed in accordance
with the laws of the State of New York and the Parties hereby submit
to the non-exclusive jurisdiction of the Courts of the State of New
York with respect to all matters relating to this Agreement.
13.8 The Executive hereby appoints CT Corporation System, 1633 Broadway,
New York, NY 10019 for service of process in connection with legal
proceedings in New York and arising under or in connection with this
Agreement.
<PAGE> 21
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IN WITNESS WHEREOF the Parties have executed this Amended and Restated
Agreement.
Attest: PLD TELEKOM INC.
s/s E. CLIVE ANDERSON By: s/s DAVID HEAVENRIDGE
- ------------------------ --------------------------------
Secretary Chairman, Compensation Committee
s/s E. CLIVE ANDERSON s/s JAMES R.S. HATT
- ------------------------ -----------------------------
Witness James R.S. Hatt
<PAGE> 1
EXHIBIT 10.3
[PLD LETTERHEAD]
Dear Mr. Davies:
This will serve to set forth the terms under which you will join PLD Telekom
Inc. (the "Company").
1. Your employment will commence on 1 June 1997.
2. Your official title will be Deputy Chief Executive Officer.
3. You shall be entitled to pursue (or, in the case of pre-existing
arrangements, continue to pursue) outside interests so long as these do not
materially interfere with the performance of your responsibilities as described
above. In this connection you have identified as outside interests to which
you are currently committed the matters described in Schedule I hereto.
4. Your salary for the balance of 1997 will be the then pro-rated portion
of an annual salary of $300,000, payable in equal monthly installments, subject
to all appropriate withholdings. Your salary will be reviewed annually, at the
same time as the other members of the senior management of the Company, any
such adjustment to be effective as of each January 1.
5. You will also be eligible for bonuses in the same manner as the other
members of senior management, to be awarded at the same time and on the basis
of such criteria as the Compensation Committee shall specify in your case
(which shall in all events be reasonably consistent, allowing for the different
roles being played, with the criteria established for the other members of
senior management).
6. You will be reimbursed promptly for all expenses incurred by you in
the performance of the business of the Company and its subsidiaries, upon
production of receipts, vouchers or other evidence of payment.
7. You shall be entitled to 25 days paid holiday in each January 1 -
December 31 period.
8. We intend to establish a benefits plan for the senior management of
the Company, to comprise medical and dental insurance for executives and
families, group life insurance, short and long term disability protection or
insurance, accident insurance, a 401K plan where the Company will match
employee contributions, and (in due course) a pension plan, in all of which you
will be eligible to participate. Until such time as
<PAGE> 2
arrangements are in place, the Company will pay in monthly instalments an
amount equal to 10% of your salary.
9. We are currently amending the Company's Stock Option Plan to inter
alia expand the range of equity-based incentive arrangements available to the
employees of the Company and you will be eligible for awards of grants
thereunder, upon all of the terms of such amended Plan. Upon the adoption of
such amended Plan, all options previously granted to you will thereupon be
governed by the terms of such Plan. Until such time, such options will be
governed by the existing terms of the Company's Stock Option Plan.
10. You may terminate this agreement at any time by giving not less than
six (6) months notice in writing. You may also terminate this agreement by
giving not less than three (3) months notice in writing upon a "change of
control" (as defined in paragraph 12 below) of the Company, in which case you
shall be entitled to receive a "termination amount" equal to 200% of the amount
of your then annual salary, without any obligation on your part to mitigate.
11. We may terminate this agreement without notice in the event of your
dishonesty, embezzlement, or wilful failure (after warning) to comply with the
terms of this agreement or any of the Company's policies for senior executives.
We may also terminate this agreement at any time by paying you the "termination
amount" referred to in paragraph 10 above (it being understood that you shall
be under no obligation to mitigate).
12. The term "change of control" shall mean, if any time:
(a) more than 51% of all outstanding voting shares of the Company
are beneficially owned by any current shareholder of the Company or in the
aggregate by any two or more shareholders, one of which is currently a
shareholder of the Company, and such two shareholders would together be
regarded as acting jointly or in concert with each other for the purposes of
Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
or
(b) more than 30% of all outstanding voting shares of the Company
are beneficially owned by any person or company or by any persons or companies
who would together be regarded as acting jointly or in concert with each other
for purposes of the provisions of Section 16 of the 1934 Act, and as a
consequence thereof of your duties as described herein in any material aspect.
13. This agreement is intended to be binding upon and enforceable against
each of us. This agreement shall come into effect upon the date on which both
parties hereto have executed this agreement.
14. This agreement shall be construed in accordance with and governed in
all respects by the laws of the State of New York. Any disputes arising under
this agreement shall be
<PAGE> 3
finally settled by arbitration conducted under the rules of the American
Arbitration Association in New York City.
If the foregoing accurately sets forth our agreement, could you kindly so
indicate by countersigning in the place indicated below.
Very truly yours,
PLD TELEKOM INC. Accepted and agreed:
s/s JAMES HATT s/s JOHN DAVIES
- ----------------------------- ----------------------------
James Hatt John Davies
Chairman and Chief Executive
<PAGE> 1
EXHIBIT 10.4
Amendment to Agreement
It is hereby agreed that Section 12 of the agreement between us
covering your employment by PLD Telekom Inc. as Deputy Chief Executive Officer
shall be amended so as to provide that the phrase "change of control" as used
therein shall, in lieu of the meaning given to that phrase in such paragraph,
have the same meaning as is given to such phrase in paragraph 13 of the PLD
Telekom Inc Equity Compensation Plan, as adopted by the shareholders of PLD
Telekom Inc. on June 12, 1997.
Executed this 30th day of July, 1997.
PLD TELEKOM INC.
By: s/s JAMES HATT s/s JOHN DAVIES
----------------------------- ----------------------------
James Hatt, President John Davies
<PAGE> 1
EXHIBIT 10.5
DATED AS OF JULY 1, 1997
AMENDED AND RESTATED
SERVICE AGREEMENT
PLD TELEKOM INC. (1)
SIMON EDWARDS (2)
<PAGE> 2
DATED AS OF July 1, 1997
PARTIES
(1) PLD TELEKOM INC., a corporation incorporated under the laws of the
State of Delaware, whose registered office is at c/o CT Corporation
System, Inc., 1209 Orange Street, Wilmington, Delaware ("the
Company"); and
(2) SIMON EDWARDS of 45 West 67th Street, New York, New York ("the
Executive").
RECITALS
The Company and the Executive were parties to a Service Agreement
dated as of October 1, 1995 (the "First Agreement") and the Executive and PLD
Management Services Limited, an English company and a wholly-owned subsidiary
of the Company ("PLDMS"), were parties to a second Service Agreement also dated
as of October 1, 1995 (the "Second Agreement").
As a result of the Company's continuance to Delaware and the
Executive's transfer to the United States, the Second Agreement is being
concluded by agreement of the parties thereto effective as of the close of
business on June 30, 1997 and the Company and the Executive are entering into
this Amended and Restated Service Agreement with a view to amending and
restating the terms of the First Agreement in their entirety, inter alia, to
incorporate the salary and other compensation and benefits previously being
provided under the Second Agreement, and to make various other changes to
reflect the fact that the Company is now a Delaware corporation.
INTERPRETATION
(3) In this Agreement, unless the context otherwise requires, the
following expressions have the meanings set out below:
<PAGE> 3
the Appointment the employment of the Executive
pursuant to this Agreement;
the Board the board of directors of the
Company for the time being
(including any committee of the
Board);
the Commencement Date October 1, 1995;
Compensation Committee a committee of the Board which
determines the annual sum (inclusive
of any bonuses and other
remuneration) payable to the
Executive and other officers and of
which a majority consists of
non-executive directors;
Confidential Information all information which may be
imparted in confidence or be of a
confidential nature relating to the
business or prospective business,
plans or internal affairs of the
Company or any Group Company and in
particular all Know-how, Marketing
Information, trade secrets,
unpublished information relating to
the Company's or any Group Company's
intellectual property and any other
confidential commercial, financial
or technical information relating to
the business of the Company or any
Group Company or to any customer or
supplier, officer or employee of the
Company or Group Company or to any
member or person interested in the
share capital of the Company or any
Group Company;
Documents documents, disks, memory, notebooks,
tapes or any other medium, whether
or not eye-readable, on which
information may from time to time be
recorded;
the Effective Date July 1, 1997
<PAGE> 4
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Group Company any company which directly or
indirectly controls, is controlled
by, or is under common control with
the Company, and references to the
"Group Companies" shall be construed
accordingly, provided that for
greater certainty "Group Company"
shall include BECET International
and Teleport-TP;
Know-how information comprised in formulae,
specifications, designs, drawings,
component lists, software (or
pre-cursor documents), databases,
manuals, instructions and catalogues
held in whatever form relating to
the creation, production or supply
of any products or services by the
Company or any Group Company, or by
or to any of the suppliers,
customers, partners or joint
ventures of such company;
Marketing Information information relating to the
marketing or sales of any products
or services of the Company or any
Group Company, including lists of
customers' and suppliers' names,
addresses and contacts, sales
targets and statistics, market share
and pricing statistics, marketing
surveys, research and reports;
Permitted Interest an interest in any class of shares
or other securities of any company
which are traded on a recognized
investment exchange which amount to
not more than five percent of such
class of issued shares or securities
and an interest in any units of any
authorized unit trust;
Termination Amount an amount equal to the amount
arrived at by multiplying by 2.0 (or
such other amount as may be agreed
by the Board and the Executive) the
aggregate total of the amount
payable to the Executive under
Clause 4.1 hereof at the rate in
force at the date that the
calculation falls to be made and
deducting
<PAGE> 5
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therefrom any taxation or other
withholdings required by law; and
Termination Date the date of termination or
expiration of the Appointment
howsoever occurring.
(4) The expressions "subsidiary" and "affiliate" have the meanings given
to them by the Delaware General Corporation Law or, in the absence
thereof, under Delaware law.
(5) References to Clauses and Parties are respectively to Clauses of and
the Parties to this Agreement.
(6) References to any enactment are to be construed as referring also to
any enactment or re-enactment thereof (whether before or after the
date hereof), and to any previous enactment which such enactment has
replaced (with or without amendment provided that the amendment does
not change the law as at the date hereof) and to any regulation or
order made thereunder.
OPERATIVE PROVISIONS
1. JOB TITLE
The Company shall employ the Executive and the Executive shall serve
the Company as Chief Financial Officer.
2. PERIOD OF ENGAGEMENT
2.1 The Appointment commenced on the Commencement Date and the
amendments made hereby shall be effective as of the Effective
Date. Unless terminated earlier under Clause 9, the
Appointment will continue until terminated by either Party
giving to the other not less than six (6) months' notice in
writing.
<PAGE> 6
-5-
2.2 The Company (and any relevant Group Company) shall not be
obliged to provide work to the Executive at any time after
notice of termination of the Appointment shall have been given
by either Party and the Company may, in its discretion, take
any one or more of the following steps in respect of all or
part of an unexpired period of notice:
(a) require the Executive to comply with such conditions
as it may specify in relation to attending at, or
remaining away from, the place(s) of business of the
Company and the Group Companies; or
(b) withdraw any powers vested in, or duties assigned to,
the Executive.
2.3 Should the Company give notice of termination of the
Appointment other than pursuant to Clause 9.1 (and whether or
not in accordance with Clause 2.1), the Company shall
forthwith upon giving such notice pay to the Executive the
Termination Amount. The Executive shall have no obligation to
mitigate in respect of such payment.
2.4 The Company reserves the right at its sole discretion, should
the Executive give notice of termination of the Appointment in
accordance with Clause 2.1, to terminate the Appointment with
immediate effect upon payment to the Executive of a lump sum
by way of six months' gross salary (defined as the amount
payable under Sections 4.1 and 4.2) in lieu of notice, which
sum shall be deemed to be accepted for all purposes by the
Executive as satisfaction in full of all claims in relation to
the Appointment or otherwise.
3. DUTIES
3.1 During the term of the Appointment, the Executive shall have
the following duties and obligations:
(a) to serve the Company as Chief Financial Officer; and
to carry out such other duties and responsibilities
as may reasonably and lawfully be
<PAGE> 7
-6-
delegated to him by the Chief Executive Officer or
the Board from time to time during the Appointment;
(b) at all times to use all reasonable endeavors to
promote the interests and maintain the goodwill of
the Company and any other Group Company and not
knowingly to do anything which is materially
prejudicial or detrimental to the Company or any
Group Company;
(c) to faithfully and diligently perform his duties and
carry out such powers and functions as may from time
to time be vested in him by or under the authority of
the Chief Executive Officer or the Board;
(d) to devote such time and attention as is necessary and
the full benefit of his knowledge, expertise and
skills in the proper performance of his duties
(unless on holiday as permitted by this Agreement or
prevented by ill health or accident);
(e) to give (in writing if so requested) to the Chief
Executive Officer, or the Board, or to such person(s)
as the Chief Executive Officer or the Board may
direct, such information and explanations regarding
the affairs of the Company or any other Group Company
or matters relating to the Appointment as the Board
may require; and
(f) to comply with any applicable code relating to
dealings in securities of the Company and with all
lawful directions from time to time given to the
Executive by or under the authority of the Chief
Executive Officer or the Board and, save as
inconsistent with the express terms of this
Agreement, all applicable rules and regulations from
time to time laid down by the Company concerning its
employees.
3.2 Subject to the provisions of Clause 3.1, the Executive shall
have such powers and do such acts in the ordinary course of
business carried on by the Company as the
<PAGE> 8
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Chief Executive Officer or the Board may from time to time
delegate to the Executive.
3.3 The Executive acknowledges that the executive offices of the
Company are in New York City, New York, U.S.A. and that the
Executive shall attend and work at any of the Company's
locations (whether within or outside the United States, the
Commonwealth of Independent States or the United Kingdom) in
the manner and on the occasions reasonably required from time
to time by the Board.
3.4 The Chief Executive Officer or the Board may require the
Executive to perform services for any Group Company wherever
situated and without further fees or remuneration and any
duties that he may have under this Agreement will be deemed to
extend to such Group Company.
3.5 The hours of work of the Executive are not fixed but are the
usual working hours of the Company and such additional hours
as may be necessary to enable him properly to discharge his
duties.
3.6 The Executive shall:
(a) at the request and expense of the Company, submit
annually to a medical examination by a medical
practitioner nominated by the Company as part of a
health screening program and for insurance purposes;
and
(b) authorize such medical practitioner to disclose to or
discuss with the Company's medical advisor any
matters arising from such examination; and the
Company's medical advisor may notify the Board of any
serious matter if, in his opinion, it might
materially and adversely affect the health of the
Executive or the proper discharge of his duties,
provided that the Company shall not disclose to any
third party any matters arising from such examination
without the previous consent in writing of the
Executive.
<PAGE> 9
-8-
4. PAY AND EXPENSES
4.1 The Company shall pay to the Executive for the proper
performance of his duties under this Agreement for the balance
of 1997 and thereafter a salary at an annual rate of $325,000
(or such higher rate as the Company may from time to time
notify in writing to the Executive).
4.2 Until the Termination Date, the Company shall pay to the
Executive (or as the Executive may otherwise direct) 20% of
the amount due under Clause 4.1 annually, in lieu of all
pension, social and other benefits whatsoever. Such amount
shall be paid at the direction of the Executive in monthly
installments.
4.3 The salary payable to the Executive will:
(a) accrue from day to day and be payable by equal
monthly installments in arrears by not later than the
last working day of each month,
(b) notwithstanding anything to the contrary contained in
the Articles of Incorporation of the Company or
equivalent charter document of any other Group
Company, be inclusive of any other fees or
remuneration of any description which the Executive
might be entitled to receive from the Company or any
Group Company or any other company or association in
which the Executive holds office as a nominee or
representative of the Company or any Group Company
(and the Executive shall, at the discretion of the
Board, either waive his right to any such
remuneration or account to the Company for the same
forthwith upon receipt);
(c) be paid by credit transfer to the account nominated
by the Executive from time to time; and
(d) be capable of set-off by the Company from time to
time against any liability of the Executive to the
Company.
All payments to the Executive shall be subject to applicable
source deduction and withholding taxes.
<PAGE> 10
-9-
4.4 From time to time (but not less frequently than April 30 of
each year of this Agreement) all compensation to the Executive
(including without limitation salary, bonuses and equity
compensation arrangements) shall be reviewed by the
Compensation Committee. Increases or awards are not automatic
but will be based on such factors as the Compensation
Committee may consider relevant, provided it is acknowledged
that increases or awards are solely in the discretion of such
Committee and are not required under this Agreement.
Increases or awards shall to the extent applicable be
retroactive to the preceding January 1.
4.5 The Executive hereby authorizes the Company to deduct from any
remuneration accrued and due to him under the terms of this
Agreement (whether or not actually paid during the
Appointment) or from any pay in lieu of notice:
(a) any overpayment (whether of salary or expenses or
otherwise) or payment made to the Executive by
mistake or through any misrepresentation; and
(b) any debt owed by the Executive to the Company or any
Group Company.
Provided that in the case of a debt owed to any Group Company
the Company shall obtain for the benefit of the Executive a
release of such debt from such Group Company.
4.6 The Company shall repay to the Executive or (at the option of
the Executive) pay all reasonable travelling, hotel,
accommodation and other expenses properly incurred by the
Executive in or about the performance of the Executive's
duties, subject to the Executive having delivered to the
Company such form(s) and vouchers or other evidence of actual
payment of such expenses as the Company may from time to time
require.
5. HOLIDAY
5.1 In addition to the usual public and bank holidays, the
Executive shall be entitled to 25 days' paid holiday in each
holiday year (and pro rata for part of each holiday year
worked) to be taken at such time or times as shall be agreed
by the Board.
<PAGE> 11
-10-
5.2 The holiday year runs from 1 January each year to the
following 31 December. No holiday entitlement may be carried
forward from one holiday year to the next and no money will be
paid in lieu of any such untaken holiday entitlement.
5.3 Upon termination of the Appointment, other than pursuant to
Clause 9.1, the Executive's entitlement to holiday will be
calculated on the basis of two days for each calendar month of
service completed during the holiday year in which termination
occurs and the Company shall make a payment in lieu of untaken
holiday entitlement.
6. CONFIDENTIALITY
6.1 Neither during the continuance of the Appointment, other than
in the proper course of the Executive's duties and for the
benefit of the Company, nor after the Termination Date for any
reason whatsoever, shall the Executive:
(a) use, disclose or communicate to any person any
Confidential Information which he shall have come to
know or have received or obtained at any time (before
or after the date of this Agreement) by reason of or
in connection with this Appointment; or
(b) copy or reproduce in any form or by or on any media
or device or allow others access to or to copy or
reproduce Documents containing Confidential
Information.
6.2 The Executive acknowledges that all Documents containing
Confidential Information at any time in his control or
possession are and shall at all times remain the absolute
property of the Company and the Executive undertakes, both
during the Appointment and after the Termination Date:
(a) to exercise due care and diligence to avoid any
unauthorized publication, disclosure or use of
Confidential Information and any Documents containing
or referring to it;
<PAGE> 12
-11-
(b) at the direction of the Board, to deliver up any
Confidential Information (including all copies of all
Documents whether or not lawfully made or obtained)
or to delete Confidential Information from any
re-usable medium; and
(c) to do such things and sign such documents at the
expense of the Company as shall be reasonably
necessary to give effect to this Clause and/or to
provide evidence that it has been complied with.
6.3 The restrictions in Clause 6.1:
(a) will not restrict the Executive from disclosing (but
only to the proper recipient) any Confidential
Information which the Executive is required to
disclose by law or any order of the court or any
relevant regulatory body (including any stock
exchange upon which the shares or other securities of
the Company are or are proposed to be traded),
provided that the Executive shall, unless obliged by
law, have given prior written notice to the Company
of the requirement and of the information to be
disclosed and allowed the Company an opportunity to
comment on the requirement before making the
disclosure, and
(b) will not apply to Confidential Information which is
or which comes into the public domain otherwise than
as a result of an unauthorized disclosure by the
Executive or any other person who owes the Company an
obligation of confidentiality in relation to the
information disclosed.
6.4 The Executive acknowledges that the restrictions set out in
this Clause 6 are without prejudice to any other duties of
confidentiality owed to the Company whether express or implied
and are to survive the termination of the Appointment
(howsoever arising).
<PAGE> 13
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7. FURTHER RESTRICTIONS
7.1 Unless agreed by the Board in advance, the Executive shall not
(a) during the Appointment carry on or be concerned, engaged
or interested directly or indirectly (whether as principal,
shareholder, partner, employee, officer, agent or otherwise)
in any trade or business other than that of the Company and
shall not engage in any other activity which the Company
reasonably considers may impair his ability to perform his
duties under this Agreement; and (b) for a period of equal to
the greater of (i) twelve months following the Termination
Date and (ii) the period the Executive receives remuneration
hereunder following the Termination Date, carry on or be
concerned, engaged or interested directly or indirectly
(whether as principal, shareholder, partner, employee,
officer, agent or otherwise) in any trade or business which is
in competition with the business of the Company or any Group
Company carried on at the Termination Date in any country in
which the Company (or any entity in which the Company has a
greater than 25 % economic interest) operates; provided that
the foregoing shall not apply to a Permitted Interest.
7.2 The Executive shall not during the Appointment and for a
period of six months thereafter either on his own behalf or on
behalf of any person, firm or company:
(a) solicit or endeavor to entice away from the Company
an actual employee, or discourage from being employed
by the Company any person who, to the knowledge of
the Executive, is an employee or a prospective
employee of the Company; or
(b) employ or procure another person to employ any such
person.
7.3 The restrictions set out in this Clause 7 are without
prejudice to any other fiduciary duties owed to the Company
whether express or implied.
<PAGE> 14
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8. ABSENCE, ILLNESS AND INCAPACITY
8.1 If at any time the Executive is prevented by reason of
ill-health, accident or other incapacity from properly
performing his duties he shall promptly furnish to the
Company, if required, evidence of such incapacity in a form
reasonably satisfactory to the Board.
8.2 The Company shall pay the Executive the amounts payable under
Clauses 4.1 and 4.2 for the first 180 days in aggregate in any
calendar year of absence due to illness or other incapacity of
the Executive, but shall not be required to pay the Executive
any salary or other remuneration for any further periods of
such absence in any calendar year, although it may at its
discretion do so.
8.3 The Company shall provide long-term disability coverage which
shall provide for disability payments in an amount not less
than 40% of basic salary commencing after the Executive has
been incapacitated from properly performing his duties for a
period of 180 days.
9. TERMINATION
9.1 The Company may at any time terminate the Appointment with
immediate effect (or any such longer period of notice as the
Company shall see fit) by giving the Executive written notice
in any of the following events:
(a) If the Executive at the time the notice is given is
prevented by reason of ill health or accident or
other incapacity from properly performing his duties
and has been so prevented (whether by the same or
another reason) for at least a continuous period of
180 days or for an aggregate period of at least 180
days (whether or not, in either case, working days)
in the preceding twelve months:
(b) If the Executive shall have:
<PAGE> 15
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(i) been guilty of gross default or gross
misconduct in respect of his duties hereunder
or otherwise as a director or officer of the
Company or any Group Company;
(ii) committed any material breach or
non-observance or, after having been given
warning in writing, any repeated or continued
material breach or material non-observance of
any of his duties or any of his express or
implied obligations arising from the
Appointment or otherwise as a director or
officer of the Company or Group Company
including refusing to comply with any proper,
reasonable and lawful instructions given to
him by the Board;
(iii) been guilty of conduct or permitted or
suffered events tending in the reasonable
opinion of the Board to bring themselves, the
Company or any Group Company into disrepute;
(iv) become prevented by any applicable law or
regulation from continuing as a director or
officer of the Company or performing any of
his duties;
(v) committed any act of fraud or dishonesty
(whether or not connected with the
Appointment) or committed any act which, in
the reasonable opinion of the Board,
materially and adversely affects his ability
properly to carry out his duties and which is
likely to bring the Company into disrepute;
(vi) become bankrupt or claimed the benefit of any
Act for the time being in force for the
relief of insolvent debtors or proposed or
made any arrangement or composition with
their creditors;
(vii) been convicted of a felony or other crime
involving moral turpitude; or
<PAGE> 16
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(viii) become of unsound mind, as certified by a
recognized doctor of psychiatry.
9.2 Upon termination of the Appointment however arising:
(a) The Executive shall, without prejudice for any claim
that may arise out of the termination of this
Appointment, forthwith at the request of the Board
resign as a director of the Company and from all
offices held by him in any Group Company and from all
other appointments or offices which he holds as
nominee or representative of the Company or any Group
Company and, if he fails so to do, the Company is
irrevocably authorized by the Executive to appoint
some person in his name and on his behalf to execute
such documents and to do such other things as are
reasonably necessary to give effect to such
resignations; and
(b) The Executive (or, if he shall be dead, of unsound
mind or bankrupt), his personal representatives or
such other persons as shall be appointed to
administer his estate and affairs shall deliver up to
the Company in accordance with the directions of the
Board all keys, security passes, credit cards,
Documents and other property belonging to or relating
to the businesses or affairs of the Company or any
Group Company, including all copies of all Documents
containing Confidential Information which may be in
his possession or under his control (or that of his
personal representatives or such other persons), and
shall not retain copies, extracts or notes of any of
the same.
9.3 The Executive shall have no claim against the Company in
respect of the termination of the Appointment by reason of the
merger, consolidation, continuation, dissolution or
liquidation or the sale of all or substantially all of the
assets of the Company provided that the Executive shall have
first been offered in writing a new appointment with the
successor or surviving company on terms no less favorable to
him than under this Agreement.
<PAGE> 17
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10. CHANGE OF CONTROL
10.1 If at any time there shall occur a "Change of Control" as that
term is defined in the Company's 1997 Equity Compensation
Plan, the Executive may at any time terminate this Agreement
by giving to the Company not less than three months notice in
writing to that effect.
10.2 In the event of such termination, the Company shall pay the
Executive upon the expiration of such notice, the Termination
Amount but without any obligation to mitigate.
11. NOTICES
Notices by either party:
(a) must be in writing addressed:
(i) to the Company at its registered office for
the time being; and
(ii) to the Executive at the address set out in
this Agreement or such other address as may
be notified to the Company from time to time.
(b) will be effectively served:
(i) on the day of receipt, where any
hand-delivered letter or facsimile
transmission is received on a business day
before or during normal working hours;
(ii) on the following business day, where any
hand-delivered letter or facsimile
transmission is received either on a business
day after normal working hours or on any
other day; or
(iii) on the fifth business day following the day
of posting to an overseas address of any
prepaid airmail letter.
