Palms & Company Document

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Dr. Pyotr Johannevich van de Waal-Palms

Sovetnik Pravitelstva CWA, Tovarichestvo Palmsa, Inc.

Investment Bankers. Washington, United States of America.

"Russian banks can receive technical and management assistance in reorganization as well as additional capital. Here is one form an agreement might take, covering such a transaction."

This is an agreement between Dr. Peter Palms, hereinafter, referred to as 'Palms", of 6421 Lake Washington Boluevard Northeast, Palms Bayshore Building, Kirkland (Seattle), Washington, USA, 98033-6876 and

____________________________________________________________________________ hereinafter referred to as 'Bank' of

______________________________________ __________________________________________________________________________


The objective of this agreement is to improve the reputation and financial position of the Bank to better function in a global economy in financing trade and economic development and to adopt world norms of operation with due regard for the obstacles inherent in Russian law and policy and cultural differences. Both parties understand the need for careful communication to avoid misinterpretation of communications. Both parties realize they are innovative pioneers in accomplishing the evolution of banking in Russia. Together they are pioneering new methods for the first time and creating a model for future development of the Russian banking industry.

WHEREAS, Bank desires the assistance of a general financial and/or strategic advisor to advise the Bank how to approach sources of management know-how, and technology that will enable Bank to achieve integration into the world banking community through modernization of its management and accounting practices, improvement of its loan portfolio performance and management. Such services may also include advice regarding exchange rates, foreign exchange, taxes and inflation.

WHEREAS, Palms is willing on a best efforts basis to provide the Bank with his experience and knowledge of corporate management and finance practices in a global market economy,

NOW THEREFORE, the parties agree as follows:

1. Bank shall wire transfer to Palms the sum of $250,000 as a retainer to cover the services of Palms which will be rendered as determined necessary by and at the sole discretion of Palms over whatever period of time is required to provide such services. Payment shall be made in dollars to a Western bank in accordance with the instructions of Palms. Services shall commence when payment is received. In no event shall the number of hours of services performed exceed 1000 hours. In no event shall the term during which services are rendered exceed 24 months.

2. In addition to the general financial and strategic advisory services described in paragraph 1., Palms may assist the Bank in efforts to increase capitalization through international syndication of placements of equity, and/or increase working capital through debt financing. In the event such finance transactions are consummated, Palms shall receive a payment of 1% of all debt financing and 3% of all equity financing which is received by the Bank from any and all sources, irrespective of their nature including European Bank for Reconstruction & Development, International Finance Corporation or other governmental programs of any nations.

3. The Scope of relationship will include advice regarding the preparation of:

  • (a) diagnostic review report
  • (b) institutional development program tailored to that bank's particular strategy, needs and resources.
  • Palms will generally act in an advisory capacity during the implementation phase of the program, although direct responsibilities may be requested in some critical areas. Advice regarding Training of counterpart and other staff, particularly in new banking processes that are developed, will form an important part of the Palms duties. All Palms advice assumes significant involvement of Bank staff in order to promote skill transfer, and to ensure that the program remains consistent with the environment and strategy of the bank.

    4. The institutional development of the Bank assumes participation by a Western Banks and its staff. The advice of Palms will be focused on identifying a Western bank for participation. The Western bank's participation may be structured in one or more of nine "classifications" corresponding to basic functional areas of banking: (a) strategy; (b) organization structure; credit management; (d) financial management; (e) marketing; (f) branch management; (g) human resources management; (h) training; and (i) technology. The final selection of which of these classification to give attention to will depend upon the decision of Bank jointly with the Western Bank.

    5. Strategy

    In the strategy area, the Consultant will advise the Bank with regard to negotiating with a Western bank partner on matters that address how to:

  • (a) refine and expand the bank's strategic planning process to cover all important areas of strategic analysis and decision;
  • (b) train the bank's strategic planning staff and a selected group of line managers in its use:
  • (c) work with the Western bank's management to develop a practical strategic plan for the Bank and a concrete program for its implementation; and
  • (d) help the Bank's line managers to work with the Western Bank to translate the strategic plans and goals for each major area of the bank.
  • 6. This classification will include analysis such as market analysis, competitive analysis, profitability analysis of customers, products and units. The Western bank's proposals should define the bank's mission, goals, basic strategies, target markets, products and services, resource requirements, and action programs, covering both corporate and retail banking.

