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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 7)*
HUNGARIAN TELEPHONE AND CABLE CORP.
(Name of Issuer)
COMMON STOCK, $0.001 PAR VALUE PER SHARE
(Title of Class of Securities)
4455421030
(CUSIP Number)
L. Russell Mitten II with a copy to:
General Counsel Stephen A. Bouchard
CITIZENS UTILITIES COMPANY FLEISCHMAN AND WALSH, L.L.P.
High Ridge Park 1400 Sixteenth Street, N.W.
Stamford, Connecticut 06905 Washington, D.C. 20036
(203) 329-8800 (202) 939-7900
(Name, Address and Telephone No. of Person
Authorized to Receive Notices and Communications)
OCTOBER 18, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with the statement. [ ] (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(see Rule 13d-7).
Note: Six copies of this statement, including all exhibits, should
be filed with the Commission. see Rule 13d-1(a) for other parties
to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment information which would alter disclosures provided
in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes.)
Page 1 of 23 pages
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Page 2 of 23 Pages
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
CITIZENS UTILITIES COMPANY 06-0619596
2. Check the Appropriate Box If A Member Of A Group* (a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds*
WC
5. Check Box If Disclosure Of Legal Proceedings
Is Required Pursuant to Items 2(d) or 2(e). [ ]
6. Citizenship Or Place Of Organization
DELAWARE
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7. Sole Voting Power
5,688,119 Common Stock
8. Shared Voting Power
0 Common Stock
9. Sole Dispositive Power
5,688,119 Common Stock
10. Shared Dispositive Power
0 Common Stock
11. Aggregate Amount Beneficially Owned By Each
Reporting Person
5,688,119 Common Stock
12. Check Box If The Aggregate Amount In Row (11)
Excludes Certain Shares* [ ]
13. Percent Of Class Represented By Amount In Row (11)
62.8% Common Stock
14. Type Of Reporting Person*
CO
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Page 3 of 23 Pages
Pursuant to Rule 101(a)(2)(ii) of Regulation S-T, this statement on
Schedule 13D filed on May 18, 1995, as amended by Amendment No. 1 to Schedule
13D filed on June 6, 1995; Amendment No. 2 to Schedule 13D filed on September
28, 1995; Amendment No. 3 to Schedule 13D filed on October 6, 1995; Amendment
No. 4 to Schedule 13D filed on November 7, 1995; Amendment No. 5 to Schedule 13D
filed on March 7, 1996; and Amendment No. 6 to Schedule 13D filed on April 16,
1996, relating to the common stock, $.001 par value (the "Common Stock"), of
Hungarian Telephone and Cable Corp., a Delaware corporation (the "Issuer"), by
Citizens Utilities Company (the "Reporting Person") is hereby amended and
restated in its entirety, except as permitted by such Rule, as follows (as
amended, this "Schedule 13D").
Item 1. Security and Issuer
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This Schedule 13D relates to the Common Stock of the Issuer. The
Issuer's principal executive office is located at 100 First Stamford Place,
Suite 204, Stamford, Connecticut 06902.
Item 2. Identity and Background
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(a), (b), (c) and (f)
Name of Reporting Person: Citizens Utilities Company
State of Incorporation: Delaware
Principal Business: Citizens Utilities Company, directly or through its
subsidiaries, principally provides telecommunications, electric, gas
and water/waste water services to customers throughout the United
States.
Address of Principal Business: High Ridge Park, Stamford,
Connecticut 06905.
Address of Principal Office: High Ridge Park, Stamford,
Connecticut 06905.
As previously reported, the Reporting Person entered into an agreement
with Peter E. Klenner as of May 5, 1995 and an Agreement in Principle with the
Issuer as of May 12, 1995, copies of which were filed as Exhibits A and B
respectively to the Reporting Person's initial statement of this Schedule 13D
filed May 18, 1995, which agreements contemplated certain definitive agreements
being entered into. The amended responses to Items 3 and 4 contained herein
describe and summarize the actions taken and the definitive agreements entered
into by the Reporting Person's 100% owned subsidiaries, CU CapitalCorp., a
Delaware corporation ("CUCC"), and Citizens International Management Services
Company, a Delaware corporation ("CIMS").
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Page 4 of 23 Pages
The principal business of CUCC is to hold investments in
telecommunications service providers, including the Issuer, and perform certain
obligations with respect to any such investment. The address of the principal
business and office of CUCC is the same as the Reporting Person.
The names, business addresses and principal occupations of the
executive officers and directors of the Reporting Person and CUCC, all of whom
are United States citizens, are set forth in Schedule I hereto and are
incorporated herein by reference.
(d)-(e) During the last five years, neither the Reporting Person, CUCC
nor, to the best knowledge of the Reporting Person, any of the executive
officers or directors of the Reporting Person or CUCC have been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
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On May 31, 1995, CUCC purchased 300,000 shares of Common Stock in a
private transaction pursuant to an agreement effective as of May 12, 1995, with
Peter Klenner, a copy of which was filed as Exhibit A to the Reporting Person's
initial statement of this Schedule 13D filed May 18, 1995. CUCC used $4,200,000
of its working capital to fund the purchase of such shares at a price of $14.00
per share. On October 3, 1995, October 30, 1995 and February 26, 1996, the
Issuer issued 2,908, 250,000 and 250,000 shares, respectively, of Common Stock,
and on October 18, 1996, the Issuer granted an option to purchase 875,850 shares
of Common Stock, to CUCC in connection with financial support provided or to be
provided to the Issuer by CUCC, as described in response to Item 4 below.
The Reporting Person and CUCC presently expect to finance any and all
other purchases of Common Stock or other equity securities of the Issuer
pursuant to any of the transactions described in response to Item 4 below, if
and when any such purchase occurs, with working capital. The Reporting Person
and CUCC do not presently intend to borrow funds specifically for the purpose of
providing any portion of the funds needed to consummate any such purchase. The
aggregate purchase price for all such purchases presently would be at least
$72,954,821 (see response to Item 4 below for a summary description of possible
purchases pursuant to such transactions), subject to adjustments pursuant to
such agreements.
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Except as set forth above in this response to Item 3, to the best
knowledge of the Reporting Person, none of the persons listed in Schedule I
hereto has acquired any Common Stock.
Item 4. Purpose of Transaction
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(a), (c), (d), (e) and (g)
As previously reported, the Reporting Person and the Issuer entered
into an Agreement in Principle as of May 12, 1995, a copy of which was filed as
Exhibit B to the Reporting Person's initial statement of this Schedule 13D filed
May 18, 1995, which contemplated certain definitive agreements being entered
into between them with respect to, among other things, the Reporting Person
making or guaranteeing certain loans to the Issuer, the Issuer granting the
Reporting Person certain rights to acquire shares of Common Stock and/or a
wholly-owned subsidiary of the Issuer, the Reporting Person having
representation on the Issuer's Board of Directors, and the Reporting Person
providing certain management services to the Issuer. On May 31, 1995, the
Reporting Person, through either CUCC or CIMS, entered into the definitive
agreements described below with the Issuer and certain other persons. On
September 28, 1995, the Reporting Person, through either CUCC or CIMS, entered
into certain agreements with the Issuer and amended and/or restated some of the
agreements entered into between the parties on May 31, 1995. On October 30,
1995, the Reporting Person, through CUCC, entered into a certain Second
Agreement to Amend and Restate ("Second Agreement to Amend and Restate") with
the Issuer pursuant to which CUCC and the Issuer amended and/or restated some of
the agreements entered into on May 31, 1995 and September 28, 1995. On February
26, 1996, the Reporting Person, through CUCC, entered into a certain Third
Agreement to Amend and Restate ("Third Agreement to Amend and Restate") with the
Issuer pursuant to which CUCC or CIMS and the Issuer entered into certain
agreements and amended some of the agreements previously entered into between
the parties. On April 3, 1996, some of the agreements between the Issuer and
CUCC were terminated upon repayment of certain loans, as hereinafter described.
On October 18, 1996, the Issuer and CUCC entered into (i) the First Amendment to
Stock Option Agreement, (ii) the First Amendment to Warrant and (iii) the Third
Stock Option Agreement, as hereinafter described. (The descriptions and
summaries below do not purport to be complete and are subject to, and qualified
in their entirety by reference to, each such agreement, copies of which are
filed as exhibits hereto and incorporated herein by reference. See Item 7
below.)