<PAGE> 18
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12. INDEMNITY
12.1 The Company agrees, for the avoidance of doubt, that in
addition to the protection offered by the By-laws of the
Company, insofar as it is lawfully able, to indemnify the
Executive for all proper and reasonable costs and expenses of
lawyers (including disbursements and applicable taxes)
incurred by the Executive in connection with or in relation to
any claim, action or proceedings brought by any person arising
out of any allegation against the Executive in respect of any
act or omission by him in the course of carrying out his
duties under this Agreement and in which the Executive is a
defendant.
12.2 This indemnity will continue to apply for the period of the
Appointment and for a further period of six years after the
Executive's employment with the Company has come to an end
provided that the Executive:
(a) instructs lawyers approved in writing by the Company;
(b) acts in accordance with their advice;
(c) instructs the lawyers to provide copies of
correspondence and other documentation to the Company
and authorizes them to provide any information to the
Company on request;
(d) has not been guilty of gross misconduct or any breach
of contract, or has not been the subject of any of
the other conditions or circumstances set out in
Clause 9.1(b), pursuant to which the Company is
entitled summarily to terminate this Agreement; and
(e) has not (after the expiry of the Appointment) acted
in breach of any of his continuing obligations under
this Agreement or any other agreement entered into by
him with the Company.
<PAGE> 19
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13. GENERAL
13.1 This Agreement, which contains all the terms of the
Appointment, is in substitution for all contracts between the
Company and any Group Company and the Executive (whether
written, oral or governed by a course of dealings) dated prior
to the date hereof which shall be deemed to have terminated
with effect from the Effective Date.
13.2 The waiver, express or implied, by either Party of any right
under this Agreement or any failure to perform or breach by
the other shall not constitute or be deemed a waiver of any
other right under this Agreement or of the same right on
another occasion.
13.3 No amendment, change or addition to the terms of this
Agreement shall be effective or binding on either Party unless
reduced to writing and executed by both Parties.
13.4 The Executive represents and warrants that, other than as
notified in writing to the Board, he is not a party to any
agreement, contract (whether of employment or otherwise) or
understanding which would in any way restrict or prohibit the
Executive from undertaking or performing any of the duties of
the Appointment in accordance with this Agreement.
13.5 The Executive undertakes not to disclose or communicate any
terms of the Appointment to any other employee of any Group
Company or to any third party (other than for the purpose of
obtaining professional advice or other than as required by
applicable law, including the securities laws and regulations
of the United States).
13.6 Any provision of this Agreement which contemplates or is
capable of operation after the termination of the Appointment
shall apply notwithstanding termination of the Appointment
howsoever arising.
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13.7 This Agreement is governed by and is to be construed in
accordance with the laws of the State of New York and the
Parties hereby submit to the non-exclusive jurisdiction of the
Courts of the State of New York with respect to all matters
relating to this Agreement.
13.8 The Executive hereby appoints CT Corporation System, 1633
Broadway, New York, NY 10019 for service of process in
connection with legal proceedings in New York and arising
under or in connection with this Agreement.
IN WITNESS WHEREOF the Parties have executed this Amended and Restated
Agreement.
Attest: PLD TELEKOM INC.
s/s E. CLIVE ANDERSON By: s/s DAVID HEAVENRIDGE
- ------------------------ ------------------------------
s/s E. CLIEVE ANDERSON s/s SIMON EDWARDS
- ------------------------ ------------------------------
Witness Simon Edwards
<PAGE> 1
EXHIBIT 10.7
DATED AS OF AUGUST 1, 1997
AMENDED AND RESTATED
SERVICE AGREEMENT
PLD TELEKOM INC. (1)
CONOR CARROLL (2)
<PAGE> 2
DATED AS OF August 1, 1997
PARTIES
(1) PLD TELEKOM INC., a corporation incorporated under the laws of the State
of Delaware, whose registered office is at c/o CT Corporation System,
Inc., 1209 Orange Street, Wilmington, Delaware ("the Company"); and
(2) CONOR CARROLL of 62 Kingwood Road, Fulham, London SW6 6SR, England ("the
Executive").
RECITALS
The Company and the Executive are parties to a Service Agreement dated as
of January 1, 1995 (the "Prior Agreement"). As a result of the Company's
continuance to Delaware, the Company and the Executive are entering into this
Amended and Restated Service Agreement with a view to amending and restating the
terms of the Prior Agreement in their entirety to make various changes, inter
alia, to reflect the fact that the Company is now a Delaware corporation.
INTERPRETATION
(3) In this Agreement, unless the context otherwise requires, the following
expressions have the meanings set out below:
the Appointment the employment of the Executive pursuant to this
Agreement;
the Board the board of directors of the Company for the
time being (including any committee of the
Board);
the Commencement Date January 1, 1995;
Compensation Committee a committee of the Board which determines the
annual sum (inclusive of any bonuses and other
remuneration) payable to the Executive and other
officers and of which a majority consists of
non-executive directors;
<PAGE> 3
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Confidential
Information all information which may be imparted in
confidence or be of a confidential nature relating
to the business or prospective business, plans or
internal affairs of the Company or any Group
Company and in particular all Know-how, Marketing
Information, trade secrets, unpublished
information relating to the Company's or any Group
Company's intellectual property and any other
confidential commercial, financial or technical
information relating to the business of the
Company or any Group Company or to any customer or
supplier, officer or employee of the Company or
Group Company or to any member or person
interested in the share capital of the Company or
any Group Company;
Documents documents, disks, memory, notebooks, tapes or any
other medium, whether or not eye-readable, on
which information may from time to time be
recorded;
the Effective Date August 1, 1997
Group Company any company which directly or indirectly
controls, is controlled by, or is under common
control with the Company, and references to the
"Group Companies" shall be construed
accordingly, provided that for greater certainty
"Group Company" shall include BECET
International and Teleport-TP;
Know-how information comprised in formulae,
specifications, designs, drawings, component
lists, software (or pre-cursor documents),
databases, manuals, instructions and catalogues
held in whatever form relating to the creation,
production or supply of any products or services
by the Company or any
<PAGE> 4
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Group Company, or by or to any of the suppliers,
customers, partners or joint ventures of such
company;
Marketing Information information relating to the marketing or sales of
any products or services of the Company or any
Group Company, including lists of customers' and
suppliers' names, addresses and contacts, sales
targets and statistics, market share and pricing
statistics, marketing surveys, research and
reports;
Permitted Interest an interest in any class of shares or other
securities of any company which are traded on a
recognized investment exchange which amount to not
more than five percent of such class of issued
shares or securities and an interest in any units
of any authorized unit trust;
Termination Amount an amount equal to the amount arrived at
by multiplying by 4.0 (or such other amount as
may be agreed by the Board and the Executive)
the aggregate total of the amount payable to the
Executive under Clause 4.1 hereof at the rate in
force at the date that the calculation falls to
be made and deducting therefrom any taxation or
other withholdings required by law; and
Termination Date the date of termination or expiration of the
Appointment howsoever occurring.
(4) The expressions "subsidiary" and "affiliate" have the meanings given to
them by the Delaware General Corporation Law or, in the absence thereof,
under Delaware law.
(5) References to Clauses and Parties are respectively to Clauses of and the
Parties to this Agreement.
(6) References to any enactment are to be construed as referring also to any
enactment or re-enactment thereof (whether before or after the date
hereof), and to any previous enactment
<PAGE> 5
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which such enactment has replaced (with or without amendment provided that
the amendment does not change the law as at the date hereof) and to any
regulation or order made thereunder.
OPERATIVE PROVISIONS
1. JOB TITLE
The Company shall employ the Executive and the Executive shall serve the
Company as Vice President, Operations.
2. PERIOD OF ENGAGEMENT
2.1 The Appointment commenced on the Commencement Date and the
amendments made hereby shall be effective as of the Effective Date.
Unless terminated earlier under Clause 9, the Appointment will
continue until terminated by either Party giving to the other not
less than six (6) months' notice in writing.
2.2 The Company (and any relevant Group Company) shall not be obliged to
provide work to the Executive at any time after notice of
termination of the Appointment shall have been given by either Party
and the Company may, in its discretion, take any one or more of the
following steps in respect of all or part of an unexpired period of
notice:
(a) require the Executive to comply with such conditions as it may
specify in relation to attending at, or remaining away from,
the place(s) of business of the Company and the Group
Companies; or
(b) withdraw any powers vested in, or duties assigned to, the
Executive.
2.3 Should the Company give notice of termination of the Appointment
other than pursuant to Clause 9.1 (and whether or not in accordance
with Clause 2.1), the Company shall forthwith upon giving such
notice pay to the Executive the Termination Amount. The Executive
shall have no obligation to mitigate in respect of such payment.
<PAGE> 6
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2.4 The Company reserves the right at its sole discretion, should the
Executive give notice of termination of the Appointment in
accordance with Clause 2.1, to terminate the Appointment with
immediate effect upon payment to the Executive of a lump sum by way
of six months' gross salary (defined as the amount payable under
Sections 4.1 and 4.2) in lieu of notice, which sum shall be deemed
to be accepted for all purposes by the Executive as satisfaction in
full of all claims in relation to the Appointment or otherwise.
3. DUTIES
3.1 During the term of the Appointment, the Executive shall have the
following duties and obligations:
(a) to serve the Company as Vice President, Operations; and to
carry out such other duties and responsibilities as may
reasonably and lawfully be delegated to him by the Chief
Executive Officer or the Board from time to time during the
Appointment;
(b) at all times to use all reasonable endeavors to promote the
interests and maintain the goodwill of the Company and any
other Group Company and not knowingly to do anything which is
materially prejudicial or detrimental to the Company or any
Group Company;
(c) to faithfully and diligently perform his duties and carry out
such powers and functions as may from time to time be vested
in him by or under the authority of the Chief Executive
Officer or the Board;
(d) to devote such time and attention as is necessary and the full
benefit of his knowledge, expertise and skills in the proper
performance of his duties (unless on holiday as permitted by
this Agreement or prevented by ill health or accident);
(e) to give (in writing if so requested) to the Chief Executive
Officer, to the Board, or to such person(s) as the Chief
Executive Officer or the Board
<PAGE> 7
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may direct, such information and explanations regarding the
affairs of the Company or any other Group Company or matters
relating to the Appointment as the Board may require; and
(f) to comply with any applicable code relating to dealings in
securities of the Company and with all lawful directions from
time to time given to the Executive by or under the authority
of the Chief Executive Officer or the Board and, save as
inconsistent with the express terms of this Agreement, all
applicable rules and regulations from time to time laid down
by the Company concerning its employees.
3.2 Subject to the provisions of Clause 3.1, the Executive shall have
such powers and do such acts in the ordinary course of business
carried on by the Company as the Chief Executive Officer or the
Board may from time to time delegate to the Executive.
3.3 The Executive acknowledges that he shall be principally based in the
Company's Operations office in London, England, but that he may be
required to attend and work at any of the Company's locations
(whether within or outside the United States, the Commonwealth of
Independent States or the United Kingdom) in the manner and on the
occasions reasonably required from time to time by the Board.
3.4 The Chief Executive Officer or the Board may require the Executive
to perform services for any Group Company wherever situated and
without further fees or remuneration and any duties that he may have
under this Agreement will be deemed to extend to such Group Company.
3.5 The hours of work of the Executive are not fixed but are the usual
working hours of the Company and such additional hours as may be
necessary to enable him properly to discharge his duties.
<PAGE> 8
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3.6 The Executive shall:
(a) at the request and expense of the Company, submit annually to
a medical examination by a medical practitioner nominated by
the Company as part of a health screening program and for
insurance purposes; and
(b) authorize such medical practitioner to disclose to or
discuss with the Company's medical advisor any matters
arising from such examination; and the Company's medical
advisor may notify the Board of any serious matter if, in
his opinion, it might materially and adversely affect the
health of the Executive or the proper discharge of his
duties, provided that the Company shall not disclose to any
third party any matters arising from such examination
without the previous consent in writing of the Executive.
4. PAY AND EXPENSES
4.1 The Company shall pay to the Executive for the proper performance of
his duties under this Agreement for the balance of 1997 and
thereafter a salary at an annual rate of $75,000 (or such higher
rate as the Company may from time to time notify in writing to the
Executive). Such amount shall be paid in monthly installments.
4.2 Until the Termination Date, the Company shall pay to the Executive
(or as the Executive may otherwise direct) 20% of the amount due
under Clause 4.1 annually, in lieu of all pension, social and other
benefits whatsoever. Such amount shall be paid at the direction of
the Executive in monthly installments.
4.3 The salary payable to the Executive will:
(a) accrue from day to day and be payable by equal monthly
installments in arrears by not later than the last working day
of each month,
(b) notwithstanding anything to the contrary contained in the
Articles of Incorporation of the Company or equivalent
charter document of any other Group Company, be inclusive of
any other fees or remuneration of any description which the
Executive might be entitled to receive from the
<PAGE> 9
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Company or any Group Company or any other company or
association in which the Executive holds office as a nominee
or representative of the Company or any Group Company (and the
Executive shall, at the discretion of the Board, either waive
his right to any such remuneration or account to the Company
for the same forthwith upon receipt);
(c) be paid by credit transfer to the account nominated by the
Executive from time to time; and
(d) be capable of set-off by the Company from time to time against
any liability of the Executive to the Company.
All payments to the Executive shall be subject to applicable source
deduction and withholding taxes.
4.4 From time to time (but not less frequently than April 30 of each
year of this Agreement) all compensation to the Executive (including
without limitation salary, bonuses and equity compensation
arrangements) shall be reviewed by the Compensation Committee.
Increases or awards are not automatic but will be based on such
factors as the Compensation Committee may consider relevant,
provided it is acknowledged that increases or awards are solely in
the discretion of such Committee and are not required under this
Agreement. Increases or awards shall to the extent applicable be
retroactive to the preceding January 1.
4.5 The Executive hereby authorizes the Company to deduct from any
remuneration accrued and due to him under the terms of this
Agreement (whether or not actually paid during the Appointment) or
from any pay in lieu of notice:
(a) any overpayment (whether of salary or expenses or otherwise)
or payment made to the Executive by mistake or through any
misrepresentation; and
(b) any debt owed by the Executive to the Company or any Group
Company.
<PAGE> 10
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Provided that in the case of a debt owed to any Group Company the
Company shall obtain for the benefit of the Executive a release of
such debt from such Group Company.
4.6 The Company shall repay to the Executive or (at the option of the
Executive) pay all reasonable travelling, hotel, accommodation and
other expenses properly incurred by the Executive in or about the
performance of the Executive's duties, subject to the Executive
having delivered to the Company such form(s) and vouchers or other
evidence of actual payment of such expenses as the Company may from
time to time require.
5. HOLIDAY
5.1 In addition to the usual public and bank holidays, the Executive
shall be entitled to 25 days' paid holiday in each holiday year (and
pro rata for part of each holiday year worked) to be taken at such
time or times as shall be agreed by the Chief Executive Officer of
the Company.
5.2 The holiday year runs from 1 January each year to the following 31
December. No holiday entitlement may be carried forward from one
holiday year to the next and no money will be paid in lieu of any
such untaken holiday entitlement unless otherwise agreed by the
Compensation Committee.
5.3 Upon termination of the Appointment, other than pursuant to Clause
9.1, the Executive's entitlement to holiday will be calculated on
the basis of two days for each calendar month of service completed
during the holiday year in which termination occurs and the Company
shall make a payment in lieu of untaken holiday entitlement.
6. CONFIDENTIALITY
6.1 Neither during the continuance of the Appointment, other than in the
proper course of the Executive's duties and for the benefit of the
Company, nor after the Termination Date for any reason whatsoever,
shall the Executive:
<PAGE> 11
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(a) use, disclose or communicate to any person any Confidential
Information which he shall have come to know or have received
or obtained at any time (before or after the date of this
Agreement) by reason of or in connection with this
Appointment; or
(b) copy or reproduce in any form or by or on any media or device
or allow others access to or to copy or reproduce Documents
containing Confidential Information.
6.2 The Executive acknowledges that all Documents containing
Confidential Information at any time in his control or possession
are and shall at all times remain the absolute property of the
Company and the Executive undertakes, both during the Appointment
and after the Termination Date:
(a) to exercise due care and diligence to avoid any unauthorized
publication, disclosure or use of Confidential Information and
any Documents containing or referring to it;
(b) at the direction of the Board, to deliver up any Confidential
Information (including all copies of all Documents whether or
not lawfully made or obtained) or to delete Confidential
Information from any re-usable medium; and
(c) to do such things and sign such documents at the expense of
the Company as shall be reasonably necessary to give effect to
this Clause and/or to provide evidence that it has been
complied with.
6.3 The restrictions in Clause 6.1:
(a) will not restrict the Executive from disclosing (but only to
the proper recipient) any Confidential Information which the
Executive is required to disclose by law or any order of the
court or any relevant regulatory body (including any stock
exchange upon which the shares or other securities of the
Company are or are proposed to be traded), provided that the
Executive
<PAGE> 12
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shall, unless obliged by law, have given prior written notice
to the Company of the requirement and of the information to be
disclosed and allowed the Company an opportunity to comment on
the requirement before making the disclosure, and
(b) will not apply to Confidential Information which is or which
comes into the public domain otherwise than as a result of an
unauthorized disclosure by the Executive or any other person
who owes the Company an obligation of confidentiality in
relation to the information disclosed.
6.4 The Executive acknowledges that the restrictions set out in this
Clause 6 are without prejudice to any other duties of
confidentiality owed to the Company whether express or implied and
are to survive the termination of the Appointment (howsoever
arising).
7. FURTHER RESTRICTIONS
7.1 Unless agreed by the Board in advance, the Executive shall not (a)
during the Appointment carry on or be concerned, engaged or
interested directly or indirectly (whether as principal,
shareholder, partner, employee, officer, agent or otherwise) in any
trade or business other than that of the Company and shall not
engage in any other activity which the Company reasonably considers
may impair his ability to perform his duties under this Agreement;
and (b) for a period of equal to the greater of (i) twelve months
following the Termination Date and (ii) the period the Executive
receives remuneration hereunder following the Termination Date,
carry on or be concerned, engaged or interested directly or
indirectly (whether as principal, shareholder, partner, employee,
officer, agent or otherwise) in any trade or business which is in
competition with the business of the Company or any Group Company
carried on at the Termination Date in any country in which the
Company (or any entity in which the Company has a greater than 25 %
economic interest) operates; provided that the foregoing shall not
apply to a Permitted Interest.
<PAGE> 13
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7.2 The Executive shall not during the Appointment and for a period of
six months thereafter either on his own behalf or on behalf of any
person, firm or company:
(a) solicit or endeavor to entice away from the Company an actual
employee, or discourage from being employed by the Company any
person who, to the knowledge of the Executive, is an employee
or a prospective employee of the Company; or
(b) employ or procure another person to employ any such person.
7.3 The restrictions set out in this Clause 7 are without prejudice to
any other fiduciary duties owed to the Company whether express or
implied.
8. ABSENCE, ILLNESS AND INCAPACITY
8.1 If at any time the Executive is prevented by reason of ill-health,
accident or other incapacity from properly performing his duties he
shall promptly furnish to the Company, if required, evidence of such
incapacity in a form reasonably satisfactory to the Board.
8.2 The Company shall pay the Executive the amounts payable under
Clauses 4.1 and 4.2 for the first 180 days in aggregate in any
calendar year of absence due to illness or other incapacity of the
Executive, but shall not be required to pay the Executive any salary
or other remuneration for any further periods of such absence in any
calendar year, although it may at its discretion do so.
9. TERMINATION
9.1 The Company may at any time terminate the Appointment with
immediate effect (or any such longer period of notice as the
Company shall see fit) by giving the Executive written notice
if the Executive shall have:
(a) been guilty of gross default or gross misconduct in
respect of his duties hereunder or otherwise as a
director or officer of the Company or any Group Company;
<PAGE> 14
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(b) committed any material breach or non-observance or,
after having been given warning in writing, any
repeated or continued material breach or material
non-observance of any of his duties or any of his
express or implied obligations arising from the
Appointment or otherwise as a director or officer of
the Company or Group Company including refusing to
comply with any proper, reasonable and lawful
instructions given to him by the Board;
(c) been guilty of conduct or permitted or suffered events
tending in the reasonable opinion of the Board to bring
themselves, the Company or any Group Company into
disrepute;
(d) become prevented by any applicable law or regulation
from continuing as a director or officer of the Company
or performing any of his duties;
(e) committed any act of fraud or dishonesty (whether or not
connected with the Appointment) or committed any act
which, in the reasonable opinion of the Board,
materially and adversely affects his ability properly to
carry out his duties and which is likely to bring the
Company into disrepute;
(f) become bankrupt or claimed the benefit of any Act for
the time being in force for the relief of insolvent
debtors or proposed or made any arrangement or
composition with their creditors;
(g) been convicted of a criminal offence (excluding an
offence under road traffic legislation in respect of
which he is not sentenced to a term of imprisonment,
whether immediate or suspended); or
(h) become of unsound mind, as certified by a recognized
doctor of psychiatry.
<PAGE> 15
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9.2 Upon termination of the Appointment however arising:
(a) The Executive shall, without prejudice for any claim that
may arise out of the termination of this Appointment,
forthwith at the request of the Board resign as a director
of the Company and from all offices held by him in any Group
Company and from all other appointments or offices which he
holds as nominee or representative of the Company or any
Group Company and, if he fails so to do, the Company is
irrevocably authorized by the Executive to appoint some
person in his name and on his behalf to execute such
documents and to do such other things as are reasonably
necessary to give effect to such resignations; and
(b) The Executive (or, if he shall be dead, of unsound mind or
bankrupt), his personal representatives or such other
persons as shall be appointed to administer his estate and
affairs shall deliver up to the Company in accordance with
the directions of the Board all keys, security passes,
credit cards, Documents and other property belonging to or
relating to the businesses or affairs of the Company or any
Group Company, including all copies of all Documents
containing Confidential Information which may be in his
possession or under his control (or that of his personal
representatives or such other persons), and shall not retain
copies, extracts or notes of any of the same.
9.3 The Executive shall have no claim against the Company in respect of
the termination of the Appointment by reason of the merger,
consolidation, continuation, dissolution or liquidation, or the sale
of all or substantially all of the assets of the Company, provided
that the Executive shall have first been offered in writing a new
appointment with the successor or surviving company on terms no less
favorable to him than under this Agreement.
<PAGE> 16
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10. CHANGE OF CONTROL
10.1 If at any time there shall occur a "Change of Control" as that term
is defined in the Company's 1997 Equity Compensation Plan, the
Executive may at any time terminate this Agreement by giving to the
Company not less than three months notice in writing to that effect.
10.2 In the event of such termination, the Company shall pay the
Executive upon the expiration of such notice, the Termination Amount
but without any obligation to mitigate.
11. NOTICES
Notices by either party:
(a) must be in writing addressed:
(i) to the Company at its registered office for the time
being; and
(ii) to the Executive at the address set out in this
Agreement or such other address as may be notified to
the Company from time to time.
(b) will be effectively served:
(i) on the day of receipt, where any hand-delivered letter
or facsimile transmission is received on a business day
before or during normal working hours;
(ii) on the following business day, where any hand-delivered
letter or facsimile transmission is received either on a
business day after normal working hours or on any other
day; or
(iii) on the fifth business day following the day of posting
to an overseas address of any prepaid airmail letter.
<PAGE> 17
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12. INDEMNITY
12.1 The Company agrees, for the avoidance of doubt, that in addition to
the protection offered by the By-laws of the Company, insofar as it
is lawfully able, to indemnify the Executive for all proper and
reasonable costs and expenses of lawyers (including disbursements
and applicable taxes) incurred by the Executive in connection with
or in relation to any claim, action or proceedings brought by any
person arising out of any allegation against the Executive in
respect of any act or omission by him in the course of carrying out
his duties under this Agreement and in which the Executive is a
defendant.
12.2 This indemnity will continue to apply for the period of the
Appointment and for a further period of six years after the
Executive's employment with the Company has come to an end provided
that the Executive:
(a) instructs lawyers approved in writing by the Company;
(b) acts in accordance with their advice;
(c) instructs the lawyers to provide copies of correspondence and
other documentation to the Company and authorizes them to
provide any information to the Company on request;
(d) has not been guilty of gross misconduct or any breach of
contract, or has not been the subject of any of the other
conditions or circumstances set out in Clause 9.1, pursuant to
which the Company is entitled summarily to terminate this
Agreement; and
(e) has not (after the expiry of the Appointment) acted in breach
of any of his continuing obligations under this Agreement or
any other agreement entered into by him with the Company.
<PAGE> 18
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13. GENERAL
13.1 This Agreement, which contains all the terms of the Appointment, is
in substitution for all contracts between the Company and any Group
Company and the Executive (whether written, oral or governed by a
course of dealings) dated prior to the date hereof which shall be
deemed to have terminated with effect from the Effective Date.
13.2 The waiver, express or implied, by either Party of any right under
this Agreement or any failure to perform or breach by the other
shall not constitute or be deemed a waiver of any other right under
this Agreement or of the same right on another occasion.
13.3 No amendment, change or addition to the terms of this Agreement
shall be effective or binding on either Party unless reduced to
writing and executed by both Parties.
13.4 The Executive represents and warrants that, other than as notified
in writing to the Board, he is not a party to any agreement,
contract (whether of employment or otherwise) or understanding which
would in any way restrict or prohibit the Executive from undertaking
or performing any of the duties of the Appointment in accordance
with this Agreement.
13.5 The Executive undertakes not to disclose or communicate any terms of
the Appointment to any other employee of any Group Company or to any
third party (other than for the purpose of obtaining professional
advice or other than as required by applicable law, including the
securities laws and regulations of the United States).
13.6 Any provision of this Agreement which contemplates or is capable of
operation after the termination of the Appointment shall apply
notwithstanding termination of the Appointment howsoever arising.
<PAGE> 19
- 18 -
13.7 This Agreement is governed by and is to be construed in accordance
with the laws of the State of New York and the Parties hereby submit
to the non-exclusive jurisdiction of the Courts of the State of New
York with respect to all matters relating to this Agreement.
13.8 The Executive hereby appoints CT Corporation System, 1633 Broadway,
New York, NY 10019 for service of process in connection with legal
proceedings in New York and arising under or in connection with this
Agreement.
IN WITNESS WHEREOF the Parties have executed this Amended and Restated
Agreement.
