-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, n2XXy8lQPPjh9/UaMmHcyVYfxrgoB7g3bdU9fUbhJB36aCZN+ZknP3QhvD99cW04 18oWktXNGl2y+p0ayIfVeQ== 0000950135-95-001169.txt : 19950516 0000950135-95-001169.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950135-95-001169 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER GROUP INC CENTRAL INDEX KEY: 0000733060 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 135657669 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08841 FILM NUMBER: 95538402 BUSINESS ADDRESS: STREET 1: 60 STATE ST CITY: BOSTON STATE: MA ZIP: 02109-1820 BUSINESS PHONE: 8008211239 MAIL ADDRESS: STREET 1: 60 STATE STREET CITY: BOSTON STATE: MA ZIP: 02109-1820 10-Q 1 THE PIONEER GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the three months ended March 31, 1995 Commission File No. 0-8841 The Pioneer Group, Inc. ----------------------- (exact name of registrant as specified in its charter) Delaware 13-5657669 - -------------------------------------------------------------------------------- (State of other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 60 State Street, Boston, Massachusetts 02109 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 742-7825 -------------- - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changes since last report. Indicate by checkmark 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 twelve 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 at least the past 90 days. X Yes No ----- ----- As of March 31, 1995, there were 24,791,028 shares of the Registrant's Common Stock, $.10 par value per share, issued and outstanding. 2 Part I Financial Information Item 1 Financial Statements THE PIONEER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in Thousands Except Per Share Amounts)
3/31/95 12/31/94 -------- -------- ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents, at cost which approximates market value......................... $ 12,120 $ 23,118 Investment in marketable securities, at value.............................................. 8,967 6,458 Receivables: From securities brokers and dealers for sales of mutual fund shares..................................................... 8,519 7,406 For gold shipments.................................................................... 3,594 4,393 Other................................................................................. 12,874 10,167 Mining inventory........................................................................... 15,085 11,881 Other current assets....................................................................... 3,969 4,696 -------- -------- Total current assets............................................................... 65,128 68,119 -------- -------- NONCURRENT ASSETS: Mining operations: Mining equipment and facilities (net of accumulated depreciation of $32,951 in 1995 and $29,793 in 1994)............................ 45,062 44,337 Deferred mining development costs (net of accumulated amortization of $9,620 in 1995 and $9,022 in 1994).............................. 10,465 11,061 Cost in excess of net assets of minority interest acquired (net of accumulated amortization of $1,499 in 1995 and $1,405 in 1994)............................... 2,247 2,341 Cost of acquisition in excess of net assets (net of accumulated amortization of $2,986 in 1995 and $2,458 in 1994)................................................. 22,357 22,789 Long-term venture capital investments, at value (cost $18,001 in 1995 and $18,181 in 1994)............................................. 19,416 19,835 Timber project in development: Deferred timber development costs....................................................... 8,977 6,765 Timber equipment and facilities......................................................... 8,424 5,384 Furniture, equipment, and leasehold improvements (net of accumulated depreciation and amortization of $8,483 in 1995 and $9,724 in 1994).................... 10,987 9,837 Dealer advances (net of accumulated amortization of $647 in 1995 and $346 in 1994).......... 6,692 4,399 Other assets (including federal and state deferred income taxes, net)....................... 9,336 7,642 -------- -------- Total noncurrent assets............................................................. 143,963 134,390 -------- -------- $209,091 $202,509 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Payable to funds for shares sold............................................................ $8,498 $7,075 Accrued expenses and accounts payable....................................................... 13,618 13,675 Accrued employees' compensation............................................................. 2,485 1,547 Accrued income taxes........................................................................ 179 748 Current portion of notes payable............................................................ 15,597 13,597 -------- -------- Total current liabilities........................................................... 40,377 36,642 -------- -------- NONCURRENT LIABILITIES: Notes payable, net of current portion....................................................... 8,289 9,101 Deferred foreign income taxes............................................................... 17,245 17,331 -------- -------- Total noncurrent liabilities........................................................ 25,534 26,432 -------- -------- Total liabilities................................................................... 65,911 63,074 -------- -------- Minority interest........................................................................... 5,138 5,013 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, $.10 par value; authorized 33,000,000 shares; issued 24,791,363 shares in 1995 and 24,697,960 shares in 1994 ...................... 2,479 2,470 Paid-in capital........................................................................ 6,003 3,599 Retained earnings...................................................................... 134,032 130,715 Treasury stock at cost, 335 shares in 1995 and 28,772 shares in 1994................... (2) (167) -------- -------- 142,512 136,617 Less - Deferred cost of restricted common stock issued................................. (4,470) (2,195) -------- -------- Total stockholders' equity.......................................................... 138,042 134,422 -------- -------- $209,091 $202,509 ======== ========
The Company's annual report on Form 10-K should be read in conjunction with these financial statements. 3 THE PIONEER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1995 1994 ----------- ----------- Revenues and sales: Investment management fees.................................... $ 15,072 $ 15,501 Underwriting commissions and other fees....................... 1,782 7,683 Shareholder services fees..................................... 5,544 4,883 Trustee fees and other income................................. 2,022 1,515 ----------- ----------- Revenues from financial services businesses............ 24,420 29,582 Gold sales.................................................... 21,259 12,976 ----------- ----------- Total revenues and sales............................... 45,679 42,558 ----------- ----------- Costs and expenses: Management, distribution, shareholder service and administrative expenses............................ 20,565 18,522 Gold mining operating costs and expenses...................... 14,413 9,521 ----------- ----------- Total costs and expenses............................... 34,978 28,043 ----------- ----------- Other (income) expense: Unrealized and realized losses (gains) on venture capital and marketable securities investments, net..... (511) 779 Interest expense.............................................. 432 207 Minority interest............................................. 483 656 Other, net.................................................... 598 219 ----------- ----------- Total other (income) expense........................... 1,002 1,861 ----------- ----------- Income before provision for federal, state and foreign income taxes.......................................... 9,699 12,654 ----------- ----------- Federal, state and foreign income taxes: Provision for federal, state and foreign income taxes......... 3,902 5,194 Cumulative deferred foreign income tax adjustment ............ --- (4,431) ----------- ----------- Net provison for federal, state, and foreign income taxes....... 3,902 763 ----------- ----------- Net income...................................................... $ 5,797 $ 11,891 =========== =========== Earnings per share.............................................. $ 0.23 $ 0.47 =========== =========== Dividends per share............................................. $ 0.10 $ 0.06 =========== =========== Weighted average common and common equivalent shares outstanding............................ 25,209,000 25,286,000 =========== ===========
The Company's annual report on Form 10-K should be read in conjunction with these financial statements. 4 THE PIONEER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS (DOLLARS IN THOUSANDS) (UNAUDITED) MARCH 31, 1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................................................ $ 5,797 $11,891 -------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization........................................................... 5,369 3,873 Unrealized and realized loss (gains) on venture capital & marketable securities, net.... (511) 779 (Equity in earnings of) other investments............................................... (598) (173) Restricted stock plan expense........................................................... 291 251 Deferred (prepaid) income taxes......................................................... 1,585 (4,603) Minority interest....................................................................... 483 656 Changes in operating assets and liabilities: Receivable from securities brokers and dealers for sales of mutual fund shares.......... (1,113) 2,341 Receivables for gold shipments.......................................................... 799 (671) Other receivables....................................................................... (2,707) (5,583) Mining inventory........................................................................ (3,204) (1,117) Other current assets ................................................................... 727 320 Dealer advances ........................................................................ (2,594) --- Other assets ........................................................................... (565) (255) Payable to funds for shares sold........................................................ 1,423 (2,334) Accrued expenses and accounts payable................................................... (57) 435 Accrued employees' compensation......................................................... 938 1,058 Accrued income taxes.................................................................... (569) 3,521 -------- ------- TOTAL ADJUSTMENTS..................................................................... (303) (1,502) -------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES............................................. 5,494 10,389 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to furniture, equipment and leasehold improvements.............................. (1,840) (1,310) Investments in marketable securities...................................................... (4,828) (8,434) Proceeds from sale of marketable securities............................................... 2,683 10,104 Long-term venture capital investments..................................................... (374) (952) Proceeds from sale of venture capital investments......................................... 940 1,735 Deferred timber development costs ....................................................... (2,212) (522) Timber equipment and facilities .......................................................... (3,040) --- Other investments......................................................................... (2,202) (1,363) Cost of acquisition in excess of net assets............................................... (96) (65) Purchase of mining equipment and facilities............................................... (3,883) (2,865) Deferred mining development costs, net.................................................... (2) (260) -------- ------- NET CASH USED IN INVESTING ACTIVITIES................................................. (14,854) (3,932) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid............................................................................ (2,480) (1,479) Distributions to minority interest holder of gold mining subsidiary....................... (350) --- Distributions to limited partners of venture capital subsidiary........................... (8) (21) Exercise of stock options................................................................. --- 32 Restricted stock plan award............................................................... 12 5 Repayments of notes payable............................................................... (812) (58) Borrowings................................................................................ 2,000 --- Reclassification of restricted cash....................................................... --- 398 -------- ------- NET CASH USED IN FINANCING ACTIVITIES................................................. (1,638) (1,123) -------- ------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........................................ (10,998) 5,334 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................................ 23,118 19,242 -------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................................. $ 12,120 $24,576 ======== =======
THE COMPANY'S ANNUAL REPORT ON FORM 10-K SHOULD BE READ IN CONJUNCTION WITH THESE FINANCIAL STATEMENTS. 5 THE PIONEER GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1995 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of The Pioneer Group, Inc. and its subsidiaries (the "Company") conform to generally accepted accounting principles. The Company has not changed any of its principal accounting policies from those stated in the Annual Report on Form 10-K for the year ended December 31, 1994. The footnotes to the financial statements reported in the 1994 Annual Report on Form 10-K are incorporated herein by reference, except to the extent that any such footnote is updated by the following: Certain reclassifications have been made to the accompanying 1994 consolidated financial statements to conform with the 1995 presentation. Income taxes paid were $2,596,000 and $3,518,000 for the three months ended March 31, 1995, and March 31, 1994, respectively. In addition, interest paid was $385,000 for the three months ended March 31, 1995, and $192,000 for the three months ended March 31, 1994. NOTE 2 - MINING INVENTORY Mining inventories consist of the following:
March 31, December 31, 1995 1994 ---- ---- (Dollars in Thousands) Gold-in-process $ 1,125 $ 1,125 Materials and supplies 13,960 10,756 ------- ------- $15,085 $11,881 ======= =======
6 NOTE 3 - MINING EQUIPMENT
March 31, December 31, 1995 1994 ---- ---- (Dollars in Thousands) Processing plant and equipment $ 22,752 $ 22,485 Mining equipment (rolling stock) 29,566 26,958 Buildings and housing units 3,736 3,718 Leach pads and ponds 11,506 10,026 Construction in progress 1,170 1,010 All other equipment 9,283 9,933 -------- -------- 78,013 74,130 Less: accumulated depreciation (32,951) (29,793) -------- -------- Total mining equipment $ 45,062 $ 44,337 ======== ========
NOTE 4 - INCOME TAXES The Company adopted the accounting and disclosure rules specified by Statement of Financial Accounting Standards ("SFAS No. 109") "Accounting for Income Taxes" as of January 1, 1993. Under SFAS No. 109, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. The amounts of deferred tax assets or liabilities are based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred tax assets consist principally of deferred interest on debt paid to the Company by Teberebie Goldfields Limited, deferred rent expense, foreign tax credits and restricted stock plans' temporary differences. Deferred tax liabilities include principally deferred foreign income taxes, dealer advances and cumulative unrealized gains related to the Company's venture capital investment portfolio. NOTE 5 -- RESTRICTED STOCK PLAN AND STOCK OPTION PLAN The Company has a Restricted Stock Plan ("the 1990 Plan") to provide incentives to certain employees who have contributed and are expected to contribute materially to the success of the Company and its subsidiaries. An aggregate total of 1,200,000 shares of the Company's stock may be awarded to participants under the 1990 Plan at a price of $.10 per share. The 1990 Plan expired in January 1995. The following table summarizes restricted stock plan activity for the 1990 Plan during the first three months of 1995.
Shares of Stock ------ -- ----- Unvested Vested Total -------- ------ ----- Beginning of period 419,264 219,000 638,264 Awards 123,400 --- 123,400 Vesting (127,700) 127,700 --- Forfeitures (1,560) --- (1,560) -------- ------- ------- End of period 413,404 346,700 760,104 ======== ======= =======
7 The Company awarded 101,460 shares in 1994 and 164,800 shares in 1993 under the 1990 Plan. The Company's 1981 Restricted Stock Plan ("the 1981 Plan") expired in 1990. The following table summarizes restricted stock plan activity for the 1981 Plan during the first three months of 1995.
Shares of Stock ------ -- ----- Unvested Vested Total -------- ------ ----- Beginning of period 15,684 1,489,648 1,505,332 Vesting (15,684) 15,684 --- ------- --------- --------- End of period --- 1,505,332 1,505,332 ======= ========= =========
The participant's right to resell the awarded stock, under both Plans, is restricted as to 100% of the shares awarded during the first two years following the award, 60% during the third year and 20% less each year thereafter. The Company may repurchase unvested restricted shares at $.10 per share upon termination of employment. Awards under both Plans are compensatory, and, accordingly, the difference between the award price and the market value of the shares under the Plans at the award date, less the applicable tax benefit, is being amortized on a straight-line basis over a five year period. On January 26, 1995, the Company's Board of Directors adopted the 1995 Restricted Stock Plan ("the 1995 Plan"). The 1995 Plan was approved by the Company's stockholders on May 4, 1995. An aggregate total of 600,000 shares of the Company's common stock may be awarded to participants under the 1995 Plan at a purchase price determined by the Board of Directors or a designated committee thereof. The terms of the 1995 Plan are substantially the same as those under the 1981 and 1990 Plans. The Company also has a stock option plan. Under the 1988 Stock Option Plan (the "Option Plan"), options on the Company's stock may be granted to key employees of the Company, and the Company has reserved an aggregate of 2,400,000 shares for issuance under the Option Plan. Both incentive stock options intended to qualify under Section 422A of the Internal Revenue Code of 1986 and non- statutory options not intended to qualify for incentive stock option treatment ("non-statutory options") may be granted under the Option Plan. The Option Plan is administered by the Board of Directors or a committee of disinterested directors designated by the Board (the "Committee") and unless the Option Plan is earlier terminated, no option may be granted after August 1, 1998. The option price per share is determined by the Board of Directors or the Committee, but (i) in the case of incentive stock options, may not be less than 100% of the fair market value of such shares on the date of option grant, and (ii) in the case of non-statutory options, may not be less than 90% of the fair market value on the date of option grant. Options issuable under the Option Plan become exercisable as determined by the Board of Directors or the Committee not to exceed ten years from the date of grant. Options granted to date vest over five years at an annual rate of 20% on each anniversary date of the date of the grant. 8 The following table summarizes all stock option activity since December 31, 1992.