A. Agreements between the Reporting Person and the Issuer.
------------------------------------------------------
(i) The Master Agreement between the Issuer and CUCC (see
Exhibit D hereto) is the original umbrella agreement for the various initial
agreements between the Issuer and either CUCC or
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Page 6 of 23 Pages
CIMS. Its provisions include representations, warranties and covenants
consistent with the nature of the transactions contemplated by such agreements,
including procedures and obligations with respect to a meeting of the Issuer's
stockholders for the purpose of approving the Stock Options granted by the
Issuer to CUCC as described below. As set forth in the Master Agreement, the
Issuer's Board of Directors approved, and recommended that the Issuer's
stockholders approve, the Stock Options described below. On September 12, 1995,
the Issuer's stockholders approved the Stock Options at the Issuer's Annual
Meeting of Stockholders.
(ii) The original Loan Agreement between the Issuer and CUCC
dated as of May 31, 1995 (the "Loan Agreement") (see Exhibit E hereto) provided
for an initial advance by CUCC of up to $4,300,000 to fund certain obligations
pertaining to HTCC Consulting Rt. ("Consulting"), a wholly-owned subsidiary of
the Issuer, and its affiliated concession companies in Hungary, and a possible
second advance of up to an additional $910,000 to fund the repayment of certain
loans to the Issuer from its affiliate, Hungarian Teleconstruct Corp.
On September 28, 1995, the Issuer and CUCC entered into the Agreement
to Amend and Restate (the "First Agreement to Amend and Restate") (see Exhibit O
hereto) pursuant to which the Issuer and CUCC, among other things, agreed to
amend the Loan Agreement to include certain other obligations of the Issuer and
to allow the Issuer to use the remaining portion of the initial advance and all
of the second advance to make and fund subordinated loans to two of the Issuer's
concession company subsidiaries, Kelet-Nograd Com Rt.
("Kelet-Nograd") and Raba Com Rt. ("Raba").
On October 30, 1995, the Issuer and CUCC entered into the Second
Agreement to Amend and Restate (see Exhibit S hereto and the discussion in
paragraph A(x) below of this section of the response to Item 4) pursuant to
which the Issuer and CUCC, among other things, further amended and restated the
Loan Agreement and the related Promissory Note. The Amended and Restated Loan
Agreement and the Amended and Restated Promissory Note dated October 30, 1995
(the "Restated Loan Agreement" and the "Restated Note", respectively) (see
Exhibit T hereto) provided for CUCC to provide financial support to the Issuer
for up to $33,200,000 (the "33.2 Million Financial Support"), for specific
purposes in limited amounts, including the refinancing of existing loans from
CUCC to the Issuer and enabling the Issuer's Hungarian subsidiaries to meet
certain financial obligations.
On February 26, 1996, the Issuer and CUCC entered into the Third
Agreement to Amend and Restate (see Exhibit V hereto and the discussion in
paragraph A(xii) below of this section of the response to Item 4) pursuant to
which, among other things, CUCC agreed to provide further financial support of
up to $30,000,000 in addition to the $33.2 Million Financial Support and the
Hungarotel Financial Support (as defined in the discussion in paragraph A(xi)
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Page 7 of 23 Pages
below of this section of the response to Item 4) through the provision of loans,
guarantees and other forms of financial support (the "Additional Financial
Support"), which, when combined with the $33.2 Million Financial Support and the
Hungarotel Financial Support, resulted in approximately $79,200,000 of total
financial support to the Issuer by CUCC. The terms of the Additional Financial
Support and the Hungarotel Financial Support were reflected in the Third
Agreement to Amend and Restate and in a certain Second Loan Agreement between
the Issuer and CUCC dated as of February 26, 1996 (the "Second Loan Agreement")
and the Second Promissory Note ("Second Note") issued pursuant to the Second
Loan Agreement (see Exhibit W hereto and the discussion in paragraph A(xii)
below of this section of the response to Item 4). The Additional Financial
Support was separated into two tranches, one for up to $20,000,000 for specific
purposes, and one for up to $10,000,000 for anticipated obligations under
construction contracts to be approved by CUCC.
The Restated Loan Agreement and the Second Loan Agreement provided for
customary events of default and remedies. The loans accrued interest at a
variable rate equal to the United States Prime Rate (as published in The Wall
Street Journal) plus 2% per annum, payable quarterly. The maturity date for both
loans was July 25, 1997. The Restated Note provided the Issuer the option of
paying the quarterly interest in shares of the Issuer's Common Stock valued at
the lower of $13.00 per share or a market average price per share during such
quarter. On October 3, 1995, the Issuer issued 2,908 shares of Common Stock to
CUCC in lieu of a cash interest payment. Pursuant to the Third Agreement to
Amend and Restate, the Issuer irrevocably agreed to pay in cash all accrued and
future interest payable to CUCC pursuant to the Restated Note (see Exhibit V
hereto and the discussion in paragraph A(xii) below of this section of the
response to Item 4).
At CUCC's election, CUCC was permitted to provide any or all of the
$33.2 Million Financial Support, the Hungarotel Financial Support or the
Additional Financial Support by arranging for a third party lender to issue
letters of credit or payment guarantees on behalf of the Issuer or to make loan
advances to the Issuer; provided that, in each such case, CUCC guaranteed the
resulting obligations and indebtedness of the Issuer to such third party lender.
Each such letter of credit, payment guarantee or loan advance that was supported
by a CUCC guarantee reduced CUCC's commitment to provide financial support. If
the interest rate payable by the Issuer to any such third party lender was less
than the interest rate set forth in the Restated Note or the Second Note, then
as partial consideration for CUCC making such guarantees, the Issuer was
required to pay CUCC the difference. The Second Agreement to Amend and Restate
provided the Issuer the option of paying such interest differential in shares of
the Issuer's Common Stock valued at the lower of $13.00 per share or a market
average price per share during such interest period. Pursuant to the Third
Agreement to Amend and Restate, the Issuer irrevocably agreed to pay in cash all
accrued and future payment
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Page 8 of 23 Pages
obligations related to such interest differential. CUCC arranged for Chemical
Bank to provide the $33.2 Million Financial Support pursuant to a certain Loan
Agreement between the Issuer and Chemical Bank dated as of November 28, 1995.
Loans made pursuant thereto were guaranteed by CUCC.
In the event that the Issuer either (i) issued or sold for cash,
pursuant to any public or private offering, any shares of its capital stock or
any other securities (including debt securities) or any obligations convertible
into or exchangeable for such capital stock or securities, or (ii) otherwise
incurred indebtedness for money borrowed from any bank or other financial
institution whether or not such indebtedness had been guaranteed by CUCC, then
the Issuer was required to prepay the outstanding principal and accrued but
unpaid interest thereon under the Restated Note and the Second Note in an amount
up to 100% of the aggregate amount of the net proceeds of such issuance or sale
or the amount of such indebtedness, subject to the prior repayment of 100% of
any third party indebtedness of the Issuer that has been guaranteed by CUCC.
On April 3, 1996, the Issuer repaid all of the outstanding principal
and interest on the loans from Chemical Bank and CUCC with the proceeds of a
certain loan agreement entered into by the Issuer and Citicorp North America,
Inc. Following such repayment, the Issuer and CUCC terminated the Restated Loan
Agreement and the Second Loan Agreement.
(iii) The Warrant, granted by the Issuer to CUCC (see Exhibit
F hereto) entitles CUCC to purchase up to 299,219 shares of Common Stock at
$13.00 per share at any time through May 31, 1997, subject to adjustments
pursuant to customary anti-dilution protections.
(iv) The Stock Pledge Agreement between the Issuer and CUCC
(see Exhibit G hereto), as amended and restated on September 28, 1995 by the
Amended and Restated Stock Pledge Agreement (see Exhibit P hereto), as further
amended and restated by the Second Amended and Restated Pledge Agreement dated
as of October 30, 1995 (see Exhibit U hereto), and as further amended by the
First Amendment to the Second Amended and Restated Pledge Agreement dated as of
February 26, 1996 (see Exhibit X hereto) (as so amended, the "Restated Pledge
Agreement"), provided for the Issuer's pledge, subject to receipt of certain
consents and waivers, of its shares in, and any indebtedness owing or to be owed
to the Issuer from four of its subsidiaries (Consulting, Kelet- Nograd, Raba and
Papa es Tersege Telefon Koncesszios Rt. ("Papatel")), and the indebtedness owing
or to be owed to the Issuer from, and when available, the shares of, its
subsidiary Hungarotel Tavkozlesi Rt. ("Hungarotel"), as collateral to CUCC to
secure the Issuer's obligations under the Restated Loan Agreement, the Restated
Note, the Restated Pledge Agreement (see discussion in paragraph A(ii) above and
A(x) below of this section of the response to Item 4), the Second Loan Agreement
and the Second Note
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(see discussion in paragraph A(ii) above and A(xii) below of this section of the
response to Item 4). As a result of the termination of the Restated Loan
Agreement and the Second Loan Agreement, the Restated Pledge Agreement was
terminated.