Attest: PLD TELEKOM INC.
s/s E. CLIVE ANDERSON By: s/s JAMES HATT
- ------------------------ -----------------------------
Secretary Chairman
s/s E. CLIVE ANDESON s/s CONOR CARROLL
- ------------------------ -----------------------------
Witness Conor Carroll
<PAGE> 1
EXHIBIT 10.8
DATED AS OF NOVEMBER 26, 1997
SERVICE AGREEMENT
PLD TELEKOM INC. (1)
BORIS ANTONIUK (2)
<PAGE> 2
DATED AS OF NOVEMBER 26, 1997
PARTIES
(1) PLD Telekom Inc., a corporation incorporated under the laws of the
State of Delaware, whose registered office is at c/o CT Corporation
System, Inc., 1209 Orange Street, Wilmington, Delaware ("the
Company"); and
(2) Boris Antoniuk of Prospect Mira, VVC, Moscow Russia ("the Employee").
INTERPRETATION
(3) In this Agreement, unless the context otherwise requires, the
following expressions have the meanings set out below:
the Appointment the employment of the Employee
pursuant to this Agreement;
the Board the board of directors of the
Company for the time being
(including any committee of the
Board);
the Commencement Date November 26, 1997;
Compensation Committee a committee of the Board which
determines the annual sum (inclusive
of any bonuses and other
remuneration) payable to the
Employee and other senior employees
and of which a majority consists of
non-executive directors;
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<PAGE> 3
Confidential Information all information which may be
imparted in confidence or be of a
confidential nature relating to the
business or prospective business,
plans or internal affairs of the
Company or any Group Company and in
particular all Know-how, Marketing
Information, trade secrets,
unpublished information relating to
the Company's or any Group Company's
intellectual property and any other
confidential commercial, financial
or technical information relating to
the business of the Company or any
Group Company or to any customer or
supplier, officer or employee of the
Company or Group Company or to any
member or person interested in the
share capital of the Company or any
Group Company;
Documents documents, disks, memory, notebooks,
tapes or any other medium, whether
or not eye-readable, on which
information may from time to time be
recorded;
Group Company any company which directly or
indirectly controls, is controlled
by, or is under common control with
the Company, and references to the
"Group Companies" shall be construed
accordingly, provided that for
greater certainty "Group Company"
shall include BECET International,
Teleport-TP and MTR-Sviaz;
Know-how information comprised in formulae,
specifications, designs, drawings,
component lists, software (or
pre-cursor documents), databases,
manuals, instructions and catalogues
held in whatever form relating to
the creation, production or supply
of any products or services by the
Company or any Group Company, or by
or to any of the suppliers,
customers, partners or joint
ventures of such company;
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<PAGE> 4
Marketing Information information relating to the
marketing or sales of any products
or services of the Company or any
Group Company, including lists of
customers' and suppliers' names,
addresses and contacts, sales
targets and statistics, market share
and pricing statistics, marketing
surveys, research and reports;
Permitted Interest an interest in any class of shares
or other securities of any company
which are traded on a recognized
investment exchange which amount to
not more than five percent of such
class of issued shares or securities
and an interest in any units of any
authorized unit trust;
Supervisor the Chief Executive Officer of the
Company;
Termination Amount an amount equal to the amount
arrived at by multiplying by 2.0 (or
such other amount as may be agreed
by the Board and the Employee) the
aggregate total of the amount
payable to the Employee under Clause
4.1 hereof at the rate in force at
the date that the calculation falls
to be made and deducting therefrom
any taxation or other withholdings
required by law; and
Termination Date the date of termination or
expiration of the Appointment
howsoever occurring.
(4) The expressions "subsidiary" and "affiliate" have the meanings given
to them by the Delaware General Corporation Law or, in the absence
thereof, under Delaware law.
(5) References to Clauses and Parties are respectively to Clauses of and
the Parties to this Agreement.
(6) References to any enactment are to be construed as referring also to
any enactment or re-enactment thereof (whether before or after the
date hereof), and to any previous enactment which such enactment has
replaced (with or without amendment provided that the amendment does
not change the law as at the date hereof) and to any regulation or
order made thereunder.
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<PAGE> 5
OPERATIVE PROVISIONS
1. JOB TITLE
The Company shall employ the Employee and the Employee shall serve the
Company as Group Director - Russia and CIS. The Company reserves the
right to change the Employee's title to reflect any change in his
responsibilities.
2. PERIOD OF ENGAGEMENT
2.1 The Appointment shall commence on the Commencement Date and
shall continue until earlier terminated (i) by either Party
giving to the other not less than six months' notice in
writing or (ii) pursuant to the provisions of Clause 11
hereof.
2.2 The Company (and any relevant Group Company) shall not be
obliged to provide work to the Employee at any time after
notice of termination of the Appointment shall have been given
by either Party and the Company may, in its discretion, take
any one or more of the following steps in respect of all or
part of an unexpired period of notice:
(a) require the Employee to comply with such conditions
as it may specify in relation to attending at, or
remaining away from, the place(s) of business of the
Company and the Group Companies; or
(b) withdraw any powers vested in, or duties assigned to,
the Employee.
3. DUTIES
3.1 During the term of the Appointment, the Employee shall have
the following duties and obligations:
(a) to serve the Company as Group Director - Russia and
CIS and to carry out the proper duties assigned to
him from time to time by the Supervisor or the Board,
and reporting to the Supervisor;
(b) at all times to use all reasonable endeavors to
promote the interests and maintain the goodwill of
the Company and any other Group Company
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<PAGE> 6
and not knowingly to do anything which is materially
prejudicial or detrimental to the Company or any
Group Company;
(c) to faithfully and diligently perform his duties and
carry out such powers and functions as may from time
to time be vested in him by or under the authority of
the Supervisor or the Board;
(d) to devote such time and attention as is necessary and
the full benefit of his knowledge, expertise and
skills in the proper performance of his duties
(unless on holiday as permitted by this Agreement or
prevented by ill health or accident);
(e) to give (in writing if so requested) to the
Supervisor or the Board, or to such person(s) as
either may direct, such information and explanations
regarding the affairs of the Company or any other
Group Company or matters relating to the Appointment
as the Supervisor or the Board may require; and
(f) to comply with any applicable code relating to
dealings in securities of the Company and with all
lawful directions from time to time given to the
Employee by or under the authority of the Supervisor
or the Board and, save as inconsistent with the
express terms of this Agreement, all applicable rules
and regulations from time to time laid down by the
Company concerning its employees.
3.2 Subject to the provisions of Clause 3.1, the Employee shall
have such powers and do such acts in the ordinary course of
business carried on by the Company and any Group Company as
the Board and/or the Supervisor may from time to time delegate
to the Employee.
3.3 The Employee acknowledges that the executive offices of the
Company are in New York, New York and that the Employee shall
attend and work at any of the Company's locations (whether
within or outside the Commonwealth of Independent States, the
United States or the United Kingdom) in the manner and on the
occasions reasonably required from time to time by the
Supervisor or the Board.
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<PAGE> 7
3.4 The Board may require the Employee to perform services for any
Group Company wherever situated and without further fees or
remuneration and any duties that he may have under this
Agreement will be deemed to extend to such Group Company.
3.5 The hours of work of the Employee are not fixed but are the
usual working hours of the Company and such additional hours
as may be necessary to enable him properly to discharge his
duties.
3.6 The Employee shall:
(a) at the request and expense of the Company, submit
annually to a medical examination by a medical
practitioner nominated by the Company as part of a
health screening program and for insurance purposes;
and
(b) authorize such medical practitioner to disclose to or
discuss with the Company's medical advisor any
matters arising from such examination; and the
Company's medical advisor may notify the Board of any
serious matter if, in his opinion, it might
materially and adversely affect the health of the
Employee or the proper discharge of his duties,
provided that the Company shall not disclose to any
third party any matters arising from such examination
without the previous consent in writing of the
Employee.
4. PAY, BENEFITS AND EXPENSES
4.1 The Company shall pay to the Employee for the proper
performance of his duties under this Agreement a salary at an
annual rate of US$50,000 which will be reviewed each year in
accordance with the provisions of Clause 4.5.
4.2 The salary payable to the Employee will:
(a) accrue from day to day and be payable by equal
monthly installments in arrears by not later than the
last working day of each month,
(b) notwithstanding anything to the contrary contained in
the Certificate of Incorporation of the Company, be
inclusive of any other fees or
7
<PAGE> 8
remuneration of any description which the Employee
might be entitled to (or may in fact) receive from
the Company (and the Employee shall, at the
discretion of the Board, either waive his right to
any such remuneration, account to the Company for the
same forthwith upon receipt or credit such
remuneration against future salary payable to the
Employee by the Company);
(c) be paid by credit transfer to the account nominated
by the Employee from time to time; and
(d) be capable of set-off by the Company from time to
time against any liability of the Employee to the
Company.
All payments to the Employee shall be subject to applicable
source deduction and withholding taxes.
4.3 The Company may, in its discretion, pay the Employee in lieu
of all or any unexpired period of notice a sum equal to the
salary and benefits which the Employee would have received in
such period whereupon this Agreement shall terminate with
immediate effect.
4.4 All payments to the Employee shall be subject to any
deductions or withholdings required by law to be made in any
country in respect of or on account of taxation, social
security or any other similar levies or charges; provided that
any social taxes which may be payable in Russia in respect of
the Employee's services hereunder shall be the responsibility
of the Company.
4.5 From time to time (but not less frequently than April 30 of
each year of this Agreement) all compensation to the Employee
(including without limitation salary, bonuses and equity
compensation arrangements) shall be reviewed by the
Compensation Committee. Increases or awards are not automatic
but will be based on such factors as the Compensation
Committee may consider relevant, provided it is acknowledged
that increases or awards are solely in the discretion of such
Committee and are not required under this Agreement.
Increases or awards shall to the extent applicable be
retroactive to the preceding January 1.
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<PAGE> 9
4.6 During the Appointment, the Employee shall be eligible to
participate in any equity compensation or bonus plans which
may be established by the Company from time to time. It is
acknowledged that all grants or payments made under such plans
shall be at the sole discretion of the Compensation Committee.
4.7 The Company shall include the Employee during the Appointment
in all employee benefit plans or programs established for the
same class of employees as the Employee. Without limiting the
generality of the foregoing, the Company will pay for the cost
of private medical insurance with BUPA International at Scale
A rates and for private dental insurance for the Employee and
his immediate family.
4.8 The Employee hereby authorizes the Company to deduct from any
remuneration accrued and due to him under the terms of this
Agreement (whether or not actually paid during the
Appointment) or from any pay in lieu of notice:
(a) any overpayment (whether of salary or expenses or
otherwise) or payment made to the Employee by mistake
or through any misrepresentation; and
(b) any debt owed by the Employee to the Company or any
Group Company.
Provided that in the case of a debt owed to any Group Company
the Company shall obtain for the benefit of the Employee a
release of such debt from such Group Company.
4.9 The Company shall repay to the Employee or (at the option of
the Employee) pay all reasonable traveling, hotel,
accommodation and other expenses properly incurred by the
Employee in or about the performance of the Employee's duties,
subject to the Employee having delivered to the Company such
form(s) and vouchers or other evidence of actual payment of
such expenses as the Company may from time to time require.
4.10 The Company will provide the Employee with a car to a maximum
value of
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<PAGE> 10
US$50,000 (this to be inclusive of import and customs duties
or levies, VAT, road tax, licensing and insurance) and the
Company shall pay all reasonable maintenance, annual insurance
and other reasonable running costs (including fuel), including
the monthly salary of a driver not to exceed $1,000 per month.
4.11 The Company will pay to the Employee all reasonable expenses
properly incurred by him in respect of his use of his private
domestic telephone for all calls and on receipt of any
documentation required by the Company.
4.12 The Company will pay for the reasonable costs of five
professional subscriptions per annum for the Employee.
4.13 During the Appointment the Company will provide the Employee
and his wife with one business class return air ticket per
annum from Russia.
4.14 The Company will pay for all reasonable costs incurred by the
Employee in respect of professional advice given by third
parties concerning the Employee's personal liability to both
Russian and foreign country taxation.
4.15 The Company will also pay on behalf of the Employee (or
reimburse the Employee for) the amount of any income taxes due
to any country other than Russia in respect of the salary and
other benefits which the Employee receives pursuant to this
Agreement, and in addition, if the Employee is required to
treat the amount paid or reimbursed by the Company as
additional income, shall pay (or reimburse the Employee for)
any additional income tax which the Employee may be required
to pay by reason of the receipt of such amount.
5. HOLIDAY
5.1 In addition to the usual public and bank holidays in the
Employee's country of residence, the Employee shall be
entitled to 25 business days' paid holiday in each holiday
year (and pro rata for part of each holiday year worked) to be
taken at such time or times as shall be agreed by the
Supervisor.
5.2 The holiday year runs from 1 January each year to the
following 31 December. The Employee shall be entitled to
carry forward any unused holiday entitlement which he has been
precluded from taking at the request of the Company up to a
maximum of 10 days per annum.
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<PAGE> 11
5.3 Upon termination of the Appointment, other than pursuant to
Clause 11.1, the Employee's entitlement to holiday will be
calculated on the basis of two days for each calendar month of
service completed during the holiday year in which termination
occurs and the Company shall make a payment in lieu of untaken
holiday entitlement.
6. CONFIDENTIALITY
6.1 Neither during the continuance of the Appointment, other than
in the proper course of the Employee's duties and for the
benefit of the Company, nor after the Termination Date for any
reason whatsoever, shall the Employee:
(a) use, disclose or communicate to any person any
Confidential Information which he shall have come to
know or have received or obtained at any time (before
or after the date of this Agreement) by reason of or
in connection with this Appointment; or
(b) copy or reproduce in any form or by or on any media
or device or allow others access to or to copy or
reproduce Documents containing Confidential
Information.
6.2 The Employee acknowledges that all Documents containing
Confidential Information at any time in his control or
possession are and shall at all times remain the absolute
property of the Company and the Employee undertakes, both
during the Appointment and after the Termination Date:
(a) to exercise due care and diligence to avoid any
unauthorized publication, disclosure or use of
Confidential Information and any Documents containing
or referring to it;
(b) at the direction of the Board, to deliver up any
Confidential Information (including all copies of all
Documents whether or not lawfully made or obtained)
or to delete Confidential Information from any
re-usable medium; and
(c) to do such things and sign such documents at the
expense of the Company as shall be reasonably
necessary to give effect to this Clause and/or to
provide evidence that it has been complied with.
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<PAGE> 12
6.3 The restrictions in Clause 6.1:
(a) will not restrict the Employee from disclosing (but
only to the proper recipient) any Confidential
Information which the Employee is required to
disclose by law or any order of the court or any
relevant regulatory body (including any stock
exchange upon which the shares or other securities of
the Company are or are proposed to be traded),
provided that the Employee shall, unless obliged by
law, have given prior written notice to the Company
of the requirement and of the information to be
disclosed and allowed the Company an opportunity to
comment on the requirement before making the
disclosure, and
(b) will not apply to Confidential Information which is
or which comes into the public domain otherwise than
as a result of an unauthorized disclosure by the
Employee or any other person who owes the Company an
obligation of confidentiality in relation to the
information disclosed.
6.4 The Employee acknowledges that the restrictions set out in
this Clause 6 are without prejudice to any other duties of
confidentiality owed to the Company whether express or implied
and are to survive the termination of the Appointment
(howsoever arising).
7. FURTHER RESTRICTIONS
7.1 The Employee shall not (a) during the Appointment carry on or
be concerned, engaged or interested directly or indirectly
(whether as principal, shareholder, partner, employee,
officer, agent or otherwise) in any trade or business other
than that of the Company and shall not engage in any other
activity which the Company reasonably considers may impair his
ability to perform his duties under this Agreement; and (b)
for a period of equal to the greater of (i) twelve months
following the Termination Date and (ii) the period the
Employee receives remuneration hereunder following the
Termination Date, carry on or be concerned, engaged or
interested directly or indirectly (whether as principal,
shareholder, partner, employee, officer, agent or otherwise)
in any trade or business which is in competition with the
business of the Company or
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<PAGE> 13
any Group Company carried on at the Termination Date in any
country in which the Company (or any entity in which the
Company has a greater than 25 % economic interest) operates;
provided that the foregoing shall not apply to a Permitted
Interest.
7.2 The Employee shall not for a period of twelve months from the
Termination Date either on his own behalf or on behalf of any
person, firm or company in relation to the business activities
of the Company in which the Employee has been engaged or
involved directly or indirectly:
(a) solicit, approach or offer goods or services to or
entice away from the Company any person, firm or company who
at the Termination Date (or at any time during six months
prior to the Termination Date) was a client or customer of the
Company and in each case with whom the Employee (or any other
employee on his behalf or under his direct instruction) has
been actively engaged or involved by virtue of his duties
hereunder; or
(a) deal with or accept custom from any person, firm or
company who at the Termination Date (or at any time
during six months prior to the Termination Date) was
a client or customer of the company and in each case
with whom the Employee (or any other employee on his
behalf or under his direct instruction) has been
actively engaged or involved by virtue of his duties
hereunder; or
(b) solicit or approach or offer goods or services to or
entice away from the Company any person, firm or
company who at the Termination Date (or at any time
during six months prior to the Termination Date) was
a supplier, agent or distributor of the Company and
in each case with whom the Employee (or any other
employee on his behalf or under his direct
instruction) has been actively engaged or involved by
virtue of his duties hereunder; or
(c) deal with or interfere with any person, firm or
company who at the Termination Date (or at any time
during six months prior to the Termination Date) was
a supplier, agent or distributor of the Company and
in each case with whom the Employee (or any other
employee on
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<PAGE> 14
his behalf or under his direct instruction) has been
actively engaged or involved by virtue of his duties
hereunder.
PROVIDED THAT nothing contained in these paragraphs (a) to (d)
shall prohibit the Employee from carrying out any activities
which are not in competition with any part of the business of
the Company with which the Employee was involved in six months
prior to the Termination Date.
7.3 The Employee shall not during the Appointment and for a period
of twelve months thereafter either on his own behalf or on
behalf of any person, firm or company:
(a) solicit or endeavor to entice away from the Company
an actual employee, or discourage from being employed
by the Company any person who, to the knowledge of
the Employee, is an employee or a prospective
employee of the Company; or
(b) employ or procure another person to employ any such
person.
7.4 The restrictions set out in this Clause 7 are without
prejudice to any other fiduciary duties owed to the Company
whether express or implied.
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<PAGE> 15
8. REMEDIES
The Employee expressly acknowledges that the remedy at law for any
breach of Clauses 6 and 7 will be inadequate and that upon any breach
or threatened breach, the Company shall be entitled as a matter of
right to injunctive relief in any court of competent jurisdiction, in
equity or otherwise, and to enforce the specific performance of the
Employee's obligations under those provisions without the necessity of
proving the actual damage to the Company or the inadequacy of a legal
remedy. Subject to the remainder of this Clause 8, the rights
conferred upon the Company by the preceding sentence shall not be
exclusive of, but shall be in addition to, any other rights or
remedies which the Company may have at law, in equity or otherwise.
9. COMPANY POLICIES REGARDING EMPLOYEE STANDARDS OF CONDUCT AND
SECURITIES TRADING
9.1 The Employee acknowledges and agrees as follows:
(a) It is the policy of the Company to abide by the spirit as well
as the letter of the law applicable to the conduct of its
business and that of the Group Companies in every jurisdiction
where it and they operate. Whenever in the course of his
employment the Employee has a question as the legality of or
propriety of any proposed action or course of conduct, he
shall obtain advice from the General Counsel of the Company
before proceeding.
(b) The Employee will not authorize, make or participate in a
payment of money or a gift of Company or Group Company
materials, equipment, services or facilities or anything else
of value to:
(i) any governmental agency or official;
(ii) any non-governmental customer or prospective
customer; or
(iii) employees agents or associates of such persons,
for the purpose of promoting or retaining business for the
Company or any Group Company or inducing the recipient to
grant favorable treatment to, or forego any claim against, the
Company or any Group Company.
(c) The Employee will not make any contribution of Company or Group
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<PAGE> 16
Company funds, materials, equipment, facilities or services or
anything else of value to any candidate for public office or
any political party or committee unless the making of such
contribution is legal in the jurisdiction in which it is
proposed to be made and has been specifically authorized by
the Board.
(d) All assets and liabilities and items of revenue and expense of
the Company and each Group Company must be recorded in its
regular books and records. All payments (other that payments
covered by normal petty cash procedures) on behalf of the
Company or any Group Company of any amounts required by law or
contract to be made shall be made only by check drawn against
a regularly constituted account of the Company or the
appropriate Group Company or other commercially acceptable
means for transfer of funds which is supported by written
evidence.
9.2 The Employee hereby confirms that he has received, read and
understands, and agrees to comply with, the June 1997 Policy
Statement on Securities Trading by PLD Telekom Inc. Personnel,
and has retained a copy of such policy for his reference.
10. ABSENCE, ILLNESS AND INCAPACITY
10.1 If at any time the Employee is prevented by reason of
ill-health, accident or other incapacity from properly
performing his duties he shall promptly furnish to the
Company, if required, evidence of such incapacity in a form
reasonably satisfactory to the Board.
10.2 The Company shall pay the Employee the amounts payable under
Clauses 4.1 and 4.2 for the first 180 days in aggregate in any
calendar year of absence due to illness or other incapacity of
the Employee, but shall not be required to pay the Employee
any salary or other remuneration for any further periods of
such absence in any calendar year, although it may at its
discretion do so.
10.3 The Company shall provide long-term disability coverage which
shall provide for disability payments in an amount not less
than 40% of basic salary commencing after the Employee has
been incapacitated from properly performing his duties for a
period of 180 days.
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<PAGE> 17
11. TERMINATION
11.1 The Company may at any time terminate the Appointment with
immediate effect (or any such longer period of notice as the
Company shall see fit) by giving the Employee written notice
in any of the following events:
(a) If the Employee at the time the notice is given is
prevented by reason of ill health or accident or
other incapacity from properly performing his duties
and has been so prevented (whether by the same or
another reason) for at least a continuous period of
180 days or for an aggregate period of at least 180
days (whether or not, in either case, working days)
in the preceding twelve months:
(b) If the Employee shall have:
(i) been guilty of gross default or gross
misconduct in respect of his duties hereunder
or otherwise as a director or officer of the
Company or any Group Company;
(ii) committed any material breach or
non-observance or, after having been given
warning in writing, any repeated or continued
material breach or material non-observance of
any of his duties or any of his express or
implied obligations arising from the
Appointment or otherwise as a director or
officer of the Company or Group Company
including refusing to comply with any proper,
reasonable and lawful instructions given to
him by the Board and/or the Supervisor;
(iii) been guilty of conduct or permitted or
suffered events tending in the reasonable
opinion of the Board to bring themselves, the
Company or any Group Company into disrepute;
(iv) become prevented by any applicable law or
regulation from continuing as a director or
officer of the Company or performing any of
his duties;
(v) committed any act of fraud or dishonesty
(whether or not connected with the
Appointment) or committed any act which,
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in the reasonable opinion of the Board,
materially and adversely affects his ability
properly to carry out his duties and which is
likely to bring the Company into disrepute;
(vi) become bankrupt or claimed the benefit of any
Act for the time being in force for the
relief of insolvent debtors or proposed or
made any arrangement or composition with
their creditors;
(vii) been convicted of a felony or other crime
involving moral turpitude; or
(viii) become of unsound mind, as certified by a
recognized doctor of psychiatry.
11.2 Upon termination of the Appointment however arising:
(a) The Employee shall, without prejudice for any claim
that may arise out of the termination of this
Appointment, forthwith at the request of the Board
resign as a director of the Company and from all
offices held by him in any Group Company and from all
other appointments or offices which he holds as
nominee or representative of the Company or any Group
Company and, if he fails so to do, the Company is
irrevocably authorized by the Employee to appoint
some person in his name and on his behalf to execute
such documents and to do such other things as are
reasonably necessary to give effect to such
resignations; and
(b) The Employee (or, if he shall be dead, of unsound
mind or bankrupt), his personal representatives or
such other persons as shall be appointed to
administer his estate and affairs shall deliver up to
the Company in accordance with the directions of the
Board all keys, security passes, credit cards,
Documents and other property belonging to or relating
to the businesses or affairs of the Company or any
Group Company, including all copies of all Documents
containing Confidential Information which may be in
his possession or under his control (or that of his
personal representatives or such other persons), and
shall not retain copies, extracts or notes of any of
the same.
18
<PAGE> 19
11.3 The Employee shall have no claim against the Company in
respect of the termination of the Appointment by reason of the
merger, consolidation, continuation, dissolution or
liquidation or the sale of all or substantially all of the
assets of the Company provided that the Employee shall have
first been offered in writing a new appointment with the
successor or surviving company on terms no less favorable to
him than under this Agreement.
12. CHANGE OF CONTROL
12.1 If at any time there shall occur a "Change of Control" as that
term is defined in the Company's 1997 Equity Compensation
Plan, the Employee may at any time terminate this agreement by
giving to the Company not less than three months notice in
writing to that effect.
12.2 In the event of such termination, the Company shall pay the
Employee upon the expiration of such notice, the Termination
Amount but without any obligation to mitigate.
13. NOTICES
Notices by either party:
(a) must be in writing addressed:
(i) to the Company at the address set out in this
Agreement; and
(ii) to the Employee at the address set out in
this Agreement or such other address as may
be notified to the Company from time to time.
(b) will be effectively served:
(i) on the day of receipt, where any
hand-delivered letter or facsimile
transmission is received on a business day
before or during normal working hours;
(ii) on the following business day, where any
hand-delivered letter or facsimile
transmission is received either on a business
day after normal working hours or on any
other day; or
19
<PAGE> 20
(iii) on the fifth business day following the day
of posting to an overseas address of any
prepaid airmail letter.
14. INDEMNITY.
14.1 The Company agrees, for the avoidance of doubt, that in
addition to the protection offered by the By-laws of the
Company, insofar as it is lawfully able, to indemnify the
Employee for all proper and reasonable costs and expenses of
lawyers (including disbursements and applicable taxes)
incurred by the Employee in connection with or in relation to
any claim, action or proceedings brought by any person arising
out of any allegation against the Employee in respect of any
act or omission by him in the course of carrying out his
duties under this Agreement and in which the Employee is a
defendant.
14.2 This indemnity will continue to apply for the period of the
Appointment and for a further period of six years after the
Employee's employment with the Company has come to an end
provided that the Employee:
(a) instructs lawyers approved in writing by the Company;
(b) acts in accordance with their advice;
(c) instructs the lawyers to provide copies of
correspondence and other documentation to the Company
and authorize them to provide any information to the
Company on request;
(d) has not been guilty of gross misconduct or any breach
of contract, or as not been the subject of any of the
other conditions or circumstances set out in Clause
11.1(b) pursuant to which the Company is entitled
summarily to terminate this Agreement; and
(e) has not (after the expiry of the Appointment) acted
in breach of any of his continuing obligations under
this Agreement or any other agreement entered into by
him with the Company.