Number of Exercise shares price per share --------- ----------------- Outstanding at December 31, 1992 1,570,800 $ 4.188 - $ 7.063 Granted 139,000 $ 12.00 Terminated (12,000) $ 4.188 Exercised (62,800) $ 4.188 --------- ----------------- Outstanding at December 31, 1993 1,635,000 $ 4.188 - $ 12.00 Granted 191,500 15.875 - $ 21.25 Exercised (32,000) $ 4.188 --------- ----------------- Outstanding at December 31, 1994 1,794,500 $ 4.188 - $ 21.25 ========= =================
There was no activity in the Option Plan in the three months ended March 31, 1995. At March 31, 1995, 1,143,800 shares had vested under the Option Plan. NOTE 6 - NET CAPITAL As a broker-dealer, Pioneer Funds Distributor, Inc. ("PFD"), is subject to the Securities and Exchange Commission's regulations and operating guidelines which, among other things, require PFD to maintain a specified amount of net capital, as defined, and a ratio of aggregate indebtedness to net capital, as defined, not exceeding 15 to 1. Net capital and the related ratio of aggregate indebtedness to net capital may fluctuate on a daily basis. PFD's net capital, as computed under Rule 15c3-1, was $2,705,260 at March 31, 1995, which exceeded required net capital of $723,054 by $1,982,206. The ratio of aggregate indebtedness to net capital at March 31, 1995, was 4.01 to 1. PFD is exempt from the reserve requirements of Rule 15c3-3, since its broker-dealer transactions are limited to the purchase, sale and redemption of redeemable securities of registered investment companies. All customer funds are promptly transmitted and all securities received in connection with activities as a broker-dealer are promptly delivered. PFD does not otherwise hold funds or securities for, or owe money or securities to, customers. NOTE 7 - BENEFIT PLANS The Company and its subsidiaries have two defined contribution benefit plans for eligible employees: a retirement benefit plan and a savings and investment plan qualified under section 401(k) of the Internal Revenue Code of 1986. The Company makes contributions to a trustee, on behalf of eligible employees, to fund both the retirement benefit and the savings and investment plans. The Company's expenses under these plans were $512,000 for the three months ended March 31, 1995, and $488,000 for the three months ended March 31, 1994. Both of the Company's qualified plans described above cover all full-time employees who have met certain age and length of service requirements. Regarding the retirement benefit plan, the Company contributes an amount which would purchase a certain targeted monthly pension benefit at the participant's normal retirement date. In connection with the savings and investment plan, participants 9 can voluntarily contribute up to 8% of their compensation to the plan, and the Company will match this contribution up to 2%. NOTE 8 - RELATED PARTY TRANSACTIONS Certain officers and/or directors of the Company and its subsidiaries are officers and/or trustees of the Pioneer mutual funds. Investment management fees earned from the mutual funds were approximately $14,400,000 for the three months ended March 31, 1995, and $15,023,000 for the three months ended March 31, 1994. Underwriting commissions and other fees earned from the sale of mutual funds shares were approximately $1,782,000 for the three months ended March 31, 1995, and $7,683,000 for the three months ended March 31, 1994, respectively. Shareholder services fees earned from the mutual funds were approximately $5,544,000 for the three months ended March 31, 1995, and $4,883,000 for the three months ended March 31, 1994. Within the Pioneer mutual funds, revenues from Pioneer II were approximately $7,920,000 for the three months ended March 31, 1995, and $7,999,000 for the three months ended March 31, 1994. Revenues from Pioneer Fund were $3,874,000 for the three months ended March 31, 1995, and $3,836,000 for the three months ended March 31, 1994. Certain partners of Hale and Dorr, the Company's legal counsel, are officers and/or directors of the Company and its subsidiaries. Amounts paid to Hale and Dorr for legal services were $585,000 for the three months ended March 31, 1995, and $380,000 for the three months ended March 31, 1994. At March 31, 1995 and 1994, the Company had a receivable from an officer of $109,000. NOTE 9 - COMMITMENTS AND CONTINGENCIES Rental expense was $1,161,000 for the three months ended March 31, 1995, and $734,000 for the three months ended March 31, 1994. Future minimum payments amount to approximately $2,203,000 for the last nine months of 1995, $3,051,000 in 1996, $3,129,000 in 1997, $3,220,000 in 1998, $3,342,000 in 1999, $3,197,000 in 2000 and $5,393,000 thereafter. These future minimum payments include estimated annual operating expenses of approximately $1,000,000 in the last nine months of 1995, and $1,330,000 thereafter. In September 1993, TGL executed a commitment letter with the Overseas Private Investment Corporation ("OPIC") pursuant to which OPIC will provide loan guarantees for up to $5.0 million. The commitment terminates in December 1995 and carries commitment fees of 0.5% per year on the undisbursed and uncanceled amount of the guarantee commitment. The Company is contingently liable to the Investment Company Institute Mutual Insurance Company for unanticipated expenses or losses in an amount not to exceed $500,000. Two thirds of this amount is secured by an irrevocable standby letter of credit with a bank. 10 NOTE 10- NOTES PAYABLE Notes payable of the Company consist of the following:
March 31, December 31, 1995 1994 ---- ---- (Dollars in Thousands) Line of Credit............................................... $ 12,000 $ 10,000 Small Business Administration ("SBA") financing, notes payable to a bank, interest payable semi-annually at rates ranging from 6.12% to 9.8%, due in 1998 through 2003..................................... 4,950 4,950 Note payable to a bank guaranteed by the Swedish Exports Credits Guarantee Board, principal payable in six semi-annual installments of $812,000 through March 31, 1997, interest payable at 5.77%, secured by equipment.................................................... 3,247 4,059 Notes payable to a bank, guaranteed by the Overseas Private Investment Corporation ("OPIC"), interest payable quarterly at approximately 0.5% in excess of the 91-day T-bill rate set in advance (aggregating 6.21% at March 31, 1995), principal payable in semi-annual installments of $1,544,000 through June 30, 1995............................. 1,544 1,544 Notes payable to a bank, guaranteed by the Company, principal payable in semi-annual installments, of $214,000 through November 30, 1999, no interest payable, secured by equipment.................... 2,145 2,145 -------- -------- 23,886 22,698 Less: Current portion....................................... (15,597) (13,597) -------- -------- $ 8,289 $ 9,101 ======== ========
In December 1991, OPIC certified that all conditions of a Project Completion Agreement had been satisfied pursuant to which the Company would no longer be required to guarantee TGL's loan guaranteed by OPIC. Among the conditions was the establishment of an escrow account covering six months of all third party debt service payments. OPIC waived the condition of the Project Completion Agreement at December 31, 1994, which had previously required that TGL maintain the escrow account balance. The balance of such escrow account was $1.8 million at March 31, 1994. In connection with non-SBA borrowings, the Company incurs various fees. Guaranty fees include an annual 2.65% fee on the outstanding unpaid principal balance of the notes guaranteed by OPIC. Administration fees include a fee of 0.25% on the outstanding balance of the notes payable to a bank secured by equipment. 11 Among other covenants of the non-SBA borrowings, the Company must maintain at least a 51% ownership interest in TGL and TGL must maintain certain financial ratios and limit its lease payments to specified levels. In addition, as certain assets of TGL secure these borrowings, TGL may not sell its assets except to replace them. Limits also exist regarding the amount of dividends TGL may pay the Company. These limits are based on certain financial ratios and the net income of TGL. During 1994 and 1993, OPIC agreed to waive its requirement that TGL prepay a certain amount of the OPIC guaranteed loans in connection with the repayment of certain principal and interest owed to the Company. In 1994, TGL prepaid a note payable to a supplier and a note payable to a bank with a remaining principal balance of approximately $761,000. Maturities of notes payable at March 31, 1995 for each of the next five years and thereafter are as follows (dollars in thousands): 1995 $15,597 1996 2,052 1997 429 1998 1,629 1999 429 Thereafter 3,750 ------- $23,886 =======
On February 28, 1995 the Company entered into an agreement with a commercial bank providing for a $30 million unsecured line of credit. Advances under the line bear interest at the Company's option at the higher of the bank's base lending rate or the federal funds rate plus 0.50%, the London Interbank Offered Rate plus 1.10% or at a money market rate set by the bank. The Company is required to pay additional interest to the bank at the rate of 0.25% per year of the unused portion of the line. At March 31, 1995 the Company had $12,000,000 outstanding on the line. The line expires February 27, 1996. NOTE 11 - MAJOR CUSTOMERS AND EXPORT SALES During the three months ended March 31, 1995, gold sales aggregated $21.3 million. During this period, gold shipments from TGL in Ghana to two unaffiliated European refiners accounted for $12.8 million and $8.5 million of total sales, respectively, representing 100% of such total sales. During the three months ended March 31, 1994, gold sales aggregated $13.0 million. During this period, gold shipments from TGL in Ghana to two unaffiliated European refiners accounted for $8.5 million and $4.5 million of total sales, respectively, representing 100% of such total sales. NOTE 12 - ACQUISITION OF MUTUAL OF OMAHA FUND MANAGEMENT COMPANY On December 1, 1993, the Company completed its acquisition of Mutual of Omaha Fund Management Company ("FMC"). The Company financed this acquisition through working capital in the amount of $23,500,000. The Company also incurred additional costs associated with the acquisition in the amount of $1,853,000. 12 The Company has allocated cost in excess of net assets acquired in the amount of $25,343,000, as set forth below. This cost is being amortized on a straight-line basis beginning December 1, 1993, over the following periods:
Amount at Estimated March 31, 1995 Useful Life -------------- ----------- (Dollars in Thousands) Goodwill $21,843 15 years Non-compete agreement 3,300 5 years Consulting 200 7 months ------- $25,343 Less: accumulated amortization 2,986 ------- Cost of acquisition in excess of net assets, net $22,357 =======
The Company also agreed to pay up to an additional $3 million in three years if certain conditions, as defined in the purchase agreement, are met. NOTE 13 - DEALER ADVANCES During 1994, certain of the Pioneer Family of Mutual Funds introduced a multi-class share structure, whereby the participant funds offer both the traditional front-end load shares and back-end load shares (B-shares). B-shares do not require the investor to pay any sales charge unless there is a redemption before the expiration of the minimum holding period which ranges from three to six years. However, the Company pays upfront sales commissions (dealer advances) to broker-dealers ranging from 2% to 4%. The Company capitalizes and amortizes dealer advances for book purposes over periods which range from three to six years depending on the participating fund. The Company deducts the dealer advances in full for tax purposes in the year such advances are paid. In the first quarter of 1995, the Company paid dealer advances in the amount of $2.6 million. Dealer advances, net of amortization were $6.7 million at March 31, 1995. NOTE 14 - FINANCIAL INFORMATION BY BUSINESS SEGMENT Total revenues and income (loss) by business segment, excluding intersegment transactions, were as follows: 13 NOTE 14 - FINANCIAL INFORMATION BY BUSINESS SEGMENT (DOLLARS IN THOUSANDS) (UNAUDITED)
MUTUAL FUND INVESTMENT UNDERWRITING VENTURE CAPITAL SHAREHOLDER MANAGEMENT AND OTHER INVESTMENTS SERVICES ---------- --------- ----------- -------- THREE MONTHS - ------------ ENDED 3/31/95 3/31/94 3/31/95 3/31/94 3/31/95 3/31/94 3/31/95 3/31/94 - ----- ------- ------- ------- ------- ------- ------- ------- ------- REVENUES & OTHER INCOME $15,071 $15,614 $ 3,611 $ 8,899 $ 180 $ 167 $5,558 $4,902 ======= ======= ======= ======= ======= ======= ====== ====== INCOME (LOSS) BEFORE INCOME TAXES $10,084 $10,569 $(6,397)(1) $ (484)(1) $ (181)(2) $ (638)(2) $ 670 $ 864 ======= ======= ======= ======= ======= ======= ====== ====== DEPRECIATION & AMORTIZATION $ 257 $ 823 $ 1,151 $ 251 $ 26 $ 21 $ 376 $ 178 ======= ======= ======= ======= ======= ======= ====== ====== CAPITAL EXPENDITURES $ 108 $ 14 $ 839 $ 492 $ 7 $ 0 $ 886 $ 804 ======= ======= ======= ======= ======= ======= ====== ====== IDENTIFIABLE ASSETS AT QUARTER END $34,137 $46,430 $32,643 $36,754 $25,824 $25,490 $8,229 $4,659 ======= ======= ======= ======= ======= ======= ====== ====== GOLD MINING OTHER CONSOLIDATED ----------- ----- ------------ THREE MONTHS - ------------ ENDED 3/31/95 3/31/94 3/31/95 3/31/94 3/31/95 3/31/94 - ----- ------- ------- ------- ------- ------- ------- REVENUES & OTHER INCOME $21,259 $12,976 $ 0 $ 0 $ 45,679 $ 42,558 ======= ======= ======= ====== ======== ======== INCOME (LOSS) BEFORE INCOME TAXES $ 6,121 (3) $ 2,562 (3) $ (598)(4) $ (219)(4) $ 9,699 $ 12,654 ======= ======= ======= ====== ======== ======== DEPRECIATION & AMORTIZATION $ 3,850 $ 2,851 $ 0 $ 0 $ 5,660 $ 4,124 ======= ======= ======= ====== ======== ======== CAPITAL EXPENDITURES $ 3,883 $ 2,887 $ 3,040 $ 0 $ 8,763 $ 4,197 ======= ======= ======= ====== ======== ======== IDENTIFIABLE ASSETS AT QUARTER END $78,122 $64,956 $30,136 $3,764 $209,091 $182,053 ======= ======= ======= ====== ======== ======== (1) Net of interest expense related to third parties of $231,000 for the three months ended March 31, 1995 and $0 for the three months ended March 31, 1994. (2) Net of minority interest and interest expense related to third parties of approximately $25,000 and $99,000 respectively, for the three months ended March 31, 1995, and $(29,000) and $99,000 for the three months ended March 31, 1994. (3) Net of minority interest and interest expense related to third parties of approximately $458,000 and $102,000 for the three months ended March 31, 1995 and $685,000 and $108,000 for the three months ended March 31, 1994. (4) Net of interest expense related to third parties of approximately $0 and expense related to the Company of $75,000 for the three months ended March 31, 1995 and $0 and $165,000 for the months ended March 31, 1994.
14 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY OF OPERATIONS The Pioneer Group, Inc. (the "Company") reported first quarter 1995 earnings per share of 23 cents versus 47 cents in the first quarter of 1994. First quarter 1994 earnings included a favorable deferred income tax adjustment to earnings of 16 cents per share from Teberebie Goldfields Limited ("TGL"), the Company's 90% owned gold mining subsidiary. Earnings per share have been adjusted for the 2 for 1 stock split, effected by the payment of a 100% stock dividend on December 9, 1994. Earnings per share from the Company's financial services businesses decreased by 14 cents per share to 10 cents per share in the first quarter of 1995 versus the comparable period of 1994, reflecting a 14 cents per share decrease in the Company's Polish operations which earned 2 cents per share in the first quarter of 1995. This decrease resulted principally from significantly lower underwriting commissions and management fees relating to the Company's Polish mutual fund, which had assets under management of approximately $350 million at March 31, 1995, down from approximately $1 billion at March 31, 1994. Reduced earnings from the financial services businesses were partially offset by an increase of 7 cents per share from the Company's gold mining operations. FINANCIAL SERVICES BUSINESSES REVENUES. Revenues from the financial services businesses of $24.4 million in the first quarter of 1995 were $5.2 million lower than the comparable 1994 period, resulting principally from lower underwriting commissions. Management fees of $15.1 million in the first quarter of 1995 were $0.4 million, or 4% lower, than the first quarter of 1994. The $0.8 million decrease in management fees from the Company's Polish mutual fund were partially offset by a $0.4 million increase in management fees from U.S. registered mutual funds. Assets under management of $11.5 billion at March 31, 1995, reflected an increase of $0.4 billion over December 31, 1994. Underwriting commissions and other fees of $1.8 million in the first quarter of 1995 were $5.9 million lower than the first quarter of 1994 as a result of significantly lower sales of the Company's Polish mutual fund. Sales of units of the Polish mutual fund were $4 million in the first quarter of 1995 and redemptions were $231 million as contrasted to sales of $621 million in the first quarter of 1994 and redemptions of $78 million. The Company's U.S. registered mutual fund sales (including reinvested dividends) of $357 million in the first quarter of 1995 were $26 million less than sales during the prior year's comparable period, while redemptions of $249 million increased by only $6 million. Sales of the Company's U.S. equity funds of $320 million in the first quarter of 1995, however increased by approximately $13 million over sales during the prior 15 year's comparable period. The Company had net sales of $108 million in the first quarter of 1995 compared to $140 million in the first quarter of 1994. Shareholder services fees of $5.5 million in the first quarter of 1995 increased by $0.7 million or 14% over the comparable 1994 period as the result of an increase in the number of shareholder accounts and a fee increase effective January 1, 1995. COSTS AND EXPENSES. Worldwide costs and expenses of $20.6 million in the first quarter of 1995 increased by $2.0 million, or 11%, over the comparable 1994 period. Virtually all of the increase resulted from higher payroll costs, principally reflecting costs related to: 1) increased staffing in the investment management, marketing and shareholder servicing groups and 2) higher bonus expenses related principally to investment management performance, and higher costs related to additional office space. These higher costs were partially offset by earnings of 2 cents per share from the Company's India and Taiwan joint ventures. OTHER INCOME AND EXPENSE. The Company reported net venture capital investment portfolio gains (excluding operating expenses) of $0.1 million in the first quarter of 1995 compared to net losses of $0.3 million in 1994. The Company's investments in its own mutual funds during their startup phase contributed net gains of $0.4 million during the first quarter of 1995 compared to net losses of $0.4 million during the same period in 1994. TAXES. The Company's effective tax rate for the financial services businesses of 42% for the first quarter of 1995 was unchanged from the first quarter of 1994. GOLD MINING BUSINESS In the first quarter of 1995, the gold mining business contributed $3.9 million, or 15 cents per share, to the Company's earnings, 7 cents per share higher than last year's first quarter (exclusive of the 16 cents per share related to the deferred income tax adjustment). Revenues increased by 64% over the first quarter of 1994 to $21.3 million as gold sales increased by 66% to 56,100 ounces and the average realized price of gold decreased by only 2% to $379 per ounce. Total gold production for 1995 is targeted at 265,000 ounces, an increase of 88,600 ounces over 1994. 16 The following table compares the cash and total cost per ounce for the three months ended March 31, 1995 with the same period in 1994:
- --------------------------------------------------------------------------- Three Months ended March 31, (Increase)/ - --------------------------------------------------------------------------- 1995 1994 decrease ---- ---- -------- - --------------------------------------------------------------------------- Cash Costs: - --------------------------------------------------------------------------- Production Costs $141 $128 $(13) - --------------------------------------------------------------------------- Royalties 11 15 4 - --------------------------------------------------------------------------- 152 143 (9) - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- General and administrative 26 39 13 - --------------------------------------------------------------------------- Cash Cost Per Ounce 178 182 4 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Non Cash: - --------------------------------------------------------------------------- Depreciation and Amortization 68 84 16 - --------------------------------------------------------------------------- Other 6 3 (3) - --------------------------------------------------------------------------- Cost of Production Per Ounce 252 269 17 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Interest and other costs 10 19 9 - --------------------------------------------------------------------------- Total Cost Per Ounce $262 $288 $ 26 - ---------------------------------------------------------------------------