(v) The Stock Option Agreement dated May 31, 1995 between the
Issuer and CUCC (see Exhibit H hereto) provides for the grant by the Issuer to
CUCC of four Stock Options which, if fully exercised, would result in CUCC
owning an aggregate amount (including shares now held or subject to purchase,
pursuant to the Warrant and other options by CUCC) of approximately 58.1% of the
Issuer's outstanding shares of Common Stock on a fully diluted basis (assuming
the exercise in full of all options and warrants held by CUCC, as well as the
exercise of all other outstanding options and warrants to purchase Common Stock,
and the issuance of all shares subject to possible issuance in connection with
the Papatel/Hungarotel purchases) (see also response to Item 5 below). Such
Stock Options initially had terms of two, three, four and five years,
respectively, in each case commencing on September 12, 1995, the date that the
Issuer's stockholders approved the Stock Options.
(a) The Two-Year Option initially was for 101,550 shares at
$13.00 per share and presently, pursuant to preemption provisions
discussed below, is for 456,437 shares of Common Stock at $13.00 per
share.
(b) The Three-Year Option initially was for 920,916 shares at
$15.00 per share and presently, pursuant to the additional
anti-dilution adjustment provisions discussed below, is for 875,850
shares of Common Stock at $15.00 per share.
(c) The Four-Year Option initially was for 920,916 shares at
$16.50 per share and presently, pursuant to the additional
anti-dilution adjustment provisions discussed below, is for 875,850
shares of Common Stock at $16.50 per share.
(d) The Five-Year Option initially was for 920,917 shares at
$18.00 per share and presently, pursuant to the additional
anti-dilution adjustment provisions described below, is for 875,850
shares of Common Stock at $18.00 per share.
The number of shares and price per share for each of the Options are
subject to adjustment pursuant to customary anti-dilution protections. In
addition, the Stock Option Agreement contains additional anti-dilution
provisions that adjust the number of shares of Common Stock subject to the
Three-Year Option, Four- Year Option and Five-Year Option granted thereunder to
equal such number of shares of Common Stock which, when the number of such
option shares are combined with the shares of Common Stock now held or subject
to purchase by CUCC (other than "Compensation Shares," as defined below), would
result in CUCC holding approximately 51%
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of the shares of Common Stock then outstanding on a fully diluted basis. In
calculating the number of shares of Common Stock subject to the Three-Year
Option, Four-Year Option and Five-Year Option, the 51% target includes such
options, the Two-Year Options, the Warrant and Additional Five-Year Options (and
adjustments thereto), but does not include the issuance of certain shares (or
options or other rights covering such shares and any adjustments thereto) to the
Reporting Person as compensation for providing financial or other services to
the Issuer ("Compensation Shares"). To date, such Compensation Shares include
(i) 2,908 Compensation Shares issued to CUCC on October 3, 1995 in lieu of the
payment of cash to satisfy certain interest obligations on the Loan, (ii)
250,000 Compensation Shares issued to CUCC on October 30, 1995 pursuant to the
Second Agreement to Amend and Restate, (iii) 250,000 Compensation Shares issued
to CUCC on February 26, 1996 pursuant to the Third Agreement to Amend and
Restate and (iv) 875,850 Compensation Shares subject to an option granted to
CUCC on October 18, 1996 pursuant to the Third Stock Option Agreement (described
below). As a result of such additional anti-dilution adjustment provisions of
the Stock Option Agreement, the Reporting Person owns approximately 58.1% of the
Issuer's outstanding shares of Common Stock on a fully diluted basis (assuming
the exercise in full of all options and warrants held by CUCC, as well as the
exercise of all other outstanding options and warrants to purchase Common Stock,
and the issuance of all shares subject to possible issuance in connection with
the Papatel/Hungarotel purchases) (see also response to Item 5 below).
The Stock Options became exercisable on September 12, 1995, when the
Stock Option Agreement and the Stock Options were approved by the Issuer's
stockholders at the Issuer's Annual Meeting of Stockholders. On September 28,
1995, the Issuer granted additional options to CUCC (see Exhibit Q and the
discussion in paragraph A(viii)(c) of this section of the response to Item 4).
On October 18, 1996, the Issuer granted additional options to CUCC (see Exhibit
CC and the discussion in paragraph A(xiii)(c) below of this section of the
response to Item 4).
The Master Agreement between the Issuer and CUCC provides that if the
Issuer issues, in connection with any public or private offering, shares of
Common Stock or other stock of the Issuer or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock or other stock of the
Issuer (the "Offered Securities") and such issuance occurs prior to the
expiration date of the Two-Year Option, then the Company must grant CUCC the
option (on the same terms and conditions applicable to the Two-Year Option as
set forth in the Stock Option Agreement and a concurrent expiration date) to
purchase such number or amount of the Offered Securities sufficient to maintain
CUCC's then existing percentage ownership interest of Common Stock on a fully
diluted basis. If such issuance of Offered Securities occurs after the
expiration date, then the Issuer must grant CUCC the right to purchase at the
applicable offering price such number of shares of the Offered Securities as is
necessary to maintain CUCC's then
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Page 11 of 23 Pages
existing percentage ownership interest of Common Stock on a fully diluted basis
(see the discussion paragraph A(i) of this section of the response to Item 4).
(vi) The Registration Agreement between the Issuer and CUCC (see
Exhibit I hereto) provides that the Issuer will pay certain expenses of and
provide upon CUCC's request up to four (4) demand registrations (which may be
shelf registrations) and unlimited incidental or piggyback registrations for the
sale of any and all shares of Common Stock now or hereafter owned by CUCC
through May 31, 2015, subject to the terms and conditions provided therein.
(vii) The Management Services Agreement between the Issuer and CIMS
(see Exhibit J hereto) as amended by the First Amendment to Management Services
Agreement dated September 28, 1995 (the "First Amendment to Management Services
Agreement") (see Exhibit R hereto) and the Second Amendment to Management
Services Agreement dated as of February 26, 1996 (the "Second Amendment to
Management Services Agreement") (see Exhibit Z hereto) (as amended, the
"Management Services Agreement"), provides for CIMS to provide certain
corporate, financial, technical, construction, marketing and operational
services to the Issuer for a term commencing July 1, 1995, and continuing until
December 31, 2007, unless terminated earlier pursuant thereto. The management
fee to be paid by the Issuer to CIMS for such services is the greater of 5% of
Adjusted Gross Revenues (as such term is defined in the Management Services
Agreement) or the Fixed Amount. The Fixed Amount for each month in 1995 is
$100,000 per month commencing with the month of July 1995; the Fixed Amount for
each of the months of January, February and March 1996, is $208,300; the Fixed
Amount for each of the months of April, May and June 1996 is $270,800; the Fixed
Amount for each of the months of July, August and September 1996 is $338,300;
the Fixed Amount for each of the months of October, November and December 1996
is $395,800; and the Fixed Amount for each remaining month during the term of
the Management Services Agreement commencing with January 1997 is $416,600,
subject to adjustment to reflect inflation. Such monthly fee payments for 1995
and 1996 may be paid, with the consent of CUCC, in shares of Common Stock having
a value, based on a market average for such month, equal to such fee. HTCC shall
have the option to elect to accrue any monthly management fee for 1995 or 1996
which is payable in cash through calendar year 1996 and to pay the aggregate
amount of all such accrued management fees, together with interest thereon at
the United States Prime Rate as announced from time to time by The Wall Street
Journal plus two percent (2%) per annum, in twenty-four (24) equal monthly
installments starting in January 1997. The Issuer has agreed with Citicorp North
America, Inc. not to pay cash for such management fees while its short term
credit agreement, which the Issuer entered into as of March 29, 1996, is in
effect. The maturity date of such loans pursuant to such credit agreement is
December 31, 1996. The Issuer has informed CIMS that it intends to accrue all
such fees and not pay such accrued fees until 1997. In addition, expenses
incurred by CIMS in providing the management
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Page 12 of 23 Pages
services, including certain allocable overhead items, will be
reimbursed by the Issuer.
(viii) On September 28, 1995, the Issuer entered into the First
Agreement to Amend and Restate with CUCC (see Exhibit O hereto) pursuant to
which, among other things, (i) CUCC agreed to provide certain financial support
to the Issuer (the "Initial Financial Support"), (ii) the Issuer and CUCC or
CIMS amended certain agreements and (iii) the Issuer granted additional options
to CUCC. The First Agreement to Amend and Restate and the related agreements are
described herein. (The descriptions and summaries herein do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
each such agreement, copies of which are filed as exhibits hereto. See Item 7
below.)