15. GENERAL
15.1 This Agreement, which contains all the terms of the
Appointment, is in substitution for all contracts between the
Company and any Group Company
20
<PAGE> 21
and the Employee (whether written, oral or governed by a
course of dealings) dated prior to the date hereof which shall
be deemed to have terminated with effect from the Commencement
Date.
15.2 Unless the context of this Agreement clearly requires
otherwise, (a) references to the plural include the singular,
the singular the plural, the part the whole, and (b)
references to one gender include all genders. The section and
other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction
of this Agreement or the interpretation thereof in any
respect.
15.3 The waiver, express or implied, by either Party of any right
under this Agreement or any failure to perform or breach by
the other shall not constitute or be deemed a waiver of any
other right under this Agreement or of the same right on
another occasion.
15.4 No amendment, change or addition to the terms of this
Agreement shall be effective or binding on either Party unless
reduced to writing and executed by both Parties.
15.5 The Employee represents and warrants that, other than as
notified in writing to the Board, he is not a party to any
agreement, contract (whether of employment or otherwise) or
understanding which would in any way restrict or prohibit the
Employee from undertaking or performing any of the duties of
the Appointment in accordance with this Agreement.
15.6 The Employee undertakes not to disclose or communicate any
terms of the Appointment to any other employee of any Group
Company or to any third party (other than for the purpose of
obtaining professional advice or other than as required by
applicable law, including the securities laws and regulations
of the United States).
15.7 Any provision of this Agreement which contemplates or is
capable of operation after the termination of the Appointment
shall apply notwithstanding termination of the Appointment
howsoever arising.
21
<PAGE> 22
15.8 If any provision of this Agreement or application thereof to
anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provisions or
applications of this Agreement which can be given effect
without the invalid or unenforceable provision or application
and shall not invalidate or render unenforceable such
provision in any jurisdiction.
15.9 This Agreement is governed by and is to be construed in
accordance with the laws of the State of New York and the
Parties hereby submit to the non-exclusive jurisdiction of the
courts of the State of New York with respect to all matters
relating to this Agreement.
15.10 The Employee hereby appoints CT Corporation System, 1633
Broadway, New York, NY 10019 for service of process in
connection with legal proceedings in New York and arising
under or in connection with this Agreement.
22
<PAGE> 23
IN WITNESS WHEREOF the Parties have executed this Agreement.
Attest: PLD TELEKOM INC.
s/s DOROTHEA H. HATT By: s/s JAMES R.S. HATT
- ----------------------------- -----------------------
s/s DOROTHEA H. HATT s/s BORIS ANTONIUK
- ----------------------------- --------------------------
Witness Boris Antoniuk
23
<PAGE> 1
EXHIBIT 10.9
28 December 1994
Dear Sirs
Consultancy Arrangement - Mr. Boris Antoniuk
We are writing to you to set out the terms of the consultancy agreement under
which you are to provide the services of Mr. Boris Antoniuk as a director of
Technocom Limited ("the Company") with effect from the date on which the
conditional agreement ("the Share Sale and Purchase Agreement") relating to the
acquisition of 50% of the issued share capital of the Company by Petersburg
Long Distance, Inc. ("PLD") dated 2 November 1994 becomes fully unconditional
("the Commencement Date").
1 Term of Agreement
1.1 Subject as stated in the Shareholder Agreement (as referred to in the
Share Sale and Purchase Agreement) as from the Commencement Date Mr. Antoniuk's
services will be provided to the Company until the later of:
(a) his voluntary resignation or retirement;
(b) either you or Mr. Antoniuk being in material breach of any of
your respective duties under this appointment or otherwise as
a director of the Company such breach not having been remedies
to the satisfaction of the Company within 30 days of the
Company serving notice of such breach on either you or Mr.
Antoniuk; or
(c) the end of the Second Option Period (as defined in the Put and
Call Option Agreement of even date and between PLD and you
referred to in the Shareholder Agreement).
2 Fee and Expenses
2.1 In return for Mr. Antoniuk devoting his full time and attention to the
affairs and management of the Company you will receive fees at the
rate of US$ 108,333 per annum (or such higher sum as may be agreed in
writing from time to time between you and the Board of Directors of
the Company). Such fee will be paid in equal monthly instalments in
arrears.
2.2 The remuneration will be reviewed annually and changes will be
notified by letter.
<PAGE> 2
Elite International Limited -2- 1994
2.3 You will be paid all reasonable travelling, hotel and other expenses
properly incurred by Mr. Antoniuk in or about the performance of his
duties, subject to you having delivered to the Company such form(s)
and vouchers or other evidence of actual payment of such expenses as
the Company may from time to time reasonably require.
2.4 Mr. Antoniuk shall be based primarily in Moscow but, to the extent
required and permitted, shall travel to and work at such other places
as the Board of Directors of the Company may reasonably require.
2.5 In addition to usual public and statutory holidays Mr. Antoniuk shall
be entitled to four weeks' holiday per annum.
3 Governing Law
3.1 This letter agreement shall be governed by and is to be construed in
accordance with English law and including the English rules as to
conflicts of law.
3.2 Each of the parties irrevocably submits tot he non exclusive
jurisdiction of the appropriate court of law in England in relation to
any matters, claims and disputes arising out of in connection with
this letter agreement and (subject as set out below) waives any
objection to legal proceedings being made in such courts whether on
the ground of venue or on the grounds of proceedings being brought in
an inconvenient forum. These submissions shall not limit the rights
of the parties to bring any action in any other court having a claim
to jurisdiction (whether concurrently or not), provided that no
proceedings shall be undertaken by either party in any federal or
state court in the United States of America.
3.3 Technocom Limited hereby appoint Messrs S J Berwin & Co, 222 Grays Inn
Road, London WC1X 8HB, all communications to be marked for the
attention of Mr. R P Burrow and Mr. N A R Williams and Elite
International Limited hereby appoints Messrs. Charles Russell of 8-10
New Fetter Lane, London EC4A 1RS, all communications to be marked for
the attention of Mr. M A C Moncreiffe and Mr. J D Holder, in each case
for service of process in connection with legal proceedings in England
and arising out of or in connection with this Agreement. Please
confirm the acceptance of the terms of your appointment by signing and
returning to us the attached duplicate of this letter agreement.
<PAGE> 1
EXHIBIT 10.10
TECHNOCOM LIMITED
Earlsfort Centre
Hatch Street
Dublin 2
Ireland
November 26, 1997
Dear Sirs:
Re: Consultancy Arrangement - Mr. Boris Antoniuk
We are writing to you to set out the terms of an amendment to the consultancy
agreement dated 28th December 1994 under which you are providing the services
of Mr. Boris Antoniuk.
1. The figure in paragraph 2.1 thereof shall be changed from "US$108,333"
to "US$158,333" effective as of the date hereof.
2. Except as set forth above, all of the other provisions of the
consultancy agreement shall remain in full force and effect, and the
consultancy agreement, as amended hereby, is hereby ratified and confirmed.
Please confirm your acceptance of the foregoing by signing this letter
agreement in the place indicated below.
Yours faithfully,
s/s JAMES R.S. HATT
- --------------------------------------
For and on behalf of Technocom Limited
s/s BORIS ANTONIUK
- ------------------------------------------------
For and on behalf of Elite International Limited
s/ss BORIS ANTONIUK
- ---------------------------------------------
Agreed and acknowledged by Mr. Boris Antoniuk
Date:
<PAGE> 1
EXHIBIT 10.28
AGREEMENT
This agreement is concluded by and between the National Joint Stock
Company "Kazakhtelecom" ("Kazakhtelecom"), and Joint Venture BECET
International, a Closed-type Joint Stock Company under the laws of the Republic
of Kazakhstan ("BECET") and shall proceed and supersede the Agreement between
the Ministry of Communications of the Republic of Kazakhstan and BECET
International, dated February 4, 1994.
ARTICLE 1
Subject of the Agreement
Kazakhtelecom and BECET have hereby agreed on the interconnection of
the cellular network ("CN"), to be created by BECET with the public switched
telephone network ("PSTN") and on mutual settlement for incoming and outgoing
calls and rates of such settlements and on certain additional matters relating
to License No. 61 issued by the Ministry of Communications of the Republic of
Kazakhstan to BECET on February 4, 1994 ("License").
ARTICLE 2
Interconnection with PSTN
In accordance with the Joint Venture agreement dated December 13,
1993, the interconnection of BECET's CN with the PSTN shall be free of charge,
as a portion of the Kazakhstan party's contribution to the Joint Venture.
ARTICLE 3
Rates
Section 3.1. BECET shall pay to the PSTN operators for carriage and
termination of intracity calls from the CN the lowest rate charged by
Kazakhtelecom for such business calls.
Section 3.2. BECET shall pay to the PSTN operators for carriage and
termination of intercity (intra- and inter-oblast') calls from the CN the rate
charged by Kazakhtelecom for intercity business calls, less a discount equal to
the greater of (i) 1/2 (one half) of the difference between the lowest rate
charged by Kazakhtelecom for intercity business calls and the lowest rate
charged by Kazakhtelecom for intercity calls by individuals or (ii) 20% (twenty
percent).
Section 3.3. BECET shall pay to the PSTN operators for carriage and
termination of the international calls from the CN the rate charged by
Kazakhtelecom for international business calls, less a discount equal to the
greater of (i) 1/2 (one-half) of the difference between the lowest rate
charged by Kazakhtelecom for international business calls and the lowest rate
charged by Kazakhtelecom for international calls by individuals of (ii) 15%
(fifteen percent).
<PAGE> 2
Section 3.4. BECET shall withhold from its payments to the PSTN
operators a reasonable percentage (from 5 to 7%) to be agreed, on a basis
consistent with international practice, for billing and collecting services.
Section 3.5. BECET shall inform the operators of PSTN connected to
BECET's CN of the rates to be charged by such operators for calls from PSTNs to
the CN. Such operators shall bill, collect and deliver to BECET the payment
received for such calls terminating on the CN less a reasonable portion thereof
to cover the costs of billing and collection of such call charges.
Section 3.6. With respect to Section 5.4.1. of the License
("Interconnection with the PSTN"), the parties agree that any changes to the
rates in effect in Kazakhstan shall not affect the formulas set forth in
article 3 of this agreement, and that payments to the PSTN operators shall
continue to be made according to the formulas set forth above.
ARTICLE 4
BECET shall establish the rates for all services provided over the CN,
without the prior approval of Kazakhtelecom.
ARTICLE 5
Section 5.1.1. (e) of the License ("Scope of the License") provides
that the Grantee may lease or resell certain excess capacity, with approval by
Kazakhtelecom. The parties thereby understand that Kazakhtelecom shall have an
opportunity to recommend to Grantee possible or preferable lessees or
purchasers of such excess capacity, without otherwise limiting the Grantee's
right to lease or sell excess capacity.
ARTICLE 6
The parties understand that if the Grantee exercises its right of
first refusal in accordance with Section 5.1.3. of the License, Kazakhtelecom
shall issue such license to Grantee and not to any other person; but that
nothing shall preclude Kazakhtelecom from deciding to issue more than one
license at the same time for the same activity, in which case the Grantee's
right of first refusal shall apply to only one such license.
ARTICLE 7
The term of this agreement shall be the term of the License, including
possible extension after the expiration of the initial term of the License.
Disputes hereunder shall be resolved in the manner set forth in the License.
This agreement is concluded on this 28 day of February, 1996 in five
original counterparts, in both English and Russian.
<PAGE> 3
LEGAL ADDRESSES OF THE PARTIES
1. The National JSC Kazaktelecom: 86 Abylay Khan Av., 480091 Almaty,
Kazakhstan Settlement account #425002 in Kazpochtabank, Almaty, code 953,
Registration Number of the Taxpayer 600700017446.
2. The JSC BECET International: 9 Zhurgenev St., 480002 Almaty,
Settlement account #8467286 in the JS Bank Kazkommertsbank, code 724.
For the National JSC "Kazakhtelecom":
s/s YERZHAN K. SAGYNDYKOV
- --------------------------------
Yerzhan K. Sagyndykov
President
For the JSC "BECET International"
s/s ROBERT SMITH
- --------------------------------
Robert Smith
Chairman of the Board
<PAGE> 1
EXHIBIT 10.42
AMENDMENT TO SHAREHOLDERS AGREEMENT
DATED AS OF NOVEMBER 26 , 1997
THIS AMENDMENT ("this Amendment") to the Subscription and
Shareholder Agreement dated 28th December 1994 between the parties hereto (the
"Shareholders Agreement") is entered into as of the date set forth above.
The parties hereto agree as follows:
1. Terms used herein with an initial capital and not otherwise
specifically defined herein shall have the meanings given to them in
the Shareholders Agreement.
2. The definition of the term "the Option Agreements" shall be amended so
as to read hereafter as follows:
"the put and call option agreements to be entered into between
Plicom and PLD and EIL and PLD, each in the agreed form, and
each as may be amended from time to time by the relevant
parties thereto"
3. Clause 5 of, and Schedule II to the Shareholders Agreement shall be
deleted therefrom in their entirety, with effect as of the date
hereof.
4. The proviso at the end of Clause 12.13 shall be deleted therefrom,
with effect as of the date hereof.
5. Clause 12.14 of the Shareholders Agreement shall be amended so as to
read hereafter as follows:
"Each of the parties hereby appoint those persons, details of
which are set out below, in each case for service of process
in connection with legal proceedings in England and arising
out of or in connection with this Agreement:
1
<PAGE> 2
<TABLE>
<CAPTION>
FOR THE
PARTY AGENT ATTENTION OF ADDRESS/FAX
<S> <C> <C> <C>
PLD E. Clive Anderson c/o PLD Telekom Inc.
and Philip R. Eager 680 Fifth Avenue
24th Floor
New York, NY 10019
(212) 262-8870
EIL Charles M. Moncreiffe 8-10 New Fetter Lane
Russell and J. Holder London EC4A 1RS
44 71 203 0202
PLICOM Charles M. Moncreiffe 8-10 New Fetter Lane
Russell and J. Holder London EC4A 1RS
44 71 203 0202
THE COMPANY
A&L Goodbody E. Fitzgerald Pinnacle House
and T. Scanlon 23-26 St. Dunstan's Hill
London EC3R 8HL"
</TABLE>
7. Clause 12.15 of the Shareholders Agreement shall be amended so as to
read hereafter as follows:
Copies of all submissions and requests for consent to be
served pursuant to clauses 4.2 and 5.1 shall also be sent to
PLD at its offices in New York, U.S.A., to Messrs. E. Clive
Anderson and Philip R. Eager, at c/o PLD Telekom Inc., 680
Fifth Avenue, New York, NY 10019, U.S.A.
8. PLD and Technocom, on the one part, and Plicom and the Plicom
Director, on the other part, hereby waive and release any claims which
either of them may have against the other in respect of any breach of
the Shareholders Agreement occurring up to and including the date
hereof.
9. Except as set forth above, all of the other provisions of the
Shareholders Agreement shall remain in full force and effect, and the
Shareholders Agreement, as amended hereby, is hereby ratified and
confirmed by the parties hereto.
2
<PAGE> 3
ATTESTATIONS
Signed by JAMES HATT )s/s JAMES R. S. HATT
For and on behalf of )
PLD TELEKOM INC. )
In the presence of: )s/s DOROTHEA H. HATT
Signed by MARK MONCREIFFE )s/s MARK MONCREIFFE
For and on behalf of )
PLICOM LIMITED )
In the presence of: )s/s VINCENZO JANNI
Signed by )s/s BORIS ANTONIUK
For and on behalf of )
ELITE INTERNATIONAL LIMITED )
In the presence of: )s/s DOROTHEA H. HATT
Signed by JAMES HATT )s/s JAMES R. S. HATT
For and on behalf of )
TECHNOCOM LIMITED )
In the presence of: )s/s DOROTHEA H. HATT
Signed by SUE COZENS AS ATTORNEY FOR )s/s SUE COZENS
MARK KLABIN )
In the presence of: )s/s VINCENZO JANNI
Signed by )s/s BORIS ANTONIUK
BORIS ANTONIUK )
In the presence of: )s/s DOROTHEA H. HATT
3
<PAGE> 1
EXHIBIT 10.46
AMENDMENT TO PUT AND CALL OPTION AGREEMENT
DATED AS OF NOVEMBER 26, 1997
THIS AMENDMENT ("this Amendment") to the Put and Call Option
Agreement dated 28th December 28 1994 between the parties hereto ("the Option
Agreement") is entered into as of the date set forth above.
The parties hereto agree as follows:
1. Terms used herein with an initial capital and not otherwise
specifically defined herein shall have the meanings given to them in
the Option Agreement.
2. The definition of the term "Option Period" shall be amended so as to
read hereafter as follows:
"the period commencing on June 30, 1999 and terminating on the
earlier of June 30, 2119 or the date that the Put Option or
the Call Option, as the case may be, is exercised"
3. The definition of the term "the Option Price" shall be amended so as
to read hereafter as follows:
"the sum of US$ 17,500,000"
4. The definition of the term "the Grantee's Solicitors" shall be amended
so as to read hereafter as follows:
"Morgan, Lewis & Bockius of 4 Carlton Gardens, London SW1Y 5AA"
5. The definition of the term "the Grantor's Solicitors" shall be amended
so as to read hereafter as follows:
"Charles Russell of 8-10 New Fetter Lane, London EC4A 1RS"
6. Clause 2.2 of the Option Agreement shall be amended by (A) the
deletion therefrom of the phrase "after determination of the Option
Price" , (B) the addition of the words "at least" before the words
"seven days' notice", and (C) the addition of
1
<PAGE> 2
the words " such notice to take effect on 30 June 1999 or such other
date as is specified in such notice" after the words "served on the
Grantor".
7. Clause 3.2 of the Option Agreement shall be amended by (A) the
deletion therefrom of the phrase "after determination of the Option
Price" , (B) the addition of the words "at least" before the words
"seven days' notice", and (C) the addition of the words " such notice
to take effect on 30 June 1999 or such other date as is specified in
such notice" after the words "served on the Grantee".
8. The opening paragraph of Clause 4.1 of the Option Agreement shall be
amended so as to read hereafter as follows:
"Completion of the purchase and sale of the Option Shares
pursuant to the exercise of the Call Option shall take place
at the offices of the Grantee's Solicitors (or such other
place as the parties shall mutually agree) on the date
specified in the notice referred to in clause 2.2 when:"
and the words "or shall deliver the Note (as hereinafter
defined) to the Grantor" shall be deleted therefrom.
9. Clause 5 of the Option Agreement shall be amended so as to read
hereafter as follows:
"Completion of the transfer or sale of the Option Shares
pursuant to the exercise of the Put Option shall take place at
the offices of the Grantee's Solicitors (or at such other
place as the parties shall mutually agree) on the date
specified in the notice referred to in clause 3.2 when the
Grantee shall pay or procure the payment to the Grantor (or as
the Grantor may direct) of the Option Price; and on payment of
the Option Price the Grantee's Solicitors shall release to the
Grantee the documents delivered to them to hold to the order
of the Grantor pursuant to the terms of clause 3.2."
10. Article 9 of the Option Agreement shall be deleted therefrom in its
entirety.
11. Article 10 of the Option Agreement shall be deleted therefrom in its
entirety.
12. Clause 11.5 of the Option Agreement shall be amended so as to read
hereafter as follows:
2
<PAGE> 3
"Copies of all notices served on the Grantee must also be
served by facsimile transmission to E. Clive Anderson, c/o PLD
Telekom Inc., 680 Fifth Avenue, New York, NY 10019, U.S.A.
(1-212-262-8870) and copies of all notices served on the
Grantor must also be served by facsimile transmission to
Messrs Charles Russell, 8-10 New Fetter Lane, London EC4A 1RS,
marked for the attention of Mr M. Moncrieffe and Miss S.
Cozens (44 171 203 0202)."
13. The proviso at the end of Clause 11.7 shall be deleted therefrom, with
effect as of the date hereof.
14. Clause 11.8 of the Option Agreement shall be amended so as to read
hereafter as follows:
"The Grantee hereby appoints E. Clive Anderson, c/o PLD
Telekom Inc., 680 Fifth Avenue, New York, NY 10019, U.S.A.,
and the Grantor hereby appoints Messrs Charles Russell of 8-10
New Fetter Lane, London EC4A 1RS, England, all communications
to be marked for the attention of Mr M. Moncrieffe and Mr J.
Holder, in each case for service of process in connection with
legal proceedings in England and arising out of or in
connection with this Agreement."
15. Except as set forth above, all of the other provisions of the Option
Agreement shall remain in full force and effect, and the Option
Agreement, as amended by this Amendment, is hereby ratified and
confirmed by the parties hereto.
ATTESTATIONS
Signed by Mark Moncreiffe ) s/s MARK MONCREIFFE
For and on behalf of )
PLICOM LIMITED ) s/s VINCENZO JANNI
In the presence of: )
Signed by ) s/s JAMES R.S. HATT
For and on behalf of )
PLD TELEKOM INC. ) s/s DOROTHEA H. HATT
In the presence of: )
3
<PAGE> 1
EXHIBIT 10.47
AMENDED AND RESTATED PUT AND CALL OPTION AGREEMENT
DATED AS OF NOVEMBER 26, 1997
PARTIES
1) PLD TELEKOM INC. (a company incorporated in the State of Delaware, U.S.A.)
whose registered office is at 1209 Orange Street, Wilmington, Delaware
18901, U.S.A. ("the Grantee"); and
2) ELITE INTERNATIONAL LIMITED (a company incorporated under the Irish
Companies Acts 1963 to 1990 with registered number 178152) whose registered
office is at First Floor, 14-15 Parliament Street, Dublin 2, Ireland ("the
Grantor", such term to include any permitted transferee).
RECITALS
The parties hereto are parties to a Put and Call Option Agreement dated 28
December 1994, and desire to amend and restate its provisions as hereinafter
set forth.
OPERATIVE PROVISIONS
1 DEFINITIONS
1.1 In this Agreement unless the context otherwise requires the following
expressions shall bear the meanings shown:
Business Day a day, other than a Saturday, on
which banks in each of the City of
London, Vienna, Toronto, Dublin and
Moscow generally are open for normal
banking business
the Call Options the rights granted to the Grantee
pursuant to Clause 2 to purchase or
procure the purchase of Option
Shares at the applicable Option
Price during the applicable Option
Period
the Company Technocom Limited, a private company
limited by shares incorporated under
the Companies Acts, 1963 to 1990 of
Ireland whose registered number is
183622 and with its registered
office at First Floor, 14-15
Parliament Street, Dublin 2, Ireland
1
<PAGE> 2
Completion the performance by the parties
hereto of their respective
obligations under Clause 4 or 5
the First Call
Option the right granted to the Grantee
pursuant to subclause (A) of Clause
2.1 to acquire two (2) Ordinary
Shares from the Grantor
the First Option
Period the period commencing on June 30,
1998 and ending on the earlier of:
(i) June 30, 2119 and (ii) the date
on which the First Put Option or the
First Call Option, as the case may
be, is exercised
the First Option
Price the price for the First Option
Shares calculated in accordance
with Clause 9.1
the First Option
Shares the two (2) Ordinary Shares which
are the subject of the First Put
Option and the First Call Option
the First Put
Option the right granted to the Grantor
pursuant to subclause (A) of Clause
3.1 to require the Grantee to
purchase two (2) Ordinary Shares
the Grantee's
Solicitors Morgan, Lewis & Bockius, of 4
Carlton Gardens, London SW1Y 5AA
the Grantor's
Solicitors Charles Russell currently of 8-10
New Fetter Lane, London EC4A 1RS, or
such other firm of solicitors as the
Grantor may hereafter notify the
Grantee in writing
Option Period the First Option Period or the
Second Option Period, as applicable
Option Shares any of the ten (10) Ordinary Shares
which are the subject of the Put
Options and the Call Options
Ordinary Shares ordinary shares in the capital of
the Company
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<PAGE> 3
the Put Options the rights granted to the Grantor
pursuant to Clause 3 to require the
Grantee to purchase or procure the
purchase of Option Shares at the
applicable Option Price during the
applicable Option Period
Reorganization in relation to the Company includes
every issue by way of capitalization
of profits or reserves and every
issue by way of rights and every
consolidation or sub-division or
reduction of capital or capital
dividend or other reconstruction or
adjustment relating to the equity
share capital (or any shares or
securities derived therefrom) and
any amalgamation or reconstruction
affecting the equity share capital
(or any shares, stocks or securities
derived therefrom)
the Second Call
Option the right granted to the Grantee
pursuant to subclause (B) of Clause
2.1 to acquire eight (8) Ordinary
Shares from the Grantor
the Second Option
Period the period commencing on June 30,
1999 and ending on the earlier of:
(i) June 30, 2119 and (ii) the date
on which the Second Put option or
the Second Call Option, as the case
may be, is exercised
the Second Option
Price the price for the Second Option
Shares calculated in accordance
with Clause 9.2
the Second Option
Shares the eight (8) Ordinary Shares which
are the subject of the First Put
Option and the First Call Option
the Second Put
Option the right granted to the Grantor
pursuant to subclause (B) of Clause
3.1 to require the Grantee to
purchase eight (8) Ordinary Shares
1.2 Reference to clauses and the parties are respectively to clauses of and
the parties to this Agreement.
3
<PAGE> 4
1.3 References to documents in the agreed form are to documents initialled
for the purpose of identification only by the Grantee's Solicitors and
the Grantor's Solicitors.
2 THE CALL OPTIONS
2.1 In consideration of the sum of pound sterling 1 (receipt of which the
Grantor acknowledges) the Grantor grants to the Grantee (A) the right
exercisable during the First Option Period to purchase two (2) Ordinary
Shares at the First Option Price, and (B) the right exercisable during
the Second Option Period to purchase eight (8) Ordinary Shares at the
Second Option Price.
2.2 The First Call Option shall be exercisable at any time during the First
Option Period and the Second Call Option shall be exercisable at any time
during the Second Option Period, in either case by notice in writing of
exercise served on the Grantor.
2.3 All Option Shares shall be sold free from all liens, charges and
encumbrances and with all rights attached thereto at the date of such
exercise.
3 THE PUT OPTIONS
3.1 In consideration of the sum of pound sterling 1 (receipt of which the
Grantee acknowledges) the Grantee grants to the Grantor (A) the right
exercisable during the First Option Period to require the Grantee to
purchase two (2) Ordinary Shares at the First Option Price, and (B) the
right exercisable during the Second Option Period to require the Grantee
to purchase eight (8) Ordinary Shares at the Second Option Price.
3.2 The First Put Option shall be exercisable at any time during the First
Option Period and the Second Put Option shall be exercisable at any time
during the Second Option Period, in either case by notice in writing of
exercise served on the Grantee, and the documents listed in clause 4.1(b)
hereof duly executed but undated shall be delivered to the Grantee's
Solicitors, to be held to the order of the Grantor pending payment of the
applicable Option Price.