Production costs represent costs attributable to mining ore and waste and processing the ore through crushing, leaching, and processing facilities. These costs increased by $13 per ounce principally because of higher stripping ratios and the mining of lower grade ore. As a result, material hauled increased by 114% to 6.4 million tonnes. Cost increases were experienced in several mining and processing categories including drilling and blasting costs, equipment maintenance, fuel costs, leaching reagents, and crushing costs. Royalty payments are linked to operating profits and tax depreciation and were estimated at 4% of revenue during the first quarter of 1994. Actual royalty payments were 3% of revenue in 1994 and are estimated at 3% of revenue for 1995. The decrease in the royalty estimate compared with the first quarter of 1994 resulted in a $4 decrease in the cost per ounce. General and administrative costs consist principally of administrative salaries and related benefits, travel expenses, insurance, utilities, legal costs, employee meals, rents, and vehicle expenditures. Since these costs are essentially fixed and unrelated to production levels, the $13 per ounce decrease in the cost per ounce during the first quarter of 1995 was largely attributable to the substantial increase in gold production. Depreciation and amortization is calculated using units of production and straight line methods designed to fully depreciate property, plant, and equipment over the lesser of 17 their estimated useful lives or ten years. Depreciation costs decreased by $10 per ounce principally because original mining equipment, which was depreciated rapidly over 400,000 ounces, was fully depreciated by the end of the second quarter of 1994. In addition, development cost amortization decreased by $8 per ounce principally because incremental development costs for the West Plant expansion were significantly lower than the original East Plant resulting in lower overall amortization. Development costs are amortized by plant over 950,000 ounces. Interest expense and other decreased by $9 per ounce compared with the corresponding period in 1994. In addition to interest expense; political risk insurance premiums, goodwill amortization, foreign exchange gains and losses, and costs for a gold price floor program are included in this category. Since these costs are relatively fixed and unrelated to production levels, the 66% increase in production reduced the cost per ounce by $6 per ounce compared with the first quarter of 1994. In addition, lower floor program costs decreased by $3 per ounce. Exclusive of the $4.4 million first quarter 1994 adjustment to deferred taxes recorded in prior years, accrued income taxes for the first quarter of 1995 and 1994 were $2.2 million and $1.0 million, respectively. The respective effective tax rates were 36% and 39%. Non-deductible expenses related to goodwill amortization and the minority interest contributed to the difference between the effective tax rate and the 35% statutory rate. LIQUIDITY AND CAPITAL RESOURCES FINANCIAL SERVICES BUSINESSES Internal Revenue Service regulations require that, in order to serve as trustee, the Company must maintain a net worth of at least 2% of the assets of Individual Retirement Accounts and other qualified retirement plans accounts at year end. At March 31, 1995, the Company served as trustee for $3.9 billion of qualified plan assets and the ratio of net worth to qualified assets was 3.5%. The Company's stockholders' equity of $138.0 million at March 31, 1995, would permit it to serve as trustee for up to an additional $3.0 billion of qualified plan assets. The Company completed the acquisition of Mutual of Omaha Fund Management Company ("FMC") on December 1, 1993. If certain asset targets are reached, the Company would be obligated to pay to Mutual of Omaha in 1996 up to $3 million of additional consideration. For certain of the Pioneer Family of Mutual Funds, the Company has introduced a multi-class share structure. Under such structure, which was first introduced in April 1994, the participating funds offer both the traditional front-end load shares and back-end load shares. On back-end load shares, the investor does not pay any sales charge unless there is a redemption before the expiration of the minimum holding period which ranges from three to six years. However, the Company pays "up front" commissions to broker-dealers 18 related to sales and service of the back-end load shares ranging from 2% to 4% of the sales transaction amount. The participating funds pay the Company distribution fees of 0.75%, and service fees of 0.25%, per annum of their respective net assets, subject to annual renewal by the trustees of the funds. Sales of back-end load shares were $73 million in the first quarter of 1995 and new dealer advances totaled $2.6 million. Dealer advances, net of amortization, were $6.7 million at March 31, 1995. In 1995, the Company intends to finance this program through working capital and the line of credit described below. On April 11, 1995, the Company acquired approximately 51% of the shares of First Investment Voucher Fund (the "Fund"), one of the largest investment funds established in Russia in connection with that country's privatization program. The shares were issued by the Fund to two newly-formed subsidiaries of Pioneer Omega, Inc. ("Pioneer Omega"), a Delaware corporation in which the Company holds an approximate 70% direct interest. The $10 million cash purchase price paid for the Fund shares was financed through the line of credit described below. In addition to acquiring shares in the Fund, Pioneer Omega, acting through its subsidiary Pioneer First Russia, Inc. ("PFR"), acquired a Russian company that holds rights to manage the Fund's investments under a management agreement. Subsidiaries of PFR also acquired shares in First Voucher Bank, a Russian bank. PFR and the Fund together own approximately 90% of the shares in the bank. Through its ownership of controlling interests in the Fund and the management company, Pioneer Omega will also effectively acquire the rights to carry out share distribution, investment and brokerage activities under the Fund umbrella. These activities will be carried out by newly-established subsidiaries of PFR. Pioneer Omega paid $2.0 million in cash and issued shares (the "Omega shares") valued at $6 million as consideration for the acquisition of the management company and related rights. The cash portion of the purchase price was financed through the line of credit described below. The Omega shares represent the approximate 30% of the shares of Pioneer Omega not currently owned by the Company. The holder of the Omega shares has the right to cause the Company to purchase such shares (the "put option") and the Company has a corresponding right to purchase such shares from the holder (the "call option"). The put and call options are each exercisable with respect to one-third of the Omega shares on the first, second and third anniversaries of the closing of the transaction. The put and call option exercise price is $2 million per tranche, plus a 5% per annum premium on the option exercise price. If the put and/or call option is exercised in full, the Company will pay a total of $6.6 million for the Omega shares over a three-year period. Any dividends paid by Pioneer Omega to the holder of the Omega shares with respect to such shares during the three-year put/call option period will be treated as prepayments of a portion of the put/call option price. 19 GOLD MINING BUSINESS TGL's cash balances decreased by $1.6 million to $1.8 million during the three months ended March 31, 1995. Cash generated from operating activities aggregated $6.6 million while capital expenditures and loan principal payments were $3.9 million and $0.8 million, respectively. In addition, TGL declared and paid its first dividend of $3.5 million during the quarter. TGL continued to generate sufficient operating cash flow to fund all of its scheduled third party debt service payments and short-term cash commitments. At the end of the first quarter of 1995, direct investment in TGL aggregated $8.8 million comprised of $6.9 million of third party debt and $1.9 million of direct equity investment by the Company. Of such third party debt, $2.1 million was guaranteed by the Company. Scheduled third party debt service for the remainder of 1995 is expected to aggregate $3.0 million, all of which is expected to be funded from mining operations revenues. The Company maintains $51.2 million of "political risk" insurance, principally from the Overseas Private Investment Corporation, covering 90% of the Company's equity investment and loan guarantees. In addition, the political risk insurance covers 90% of the Company's proportionate share of cumulative retained earnings. The Company has also secured up to $18.1 million in stand-by insurance subject to semiannual coverage elections to cover increases in retained earnings. TGL has purchased put options to limit its exposure to a decline in market prices of gold to $310 per ounce. TGL has also secured business interruption coverage of up to $19.0 million for losses associated with machinery breakdown and property damage and continuing infrastructure and interest cost. At March 31, 1995, remaining in-situ proven and probable gold reserves were approximately 6.7 million ounces. TGL is continuing its development drilling program to increase proven and probable reserves and to gain additional information for mine planning. In the third quarter of 1994, TGL completed construction of a mine expansion expected to increase gold production to approximately 265,000 ounces per annum in 1995. In the first quarter of 1995, the Company decided to proceed with a second expansion of TGL's existing heap leaching facilities and has begun evaluating the economic feasibility of various ore processing alternatives. Preliminary capital cost projections for a mine expansion which replicates TGL's existing open pit mining, crushing, and heap leaching technology are estimated at approximately $30.0 million. Gold production is expected to increase by at least 120,000 ounces under this alternative. The Company is also examining an in-pit crushing alternative which would further increase gold production at an additional cost of approximately $15.0 million. TGL estimates that the new facility, under either alternative, will commence production in early 1997 and will reach full production by the middle of that year. TGL expects to finance 75% of the expansion externally from third party sources, with the balance financed through TGL's operations. 20 The Company has informed the government of the Republic of Ghana, TGL's minority owner, that the Company is exploring the possibility of selling to the public a minority interest in TGL's parent, Pioneer Goldfields Limited ("PGL"), currently a wholly-owned subsidiary of the Company. The structure, terms, and timing of any such sale, as well as the countries in which any such sale would take place, have not been determined, although the Company does not anticipate selling more than a 20% interest in PGL. In the event that the Company does conduct such a sale, any securities sold in the United States will not be registered under the Securities Act of 1933, as amended (the "Act"), and may not be offered or sold in the United States absent registration under the Act or an applicable exemption from the Act's registration requirements. There can be no assurance, however, that a decision will be made to commence such a sale, or if such a sale does commence, that it will be successful. OTHER NATURAL RESOURCE BUSINESS The Company's Russian venture, Forest Starma, in which the Company has a 50% direct interest and a 7.4% indirect interest, is pursuing the development of timber production under a 50-year lease of 33,000 hectares (82,000 acres) with annual cutting rights of 130,000 cubic meters awarded to the venture in the Khabarovsk Territory of Russia. The venture also expects to acquire a lease of additional forest land. Forest Starma has developed a site, including a jetty, from which its timber production would be exported primarily to the Japanese market. Timber production commenced in the first quarter of 1995 and it is expected that shipments will commence in the second quarter of 1995. Forest Starma estimates that 1995 timber production and shipments will be approximately 95,000 cubic meters and 70,000 cubic meters, respectively. Capital required by this venture is now projected at approximately $22.0 million (net of an assumed Value Added Tax recovery on imports) of which $9.3 million would be financed pursuant to a conditional loan commitment already in place. The loan, which initially would be guaranteed by the Company, would cease to be guaranteed when the project meets certain production and cash flows tests. The Company expects to provide financing of $12.6 million in the form of equity and subordinated debt. Investments by the Company in the venture totaled $21.0 million at April 30, 1995, some of which is considered bridge financing by the Company. The Company has increased its cost estimate from the $20.6 million reported at year-end 1994 principally as a result of additional capital equipment and site work. The Company is also in the process of securing political risk insurance which would protect 90% of the Company's equity investment and loans and a proportionate share of cumulative retained earnings. A second venture with similar but not identical ownership is negotiating a lease of another large tract of forest land in the Khabarovsk Territory. 21 GENERAL The Company's liquid assets consisting of cash and marketable securities (exclusive of gold mining operations) decreased by $6.9 million in the first quarter of 1995 to $19.2 million, principally from the investments described above. On February 28, 1995, the Company entered into an agreement with a commercial bank providing for a $30 million unsecured line of credit. Advances under the line bear interest, at the Company's option, at (a) the higher of the bank's base lending rate or the federal funds rate plus 0.50%, (b) the London Interbank Offered Rate plus 1.10%, or (c) at a money market rate set by the bank. The line, which expires on February 27, 1996, provides that the Company must pay additional interest to the bank at the rate of 0.25% per annum of the unused portion of the line. At April 30, 1995, the Company had $27 million outstanding under the line. THE COMPANY BELIEVES THAT IT IS IN SOUND FINANCIAL CONDITION, THAT IT HAS SUFFICIENT LIQUIDITY TO COVER SHORT-TERM COMMITMENTS AND CONTINGENCIES AND THAT IT HAS ADEQUATE CAPITAL RESOURCES TO PROVIDE FOR LONG-TERM COMMITMENTS AND TO TAKE ADVANTAGE OF INVESTMENT OPPORTUNITIES. 22 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: 10.1 Master Share Purchase Agreement dated as of April 7, 1995 by and among Pioneer Omega, Inc. and First Investment Voucher Fund. 10.2 Agreement dated as of April 7, 1995 by and among Pioneer Omega, Inc. and DOM Investment Company. 10.3 Agreement dated as of April 7, 1995 by and among Pioneer Omega, Inc. and Moscow International Business Centre Limited. 10.4 Stockholders Agreement dated as of April 11, 1995 by and among The Pioneer Group, Inc. and Moscow International Business Centre Limited. 11 Computation of earnings per share. 27 Financial Data Schedule. (b) Reports filed on Form 8-K: None 23 SIGNATURES ---------- It is the opinion of management that the financial information contained in this report reflects all adjustments necessary to a fair statement of results for the period report, but such results are not necessarily indicative of results to be expected for the year due to the effect that stock market fluctuations may have on assets under management. All accounting policies have been applied consistently with those of prior periods. Such financial information is subject to year-end adjustments and annual audit by independent public accountants. Pursuant to the requirements 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. THE PIONEER GROUP, INC. /s/ William H. Keough William H. Keough Senior Vice President Chief Financial Officer and Treasurer 24 EXHIBIT INDEX ------------- 10.1 Master Share Purchase Agreement dated as of April 7, 1995 by and among Pioneer Omega, Inc. and First Investment Voucher Fund. 10.2 Agreement dated as of April 7, 1995 by and among Pioneer Omega, Inc. and DOM Investment Company. 10.3 Agreement dated as of April 7, 1995 by and among Pioneer Omega, Inc. and Moscow International Business Centre Limited. 10.4 Stockholders Agreement dated as of April 11, 1995 by and among The Pioneer Group, Inc. and Moscow International Business Centre Limited. 11 Computation of earnings per share. 27 Financial Data Schedule. EX-10.1 2 MASTER SHARE PURCHASE AGREEMENT 1 Exhibit 10.1 MASTER SHARE PURCHASE AGREEMENT This Agreement dated as of April 7, 1995 is entered into by and among Pioneer Omega, Inc., a Delaware corporation with its registered office at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, USA, acting upon the basis of its charter and represented by Timothy T. Frost, a member of its Board of Directors ("Pioneer"), and First Investment Voucher Fund, a joint stock company of the open type formed under the legislation of the Russian Federation, with its legal address at Trubnikovsky pereulok 21, building 2, acting upon the basis of its charter and represented by M.A. Kharshan, M.Iu. Chebotarev, A.A. Izmailov, and D.S. Paltsev, members of its Board of Directors (the "Fund"). 1. Subject of Agreement; Sale of Shares. 1.1 Subject of Agreement. The subject of this Agreement shall be to establish the general terms governing the sale by the Fund of shares in the Fund under the separate Share Purchase Agreements to be entered into in accordance with Section 1.5 below. 1.2 Sale of Shares. The Fund agrees to sell and issue to the Buyers (as defined in Section 1.5 below), and the Buyers agree to purchase an aggregate of 280,000,000 shares of the Fund, having a nominal value of 100 rubles per share. The shares to be purchased by the Buyers (the "Shares") constitute a portion of the 600 million shares of the Fund authorized for issuance under the fourth prospectus of the Fund, which was registered with the State Committee of the Russian Federation for Management of State Property ("GKI") on December 30, 1993 (Code No. 1145-IF-225)(the "Fourth Prospectus"). 1.3 Purchase Price. The aggregate purchase price (the "Aggregate Purchase Price") to be paid for the Shares shall be Ten Million United States Dollars (US$ 10,000,000). 1.4 Use of Proceeds. The Fund will use the proceeds from the sale of the Shares for the purposes set forth in the investment declaration contained in the Fourth Prospectus. 1.5 Buyers of Shares. Pioneer has designated one or more legal entities (the "Buyers") which will enter into separate share purchase agreements (the "Share Purchase Agreements") with the Fund at the Closing (as defined below) for the purchase and sale of the Shares. This Agreement shall be the master purchase agreement governing such purchases and sales. The Share Purchase Agreements shall be identical in form and substance to one another and shall indicate only the respective numbers of shares to be purchased by each Buyer and the purchase price therefor. The Share Purchase Agreements shall be governed by the legislation of the Russian Federation. 1.6 Closing. The closing (the "Closing") of the purchase and sale of the Shares shall take place at the offices of Pioneer Investments, Ogaryova 5, Moscow, Russia at 10:00 am on or about April 11, 1995, or at such other time, date and place as are mutually agreeable to the Fund and Pioneer (the "Closing Date"). If at Closing any of the conditions specified in Article 4 or 5 shall not have been fulfilled, Pioneer or the Fund, as the case may be, may, at its election, terminate this Agreement without thereby waiving any rights it may have by reason of such failure or such non-fulfillment. 2. Registration of Shares. The Shares shall be issued to the Buyers against payment to the Fund of the Aggregate Purchase Price, by bank transfer to the account of the Fund or other method acceptable to the Fund. At the Closing, the Fund shall instruct the joint stock company of the closed type Depository RINACO ("RINACO"), which serves as the transfer 2 agent and registrar for the Fund's shares, to deposit the Shares into special escrow accounts for exclusive purchase by the Buyers, pursuant to the Share Purchase Agreements, pending confirmation by the Fund's bank that payment has been received into the Fund's account. Immediately upon confirmation of such payment, the Fund shall cause RINACO to record on the share records of the Fund the Buyers' ownership of the Shares and to deliver to each of the Buyers one or more share certificates representing the aggregate number of Shares purchased by such Buyer, registered in the name of such Buyer. 3. Representations of the Parties. 3.1 Representations of the Fund. Subject to and except as disclosed by the Fund in Exhibit I to this Agreement, the Fund represents and warrants to Pioneer as follows: 3.1.1 Organization and Standing. The Fund is a joint stock company of the open type properly organized and registered in accordance with the legislation of the Russian Federation. The Founders Agreement and Charter of the Fund were registered by the Moscow Registration Chamber on September 30, 1992, Registration No. 17171, and such registration has not been revoked. The Fund has full corporate power and authority to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement. The Fund has furnished to Pioneer true and complete copies of its Founders Agreement and of its Charter, as amended to date and presently in effect. On December 11, 1992, the Fund was issued a license (Registration No. 12) by the GKI to operate as a specialized privatization investment fund accumulating vouchers from the public. On October 14, 1994, the Fund was issued a renewed license (Registration No. 12) by the GKI to operate on the securities market as an investment fund. The Fund has not received any notice from GKI that such license has been suspended or revoked. 3.1.2 Capitalization. The Fund has the following share capitalization: (A) Initial authorized fund of 50,000 shares, nominalvalue 1,000 rubles per share, authorized for issuance by the Charter of the Fund and registered under the prospectus (contained in the Charter) approved by GKI on May 12, 1993 (Code No. 1145-IF-133) (the "First Prospectus"), all of which shares have been issued, distributed and paid in; (B) 10 million shares, nominal value 1,000 rubles per share, registered under the prospectus approved by GKI on December 30, 1992 (Code No. 1145-IF-004)(the "Second Prospectus"), all of which shares have been issued, distributed and paid in; (C) 30 million shares, nominal value 1,000 rubles per share, registered under the prospectus approved by GKI on May 12, 1993 (Code No. 1145-IF-134) (the "Third Prospectus"), of which 15,000,000 shares have been issued, distributed and paid in, and the remaining portion of which shares were not issued and may not in the future be issued; and (D) 600 million shares, nominal value 100 rubles per share, registered under the Fourth Prospectus approved by GKI on December 30, 1993, approximately 18,750,000 of which have been or, prior to the Closing, will have been, issued, distributed and paid in, and the remaining portion of which are available for issuance to the Buyers under the Share Purchase Agreements. All of the issued shares of the Fund have been duly authorized for issuance by the shareholders of the Fund and registered by GKI, have been validly issued and distributed and are paid in. Except as provided in this Agreement or as set forth on Exhibit I, (i) no option or other right to purchase or acquire any shares of the Fund is authorized, (ii) the Fund has no obligation (contingent or otherwise) to issue any option or other such right or to issue or distribute to holders of any of its shares any assets of the Fund, and (iii) the Fund has no 3 obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any of its shares or to pay any dividend or make any other distribution in respect of its shares. 3.1.3 Securities Legislation Compliance. All of the issued shares of the Fund have been offered, issued and sold by the Fund in compliance with applicable Russian securities legislation, rules and regulations. Each of the First, Second and Third Prospectuses contained all material information required to be contained in such prospectuses under the legislation of the Russian Federation and all information contained in such prospectuses was correct in all material respects. The Fourth Prospectus contains all material information required to be contained in such prospectus under the legislation of the Russian Federation and all information contained in the Fourth Prospectus is true and correct in all material respects. 3.1.4 Shareholder List and Agreements. RINACO has provided to Pioneer a correct and complete list of the 1000 largest shareholders of the Fund as of April 8, 1995 showing the number of shares of the Fund held by each such shareholder asof such date. RINACO has also provided to Pioneer a description of the approximate distribution of the remaining shares of the Fund. Such list and such description are correct and complete in all material respects. Except as provided in this Agreement, there are no agreements, written or oral, between the Fund and any of its shareholders or, to the best of the Fund's knowledge, among any of its shareholders, relating to the acquisition, disposition or voting of the shares of the Fund, other than proxies registered to RINACO, information about which will be provided to Pioneer at the Closing. The share transfer records of the Fund maintained by RINACO are complete and correct and reflect all issuances, transfers, repurchases and cancellations of shares of the Fund. The depository records of the Fund maintained by RINACO are complete and correct and reflect all purchases or other acquisitions and all sales or other dispositions of securities by the Fund. 3.1.5 Authority for Agreement; Issuance of Shares. The execution and performance by the Fund of this Agreement and the Share Purchase Agreements with the Buyers, the sale and issuance of the Shares in accordance with this Agreement and the Share Purchase Agreements and the consummation by the Fund of the transactions contemplated by this Agreement and the Share Purchase Agreements, have been duly authorized by all necessary corporate action. This Agreement and the Share Purchase Agreements have been duly executed by the Fund and constitute valid and binding obligations of the Fund enforceable in accordance with their respective terms. The execution of, and performance of the transactions contemplated by, this Agreement and the Share Purchase Agreements and compliance with their provisions by the Fund do not violate any provision of Russian Federation legislation and do not conflict with or result in any breach of any of the terms of, or constitute a default under, or require a consent or waiver under, the Charter (as amended to date) of the Fund or any agreement to which the Fund is a party or by which it or any of its properties is bound, or any decree, judgment, order, statute, rule or regulation applicable to the Fund. Exhibit I sets forth a complete list of all consents and approvals of third parties and all filings with Russian governmental agencies or authorities that are required in connection with the consummation by the Fund of the transactions contemplated by this Agreement. When the Buyers have paid for the Shares and the Shares have been issued and sold to the Buyers in accordance with the provisions of this Agreement, the Shares will be validly issued and paid in. 3.1.6 Litigation. Except as set forth in Exhibit I, there is no action, suit or proceeding, arbitration proceeding or governmental inquiry or investigation, pending, or, to the best of the Fund's knowledge, any material basis therefor or material threat thereof, against the Fund, Investment Company Dom ("DOM") or any other entity in which the Fund holds any direct or indirect ownership interest or with which the Fund has or had a joint activity or similar 4 agreement, which action, suit, proceeding, arbitration proceeding or governmental inquiry or investigation, if determined adversely to such party, could have a material adverse effect upon the Fund or its assets. 