    Organization Structure

    7. Palms may, as deemed necessary, advice Bank how to work with Western bank to (i) assess the existing head office organization structure and a sample of branches in the context of the strategic plan; (ii) plan a new organization structure for the head office focused on successfully executing the strategic plan, exploring specific opportunities for making the structure more market-oriented; (iii) plan a new organization structure for perhaps two representative branches to serve as guide for all branches; (iv) identify the required staffing levels and the main skill requirements in each organization unit; and (v) prepare a concrete plan for implementing new structures with the Western bank.

    8. In defining new organizational units, with the Western bank the Bank will receive advice from Palms regarding the nature of the information it should provide to the Western bank.

    Credit Management

    7. Palms way provide advice to Bank to assist it in discussing with the Western bank the credit management of Bank. The Western bank may wish to (i) assess the bank's existing credit policies, processes, organization and skills - covering ruble and hard currency lending, enterprise and individual lending, and project finance, from origination through analysis, approval structuring, pricing, administration, monitoring, classification, provisioning and problem loan management - in the context

    of the credit requirements of the strategic plan and good credit management practice; (ii) identify areas that needs to be improved or developed; (iii) work with management to make those improvements ultimately necessary to build a fully effective credit management system; (iv) document the new policies and procedures in a credit manual; (v) train a core staff in utilization of the new or modified processes; (vi) identify the additional skill development needed by the bank to effectively execute and sustain the system; and (vii) identify the automation requirements of the new credit management system.

    Financial Management

    8. Palms may provide advice to Bank to assist it in discussing with the Western bank the Financial Management of Bank. The Western Bank may wish to: (i) assess the full scope of the bank's financial management processes, organization and skill, and identify needed improvements; (ii) work with Bank management to make needed improvements in priority areas - which may include the accounting system, planning and budgeting process, financial reporting, management information, asset/liability management, treasury operations, performance assessment and internal controls; (iii)train a core financial staff in utilization of new or modified processes; (iv) identify additional skill development needed by the bank to effectively execute and sustain the system; and (v) identify the automation requirements of the new financial management system.


    9. Palms may provide advice to Bank to assist it in discussing with the Western bank the Marketing of Bank. The Western bank may wish to work with the Bank's management to: (i) prepare a concrete marketing plan for the Bank and its main businesses, recognizing the different needs of corporate and retail banking; (ii) specify the organization and other resources needed for executing the plan; (iii) develop key marketing techniques to be used by the bank in each business area; and (iv) identify the skills needed by the bank to sustain a successful marketing program.

    Branch Management

    10. Palms may provide advice to Bank to assist it in discussing Branch Management with the Western bank. The Western bank may wish to: (i) review the current system of managing branches and identify needed improvements, particularly in control and risk management; (ii) review the process of planning the branch network and identify needed improvements; (iii) select, with management, a "typical" branch, redesign its work flows, organization, staffing, physical layout, equipment, quality standards for operations and customer service, and other major operating elements so that it can serve as a model for all other similar branches in the network; (iv) plan the development of a computer system for assembling branch asset and liability data on a real-time basis; and (v) prepare a plan for improving head office/branch communications

    Human Resources Management

    11. Palms may provide advice to Bank to assist it in discussing Human Resource Management with the Western bank. The Western bank may wish to: work with management to build an effective human resource management system, refining existing human resources processes such as recruiting, remuneration and incentives, and building or improving human resources processes such as performance/potential appraisal, individual development planning, training and development, transfer and promotion, and succession planning. The Western bank may also wish to train a core human resources staff in the utilization of new or modified processes and identify any additional skill development needed for an effective ongoing human resources management function.

    12. The Western bank may wish to(i) assess the organizational culture; (ii) identify major aspects of the culture that require change in order for the bank to successfully operate in a commercial, competitive and market-oriented mode; and (iii) define the actions needed to achieve these changes.


    13. Palms may provide advice to Bank to assist it in discussing Training with the Western bank. The Western bank may wish to work with training staff to (i) conduct a training needs analysis of key jobs in all units; (ii) prioritize training needs, with a view towards the required integration of training with the business plan, and organize them into a training master plan that meets priority training needs within the required time period and reasonable departmental budgets; (iii) reassess the training infrastructure in the context of the training master plan; and (iv) make needed improvements in areas such as planning the training center, methodologies for training course development, methodologies for conducting training, training materials, on-the-job training, identification and evaluation of external training, selecting and preparing trainers, selecting and preparing trainees, training evaluation, and the training organization.

