Alixpartners Services UK LLP Advisory Eng Ltr Template

The National Bank of Ukraine

16 June 2016

Page 7 of 16

The National Bank of Ukraine

9 Instytutska St, Kiev, 01601, Ukraine

16 June 2016

Dear Sirs

Agreement for the provision of Consulting Services

This letter (“Letter of Engagement”), together with the attached Schedule and General Terms and Conditions, which form part of and are incorporated by reference herein, sets forth the agreement (“Agreement”) between the National Bank of Ukraine (the “NBU”) and AlixPartners Services UK LLP (“AlixPartners”) for the engagement of AlixPartners by NBU to provide consulting services to the NBU.

References to “Party” or “Parties” below mean a party or the parties to the Agreement (as the case may be).

1.  Background

The NBU is the central bank of Ukraine, which has as part of its remit, to ensure the stability of the Ukrainian banking system. In this context it occasionally acts as lender of last resort, providing liquidity support to Ukrainian banks that are solvent but illiquid.

AlixPartners understands that NBU has provided significant amounts of liquidity support to a systemically important bank (the “Bank”). NBU has become increasingly concerned about the capitalization of the Bank, as well as potential or actual breaches of regulatory limits. It is therefore increasingly concerned about the recoverability of the liquidity support that it has provided to the Bank, of the value and recoverability of the underlying collateral, and the need to consider a number of options in relation to the Bank.

One of the options being considered by the NBU, working in coordination with the Ministry of Finance (the “MinFin”) and the Deposit Guarantee Fund (the “DGF”) is for resolution leading to nationalization of the Bank (the “Nationalisation”).

In order to minimize risk of any further reduction in recoverability of the liquidity support provided by NBU, as well as for broader systemic stability considerations, it will be critical that any transition to Nationalisation is done in a planned and orderly manner.

On the basis of Decision of the Expert Analytical Council on matters of state participation in the authorized capital of banks (Protocol dated 9th June 2016) NBU wishes to engage AlixPartners to provide it with certain services to support the NBU in the potential Nationalisation to improve recovery prospects.

2.  Services to be Provided by AlixPartners

With effect from date on which AlixPartners receives, in cleared funds, the Initial Retainer (as defined in section no. 1 of Schedule 1) (the “Commencement Date”), AlixPartners shall, subject to and in accordance with the Agreement, in relation to and in support of the Nationalisation and preparation for the Nationalisation, provide to the NBU consultancy services to assist and support the NBU in the design preparation, implementation and execution of a plan for the Nationalisation (the "Services").

The Services shall comprise two components (A.1 and A.2) as set out below:

Component A.1 – Planning for an orderly transition to Nationalisation

During Component A.1 of the Services:

With the intention of minimising the risk of any further reduction in recoverability of the liquidity support provided to the Bank by NBU, as well as for broader systemic stability considerations, AlixPartners will assist NBU in the planning to prepare for Nationalisation and the orderly transition to state-ownership by providing leadership and guidance for each of the work streams set out below as may be required by NBU. In providing such leadership and guidance AlixPartners will endeavour to leverage as much as reasonably possible (and as appropriate) existing resources from the NBU, the Bank, and from other local and international advisors.

It is anticipated by the Parties that Component A.1 will comprise AlixPartners supporting NBU in some or all of the following key operational and organisational work streams and/ or activities in relation to the Nationalisation:

Overall project management

-  project leadership;

-  creation and operation of a project management office (PMO);

-  communications and stakeholder management;

-  arranging and coordinating of legal support to protect the project`s objectives;

Continuation of operations

-  governance and management (immediate needs to manage the transition);

-  safeguarding information technology and systems of the Bank;;

-  continuation of the Bank payment systems;

-  providing related-party asset recovery;

Financials and viability

-  recapitalization and bail-in considerations;

-  business model and financial viability going forward (initial assessments);

-  further contingency planning (alternative options);

-  depositors and funding (including liquidity scenarios); and

-  treasury and liquidity management (including contingency needs).

The Parties anticipate that Component A.1 will take three to six weeks (but potentially longer) to complete.