3.1.7 Investment Portfolio; Other Investments; Bank Accounts and Cash. (A) A list of all investments held by the Fund, directly or indirectly, as of April 7, 1995, certified by RINACO, is attached to and made a part of Exhibit I. Except as set forth on Exhibit I, since the date of such list, the Fund has not sold or otherwise disposed of any of the investments shown on such list nor purchased any additional securities or other interests. The Fund is the legal and record owner of all of the shares and other ownership interests indicated on such list, free and clear of all restrictions, liens and encumbrances. All such shares or other ownership interests are fully paid in. The Fund has no outstanding commitments, agreements or understandings with respect to the sale or other disposition of any such shares or ownership interests or with respect to the purchase or other acquisition of any other shares or ownership interests, except for the commitments described in Exhibit I. (B) Exhibit I sets forth a list of all cash and liquid investments of the Fund which indicates the amount and location of all bank deposits, GKOs, bills of exchange, hard currency and ruble futures contracts and similar holdings of the Fund as of April 7, 1995. Such list indicates the rate of interest or return payable on each such holding and all other material terms governing such holdings. Except as set forth in Exhibit I, the Fund has no reason to question the security of any of the holdings. Since the date of such list, there has been no material change in the balance of any cash deposit or other cash-equivalent amount shown on such list. Other than the diversion by unknown parties of the sum of US$ 1.5 million from the account of the Fund at Russian National Credit Bank in December, 1994, to the knowledge of the Fund, no funds have at any time been improperly removed from any account of the Fund holding cash or other liquid investments. 3.1.8 Joint Activity Agreements. Exhibit I sets forth a list and description of all joint activity agreements to which the Fund is now, or has ever been, a party. The Fund has provided to Pioneer copies of all such joint activity agreements, and all amendment to such joint activity agreements, and has disclosed to Pioneer all relevant information relating to the joint activity thereunder. The financial books and records of the Fund provided to Pioneer accurately reflect all activities under the joint activity agreements. 3.1.9 Financial Statements. (A) The Fund has previously delivered to Pioneer the audited balance sheet of the Fund as of December 31, 1994 (the "Audited Balance Sheet") and the related income and loss statements for the fiscal year then ended (collectively, the "Audited Financial Statements"). The Fund has also previously delivered to Pioneer the unaudited balance sheet of the Fund as of March 31, 1995 (the "Current Balance Sheet") and the related income and loss statements for the three-month period then ended (collectively, the "Current Financial Statements"). The Audited Financial Statements and the Current Financial Statements (collectively, the "Financial Statements") have beenprepared in accordance with accounting procedures established by Russian Federation legislation, consistently applied, and, in the case of the Audited Financial Statements, have been certified without qualification by the Fund's independent accountants, and, in the case of the Current Financial Statements, have been certified by the Fund's chief accountant. (B) The Financial Statements fairly present, as of their respective dates, the financial condition, 5 retained earnings, assets and liabilities of the Fund and the results of operations of the Fund's business for the periods indicated. The amounts shown as accrued for current and deferred income and other taxes in the Financial Statements are sufficient for the payment of all accrued and unpaid income, value added, securities transfer, property and other taxes of whatever sort and for all periods prior to and including the periods shown, plus all interest, penalties, assessments or deficiencies applicable to the Fund, whether disputed or not, for the applicable period then ended and all prior periods. 3.1.10 Absence of Undisclosed Liabilities. Except as and to the extent (a) reflected and reserved against in the Current Balance Sheet, (b) set forth on Exhibit I, or (c) incurred in the ordinary course of business after the date of the Current Balance Sheet and not material in amount, either individually or in the aggregate, the Fund has no liability or obligation, whether accrued, absolute, contingent, unasserted or otherwise, which is material to the condition (financial or otherwise) of the assets, properties, business or prospects of the Fund. 3.1.11 Taxes. The Fund has filed all tax returns which are required to be filed by it, such returns are true and correct and all taxes shown thereon to be due have been timely paid with exceptions not material to the Fund. Except for the current inspection by the State Tax Inspectorate for the No. 8 Central Administrative District of A/O NIKA Inc. ("NIKA Inc.") and Investment Company NIKA ("NIKA Invest"), which are or were parties to certain joint activity agreements with the Fund and which inspection could consequently have a material adverse effect upon the Fund, no controversy with respect to taxes of any type is pending or, to the best of the Fund's knowledge, threatened, concerning the Fund, DOM or any party with which the Fund now has or has had a joint activity agreement. 3.1.12 Fixed Assets. The Fund has good title to all of its fixed assets, including all fixed assets reflected in the Current Balance Sheet, except those disposed of since the date of the Current Balance Sheet in the ordinary course of business, and none of such assets is subject to any pledge, lien, security interest, lease, charge or encumbrance other than those the material terms of which are described in the Current Balance Sheet or in Exhibit I. 3.1.13 Personal Property. Exhibit I lists all items of tangible personal property owned by the Fund having either a net book value or an estimated fair market value in excess of five million rubles; or not owned by the Fund but in thepossession of or used in the business of the Fund (collectively, the "Personal Property"); and a description of the owner of, and any agreement relating to the use of, each item of Personal Property not owned by the Fund. 3.1.14 Intellectual Property. Except as set forth on Exhibit I, the Fund has not registered, or applied for registration of, any intellectual property rights, including trade secrets, know-how, patents, trade names, trademarks and trade names (collectively, "Intellectual Property"). All items of Intellectual Property now used by the Fund are either owned by the Fund or used by the Fund under license from or with the permission of a third party. The Fund is not aware of any claims by third parties that the Fund is using any Intellectual Property of such third party without permission or in violation of such third party's rights. 3.1.15 Leases. Exhibit I lists all leases of real property to which the Fund is a party. 3.1.16 Insurance. Exhibit I lists all insurance policies maintained by the Fund. 3.1.17 Material Contracts and Obligations. Exhibit I lists all material obligations, whether written or oral, to which the Fund is a party or by which it is bound, including (a) each agreement which requires future expenditures 6 by the Fund in excess of the ruble equivalent of US$25,000, (b) all employment and consulting agreements, management agreements, employee benefit, bonus, pension, profit-sharing, and similar plans and arrangements, and distributor, broker/ dealer and similar agreements (a standard form of employment agreement, together with a list of subject employees and salary data is attached to Exhibit I) and (c) any agreement with any shareholder, officer or director of the Fund, or any affiliate or associate of such persons. All agreements listed elsewhere in Exhibit I are deemed to be included in the list of material contracts without specific reference thereto. 3.1.18 Absence of Changes. Since the date of the Current Balance Sheet, there has been no material adverse change in the condition, financial or otherwise, net worth or results of operations of the Fund, other than changes occurring in the ordinary course of business which changes have not, individually or in the aggregate, had a materially adverse effect on the business, prospects, assets or condition, financial or otherwise, of the Fund. 3.1.19 Books and Records. The minute books of the Fund contain complete and accurate records of all meetings and other corporate actions of its shareholders and its Board of Directors and committees thereof. 3.1.20 Indebtedness to and from Officers, Directors and Shareholders. The Fund is not indebted, directly or indirectly, to any person who is an officer, director or shareholder of the Fund or to any affiliate of any such person other than for salaries for services rendered or reimbursable business expenses, all of whichhave been reflected on the Current Financial Statements, and no such officer, director, shareholder or affiliate is indebted to the Fund. 3.1.21 Management Agreements. The Management Agreements between the Fund and DOM Investment Company, dated December 25, 1992, as amended, between the Fund and M. Chebotaryov, dated December 25, 1992, and between the Fund and AOZT Management Company ("KUIF"), dated March 27, 1995, were in full force and effect prior to the Closing Date. DOM, Mr. Chebotaryov and KUIF have all licenses, permits and approvals necessary to act as managers of a specialized privatization investment fund and have made all necessary filings with GKI and other Russian Federation governmental authorities. The aggregate management fees paid to DOM, Mr. Chebotaryov and KUIF during all periods when they have served as managers for the Fund have not exceeded during any period or in the aggregate applicable limitations on the management fees payable by specialized privatization investment funds according to Russian legislation in force. The Management Agreements between the Fund and DOM, Mr. Chebotaryov and KUIF have been approved by the shareholders of the Fund and filed with the GKI, in accordance with applicable Russian Federation legislation. 3.1.22 Depository Agreement. The Depository Agreement dated December 25, 1992, as amended, between the Fund and RINACO is in full force and effect. RINACO qualifies as a depository under applicable rules and regulations and has all licenses, permits and approvals necessary for it to serve as a transfer agent and registrar and depository for a specialized privatization investment fund. 3.1.23 Compliance with Legislation. The Fund is not in violation of any legislation, regulation or ordinance, the violation of which could have a material adverse effect on the Fund. 3.1.24 Disclosures. Neither this Agreement nor any Exhibit hereto, nor any document furnished to Pioneer by the Fund in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in this Agreement or in such other document not misleading. The Fund knows of no information or fact which has or would have a material adverse effect on the business, prospects, assets or condition, financial or otherwise, of the Fund which has not been 7 disclosed in Exhibit I. 3.2 Representations of Pioneer. Pioneer represents and warrants to the Fund as follows: 3.2.1 Organization and Standing. Pioneer is a corporation duly organized and in good standing under the laws of the State of Delaware, USA. Pioneer has full corporate power and authority to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement. 3.2.2 Authority for Agreement. The performance by Pioneer of this Agreement and the consummation by Pioneer of the transactions contemplated by this Agreement have been approved by the Board of Directors of Pioneer and have been duly authorized by all necessary corporate action. This Agreement has been duly executed by Pioneer and constitutes the valid and binding obligation of Pioneer enforceable in accordance with its terms. The execution of, and performance of the transactions contemplated by, this Agreement and compliance with its provisions by Pioneer will not conflict with or result in any breach of any of the terms of, or constitute a default under, or require a consent or waiver under, the Certificate of Incorporation and By-laws (each as amended to date) of Pioneer. 4. Conditions to the Obligations of Pioneer. The obligation of Pioneer to cause the Buyers to purchase the Shares at the Closing is subject to the fulfillment, or the waiver by Pioneer, of each of the following conditions on or before Closing: 4.1 Accuracy of Representations and Warranties. Each representation and warranty of the Fund contained in Section 3.1 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. 4.2 Fund Shareholder Approval. At the Annual General Meeting, a majority of the Fund shareholders represented in person or by proxy at such meeting (excluding proxies held by the Fund's Board of Directors) shall have approved each of the following: (A) the indirect purchase by Pioneer, through its subsidiaries, of an aggregate of 280,000,000 shares of the Fund; and (B) the purchase price being paid by Pioneer, through its subsidiaries, for the Shares; and (C) the Management Agreement between the Fund and KUIF. 4.3 Certificates and Documents. The Fund shall have delivered to Pioneer: 4.3.1 Copies of the Charter (ustav) and Founders Agreement (uchreditel'ny dogovor) of the Fund, each as amended and in effect as of the Closing Date. 4.3.2 Copy of the current license issued by GKI for the Fund to operate as an investment fund. 4.3.3 Copies of the Second, Third and Fourth Prospectuses, each as registered with the GKI. 4.3.4 Copies of the GKI licenses of DOM, Mr. Chebotaryov and KUIF to act as managers of the Fund. 4.3.5 Copies of the management agreements between the Fund and each of DOM, Mr. Chebotaryov and KUIF. 4.3.6 Copy of Depositary Agreement between the Fund and RINACO. 4.4 Agreement for the Purchase of KUIF. All 8 conditions to closing under the agreement dated April 7, 1995 between DOM and Pioneer, providing for the sale of KUIF to Pioneer's wholly-owned subsidiary, Pioneer First Russia, Inc. ("PFR"), shall have been satisfied or waived by the appropriate party, and DOM and Pioneer shall have each certified to the other in writing that all such conditions to its obligations to proceed with such transaction have been satisfied or waived. 5. Conditions to the Obligation of the Fund. The obligation of the Fund to sell shares to the Buyers at the Closing is subject to the fulfillment, or the waiver by the Fund, of the following conditions on or before Closing. 5.1 Accuracy of Representations and Warranties. Each representation and warranty of Pioneer contained in Section 3.2 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. 5.2 Fund Shareholder Approval. At the Annual General Meeting, a majority of the Fund shareholders represented in person or by proxy at such meeting (excluding proxies held by the Fund's Board of Directors) shall have approved the sale of the Shares to the Buyers. 5.3 Agreement for the Purchase of KUIF. All conditions to closing under the agreement dated April 7, 1995 between DOM and Pioneer, providing for the sale of KUIF to PFR, shall have been satisfied or waived by the appropriate party, and DOM and Pioneer shall have each certified to the other in writing that all such conditions to its obligations to proceed with such transaction have been satisfied or waived. 6. Indemnification 6.1 Indemnification. The Fund agrees to indemnify and hold harmless Pioneer from and against all claims, damages, losses, liabilities, costs and expenses (including settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) (collectively, the "Losses") in connection with each and all of the following: (a) any misrepresentation or breach of any representation or warranty made by the Fund in this Agreement; (b) any breach of any covenant, agreement or obligation of the Fund contained in this Agreement, or any other agreement, instrument or document contemplated by this Agreement; (c) any misrepresentation contained in any statement, certificate, schedule or attachment furnished by the Fund pursuant to this Agreement or in connection with the transactions contemplated by this Agreement; (d) any violation by the Fund of, or any failure by the Fund to comply with, any legislation, ruling, order, decree, regulation or permit requirement applicable to the Fund, its assets or its business, whether or not any such violation or failure to comply has been disclosed to Pioneer; and (e) any tax liability of the Fund incurred prior to or related to activities that occurred prior to the Closing outside of tax liabilities or obligations incurred in the normal and regular course of business. 6.2 Claims for Indemnification. Whenever any claim shall arise for indemnification under this Section 6, Pioneer shall promptly notify the Fund of the claim and, when known, the facts constituting the basis for such claim. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party, the notice shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. 6.3 Survival of Representations. All representations and warranties made by the Fund in this 9 Agreement, or in any instrument or document furnished in connection with this Agreement or the transactions contemplated hereby, shall survive the Closing and any investigation at any time made by or on behalf of Pioneer. 7. Arbitration. In the event of any dispute between the parties with respect to any matter covered by this Agreement, the parties shall first use their best efforts to resolve such dispute among themselves. If the parties are unable to resolve the dispute within 30 calendar days after the commencement of efforts to resolve the dispute, the dispute may be submitted by either party for final settlement by arbitration, which shall be the sole means of resolving unreconciled disputes between the parties under this Agreement. Any such arbitration shall be conducted on an ad hoc basis in London, England, in the English language under the UNCITRAL Rules by a single arbitrator appointed in accordance with such rules by the London Court of International Arbitration. The prevailing party in any arbitration shall be entitled to an award of reasonable attorneys' fees incurred in connection with the arbitration. The non-prevailing party shall pay such fees, together with the fees of the arbitrator and the costs and expenses of the arbitration. Any arbitration award may be entered in and enforced by any court having jurisdiction over such matter or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, the parties shall be entitled to seek injunctive relief or other equitable remedies from any court of competent jurisdiction. 8. Governing Legislation. This Agreement shall be governed by and construed in any arbitration or enforcement proceeding in accordance with the legislation of the Commonwealth of Massachusetts, United States of America, without giving effect to the conflict of law provisions thereof. 9. Counterparts; Governing Language. This Agreement has been executed in two counterparts in the English language, each of which shall be deemed to be an original, but both of which shall be one and the same document, and two counterparts in the Russian language, each of which shall be deemed to be an original, but both of which shall be one and the same document. This Agreement was prepared in English and translated into Russian. All reasonable efforts were made to ensure that the Russian translation corresponds in substance and in form to the English original. In the event that there shall be any discrepancy between the language in the Russian and English language versions of the Agreement, the English language version shall prevail. 10. Force Majeure. Neither party to this Agreement shall be liable for delay or failure in the performance of any of its obligations under this Agreement due to causes beyond its control, including but not limited to acts of God or a public enemy, acts or any order of a governmental or military authority, fire or other casualty, floods or other natural disasters, embargoes, explosions, enemy or hostile governmental action, civil insurrection, revolution, sabotage or similar conditions, delay caused by a communications, document delivery, wire transmission of funds or similar service, or governmental delay in processing or approving any necessary application, license or other permit. If such delay occurs, the party whose performance is delayed shall give immediate notice thereof to the other party and such other party may elect to terminate this Agreement or to extend the period for performance by a number of days equal to the duration of the delay; provided that at any time during the continuation of any such delay the party that has authorized extension of the period for performance may deliver notice of cancellation of the Agreement. 11. Miscellaneous. 11.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns. The rights and obligations of the parties under this Agreement may not be assigned, except that Pioneer may assign its rights and 10 obligations (or portions thereof) in accordance with Section 1.5. 11.2 Notices. All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be delivered by hand or sent by international courier: If to the Fund, at Trubnikovsky pereulok 21, building 2, Moscow, Russian Federation, Attention: Chairman, or at such other address as may have been furnished in writing by the Fund to Pioneer; If to Pioneer, care of The Pioneer Group, Inc., 60 State Street, Boston, Massachusetts 02109, USA, Attention: President, or at such other address as may have been furnished to the Fund in writing by Pioneer. Notices provided in accordance with this Section 11.2 shall be deemed delivered upon personal delivery or three business days after deposit with a courier service. 11.3 Entire Agreement. This Agreement and the Share Purchase Agreements embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter, including without limitation the Agreement on Obligations of the Parties in Preparation for Closing, dated October 29, 1994, as amended, between the Fund and The Pioneer Group, Inc., which assigned all of its rights under such agreement to Pioneer. 11.4 Amendments. This Agreement may be amended only by a written instrument signed by Pioneer and the Fund. 11.5 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. FIRST INVESTMENT VOUCHER FUND: /s/ M.A. Kharshan __________________________________ M.A. Kharshan Chairman, Board of Directors /s/ M.Iu Chebotarev __________________________________ M.Iu. Chebotarev Member, Board of Directors /s/ A.A. Izmailov __________________________________ A.A. Izmailov Member, Board of Directors /s/ D.S. Paltsev __________________________________ D.S. Paltsev Member, Board of Directors PIONEER OMEGA, INC. /s/ Timothy T. Frost ________________________________ Timothy T. Frost, Vice President 11 Exhibit I 3.1.2 Capitalization The Board of Directors of the Fund will recommend to the Fund's shareholders at the Annual Meeting of Shareholders to be held on April 8, 1995, that the Fund declare and pay to shareholders of record on April 8, 1995 a dividend with respect to fiscal year 1994 equal to 50 % of nominal value per share (i.e., 50 rubles per 100 ruble share) for each share held on that date. 3.1.5 Authority for Agreement; Issuance of Shares The Fund must file notifications following the Closing with the Ministry of Finance of the Russian Federation to report the sales of shares to Luscinia, Inc. and Theta Enterprises, Inc. 3.1.6. Litigation (a) Claim on the sum of 236,280,000 rubles sent by letter dated July 1, 1994 No. 100 [Cyrillic yu r] by the Fund against Joint-Stock Commercial Bank VIZ-BANK and Closed Joint Stock Company Ural-Invest-Center for return of a deposit made by the Fund in VIZ-BANK of 100,000,000 rubles plus interest pursuant to Fixed-Date Deposit Agreement, dated November 26, 1993, and expiring on April 9, 1994. Notice of claim by the Fund to the Arbitration Court of the Sverdlovsk Region No. 43 [cyrillic yu r], dated October 10, 1994, for the recovery of the claim in the amount of 236,280,000 rubles from Joint Stock Commercial Bank VIZ-BANK for a deposit made by the Fund in the amount of 100,000,000 rubles plus interest and compensation of the expenses for state duties in the amount of 6,025,600. Award of Sverdlovsk Region Arbitration Court dated February 15, 1995 ordering payment of 582,180,889 rubles to the Fund. (b) Claim for damages reimbursement and duties of proper execution of obligations under Contract # 352/94 of August 4, 1994 for the amount of 245, 000 US dollars (in Russian rubles at MICEX rate on the day of claim execution by the Fund) sent by letter dated September 21, 1994 by Joint Stock Company "Troika Dialog" against the Fund. [This claim has been rejected by the Arbitration court but the Fund is awaiting written confirmation.] 12 Claim for damages and severance of contract based on Troika Dialog's breach of Contract #352/94, sent by letter dated October 20, 1994 by the Fund against Troika Dialog. [This claim has been postponed.] 13 3.1.7 Investment Portfolio; Other Investments; Bank Accounts and Cash. 1. First Voucher Bank Closed joint stock company with charter capital of 4 billion rubles, common stock of 100,000 ruble face value, held as follows:
Company Amount (thousand Number of % of rubles) shares Charter Capital Closed Joint Stock 1,204,000 12,040 30.1 Company "Investment Company NIKA" Closed Joint Stock 1,400,000 14,000 35.0 Company DOM Krazross 300,000 3,000 7.5 Chief Center of 100,000 1,000 2.5 Highway Postal Deliveries (GTsMPP) First Investment 996,000 9,600 24.9 Voucher Fund
2. First Company/First Port Closed joint stock company with authorized capital of 2,000,000 rubles, nominal value of 10,000 rubles per share, held as follows:
Company Amount Number of % of Charter (roubles) Shares Capital First 1,000,000 10,000 50% Investment Voucher Fund Limited 1,000,000 10,000 50% Partnership "Stock Service Ltd."