    14. As noted in the above sections, the Western bank may wish to train core staff in all new banking processes developed or modified during the project. In addition, the Western bank may wish to provide training to managers and professionals in other high priority skill areas. The scope and type of this training is to be determined between the Western bank and Bank management, based fundamentally on importance, cost, and the relative advantage of the Consultant providing such training compared with other potential providers. The following methods will be utilized for delivering training: (i) "on-the-job" training for the bank's counterpart staff who are working with the Western bank; (ii) training of core functional staff in utilization of new or modified processes developed by the Western bank; modified processes developed by the Western bank in each classification of work; and (iii) additional training of managers and professionals in high priority areas as decided between the Bank management and the Western bank.


    15. Palms may provide advice to Bank to assist it in discussing Technology with the Western bank. The Western bank may wish to clearly define Bank's requirements and refine the Bank's automation strategy in the context of the Bank's overall strategic plan, then refine the existing automation plan to ensure the most cost-effective implementation.

    16. The Western bank may wish to achieve this goal through several stages: (i) evaluating the Bank's existing hardware architecture and systems engineering and its near-term automation plans in the context of the new strategic plan; (ii) working with management and its consultants to refine and update the plan; and (iii) continuing to update the plan as new banking processes are developed - e.g., in credit management, financial management, human resource management and branch management. In addition, the Western bank may wish to identify priority needs for development of core technology skills and technology management processes.


    17. Communication shall be accomplished via e-mail.

    Within two months of commencing work, Palms will prepare an outline of the information required of the bank and a revised outline of what he recommends should be done. Quarterly progress reports documenting findings, conclusions, recommendations, end-products, issues and proposed next steps will be provided to Bank by Palms.

    18. The parties agree that Dr. Peter Palms is a U.S. citizen operating from the United States and subject to taxation in the U.S. and not Russia under non-double taxation agreements between the U.S. and Russia.

    19. Any disagreement under this agreement shall be settled in a friendly way by arbitration under the rules of the American Arbitration Association with venue in Kirkland, Washington. Each party will bear his own cost of arbitration. Arbitrators shall have no right to award punitive damages or penalties, or consequential damages.

    20. When in the opinion of Palms it is necessary to perform any portion of the work in Russia Palms may at his sole discretion designate any colleague or associate to perform such tasks.

    21. When, in the opinion of Palms it is necessary for certain representative of the Bank to make themselves available in the United States or Europe or Asia for meetings, the Bank will exercise its best efforts to make Bank staff available for such meetings and Palms will provide invitations for such purpose and communicate with eh U.S. Embassy with regard to requests for visas. The travel expenses of such travel shall be paid by Bank. Palms will pay his own travel expenses as necessary at his sole discretion.

    Dr. Peter Palms

    ______________________________________________ Date_________________________________________




    General Director



    Seal of Bank_____________________________

    For discussions in Russian language in Moscow 7-095-324-6134 7-095-324-4249 ,Alexander Wilobokov

    For discussions in Rusisan language in United States of America, Washington D.C., Tel: 1 804 970-2288 email: Alexander Goldenberg

    For discussions in Russian language in Moscow 7-095-324-6134 7-095-324-4249, Alexander Wislobokov

    For discussions in Russian language in United States of America, Washington D.C., Tel: 1-703-818-0508 Fax: 1-703-818-00236 , Email: Alexander Goldenberg

    For discussion in English or Dutch: 1 425 828-6774 E-mail: Dr. Pyotr Joannevich van de Waal-Palms

    Offices in Vilnius Lithuania E-mail,
    Grigorij Kolesnikov
    2012 Vilnius, Zirmunn 58-41, Fax: (3702) 42-54-40 Tel: 3702 72-11-34
    Other e-mail: or

    Offices in Gomel, Belarus: David Sticknety, E-mail
    IAEWP I.L. U.N. P.O. Box 97 Gomel 246050
    Tel: 375-232-54-4404, Pager (Russian only) 375-232-53-9130 - A770

    Office in St. Petersburg: Tate Ulsacker, Dun & Bradstreet Nord, Tel: ( ) , Fax ( ) E-mail <

    UKRAINE Oleg Jourin PhD
    P.O. Box 25 Lutsk-23 City Volyn Region, Ukraine 262023
    Tel: 380-3322-45521 Fax: 380-3344-30631

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    Palms & Company, Inc., Investment bankers (1934-1997): Palms Palms Bayshore Building, 6421 Lake Washington Boluevard Northeast, Kirkland, State of Washington, United States of America, 98033-6876;
    Phone: 1-425-828-6774 & 1-425-827-5528
    Copyright 1995, Palms and Company, Inc.; all rights reserved; email:
    Date Last Revised: Sept. 9, 1997