The Parties acknowledge and agree that in order: (i) for AlixPartners to perform the Services; and (ii) to support the achievement of the intended purposes of the Services, certain additional services will need to be performed, by third parties, contemporaneously with the Services and the Parties agree that due to the critical timing requirements for the Services and such additional services, AlixPartners will engage the following categories of third party service providers for the benefit of NBU: (i) local legal advisors; (ii) international legal advisors; (iii) public relations and communications specialists; (iv) translations and interpreter services; and (v) any other category of services agreed in writing by the Parties (all of the foregoing “Agreed Subcontractors”). The Parties agree that AlixPartners will consult with NBU in advance of AlixPartners’ engagement of any Agreed Subcontractors and in the event that the NBU has any concerns with any proposed engagements of any Agreed Subcontractors the Parties will enter into good faith discussions with the intention of addressing NBU’s concerns. AlixPartners agrees that it will provide to NBU copies of all contracts it enters into in engaging any Agreed Subcontractors.

Component A.2 – Implementing an orderly transition to Nationalisation

During Component A.2 of the Services:

With the intention of minimising the risk of any further reduction in recoverability of the liquidity support provided to the Bank by NBU, as well as for broader systemic stability considerations, once the technical steps to effect the Nationalisation of the Bank have been completed, AlixPartners will assist NBU in the implementation of the Nationalisation and orderly transition of the Bank to state-ownership. It is expected that the key work streams will be a continuation of the areas detailed in the planning work, focussing on the implementation priorities relating to the key risks identified in the performance of Component A.1 of the Services. The precise scope of this second component will be determined during the planning work comprising Component A.1 of the Services. The Parties anticipate that this Component A.2 of the Services would be undertaken over a period of six months up to twelve months (but potentially longer) commencing on execution of the Nationalisation.

The Parties acknowledge and agree that it is anticipated that Component A.2 of the Services may be undertaken by AlixPartners and by the Agreed Subcontractors under new letters of engagement with the Bank which would supersede this Letter of Engagement (such new letters of engagement subject to the agreement of the Parties and of the Bank and anticipated to be in a substantiality similar form to this Letter of Engagement) provided that in the event that the Parties do not enter into such new letters of engagement Component A.2 of the Services shall be performed under this Letter of Engagement.

AlixPartners will also assist the NBU with such other matters as may be requested that fall within AlixPartners’ expertise and that are mutually agreed and confirmed in writing accordingly.

For the purposes of the Services, AlixPartners has assumed and the NBU shall ensure:

-  appropriate arrangements, as agreed by the Parties in more details separately, are in place to ensure the safety and physical security of AlixPartners personnel whilst they are in Ukraine. Such security arrangements will be reviewed continuously during the course of the Services. NBU hereby acknowledges and agrees that AlixPartners personnel individually retain a unilateral right to stop supporting this assignment at any time should they have concerns for personal security, even if this could be perceived as being potentially detrimental to the overall assignment;

-  appropriate resources, including (but not limited to) security specialists, other advisory resources, to support and complete the Nationalisation are available and shall be employed in the Nationalisation by, and/ or made available to, the NBU and AlixPartners taking into account the importance, complexity and sensitivity of the Nationalisation. It is expected by the Parties that NBU (and/or the Bank after Nationalisation) will enter intro appropriate contractual arrangements with any of the aforesaid reasonably required additional resources as and when required for the performance of the Services by AlixPartners and NBU shall be responsible for all costs, including (without limitation) fees and expenses arising under and in relation to such arrangements;

-  timely availability of and access to key NBU and Bank management team, and NBU and Bank stakeholders for the completion of the Services;

-  timely availability of all relevant NBU and Bank information, data, materials and documentation, that is reliable and accurate in all material respects; such information whether in the form of documents or management interviews will not be verified by AlixPartners;

-  that AlixPartners shall not be responsible for nonperformance hereunder if such nonperformance has occurred due to third party interference in the provision of Services;

-  an agreed results’ measurement, monitoring and approval process being adhered to;

-  the NBU will provide the necessary leadership and resources to support the Services;

-  NBU shall use its best endeavours to ensure timely co-operation, decisions and approvals by the NBU, MinFin and DGF as necessary or desirable for the performance of the Services;

-  that AlixPartners will not be held accountable for disruption to the Services due to the impact of unforeseen events within the NBU, MinFin, DGF, the Ukrainian Government, Ukrainian laws and/ or the Ukraine itself.