3.3 All Option Shares shall be sold free from all liens, charges and
encumbrances and with all rights attached thereto at the date of such
exercise.
4 COMPLETION OF THE CALL OPTION
4.1 Completion of the purchase and sale of any Option Shares pursuant to the
exercise of the First or Second Call Option shall take place at the
offices of the Grantee's Solicitors (or at such other place as the
parties shall mutually agree). In the case of the First Call Option,
Completion shall take place on such date as the Grantor and the Grantee
shall agree, but in all events not later than ten Business Days after the
Grantor shall have received the notice of exercise. In the case of the
Second Call
4
<PAGE> 5
Option, Completion shall take place on the date specified in Clause
9.2(e). At either such Completion:
(a) the Grantee shall either pay or procure the payment
by telegraphic transfer to the Grantor (or as the
Grantor may direct) of the applicable Option Price
for the Option Shares being acquired (or, in respect
of the First Call Option, in the event that the
Grantor shall elect pursuant to Clause 9.1 to receive
the Additional Consideration Shares (as defined
therein) in lieu of cash, the Grantee shall deliver
to the Grantor the share certificates for the
Additional Consideration Shares (legended as required
pursuant to the United States securities laws) and
such other documents as shall be required to vest
title to the Additional Consideration Shares with the
Grantor ); and
(a) the Grantor shall deliver to the Grantee:
(i) duly executed but undated stock
transfer forms in respect of the
Option Shares being purchased by the
Grantee together with the relative
share certificates or, to the extent
that the Grantor can so provide,
such other documents as shall be
required to vest title to the Option
Shares being purchased with the
Grantee or its designee, and, if it
is taking the Additional
Consideration Shares, an undertaking
satisfactory to the Grantee that it
is taking such Shares for investment
purposes only and not with a view to
the distribution thereof; and
(i) to the extent that the Grantor can
so provide, such other deeds and
documents and opinions of Counsel as
may be necessary to transfer to the
Grantee or its designee or as it may
direct the unencumbered beneficial
ownership of the Option Shares being
purchased.
4.2 If the Grantor makes default in transferring any of the Option Shares as
aforesaid the Directors of the Company shall be entitled to receive and
give a good discharge for the Option Price payable for such Option Shares
on behalf of the Grantor (but shall not be bound to earn any interest
thereon) and the Grantor hereby irrevocably appoints such one of the
Directors of the Company as the Grantee shall nominate in writing as the
Grantor's attorney to execute on its behalf the transfer or transfers of
the Option Shares in favour of the Grantee (or as the Grantee may direct)
and such other documents as may be necessary to transfer title to such
Option Shares to the Grantee (or as the Grantee may direct) and hereby
authorizes the Directors of the
5
<PAGE> 6
Company to approve the registration of such transfer or transfers or such
other documents.
4.3 The Grantor shall (so far as it is able) procure the Grantee or its
designee will be registered as the holder of any Option Shares being
purchased.
4.4 Any payments by the Grantee under the First or Second Put Options or the
First or Second Call Options shall be made free and clear of all
withholdings and deductions, howsoever arising.
5 COMPLETION OF THE PUT OPTION
Completion of the transfer or sale of any Option Shares pursuant to the
exercise of the First or the Second Put Option shall take place at the
offices of the Grantee's Solicitors (or at such other place as the
parties shall mutually agree). In the case of the First Put Option,
Completion shall take place on such date as the Grantor and the Grantee
shall agree, but in all events not later than ten Business Days after the
Grantee shall have received the notice of exercise. In the case of the
Second Put Option, Completion shall take place on the date specified in
Clause 9.2(e). At either such Completion the Grantee shall take the
actions specified in Clause 4.1(a), and upon such actions having been
taken, the Grantee's Solicitors shall release to the Grantee the
documents delivered to them to hold to the order of the Grantor pursuant
to the terms of Clause 3.2.
6 EFFECTS OF A REORGANIZATION
6.1 If any Reorganization shall take place after the date hereof all the
shares, stock and other securities (if any) which shall have become owned
by the Grantor or successors in title as a result of each such
Reorganization and which shall derive (whether directly or indirectly)
from the Option Shares shall be deemed to be subject to an exercise of
either the First or Second Call Options or the First or Second Put Option
(as the case may be) and shall be transferred or sold to the Grantee (or
as the Grantee may direct) in accordance with Clause 2 or 3 (as the case
may be).
6.2 References in this Agreement to the Option Shares shall be so construed
as to give full effect to this Clause 6.
7 PROHIBITION ON DISPOSAL
Subject to the terms of a Shareholder Agreement relating to the Company
entered into on 28 December 1994 and made between inter alia the Grantor
and the Grantee, as heretofore amended or supplemented ("the Shareholder
Agreement"), and notwithstanding the provisions of Clause 6, while either
the First Call Option or the Second Call Option remains exercisable the
Grantor shall not, without the prior written consent of the Grantee,
sell, transfer or otherwise dispose of (including
6
<PAGE> 7
without prejudice to the generality of the foregoing accept an offer made
to all holders for the class or classes of securities to which the
applicable Option Shares belong) or mortgage, charge, pledge or otherwise
encumber any of the Option Shares or any interest therein subject to the
applicable Call Option.
8 GRANTOR'S WARRANTIES
8.1 The Grantor warrants to the Grantee that it is and will remain until the
exercise of either the First Call Option or the First Put Option (as the
case may be) or the expiry of the First Option Period (whichever is the
later), the beneficial owner of the First Option Shares, subject only to
such Options, that it is and will remain until the exercise of either the
Second Call Option or the Second Put Option (as the case may be) or the
expiration of the Second Option Period (whichever is the later), the
beneficial owner of the Second Option Shares, subject only to such
Options, and that it has and will have full power and authority to grant
Options in respect of the same upon the terms and conditions of this
Agreement.
8.2 The Grantee warrants to the Grantor that it has and will have full power
and authority to execute and comply with the terms and conditions of this
Agreement.
9 THE OPTION PRICES
9.1 The First Option Price shall be US $1,000,000 or, if the Grantor so
elects in its notice of exercise of the First Option, that amount of
shares of common stock of the Grantee (the "Additional Consideration
Shares") which results from dividing the sum of $1,000,000 by the lesser
of: (i) $5.85 and (ii) the average closing price of the Grantee's common
stock over the ten trading days prior to the applicable Completion date.
In the event that the Grantor shall elect to take the Additional
Consideration Shares, the Grantor and/or any other party in whose name
the Additional Consideration Shares may be issued shall give an
undertaking satisfactory to the Grantee that such Shares are being taken
for investment purposes only and not with a view to the distribution
thereof, and all certificates for Additional Consideration Shares shall
be appropriately legended to comply with the United States securities
laws.
9.2 The Second Option Price shall be calculated and paid as follows:
(a) Within thirty (30) days after the exercise of the Second Call Option
or the Second Put Option, as the case may be, the Grantee shall
deliver to the Grantor its valuation of the entire issued ordinary
share capital of the Company (the "Valuation"). The Valuation, as
determined by the Grantee, shall be conclusive and binding upon the
Grantor for all purposes hereof and the Grantor's sole rights in
respect thereof shall be as specifically set forth hereinafter.
7
<PAGE> 8
(b) If the Valuation shall be less than US $111,000,000, then the
Second Option Price shall be US $6,689,655. If the Valuation shall
be more than US $145,000,000, then the Second Option Price shall be
US $9,620,689. Under no circumstances shall the Second Option Price
exceed US $9,620,689.
(c) If the Valuation shall be between US $111,000,000 and US
$145,000,000, then the Second Option Price shall be the amount
which results from the following calculation:
US $6,689,655 plus US $2,931,034 multiplied by the Valuation less 111,000,000
------------------------------
divided by 34,000,000
(d) Following the finalization of the Second Option Price as set forth
above, both parties shall be obligated to proceed to the Completion
of the purchase and sale of the Second Option Shares.
(e) Completion of the purchase and sale of the Second Option Shares
pursuant to the exercise of either the Second Call Option or the
Second Put Option shall take place in the manner provided in Clauses
4.1 and 5, as the case may be, on the ninetieth (90th) day following
the delivery of the Valuation to the Grantor (the "Due Date"), at
which time the actions specified in such Clauses shall be taken.
10 GENERAL
10.1 No amendment, change or addition hereto shall be effective or binding on
either party unless reduced to writing and executed by both parties.
10.2 This Agreement and the rights hereunder may not be assigned in whole or
in part to any company or person, save that the Grantor may assign its
rights to a Member of the same Group (as that term is defined in the
Shareholder Agreement) as the Grantor.
10.3 The headings to clauses of this Agreement are for ease of reference only
and do not form part of this Agreement and are not in any way to affect
its construction.
10.4 Any notice to be given under this Agreement:
(a) must be in writing;
(b) may be given to the Grantor at its registered office (or such
other address as it may notify to the Grantee for such
purpose);
(c) may be given to the Grantee at its registered office (or such
other address as it or its assignee may notify to the Grantor
for such purpose); and
8
<PAGE> 9
(d) will be effectively served:
(i) on the day of receipt, where any hand
delivered letter, telex or telefax message is
received on any Business Day before or during
normal working hours;
(ii) on the following Business Day, where any hand
delivered letter, telex or telefax message is
received either on an Business Day after
normal working hours or on any day which is
not a Business Day; or
(iii)on the second Business Day following the day of
posting, upon despatch from within the United
Kingdom of any posted letter by post office
inland first class mail postage prepaid, or
the fifth Business Day following the day of
posting of any letter sent by air mail
postage prepaid, and in proving such service
it shall only be necessary to prove that the
same was stamped, properly addressed and
posted as aforesaid.
10.5 Copies of all notices served on the Grantee must also be served by
facsimile transmission sent to 680 Fifth Avenue, New York, New York
10019, U.S.A., marked for the attention of Mr. E. Clive Anderson and Mr.
Philip Eager (1-212-262-8870) and copies of all notices served on the
Grantor must also be served by facsimile transmission sent to Messrs.
Charles Russell of 8-10 New Fetter Lane, London EC4A 1RS marked for the
attention of Mr. M. Moncreiffe and Mr. J. Holder (44-71-203-0202).
10.6 This Agreement is governed by and is to be construed in accordance with
English Law, including its rules as to the conflict of laws.
10.7 Each of the parties irrevocably submits to the non-exclusive jurisdiction
of the appropriate court of law in England in relation to any matters
arising out of or in connection with this Agreement and waives any
objection to legal proceedings being made in such courts whether on the
ground of venue or on the ground that such proceedings have been brought
in an inconvenient forum. These submissions shall not limit the rights
of the parties to bring any action in any other court having or claiming
jurisdiction (whether concurrently or not), provided that no proceedings
shall be undertaken by either party in any federal or state court in the
United States of America.
10.8 The Grantee hereby appoints Messrs. Morgan, Lewis & Bockius, of 4 Carlton
Gardens, London SW1Y 5AA all communications to be marked for the
attention of Mr. Thomas J. Benz and the Grantor hereby appoints Messrs.
Charles Russell of 8-10 New Fetter Lane, London EC4A 1RS all
communications to be marked for the attention of Mr. M. Moncreiffe and
Mr. J. Holder in each case for service of process
9
<PAGE> 10
in connection with legal proceedings in England and arising out of or in
connection with this Agreement.
10.9 In the event that any legal action in respect of this Agreement is
started, the process by which it is started may be served on the
defendant or, if specified in this Agreement, any other person on its
behalf at the place at which and in the manner in which notices may be
given to that party.
10
<PAGE> 11
ATTESTATIONS
Executed as a Deed by )
PLD TELEKOM INC. )
acting by: )
Director s/s JAMES R.S. HATT
Director s/s SIMON EDWARDS
Given under the Common Seal of )
ELITE INTERNATIONAL LIMITED )
acting by: )
Director s/s BORIS ANTONIUK
Secretary s/s TATIANA SALTANOVA
11
<PAGE> 1
EXHIBIT 10.48
DATED 26TH NOVEMBER 1997
PLICOM LIMITED (1)
TECHNOCOM LIMITED (2)
PLD TELEKOM INC. (3)
MARK KLABIN (4)
---------------------------------
SHARE PURCHASE AGREEMENT
---------------------------------
<PAGE> 2
THIS AGREEMENT is dated 26th November 1997
and made BETWEEN
(1) PLICOM LIMITED (a company incorporated under the Irish Companies Act
1963 to 1990 with registered number 214427) whose registered office
is at First Floor, 14-15 Parliament Street, Dublin 2, Ireland ("the
Vendor");
(2) TECHNOCOM LIMITED (a company incorporated under the Irish Companies
Acts 1963 to 1990 with registered number 183622) whose registered
office is at 1 Earlsfort Centre, Hatch Street, Dublin 2, Ireland,
and whose particulars are as set forth in Schedule I hereto
("Technocom");
(3) PLD TELEKOM INC. (previously named "Petersburg Long Distance Inc.")
(a company incorporated in the State of Delaware, U.S.A.) whose
registered office is at 1209 Orange Street, Wilmington, Delaware
18901, U.S.A. ("the Purchaser"); and
(4) MARK KLABIN of Rauhensteingasse 10, Vienna, AIO-10, Austria ("Mr.
Klabin")
WHEREAS:
(A) The Vendor owns Fifty-Nine (59) Ordinary Shares of Technocom which
it holds subject to the Subscription and Shareholders Agreement
relating to Technocom dated 28th December 1994, as heretofore
amended or supplemented (the "Shareholder Agreement"); and
(B) The Purchaser desires to acquire, and the Vendor desires to sell
Thirty (30) of such Ordinary Shares, subject to all of the terms and
conditions of this Agreement.
NOW IT IS HEREBY AGREED as follows:
1.1 INTERPRETATION
In this Agreement (including the Introduction and Schedules), unless
the context otherwise requires, the following words and expressions
have the meanings shown:
<TABLE>
<S> <C>
Board the board of directors of Technocom
Business Day a day, other than a Saturday or Sunday, on
which banks in each of the cities of Dublin,
New York and London generally are open for
normal banking business
the Completion Date November 26, 1997
</TABLE>
1
<PAGE> 3
<TABLE>
<S> <C>
Elite Elite International Limited
a Member of the same Group means, as regards any company, a company
which is for the time being a holding company
of that company or a subsidiary of that
company or any such holding company
the Parties the parties to this Agreement
the Shares the thirty (30) Ordinary Shares of Technocom
being purchased by the Purchaser
from the Vendor hereunder
the Vendor's Solicitors Charles Russell of 8-10 New Fetter Lane,
London EC4A 1RS
Warranties the warranties, representations and
undertakings given in Clause 5
</TABLE>
1.2 All references to statutory provisions or enactments shall include
references to any amendment, modification or re-enactment of any
such provision or enactment, and to any regulation or order made
under such provision or enactment (in any case before the date of
this Agreement).
1.3 The term "holding company" shall have the meaning attributed to it
in sections 736 and 736A of the United Kingdom Companies Act 1985
(as amended) and a company or other entity shall be a "subsidiary"
for the purposes of this Agreement if it falls within any of the
meanings attributed to a "subsidiary" in such sections or the
meaning attributed to the term "subsidiary undertaking" in section
258 of such Act, and a company shall be an "associate" if it falls
within the meaning attributed to an "associated undertaking" in
paragraph 20 of Schedule 4A to such Act and the terms
"subsidiaries", "associates" and "holding companies" are to be
construed accordingly.
1.4 References in this Agreement and the Schedules to the Parties, the
Introduction, Schedules and Clauses are references respectively to
the Parties, the Introduction and Schedules to and Clauses of this
Agreement.
1.5 Save where the context specifically requires otherwise, words
importing one gender shall be treated as importing any gender, words
importing individuals shall be treated as importing corporations and
vice versa, words importing the singular shall be treated as
importing the plural and vice versa, and words importing the whole
shall be treated as including a reference to any part thereof.
1.6 Clause and paragraph headings are inserted for ease of reference
only and shall not
2
<PAGE> 4
affect construction.
1.7 For the avoidance of doubt, any references in this Agreement to a
statutory and other regulatory provision in force in the United
Kingdom or the Republic of Ireland (as the case may be) shall,
unless the context otherwise requires, also include a reference to
the equivalent or analogous provision under Irish, English or other
law applicable to the relevant company.
1.8 Reference to a document "in the agreed form" shall be to a document
in a form agreed between the Parties and initialled for purposes of
identification only by the Vendor's Solicitors (on behalf of the
Vendor and Mr Klabin) and E. Clive Anderson (on behalf of the
Purchaser and Technocom).
2. SALE AND PURCHASE OF THE SHARES
The Vendor shall sell the Shares with effect from Completion and the
Purchaser (relying on the representations, warranties and
undertakings contained herein on the part of the Vendor and the
fulfillment of all conditions to such purchase contained herein)
shall purchase the Shares with any dividends, distributions and
rights declared, created or arising on or after the Completion Date,
and free from all claims, charges, liens, encumbrances, options,
rights of pre-emption or equities.
3. CONSIDERATION
In consideration of the sale of the Shares in accordance with the
terms of this Agreement, the Purchaser shall pay to the Vendor at
Completion the sum of US$18,500,000 (eighteen million five hundred
thousand US dollars) in cash by telegraphic transfer to an account
or accounts nominated by the Vendor.
4. COMPLETION
4.1 Completion shall take place at the offices of the Vendor's
Solicitors (or any other location agreed upon by the Vendor and the
Purchaser) on the Completion Date.
4.2 At Completion:
(a) the Vendor shall deliver (where appropriate as agent for
Technocom) to the Purchaser:
(i) a transfer in respect of the Shares duly executed
by the Vendor in favour of the Purchaser or as it
may direct;
(ii) a certificate for the Shares and any other
documents which may be required to give good title
to the Shares and to enable the Purchaser to
procure registration of the same in its name or as
it may direct;
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<PAGE> 5
(iii) the resignation in the agreed form of Mr Klabin as
Managing Director (but not as a director) of
Technocom, together with documentation in the
agreed form (A) directing the banks in which
Technocom has accounts that his authority to
execute cheques, notes, payment orders and other
similar payment directions to such banks is
terminated, and (B) acknowledging that any and
all other authority that he may have or have had to
execute documents on behalf of, or to bind or
commit Technocom, is similarly terminated; and
(iv) the approval in the agreed form of Mr Klabin of the
accounts of Rosh Telecom Limited for 1996 and the
termination of the US$ 6,000 monthly retainer
currently being paid to Professor Krotov (or to
Rosh Petersburg on his behalf);
(b) the Purchaser shall deliver the sum of US$ 18,500,000 by
telegraphic transfer to the account(s) nominated by the
Vendor;
(c) the Purchaser shall deliver to the Vendor a promissory note
in the form attached hereto as Schedule II;
(d) the Parties shall procure the passing of resolutions of
the Board resolving:
(i) to register the share transfer referred to in
subclause (a) (i) above, subject only to due
stamping;
(ii) to approve a three year business plan for Technocom
and its subsidiaries, including capital and
operating budgets; and
(ii) to approve the Technocom accounts for 1994, 1995
and 1996;
(e) the Parties shall (and shall procure, so far as they are so
able, that the other parties thereto) execute an amendment
to the Shareholder Agreement in the agreed form which shall
provide that:
(i) the parties appointed by PLD pursuant to clause
12.14 thereof shall be E. Clive Anderson and Philip
R. Eager, c/o PLD Telekom Inc., 680 Fifth Avenue,
New York, NY 10019, U.S.A. in place of R. P.
Burrow and N.A.R. Williams of SJBerwin & Co.;
(ii) copies of the items referred to in clause 12.15
shall thereafter be sent to the persons named in
subclause (e) (i) above, and shall no longer be
sent to Mr Roger Blott or PLD's Solicitors;
(iii) Clause 5 and Schedule II thereto shall be deleted
therefrom in their entirety;
(iv) the following words shall be added to the
definition of the term "the Option Agreements" :
4
<PAGE> 6
", each as may be amended from time to time by
the relevant parties thereto";
(v) each of the Purchaser, on the one hand, and the
Vendor and Mr Klabin, on the other, shall waive any
claims it may have against the other in respect of
a breach thereunder occurring before the Completion
Date; and
(vi) the proviso at the end of clause 12.13 shall be
deleted therefrom;
(f) the Vendor and the Purchaser shall execute an amendment in
the agreed form to the Put and Call Option Agreement dated
28th December 1994 ("the Put and Call Option Agreement")
which shall provide for:
(i) the amendment of the definition of the term "Option
Period", so that such term thereafter shall be
defined as:
"the period commencing on June 30, 1999 and
terminating on the earlier of June 30, 2119 or the
date that the Put Option or the Call Option, as the
case may be, is exercised";
(ii) the amendment of the definition of the term "the
Grantee's Solicitors", so that such term thereafter
shall be defined as:
"Morgan, Lewis & Bockius of 4 Carlton
Gardens, London SW1Y 5AA";
(iii) the amendment of the definition of the term "the
Grantor's Solicitors", so that such term thereafter
shall be defined as:
"Charles Russell of 8-10 New Fetter Lane,
London EC4A 1RS";
(iv) the amendment of each of Clauses 2.2 and 3.2 as
follows:
(A) the deletion of the phrase "after
determination of the Option Price";
(B) the addition of the words "at least"
before "seven days' notice"; and
(C) the addition of the words "such notice
to take effect on 30 June 1999 or such
other date as is specified in such
notice" after the words "served on the
Grantee" or "served on the Grantor",
as applicable;
(v) the amendment of Clauses 4.1 and 5 so as to provide
that in either
5
<PAGE> 7
case Completion shall take place at the offices of
the Grantee's Solicitors (or at such other place as
the parties shall mutually agree), and the further
amendment of Clause 4.1 so as to provide that the
words in the first paragraph "or, if later, seven
days following notification to the parties of the
Value (as hereinafter defined)" and the words in
Clause 4.1(a) "or shall deliver the Note (as
hereinafter defined) to the Grantor "are all
deleted;
(vi) the deletion in its entirety of Article 9 and the
amendment of the definition of the term "Option
Price" so as to read thereafter as "the sum of US$
17,500,000";
(vii) the deletion in its entirety of clause 10 thereof;
(viii) the amendment of clause 11.5 thereof to provide
that the copies of notices served on the Grantee
shall henceforth be sent to E. Clive Anderson, c/o
PLD Telekom Inc., 680 Fifth Avenue, New York, NY
10019, U.S.A., in lieu of the parties named
therein, and of clause 11.8 thereof to provide that
the party appointed by the Grantee shall henceforth
be the party named in this subparagraph in lieu of
the parties named therein; and
(ix) the deletion of the proviso at the end of clause
11.7 thereof;
(g) Technocom, the Vendor and Mr Klabin shall execute an
amendment in the agreed form to the Consultancy Agreement
between them dated 28th December 1994 ("the Consulting
Agreement") which shall provide for (1) the figure in
paragraph 2.1 thereof to be changed from "$100,000" to
"$200,000" effective as of the Completion Date, (2)
the Consulting Agreement to terminate once the Purchaser
shall have acquired all of the shares in the capital of
Technocom held by the Vendor, and (3) Mr Klabin to
undertake, in addition to his existing duties, to:
(i) analyze and make recommendations to the Board
regarding all proposed installations of antennae or
other facilities for the Technocom's and
Teleport-TP's "Satelink" network;
(ii) use his reasonable endeavors (without incurring any
personal liability to make payment) to procure that
Technocom subsidiaries (which term as used herein
shall include Teleport-TP, MTR-Sviaz and JV
Technopark), become and remain current in respect of
their monetary obligations (of whatever kind) to
Technocom;
(iii) if and when requested by the Board, use his
reasonable endeavors (without incurring any personal
liability to make payment) to procure the transfer
to such location(s), account(s) and/or personnel as
the
6
<PAGE> 8
Board shall designate of such management, treasury,
accounting, banking or other functions then being
conducted by or on behalf of Technocom in Vienna,
Austria, and/or of such funds or other property of
Technocom or any of its subsidiaries, wherever
located, which are under his control;
(iv) consent to the appointment of Mr Simon Edwards as an
additional signatory for all bank accounts of
Technocom, with authority to sign cheques and
authorize other payments;
(v) assist the Purchaser in having those personnel
appointed by the Purchaser to act as Technocom's
Finance Director, Director of Sales and Marketing,
and Chief Operating Officer also appointed to act in
the same capacities for the Technocom subsidiaries,
with the proper authority to perform those
functions, subject in all cases to the direction of
the boards of directors of such Technocom
subsidiaries, and in recovering the cost to the
Purchaser of having such persons act in such
capacities for such Technocom subsidiaries;
(vi) take whatever steps are necessary as a director of
Technocom, and procure that the Vendor takes
whatever steps are necessary as a shareholder of
Technocom, to ratify and confirm as obligations of
Technocom all advances heretofore made by the
Purchaser to Technocom, and authorize the borrowing
by Technocom of an additional US$ 9,000,000
simultaneously with or immediately following
Completion, and a further US$ 8,000,000 as promptly
as practicable following the Completion, to be used
in whole or in part by Technocom to repay advances
already made by the Purchaser to Technocom, and/or
to reimburse the Purchaser for payments already made
by the Purchaser on Technocom's behalf;
(vii) carry out the other duties and responsibilities set
forth in Schedule III hereto;
provided that, in respect of all of the foregoing, Mr
Klabin shall not be obliged to take any action which is
contrary to ANY applicable law or any decision of the
board of directors, or any provision of the charter
documents, of the relevant company, and shall not be
involved with or responsible for the day to day operation
and/or management of Technocom or any Technocom
subsidiaries; and provided further that Mr Klabin shall
not be liable for any deficiency in performance in respect
of the foregoing additional duties except in the case of
wilful default or gross negligence.
4.3 If for any reason the provisions of Clause 4.2 are not fully
complied with by reason of default on the part of the Vendor or Mr
Klabin, the Purchaser shall be entitled to elect, by giving written
notice to the Vendor and/or Mr Klabin:
7
<PAGE> 9
(a) to terminate this Agreement (other than Clause 7.2) in which
case the Purchaser shall not be obliged to purchase the
Shares, pay any of the Consideration or perform any of its
other obligations under Clause 4.2 (and the Vendor and Mr
Klabin shall be released from all further obligations
hereunder other than Clause 7.2); or
(b) to fix a new date for Completion within 28 days of the date
originally set for Completion; or
(c) to proceed to Completion so far as practicable, the Vendor
then being obliged to use its reasonable endeavours to
perform or procure the performance of any of the outstanding
provisions of Clause 4.2.