(a) The First Agreement to Amend and Restate between the
Issuer and CUCC provided for CUCC to support and assist the Issuer
through the provision of guarantees, loans and other forms of financial
support to enable the Issuer to perform or satisfy, or to cause its
subsidiaries to perform or satisfy, certain additional financial
obligations and responsibilities arising in connection with or relating
to the Issuer's acquisition of shares and/or other rights and interests
in and to Papatel and Hungarotel. Papatel and Hungarotel each is a
Hungarian corporation and a party to one or more concession contracts
with the Ministry authorizing the provision of local telecommunications
services within the areas designated in the concession contracts (see
the Issuer's Current Report on Form 8-K filed on September 5, 1995). On
September 14, 1995, CUCC provided letters of support to Citibank, to
induce such bank to issue, on behalf of the Issuer, Papatel and
Hungarotel, and for the benefit of the Ministry and in compliance with
the respective concession contract(s) of Papatel and Hungarotel, three
payment guarantees dated September 18, 1995, for the purpose of
guaranteeing the payment by Papatel and Hungarotel on or before
December 1, 1995, of the concession fees required to be paid to the
Ministry under their respective concession contracts which fees total,
in the aggregate, approximately $7,065,000. CUCC agreed to support and
assist the Issuer in arranging for Papatel and Hungarotel to obtain the
requisite funds with which to pay their respective concession fees to
the Ministry by December 1, 1995. All advances of funds by CUCC in
connection with or arising out of CUCC's provision of financial support
were deemed an advance of funds by CUCC under the Loan Agreement and
the related Promissory Note, both to be amended and restated (see
discussion in paragraph A(ii) above of this section of the response to
Item 4). The First Agreement to Amend and Restate also provided that
the amended and restated Loan Agreement and Promissory Note shall allow
the remaining portion of the Initial Advance and all of the Second
Advance, as such terms are defined in the Loan Agreement, to be used to
make and fund subordinated loans from the Issuer to Kelet-Nograd and
Raba (see discussions at
<PAGE>
Page 13 of 23 Pages
paragraphs A (ii) above this section of the response to
Item 4).
(b) Contemporaneously with the execution of, and pursuant to,
the First Agreement to Amend and Restate, the Issuer and CUCC entered
into the Amended and Restated Stock Pledge Agreement (see Exhibit P
hereto and discussion at paragraph A(iv) above of this section of the
response to Item 4) and the Issuer and CIMS entered into the First
Amendment to Management Services Agreement (see Exhibit R hereto and
the discussion at paragraph A (vii) of this section of the response to
Item 4) pursuant to which the Issuer and CIMS amended the Management
Services Agreement.
(c) Contemporaneously with the execution of, and pursuant to,
the First Agreement to Amend and Restate, the Issuer and CUCC also
entered into a Second Stock Option Agreement dated as of September 28,
1995 (see Exhibit Q hereto) pursuant to which the Issuer granted CUCC
the right to buy 626,155 shares of Common Stock at an exercise price of
$17.00 per share during the five-year period ending September 12, 2000.
Such exercise price was reset to $13.75 per share pursuant to the
Second Agreement to Amend and Restate (see discussion in paragraph
A(x)(b) below of this section of the response to Item 4). Such options
were granted to CUCC in consideration of the additional financial
commitments made by CUCC pursuant to the First Agreement to Amend and
Restate and the essential role played by CUCC in enabling the Issuer to
obtain the consent of the Ministry to the Issuer's acquisition of
control of Papatel and Hungarotel (see discussion in paragraph
A(viii)(a) above of this section of the response to Item 4).
(ix) On October 6, 1995, an affiliate of CUCC provided a letter of
support to Citibank, which Citibank required as a condition to issuing a payment
guarantee to Magyar Tavkozlesi Rt., a Hungarian corporation limited by shares
and the former Hungarian stated-owned telephone monopoly ("MATAV") to secure the
Issuer's obligation to pay $925,000 to MATAV on or before December 1, 1995, as
the purchase price for the shares in Papatel that the Issuer purchased from
MATAV. CUCC agreed to make a loan to the Issuer to enable the Issuer to perform
such payment obligation (the "$925,000 Financial Support").
(x) On October 30, 1995, the Issuer entered into the Second Agreement
to Amend and Restate (see Exhibit S hereto) with CUCC, pursuant to which, among
other things, (i) CUCC agreed to provide certain additional financial support to
the Issuer, which, together with other financial support previously provided
for, aggregated $33,200,000, (ii) the Issuer and CUCC amended and restated
certain previously reported agreements and (iii) the Issuer agreed to issue
shares of Common Stock to CUCC as partial consideration for CUCC providing
additional financial support. (The descriptions and summaries herein do not
purport to be complete, and are subject to,
<PAGE>
Page 14 of 23 Pages
and qualified in their entirety by reference to, each such
agreement, copies of which are filed as exhibits hereto. See
Item 7 below.)
(a) The Second Agreement to Amend and Restate (see
Exhibit S hereto) provided for CUCC to provide further
financial support of up to $20,000,000 in addition to the
Initial Financial Support, the $925,000 Financial Support and
the Loan referred to in the Loan Agreement (the "Loan") to the
Issuer through the provision of loans, guarantees and other
forms of financial support (the "$20,000,000 Financial
Support"), which, when combined with the Initial Financial
Support, the $925,000 Financial Support and the Loan, resulted
in up to $33,200,000 of total financial support to the Issuer
by CUCC (the Initial Financial Support, the $925,000 Financial
Support, the Loan and the $20,000,000 Financial Support being,
in the aggregate, the $33.2 Million Financial Support). The
terms of the $33.2 Million Financial Support were reflected in
the Second Agreement to Amend and Restate, the Restated Loan
Agreement and the Restated Note (see Exhibits S and T and the
discussion in paragraph A(ii) above of this section of the
response to Item 4).
(b) As partial consideration for committing to
provide the $20,000,000 Financial Support, the Issuer, among
other things, (i) issued 250,000 shares of Common Stock to
CUCC, (ii) reset the initial purchase price of the Additional
Five-Year Option Shares set forth in the Second Stock Option
Agreement from $17.00 per share to $13.75 per share (see
Exhibit Q hereto and the discussion in paragraph A(viii)(c)
above of this section of the response to Item 4), and (iii)
entered into the Second Amended and Restated Pledge Agreement
(see Exhibit U hereto and the discussion in paragraph A(iv)
above of this section of the response to Item 4).
(xi) On December 28, 1995, an affiliate of CUCC provided a letter of
support to Citibank (the "Hungarotel Financial Support") which Citibank required
as a condition to issuing a Payment Guarantee on December 29, 1995 in the amount
of up to 2,100,000,000 HUF to MATAV to secure Hungarotel's payment obligations
to MATAV arising from its purchase of certain assets from MATAV.
(xii) On February 26, 1996, the Issuer entered into the Third Agreement
to Amend and Restate (see Exhibit V hereto) with CUCC, pursuant to which, among
other things, (i) CUCC provided further financial support to the Issuer, which,
together with other financial support previously provided for, aggregated up to
$79,200,000, (ii) the Issuer and CUCC or CIMS entered into certain other
agreements and amended certain previously reported agreements and (iii) the
Issuer issued shares of Common Stock to CUCC as partial consideration for CUCC
providing further financial support.
<PAGE>
Page 15 of 23 Pages
(The descriptions and summaries herein do not purport to be complete, and are
subject to, and qualified in their entirety by reference to, each such
agreement, copies of which are filed as exhibits hereto. See Item 7 below.)
(a) The Third Agreement to Amend and Restate (see Exhibit V
hereto) provided for CUCC to provide further financial support of up to
$30,000,000 in addition to the $33.2 Million Financial Support and the
Hungarotel Financial Support through the provisions of loans,
guarantees and other forms of financial support, which, when combined
with the $33.2 Million Financial Support and the Hungarotel Financial
Support resulted in approximately $79,200,000 of total financial
support to the Issuer by CUCC. The terms of the Hungarotel Financial
Support and the Additional Financial Support were reflected in the
Third Agreement to Amend and Restate, the Second Loan Agreement and the
Second Note (see Exhibits V and W and the discussion in paragraph A(ii)
above of this section of the response to Item 4).
