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EXHIBIT 10.5
AGREEMENT WITH RESPECT TO PROJECT COMPLETION AGREEMENT
AGREEMENT (the "Agreement"), dated as of June 3, 1999, among CLOSED
JOINT- STOCK COMPANY "FOREST-STARMA", a closed joint stock company, organized
and existing under the legislation of the Russian Federation (the "Company"),
THE PIONEER GROUP, INC., a corporation organized and existing under the laws of
the state of Delaware (the "U.S. Sponsor"), PIONEER FOREST, INC., a corporation
organized and existing under the laws of the state of Delaware and a wholly
owned subsidiary of the U.S. Sponsor (the "U.S. Sponsor Subsidiary"), and
OVERSEAS PRIVATE INVESTMENT CORPORATION, an agency of the United States of
America ("OPIC").
WITNESSETH:
WHEREAS, the Company, the U.S. Sponsor, International Joint Stock
Company "Starma Holding" (the "Russian Sponsor") and OPIC are parties to a
Project Completion Agreement dated as December 21, 1995 (the "Project Completion
Agreement");
WHEREAS, all capitalized terms used herein and not otherwise defined
herein shall have their respective meanings set forth in the Finance Agreement
dated December 21, 1995, as amended to and including the date hereof, between
the Company and OPIC or in the Project Completion Agreement;
WHEREAS, as a result of the Recapitalization, the U.S. Sponsor
Subsidiary will own 99%, and may own 100%, of the shares of capital stock of the
Company and the Russian Sponsor no longer holds any capital stock of the
Company; and
NOW, THEREFORE, the parties agree as follows:
1. INDEMNITY.
The U.S. Sponsor hereby indemnifies and holds harmless the
Indemnified Persons from and against any and all losses,
liabilities, obligations, damages, penalties, actions, judgments,
suits, costs, expenses, or disbursements of any kind or nature
whatsoever (Losses) that may be imposed on, incurred by, or
asserted against any Indemnified Person in any way relating to the
Contract of Pledge of Shares between the U.S. Sponsor Subsidiary
and OPIC or the Recapitalization, if such Losses would not have
occurred had the U.S. Sponsor and the Russian Sponsor not
transferred their shares of the Company, directly or indirectly,
to the U.S. Sponsor Subsidiary in connection with the
Recapitalization. In particular, but without limitation, this
indemnity extends to any Losses incurred by an Indemnified Person
as a result of the bankruptcy
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of the U.S. Sponsor Subsidiary or due to the existence of any
contract for pledge of shares in the Company which the U.S.
Sponsor Subsidiary may have entered into, and having priority to,
the contract for the Pledge of Shares with OPIC."
2. REPRESENTATIONS AND WARRANTIES.
(a) Each of the Company, the U.S. Sponsor, the U.S. Sponsor
Subsidiary represents and warrants to OPIC that this
Agreement constitutes a legal, valid and binding obligation
of it, enforceable against it in accordance with its terms.
(b) Each of the U.S. Sponsor and the U.S. Sponsor Subsidiary
represents and warrants to OPIC, jointly and severally that:
(i) As of the effective date hereof the U.S. Sponsor
Subsidiary owns of record and beneficially, and the
U.S. Sponsor owns beneficially, 97%, and upon
completion of the Recapitalization will so own
beneficially at least 99%, of the issued and
outstanding shares of capital stock of the Company,
and the U.S. Sponsor owns of record and beneficially
all of the issued and outstanding shares of capital
stock of the U.S. Sponsor Subsidiary;
(ii) As of the date hereof each of the representation and
warranties of the Sponsors in paragraphs (b) through
(j) of Section 8.A of the Project Completion
Agreement are true and accurate.
3. UNDERTAKING OF U.S. SPONSOR SUBSIDIARY. The U.S. Sponsor
Subsidiary hereby agrees to be bound by, and jointly and severally
responsible and liable for all obligations and liabilities of the
U.S. Sponsor under, the terms of Project Completion Agreement and
to appoint an agent for service of process satisfactory to OPIC in
connection with this undertaking in compliance with the terms of
Section 14(b) of the Project Completion Agreement and give written
notice thereof to OPIC within 30 days after the date hereof.
Notices to the U.S. Sponsor Subsidiary may be given to it at the
following address:
60 State Street
Boston, MA 02109
Tel: 617-742-7825
Fax: 617-422-4286
4. RATIFICATION AND CONFIRMATION. All the terms and provisions of the
Project Completion Agreement are hereby ratified and confirmed by
the U.S. Sponsor and the U.S. Sponsor Subsidiary and shall apply
in full force and effect.
5. EFFECTIVE DATE. This Agreement shall be effective as of the date
hereof.
6. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which when so executed and delivered shall be deemed an
original and all of which shall constitute one and the same
instrument.
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IN WITNESS whereof, the parties hereto have caused this Agreement to be
executed by their authorized representatives as of the day and year first
above written.
CLOSED JOINT-STOCK COMPANY "FOREST-STARMA"
By: /s/ Donald H. Hunter
Its: Authorized Officer
By: /s/ Catherine V. Mannick
Its: Authorized Officer
By: /s/ Inna Verdini
Its: Chief Accountant
THE PIONEER GROUP, INC.
By: /s/ Eric W. Reckard
Its: Executive Vice President, CFO and Treasurer
PIONEER FOREST, INC.
By: /s/ Stephen G. Kasnet
Its: President
OVERSEAS PRIVATE INVESTMENT CORPORATION
By: /s/ Steven S. Smith
Its: Investment Officer