4.4 If for any reason the provisions of Clause 4.2 are not fully
complied with by reason of default on the part of the Purchaser or
Technocom, the Vendor shall be entitled to elect, by giving written
notice to the Purchaser:
(a) to terminate this Agreement (other than Clauses 7.2 and 7.3)
in which case the Vendor shall not be obliged to sell the
Shares and the Vendor and Mr Klabin shall not be obligated
to perform any of their other obligations under Clause 4.2
(and the Purchaser and Technocom shall be released from all
further obligations hereunder other than Clauses 7.2 and
7.3); or
(b) to fix a new date for Completion within 28 days of the date
originally set for Completion; or
(c) to proceed to Completion as far as practicable, the
Purchaser then being obliged to use its reasonable
endeavours to perform or procure the performance of any of
the outstanding provisions of Clause 4.2.
4.5 The Purchaser shall, following Completion, promptly deliver to the
Revenue Commissioners of Ireland the share transfer referred to in
Clause 4.2(a)(i) for assessment of stamp duty, and shall promptly
pay the duty thus assessed. Prior to the registration of such duly
stamped stock transfer form in the register of shareholders of
Technocom, the Vendor shall, in respect of the Shares, cooperate in
any manner required by the Purchaser for the convening, holding at
short notice and conduct of general meetings of Technocom, execute
on a timely basis all proxy forms, appointments of representatives,
documents of consent to short notice and such like that the
Purchaser may reasonably require and shall generally act in all
respects as the nominee and at the directions of the Purchaser in
respect of the Shares and all rights and interest attached thereto.
4.6 Upon the Completion Date the Vendor and Mr Klabin shall be deemed,
without any further action on the part of either being required, to
have waived the provisions of
8
<PAGE> 10
clause 7 of the Shareholder Agreement giving them the right to
receive notice of the proposed sale of, to be offered and/or to
purchase Ordinary Shares owned by Elite so as to permit the sale by
Elite to the Purchaser at such time or times as may be mutually
determined by such parties of the 39 Ordinary Shares of Technocom
owned by Elite, free from any rights which either of them may have
in respect thereof under such clause 7.
5. WARRANTIES
5.1 The Vendor hereby covenants with the Purchaser that each and all of
subclauses (a) and (b) to this Clause is and are true and correct
and not misleading at the date of this Agreement and will at all
times up to and including Completion remain so:
(a) the Shares constitute thirty out of a total of fifty-nine
Ordinary Shares of Technocom currently held by the Vendor
and are fully paid or credited as fully paid and the Vendor
is the legal and beneficial owner of and is entitled
(subject as stated in the Shareholder Agreement, the Put and
Call Option Agreement and the Articles of Association of
Technocom) to sell the Shares without the consent of any
third party; and
(b) other than as provided in or pursuant to this Agreement
there is no mortgage, charge, pledge, lien or other
encumbrance or interest on, over or affecting the Shares, no
agreement to create such mortgage, charge, pledge, lien or
other encumbrance or interest has been made and no claim has
been made that any person is entitled to any such mortgage,
charge, pledge, lien or other encumbrance or interest.
5.2 Claims against the Vendor or the Purchaser under or in connection
with this Agreement shall be wholly barred and unenforceable unless
written details thereof shall have been given to the party against
which a claim is to be made by no later than a date three (3) months
from the date hereof.
5.3 The aggregate amount of liabilities of the Vendor under or in
connection with this Agreement shall not exceed the total amount of
the Consideration that the Vendor has received under this Agreement.
6. POSITION PENDING COMPLETION AND POST-COMPLETION OPERATION
6.1 The Vendor hereby covenants with and undertakes to the Purchaser
that it shall not at any time prior to Completion dispose or attempt
to dispose of any interest in the Shares or grant any option over,
or mortgage, charge or otherwise encumber or dispose of the Shares.
6.2 The Vendor hereby covenants with and undertakes to the Purchaser
that it will as soon as reasonably practicably notify to the
Purchaser in writing any matter or thing which may arise or become
known to it after the date hereof and prior to
9
<PAGE> 11
Completion which constitutes (or would with the passage of time
constitute) a breach of the Warranties or a breach of any of the
covenants or undertakings or obligations of the Vendor under this
Agreement.
6.3 If any material breach of the Warranties shall come to the notice of
either of the Vendor or the Purchaser before Completion, or if any
act or event shall occur which, had it occurred on or before the
date hereof, would have constituted a material breach of the
Warranties, then the Purchaser shall be at liberty without any
liability whatsoever to the other to elect not to complete the sale
and purchase of the Shares (and in such case all parties shall be
released from their obligations under this Agreement, other than
under Clause 7.2).
6.4 The Vendor hereby declares for the purpose of the Financial
Transfers Act 1992 of the Republic of Ireland that it is not
resident in any jurisdiction to which financial transfers (within
the meaning of the said Act) are restricted by order of the Minister
for Finance in accordance with the provisions of that Act and does
not hold the Shares and will not receive any part of the
Consideration hereunder as nominee for any person so resident, and
the Purchaser declares for the purpose of the said Act that it is
not so resident, it is not acquiring the Shares as nominee for any
persons so resident and it is not to its knowledge controlled
directly or indirectly by persons so resident.
7. GENERAL PROVISIONS
7.1 The waiver by any party of any right arising under, or any breach,
default or omission by any other party of any of the terms of this
Agreement or any of the documents in the agreed form shall not take
effect unless in writing and shall not constitute a continuing
waiver of the right waived or apply to, or operate as a waiver of,
any other breach, default or omission and any forbearance in
enforcing any right shall not constitute a waiver.
7.2 No party shall divulge to any third party (other than their
respective professional advisers or insurers) the fact that this
Agreement or any of the documents in the agreed form has been
entered into or any information regarding its terms or any matters
contemplated by this transaction or any information relating to any
other party or make any announcement relating to it without the
prior agreement (not to be unreasonably withheld or delayed) of the
other parties unless such announcement is required by a taxing
authority and/or a court of competent jurisdiction or by a
recognised stock exchange or by any other similar regulatory
authority in which event the other parties shall, so far as
possible, be given prior written notice of such intended
announcement. Any announcement shall in any event be made or issued
only in a form approved by the Purchaser and with the consent of the
Vendor (not to be unreasonably withheld or delayed). Nothing herein
shall be deemed to prohibit any disclosure of the terms of this
Agreement which is required in connection with the Purchaser's
arranging financing for the transactions contemplated by this
Agreement from The Travelers Insurance Company and The Travelers
Indemnity
10
<PAGE> 12
Company.
7.3 The Purchaser shall pay its own legal, accountancy and other costs,
charges and expenses incurred in connection with this Agreement, and
shall pay (or reimburse the Vendor for) the Vendor's reasonable
legal, accountancy and other costs, charges and expenses incurred in
connection with this Agreement, including all prior negotiations
relating to the sale of the Shares.
7.4 This Agreement, together with any document expressly referred to in
any of its terms, contains the entire agreement between the parties
relating to the subject-matter covered. No oral explanation or oral
information given by any party shall alter the interpretation of
this Agreement.
7.5 The Vendor hereby undertakes with the Purchaser at the request of
the Purchaser and at the expense of the Purchaser to do or procure
to be done all such further acts and things and execute or procure
to be executed all such further deeds and documents as may be
necessary or desirable fully and effectively to vest in the
Purchaser the legal and beneficial ownership of the Shares and the
benefits of this Agreement and, pending such vesting, the Vendor
shall hold such Shares and benefits in trust for the Purchaser and
shall receive all monies in connection therewith as trustee of the
Purchaser and shall account to the Purchaser forthwith on receipt.
7.6 Any notice:
(a) must be in writing and must be given to a company which is a
party at its registered office or to such other address as
may have been notified to the other party; and
(b) will be effectively served:
(i) on the day of receipt, where any hand-delivered
letter or telefax message is received on a Business
Day before or during normal working hours; or
(ii) on the following Business Day, where any
hand-delivered letter or telefax message is
received either on a Business Day after normal
working hours or on any other day; or
(iii) on the fifth Business Day following the day of
posting of any properly addressed letter sent by
air mail postage prepaid.
7.7 This Agreement and all documents supplemental thereto are governed
by and are to be construed in accordance with English law excluding
the English rules as to conflicts of law.
11
<PAGE> 13
7.8 Each of the parties irrevocably submits to the non-exclusive
jurisdiction of the appropriate court of law in England in relation
to any matters, claims and disputes arising out of or in connection
with this Agreement, any of the documents in the agreed form or any
documents supplemental thereto and (subject as set out below) waives
any objection to legal proceedings being made in such courts whether
on the ground of venue or on the ground that such proceedings have
been brought in an inconvenient forum. These submissions shall not
limit the rights of the parties to bring any action in any other
court having or claiming jurisdiction (whether concurrently or not).
7.9 The Purchaser and Technocom hereby appoint Morgan, Lewis & Bockius
of 4 Carlton Gardens, Pall Mall, London SW1Y 5AA, all communications
to be marked for the attention of Mr. T. J. Benz, and the Vendor and
Mr Klabin hereby appoint Messrs. Charles Russell of 8-10 New Fetter
Lane, London EC4A 1RS, all communications to be marked for the
attention of Mr. M. Moncreiffe and Mr. J. Holder, in each case for
service of process in connection with legal proceedings in England
and arising out of or in connection with this Agreement. Copies of
all notices pursuant to Clause 7.6 shall also be sent to the
Purchaser at 680 Fifth Avenue, New York, NY 10019, U.S.A.,
attention: E. Clive Anderson.
7.10 In the event that any legal action in respect of this Agreement is
started, the process by which it is started may be served on the
defendant or, if specified in this Agreement, any other person on
its behalf at the place at which and in the manner in which notices
may be given to that party.
7.11 Any provisions of this Agreement shall, so far as they are capable
of being performed or observed, continue in full force and effect
notwithstanding Completion except in respect of those matters
already performed.
7.12 This Agreement may be executed in several counterparts (whether
original or facsimile counterparts) and upon the execution of all
such counterparts by one or more parties, each counterpart shall be
deemed to be an original hereof.
12
<PAGE> 14
SCHEDULE I
PARTICULARS OF THE COMPANY
<TABLE>
<CAPTION>
Name: Technocom Limited Number: 183622
<S> <C>
Registered Office: 1 Earlsfort Centre, Hatch Street, Dublin 2, Ireland
Authorised share capital: IR Pound Sterling 1,000,000 and US$1,000 divided into 1,000,000 shares of
IR Pound Sterling 1 each and 1,000 preferred shares of US$1 each
Issued share capital: 199 Ordinary Shares and 1,000 preferred shares have been issued and are fully paid as follows:
Ordinary Shares Preferred Shares
--------------- ----------------
Plicom Limited 59
PLD Telekom Inc. 101 1,000
Elite International
Limited 39
Directors: Mark Klabin
Boris Antoniuk
James R. S. Hatt
Joe Crouch
Alan G. Brooks
Secretary: Tatiana Saltanova
</TABLE>
13
<PAGE> 15
Schedule II
FORM OF PROMISSORY NOTE
US$ 17,500,000 November 26, 1997
FOR VALUE RECEIVED, the undersigned, PLD Telekom Inc., a Delaware corporation
(the "Payor"), promises to pay to Plicom Limited, a company incorporated
under the Irish Companies Act 1963 to 1990 with registered number 214427
(the "Payee"), the sum of US$ 17,500,000 (seventeen million, five hundred
thousand US dollars) (the "Sum").
The Sum shall be paid on June 30, 1999, subject to the Payee's fulfillment of
all conditions required by Clause 4.1(b) of the Put and Call Option Agreement
dated December 28, 1994 between the Payor and the Payee, as heretofore
amended pursuant to the terms of an Amendment to Put and Call Option
Agreement dated as of the date hereof between the Payor and the Payee
(collectively, the "Amended Option Agreement"), to be fulfilled by the Payee
with respect to the sale of the Option Shares (as defined in the Amended
Option Agreement).
The Sum shall not bear interest.
Upon payment of the Sum this promissory note shall cease to have any further
force or effect and, upon the request of the Payor, shall be marked
"cancelled" by the Payee and returned to the Payor.
This promissory note and the rights hereunder may be assigned by the Payee in
accordance with Clause 11.2 of the Amended Option Agreement, but otherwise
only with the prior written agreement of the Payor (such agreement not to be
unreasonably withheld or delayed)..
In case of any event of default, the Payor shall pay all costs of collection,
including all reasonable legal fees.
This promissory note is governed by and is to be construed in accordance with
English law, including its rules as to the conflicts of laws.
ATTESTATIONS
Executed as a deed by )
PLD TELEKOM INC. )
acting by: )
14
<PAGE> 16
SCHEDULE III
LIST OF ADDITIONAL DUTIES
1. Where necessary, assist with obtaining full and unequivocal
certification from regional and/or local branches of Gosvaznadzor
for the use of earth stations within the Satelink system.
2. Where required and when called upon by the Purchaser, assist with
negotiations to obtain supplier credit on terms favourable to
Technocom and other Members of the same Group (the "Technocom
Group").
3. Where required and where possible, provide introductions to key
people and logistical and other support for directors and staff of
the Technocom Group and associated companies in regions outside of
Moscow and St. Petersburg.
4. Support the sales activities of Rosh Telecom Limited, as a member of
the Technocom Group, with specific reference to their role as sales
agent for ECI Telecom Limited ("ECI"), so that ECI increases market
share within the CIS for the benefit of the Technocom Group; and
also help facilitate the establishment of direct communications and
commercial relationships between the Purchaser and Rosh Telecom
Limited, on the one hand, and ECI, on the other.
5. Provide additional management support, if requested, to the new
Technocom sales and marketing group, such that they are able to
function as the sales and marketing divisions of all the companies
in the Technocom Group. For this purpose the Technocom Group
includes, but is not limited to,Technocom, Teleport-TP, MTR-Sviaz,
Satelink and its associated joint ventures and partners, Portal,
Cardlink and SCS.
6. Without assuming any payment obligation, facilitate or assist both
in the control of credit to and collection of debt from partners and
associated operators using the Satelink service.
7. Promote the continued support of Rostelecom for both the Teleport-TP
and the Satelink operations and, in this context, encourage
Rostelecom to issue letters and other communications as appropriate,
to ensure that the key executives in distant electrosviazes
understand that Satelink is the first choice carrier for both
digital services and improved quality direct dialed calls, where
Rostelecom has invited Teleport-TP to provide such services.
8. Assist in increasing the acceptable level of incoming traffic via
the Purchaser and other Members of the Group (the "PLD Group"),
which by-passes local carriers, noting that PLD does not wish to
provide routes for any of the principal national carriers, but
15
<PAGE> 17
would like to be able to accept overflow, provide access for second
level carriers, and terminate and transit the PLD Group's own
traffic.
9. Propose the use of PLD Group facilities to companies and
organisations based in oblasts outside of Moscow and St. Petersburg
where Mr. Klabin or his associates are active.
10. Provide support or assistance, as required and as possible, to
Technocom's efforts to ensure that the provision of Satelink service
to particular regions and cities results in the system being the
first choice routing for long distance calls.
11. Introduce Technocom and Teleport-TP to new telecom business
opportunities, as Mr. Klabin's first choice, where he is approached
as the first contact.
12. Provide support and assistance in respect of the security of the
businesses, if and when required.
13. Advise when required on the implications of changes in the law, with
particular reference to those laws involving taxes and specifically
to advise on the best means of tax avoidance for the Technocom Group
companies, given the laws prevailing at the time.
14. Permit representatives of Technocom and the Purchaser (including
their outside auditors) to have access during normal business hours
and upon reasonable notice to the books and records of any of the
following companies, to the extent maintained or kept at any
premises to which Mr Klabin has access: SCS, Rosh Telecom, Roscomm,
Portal and Teleport-TP, with particular reference to dealings
between such companies and other companies owned or controlled by Mr
Klabin, and, in the case of Rosh Telecom, ECI Telecom.
16
<PAGE> 18
ATTESTATIONS
Signed by Mark Moncreiffe ) s/s MARK MONCREIFFE
for and on behalf of (Alternate )
PLICOM LIMITED Director) ) s/s VINCENZO JANNI
in the presence of: )
Signed by James Hatt ) s/s JAMES R.S. HATT
for and on behalf of )
TECHNOCOM LIMITED )
in the presence of: )
s/s DOROTHEA H. HATT
Signed by James Hatt ) s/s JAMES R.S. HATT
for and on behalf of )
PLD TELEKOM INC. )
in the presence of: )
s/s DOROTHEA H. HATT
Signed by Sue Cozens ) s/s SUE COZENS
MARK KLABIN (As Attorney for) )
in the presence of: ) s/s VINCENZO JANNI
17
<PAGE> 1
EXHIBIT 10.49
DATED 26 NOVEMBER 1997
ELITE INTERNATIONAL LIMITED (1)
TECHNOCOM LIMITED (2)
PLD TELEKOM INC. (3)
-------------------------------
SHARE PURCHASE AGREEMENT
-------------------------------
<PAGE> 2
THIS AGREEMENT is dated 26 November 1997
and made BETWEEN
(1) ELITE INTERNATIONAL LIMITED (a company incorporated under the Irish
Companies Act 1963 to 1990 with registered number 178152) whose
registered office is at First Floor, 14-15 Parliament Street, Dublin
2, Ireland ("the Vendor");
(2) TECHNOCOM LIMITED (a company incorporated under the Irish Companies
Acts 1963 to 1990 with registered number 183622) whose registered
office is at 1 Earlsfort Centre, Hatch Street, Dublin 2, Ireland, and
whose particulars are as set forth in Schedule I hereto ("Technocom");
and
(3) PLD TELEKOM INC. (previously named "Petersburg Long Distance Inc.")
(a company incorporated in the State of Delaware, U.S.A.) whose
registered office is at 1209 Orange Street, Wilmington, Delaware
18901, U.S.A. ("the Purchaser").
WHEREAS:
(A) The Vendor owns Thirty-Nine (39) Ordinary Shares of Technocom which it
holds subject to the Subscription and Shareholders Agreement relating
to Technocom dated 28th December 1994, as heretofore amended or
supplemented (the "Shareholder Agreement"); and
(B) The Purchaser desires to acquire, and the Vendor desires to sell
Twenty-Nine (29) of such Ordinary Shares, subject to all of the terms
and conditions of this Agreement.
NOW IT IS HEREBY AGREED as follows:
1.1 INTERPRETATION
In this Agreement (including the Introduction and Schedules), unless
the context otherwise requires, the following words and expressions
have the meanings shown:
Board the board of directors of
Technocom
Business Day a day, other than a Saturday
or Sunday, on which banks in
each of the cities of Dublin,
New York and London generally
are open for normal banking
business
the Completion Date November 26, 1997
1
<PAGE> 3
a Member of the same Group means, as regards any
company, a company which is
for the time being a holding
company of that company or a
subsidiary of that company or
any such holding company
the Parties the parties to this Agreement
Plicom Plicom Limited
the Shares the twenty-nine (29)
Ordinary Shares of the
Company being purchased by
the Purchaser from the Vendor
hereunder
Warranties the warranties,
representations and
undertakings given in Clause
5
1.2 All references to statutory provisions or enactments shall include
references to any amendment, modification or re-enactment of any such
provision or enactment, and to any regulation or order made under such
provision or enactment (in any case before the date of this
Agreement).
1.3 The term "holding company" shall have the meaning attributed to it in
sections 736 and 736A of the United Kingdom Companies Act 1985 (as
amended) and a company or other entity shall be a "subsidiary" for the
purposes of this Agreement if it falls within any of the meanings
attributed to a "subsidiary" in such sections or the meaning
attributed to the term "subsidiary undertaking" in section 258 of such
Act, and a company shall be an "associate" if it falls within the
meaning attributed to an "associated undertaking" in paragraph 20 of
Schedule 4A to such Act and the terms "subsidiaries", "associates" and
"holding companies" are to be construed accordingly.
1.4 References in this Agreement and the Schedules to the Parties, the
Introduction, Schedules and Clauses are references respectively to the
Parties, the Introduction and Schedules to and Clauses of this
Agreement.
1.5 Save where the context specifically requires otherwise, words
importing one gender shall be treated as importing any gender, words
importing individuals shall be treated as importing corporations and
vice versa, words importing the singular shall be treated as importing
the plural and vice versa, and words importing the whole shall be
treated as including a reference to any part thereof.
1.6 Clause and paragraph headings are inserted for ease of reference only
and shall not affect construction.
1.7 For the avoidance of doubt, any references in this Agreement to a
statutory
2
<PAGE> 4
and other regulatory provision in force in the United Kingdom or the
Republic of Ireland (as the case may be) shall, unless the context
otherwise requires, also include a reference to the equivalent or
analogous provision under Irish, English or other law applicable to
the relevant company.
2. SALE AND PURCHASE OF THE SHARES
The Vendor shall sell the Shares with effect from Completion and the
Purchaser (relying on the representations, warranties and undertakings
contained herein on the part of the Vendor and the fulfillment of all
conditions to such purchase contained herein) shall purchase the
Shares with any dividends, distributions and rights declared, created
or arising on or after the Completion Date, and free from all claims,
charges, liens, encumbrances, options, rights of pre-emption or
equities.
3. CONSIDERATION; TRANSFER RESTRICTIONS
3.1 In consideration of the sale of the Shares in accordance with the
terms of this Agreement, the Purchaser shall (i) pay to the Vendor
at Completion the sum of US$ 6,250,000 (Six Million Two Hundred Fifty
Thousand US dollars) in cash by telegraphic transfer to an account or
accounts nominated by the Vendor, and (ii) deliver to the Vendor at
Completion 1,316,240 shares of its Common Stock (the "Consideration
Shares").
3.2 Neither the Vendor nor any other party in whose name the Consideration
Shares may be issued shall be permitted to sell, transfer or otherwise
dispose of, or to pledge, any of the Consideration Shares for any
reason whatsoever prior to January 1, 2000, except that the Vendor or
such other party may pledge the Consideration Shares to financial
institutions as security for indebtedness, provided that the pledgee
enters into a written undertaking satisfactory to the Purchaser to
hold such Shares subject to the provisions of this Clause 3.2.
4. COMPLETION
4.1 Completion shall take place at the offices of Charles Russell at 8-10
New Fetter Lane, London EC4A 1RS, England (or any other location
agreed upon by the Vendor and the Purchaser) on the Completion Date.
4.2 At Completion:
(a) the Vendor shall deliver (where appropriate as agent for
Technocom) to the Purchaser:
(i) a transfer in respect of the Shares duly executed by
the Vendor in favour of the Purchaser or as it may
direct; and
(ii) a certificate for the Shares and any other documents
which may be
3
<PAGE> 5
required to give good title to the Shares and to
enable the Purchaser to procure registration of the
same in its name or as it may direct;
(b) the Purchaser shall deliver (i) the sum of US$ 6,250,000 by
telegraphic transfer to the account(s) nominated by the
Vendor, and (ii) certificates for the Consideration Shares
in such denominations as the Vendor shall direct at least two
business days prior to the Completion Date (in default of
which direction a single certificate in the name of the Vendor
in the full amount of the Consideration Shares shall be
issued), which certificate(s) shall be appropriately legended
to reflect the terms of Clause 3.2 hereof, in addition to any
other legends required to comply with United States securities
laws;
(c) the Parties shall procure the passing of resolutions of the
Board resolving to register the share transfer referred to in
subclause (a)(i) above, subject only to due stamping; and
(d) the Vendor (and/or any other party or parties in whose name
the Consideration Shares may be issued) shall execute an
undertaking in form and substance satisfactory to the
Purchaser confirming that it is taking the Consideration
Shares for investment purposes only and not with a view to the
distribution thereof, and that it is bound by the terms of
Clause 3.2 hereof, and shall deliver to the Purchaser such
other evidence (including opinions of counsel) as the
Purchaser may reasonably request to confirm that the Vendor
and/or such other parties are bound by the provisions of such
Clause;
(e) the Parties shall (and shall procure that the other parties
thereto) execute an amendment to the Shareholder Agreement
which shall provide that:
(i) the parties appointed by PLD pursuant to clause 12.14
thereof shall be E. Clive Anderson and Philip R.
Eager, c/o PLD Telekom Inc., 680 Fifth Avenue, New
York, NY 10019, U.S.A. in place of R. P. Burrow and
N.A.R. Williams of SJBerwin & Co.;
(ii) copies of the items referred to in clause 12.15 shall
thereafter be sent to the persons named in subclause
(e) (i) above, and shall no longer be sent to Mr
Roger Blott or PLD's Solicitors;
(iii) Clause 5 and Schedule II thereto shall be deleted
therefrom in their entirety; and
(iv) the following words shall be added to the definition
of the term "the Option Agreements":
", each as may be amended from time to time
by the relevant parties thereto";
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<PAGE> 6
(f) the Vendor and the Purchaser shall amend and restate the Put
and Call Option Agreement dated 28th December 1994 ("the Put
and Call Option Agreement") so that it shall read hereafter in
the form attached hereto as Schedule II ("the Amended Option
Agreement"); and
(g) the Vendor shall execute such other documents and take such
other actions as the Purchaser may reasonably request to carry
into effect the purpose and intent of this Agreement.
4.3 If for any reason the provisions of Clause 4.2 are not fully complied
with by reason of default on the part of the Vendor, the Purchaser
shall be entitled to elect, by giving written notice to the Vendor:
(a) to terminate this Agreement (other than Clause 7.2) in which
case the Purchaser shall not be obliged to purchase the
Shares, pay any of the Consideration or perform any of its
other obligations under Clause 4.2 (and the Vendor shall be
released from all further obligations hereunder other than
Clause 7.2); or
(b) to fix a new date for Completion within 28 days of the date
originally set for Completion; or
(c) to proceed to Completion so far as practicable, the Vendor then
being obliged to use its reasonable endeavours to perform or
procure the performance of any of the outstanding provisions of
Clause 4.2.
4.4 If for any reason the provisions of Clause 4.2 are not fully complied
with by reason of default on the part of the Purchaser or Technocom,
the Vendor shall be entitled to elect, by giving written notice to the
Purchaser:
(a) to terminate this Agreement (other than Clauses 7.2 and 7.3)
in which case the Vendor shall not be obliged to sell the
Shares and the Vendor shall not be obligated to perform any of
its other obligations under Clause 4.2 (and the Purchaser and
Technocom shall be released from all further obligations
hereunder other than Clauses 7.2 and 7.3); or
(b) to fix a new date for Completion within 28 days of the date
originally set for Completion; or
(c) to proceed to Completion as far as practicable, the Purchaser
then being obliged to use its reasonable endeavours to perform
or procure the performance of any of the outstanding
provisions of Clause 4.2.