First Company has formed First Port held 50% by First Company and 50% by Nakhodka Fishing Port. First Company won the tender for 38% of the shares in the Nahodka fishing port. The Fund estimates it will invest approximately 5 billion rubles in upgrading the Port after the tender. The other partner in First Company will contribute an equal amount. 3. First Print Yard
Company Amount ($) Number of % of Charter Shares Capital First 200,000 200 25% Investment
14 Voucher Fund AO NKTs MARSEZ 600,000 600 75%
15 3.1.8 Joint Activity Agreements (a) 1. NIKA Inc. Joint Activities Agreement No. SD-1, dated October 3, 1993, between the Fund and NIKA, Inc. whereby vouchers and cash are deposited in the joint activity agreement to be used to purchase shares and pay the expenses of the Fund, as amended by: Transfer Acceptance Act No. 1, dated October 4, 1993, whereby the Fund transferred 334,447 vouchers valued at 20,000 rubles each for a total of 6,688,940,000 rubles. Transfer Agreement Act No. 2, dated October 4, 1993, whereby NIKA, Inc. transferred 5,816 vouchers valued at 11,501 rubles for a total of 66,889,400. Additional Agreement No. 1-SD, dated October 11, 1993, increasing the Joint Activities Agreement (JA) contribution to 10,355,829,400 rubles. Act attached to Agreement SD-1, dated October 11, 1993, transferring 200,000 vouchers valued at 18,000 rubles for a total of 3,600,000,000 rubles. Additional Agreement No. 2-SD, dated October 15, 1993, reducing the JA contribution to 3,666,889,400 rubles. Act Attached to Additional Agreement No. 2-SD, dated October 15, 1993, transferring 334,447 vouchers valued at 20,000 rubles each for a total of 6,688,940,000. Additional Agreement No. 3-SD, dated October 25, 1993, reducing the JA assets to 3,285,939,400. Act Attached to Additional Agreement No. 3-SD transferring 380,950,000 to TOO "MGK". Additional Agreement No. 4-SD, dated November 3, 1993, increasing the JA contribution to 9,040,167,150 rubles. Act Attached to Additional Agreement No. 4-SD, dated November 3, 1993, transferring 200,000 vouchers for the amount of 5,570,000,000 rubles and 4,450 vouchers for the amount of 184,227,750 rubles. Additional Agreement No. 5-SD, dated November 4, 1993, reducing the JA assets to 4,790,167,150 rubles. Act Attached to Additional Agreement No. 5-SD, dated November 8, 1993, transferring 3,000,000,000 rubles and 1,250,000,000 rubles to TOO "MGK". Additional Agreement No. 6-SD, dated November 14, 1993, reducing the JA contribution to 4,532,250,150 . Act Attached to Additional Agreement No. 6-SD, dated November 26, 1993, paying the Fund's expenses. Additional Agreement No. 7-SD, dated December 5, 1993, reducing the JA assets to 4,405,524,150. Act Attached to Additional Agreement No. 7-SD, dated December 22,1993, transferring 24,000,000 rubles to "Novator" Ltd., and 5,707 vouchers valued at 18,000 rubles each to the 16 Fund's account at Cash Union. Additional Agreement No. 8-SD, dated December 28, 1993, distributing all revenues from the JA from October 3, 1993 to December 31, 1993 to the Fund as 16,902 vouchers for 304,236,000 rubles and 3,289 voucher for 91,621,325. Act on distribution of revenue, dated December 31, 1993. Additional Agreement No. 9-SD, dated January 2, 1993, reducing the JA assets to 3,068,604,425 and reimbursing the assets to the fund in the form of 35,000 vouchers for 406,000,000 rubles; 88,991 vouchers for 2,478,352,175 and 4,450 vouchers for 184,252,250 Transfer-Acceptance Act attached to Agreement No. 9- SD, dated January 12, 1994, transferring 128,441 vouchers for 3,068,604,425. Additional Agreement No. 10-SD, dated January 25, 1994, reducing the JA assets by 94,132,000 rubles: 50,000,000 transferred to MBO "Orgbank" and 44,132,000 transferred to JSC "Smolensky Center Delovyh Krugov". Additional Agreement No. 11-SD, dated February 2, 1994, reducing the JA assets by 102,857,900 for payment of the Fund's expenses. Additional Agreement No. 12-SD, dated February 23, 1994, reducing the JA assets by 105,897,924 for payment of the Fund's expenses. Additional Agreement No. 13-SD, dated February 2, 1994, reducing the JA assets by 3,536,526 for payment of the Fund's expenses. Additional Agreement No. 15-SD, dated July, 7, 1994, increasing the JA assets by 410,555,680 as a result of contribution by Nika Inc. of the following stocks: 13,240 shares in AO "Arnest", 82,144 shares in AO "Narzan", 5,600 shares in AOOT NITI-Tesar, 6,000 shares in AO "IBC", and contribution by the Fund of 11,500 shares in Novosibirsk Chemical Concentrates Plant. Notification addressed to Nika Inc from Omega, dated July, 11, 1994 on the sale of Novosibirsk Chemical Concentrates Plant shares and increase of the Fund indebtedness to the joint activity in the amount of 199,400,000. Additional Agreement No. 16-SD, dated September, 26, 1994, reducing the JA assets by 360,555,680 by transferring to the Fund 13,240 shares in AO "Arnest", 82,144 shares in AO "Narzan", 5600 shares in AOOT NITI-Tesar, 6000 shares in AO "IBC". Transfer-Acceptance Act attached to Additional Agreement No. 16-SD, dated September, 26, 1994, whereby the following shares were transferred to the Fund: 13,240 shares in AO "Arnest", 82,144 shares in AO "Narzan", 5600 shares in AOOT NITI-Tesar, 6000 shares in AO "IBC". Additional Agreement No. 17-SD, dated September, 30, 1994, distributing the profit from the JA for the third quarter of 1994. All profit in the amount of 113,232,244 17 was distributed to the Fund and offset against Fund's indebtedness to the JA. Additional Agreement No. 18-SD, dated September, 30, 1994, closing JA and ruling withdrawal of assets from JA. 18 2. Investment Company NIKA Joint Activities Agreement No. SD-2, dated November 9, 1993, between the Fund and Investment Company NIKA ("NIKA Invest"), as amended by: Transfer--Acceptance Certificate No. 1, dated November 14, 1993, accepting the initial contribution of the Fund of 50,000 vouchers valued at 20,000 rubles per voucher for a total of 1,000,000,000 rubles. Transfer--Acceptance Certificate No. 2, dated November 14, 1993, accepting the initial contribution of NIKA Invest of 800 vouchers valued at 12,500 rubles per voucher for a total of 10,000,000 rubles. Additional Agreement No. 1 CDI, dated November 20, 1993, reducing the amount of the JA assets up to 999,291,000. Additional Agreement No. 2 CDI, dated November 27, 1993, increasing the amount of the JA assets up to 2,599,291,000 rubles. Additional Agreement No. 3 CDI, dated November 30, 1993, reducing the amount of the JA assets up to 2,595,491,000 rubles. Additional Agreement No. 4 CDI, dated December 3, 1993, reducing the amount of the JA assets up to 2,597,991,000 rubles. Additional Agreement No. 5 CDI, dated December 13, 1993, reducing the amount of the JA assets up to 2,432,685,026 rubles. Additional Agreement No. 6 CDI, dated December 15, 1993, increasing the amount of the JA assets up to 2,816,685,026 rubles. Additional Agreement No. 6-1 CDI, dated December 16, 1993, reducing the amount of the JA assets up to 2,815,365,026 rubles. Additional Agreement No. 7 CDI, dated December 29, 1993, distributing the revenues received under the JA from November 3, 1993 to December 31, 1993 to the Fund in the amount of 21,645 vouchers valued at 20,000 rubles each for 432,893,104 rubles. Additional Agreement No. 8 CDI, dated January 2, 1994, increasing the amount of the JA assets by 3,900,000,000 rubles in the form of 130,000 vouchers valued at 30,000 rubles each. Additional Agreement No. 9 CDI, dated January 25, 1994, reducing the amount of the JA assets up to 40,000,000 rubles. Additional Agreement No. 10 CDI, dated February 7, 1994, reducing the amount of the JA assets up to 24,614,715 rubles. Additional Agreement No. 11 CDI, dated February 9, 1994, reducing the amount of the JA assets up to 400,000,000 rubles by direct transfer to the Fund's account. Additional Agreement No. 12 CDI, dated February 11, 1994, reducing the amount of the JA assets up to 7,652,544 19 rubles for payment of various Fund expenses. Additional Agreement No. 13 CDI, dated April 1, 1994, increasing the amount of the JA assets by to 2,220,387,020 rubles to be returned to the Fund in the form of 59,235 vouchers for the total amount of 1,505,754,520 rubles and 60,488 vouchers for the total amount 714,632,500 rubles. Additional Agreement No. 15, CDI dated April 2, 1994, increasing the amount of the JA assets by to 8,493,200,00 rubles in the form of 212,330 vouchers valued at 40,000 rubles each. Additional Agreement No. 16 CDI, dated April 4, 1994, increasing the amount of the JA assets by 3,384,551,600 rubles in the form of the following shares belonging to the Fund: 754,500 shares of JSC "Surgutneftegas" at the average estimated value of 3,900 rubles each in the total amount of 2,942,550,000 240,000 shares of JSC "Belomoro-Onezhskoe Parodhodstvo" at the average estimated value of 1,800 rubles each in the total amount of 432,000,000 rubles 1,645 shares of JSC "Vagonostoritel" at the average estimated value of 6,080 rubles each in the total amount of 10,001,600 rubles. Additional Agreement No. 17 CDI, dated April 14, 1994, decreasing the amount of the JA assets by 285,040,000 rubles by transfer to the Fund's account. Additional Agreement No. 18 CDI, dated April 18, 1994, decreasing the amount of JA assets by 8,000,000,000 by the return of 200,000 vouchers to the Fund. Additional Agreement No. 19 CDI, dated April 29, 1994, increasing the amount of the JA assets by 5,943,000,000 rubles in the form of the following shares belonging to the Fund: 900,000 shares of JSC "Rostelecom" at the average estimated value of 5,550 rubles each in the total amount of 4,995,000,000 rubles 30,000 shares of JSC "EES Russia" at the average estimated value of 6,000 rubles each in the total amount of 180,000,000 rubles 15,000 shares of JSC "Dalnevostochnoe Morskoe Parokhodstvol" at the average estimated value of 33,200 rubles each in the total amount of 498,000,000 rubles 220,000 shares of JSC "NOSTA" at the average estimated value of 1,227 rubles each in the total amount of 270,000,000 rubles. 20 Additional Agreement No. 20 CDI, dated May 30, 1994, increasing the amount of the JA assets by 6,523,000,000 rubles in the form of the following shares belonging to the Fund: 350,000 shares of JSC "LUKOil IK" at the average estimated value of 8,500 rubles each in the total amount of 2,975,000,000 rubles 1,000 shares of JSC "Samocvety" at the average estimated value of 25,000 rubles each in the total amount of 25,000,000 rubles 300 shares of JSC "TIGI" at the average estimated value of 10,000 rubles each in the total amount of 3,000,000 rubles 130,000 shares of JSC "PurNefteGas" at the average estimated value of 3,846 rubles each in the total amount of 500,000,000 rubles 550,000 shares of JSC "LangepasNefteGas" at the average estimated value of 5,091 rubles each in the total amount of 2,800,000,000 rubles 10,000 shares of JSC "Akrikhin" at the average estimated value of 22,000 rubles in the total amount of 220,000,000 rubles. Additional Agreement No. 21 CDI, dated June 7, 1994, increasing the amount of the JA assets by 8,050,000,000 rubles in the form of the following shares belonging to the Fund: 70,000 shares of JSC "Tomskneft" at the average estimated value of 6,714 rubles each in the total amount of 470,000,000 rubles 310,000 shares of JSC "CentrJuvelir" at the average estimated value of 968 rubles each in the total amount of 300,000,000 rubles 120,000 shares of JSC "NojabrskNefteGas" at the average estimated value of 12,500 rubles each in the total amount of 1,500,000,000 rubles 50,000 shares of JSC LukOil-KogalymNefteGas" at the average estimated value of 49,000 rubles each in the total amount of 2,450,000,000 rubles 440 shares of JSC "Smolensky Center Delovykh Krugov" at the average estimated value of 340,909 rubles in the total amount of 150,000,000 rubles 350,000 shares of JSC "AutoVAS" at the average estimated value of 9,086 rubles in the total amount of 3,180,000,000 rubles. Additional Agreement No. 22 CDI, dated June 24, 1994, decreasing the amount of JA assets by 721,187,200 by the return of 30,794 vouchers to the Fund. Additional Agreement No. 23 CDI, dated June 30, 1994, distributing the profit from the JA in the first half of 1994 300,000,000 rubles to NIKA Invest and 586,149,942 to the Fund. 21 Additional Agreement No. 24-CDI, dated July, 5, 1994, increasing JA assets by 7,225,000,000 as a result of contribution by the Fund of the following shares: 5 000 shares in AO "Ryazansky refinery plant" 125 000 shares in AO "Lukoil-Volgogradneftepererabotka" 180 000 shares in AO "Tebukneft" 170 000 shares in AO "Lukoil-Permnefteorgsyntez" 275 000 shares in AO "Nakhodka BAMPR" Transfer-Acceptance Act attached to the Additional Agreement No. 24-CDI, dated July, 5, 1994, for the transfer of the following stocks into JA by the Fund: 5 000 shares in AO "Ryazansky refinery plant" 125 000 shares in AO "Lukoil-Volgogradneftepererabotka" 180 000 shares in AO "Tebukneft" 170 000 shares in AO "Lukoil-Permnefteorgsyntez" 275 000 shares in AO "Nakhodka BAMPR" Additional Agreement No. 25-CDI, dated July, 20, 1994, increasing JA assets by 691 918 000 as a result of contribution by NIKA Invest of the following shares: 105 000 shares in AO "Kosmos" 6 400 shares in AO Polyplast 300 912 shares in AO Tyazheks 2 400 shares in AO "IBC" Additional Agreement No. 26-CD, dated September, 6, 1994, reducing JA assets by 8,822,613,366 by decreasing the Fund's indebtedness to the JA. Additional Agreement No. 27-CD, dated September, 26, 1994, increasing JA assets by 583,750,000 as a result of contribution by NIKA Invest of 50,000 shares in AO "Irkutsk- energo". Additional agreement No. 28-CD, dated September, 27, 1994, increasing JA assets by 30,558,350,000 as a result of contribution by the Fund of the following stocks: 300,000 shares in AO "Nizhnevartovskneft" for the amount of RR400,000,000; 385,000 shares in AO "Megionneftegaz" for the amount of RR3,850,000,000; 176,945 shares in AO "Norislk Nikel" for the amount of RR5,308,350,000. Transfer-Acceptance Act attached to the additional agreement No. 28-CD, dated September, 27, 1994 a, for the transfer of the following stocks into JA: 300,000 shares in AO "Nizhnevartovskneftegaz" for the amount of RR21,000,000,000; 20,000 shares in AO "Nizhnevartovskneft" for the amount of RR400,000,000; 22 385,000 shares in AO "Megionneftegaz" for the amount of RR3,850,000,000; 176,945 shares in AO "Norilsk Nikel" for the amount of RR5,308,350,000. Additional Agreement No. 29-CDE, dated September, 30, 1994, reducing JA assets by RR23,265,950,117 by the means of offsetting the Fund indebtedness to the JA for the amount of RR8,767,100,117 and transfer of the following stocks from the JA to the Fund for the amount of RR14,498,850,000: 5,000 shares in AO "Ryazansky Oil Refinery" for the amount of RR250,000,000; 125,000 shares in AO "Lukoil-Volgogradneftepererabotka" for the amount of RR725,000,000; 180,000 shares in AO "tebukneft" for the amount of 1,800,000,000; 170,000 shares in AO "Lukoil-Permnefteorgsynthez" for the amount of RR1,700,000,000; 275,000 shares in AO "Nakhodka BAMP" for the amount of RR2,750,000,000; 1,000 shares in AO "Samotsvety" for the amount of RR 25,000,000; 300 shares in AO "TIGI" for the amount of RR3,000,000; 10,000 shares in AO "Akrikhin" for the amount of RR220,000,000; 70,000 shares in AO "Tomskneft" for the amount of RR470,000,000; 31,000 shares in AO "Centre Jeweler" for the amount of RR300,000,000; 120,000 shares in AO "Noyabrskneftegaz" for the amount of RR1,500,000,000; 440 shares in AO "Smolensky Center Delovykh Krugov" for the amount of RR150,000,000; 350,000 shares in AO "AVTOVAZA" for the amount of RR3,180,000,000; 240,000 shares in AO "Belomor-Onezh shipping" for the amount of RR43,200,000; 500 shares in AO "Surgutneftegaz" for the amount of RR1,950,000; 2,400 shares in AO "IBC" for the amount of RR72,000,000; 50,000 shares in AO "Irkutsk-energo" for the amount of RR583,750,000; 105,000 shares in AO "Kosmos" for the amount of RR66,150,000; 220,000 shares in AO "NOSTA" for the amount of RR270,000,000. Transfer-Acceptance Act attached to the Additional Agreement No. 29-CDI, dated September, 30, 1994, for the transfer of the following stocks from the JA to the Fund: 5,000 shares in AO "Ryazansky Oil Refinery" for the 23 amount of RR250,000,000; 125,000 shares in AO "Lukoil-Volgogradneftepererabotka" for the amount of RR725,000,000; 180,000 shares in AO "tebukneft" for the amount of 1,800,000,000; 170,000 shares in AO "Lukoil-Permnefteorgsynthez" for the amount of RR1,700,000,000; 275,000 shares in AO "Nakhodka BAMP" for the amount of RR2,750,000,000; 1,000 shares in AO "Samotsvety" for the amount of RR 25,000,000; 300 shares in AO "TIGI" for the amount of RR3,000,000; 10,000 shares in AO "Akrikhin" for the amount of RR220,000,000; 70,000 shares in AO "Tomskneft" for the amount of RR470,000,000; 31,000 shares in AO "Centre Jeweler" for the amount of RR300,000,000; 120,000 shares in AO "Noyabrskneftegaz" for the amount of RR1,500,000,000; 440 shares in AO "Smolensky Center Delovykh Krugov" for the amount of RR150,000,000; 350,000 shares in AO "AVTOVAZA" for the amount of RR3,180,000,000; 240,000 shares in AO "Belomor-Onezh shipping" for the amount of RR43,200,000; 500 shares in AO "Surgutneftegaz" for the amount of RR1,950,000; 2,400 shares in AO "IBC" for the amount of RR72,000,000; 50,000 shares in AO "Irkutsk-energo" for the amount of RR583,750,000; 105,000 shares in AO "Kosmos" for the amount of RR66,150,000; 220,000 shares in AO "NOSTA" for the amount of RR270,000,000. Additional Agreement No. 30-NA, distributing all profit from the JA for the third quarter of 1994 to the Fund by offsetting the Fund's indebtedness to the JA. Additional Agreement No. 31 CDI, dated November 10, 1994 Additional Agreement No. 32 CDI, dated November 16, 1994 Additional Agreement No. 33 CDI, dated December 30, 1994 Additional Agreement No. 34 CDI, dated December 30, 1994 (b) 1. Postal Service (a) Joint Activity Agreement No. 10, dated March 15, 1993, between the Fund and the Chief Center of Highway 24 Postal Deliveries (the "Postal Service") providing for the exchange of vouchers for shares of the Fund at post offices and the transportation of vouchers to Moscow to Rinaco at rate of 15% of the nominal value of the vouchers (1,500 rubles). Rules on the acceptance of vouchers for shares of the Fund coordinated by the Manager of the Fund on February 15, 1993 and approved by the First Deputy of the Ministry of Communications of the Russian Federation on February 22, 1993. Additional Agreement to Joint Activity Agreement No. 10, dated June 1, 1993, whereby the Postal Service agrees to purchase shares of the Fund pursuant to separate agreements and resell the shares for cash or vouchers and in the case of sale of shares for vouchers giving the Fund the exclusive right to purchase the vouchers at a specified price. Rules on the acceptance of Postal transfers of money as payment for shares of the fourth issue of the Fund co- ordinated by the Manager of the Fund on December 22, 1993 and approved by the General Director of the Federal Department of Postal Administration of the Ministry of Communications of Russia on December 23, 1993. Agreement on Prolongation of the Contract No. 10, dated December 17, 1993, prolonging the term of the contract until December 31, 1994. Agreement No. 5-D on Cooperation, dated January 5, 1994, between the Fund and the Postal Service, as amended by Amendment No. 1 between the Fund, the Postal Service and NIKA Invest, whereby NIKA Invest, acting as a dealer in the Fund's shares, sell shares to the Postal Service and pays a commission for shares sold by the Postal Service (b) Agreements on Cooperation and Joint Activity have been executed between the Fund and following the Oblast Federal Postal Administration ("OFPA") on the dates indicated, all of which expire on December 31, 1994, each with attached Rules approved by the head of the OFPA and co- ordinated by the Manger of the Fund: Agreement on Cooperation and Joint Activity No. 7, dated February 7, 1994, between the Fund and the Moscow OFPA. Agreement on Cooperation and Joint Activity No. 337, dated January 27, 1994, between the Fund and the Kaluga OFPA; Addendum, dated March 2, 1994, designating NIKA Invest the official dealer in the Fund's shares. Agreement No. 73 yu r on Cooperation and Joint Activity, 25 dated January 26, 1994, between the Fund and the Moscow City Post Office. 3.1.13 Personal Property A list of items of personal property owned by the Fund has been provided to Pioneer. The list consists principally of items of computer equipment, none of which has material value individually or in the aggregate. 3.1.16 Insurance Copies of the insurance polices covering 12 automobiles owned by the Fund have been provided to Pioneer. The Fund has no other insurance policies in effect. 3.1.17 Material Contracts and Obligations 1. International Business Center Tender Contract, dated December 1, 1993, between the Moscow State Property Fund and the Fund whereby the Fund paid 4.5 billion rubles for the right to receive the building at Smolnaya ulitsa 24 as outright owner upon completion of the construction of the building by February 1995. Order of the perfect of the Northern Administrative District of Moscow "On leasing a plot of land to the public joint stock company special closed check investment privatization fund First Investment Voucher Fund" N. 1081, dated 20.7.94. Leasehold Agreement on Land in Moscow No. M-09-000979, dated September 6, 1994, between the Moscow Land Committee and the Fund on leasing a plot of land at U. Smolnaya 24 for a term of 49 years contingent upon completion of the building before February 1, 1995. Construction Management Agreement, dated July 13, 1994, between the Fund and Bovis as amended by letter agreement dated February 9, 1995. Contract, dated June 10, 1994, between the Fund and JSC "Shcherbinka Otis Lift". Agreement on Demolition Work, dated July 15, 1994, between the Fund and limited liability partnership Vako. Contract #312/94 on Purchase and Sale of Securities realized by the Participants of the Investment Dealers Pool, 26 dated July 5, 1994, between NIKA Investment and the Fund whereby the Fund sells 50,000 shares of IBC to NIKA Invest by blocks. Agreement, dated May 31, 1994 between the International Business Center " a division of the Fund" and Oster & Company. Consultancy Agreement, dated ____, 1994, between the International Business Center and SPGA/Sergey Kisselev & Partners, Inc. Consultancy Agreement, dated _____, 1994, between the International Business Center and Oscar Faber Consult Ltd. Contract No. 95 on cooperation, dated May 16, 1994, between the International Business Center and the Postal Service relating to distribution of IBC shares. Extract from Protocol No. 56, dated December 14, 1994, of the meeting of the Tender Commission for the Sale of Uncompleted Buildings on the application of the Fund extending the construction period on the IBC building to December 1, 1997. Office Lease Agreement, dated December 29, 1994, between the International Business Center and Rostel Holdings Ltd. Construction Agreement for the General Building Works on 24 Smolnaya Street, Moscow, Russia, effective as of January 16, 1995, between the Fund and IlkUMUT, as amended by an addendum dated February 20, 1995. Brokers Services Agreement, effective December 11, 1994, between the Fund and Corpbridge Services. 2. Sovlex Consulting Agreement No.--383/94, dated September 15, 1994, between the Fund and Sovlex relating to purchase and sale of shares on the New York Stock Exchange by the Fund through Montgomery Securities to be held for the Fund's account by Sovlex. 3. First Voucher Bank Lease Agreement No. 90, dated March 24, 1995, between the First Voucher Bank and the GTsMPP. 