The NBU hereby acknowledges and agrees that:

-  AlixPartners support will be of an advisory nature only, with all formal decision-making resting solely either with (i) NBU, MinFin, DGF and/or other Ukrainian Government entities and agencies as appropriate, or (ii) with the new formal governance structures of the Bank after Nationalisation; and

-  AlixPartners will not be involved in preparing or evaluating alternative, non-Nationalisation, restructuring and/or resolution options or strategies (or their legal ramifications), and all/any related decision-making will rest solely with NBU, MinFin, DGF and/or other Ukrainian Government entities and agencies as appropriate.

The NBU agrees that AlixPartners will not provide any legal, tax or accounting advice in connection with any phase or component of the Services. Such advice will, with exception of the Agreed Subcontractors as anticipated hereunder, be procured by the NBU separately using appropriately qualified professional advisors. The Services may be conducted alongside such other specialist advisors, including, without limitation, the Agreed Subcontractors and other parties acting separately for the NBU, and while AlixPartners will seek to co-ordinate with the information/advice provided by such other advisers, the NBU accepts and acknowledges that AlixPartners’ role will be limited to liaison and collation of information/advice; it will not in any way involve AlixPartners assuming responsibility or liability for the information/advice provided by those other advisors.

3.  Work Product

The NBU agrees that:

(a)  it shall only use the Work Product (as defined in clause 13 of the General Terms and Conditions) internally and in accordance with clause 9.6 of the General Terms and Conditions and that any person who is entitled thereunder to have access to the Work Product is made aware of the NBU’s obligations under this Agreement in relation to the Work Product and, as between the Parties, the NBU shall be responsible to AlixPartners for the observance, by any such person, of such obligations; and

(b)  any disclosures of the Work Product to any parties other than those that are entitled to receive it under the said Clause 9.6 will be on a confidential basis and require the prior written consent of AlixPartners and such consent will be subject to AlixPartners receiving a signed letter of non-reliance (addressed, and in a format acceptable, to AlixPartners) from any such party relating to their proposed access to, and use of, the Work Product in advance of any disclosure of the Work Product.

4.  Retainer, Fees and Expenses

Agreed terms relating to the Retainer, Fees, and Expenses (as defined below) are set out in Schedule 1.

5.  Key Personnel

The principal contacts for the NBU at AlixPartners shall be Alastair Beveridge, Managing Director and Alfredo Bello, Director. Mr. Beveridge and Mr. Bello will draw on other AlixPartners personnel as is appropriate, and after conferring with the NBU (the “Key Personnel”).

AlixPartners shall be entitled to substitute or replace any of the Key Personnel throughout the Term (as defined below) after consulting with the NBU. In addition, AlixPartners and its affiliates have relationships with, and may periodically use, independent contractors with specialised skills and abilities to assist in this engagement.

References in this Agreement to “personnel” shall include directors, officers, employees, agents, contractors and sub-contractors of either Party that are, directly or indirectly, involved in the performance, compliance and/ or discharge of any obligations or duties of that Party under or in relation to this Agreement. AlixPartners shall be responsible for involvement of critically necessary personnel for provision of Services hereunder, as well as for the maintenance of banking secrecy in relation of information provided by the NBU to AlixPartners, as may be necessary for provision of Services hereunder, by such involved personnel.

6.  Term and Termination

The Agreement shall be deemed to have commenced on the Commencement Date and shall continue in full force and effect until terminated in accordance with the Agreement (the “Term”).

Either Party may terminate the Agreement at any time by giving not less than 30 days written notice to the other Party.

In the event that AlixPartners believes at any time, acting reasonably and in good faith, that the continuation of the Agreement and/ or the continued performance of the Services: (i) risks, or is likely to risk, the personal safety of any AlixPartners personnel, including without limitation, the Advisors; and/ or (ii) damages, or is likely to damage, the reputation or goodwill of AlixPartners or any of its affiliates (as defined in clause 3.1 of the General Terms and Conditions), AlixPartners may terminate this Agreement with immediate effect by serving notice to that effect to NBU.