(b) As partial consideration for committing to provide such
Additional Financial Support and the Hungarotel Financial Support, the
Issuer, among other things, (i) issued 250,000 shares of Common Stock
to CUCC, (ii) entered into the Second Loan Agreement and issued the
Second Note pursuant thereto (see Exhibit W hereto and the discussion
in paragraph A (ii) above of this section of the response to Item 4),
(iii) entered into the First Amendment to the Second Amended and
Restated Pledge Agreement (see Exhibit X hereto and the discussion in
paragraph A(iv) above of this section of the response to Item 4), (iv)
entered into the First Amendment to the Amended and Restated Loan
Agreement (see Exhibit X hereto and the discussion in paragraph A(ii)
above of this section of the response to Item 4), (v) agreed to pay in
cash all accrued and future interest payable to CUCC pursuant to the
Restated Note and all accrued and future payment obligations payable to
CUCC pursuant to Section 1.1(b) of the Second Agreement to Amend and
Restate and (vi) entered into the Second Amendment to Management
Services Agreement (see Exhibit Z hereto and the discussion in
paragraph A(vii) above of this section of the response to Item 4).
(xiii) On October 18, 1996, the Issuer and CUCC entered into (a) the
First Amendment to Stock Option Agreement (see Exhibit AA hereto), (b) the First
Amendment to Warrant (see Exhibit BB hereto) and (c) the Third Stock Option
Agreement (see Exhibit CC hereto), each of which is described below. (The
descriptions and summaries herein do not purport to be complete and are subject
to, and qualified in their entirety by reference to, each such agreement, copies
of which are filed as exhibits hereto. See Item 7 below.)
(a) Pursuant to the First Amendment to Stock Option Agreement,
the Issuer extended the exercise periods of the Two-Year Option, the
Three-Year Option and the Four-Year
<PAGE>
Page 16 of 23 Pages
Option through September 12, 2000. Accordingly, as amended by the First
Amendment to Stock Option Agreement, each of the Two-Year Option, the
Three-Year Option and the Four-Year Option have the same exercise
period as the Five-Year Option and the Additional Five-Year Options.
(b) Pursuant to the First Amendment to Warrant, the Issuer
extended the exercise period of the Warrant through September 12, 2000.
(c) Pursuant to the Third Stock Option Agreement, the Issuer
granted to CUCC the option to purchase an additional 875,850 shares of
Common Stock at an initial exercise price of $12.75 per share,
exercisable at any time during the five-year period ending September
12, 2000. The number of shares and price per share for such option are
subject to adjustment pursuant to customary anti-dilution protections
applicable to the Stock Options.
The parties entered into such agreements in consideration of CUCC or an
affiliate thereof (i) furnishing or agreeing to furnish additional financial
support to the Issuer and/or its subsidiaries, including through the issuance to
Citicorp North America, Inc. ("CNA") of a letter of comfort and a letter
indemnifying CNA against all events of political, currency exchange and other
cross-border risks in connection with a $75 million Secured Term Loan Credit
Facility for the Issuer from CNA, (ii) issuing to Postabank Rt. a letter of
support in connection with a $170 million Credit Facility for the Hungarian
subsidiaries of the Issuer from Postabank, (iii) providing assurance to CNA of
the repayment by the Issuer of any and all amounts owed to CNA by October 15,
1996 in connection with the CNA Credit Facility, and (iv) negotiating the
effective cancellation of a $750,000 contingent commitment fee payable by the
Issuer to CNA in connection with the CNA Credit Facility and a $2,000,000
interest credit payable to a subsidiary of the Issuer by Postabank in connection
with the Postabank Credit Facility. In further consideration of the Reporting
Person providing such additional financial support to the Issuer and its
subsidiaries and for obtaining such financial benefits for the Issuer and its
subsidiaries, the Issuer has paid $750,000 to CUCC.
B. Pursuant to the Master Agreement, CUCC was entitled to have one
representative elected to the Issuer's Board of Directors at the time such
agreement was entered into, and to have such representative (or his
successor(s)) nominated by such Board for election at all Issuer's stockholders'
meetings for so long as CUCC owns at least 300,000 shares of Common Stock.
Accordingly, CUCC designated, and the Issuer's Board of Directors as of May 31,
1995, elected, Donald K. Roberton (then, the Reporting Person's Assistant to the
Chairman and Vice President, Strategic Development -- Telecommunications) to the
Issuer's Board. Mr. Roberton was also nominated for election, and was elected,
to the Issuer's Board at the Issuer's Annual Meeting on September 12, 1995.
Following Mr. Roberton's resignation from the Reporting Person, effective April
<PAGE>
Page 17 of 23 Pages
5, 1996, the Reporting Person designated Ronald E. Spears (the Reporting
Person's Vice President-Telecommunications) to be its representative on the
Issuer's Board of Directors and the Board of Directors of the Issuer elected Mr.
Spears to the Issuer's Board of Directors at its meeting on April 12, 1996. The
Master Agreement also provides that the Issuer will maintain a minimum of six
directors, whose terms will not be classified or staggered.
C. On May 31, 1995, CUCC consummated the purchase of 300,000 shares of
Common Stock from Peter Klenner, a director of the Issuer, for $4,200,000. (See
response to Item 3 above.) Mr. Klenner resigned as President, Chief Executive
Officer and Chief Financial Officer of the Issuer and its subsidiaries effective
as of May 31, 1995, but remained a member of the Issuer's Board of Directors
until the Issuer's September 12, 1995, Annual Meeting.
D. As previously reported, CUCC entered into certain Voting Agreements
with certain directors, officers and stockholders of the Issuer on May 31, 1995,
which agreements also contained certain restrictions on sales of or other
encumbrances on the shares of Common Stock of such persons. These Voting
Agreements expired on September 12, 1995, as a result of the Issuer's
stockholders having approved on that date the May 31, 1995 Stock Option
Agreement and the Stock Options granted thereunder.
(b), (f), (h), (i) and (j)
Except as set forth above, the Reporting Person presently has no plans
or proposals that specifically relate to or would result in any of the actions
listed in subparagraphs (b), (f), (h), (i) or (j) of this Item 4.
(a) through (j)
Since CUCC has and expects to continue to have representation on the
Board of Directors of the Issuer, and CIMS will be providing management services
to the Issuer, all as hereinabove described in this response to Item 4, the
Reporting Person anticipates that it, directly or indirectly through affiliates
(such as CUCC and CIMS) or its (or their) representatives, will participate from
time to time in discussions with and decisions by management of the Issuer, and
transactions involving the Issuer, that might result in actions described in
such subparagraphs. Accordingly, reference is hereby made to the Issuer's
reports, to the extent they contain any information with respect to the
foregoing, as filed from time to time by the Issuer with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
The Reporting Person intends to continuously review its and its
affiliated entities' investment in the Issuer and, based upon future conditions,
may alter their intentions with respect to any or all of the foregoing plans,
intentions or transactions, including, without limitation, deciding to sell all
or a portion of any shares of Common Stock or other Issuer securities that they
may
<PAGE>
Page 18 of 23 Pages
now own or hereafter acquire, or that they may now or hereafter
have the right to acquire.
Except as set forth above in this response to Item 4, to the best
knowledge of the Reporting Person, none of the persons listed in Schedule I
hereto has acquired any Common Stock or has any plans or proposals that
specifically relate to or would result in any of the actions listed in
subparagraphs (a)-(j).
Item 5. Interest in Securities of the Issuer
- ----------------------------------------------
The Reporting Person's response to Item 5 in this Schedule 13D is
hereby amended by deleting the previous response in its entirety and
substituting the following:
(a) As a result of (i) the purchase of 300,000 shares of Common Stock
made on May 31, 1995, (ii) the Warrant to purchase 299,219 shares of Common
Stock, (iii) the approval of the May 31, 1995, Stock Option Agreement and Stock
Options granted thereunder (as subsequently adjusted, including adjustments to
the Two-Year Option to cover an additional 354,887 shares of Common Stock), by
the Issuer's stockholders at the Issuer's Annual Meeting of Stockholders on
September 12, 1995 (presently covering a total of 3,083,987 shares of Common
Stock), (iv) the grant of the Additional Five-Year Stock Options on September
28, 1995, pursuant to the Second Stock Option Agreement, covering a total of
626,155 shares of Common Stock (v) the issuance by the Issuer to CUCC of 2,908
Compensation Shares on October 3, 1995 in lieu of the payment of cash to satisfy
certain interest obligations on the Loan, (vi) the issuance by the Issuer to
CUCC of 250,000 Compensation Shares on October 30, 1995 pursuant to the Second
Agreement to Amend and Restate and (vii) the issuance by the Issuer to CUCC of
250,000 Compensation Shares on February 26, 1996 pursuant to the Third Agreement
to Amend and Restate, all as previously reported in response to Item 4, and
(viii) the grant by the Issuer to CUCC of the option to purchase an additional
875,850 Compensation Shares on October 18, 1996 pursuant to the Third Stock
Option Agreement described in response to Item 4 above, the Reporting Person may
be deemed to have beneficial ownership of 5,688,119 shares of Common Stock, of
which 4,885,211 shares are subject to purchase pursuant to presently exercisable
options or warrants beneficially held by the Reporting Person. Accordingly, the
Reporting Person beneficially owns 62.8% of all Common Stock presently reported
by the Issuer to be outstanding (or approximately 58.1% if all of CUCC's options
and warrants, as well as all other outstanding options and warrants, and all
other shares subject to possible issuance in connection with the
Papatel/Hungarotel purchases, are eventually issued).