4. Stock Shop 27 Contract No. 649, dated December 16, 1994 between the Fund and AO Central Universal Russian Exchange leasing premises for the Stock Shop (a) Agreements requiring future obligations by the Fund in excess of the ruble equivalent of $25,000: 1. Advance Payment for Shares (a) Contract No. 140/1, dated March 3, 1994, between the Fund and the Yaroslovl Regional Property Fund relating to the purchase of 31,446 shares in Polyplast at 200 rubles par value per share (6,289,200 rubles total), with additional investments to be made by the Fund by December 31, 1995 in the amount of $223,000 to purchase plastic form equipment, $152,000 to purchase machinery for plastic processing. Joint Activity Agreement, May 5, 1994, between the Fund and Polyplast. (b) All employment and consulting agreements, management agreements, employee benefit bonus, pension, profit-sharing, and similar plans and agreements, broker/ dealer and similar agreements: 1. Employment Agreements Employment contracts all or which expire on December 31, 1994, substantially in the form provided, entered into between the Fund and the individuals and on the terms described in the list attached to the contract. EX-10.2 3 AGREEMENT AMONG PIONEER OMEGA INC & DOM INVESTMENT 1 Exhibit 10.2 AGREEMENT This Agreement dated as of April 7, 1995, entered into by and among Pioneer Omega, Inc., a Delaware corporation with its registered office at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, USA ("Pioneer Omega"), and DOM Investment Company, a closed joint stock company formed under the Laws of the Russian Federation, with its registered office at Dmitrovskoye shosse, 25, Moscow 127434, Russian Federation ("DOM"). A. On October 29, 1994, The Pioneer Group, Inc. ("PGI") entered into an "Agreement on the Obligations of the Parties in Preparation for Closing" with the First Investment Voucher Fund (the "Fund"), and such agreement was amended on November 18, 1994 (as so amended, the "Pre-Closing Agreement"). On April 7, 1995, PGI assigned to Pioneer Omega all of its rights and obligations under the Pre-Closing Agreement, and the Fund consented to such assignment. B. Simultaneously with the execution of this Agreement, Pioneer Omega has entered into a Master Share Purchase Agreement with the Fund (the "Fund Agreement") under which Pioneer Omega, acting through one or more affiliated companies, will purchase shares in the Fund. C. DOM's wholly-owned subsidiary, AOZT Management Company ("KUIF"), holds rights to act as the investment manager of the Fund under a Management Agreement between KUIF and the Fund. DOM wishes to sell to Pioneer Omega's wholly-owned subsidiary, Pioneer First Russia, Inc., a Delaware corporation ("PFR"), and Pioneer Omega wishes to cause PFR to purchase, upon the terms and conditions set forth in this Agreement, all of DOM's right, title and interest in and to the shares of KUIF. DOM has also agreed to terminate, effective after the Closing (as defined below) and upon the written request of Pioneer Omega, the Management Agreement between DOM and the Fund, and to cause Mikhail Chebotaryov to terminate the Management Agreement between Mr. Chebotaryov and the Fund. D. DOM and certain of its affiliates have assisted Pioneer Omega with its investigation of the Fund, and Pioneer Omega will rely upon the representations and warranties made by DOM with respect to the Fund set forth in this Agreement in deciding to purchase shares in the Fund. DOM will agree to make such representations and warranties with respect to the Fund as an inducement to Pioneer Omega to purchase the Fund shares, which is a precondition to Pioneer Omega's agreement to cause PFR to purchase the shares of KUIF under this Agreement. E. DOM and its affiliates have significant expertise in the Russian securities market, and Pioneer Omega wishes to have DOM and such affiliates provide continuing consulting services to Pioneer Omega and to its affiliates following the Closing, and wishes to secure from DOM and such affiliates their agreements not to compete with the operations of the Fund, Pioneer Omega and Pioneer Omega's affiliates following theClosing. F. All of the foregoing understandings and agreements between Pioneer Omega and DOM shall be upon the terms and conditions set forth in this Agreement. In consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows: 1. Purchase and Sale of the Shares of KUIF; Consulting and Non-Competition Agreement 1.1 Purchase of the Shares. Subject to and upon the terms and conditions of this Agreement, at the Closing (as 2 defined in Section 1.5 below) DOM shall sell to PFR, and PFR shall purchase from DOM, all of the issued share capital of KUIF (the "Shares"), under a separate Share Purchase Agreement between DOM and PFR (the "KUIF Share Purchase Agreement"). The KUIF Share Purchase Agreement shall state only the number of Shares being purchased and the cash purchase price being paid therefor. This Agreement shall otherwise govern all aspects of the purchase and sale of the Shares. 1.2 Consulting and Non-Competition Agreement; Agreement Regarding Bank Shares. (a) At the Closing, DOM and each of the Founders named therein shall enter into a Consulting and Non-Competition Agreement with Pioneer Omega, substantially in the form attached to this Agreement as Exhibit A (the "Consulting and Non- Competition Agreement"), and each of the Founders shall enter into the separate non-competition agreements specified in the Consulting and Non-Competition Agreement. Pioneer Omega may assign such agreements to PFR, in which case they shall be reexecuted by DOM, the Founders and PFR. (b) After the Closing and immediately upon the request of Pioneer Omega, DOM and Investment Company NIKA, a Russian closed joint stock company ("IC NIKA"), shall each have entered into an agreement with PFR (the "Bank Share Purchase Agreement") under which they will agree to sell to Russian companies designated by PFR shares in First Voucher Bank (the "Bank") representing an aggregate of 65.1% of the share capital of the Bank. 1.3 Further Assurances. At any time and from time to time after the Closing, at Pioneer Omega's or PFR's request and without further consideration, DOM shall promptly execute and deliver such instruments of sale, transfer, conveyance, assignment and confirmation, and take all such other action as Pioneer Omega or PFR may reasonably request, more effectively to transfer, convey and assign to PFR, and to confirm PFR's title to, all of the Shares, to assist PFR in exercising all rights with respect thereto and to carry out the purpose and intent of this Agreement and the KUIF SharePurchase Agreement. 1.4 Purchase Price for the KUIF Shares. (a) The aggregate purchase price to be paid by PFR for the Shares shall be Two Million Twenty-Two Thousand One Hundred Thirty-Two United Stated Dollars and Eighty Cents (US$ 2,022,132.80) (the "Purchase Price"). The Purchase Price shall be payable in the manner described in paragraph (b) of this Section 1.4. (b) At the Closing, PFR shall pay to DOM the entire Purchase Price immediately upon receipt of (i) an extract from the shareholder records of the Fund, maintained by RINACO, showing the recordation of Luscinia, Inc. and Theta Enterprises, Inc. as the record owners of an aggregate of 280,000,000 shares in the Fund, (ii) a copy of the amendment to the KUIF charter indicating PFR as the sole shareholder of KUIF, as filed with the Moscow Registration Chamber, (iii) a copy of the Consulting and Non-Competition Agreement, signed by DOM and each of the Founders, and copies of the non-competition agreements signed by each of the Founders, and (iv) a copy of the Bank Share Purchase Agreement, signed by each of DOM and IC NIKA. 1.5 Closing. The closing (the "Closing") of the purchase and sale of the Shares shall take place at the offices of Pioneer Investments, Ogaryova 5, Moscow, Russia, at 10:00 am on or about April 11, 1995, or at such other time, date and place as are mutually agreeable to DOM and Pioneer Omega (the "Closing Date"). If at Closing any of the conditions specified in Section 3 shall not have been fulfilled, Pioneer Omega or DOM, as the case may be, may, at its election, terminate this Agreement without thereby waiving any rights it may have by reason of such failure or such non-fulfillment. 1.6 Taxes. DOM shall be responsible for the payment of all Russian Federation securities transfer taxes required to be paid by DOM and PFR with respect to the sale of the Shares. 3 2. Representations of the Parties. 2.1 Representations of DOM with Respect to Itself. DOM represents and warrants to Pioneer Omega as follows with respect to itself: 2.1.1 Organization and Standing. DOM is a closed joint stock company duly organized and validly existing under the laws of the Russian Federation. DOM has full corporate power and authority to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement. DOM has furnished to Pioneer Omega true and complete copies of its Charter and Founders Agreement, as currently in effect. DOM has delivered to Pioneer Omega a copy of its Certificate of Registration with the Moscow Registration Chamber. 2.1.2 Authority for Agreement. The execution and performance by DOM of this Agreement, the KUIF Share Purchase Agreement, the Consulting and Non-Competition Agreement and the Bank Share Purchase Agreement (collectively the "DOM Agreements") and the consummation by DOM of the transactions contemplated by this Agreement and the other DOM Agreements, have been duly authorized by all necessary corporate action. This Agreement and the other DOM Agreements have been duly executed by DOM and constitute valid and binding obligations of DOM, enforceable in accordance with their respective terms. The execution of, and performance of the transactions contemplated by, this Agreement and the other DOM Agreements and compliance with their provisions by DOM will not conflict with or result in a breach of any of the terms of, or constitute a default under, or require a consent or waiver under, the Charter and Founders Agreement (each as amended to date) of DOM or any agreement to which DOM is a party or by which it or any of its properties is bound, or any decree, judgment, order, statute, rule or regulation applicable to DOM. No consents or approvals of third parties or filings with governmental agencies or authorities are required in connection with the consummation by DOM of the transactions contemplated by this Agreement or the other DOM Agreements. 2.1.3 Litigation. There is no action, suit or proceeding, or arbitration proceeding or governmental inquiry or investigation, pending or, to the best of DOM's knowledge, any basis therefor or threat thereof, against DOM, which questions the validity of this Agreement or the other DOM Agreements or the right of DOM to enter into this Agreement or the other DOM Agreements. 2.1.4 Bank Shares. DOM and IC NIKA have good title to shares of the Bank equal to 65.1% in the aggregate of the total share capital of the Bank, free and clear of all covenants, conditions, restrictions, liens, charges, encumbrances, options and adverse claims or rights whatsoever. Upon consummation of the sale of such shares to the companies designated by PFR, such companies will acquire good title to all such shares, free and clear of all covenants, conditions, restrictions, liens, charges, encumbrances, options and adverse claims or rights whatsoever. 2.2 Representations of DOM with Respect to KUIF. DOM represents and warrants to Pioneer Omega as follows with respect to KUIF: 2.2.1 Ownership of Shares. Dom has good title to all of the Shares, free and clear of all covenants, conditions, restrictions, liens, charges, encumbrances, options and adverse claims or rights whatsoever. Upon consummation of the Closing, PFR will acquire from DOM good title to the Shares, free and clear of all covenants, conditions, restrictions, liens, charges, encumbrances, options and adverse claims or rights whatsoever, provided that PFR will take the Shares subject to the obligation to pay the 50% of the nominal value of such Shares that remains unpaid, which payment will be made by DOM through the contribution of certain assets to the capital of KUIF. 2.2.2 Organization. KUIF is a closed joint 4 stock company duly organized, validly existing and in good standing under the laws of the Russian Federation,and has all requisite power and authority (corporate and other) to own its properties and to carry on its business as now being conducted. Notarized copies of the Charter and Founders Agreement of KUIF, as amended to date, have been previously delivered to Pioneer Omega, are complete and correct, and no amendments have been made thereto since the date of delivery. 2.2.3 Capitalization. KUIF's authorized share capital consists of 110,000 shares of nominal value 1000 Russian rubles each, all of which are issued and outstanding on the date hereof and held of record and beneficially by DOM. All such issued and outstanding shares have been duly and validly issued and are partly paid to the extent of 50% of their nominal value and assessable to the extent of the unpaid 50% of their nominal value. 2.2.4 Actions Since Acquiring KUIF. DOM acquired all of the shares of KUIF from Pioneer International Corporation and Theta Enterprises, Inc., subsidiaries of PGI, on March 27, 1995. Since the date of such acquisition, except as set forth on Exhibit B, KUIF has entered into no agreements, has assumed no obligations, has incurred no liabilities and has not changed its share capital nor granted any right to acquire any interests in KUIF to any party. Since the date of such acquisition, except as stated in Exhibit B, there has been no material change in the assets or liabilities of KUIF. 2.2.5 Management Agreement; Licenses. The Management Agreement between the Fund and KUIF, dated March 27, 1995, has been validly authorized and executed by each of the Fund and KUIF and is in full force and effect. KUIF has applied for all licenses, permits and approvals necessary to act as the manager of a specialized privatization investment fund and has made all necessary filings with GKI and other Russian Federation governmental authorities. The GKI has issued a decree authorizing the issuance to KUIF of a license to act as the manager of the Fund, and KUIF will obtain the license prior to the Closing. The Management Agreement between the Fund and KUIF has been, or will be prior to the Closing, approved by the shareholders of the Fund and filed with the GKI, in accordance with applicable Russian Federation legislation. 2.3 Representations of DOM with Respect to the Fund. DOM represents and warrants to Pioneer Omega as follows with respect to the Fund: 2.3.1 Representations in the Fund Agreement. Each and every one of the representations and warranties of the Fund set forth in the Fund Agreement is true and correct and incorporated into this Agreement as if set forth herein; and DOM hereby repeats and reconfirms each and every such representation and warranty, in its own name. 2.4 Survival of Representations. All representations and warranties made by DOM in this Agreement, or in any instrument or document furnished in connection with this Agreement or the transactions contemplated hereby, shall survive the Closing and any investigation at any time made by or on behalf of Pioneer Omega. 2.5 Representations of Pioneer Omega. Pioneer Omega represents and warrants to DOM as follows: 2.5.1 Representations with Respect to Pioneer Omega. Pioneer Omega is a company duly organized, validly existing and in good standing under the laws of the State of Delaware, USA. Pioneer Omega has full corporate power and authority to enter into and perform this Agreement and to carry out the transactions contemplated by this Agreement. The performance by Pioneer Omega of this Agreement and the consummation by Pioneer Omega of the transactions contemplated by this Agreement have been approved by the Board of Directors of Pioneer Omega and have been duly authorized by all necessary corporate action. This Agreement constitutes the valid and binding obligation of Pioneer Omega, enforceable against Pioneer Omega in accordance with its terms. The execution of, and performance of the transactions contemplated by, this Agreement and compliance with its provisions by Pioneer Omega will not 5 conflict with or result in any breach of any of the terms of, or constitute a default under, or require a consent or waiver under, the Certificate of Incorporation and By-laws (each as amended to date) of Pioneer Omega. 2.5.2 Representations with Respect to PFR. PFR is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, USA. PFR has full corporate power and authority to enter into and perform the DOM Agreements to which PFR is a party and to carry out the transactions contemplated thereby. The performance by PFR of the DOM Agreements to which PFR is a party and the consummation by PFR of the transactions contemplated thereby have been approved by the Board of Directors of PFR and have been duly authorized by all necessary corporate action. The DOM Agreements to which PFR is a party constitute the valid and binding obligations of PFR, enforceable against PFR in accordance with their respective terms. The execution and performance of the transactions contemplated by the DOM Agreements to which PFR is a party and compliance with their provisions by PFR will not conflict with or result in any breach of any of the terms of, or constitute a default under, or require a consent or waiver under, the Certificate of Incorporation or By-laws (each as amended to date) of PFR. 3. Conditions to the Obligations of the Parties. 3.1 Conditions to the Obligations of Pioneer Omega. The obligations of Pioneer Omega to enter into this Agreement and to perform its obligations under this Agreement, and to cause PFR to purchase the Shares at the Closing and to enter into the DOM Agreements to which it is a party, are subject to the fulfillment, or the waiver by Pioneer Omega, of each of the following conditions on or before Closing: 3.1.1 Accuracy of Representations and Warranties. Each representation and warranty of DOM contained in Sections 2.1, 2.2 and 2.3 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. 3.1.2 DOM Agreements. DOM shall have executed and delivered to Pioneer Omega or PFR each of the DOM Agreements. 3.1.3 Certificates and Documents. DOM shall have delivered to Pioneer Omega: (A) Copies of the Charters (ustav) and Founders Agreements (uchreditel'ny dogovor) of DOM and KUIF, as amended and in effect as of the Closing Date. (B) Copy of the GKI license of KUIF to act as manager of the Fund. (C) Copy of the management agreement between the Fund and KUIF. (D) The signed resignations of DOM and Mr. Chebotaryov as managers of the Fund under their respective management agreements, with the effective dates of such resignations to be left blank and filled in by Pioneer Omega, together with waivers executed by the Fund, waiving the notice period under such management agreements. (E) The signed resignations of three directors of the Fund, with the effective dates of such resignations to be left blank and filled in by Pioneer Omega. 3.1.4 Fund Agreement. All conditions to closing under the Fund Agreement shall have been satisfied or waived by the appropriate party, and the Fund and Pioneer Omega shall have each certified to the other in writing that all such conditions to its obligations to proceed with such transaction have been satisfied or waived. 3.2 Conditions to the Obligations of DOM. The obligations of DOM to sell the Shares to PFR at the Closing, to enter into the DOM Agreements and to perform its obligations 6 thereunder and under this Agreement are subject to the fulfillment, or the waiver by DOM, of the following conditions on or before Closing: 3.2.1 Accuracy of Representations and Warranties. Each representation and warranty of Pioneer Omega contained in Section 2.5 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. 3.2.2 Fund Agreement. All conditions to closing under the Fund Agreement shall have been satisfied or waived by the appropriate party, and the Fund and Pioneer Omega shall have each certified to the other in writing that all such conditions to its obligations to proceed with such transaction have been satisfied or waived. 4. Arbitration. In the event of any dispute between the parties with respect to any matter covered by this Agreement, the parties shall first use their best efforts to resolve such dispute among themselves. If the parties are unable to resolve the dispute within 30 calendar days after the commencement of efforts to resolve the dispute, the dispute may be submitted by either party for final settlement by arbitration, which shall be the sole means of resolving unreconciled disputes between the parties under this Agreement. Any such arbitration shall be conducted on an ad hoc basis in London, England, in the English language under the UNCITRAL Rules by a single arbitrator appointed in accordance with such rules by the London Court of International Arbitration. The prevailing party in any arbitration shall be entitled to an award of reasonable attorneys' fees incurred in connection with the arbitration. The non-prevailing party shall pay such fees, together with the fees of the arbitrator and the costs and expenses of the arbitration. Any arbitration award may be entered in and enforced by any court having jurisdiction over such matter or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, the parties shall be entitled to seek injunctive relief or other equitable remedies from any court of competent jurisdiction. 5. Governing Legislation. This Agreement shall be governed by and construed in any arbitration or enforcement proceeding in accordance with the legislation of the Commonwealth of Massachusetts, United States of America, without giving effect to the conflicts of laws provisions thereof. 6. Counterparts; Governing Language. This Agreement has been executed in two counterparts in the English language, each of which shall be deemed to be an original, but both of which shall be one and the same document, and two counterparts in the Russian language, each of which shall be deemed to be an original, but both of which shall be one and the same document. This Agreement was prepared in English and translated into Russian. All reasonable efforts were made to ensure that the Russian translation corresponds in substance and in form to the English original. In the event that there shall be any discrepancy between the language in the Russian and English language versions of the Agreement, the English language version shall prevail. 7. Force Majeure. Neither party to this Agreement shall be liable for delay or failure in the performance of any of its obligations under this Agreement due to causes beyond its control, including but not limited to acts of God or a public enemy, acts or any order of a governmental or military authority, fire or other casualty, floods or other natural disasters, embargoes, explosions, enemy or hostile governmental action, civil insurrection, revolution, sabotage or similar conditions, delay caused by a communications, document delivery, wire transmission of funds or similar service, or governmental delay in processing or approving any necessary application or permit. If such delay occurs, the party whose performance is delayed shall give immediate notice thereof to the other party and such other party may elect to terminate this Agreement or to extend the period for performance by a number of days equal to the duration of the delay; provided that at any time during the continuation of any such delay the party thathas authorized 7 extension of the period for performance may deliver notice of cancellation of the Agreement. 8. Confidentiality. The parties agree that all matters and information contained in this Agreement and all information relating to this Agreement and all information relating to this Agreement shall not be disclosed to any third party except by mutual agreement of DOM and Pioneer Omega, or as required by law. 9. Miscellaneous. 