4.5 The Purchaser shall, following Completion, promptly deliver to the
Revenue
5
<PAGE> 7
Commissioners of Ireland the share transfer referred to in Clause
4.2(a)(i) for assessment of stamp duty, and shall promptly pay the
duty thus assessed. Prior to the registration of such duly stamped
stock transfer form in the register of shareholders of Technocom, the
Vendor shall, in respect of the Shares, cooperate in any manner
required by the Purchaser for the convening, holding at short notice
and conduct of general meetings of Technocom, execute on a timely
basis all proxy forms, appointments of representatives, documents of
consent to short notice and such like that the Purchaser may
reasonably require and shall generally act in all respects as the
nominee and at the directions of the Purchaser in respect of the
Shares and all rights and interest attached thereto.
4.6 Upon the Completion Date the Vendor shall be deemed, without any
further action on its part being required, to have waived the
provisions of clause 7 of the Shareholder Agreement giving it the
right to receive notice of the proposed sale of, to be offered and/or
to purchase Ordinary Shares owned by Plicom so as to permit the sale
by Plicom to the Purchaser at such time or times as may be mutually
determined by such parties of the 59 Ordinary Shares of Technocom
owned by Plicom, free from any rights which it may have in respect
thereof under such clause 7.
5. WARRANTIES
5.1 The Vendor hereby covenants with the Purchaser that each and all of
subclauses (a) and (b) to this Clause is and are true and correct and
not misleading at the date of this Agreement and will at all times up
to and including Completion remain so:
(a) the Shares constitute twenty-nine out of a total of
thirty-nine Ordinary Shares of Technocom currently held by the
Vendor and are fully paid or credited as fully paid and the
Vendor is the legal and beneficial owner of and is entitled
(subject as stated in the Shareholder Agreement, the Put and
Call Option Agreement and the Articles of Association of
Technocom) to sell the Shares without the consent of any third
party; and
(b) other than as provided in or pursuant to this Agreement there
is no mortgage, charge, pledge, lien or other encumbrance or
interest on, over or affecting the Shares, no agreement to
create such mortgage, charge, pledge, lien or other
encumbrance or interest has been made and no claim has been
made that any person is entitled to any such mortgage, charge,
pledge, lien or other encumbrance or interest.
5.2 The aggregate amount of liabilities of the Vendor under or in
connection with this Agreement shall not exceed the total amount of
the Consideration that the Vendor has received under this Agreement.
5.3 Claims against the Vendor under or in connection with this Agreement
shall be wholly barred and unenforceable unless written details
thereof shall have been given
6
<PAGE> 8
to it by no later than a date three (3) months from the date hereof.
6. POSITION PENDING COMPLETION AND POST-COMPLETION OPERATION
6.1 The Vendor hereby covenants with and undertakes to the Purchaser that
it shall not at any time prior to Completion dispose or attempt to
dispose of any interest in the Shares or grant any option over, or
mortgage, charge or otherwise encumber or dispose of the Shares.
6.2 The Vendor hereby covenants with and undertakes to the Purchaser that
it will as soon as reasonably practicably notify to the Purchaser in
writing any matter or thing which may arise or become known to it
after the date hereof and prior to Completion which constitutes (or
would with the passage of time constitute) a breach of the Warranties
or a breach of any of the covenants or undertakings or obligations of
the Vendor under this Agreement.
6.3 If any material breach of the Warranties shall come to the notice of
either of the Vendor or the Purchaser before Completion, or if any act
of event shall occur which, had it occurred on or before the date
hereof, would have constituted a material breach of the Warranties,
then the Purchaser shall be at liberty without any liability
whatsoever to the other to elect not to complete the sale and purchase
of the Shares (and in such case all parties shall be released from
their obligations under this Agreement, other than under Clause 7.2).
6.4 The Vendor hereby declares for the purpose of the Financial Transfers
Act 1992 of the Republic of Ireland that it is not resident in any
jurisdiction to which financial transfers (within the meaning of the
said Act) are restricted by order of the Minister for Finance in
accordance with the provisions of that Act and does not hold the
Shares and will not receive any part of the Consideration hereunder as
nominee for any person so resident, and the Purchaser declares for the
purpose of the said Act that it is not so resident, it is not
acquiring the Shares as nominee for any persons so resident and it is
not to its knowledge controlled directly or indirectly by persons so
resident.
7. GENERAL PROVISIONS
7.1 The waiver by any party of any right arising under, or any breach,
default or omission by any other party of any of the terms of this
Agreement or any of the documents in the agreed form shall not take
effect unless in writing and shall not constitute a continuing waiver
of the right waived or apply to, or operate as a waiver of, any other
breach, default or omission and any forbearance in enforcing any right
shall not constitute a waiver.
7.2 No party shall divulge to any third party (other than their respective
professional advisers or insurers) the fact that this Agreement or any
of the documents in the agreed form has been entered into or any
information regarding its terms or any
7
<PAGE> 9
matters contemplated by this transaction or any information relating
to any other party or make any announcement relating to it without the
prior agreement (not to be unreasonably withheld or delayed) of the
other parties unless such announcement is required by a taxing
authority and/or a court of competent jurisdiction or by a recognised
stock exchange or by any other similar regulatory authority in which
event the other parties shall, so far as possible, be given prior
written notice of such intended announcement. Any announcement shall
in any event be made or issued only in a form approved by the
Purchaser and with the consent of the Vendor (not to be unreasonably
withheld or delayed). Nothing herein shall be deemed to prohibit any
disclosure of the terms of this Agreement which is required in
connection with the Purchaser's arranging financing for the
transactions contemplated by this Agreement.
7.3 The Purchaser shall pay its own legal, accountancy and other costs,
charges and expenses incurred in connection with this Agreement, and
shall pay (or reimburse the Vendor for) the Vendor's reasonable legal,
accountancy and other costs, charges and expenses incurred in
connection with this Agreement, including all prior negotiations
relating to the sale of the Shares.
7.4 This Agreement, together with any document expressly referred to in
any of its terms, contains the entire agreement between the parties
relating to the subject-matter covered. No oral explanation or oral
information given by any party shall alter the interpretation of this
Agreement.
7.5 The Vendor hereby undertakes with the Purchaser at the request of the
Purchaser and at the expense of the Purchaser to do or procure to be
done all such further acts and things and execute or procure to be
executed all such further deeds and documents as may be necessary or
desirable fully and effectively to vest in the Purchaser the legal and
beneficial ownership of the Shares and the benefits of this Agreement
and, pending such vesting, the Vendor shall hold such Shares and
benefits in trust for the Purchaser and shall receive all monies in
connection therewith as trustee of the Purchaser and shall account to
the Purchaser forthwith on receipt.
7.6 Any notice:
(a) must be in writing and must be given to a company which is a
party at its registered office or to such other address as may
have been notified to the other party; and
(b) will be effectively served:
(i) on the day of receipt, where any hand-delivered
letter or telefax message is received on a Business
Day before or during normal working hours; or
8
<PAGE> 10
(ii) on the following Business Day, where any
hand-delivered letter or telefax message is received
either on a Business Day after normal working hours
or on any other day; or
(iii) on the fifth Business Day following the day of
posting of any properly addressed letter sent by air
mail postage prepaid.
7.7 This Agreement and all documents supplemental thereto are governed by
and are to be construed in accordance with English law excluding the
English rules as to conflicts of law.
7.8 Each of the parties irrevocably submits to the non-exclusive
jurisdiction of the appropriate court of law in England in relation to
any matters, claims and disputes arising out of or in connection with
this Agreement, any of the documents in the agreed form or any
documents supplemental thereto and (subject as set out below) waives
any objection to legal proceedings being made in such courts whether
on the ground of venue or on the ground that such proceedings have
been brought in an inconvenient forum. These submissions shall not
limit the rights of the parties to bring any action in any other court
having or claiming jurisdiction (whether concurrently or not).
7.9 The Purchaser and Technocom hereby appoint Morgan, Lewis & Bockius of
4 Carlton Gardens, Pall Mall, London SW1Y 5AA, all communications to
be marked for the attention of Mr. T. J. Benz, and the Vendor hereby
appoints Messrs. Charles Russell of 8-10 New Fetter Lane, London EC4A
1RS, all communications to be marked for the attention of Mr. M.
Moncreiffe and Mr. J. Holder, in each case for service of process in
connection with legal proceedings in England and arising out of or in
connection with this Agreement. Copies of all notices pursuant to
Clause 7.6 shall also be sent to the Purchaser at 680 Fifth Avenue,
New York, NY 10019, U.S.A., attention: E. Clive Anderson.
7.10 In the event that any legal action in respect of this Agreement is
started, the process by which it is started may be served on the
defendant or, if specified in this Agreement, any other person on its
behalf at the place at which and in the manner in which notices may be
given to that party.
7.11 Any provisions of this Agreement shall, so far as they are capable of
being performed or observed, continue in full force and effect
notwithstanding Completion except in respect of those matters already
performed.
7.12 This Agreement may be executed in several counterparts (whether
original or facsimile counterparts) and upon the execution of all such
counterparts by one or more parties, each counterpart shall be deemed
to be an original hereof.
9
<PAGE> 11
SCHEDULE I
PARTICULARS OF THE COMPANY
<TABLE>
<CAPTION>
Name: Technocom Limited Number: 183622
<S> <C>
Registered Office: 1 Earlsfort Centre, Hatch Street, Dublin 2, Ireland
Authorised share capital: IR pound sterling 1,000,000 and US$1,000 divided into 1,000,000 shares of IR pound
sterling 1 each and 1,000 preferred shares of US$1 each
Issued share capital: 199 Ordinary Shares and 1,000 preferred shares have been issued and are fully paid as
follows:
Ordinary Shares Preferred Shares
--------------- ----------------
Plicom Limited 59
PLD Telekom Inc. 101 1,000
Elite International
Limited 39
Directors: Mark Klabin
Boris Antoniuk
James R. S. Hatt
Joe Crouch
Alan G. Brooks
Secretary: Tatiana Saltanova
</TABLE>
10
<PAGE> 12
SCHEDULE II
FORM OF AMENDED AND RESTATED PUT AND CALL OPTION AGREEMENT
DATED AS OF NOVEMBER __, 1997
PARTIES
1) PLD TELEKOM INC. (a company incorporated in the State of Delaware, U.S.A.)
whose registered office is at 1209 Orange Street, Wilmington, Delaware
18901, U.S.A. ("the Grantee"); and
2) ELITE INTERNATIONAL LIMITED (a company incorporated under the Irish
Companies Acts 1963 to 1990 with registered number 178152) whose registered
office is at First Floor, 14-15 Parliament Street, Dublin 2, Ireland ("the
Grantor", such term to include any permitted transferee).
RECITALS
The parties hereto are parties to a Put and Call Option Agreement dated 28
December 1994, and desire to amend and restate its provisions as hereinafter
set forth.
OPERATIVE PROVISIONS
1 DEFINITIONS
1.1 In this Agreement unless the context otherwise requires the following
expressions shall bear the meanings shown:
Business Day a day, other than a Saturday, on
which banks in each of the City of
London, Vienna, Toronto, Dublin and
Moscow generally are open for normal
banking business
the Call Options the rights granted to the Grantee
pursuant to Clause 2 to purchase or
procure the purchase of Option
Shares at the applicable Option
Price during the applicable Option
Period
the Company Technocom Limited, a private company
limited by shares incorporated under
the Companies Acts, 1963 to 1990 of
11
<PAGE> 13
Ireland whose registered number is
183622 and with its registered
office at First Floor, 14-15
Parliament Street, Dublin 2, Ireland
Completion the performance by the parties
hereto of their respective
obligations under Clause 4 or 5
the First Call Option the right granted to the Grantee
pursuant to subclause (A) of Clause
2.1 to acquire two (2) Ordinary
Shares from the Grantor
the First Option Period the period commencing on June 30,
1998 and ending on the earlier of:
(i) June 30, 2119 and (ii) the date
on which the First Put Option or the
First Call Option, as the case may
be, is exercised
the First Option Price the price for the First Option
Shares calculated in accordance with
Clause 9.1
the First Option Shares the two (2) Ordinary Shares which
are the subject of the First Put
Option and the First Call Option
the First Put Option the right granted to the Grantor
pursuant to subclause (A) of Clause
3.1 to require the Grantee to
purchase two (2) Ordinary Shares
the Grantee's Solicitors Morgan, Lewis & Bockius, of 4
Carlton Gardens, London SW1Y 5AA
the Grantor's Solicitors Charles Russell currently of 8-10
New Fetter Lane, London EC4A 1RS, or
such other firm of solicitors as the
Grantor may hereafter notify the
Grantee in writing
Option Period the First Option Period or the
Second Option Period, as applicable
Option Shares any of the ten (10) Ordinary Shares
which are the subject of the Put
Options and the Call Options
Ordinary Shares ordinary shares in the capital of
the Company
the Put Options the rights granted to the Grantor
pursuant to Clause 3 to require the
Grantee to purchase or procure the
purchase of Option Shares at the
applicable Option Price during the
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<PAGE> 14
applicable Option Period
Reorganization in relation to the Company includes
every issue by way of capitalization
of profits or reserves and every
issue by way of rights and every
consolidation or sub-division or
reduction of capital or capital
dividend or other reconstruction or
adjustment relating to the equity
share capital (or any shares or
securities derived therefrom) and
any amalgamation or reconstruction
affecting the equity share capital
(or any shares, stocks or securities
derived therefrom)
the Second Call Option the right granted to the Grantee
pursuant to subclause (B) of Clause
2.1 to acquire eight (8) Ordinary
Shares from the Grantor
the Second Option Period the period commencing on June 30,
1999 and ending on the earlier of:
(i) June 30, 2119 and (ii) the date
on which the Second Put option or
the Second Call Option, as the case
may be, is exercised
the Second Option Price the price for the Second Option
Shares calculated in accordance with
Clause 9.2
the Second Option Shares the eight (8) Ordinary Shares which
are the subject of the First Put
Option and the First Call Option
the Second Put Option the right granted to the Grantor
pursuant to subclause (B) of Clause
3.1 to require the Grantee to
purchase eight (8) Ordinary Shares
1.2 Reference to clauses and the parties are respectively to clauses of and
the parties to this Agreement.
1.3 References to documents in the agreed form are to documents initialled
for the purpose of identification only by the Grantee's Solicitors and
the Grantor's Solicitors.
2 THE CALL OPTIONS
2.1 In consideration of the sum of pound sterling 1 (receipt of which the
Grantor acknowledges) the Grantor grants to the Grantee (A) the right
exercisable during the First Option Period to purchase two (2) Ordinary
Shares at the First Option Price, and (B) the right exercisable during the
Second Option Period to purchase eight (8) Ordinary Shares at the Second
Option Price.
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<PAGE> 15
2.2 The First Call Option shall be exercisable at any time during the First
Option Period and the Second Call Option shall be exercisable at any time
during the Second Option Period, in either case by notice in writing of
exercise served on the Grantor.
2.3 All Option Shares shall be sold free from all liens, charges and
encumbrances and with all rights attached thereto at the date of such
exercise.
3 THE PUT OPTIONS
3.1 In consideration of the sum of pound sterling 1 (receipt of which the
Grantee acknowledges) the Grantee grants to the Grantor (A) the right
exercisable during the First Option Period to require the Grantee to
purchase two (2) Ordinary Shares at the First Option Price, and (B) the
right exercisable during the Second Option Period to require the Grantee
to purchase eight (8) Ordinary Shares at the Second Option Price.
3.2 The First Put Option shall be exercisable at any time during the First
Option Period and the Second Put Option shall be exercisable at any time
during the Second Option Period, in either case by notice in writing of
exercise served on the Grantee, and the documents listed in clause 4.1(b)
hereof duly executed but undated shall be delivered to the Grantee's
Solicitors, to be held to the order of the Grantor pending payment of the
applicable Option Price.
3.3 All Option Shares shall be sold free from all liens, charges and
encumbrances and with all rights attached thereto at the date of such
exercise.
4 COMPLETION OF THE CALL OPTION
4.1 Completion of the purchase and sale of any Option Shares pursuant to the
exercise of the First or Second Call Option shall take place at the
offices of the Grantee's Solicitors (or at such other place as the
parties shall mutually agree). In the case of the First Call Option,
Completion shall take place on such date as the Grantor and the Grantee
shall agree, but in all events not later than ten Business Days after the
Grantor shall have received the notice of exercise. In the case of the
Second Call Option, Completion shall take place on the date specified in
Clause 9.2(e). At either such Completion:
(a) the Grantee shall either pay or procure the payment
by telegraphic transfer to the Grantor (or as the
Grantor may direct) of the applicable Option Price
for the Option Shares being acquired (or, in respect
of the First Call Option, in the event that the
Grantor shall elect pursuant to Clause 9.1 to receive
the Additional Consideration Shares (as defined
therein) in lieu of cash, the Grantee shall deliver
to the Grantor the share certificates for the
Additional Consideration Shares (legended as required
pursuant to the United States securities laws) and
such other
14
<PAGE> 16
documents as shall be required to vest title to the
Additional Consideration Shares with the Grantor );
and
(b) the Grantor shall deliver to the Grantee:
(i) duly executed but undated stock
transfer forms in respect of the
Option Shares being purchased by the
Grantee together with the relative
share certificates or, to the extent
that the Grantor can so provide,
such other documents as shall be
required to vest title to the Option
Shares being purchased with the
Grantee or its designee, and, if it
is taking the Additional
Consideration Shares, an undertaking
satisfactory to the Grantee that it
is taking such Shares for investment
purposes only and not with a view to
the distribution thereof; and
(ii) to the extent that the Grantor can
so provide, such other deeds and
documents and opinions of Counsel as
may be necessary to transfer to the
Grantee or its designee or as it may
direct the unencumbered beneficial
ownership of the Option Shares being
purchased.
4.2 If the Grantor makes default in transferring any of the Option Shares as
aforesaid the Directors of the Company shall be entitled to receive and
give a good discharge for the Option Price payable for such Option Shares
on behalf of the Grantor (but shall not be bound to earn any interest
thereon) and the Grantor hereby irrevocably appoints such one of the
Directors of the Company as the Grantee shall nominate in writing as the
Grantor's attorney to execute on its behalf the transfer or transfers of
the Option Shares in favour of the Grantee (or as the Grantee may direct)
and such other documents as may be necessary to transfer title to such
Option Shares to the Grantee (or as the Grantee may direct) and hereby
authorizes the Directors of the Company to approve the registration of
such transfer or transfers or such other documents.
4.3 The Grantor shall (so far as it is able) procure the Grantee or its
designee will be registered as the holder of any Option Shares being
purchased.
4.4 Any payments by the Grantee under the First or Second Put Options or the
First or Second Call Options shall be made free and clear of all
withholdings and deductions, howsoever arising.
5 COMPLETION OF THE PUT OPTION
Completion of the transfer or sale of any Option Shares pursuant to the
exercise of the First or the Second Put Option shall take place at the
offices of the Grantee's Solicitors
15
<PAGE> 17
(or at such other place as the parties shall mutually agree). In the
case of the First Put Option, Completion shall take place on such date as
the Grantor and the Grantee shall agree, but in all events not later than
ten Business Days after the Grantee shall have received the notice of
exercise. In the case of the Second Put Option, Completion shall take
place on the date specified in Clause 9.2(e). At either such Completion
the Grantee shall take the actions specified in Clause 4.1(a), and upon
such actions having been taken, the Grantee's Solicitors shall release to
the Grantee the documents delivered to them to hold to the order of the
Grantor pursuant to the terms of Clause 3.2.
6 EFFECTS OF A REORGANIZATION
6.1 If any Reorganization shall take place after the date hereof all the
shares, stock and other securities (if any) which shall have become owned
by the Grantor or successors in title as a result of each such
Reorganization and which shall derive (whether directly or indirectly)
from the Option Shares shall be deemed to be subject to an exercise of
either the First or Second Call Options or the First or Second Put Option
(as the case may be) and shall be transferred or sold to the Grantee (or
as the Grantee may direct) in accordance with Clause 2 or 3 (as the case
may be).
6.2 References in this Agreement to the Option Shares shall be so construed
as to give full effect to this Clause 6.
7 PROHIBITION ON DISPOSAL
Subject to the terms of a Shareholder Agreement relating to the Company
entered into on 28 December 1994 and made between inter alia the Grantor
and the Grantee, as heretofore amended or supplemented ("the Shareholder
Agreement"), and notwithstanding the provisions of Clause 6, while either
the First Call Option or the Second Call Option remains exercisable the
Grantor shall not, without the prior written consent of the Grantee,
sell, transfer or otherwise dispose of (including without prejudice to
the generality of the foregoing accept an offer made to all holders for
the class or classes of securities to which the applicable Option Shares
belong) or mortgage, charge, pledge or otherwise encumber any of the
Option Shares or any interest therein subject to the applicable Call
Option..
8 GRANTOR'S WARRANTIES
8.1 The Grantor warrants to the Grantee that it is and will remain until the
exercise of either the First Call Option or the First Put Option (as the
case may be) or the expiry of the First Option Period (whichever is the
later), the beneficial owner of the First Option Shares, subject only to
such Options, that it is and will remain until the exercise of either the
Second Call Option or the Second Put Option (as the case may be) or the
expiration of the Second Option Period (whichever is the later), the
beneficial owner of the Second Option
16
<PAGE> 18
Shares, subject only to such Options, and that it has and will have full
power and authority to grant Options in respect of the same upon the terms
and conditions of this Agreement.
8.2 The Grantee warrants to the Grantor that it has and will have full power
and authority to execute and comply with the terms and conditions of this
Agreement.
9 THE OPTION PRICES
9.1 The First Option Price shall be US $1,000,000 or, if the Grantor so
elects in its notice of exercise of the First Option, that amount of
shares of common stock of the Grantee (the "Additional Consideration
Shares") which results from dividing the sum of $1,000,000 by the lesser
of: (i) $5.85 and (ii) the average closing price of the Grantee's common
stock over the ten trading days prior to the applicable Completion date.
In the event that the Grantor shall elect to take the Additional
Consideration Shares, the Grantor and/or any other party in whose name
the Additional Consideration Shares may be issued shall give an
undertaking satisfactory to the Grantee that such Shares are being taken
for investment purposes only and not with a view to the distribution
thereof, and all certificates for Additional Consideration Shares shall
be appropriately legended to comply with the United States securities
laws.
9.2 The Second Option Price shall be calculated and paid as follows:
(a) Within thirty (30) days after the exercise of the Second Call Option
or the Second Put Option, as the case may be, the Grantee shall
deliver to the Grantor its valuation of the entire issued ordinary
share capital of the Company (the "Valuation"). The Valuation, as
determined by the Grantee, shall be conclusive and binding upon the
Grantor for all purposes hereof and the Grantor's sole rights in
respect thereof shall be as specifically set forth hereinafter.
(b) If the Valuation shall be less than US $111,000,000, then the Second
Option Price shall be US $6,689,655. If the Valuation shall be more
than US $145,000,000, then the Second Option Price shall be US
$9,620,689. Under no circumstances shall the Second Option Price
exceed US $9,620,689.
(c) If the Valuation shall be between US $111,000,000 and US
$145,000,000, then the Second Option Price shall be the amount which
results from the following calculation:
<TABLE>
<S> <C>
US $6,689,655 plus US $2,931,034 multiplied by the Valuation less 111,000,000
------------------------------
divided by 34,000,000
</TABLE>
17
<PAGE> 19
(d) Following the finalization of the Second Option Price as set forth
above, both parties shall be obligated to proceed to the Completion
of the purchase and sale of the Second Option Shares.
(e) Completion of the purchase and sale of the Second Option Shares
pursuant to the exercise of either the Second Call Option or the
Second Put Option shall take place in the manner provided in Clauses
4.1 and 5, as the case may be, on the ninetieth (90th) day following
the delivery of the Valuation to the Grantor (the "Due Date"), at
which time the actions specified in such Clauses shall be taken.
10 GENERAL
10.1 No amendment, change or addition hereto shall be effective or binding
on either party unless reduced to writing and executed by both
parties.
10.2 This Agreement and the rights hereunder may not be assigned in whole
or in part to any company or person, save that the Grantor may assign
its rights to a Member of the same Group (as that term is defined in
the Shareholder Agreement) as the Grantor.
10.3 The headings to clauses of this Agreement are for ease of reference
only and do not form part of this Agreement and are not in any way to
affect its construction.
10.4 Any notice to be given under this Agreement:
(a) must be in writing;
(b) may be given to the Grantor at its registered office (or such
other address as it may notify to the Grantee for such
purpose);
(c) may be given to the Grantee at its registered office (or such
other address as it or its assignee may notify to the Grantor
for such purpose); and
(d) will be effectively served:
(i) on the day of receipt, where any hand
delivered letter, telex or telefax message is
received on any Business Day before or during
normal working hours;
(ii) on the following Business Day, where any hand
delivered letter, telex or telefax message is
received either on an Business Day after
normal working hours or on any day which is
not a Business Day; or
(iii) on the second Business Day following the day
of posting, upon despatch from within the
United Kingdom of any posted letter by post
office inland first class mail postage
prepaid, or the fifth
18
<PAGE> 20
Business Day following the day of posting of
any letter sent by air mail postage prepaid,
and in proving such service it shall only be
necessary to prove that the same was stamped,
properly addressed and posted as aforesaid.
10.5 Copies of all notices served on the Grantee must also be served by
facsimile transmission sent to 680 Fifth Avenue, New York, New York
10019, U.S.A., marked for the attention of Mr. E. Clive Anderson and
Mr. Philip Eager (1-212-262-8870) and copies of all notices served on
the Grantor must also be served by facsimile transmission sent to
Messrs. Charles Russell of 8-10 New Fetter Lane, London EC4A 1RS
marked for the attention of Mr. M. Moncreiffe and Mr. J. Holder
(44-71-203-0202).
10.6 This Agreement is governed by and is to be construed in accordance
with English Law, including its rules as to the conflict of laws.
10.7 Each of the parties irrevocably submits to the non-exclusive
jurisdiction of the appropriate court of law in England in relation to any
matters arising out of or in connection with this Agreement and waives any
objection to legal proceedings being made in such courts whether on the
ground of venue or on the ground that such proceedings have been brought
in an inconvenient forum. These submissions shall not limit the rights
of the parties to bring any action in any other court having or claiming
jurisdiction (whether concurrently or not), provided that no proceedings
shall be undertaken by either party in any federal or state court in the
United States of America.
10.8 The Grantee hereby appoints Messrs. Morgan, Lewis & Bockius, of 4
Carlton Gardens, London SW1Y 5AA all communications to be marked for the
attention of Mr. Thomas J. Benz and the Grantor hereby appoints Messrs.
Charles Russell of 8-10 New Fetter Lane, London EC4A 1RS all
communications to be marked for the attention of Mr. M. Moncreiffe and
Mr. J. Holder in each case for service of process in connection with
legal proceedings in England and arising out of or in connection with
this Agreement.