(b) Common Stock
(i) Sole power to vote or direct the
vote of 5,688,119 shares of Common Stock.
<PAGE>
Page 19 of 23 Pages
(ii) Shared power to vote or direct the vote of 0
shares of Common Stock.
(iii) Sole power to dispose or direct the disposition
of 5,688,119 shares of Common Stock.
(iv) Shared power to dispose or direct the
disposition of 0 shares of Common Stock.
(c) See responses to Items 3 and 4 above.
(a) - (c)
Except as set forth above in this response to Item 5, to the best
knowledge of the Reporting Person, none of the persons listed in
Schedule I hereto beneficially owns any Common Stock or has effected
any transaction in Common Stock in the past 60 days.
(d) Not Applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
- ------------------------------------------------------------------
Except as otherwise described in the response above to Item 4 herein,
there are no contracts, arrangements, understandings or relationships (legal or
otherwise) among, the Reporting Person, CUCC, CIMS or, to the best knowledge of
the Reporting Person, the persons listed in Schedule I hereto, or between the
Reporting Person, CUCC, CIMS or, to the best knowledge of the Reporting Person,
any of the persons listed in Schedule I hereto, on the one hand, and any other
person, on the other hand, with respect to any securities of the Issuer. See
also Exhibits D through M and O through CC attached hereto, which are
incorporated herein by reference.
Item 7. Materials to be Filed as Exhibits
- -------------------------------------------
The Reporting Person's response to Item 7 in this Schedule 13D is
hereby amended by deleting the previous response in its entirety and
substituting the following:
Exhibit A Letter Agreement dated May 5, 1995,
between the Reporting Person and Peter E.
Klenner, executed and delivered by the
Reporting Person on May 12, 1995.(1)
Exhibit B Letter Agreement dated May 12, 1995, between
the Reporting Person and the Issuer, executed
<PAGE>
Page 20 of 23 Pages
and delivered by the Reporting Person on May
12, 1995.(1)
Exhibit C Press Release issued by the Reporting Person
on May 18, 1995.(1)
Exhibit D Master Agreement, dated May 31, 1995, between
the Issuer and CUCC.(2)
Exhibit E Loan Agreement (which includes the form of
the Note as Exhibit I thereto), dated May
31, 1995, between the Issuer and CUCC.(2)
Exhibit F Warrant, dated May 31, 1995, granted by the
Issuer to CUCC.(2)
Exhibit G Stock Pledge Agreement, dated May 31, 1995,
between the Issuer and CUCC.(2)
Exhibit H Stock Option Agreement, dated May 31, 1995,
between the Issuer and CUCC.(2)
Exhibit I Registration Agreement, dated May 31, 1995,
between the Issuer and CUCC.(2)
Exhibit J Management Services Agreement, dated May 31,
1995, between the Issuer and CIMS.(2)
Exhibit K Voting Agreement, dated May 31, 1995, between
CUCC and Robert Genova.(2)
Exhibit L Voting Agreement, dated May 31, 1995, between
CUCC and Frank R. Cohen.(2)
Exhibit M Voting Agreement, dated May 31, 1995, between
CUCC and Peter E. Klenner.(2)
Exhibit N Power of Attorney, dated September 26,
1995.(3)
Exhibit O Agreement to Amend and Restate, dated
September 28, 1995, between the Issuer and
CUCC.(4)
Exhibit P Amended and Restated Stock Pledge Agreement,
dated September 28, 1995, between the Issuer
and CUCC.(4)
Exhibit Q Second Stock Option Agreement, dated
September 28, 1995, between the Issuer and
CUCC.(4)
<PAGE>
Page 21 of 23 Pages
Exhibit R First Amendment to Management Services
Agreement, dated September 28, 1995, between
the Issuer and CIMS.(4)
Exhibit S Second Agreement to Amend and Restate, dated
October 30, 1995, between the Issuer and
CUCC.(5)
Exhibit T Amended and Restated Loan Agreement, dated
October 30, 1995, between the Issuer and
CUCC (which includes the form of the Amended
and Restated Promissory Note as Exhibit I
thereto).(5)
Exhibit U Second Amended and Restated Pledge Agreement,
dated October 30, 1995, between the Issuer
and CUCC(5)
Exhibit V Third Agreement to Amend and Restate, dated
February 26, 1996, between the Issuer and
CUCC.(6)
Exhibit W Second Loan Agreement, dated February 26,
1996, between the Issuer and CUCC (which
includes the form of the Second Promissory
Note as Exhibit I thereto).(6)
Exhibit X First Amendment to the Second Amended and
Restated Pledge Agreement, dated February
26, 1996, between the Issuer and CUCC.(6)
Exhibit Y First Amendment to the Amended and
Restated Loan Agreement, dated February 26,
1996, between the Issuer and CUCC.(6)
Exhibit Z Second Amendment to the Management Services
Agreement, dated February 26, 1996, between
the Issuer and CIMS.(6)
Exhibit AA First Amendment to Stock Option
Agreement, dated October 18, 1996, between
the Issuer and CUCC (filed herewith)
Exhibit BB First Amendment to Warrant, dated October 18,
1996 between the Issuer and CUCC (filed
herewith)
Exhibit CC Third Stock Option Agreement, dated
October 18, 1996, between the Issuer and
CUCC (filed herewith)
- --------------------------
<PAGE>
Page 22 of 23 Pages
(1) Previously filed with the Reporting Person's initial statement of this
Schedule 13D filed May 18, 1995.
(2) Previously filed with the Reporting Person's Amendment No. 1 to
Schedule 13D filed June 6, 1995.
(3) Previously filed with the Reporting Person's Amendment No. 2
to Schedule 13D filed September 28, 1995.
(4) Previously filed with the Reporting Person's Amendment No. 3
to Schedule 13D filed October 6, 1995.
(5) Previously filed with the Reporting Person's Amendment No. 4
to Schedule 13D filed November 7, 1995.
(6) Previously filed with the Reporting Person's Amendment No. 5
to Schedule 13D filed March 7, 1996.
* Previously filed with the Reporting Person's initial statement of this
Schedule 13D filed May 18, 1995.
** Previously filed with the Reporting Person's Amendment No. 1 to
Schedule 13D filed June 6, 1995.
*** Previously filed with the Reporting Person's Amendment No. 2
to Schedule 13D filed September 28, 1995.
<PAGE>
Page 23 of 23 Pages
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
CITIZENS UTILITIES COMPANY
Dated: October 24, 1996 By: /s/ Stephen A. Bouchard
-----------------------
Stephen A. Bouchard
Attorney-In-Fact
<PAGE>
SCHEDULE I
----------
The names, addresses and principal occupations of each of the executive
officers and directors of Citizens Utilities Company are listed below.
NAMES AND ADDRESSES PRINCIPAL OCCUPATION
------------------- --------------------
DIRECTORS
Norman I. Botwinik Director Emeritus of the Board
Building #14 of Governors
60 Connolly Parkway University of New Haven
Harnden, CT 06514 (retired)
Aaron I. Fleischman Senior Partner,
Fleischman and Walsh, L.L.P. Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W. (legal services)
Washington, D.C. 20036
James C. Goodale Of Counsel
Debevoise & Plimpton Debevoise & Plimpton
875 Third Avenue (legal services)
New York, NY 10022
Stanley Harfenist President and Chief Executive
Adesso, Inc. Officer
5110 W. Goldleaf Circle Adesso, Inc.
Suite 50 (computer hardware
Los Angeles, CA 90056 manufacturing)
Andrew N. Heine Of Counsel
Gordon Altman Butowsky Weitzen Gordon Altman Butowsky Weitzen
Shalov & Wein Shalov & Wein
114 West 47th Street, 20th Fl. (legal services)
New York, NY 10036-1510
Elwood A. Rickless Managing Partner
Whitman Breed Abbott & Morgan Whitman Breed Abbott & Morgan
11 Waterloo Place (legal services)
London, SW1Y 4AU, England
John L. Schroeder Director
Dean Witter Funds Dean Witter Funds
(investment services)
New York, NY
Robert D. Siff Consultant and former
Citizens Utilities Company Executive Vice President
3 High Ridge Park Chittenden Bank
Stamford, CT 06905 (banking services)
<PAGE>
Robert A. Stanger Chairman, Robert A. Stanger &
Robert A. Stanger & Co., Inc. Co., Inc.