9.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns. The rights and obligations of the parties under this Agreement may not be assigned. 9.2 Notices. All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be delivered by hand or sent by telecopier or overnight courier: If to DOM, at Kutuzovsky Prospekt, 33, apt. 10, Moscow 121165, Russian Federation, Attn.: D.M. Paltsev, or at such other address or telecopier number as may have been furnished in writing by DOM to Pioneer Omega; If to Pioneer Omega, c/o The Pioneer Group, Inc., 60 State Street, Boston, MA 02109, USA, Attention: President (telecopier No. 1-617-422-4286), or at such other addresses and telecopier number(s) as may have been furnished to DOM in writing by Pioneer Omega. Notices provided in accordance with this Section 9.2 shall be deemed delivered upon personal delivery, one day after transmission by telecopier or three business days after deposit with a courier service. 9.3 Entire Agreement. This Agreement and the other DOM Agreements embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. 9.4 Amendments and Waivers. This Agreement may be amended only by a written instrument signed by Pioneer Omega and DOM. 8 9.5 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. DOM INVESTMENT COMPANY: /s/ By:________________________________ [Name] __________________________________ [Title] PIONEER OMEGA, INC. /s/ By:________________________________ Timothy T. Frost, Vice President EX-10.3 4 AGREEMENT BETWEEN PIONEER OMEGA,INC. & MOSCOW INTL 1 Exhibit 10.3 AGREEMENT This Agreement dated as of April 7, 1995, entered into by and among Pioneer Omega, Inc., a Delaware corporation with its registered office at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware, USA ("Pioneer Omega"), and Moscow International Business Centre Limited, a Turks & Caicos Islands company with its registered office c/o The Chartered Trust Company Limited, Town Centre Building, P.O. Box 125, Providenciales, Turks & Caicos Islands, BWI ("MIBC"). A. On October 29, 1994, The Pioneer Group, Inc. ("PGI") entered into an "Agreement on the Obligations of the Parties in Preparation for Closing" with the First Investment Voucher Fund (the "Fund"), and such agreement was amended on November 18, 1994 (as so amended, the "Pre-Closing Agreement"). On April 7, 1995, PGI assigned to Pioneer Omega all of its rights and obligations under the Pre-Closing Agreement, and the Fund consented to such assignment. B. Simultaneously with the execution of this Agreement, Pioneer Omega has entered into a Master Share Purchase Agreement with the Fund (the "Fund Agreement") under which Pioneer Omega, acting through one or more affiliated companies, will purchase shares in the Fund. C. Simultaneously with the execution of this Agreement, DOM Investment Company, a Russian joint stock company ("DOM") and the Company have entered into an agreement (the "DOM Master Agreement") under which the Company will purchase from DOM all of the shares of AOZT Management Company ("KUIF"), a wholly owned subsidiary of DOM which holds rights to act as the investment manager of the Fund under a Management Agreement between KUIF and the Fund. Under the DOM Master Agreement, Pioneer Omega will cause PFR to purchase all of DOM's right, title and interest in and to the shares of KUIF. D. MIBC, DOM and certain of their affiliates have assisted Pioneer Omega with its investigation of the Fund, and Pioneer Omega will rely upon the representations and warranties made by MIBC and DOM with respect to the Fund set forth in this Agreement and in the DOM Master Agreement in deciding to purchase shares in the Fund. MIBC will agree to make such representations and warranties with respect to the Fund, and to indemnify Pioneer Omega with respect to such representations and warranties as set forth herein and in the DOM Master Agreement, as an inducement to Pioneer Omega to purchase the Fund shares and to cause PFR to purchase the shares of KUIF under the DOM Master Agreement. E. DOM and its affiliates have significant expertise in the Russian securities market, and Pioneer Omega wishes to have DOM and such affiliates provide continuing consulting services to the Fund, to PFR and to PFR's affiliates following the Closing, and wishes to secure from DOM and such affiliates their agreements not to compete with the operations of the Fund, PFR and PFR's affiliates following the Closing. MIBC hasagreed to cause DOM and such affiliates to provide such consulting services and to comply with such agreements not to compete. F. All of the foregoing understandings and agreements between Pioneer Omega and MIBC shall be upon the terms and conditions set forth in this Agreement. In consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows: 1. Consulting and Non-Competition Agreement; Issuance of Shares to MIBC. 1.1 Consulting and Non-Competition Agreement. MIBC 2 shall cause DOM and each of the Founders named therein to enter into a Consulting and Non-Competition Agreement with Pioneer Omega, substantially in the form attached to this Agreement as Exhibit A (the "Consulting and Non-Competition Agreement"), and each of the Founders shall enter into the separate non- competition agreements specified in the Consulting and Non- Competition Agreement. Pioneer Omega may assign such agreements to PFR, in which case they shall be reexecuted by DOM, the Founders and PFR. 1.2. Issuance of Shares. At the Closing, Pioneer Omega shall issue to MIBC Six Hundred Thousand (600,000) shares of the Series A Preferred Stock of Pioneer Omega (the "Shares"). Certificates representing the Shares shall be delivered to MIBC upon presentation by MIBC of (i) an extract from the shareholder records of the Fund, maintained by Depositary RINACO, showing the recordation of Luscinia, Inc. and Theta Enterprises, Inc. as the record owners of an aggregate of 280,000,000 shares in the Fund, (ii) a copy of the amendment to the KUIF charter indicating PFR as the sole shareholder of KUIF, as filed with the Moscow Registration Chamber and (iii) a copy of the Consulting and Non-Competition Agreement, signed by DOM and each of the Founders, and copies of the non-competition agreements signed by each of the Founders. 1.3 Closing. The closing (the "Closing") of the transactions contemplated by this Agreement shall take place at the offices of Pioneer Investments, Ogaryova 5, Moscow, Russia, at 10:00 am on or about April 11, 1995, or at such other time, date and place as are mutually agreeable to MIBC and Pioneer Omega (the "Closing Date"). If at Closing any of the conditions specified in Section 4 shall not have been fulfilled, Pioneer Omega or MIBC, as the case may be, may, at its election, terminate this Agreement without thereby waiving any rights it may have by reason of such failure or such non-fulfillment. 2. Additional Agreement Between Pioneer Omega, PGI and MIBC. Simultaneously with the execution of this Agreement, MIBC, Pioneer Omega and PGI shall enter into a Stockholders Agreement, substantially in the form attached to this Agreement as Exhibit B (the "Stockholders Agreement"), under which (i) PGI will grant MIBC the right to cause PGI to purchase the Shares and MIBC will grant PGI the right topurchase the Shares and (ii) PGI and MIBC will agree as to certain other matters with respect to the Shares. 3. Representations of the Parties. 3.1 Representations of MIBC with Respect to Itself. MIBC represents and warrants to Pioneer Omega as follows with respect to itself: 3.1.1 Organization and Standing. MIBC is a company duly organized and validly existing under the laws of the Turks & Caicos Islands. MIBC has full corporate power and authority to enter into and perform this Agreement and the Stockholders Agreement and to carry out the transactions contemplated by this Agreement and the Stockholders Agreement. MIBC has furnished to Pioneer Omega true and complete copies of its Memorandum and Articles of Association, as currently in effect. 3.1.2 Authority for Agreement. The execution and performance by MIBC of this Agreement and the Stockholders Agreement and the consummation by MIBC of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action. This Agreement and the Stockholders Agreement have been duly executed by MIBC and constitute valid and binding obligations of MIBC, enforceable in accordance with their respective terms. The execution of, and performance of the transactions contemplated by, this Agreement and the Stockholders Agreement and compliance with their provisions by MIBC will not conflict with or result in a breach of any of the terms of, or constitute a default under, or require a consent or waiver under, the Memorandum and Articles of Association (each as amended to date) of MIBC or any agreement to which MIBC is a party or by which it or any of its properties is bound, or any decree, judgment, order, statute, 3 rule or regulation applicable to MIBC. No consents or approvals of third parties or filings with governmental agencies or authorities are required in connection with the consummation by MIBC of the transactions contemplated by this Agreement or the Stockholders Agreement. 3.1.3 Litigation. There is no action, suit or proceeding, or arbitration proceeding or governmental inquiry or investigation, pending or, to the best of MIBC's knowledge, any basis therefor or threat thereof, against MIBC, which questions the validity of this Agreement or the Stockholders Agreement or the right of MIBC to enter into this Agreement or the Stockholders Agreement. 3.2 Representations of MIBC with Respect to DOM. MIBC represents and warrants to Pioneer Omega as follows with respect to DOM: 3.2.1 Representations in the DOM Master Agreement. Each and every one of the representations and warranties of DOM set forth in the DOM Master Agreement is true and correct and incorporated into this Agreement as if set forth herein; and MIBC hereby repeats and confirms each and every such representation and warranty, in its own name. 3.3 Representations of MIBC with Respect to the Fund. MIBC represents and warrants to Pioneer Omega as follows with respect to the Fund: 3.3.1 Representations in the Fund Agreement. Each and every one of the representations and warranties of the Fund set forth in the Fund Agreement is true and correct and incorporated into this Agreement as if set forth herein; and MIBC hereby repeats and reconfirms each and every such representation and warranty, in its own name. 3.4 Representations of Pioneer Omega. Pioneer Omega represents and warrants to MIBC as follows: 3.4.1 Representations with Respect to Pioneer Omega. Pioneer Omega is a company duly organized, validly existing and in good standing under the laws of the State of Delaware, USA. Pioneer Omega has full corporate power and authority to enter into and perform this Agreement and the Stockholders Agreement and to carry out the transactions contemplated by this Agreement and the Stockholders Agreement. The performance by Pioneer Omega of this Agreement and the Stockholders Agreement and the consummation by Pioneer Omega of the transactions contemplated by this Agreement and the Stockholders Agreement have been approved by the Board of Directors of Pioneer Omega and have been duly authorized by all necessary corporate action. This Agreement and the Stockholders Agreement constitute valid and binding obligations of Pioneer Omega enforceable against Pioneer Omega in accordance with their respective terms. The execution of, and performance of the transactions contemplated by, this Agreement and the Stockholders Agreement and compliance with their provisions by Pioneer Omega will not conflict with or result in any breach of any of the terms of, or constitute a default under, or require a consent or waiver under, the Certificate of Incorporation and By-laws (each as amended to date) of Pioneer Omega. 4. Conditions to the Obligations of the Parties. 4.1 Conditions to the Obligations of Pioneer Omega. The obligations of Pioneer Omega to enter into the Stockholders Agreement and to perform its obligations thereunder and under this Agreement, are subject to the fulfillment, or the waiver by Pioneer Omega, of each of the following conditions on or before Closing: 4.1.1 Accuracy of Representations and Warranties. Each representation and warranty of MIBC contained in Sections 3.1, 3.2 and 3.3 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. 4.1.2 Stockholders Agreement. MIBC shall have executed and delivered to Pioneer Omega the Stockholders 4 Agreement. 4.1.3 Fund Agreement. All conditions to closing under the Fund Agreement shall have been satisfied or waived by the appropriate party, and the Fund and Pioneer Omega shall have each certified to the other in writing that all such conditions to its obligations to proceed with such transaction have been satisfied or waived. 4.1.4 DOM Master Agreement. All conditions to closing under the DOM Master Agreement shall have been satisfied or waived by the appropriate party, and DOM and Pioneer Omega shall have each certified to the other in writing that all such conditions to its obligations to proceed have been satisfied or waived. 4.2 Conditions to the Obligations of MIBC. The obligations of MIBC to perform its obligations under this Agreement and under the Stockholders Agreement are subject to the fulfillment, or the waiver by MIBC, of the following conditions on or before Closing: 4.2.1 Accuracy of Representations and Warranties. Each representation and warranty of Pioneer Omega contained in Section 3.4 shall be true on and as of the Closing Date with the same effect as though such representation and warranty had been made on and as of that date. 4.2.2 Fund Agreement. All conditions to closing under the Fund Agreement shall have been satisfied or waived by the appropriate party, and the Fund and Pioneer Omega shall have each certified to the other in writing that all such conditions to its obligations to proceed with such transaction have been satisfied or waived. 4.2.3 DOM Master Agreement. All conditions to closing under the DOM Master Agreement shall have been satisfied or waived by the appropriate party, and DOM and Pioneer Omega shall have each certified to the other in writing that all such conditions to its obligations to proceed have been satisfied or waived. 5. Indemnification 5.1 Indemnification. MIBC agrees to indemnify and hold harmless Pioneer Omega and PFR from and against all claims, damages, losses, liabilities, costs and expenses (including settlement costs and any legal, accounting or other expenses for investigating or defending any actions or threatened actions) (collectively, the "Losses") in connection with each and all of the following: (a) any misrepresentation or breach of any representation or warranty made by MIBC in this Agreement, by DOM in the DOM Master Agreement or by the Fund in the Fund Agreement; (b) any breach of any covenant, agreement or obligation of MIBC contained in this Agreement, or by DOM in the DOM Master Agreement, the Consulting and Non-Competition Agreement or any other agreement, instrument ordocument contemplated by this Agreement or the DOM Master Agreement; (c) any breach of any covenant, agreement or obligation of the Fund contained in the Fund Agreement or any other agreement, instrument or document contemplated by the Fund Agreement; (d) any misrepresentation contained in any statement, certificate or schedule furnished by MIBC pursuant to this Agreement or in connection with the transactions contemplated by this Agreement or by DOM pursuant to the DOM Master Agreement or in connection with the transactions contemplated by the DOM Master Agreement; (e) any misrepresentation contained in any 5 statement, certificate or schedule furnished by the Fund pursuant to the Fund Agreement or in connection with the transactions contemplated by the Fund Agreement; (f) at any time prior to the Closing, any violation by the Fund of, or any failure by the Fund to comply with, any law, ruling, order, decree, regulation or permit requirement applicable to the Fund, its assets or its business, whether or not any such violation or failure to comply has been disclosed to Pioneer Omega; and (g) any tax liabilities or obligations of the Fund arising with respect to any period prior to the Closing, outside of the tax liabilities or obligations incurred and paid by the Fund in the normal and regular course of business. The indemnification obligations of MIBC under this Agreement with respect to the Fund and DOM, set forth in this Section 5.1, shall be primary and direct obligations of MIBC, and Pioneer Omega shall have no obligation to, and does not intend to, proceed against DOM or the Fund prior to enforcing its indemnification obligations against MIBC under this Agreement. MIBC's indemnification obligations under this Section 5 shall expire on the third anniversary of the date of delivery to Pioneer Omega of a notarized extract from the shareholder register of the Fund showing the recordation of Luscinia, Inc. and Theta Enterprises, Inc. as the record owners of an aggregate of 280,000,000 shares of the Fund, provided that if as of the date of such third anniversary Pioneer Omega has delivered notice to MIBC under Section 5.2 of any indemnification claim(s) that has (have) not been settled by such date, MIBC's indemnification obligations with respect to such claim(s) shall continue until final resolution of such claim(s). 5.2 Claims for Indemnification. Whenever any claim shall arise for indemnification under this Section 5, Pioneer Omega shall promptly notify MIBC of the claim and, when known, the facts constituting the basis for such claim. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party against Pioneer Omega or the Fund, the noticeshall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. Pioneer Omega shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder (nor permit the Fund to settle or compromise any such claim) without the prior written consent, which shall not be unreasonably withheld or delayed, of MIBC; provided, however, that if suit shall have been instituted against Pioneer Omega or the Fund and MIBC or DOM shall not have taken control of such suit after notification thereof as provided in Section 5.3 of this Agreement, Pioneer Omega shall have the right to settle or compromise such claim upon giving notice to MIBC as provided in Section 5.3. 5.3 Defense by MIBC or DOM. In connection with any claim which may give rise to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a person other than Pioneer Omega, MIBC or DOM, at its sole cost and expense, may, upon written notice to Pioneer Omega, assume the defense of any such claim or legal proceeding if MIBC acknowledges to Pioneer Omega in writing the obligation of MIBC to indemnify Pioneer Omega with respect to all elements of such claim. If MIBC or DOM assumes the defense of any such claim or legal proceeding, MIBC or DOM shall select counsel reasonably acceptable to Pioneer Omega to conduct the defense of such claims or legal proceedings and at the sole cost and expense of MIBC or DOM shall take all steps necessary in the defense or settlement thereof. Neither MIBC nor DOM shall consent to a settlement of, or the entry of any judgment arising from, any such claim or legal proceeding, without the prior written consent of Pioneer Omega (which consent shall not be unreasonably withheld or delayed). Pioneer Omega shall be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense. If neither MIBC nor DOM assumes the defense of any such claim or litigation resulting therefrom within 30 days after the date such claim is made: (a) Pioneer Omega (or the Fund, as the case 6 may be) may defend against such claim or litigation in such manner as it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to MIBC, on such terms as Pioneer Omega (or the Fund) may deem appropriate, and (b) MIBC or DOM shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If MIBC thereafter seeks to question the manner in which Pioneer Omega (or the Fund) defended such third party claim or the amount or nature of any such settlement, MIBC shall have the burden to prove by a preponderance of the evidence that Pioneer Omega (or the Fund) did not defend or settle such third party claim in a reasonably prudent manner. 5.4 Survival of Representations. All representations and warranties made by MIBC in this Agreement, or in any instrument or document furnished in connection with this Agreement or the transactions contemplated hereby, shall survive the Closing and any investigation at any time made by or on behalf of Pioneer Omega. 5.5 Limitation of Indemnification Obligations. The obligation of MIBC to indemnify Pioneer Omega under this Section 5 shall be limited as follows: (A) the total indemnification obligations of MIBC shall not exceed $1,500,000; (B) no indemnification obligation will arise unless and until indemnification claims by Pioneer Omega under this Agreement exceed $500,000 in the aggregate; and (C) in no event will Pioneer Omega be entitled to indemnification for the first $500,000 in claims. Any indemnification payment shall be settled by way of offset by PGI, on behalf of Pioneer Omega, against the amount to be paid by PGI for the last 200,000 shares of Pioneer Omega Preferred Stock owned by MIBC and purchasable by PGI in accordance with Section 3 of the Stockholders Agreement. 6. Arbitration. In the event of any dispute between the parties with respect to any matter covered by this Agreement, the parties shall first use their best efforts to resolve such dispute among themselves. If the parties are unable to resolve the dispute within 30 calendar days after the commencement of efforts to resolve the dispute, the dispute may be submitted by either party for final settlement by arbitration, which shall be the sole means of resolving unreconciled disputes between the parties under this Agreement. Any such arbitration shall be conducted on an ad hoc basis in London, England, in the English language under the UNCITRAL Rules by a single arbitrator appointed in accordance with such rules by the London Court of International Arbitration. The prevailing party in any arbitration shall be entitled to an award of reasonable attorneys' fees incurred in connection with the arbitration. The non-prevailing party shall pay such fees, together with the fees of the arbitrator and the costs and expenses of the arbitration. Any arbitration award may be entered in and enforced by any court having jurisdiction over such matter or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, the parties shall be entitled to seek injunctive relief or other equitable remedies from any court of competent jurisdiction. 7. Counterparts; Governing Legislation. This Agreement has been executed in two counterparts, each of which shall be deemed to be an original, but both of which shall be one and the same document. This Agreement shall be governed by and construed in any arbitration or enforcement proceeding in accordance with the legislation of the State of New York, United States of America, without giving effect to the conflicts of laws provisions thereof. The parties have selected the laws of New York because it is a neutral jurisdiction with a highly developed commercial and contract law 8. Force Majeure. Neither party to this Agreement shall be liable for delay or failure in the performance of any of its 7 obligations under this Agreement due to causes beyond its control, including but not limited to acts of God or a public enemy, acts or any order of a governmental or military authority, fire or other casualty, floods or other natural disasters, embargoes, explosions, enemy or hostile governmental action, civilinsurrection, revolution, sabotage or similar conditions, delay caused by a communications, document delivery, wire transmission of funds or similar service, or governmental delay in processing or approving any necessary application or permit. If such delay occurs, the party whose performance is delayed shall give immediate notice thereof to the other party and such other party may elect to terminate this Agreement or to extend the period for performance by a number of days equal to the duration of the delay; provided that at any time during the continuation of any such delay the party that has authorized extension of the period for performance may deliver notice of cancellation of the Agreement. 