10.9 In the event that any legal action in respect of this Agreement is
started, the process by which it is started may be served on the
defendant or, if specified in this Agreement, any other person on its
behalf at the place at which and in the manner in which notices may be
given to that party.
19
<PAGE> 21
ATTESTATIONS
Executed as a Deed by )
PLD TELEKOM INC. )
acting by: )
Director
Director/Secretary
Given under the Common Seal of )
ELITE INTERNATIONAL LIMITED )
acting by: )
Director
Director/Secretary
20
<PAGE> 22
ATTESTATIONS
Signed by ) s/s BORIS ANTONIUK
for and on behalf of )
ELITE INTERNATIONAL ) s/s DOROTHEA H. HATT
LIMITED )
in the presence of: )
Signed by ) s/s JAMES R.S. HATT
for and on behalf of )
TECHNOCOM LIMITED ) s/s DOROTHEA H. HATT
in the presence of: )
Signed by ) s/s JAMES R.S. HATT
for and on behalf of )
PLD TELEKOM INC. ) s/s DOROTHEA H. HATT
in the presence of: )
21
<PAGE> 1
EXHIBIT 10.50
SECURITIES SALE AND PURCHASE AGREEMENT NO. 3064-SMM-0515-00001
This SALE AND PURCHASE AGEEMENT is entered into between PLD TELEKOM INC.
(formerly known as Petersburg Long Distance Inc.), a company organised under the
laws of state Delaware, USA (the Seller), represented by JAMES HATT acting on
the basis of CORPORATE AUTHORITY AS CHAIRMAN and REDFORD LIMITED, a company
organised under the laws of Cyprus (the Purchaser), represented by Kruglov Igor
on the basis of the Power of Attorney.
POWER OF ATTORNEY
1. SUBJECT OF AGREEMENT The Seller is the owner of certain securities as stated
in Attachment 1 to this Agreement, which the Seller owns free and clear from
the rights of third parties (the Securities). The Purchaser hereby agrees to
purchase from the Seller, and the Seller agrees to sell to the Purchaser, the
Securities together with any and all rights attaching thereto, including any
dividends not as yet paid or stock splits effected, against the Purchase
Price stated in Attachment 1.
2. ACKNOWLEDGMENT The Purchaser acknowledges that it has made all investigations
into the value of the Securitiees and the business, operations and prospects
of the issuer that it has deemed necessary or desirable in connection with
this purchase, and that it has not relied upon the Seller to provide any such
information nor upon any representation, warranty or other statement made by
the Seller with respect to any of the foregoing.
3. REGISTRATION The Purchaser shall execute and deliver to the Seller a power of
attorney enabling the Seller to re-register the Securities into the name of
the Purchaser its name in the register of security holders of the issuer of
the Securities. The Seller shall use all reasonable endeavours to effect such
re-registration.
4. SETTLEMENT. Upon delivery to the Purchaser or an extract from the register of
shareholders of the issuer of the Securities designating the Purchaser as the
owner of the Securities (the Settlement Date), the Purchaser shall transfer
to the Seller the Purchase Price specified in Attachment 1 hereto. The
Purchase Price shall be effected in United States dollars by the Purchaser
within three (3) business days from the Settlement Date by means of wire
transfer in immediately available funds to the account designated by the
Seller. The Purchase Price shall be equal to the number of shares multiplied
by the price per share. Amounts of prepayment, if any, in respect of the
Securities shall be credited against the Purchase Price.
5. TERM AND TERMINATION The term of this Agreement shall commence on the date
hereof and shall expire upon performance by the parties of their obligations
hereunder. Notwithstanding the foregoing, if the Settlement Date shall not
have occurred within one month from the date hereof, this Agreement shall
terminate without any further liability between the parties in respect of
this Agreement.
<PAGE> 2
5. GOVERNING LAW In the event of any dispute or disagreement arising between the
Purchaser and the Seller under, or in connection with, this Agreement, such
dispute or disagreement shall be resolved by binding arbitration held at the
Arbitration Institute of the Stockholm Chamber of Commerce before a panel of
three (3) arbitrators appointed in accordance with the rules of the
Institute. This agreement shall be governed by, and construed in accordance
with, the laws of the Russian Federation
6. SIGNATURES This Agreement and Attachment 1 hereto may be signed by the
parties in two counterparts but such counterparts shall together constitute a
single agreement.
Signed by James Hatt
Executive Chairman
PLD Telekom Inc.
for and on behalf of the Seller
s/s James Hatt
-----------------------------
Signed by Kruglov I.E.
for and on behalf of the Purchaser
s/s Kruglov I.E.
-----------------------------
<PAGE> 1
EXHIBIT 10.52
SUBLEASE
SUBLEASE made this ____ day of June, 1997, by and between SEIKO
CORPORATION OF AMERICA, a New York corporation, having an office at 1111
MacArthur Blvd., Mahwah, New Jersey 07430 (hereinafter called "Sublessor"), and
PLD TELEKOM INC. a Delaware corporation , having an office at 1270 Avenue of
the Americas, New York, New York 10020 (hereinafter called "Sublessee").
W I T N E S S E T H :
WHEREAS, pursuant to a Lease dated as of July 1, 1990 (hereinafter
called the "Prime Lease"), 680 Fifth Avenue Associates, (hereinafter called the
"Landlord"), leased to Sublessor, the 24th floor of the building located at 680
Fifth Avenue, New York, New York (hereinafter referred to as the "Leased
Premises");
WHEREAS, Sublessee desires to sublet from Sublessor the Leased
Premises on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
SECTION 1. LEASED PREMISES. Sublessor hereby subleases to
Sublessee and Sublessee hereby hires from Sublessor the Leased Premises.
SECTION 2. TERM. The term of this Sublease shall commence on
June 15, 1997 or as soon thereafter as Landlord's written consent to the
Sublease is delivered to Sublessee, and the term shall expire on midnight of
December 30, 1999, unless sooner terminated in accordance with this Sublease.
The actual date on which the term commences shall be the "Commencement Date".
SECTION 3. RENT AND ADDITIONAL RENT. Sublessee shall pay to
Sublessor, during the term of this Sublease, at the time, place and manner
herein below set forth, the following base rents and additional rents, all of
which shall be payable without abatement, setoff or deduction, in lawful money
of the United States.
(a) Sublessee shall pay annual base rent in the amount of $150,000.00
and monthly base rent in advance in the amount of $12,500.00 on
the first day of each month from the Commencement Date to December
30, 1999, without notice or demand, to Sublessor, Attention:
Treasury Department, at 1111 MacArthur Blvd., Mahwah, New Jersey
07430, or at such other place designated by Sublessor to
Sublessee by written notice. The first month base rent as
pro-rated shall be delivered to Sublessor on the Commencement
Date. Monthly base rent shall be abated for the first and second
full months of this Sublease.
<PAGE> 2
(b) Sublessee shall pay electrical charges to the utility company
servicing Leased Premises.
(c) Sublessee shall pay to Sublessor as additional rent, all
additional rent, as paid by Sublessor pursuant to Article 7 of the
Prime Lease. However, in Section 7.01 D., the words "fiscal year
beginning July 1, 1991 and ending June 30, 1992" shall be changed
to "fiscal year beginning July 1, 1997 and ending June 30, 1998."
Also, in Section 7.03 A.(a), the date "January 1, 1992" shall be
changed to "January 1, 1997." The number "5,700" shall be changed
to "6,000" in Sections 7.03 A.(a) and 7.03 A.(b).
(d) Sublessee shall pay to Sublessor as additional rent any sums other
than those described in the preceding provisions of this Section
3, which are paid by Sublessor pursuant to the terms of the Prime
Lease, except late charges payable by Sublessor to Landlord.
(e) If by reason of any act or omission of Sublessee, Sublessor's rent
under the Prime Lease shall be increased pursuant to the terms of
the Prime Lease other than those described in the preceding
provisions of this Section 3, Sublessee shall pay to Sublessor, as
additional rent, an amount equal to such increase.
(f) All additional rent shall be payable to Sublessor upon demand at
its address first above stated or at such other place designated
by Sublessor to Sublessee by written notice.
SECTION 4. USE. The Leased Premises shall be used only for
general and executive office use.
SECTION 5. REPAIRS AND IMPROVEMENTS.
(a) Notwithstanding anything to the contrary contained in this
Sublease, Sublessor has no obligation to perform or make any work,
repairs, improvements or installations in the Leased Premises.
Sublessee accepts the Leased Premises in its present "as is"
condition.
(b) No tenant work of any nature shall be installed in the Leased
Premises by Sublessee unless the plans therefor have been first
approved in writing by Sublessor.
(c) At the expiration or earlier termination of this Sublease,
possession of the Leased Premises shall be surrendered to
Sublessor and at such time shall contain and be equipped with all
of Sublessee's additions or improvements (except Sublessee shall
be permitted to remove the same as allowed to be removed by the
Prime Lease), in good condition, ordinary wear and tear excepted
and the Leased Premises shall be restored by Sublessee at its sole
cost and expense, to the extent the Prime Lease so
2
<PAGE> 3
requires.
SECTION 6. SECURITY DEPOSIT. Sublessee shall, upon
execution of this Sublease, deposit with Sublessor the sum of $75,000 as
security for the full and faithful performance by Sublessee of Sublessee's
covenants and obligations under this Sublease. If Sublessee defaults in the
full and prompt payment and performance of any of Sublessee's covenants and
obligations under this Sublease, including but not limited to, the payment of
base rent and additional rent and other charges, Sublessor may use, apply or
retain the whole or any part of the security so deposited to the extent
required for the payment of any base rent and additional rent or any other sums
as to which Sublessee is in default or for any sum which Sublessor may expend
or may be required to expend by reason of Sublessee's default in respect of any
of the covenants, agreements, terms, provisions and conditions of this
Sublease. If Sublessor shall so use, apply or retain the whole or any part of
the security, Sublessee shall, upon demand, immediately deposit with Sublessor
a sum equal to the amount so used, applied or retained as a security as
aforesaid. Sublessee shall not assign or encumber or attempt to assign or
encumber the monies deposited herein as security, and neither Sublessor nor its
successors or assigns shall be bound by any such assignments, encumbrance,
attempted assignment or attempted encumbrance. On September 1, 1998, Sublessor
shall reduce the security to $50,000 provided Sublessee has not been in default
in the performance of any terms of this Sublease during the period June 15,
1997 to September 1, 1998.
SECTION 7. ASSIGNMENT AND SUBLETTING. During the term of this
Sublease, this Sublease shall not be sold, assigned, transferred or in any way
disposed of, whether by operation of law or otherwise, nor shall any part or
all of the Leased Premises be sublet without the prior written consent of
Sublessor, which may be withheld in Sublessor's sole discretion.
SECTION 8. PRIME LEASE.
(a) A copy of the Prime Lease, has been examined by Sublessee and
Sublessee acknowledges it is familiar with the terms thereof.
This Sublease is subject and subordinate to such Prime Lease.
Except as may be inconsistent, inapplicable or inappropriate with
the terms hereof or as otherwise expressly provided herein, all
the terms, covenants and conditions in the Prime Lease contained
shall be applicable to this Sublease, and be deemed incorporated
herein, with the same force and effect (unless the context of the
Prime Lease otherwise requires) as if Sublessor were the
"Landlord" under the Prime Lease and Sublessee were the "Tenant"
under the Prime Lease and the Leased Premises was the "Premises"
and as if reference therein to "Lease" meant this Sublease.
(b) Without intending to recite or limit all the provisions of the
Prime Lease (for example, the parties, rent, terms, premises and
use and occupancy recited in the Prime Lease), which may be
inconsistent with, or inapplicable to, this Sublease or as to
which express provision is made in this Sublease, reference is
hereby made to the following inconsistent or inapplicable
provisions of the Prime Lease:
3
<PAGE> 4
(i) The following articles of the Lease are inapplicable:
Article 4, Section 8.06, Articles 22, 35, 39, and
Exhibit C.
(ii) The term Landlord in Article 8 shall include Sublessor
and Landlord.
(iii) Any obligations of Landlord in Article 9 and Sections
11.02, 12.01 shall not include Sublessor.
SECTION 9. SUBLESSOR'S OBLIGATIONS.
(a) Except as specifically provided herein, Sublessor will not furnish
or bear the cost of any services or repairs of any kind, including
repairs needed as a result of destruction or condemnation
(hereinafter collectively "services") to Sublessee. Sublessee
will look solely to the Landlord for the providing and performance
of all services, if any, and will not seek nor require Sublessor
to provide or perform same, nor shall Sublessee make any claim
upon Sublessor for any failure to perform such obligation of
Landlord respecting such services.
(b) Without limiting the generality of Section 9 (a) above, it is
agreed that (i) Sublessor's obligations to Sublessee hereunder
with respect to the Leased Premises shall be no greater than
Landlord's obligations to Sublessor under the Prime Lease with
respect thereto; (ii) Sublessor shall be required to perform its
obligations to Sublessee hereunder with respect to the Leased
Premises only to the extent that Landlord has performed its
similar obligations to Sublessor under the Prime Lease with
respect thereto; (iii) Sublessee shall have no greater rights
against Sublessor hereunder with respect to the Leased Premises
than Sublessor has against Landlord under the Prime Lease with
respect thereto; and (iv) if Sublessee shall be entitled to
recover damages from Sublessor for Sublessor's failure to perform
its obligations to Sublessee hereunder with respect to the Leased
Premises, it may so recover only to the extent that Sublessor has
succeeded in recovering from Landlord for its failure to perform
its similar obligations to Sublessor.
(c) It is further agreed that, in the event and to the extent that the
exercise of any of Sublessee's rights with respect to the Landlord
requires notice or other action (including joinder in any action
to be taken by Sublessee) on the part of Sublessor, Sublessor will
upon reasonable notice from Sublessee take or join in such action
at Sublessee's cost and expense.
SECTION 10. INDEMNIFICATION. Sublessee shall neither do nor
permit anything to be done which would constitute a breach or violation of any
of the terms, covenants or conditions of the Prime Lease or which would cause
the Prime Lease to be terminated or forfeited by reason of any right of
termination or forfeiture reserved or vested in the Landlord, and Sublessee
shall indemnify and hold Sublessor harmless from and against all claims, loss,
expense or liability of any kind whatsoever (including reasonable counsel fees)
by reason of any breach or default on
4
<PAGE> 5
the part of Sublessee of its obligations under this Section 10.
SECTION 11. DEFAULT. In the event Sublessee shall default in
performing any of the terms of the Prime Lease and/or this Sublease, then
Sublessor shall have all the rights and remedies against Sublessee respecting
such default as would be available to Landlord under the Prime Lease.
SECTION 12. TERMINATION. If for any reason the term of the
Prime Lease shall be terminated prior to the expiration date of this Sublease,
this Sublease shall thereupon be terminated, and Sublessor shall not be liable
to Sublessee by reason thereof.
SECTION 13. NOTICES.
(a) Except as otherwise expressly provided in this Sublease, any
bills, statements, notices, demands, requests or other
communications given or required to be given under this Sublease
shall be deemed sufficiently given or rendered if in writing, sent
by registered or certified mail (return receipt requested),
addressed (a) to Sublessor at its address first above written,
Attention: Michael J. Marin, Director of Legal Affairs, with a
copy to Seiko Corporation of America, Manager of Corporate
Facilities, at the address first above written, or (b) to
Sublessee (i) at the Leased Premises, or (ii) at any place where
Sublessee or any agent or employee of Sublessee may be found, if
mailed prior to Sublessee taking possession of the Leased Premises
or subsequent to Sublessee's vacating, deserting, abandoning or
surrendering the Leased Premises, or (c) to such other address(es)
or other parties as either Sublessor or Sublessee may designate as
its new address(es) or other parties for such purpose by notice
given to the other in accordance with the provisions of this
Section 13.
(b) The time limits, if any, set forth in the Prime Lease for the
giving of any notice are, for the purpose of this Sublease,
changed so that the time limits of Sublessor and Sublessee shall
be three (3) days less than the number of days, if any, stated in
any particular case in the Prime Lease.
SECTION 14. BROKER. Sublessee warrants and represents to
Sublessor that it has dealt with no broker or finder with respect to the
subleasing of the Leased Premises other than Cushman & Wakefield, Inc. and
Synergy Realty Inc. Sublessor agrees to be responsible for the payment of any
commissions or other amounts due to such parties on account of this Sublease
pursuant to separate agreement. Sublessee agrees to indemnify and hold
Sublessor harmless from and against any and all loss, cost, claim, liability,
damage and expense (including, without limitation, reasonable attorneys' fees)
which Sublessor may incur or sustain in connection with any claim by any broker
or finder other than Cushman & Wakefield, Inc. and Synergy Realty Inc. which
may be asserted against Sublessor as a result of any conversations,
correspondence or other dealings between Sublessee and such broker or finder
relating to the Leased Premises.
5
<PAGE> 6
SECTION 15. INSURANCE.
(a) Sublessee shall obtain and keep in full force and effect during
the term of this Sublease at its own cost and expense the
insurance required in the Prime Lease, protecting Sublessor as an
additional insured against any and all claims for personal injury,
death or property damage occurring in, upon, adjacent to, or
connected with the Leased Premises or any part thereof. Sublessee
shall pay all premiums and charges therefor and upon failure to do
so, Sublessor may, but shall not be obligated to make such
payments, and in such latter event, Sublessee agrees to pay the
amount thereof to Sublessor on demand and said sum shall be and be
deemed to be additional rent. Sublessee will include in the
policies for such insurance a provision to the effect that the
same will be non-cancelable except upon 30 days advance written
notice to Sublessor. The original insurance policies or
appropriate certificates shall be deposited with Sublessor
together with any renewals, replacements or endorsements to the
end that said insurance shall be in full force and effect for the
benefit of Sublessor during the term of this Sublease. In the
event Sublessee shall fail to procure and place such insurance,
Sublessor may, but shall not be obligated to, procure and place
the same, in which event the amount of the premium paid shall be
paid by Sublessee to Sublessor upon demand and such sum shall be
and be deemed to be additional rent.
(b) Sublessee agrees to include in any policy insuring against loss,
damage or destruction by fire or other casualty to Sublessee's
Property and business interest in the Leased Premises (business
interruption insurance), a waiver of the insurer's right of
subrogation against Sublessor.
(c) Sublessee hereby releases Sublessor with respect to any claim
which it might otherwise have against Sublessor for loss, damage
or destruction with respect and to the extent of its property
(including rental value or business interruption) and for injury
to its employees, agents and invitees, occurring during the term
of this Sublease, unless due to the negligence of Sublessor or its
agents.
SECTION 16. HAZARDOUS MATERIALS.
(a) Indemnification.
(1) Sublessee shall and does indemnify and hold harmless
Sublessor from and against any and all loss, damage, expenses,
fees, claims, costs, fines, penalties, and liabilities including,
but not limited to, reasonable attorneys' fees and costs of
litigation, arising out of or in any manner connected with the
presence or release or threatened release of Hazardous Materials,
as herein defined, caused by Sublessee, its agents, employees,
contractors or invitees.
(2) Sublessee's indemnification of Sublessor pursuant to Section
16.(a) of this Sublease shall extend to all liability, including
all foreseeable and unforeseeable
6
<PAGE> 7
consequential damages, directly or indirectly arising out of the
use, generation, storage, release or disposal of Hazardous
Materials on or about the Prime Leased Premises by Sublessee, its
agents, employees, contractors or invitees, including, without
limitation, the cost of any required or necessary repair,
cleanup, or detoxification and the preparation of any closure or
other required plans, whether such action is required or
necessary prior to or following the termination of this Sublease,
to the full extent that such action is attributable, directly or
indirectly, to the use, presence, generation, storage, release or
disposal of Hazardous Materials by Sublessee, its agents,
employees, contractors or invitees. Neither the written consent
by Sublessor to the use, generation, storage, or disposal of
Hazardous Materials nor the strict compliance by Sublessee with
all statutes, laws, ordinances, rules, regulations, and
precautions pertaining to Hazardous Materials shall excuse
Sublessee from Sublessee's obligation of indemnification, which
shall survive the expiration or earlier termination of the
Sublease.
(b) Compliance.
(1) Sublessee_shall strictly comply with all statutes, laws,
ordinances, rules, regulations, and precautions now or hereafter
mandated by any federal, state, local, or other governmental
agency (collectively, "the Law") with respect to the use,
generation, storage, or disposal of Hazardous Materials at the
Leased Premises by Sublessee, its agents, employees, contractors
or invitees.
(2) Sublessee shall not cause, or allow any agent, employee,
contractor, or invitee of Sublessee to cause any Hazardous
Materials to be used, generated, stored, or disposed of on or
about the Leased Premises, except in compliance with the Law.
(c) Entry. Sublessee shall allow Sublessor to enter upon the Leased
Premises to perform any testing Sublessor desires. The testing
shall be done at Sublessor's sole expense.
(d) Definition. As used herein, Hazardous Materials shall include,
but not be limited to those substances defined as "hazardous
substances", "Hazardous Materials", "hazardous wastes", or other
similar designations in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., and any other
federal, state and local governmental statutes, laws, ordinances,
rules, regulations, and precautions.
SECTION 17. ENTIRE AGREEMENT. All prior understandings and
agreements between the parties are merged within this Sublease which alone
fully and completely sets forth the understandings of the parties; and this
Sublease may not be changed or terminated orally or in any manner other than by
an agreement in writing and signed by the party against whom enforcement of the
change or termination is sought.
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<PAGE> 8
SECTION 18. APPLICABLE LAW. This Sublease shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 19. APPLICATION. Subject to the terms hereof, the
covenants and agreements herein shall bind and inure to the benefit of the
parties hereto and their respective personal representatives, successors and
assigns.
SECTION 20. LANDLORD'S CONSENT. This Sublease shall have no
binding force and effect and shall not confer any rights or impose any
obligations upon either party unless and until both parties have executed it
and Sublessor shall have obtained Landlord's written consent to this Sublease
and delivered to Sublessee an executed copy of such consent. If Sublessee does
not receive an executed copy of said consent by June 28, 1997, Sublessee shall
have the option to terminate this Sublease by notifying Sublessor in writing on
or before July 2, 1997. If Sublessee fails to give said notice to terminate
this Sublease by July 2, 1997, then Sublessee shall be deemed to have waived
its right to terminate the Sublease. Under no circumstances shall the
submission of this Sublease in draft form by or to either party be deemed to
constitute and offer for the subleasing of the Lease Premises.
SECTION 21. WARRANTIES; FURNITURE.
(a) Sublessor represents and warrants to Sublessee that: (i) there
have been no amendments, supplements or other modifications to the
terms of the Prime Lease (including the Exhibits thereto) since its
execution, except Master Lessor's Non-Disturbance Agreement and
Sub-Lessee's Agreement to Attorn dated July 10, 1990, (ii) all major
Improvements (as defined in the Prime Lease) made by Sublessor have
been consented to by Landlord, and (iii) Sublessor is not in default
under any of the terms of the Prime Lease.
(b) Sublessor agrees to sell to Sublessee for the sum of $3,000, to
be paid on the Commencement Date, the items of furniture and equipment
identified on Schedule I hereto and any other furniture owned by
Sublessor located in the Leased Premises on the Commencement Date.
IN WITNESS WHEREOF, the parties have caused this Sublease to be duly
executed the day and year first above written.
SUBLESSOR:
SEIKO CORPORATION OF AMERICA
By: s/s RICHARD E. RENDUN
-------------------------------
Treasurer
8
<PAGE> 9
SUBLESSEE:
PLD TELEKOM INC.
By: s/s SIMON EDWARDS
-------------------------------
Senior V.P.
9
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Name Jurisdiction
- ---- ------------
<S> <C>
AO PeterStar Company Limited Russia
Baltic Communications Limited Russia
BECET International Kazakhstan
NWE Capital (Cyprus) Ltd. Cyprus
Technocom Company Limited Ireland
Teleport-TP Russia
Wireless Technology Corporations Limited British Virgin Islands
</TABLE>
<PAGE> 1
Exhibit 23.1
The Board of Directors
PLD Telekom Inc.
We consent to incorporation by reference in the registration statement (no.
333-35139) on Form S-8 of PLD Telekom Inc., and in the Post-Effective Amendment
No. 1 to Form S-4 Registration Statement on Form S-8 (333-18713) of PLD Telekom
Inc., of our report dated March 23, 1998, relating to the consolidated balance
sheet of PLD Telekom Inc. and subsidiaries as of December 31, 1997 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the year ended December 31, 1997, which report appears in the December
31, 1997 annual report on Form 10-K of PLD Telekom Inc.
KPMG PEAT MARWICK LLP
New York, New York
March 30, 1998
<PAGE> 1
Exhibit 23.2
The Board of Directors
PLD Telekom Inc.
We consent to incorporation by reference in the registration statement (no.
333-35139) on Form S-8 of PLD Telekom Inc. and in the Post-Effective Amendment
No. 1 to Form S-4 Registration Statement on Form S-8 (333-18713) of PLD
Telekom, Inc., of our report dated March 21, 1997, relating to the consolidated
balance sheets of PLD Telekom Inc. and subsidiaries as of December 31, 1996 and
1995 and the related consolidated statement of operations, shareholders'
equity, and cash flows for each of the years in the two-year period ended
December 31, 1996, which report appears in the December 31, 1996 annual report
on Form 10-K of PLD Telekom Inc.
KPMG
Chartered Accountants
Calgary, Canada
March 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLD TELEKOM
INC.'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BE REFERENCE TO SUCH FORM 10-K AND THE AUDITED CONSOLIDATED FINANCIAL
STATEMENTS FOR PLD TELEKOM INC. AT AND FOR THE YEAR ENDED DECEMBER 31, 1997
CONTAINED THEREIN.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 17,256
<SECURITIES> 0
<RECEIVABLES> 20,304
<ALLOWANCES> 3,226
<INVENTORY> 2,802
<CURRENT-ASSETS> 52,071
<PP&E> 158,120
<DEPRECIATION> 23,122
<TOTAL-ASSETS> 335,586
<CURRENT-LIABILITIES> 53,457
<BONDS> 122,214
0
4
<COMMON> 333
<OTHER-SE> 126,894
<TOTAL-LIABILITY-AND-EQUITY> 335,586
<SALES> 0
<TOTAL-REVENUES> 114,424
<CGS> 0
<TOTAL-COSTS> 39,186
<OTHER-EXPENSES> 63,220
<LOSS-PROVISION> 1,482
<INTEREST-EXPENSE> 17,846
<INCOME-PRETAX> (3,428)
<INCOME-TAX> 7,739
<INCOME-CONTINUING> (20,566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (20,566)
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
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