1129 Broad Street (publishing; investment
Shrewsbury, NJ 07702 advisory services)
Charles H. Symington, Jr. Director
S.G. Warburg & Co. Inc. S.G. Warburg & Co. Inc.
(investment services)
New York, NY
Edwin Tornberg President, Edwin Tornberg &
Edwin Tornberg & Co., Inc. Co., Inc. (management and
7251 15th Place, N.W. brokerage services in the
Washington, D.C. 20012 radio industry)
Claire Tow Senior Vice President
Century Communications Corp. Century Communications Corp.
50 Locust Avenue (cable television services)
New Canaan, CT 06840
Leonard Tow Chairman of the Board, Chief
Citizens Utilities Company Executive Officer and Chief
3 High Ridge Park Financial Officer
Stamford, CT 06905 Citizens Utilities Company
NAMES AND ADDRESSES POSITIONS
------------------- ---------
EXECUTIVE OFFICERS
Leonard Tow Chairman of the Board, Chief
Citizens Utilities Company Executive Officer and Chief
3 High Ridge Park Financial Officer
Stamford, CT 06905
Daryl A. Ferguson President and Chief Operating
Citizens Utilities Company Officer
3 High Ridge Park
Stamford, CT 06905
James P. Avery Vice President, Energy Sector
LGS Natural Gas Company
P.O. Box 433
1233 West Bank Expressway
Harvey, LA 70059
Robert J. DeSantis Vice President and Treasurer
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Richard A. Faust, Jr. Vice President, Mohave County,
Citizens Utilities Company Arizona and Assistant
3 High Ridge Park Secretary
Stamford, CT 06905
<PAGE>
J. Michael Love Vice President, Corporate
Citizens Utilities Company Planning
3 High Ridge Park
Stamford, CT 06905
Robert L. O'Brien Vice President, Regulatory
Citizens Utilities Company Affairs
3 High Ridge Park
Stamford, CT 06905
David B. Sharkey Vice President, Electric
Citizens Utilities Company Lightwave
3 High Ridge Park
Stamford, CT 06905
Livingston E. Ross Vice President and Controller
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Ronald E. Spears Vice President,
Citizens Utilities Company Telecommunications
3 High Ridge Park
Stamford, CT 06905
Ronald E. Walsh Vice President, Water and
Citizens Utilities Company Wastewater Treatment Sector
3 High Ridge Park
Stamford, CT 06905
The names, addresses and principal occupations of each of the
executive officers and directors of CU CapitalCorp. are listed
below.
NAMES AND ADDRESSES
------------------- PRINCIPAL OCCUPATION
DIRECTORS --------------------
Robert J. DeSantis Vice President and Treasurer,
Citizens Utilities Company Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Daryl A. Ferguson President and Chief Operating
Citizens Utilities Company Officer, Citizens Utilities
3 High Ridge Park Company
Stamford, CT 06905
Peter C. Fulweiler Vice President, Bank of
Bank of Delaware Delaware
222 Delaware Avenue
Wilmington, DE 19899
Leonard Tow Chairman of the Board, Chief
Citizens Utilities Company Executive Officer and Chief
3 High Ridge Park Financial Officer
Stamford, CT 06905 Citizens Utilities Company
<PAGE>
NAMES AND ADDRESSES
------------------- POSITIONS
EXECUTIVE OFFICERS ---------
Daryl A. Ferguson President and Chief Operating
Citizens Utilities Company Officer
3 High Ridge Park
Stamford, CT 06905
Robert J. DeSantis Vice President, Treasurer,
Citizens Utilities Company Chief Financial Officer and
3 High Ridge Park Assistant Secretary
Stamford, CT 06905
Edward O. Kipperman Vice President-Tax
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
L. Russell Mitten, II Vice President, General
Citizens Utilities Company Counsel and Assistant
3 High Ridge Park Secretary
Stamford, CT 06905
Livingston E. Ross Vice President and Controller
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Charles J. Weiss Secretary and Assistant Vice
Citizens Utilities Company President
3 High Ridge Park
Stamford, CT 06905
Laura L. DiPreta Assistant Vice President and
Citizens Utilities Company Assistant Controller
3 High Ridge Park
Stamford, CT 06905
Ronald E. Walsh Assistant Corporate Secretary
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
<PAGE>
INDEX OF EXHIBITS FILED HEREWITH
--------------------------------
Exhibit
Number Description
- --------- ----------------
Exhibit AA First Amendment to Stock Option Agreement, dated
October 18, 1996, between the Issuer and CUCC
Exhibit BB First Amendment to Warrant, dated October 18, 1996,
between the Issuer and CUCC
Exhibit CC Third Stock Option Agreement, dated October 18,
1996, between the Issuer and CUCC
<PAGE>
EXHIBIT AA
FIRST AMENDMENT TO STOCK OPTION AGREEMENT
-----------------------------------------
THIS FIRST AMENDMENT TO STOCK OPTION AGREEMENT ("First
Amendment") is made and entered into effective as of October 18,
1996, by and between CU CapitalCorp., a Delaware corporation
("CUCC"), and Hungarian Telephone and Cable Corp., a Delaware
corporation (the "Company").
W I T N E S S E T H
WHEREAS, CUCC and the Company are parties to that certain
Stock Option Agreement dated as of May 31, 1995 (the "Original
Agreement");
WHEREAS, requisite Stockholder Approval was obtained on
September 12, 1996, and has not been rescinded, and no further
action by the stockholders of the Company is required in connection
with the Original Agreement or this First Amendment;
WHEREAS, CUCC or an affiliate thereof has furnished or has
agreed to furnish additional financial support to the Company
and/or its subsidiaries, including through the issuance to Citicorp
North America, Inc. ("CNA") of a letter of comfort and a letter
indemnifying CNA against all events of political, currency exchange
and other cross-border risks in connection with a $75 million
Secured Term Loan Credit Facility for the Company from CNA, the
issuance to Postabank Rt. of a letter of support in connection with
a $170 million Credit Facility for the Hungarian subsidiaries of
the Company from Postabank, and the provision of assurance to CNA
of the repayment by the Company of any and all amounts owed to CNA
by October 15, 1996 in connection with the CNA Credit Facility;
WHEREAS, CUCC or an affiliate thereof has negotiated the
extension of a $750,000 contingent commitment fee payable by the
Company to CNA in connection with the CNA Credit Facility and a
$2,000,000 interest credit payable to a subsidiary of the Company
by Postabank in connection with the Postabank Credit Facility;
WHEREAS, CUCC has insisted, as compensation for providing such
additional financial support to the Company and its subsidiaries
and for obtaining such financial benefits for the Company and its
subsidiaries, that the Company (i) extend the exercise periods of
the Warrant, the Two-Year Option, the Three-Year Option and the
Four-Year Option to coincide with the exercise period of the Five-
Year Option, (ii) grant to CUCC the option to purchase an
additional 875,850 shares of Common Stock at an exercise price of
$12.75, exercisable at any time through September 12, 2000, and
(iii) pay to CUCC $750,000;
WHEREAS, the Company believes that the receipt of such
additional financial support from CUCC and the receipt of the
financial benefits arising from CUCC's negotiations with CNA and
Postabank was and would be in the best interests of all
stockholders of the Company and, therefore, in order to compensate
<PAGE>
CUCC for obtaining such financial benefits for the Company and its
subsidiaries and for providing such additional financial support in
connection with the CNA Credit Facility, and to induce CUCC to
proceed to provide such additional financial support in connection
with the Postabank Credit Facility, the Company is willing (i) to
extend the exercise periods of the Warrant, the Two-Year Option,
the Three-Year Option and the Four-Year Option to coincide with the
exercise period of the Five-Year Option, (ii) concurrently with the
execution of this First Amendment, to enter into a Third Stock
Option Agreement with CUCC granting to CUCC the option to purchase
875,850 additional shares of Common Stock (the "Third Stock Option
Agreement"), and (iii) to pay CUCC $750,000; and
WHEREAS, the parties now desire to amend the Original
Agreement through execution of this First Amendment.