9. Confidentiality. The parties agree that all matters and information contained in this Agreement and all information relating to this Agreement and all information relating to this Agreement shall not be disclosed to any third party except by mutual agreement of MIBC and Pioneer Omega, or as required by law. 10. Miscellaneous. 10.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns. The rights and obligations of the parties under this Agreement may not be assigned. 10.2 Notices. All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be delivered by hand or sent by telecopier or overnight courier: If to MIBC, at 3038 Greenbrier Street, Little Canada, MN 55117, USA, or at such other address or telecopier number as may have been furnished in writing by MIBC to Pioneer Omega; If to Pioneer Omega, c/o The Pioneer Group, Inc., 60 State Street, Boston, MA 02109, USA, Attention: President (telecopier No. 1-617-422-4286), or at such other addresses and telecopier number(s) as may have been furnished to MIBC in writing by Pioneer Omega. Notices provided in accordance with this Section 10.2 shall be deemed delivered upon personal delivery, one day after transmission by telecopier or three business days after deposit with a courier service. 10.3 Entire Agreement. This Agreement and the Stockholders Agreement embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter. 10.4 Amendments and Waivers. This Agreement may be amended only by a written instrument signed by Pioneer Omega and MIBC. 8 10.5 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. MOSCOW INTERNATIONAL BUSINESS CENTRE LIMITED /s/ By:________________________________ [Name] ________________________________ [Title] PIONEER OMEGA, INC. /s/ By:________________________________ Timothy T. Frost, Member of Board of Directors EX-10.4 5 STOCKHOLDERS AGREEMENT 1 Exhibit 10.4 STOCKHOLDERS AGREEMENT Agreement made this 11th day of April, 1995, by and among The Pioneer Group, Inc., a Delaware corporation ("Pioneer"), Moscow International Business Centre Limited, a Turks & Caicos Islands company ("MIBC"), and Pioneer Omega, Inc., a Delaware corporation (the "Company"). Recitals 1. Both Pioneer and MIBC hold shares of the Preferred Stock of the Company; and 2. Pioneer wishes to obtain from MIBC an option to purchase the shares of Preferred Stock of the Company held by MIBC, and MIBC wishes to grant such option to Pioneer; and 3. MIBC wishes to obtain from Pioneer the right to cause Pioneer to purchase the shares of Preferred Stock of the Company held by MIBC, and Pioneer wishes to grant such right to MIBC; and 4. Pioneer wishes to receive and MIBC is willing to grant to Pioneer certain additional rights with respect to the disposition and voting of the shares of Preferred Stock held by MIBC; and 5. Pioneer and MIBC desire that the Company become a party to this Agreement, solely for the purpose of enforcing the agreements of the parties hereunder. In consideration of the mutual covenants contained herein and for other valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows: 1. Shares. The "Shares" shall mean the 600,000 shares of Preferred Stock of the Company issued on April 11, 1995 to MIBC, and any and all shares of capital stock of the Company, by whatever name called, issued in respect of such shares, including without limitation any shares of the Company's Common Stock issued upon conversion of the Shares. 2. Grants of Put and Call Options; Purchase Price. (a) Pioneer hereby grants to MIBC the right (the "Put Option") to cause Pioneer to purchase from MIBC a portion or all of the Shares. The Put Option shall be exercisable in accordance with Section 3 below. The Put Option shall terminate with respect to any Shares that MIBC has voluntarily converted into shares of Common Stock of the company, effective immediately upon such conversion. (b) MIBC hereby grants to Pioneer the right (the "Call Option") to purchase from MIBC a portion or all of the Shares. The Call Option shall be exercisable in accordance with Section 3 below. (c) The purchase price payable by Pioneer for any Shares purchased under the Put Option or the Call Option shall be equal to US$10 (Ten United States Dollars) per Share, plus simple interest at a rate of Five Percent (5%) per annum from the date of issuance of the Share to the applicable Put/Call Exercise Date (the "Purchase Price"). In the event that the Company pays dividends on any Shares while they remain subject to the Put Option or the Call Option, the Purchase Price payable with respect to such Shares shall be reduced by the full amount of such dividend, and interest on the portion of the Purchase Price deemed to have been paid as a result of such dividend payment shall cease to accrue as of the dividend payment date. The number of Shares as to which the Put Option or the Call Option shall be exercisable, and the Purchase Price therefor, shall be adjusted in accordance with Section 4 below in the 2 event of a capital adjustment, as defined in Section 4 below. (d) In the event that the Company is entitled to indemnification by MIBC under the Agreement dated April 7, 1995, between the Company and MIBC relating to the issuance of the Shares to MIBC, then the Purchase Price paid for the last portion of the Shares purchased pursuant to the Put Option or the Call Option shall be reduced by way of offset against the full amount of such indemnification payment. 3. Put/Call Option Exercise. (a) Either the Put Option or the Call Option may be exercised on the following dates (the "Put/Call Exercise Dates") with respect to the numbers of Shares listed below: (i) On April 11, 1996, with respect to 200,000 Shares; (ii) On April 11, 1997, with respect to an additional 200,000 Shares; and (iii) On April 11, 1998, with respect to the final 200,000 Shares. The Put Option or the Call Option may be exercised with respect to only a portion of the Shares subject to such option on the applicable Put/Call Exercise Date. (b) The Put Option shall be deemed to have been automatically exercised on each Put/Call Exercise Date with respect to the subject Shares, unless on or not more than 30 days prior to the applicable Put/Call Exercise Date MIBC shall have delivered written notice to Pioneer that it does not intend to exercise its Put Option with respect to the subject Shares on such Put/Call Exercise Date. If the Put Option shall have been automatically exercised, such exercise may not be revoked by MIBC without the consent of Pioneer. (c) Pioneer may exercise the Call Option by delivering written notice of exercise to MIBC on or not more than 30 days prior to the applicable Put/Call Exercise Date. If neither the Put Option nor the Call Option has been exercised with respect to any portion of the Shares on the applicable Put/ Call Exercise Date, then the Put Option and the Call Option with respect to such Shares will terminate on such Put/Call Exercise Date. (d) Any notice of exercise of the Call Option or of the non-exercise of the Put Option may be withdrawn by the notifying party at any time prior to the applicable Put/Call Exercise Date. (e) Pioneer shall purchase all Shares as to which the Put Option or the Call Option has been exercised not later than 30 days after the Put/Call Exercise Date on which such option was exercised. Payment shall be made in United States dollars in cash, by wire transfer to the account of MIBC, or other method mutually acceptable to Pioneer and MIBC. Payment shall be made against receipt by Pioneer of certificates representing the Shares being purchased, duly endorsed for transfer to Pioneer or accompanied by duly endorsed stock transfer powers. Such certificates and stock powers shall be held by the Company in accordance with paragraph 3(f) below and delivered to Pioneer in accordance with such paragraph 3(f). If Pioneer shall not have made such payment in full by the 30th day after the Put/ Call Exercise Date on which the option was exercised, it shall be required to pay a penalty of one-quarter of one percent (.25%) per day on the unpaid balance of the Purchase Price from such 30th day until payment is made in full. (f) As requested by MIBC, the certificates representing the Shares and stock powers duly indorsed in blank by MIBC shall be delivered by MIBC to the Secretary of the Company and held by the Company on behalf of MIBC. Upon payment by Pioneer of the Purchase Price for a portion of the Shares, the Company shall deliver to Pioneer the certificates held by it on behalf of MIBC representing the Shares so purchased, together with the executed stock powers. The Company's Secretary will return to MIBC, at any time upon MIBC's request, any or all 3 certificates representing Shares being held by the Company in accordance with this provision, and will in any event return to MIBC certificates representing Shares that are no longer subject to the Put Option or the Call Option. If only a portion of the Shares represented by a certificate is transferred to Pioneer, the Company will cancel such certificate and issue two new replacement certificates, in the names of Pioneer and MIBC, representing the respective numbers of shares owned by Pioneer and MIBC. (g) In the event that stock certificates representing Shares purchased by Pioneer upon exercise of the Put Option or the Call Option are not delivered to Pioneer by the holder thereof after such exercise, then the Company shall treat such stock certificates as void and shall issue replacement certificates in lieu thereof to Pioneer. If MIBC shall transfer any of the Shares to a third party while such Shares are subject to the Call Option, it shall be a condition to the Company's registration of such transfer that thetransferee acknowledge in writing the application of the provisions of the preceding sentence and agree to be bound thereby. 4. Capital Adjustments. All shares or other securities issued in respect of the Shares as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, stock distribution or other similar transaction (collectively, a "capital adjustment") shall be subject to the Put Option and the Call Option, to the right of first refusal set forth in Section 5, to the voting agreement set forth in Section 6 and to the restrictions on transfer set forth in Section 8, to the same extent that the Shares with respect to which the additional or replacement securities were issued are subject to such provision. If, as a result of a capital adjustment, (i) the number of Shares is increased or decreased, (ii) the Shares are exchanged for a different number or kind of shares or other securities of the Company or (iii) additional shares or other securities of the Company or other non-cash assets are distributed with respect to the Shares, then in the case of a capital adjustment described in clause (i), the number of Shares purchasable on each Put/Call Exercise Date and the Purchase Price per Share shall be adjusted appropriately to reflect such increase or decrease in the number of Shares; in the case of a capital adjustment in accordance with clause (ii), the replacement shares or other securities shall be appropriately allocated between the remaining Put/Call Exercise Dates and the aggregate Purchase Price of the Shares that have been replaced by such shares or other securities shall be allocated on a pro rata basis over such replacement shares or securities; and, in the case of a capital adjustment in accordance with clause (iii), such additional shares or securities or other non-cash assets shall be allocated to the Shares in respect of which they were issued and no additional amount shall be payable by Pioneer to acquire such additional shares, securities or assets when Pioneer acquires the Shares in respect of which they were issued. 5. Pioneer Right of First Refusal. (a) If MIBC desires to sell, transfer or otherwise dispose of any of the Shares, or of any interest in the Shares, whether voluntarily or by operation of law, in any transaction other than pursuant to Section 3 of this Agreement, it shall first deliver written notice of its desire to do so (the "Notice") to the Company and to Pioneer. The Notice must specify: (i) the name and address of the party to which MIBC proposes to sell or otherwise dispose of the Shares or an interest in the Shares (the "Offeror"), (ii) the number of Shares MIBC proposes to sell or otherwise dispose of (the "Offered Shares"), (iii) the consideration per Share to be delivered to MIBC for the proposed sale, transfer or disposition, and (iv) all other material terms and conditions of the proposed transaction. (b) Pioneer shall have the first option to purchase all of the Offered Shares for the consideration per share and on the terms and conditions specified in the Notice. Pioneer must exercise such option, no later than 15 days after the date of receipt of such Notice, by written notice to MIBC. 4 (c) In the event Pioneer duly exercises its option to purchase all of the Offered Shares, the closing of such purchase shall take place not later than 30 days after the date of receipt of the Notice. The closing shall be effected by Pioneer's transfer of the Purchase Price to MIBC and by the Company's delivery to Pioneer of certificates representing the Shares purchased, together with stock powers, in accordance with paragraph 3(f) above.. (d) To the extent that the consideration proposed to be paid by the Offeror for the Offered Shares consists of property other than cash or a promissory note, the consideration required to be paid by Pioneer may consist of cash equal to the value of such property, as determined in good faith by agreement of MIBC and Pioneer. (e) Notwithstanding anything to the contrary herein, Pioneer shall not have any right to purchase any of the Offered Shares hereunder unless Pioneer exercises it option under this Section 5 to purchase all of the Offered Shares. (f) If Pioneer does not exercise its option to purchase all of the Offered Shares within the period described in this Agreement (the "Option Period"), then the option of Pioneer to purchase the Offered Shares shall terminate. The transaction contemplated by the Notice shall be consummated not later than 60 days after the expiration of the Option Period. If the transaction has not been consummated on the terms set forth in the Notice by such date, or if the terms of the transaction change in any material respect, then MIBC may not sell the Offered Shares to any third party unless it has first reoffered such shares to Pioneer in accordance with this Section 5. 6. Voting of Shares. In any and all elections of directors of the Company (whether at a meeting or by written consent in lieu of a meeting), MIBC shall vote or cause to be voted all Shares owned by it in favor of all directors designated by Pioneer. Pioneer shall give notice to the Company and MIBC, no later than 7 days prior to the date of any meeting at which directors are to be elected, of the person(s) designated by Pioneer as nominee(s) for election as director(s). If Pioneer shall fail to give notice to the Company and MIBC as provided above, it shall be deemed that the designee(s) of Pioneer then serving as director(s) shall be Pioneer's designee(s) for reelection. MIBC shall not vote to remove any director designated by Pioneer except for bad faith or willful misconduct. The voting agreement contained herein is coupled with an interest and may not be revoked, except by written consent of Pioneer. 7. Agreement Binding on Transferees. Any Shares transferred to a third party shall remain subject to the Call Option and the voting agreement set forth in Section 6 of this Agreement to the same extent as such Shares would be subject to the Call Option and such voting agreement if held by MIBC. It shall be a condition to the transfer of such Shares to the transferee that the transferee shall have acknowledged in writing the existence of the Call Option and the voting agreement and shall have agreed to sell such Shares to Pioneer in accordance with the terms of this Agreement upon exercise of the Call Option, and to vote such shares in accordance with the provisions of Section 6. 8. Restrictions on Transfer. (a) Any sale or other disposition of any of the Shares, or of any interest in the Shares, by MIBC, other than according to the terms of this Agreement, shall be void and shall transfer no right, title, or interest in or to any of such Shares to the purported transferee. (b) An original copy of this Agreement, duly executed by each of the parties hereto, shall be delivered to the Secretary of the Company and maintained at the principal executive office of the Company. This Agreement shall be maintained in the strictest confidence and shall not be made available by the Company for inspection by any person except as 5 required by law. (c) All certificates representing Shares owned or hereafter acquired by MIBC or any transferee of MIBC bound by this Agreement shall have affixed thereto a legend substantially in the following form: "The shares of stock represented by this certificate are subject to certain agreements with respect to the disposition and voting of such shares, as set forth in a Stockholders Agreement by and among the registered owner of this certificate, the Company and certain other stockholders of the Company, a copy of which is available for inspection at the offices of the Secretary of the Company." 9. Termination. This Agreement shall terminate in its entirety upon the earlier of the tenth anniversary of the date of this Agreement or the purchase by Pioneer of all of the Shares. 10. Arbitration. In the event of any dispute between the parties with respect to any matter covered by this Agreement, the parties shall first use their best efforts to resolve such dispute among themselves. If the parties are unable to resolve the dispute within 30 calendar days after the commencement of efforts to resolve the dispute, the dispute may be submitted by either party for final settlement by arbitration, which shall be the sole means of resolving unreconciled disputes between the parties under this Agreement. Any such arbitration shall be conducted on an ad hoc basis in New York, New York, in the English language under the rules of the American Arbitration Association by a single arbitrator appointed in accordance with such rules. The prevailing party in any arbitration shall be entitled to an award of reasonable attorneys' fees incurred in connection with the arbitration. The non-prevailing party shall pay such fees, together with the fees of the arbitrator and the costs and expenses of the arbitration. Any arbitration award may be entered in and enforced by any court having jurisdiction over such matter or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing,the parties shall be entitled to seek injunctive relief or other equitable remedies from any court of competent jurisdiction. 11. Governing Legislation. This Agreement shall be governed by and construed in any arbitration or enforcement proceeding in accordance with the legislation of the State of New York, United States of America, without giving effect to the conflicts of laws provisions thereof; provided, however, that the provisions of Section 6 of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, United States of America, without giving effect to the conflicts of laws provisions thereof. The parties have selected the laws of New York because it is a neutral jurisdiction with a highly developed commercial and contract law. 12. Counterparts. This Agreement has been executed in two counterparts, each of which shall be deemed to be an original, but both of which shall be one and the same document. 13. Miscellaneous. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and permitted assigns. MIBC may not assign its rights and obligations hereunder without the prior written consent of Pioneer. Pioneer may assign its rights and obligations under this Agreement without the consent of MIBC; provided, however, that, unless MIBC shall have consented in writing to such assignment, notwithstanding such assignment, Pioneer shall remain liable for the performance of all of its obligations hereunder. (b) Notices. All notices, requests, consents, and other communications under this Agreement shall be in writing 6 and shall be delivered by hand or sent by telecopier or overnight courier: If to MIBC, at 3038 Greenbrier Street, Little Canada, Minnesota 55117 USA or at such other address or telecopier number as may have been furnished in writing by MIBC to Pioneer and the Company; If to Pioneer or the Company, c/o The Pioneer Group, Inc., 60 State Street, Boston, MA 02109, USA, Attention: President (telecopier No. 1-617-422-4286), or at such other addresses and telecopier number(s) as may have been furnished to MIBC in writing by Pioneer or the Company. Notices provided in accordance with this Section 13(b) shall be deemed delivered upon personal delivery, one day after transmission by telecopier or three business days after deposit with a courier service. (c) Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matterhereof and supersedes all prior agreements and understandings relating to such subject matter. (d) Amendments and Waivers. This Agreement may be amended only by a written instrument signed by Pioneer, MIBC and the Company. (e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) Specific Performance. In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, Pioneer and MIBC shall each be entitled to specific performance of the agreements and obligations of each other and of the Company hereunder and to such other injunctive or other equitable relief as may be granted by a court of competent jurisdiction. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written. PIONEER OMEGA, INC. /s/ By:___________________________ Timothy T. Frost, Vice President THE PIONEER GROUP, INC. /s/ By:____________________________ Timothy T. Frost, under power of attorney MOSCOW INTERNATIONAL BUSINESS CENTRE LTD. /s/ By:____________________________ Title:___________________________ EX-11 6 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit 11 THE PIONEER GROUP, INC. COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
COMPUTATION FOR CONSOLIDATED STATEMENT OF INCOME THREE MONTHS ENDED MARCH 31, - ------------------- ---------------------------- 1995 1994 ---- ---- NET INCOME (1) $ 5,797 $ 11,891 =========== =========== SHARES Weighted average number of common shares outstanding (2) 24,790,000 24,656,000 Dilutive effect of stock options and restricted stock proceeds as common stock equivalents computed under the treasury stock method using the average price during the period (2) 419,000 630,000 WEIGHTED AVERAGE NUMBER OF SHARES outstanding as adjusted (1) (2) 25,209,000 25,286,000 =========== =========== EARNINGS PER SHARE (1) (2) $ 0.23 $ 0.47 =========== =========== (1) These amounts agree with the related amounts in the Consolidated Statement of Income. (2) Adjusted for December 1, 1994, 2-for-1 stock split effected in the form of a 100% stock dividend.
EX-27 7 FIANACIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE. EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE PIONEER GROUP, INC. FOR THE 3 MONTHS ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000733060 THE PIONEER GROUP, INC. 1,000 U.S. DOLLAR 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1 12,120 8,967 24,987 0 15,085 65,128 105,907 (41,434) 209,091 40,377 0 2,479 0 0 135,563 209,091 0 45,679 0 34,978 570 0 432 9,699 3,902 0 0 0 0 5,797 0.230 0.230
-----END PRIVACY-ENHANCED MESSAGE-----