NOW, THEREFORE, in consideration of the premises hereof, the
parties hereby agree as follows:
1. The second and third sentences of Sections 1(a), (b) and
(c) of the Original Agreement are each hereby amended to provide
for a five-year exercise period for the Two-Year Option, the Three-
Year Option and the Four-Year Option, such that in each case the
exercise period of such Stock Options would be "from the date of
Stockholder Approval through five (5) years after the date of
Stockholder Approval," and to provide for exercise of any or all of
the Two-Year Option, the Three-Year Option and the Four-Year Option
by written notice to the Company "at any time and from time to time
during such five-year exercise period."
2. Clause (B) of Section 3(b)(iv) of the Original Agreement
is hereby amended to read in its entirety as follows:
"(B) shares of Common Stock issued upon any exercise of any
option or warrant to purchase shares of Common Stock granted
to CUCC or any affiliate thereof."
3. The Company hereby confirms that the condition to
exercisability of the Stock Options set forth in Section 1(f) of
the Original Agreement has been satisfied and, therefore, that all
of the Stock Options are exercisable in accordance with the terms
of the Original Agreement, as amended by this First Amendment.
4. The Company hereby agrees that shares of Common Stock and
options to acquire shares of Common Stock that are issued or
granted to CUCC or any affiliate thereof as compensation for
providing financial support or other services to the Company,
including without limitation the option granted to CUCC pursuant to
the Third Stock Option Agreement, together with any additional
stock options granted to CUCC or shares of Common Stock acquired by
CUCC pursuant to Section 4.3(d) of the Master Agreement to the
extent relating to such compensation shares and stock options,
shall be excluded and not considered when calculating the number of
Three-Year Option Shares, Four-Year Option Shares and Five-Year
Option Shares in accordance with the Original Agreement.
2
<PAGE>
5. All other provisions of the Original Agreement shall
remain in full force and effect, except as expressly amended
herein.
6. Any capitalized term used in this First Amendment that is
not otherwise defined herein shall have the same meaning given to
it in the Original Agreement.
7. This First Amendment shall in all respects be governed by
and construed in accordance with the internal laws of the State of
Delaware (except that no effect shall be given to any conflicts of
law principles of the State of Delaware that would require the
application of the laws of any other jurisdiction). In accordance
with Title 6, Section 2708 of the Delaware Code Annotated, the
parties agree to the jurisdiction of the courts of Delaware and to
be served with legal process from any of such courts.
8. This First Amendment may be executed in counterparts,
each of which shall be an original, but such counterparts shall
together constitute but one and the same document.
3
<PAGE>
IN WITNESS WHEREOF, CUCC and the Company have caused this
First Amendment to Stock Option Agreement to be duly executed by
their authorized representatives, all as of the day and year first
written above.
ATTEST: HUNGARIAN TELEPHONE AND CABLE CORP.
/s/ Richard P. Halka By: /s/ James G. Morrison
- -------------------- ----------------------------
Richard P. Halka James G. Morrison
Controller Chief Executive Officer
CU CAPITALCORP.
By: /s/ Charles J. Weiss
---------------------------
Charles J. Weiss
Authorized Signatory
4
<PAGE>
EXHIBIT BB
FIRST AMENDMENT TO WARRANT
--------------------------
THIS FIRST AMENDMENT TO WARRANT ("First Amendment") is made
and entered into effective as of October 18, 1996, by and between
CU CapitalCorp., a Delaware corporation ("CUCC"), and Hungarian
Telephone and Cable Corp., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, the Company issued and delivered to CUCC that certain
Warrant to Purchase Shares of Common Stock of the Company, dated
May 31, 1995 (the "Warrant");
WHEREAS, CUCC or an affiliate thereof has furnished or has
agreed to furnish additional financial support to the Company
and/or its subsidiaries, including through the issuance to Citicorp
North America, Inc. ("CNA") of a letter of comfort and a letter
indemnifying CNA against all events of political, currency exchange
and other cross-border risks in connection with a $75 million
Secured Term Loan Credit Facility for the Company from CNA, the
issuance to Postabank Rt. of a letter of support in connection with
a $170 million Credit Facility for the Hungarian subsidiaries of
the Company from Postabank, and the provision of assurance to CNA
of the repayment by the Company of any and all amounts owed to CNA
by October 15, 1996 in connection with the CNA Credit Facility;
WHEREAS, CUCC or an affiliate thereof has negotiated the
extension of a $750,000 contingent commitment fee payable by the
Company to CNA in connection with the CNA Credit Facility and a
$2,000,000 interest credit payable to a subsidiary of the Company
by Postabank in connection with the Postabank Credit Facility;
WHEREAS, CUCC has insisted, as compensation for providing such
additional financial support to the Company and its subsidiaries
and for obtaining such financial benefits for the Company and its
subsidiaries, that the Company (i) extend the exercise periods of
the Warrant and certain of the Stock Options through September 12,
2000, (ii) grant to CUCC the option to purchase an additional
875,850 shares of Common Stock at an exercise price of $12.75,
exercisable at any time through September 12, 2000, and (iii) pay
to CUCC $750,000;
WHEREAS, the Company believes that the receipt of such
additional financial support from CUCC and the receipt of the
financial benefits arising from CUCC's negotiations with CNA and
Postabank was and would be in the best interests of all
stockholders of the Company and, therefore, in order to compensate
CUCC for obtaining such financial benefits for the Company and its
subsidiaries and for providing such additional financial support in
connection with the CNA Credit Facility, and to induce CUCC to
proceed to provide such additional financial support in connection
with the Postabank Credit Facility, the Company is willing (i) to
extend the exercise periods of the Warrant and certain of the Stock
Options through September 12, 2000, (ii) concurrently with the
<PAGE>
execution of this First Amendment, to enter into a Third Stock
Option Agreement with CUCC granting to CUCC the option to purchase
875,850 additional shares of Common Stock (the "Third Stock Option
Agreement"), and (iii) to pay CUCC $750,000; and
WHEREAS, the parties now desire to amend the Warrant through
execution of this First Amendment.
NOW, THEREFORE, in consideration of the premises hereof, the
parties hereby agree as follows:
1. The first sentence of the Warrant is hereby amended to
provide for an exercise period for the Warrant that expires at
"5:00 p.m. on September 12, 2000" and that grants the Purchaser
"the right to purchase from the Company at any time before 5:00
p.m. on September 12, 2000."
2. Clause (B) of Paragraph (3)(b)(iv) of the Warrant is
hereby amended to read in its entirety as follows:
"(B) shares of Common Stock issued upon any exercise of any
option or warrant to purchase shares of Common Stock granted
to CUCC or any affiliate thereof."
3. All other provisions of the Warrant shall remain in full
force and effect, except as expressly amended herein.
4. Any capitalized term used in this First Amendment that is
not otherwise defined herein shall have the same meaning given to
it in the Warrant.
5. This First Amendment shall in all respects be governed by
and construed in accordance with the internal laws of the State of
Delaware (except that no effect shall be given to any conflicts of
law principles of the State of Delaware that would require the
application of the laws of any other jurisdiction). In accordance
with Title 6, Section 2708 of the Delaware Code Annotated, the
parties agree to the jurisdiction of the courts of Delaware and to
be served with legal process from any of such courts.
6. This First Amendment may be executed in counterparts,
each of which shall be an original, but such counterparts shall
together constitute but one and the same document.
2
<PAGE>
IN WITNESS WHEREOF, CUCC and the Company have caused this
First Amendment to Warrant to be duly executed by their authorized
representatives, all as of the day and year first written above.
ATTEST: HUNGARIAN TELEPHONE AND CABLE CORP.
/s/ Richard P. Halka By: /s/ James G. Morrison
- --------------------- -----------------------------
Richard P. Halka James G. Morrison
Controller Chief Executive Officer
CU CAPITALCORP.
By: /s/ Charles J. Weiss
----------------------------
Charles J. Weiss
Authorized Signatory
3
<PAGE>
EXHIBIT CC
THIRD STOCK OPTION AGREEMENT
----------------------------
THIS THIRD STOCK OPTION AGREEMENT (this "Agreement"), made as
of October 18, 1996, by and between Hungarian Telephone and Cable
Corp., a Delaware corporation (the "Company"), and CU CapitalCorp.,
a Delaware corporation ("CUCC").
W I T N E S S E T H
WHEREAS, CUCC or an affiliate thereof has furnished or has
agreed to furnish additional financial support to the Company
and/or its subsidiaries, including through the issuance to Citicorp
North America, Inc. ("CNA") of a letter of comfort and a letter
indemnifying CNA against all events of political, currency exchange
and other cross-border risks in connection with a $75 million
Secured Term Loan Credit Facility for the Company from CNA, the
issuance to Postabank Rt. of a letter of support in connection with
a $170 million Credit Facility for the Hungarian subsidiaries of
the Company from Postabank, and the provision of assurance to CNA
of the repayment by the Company of any and all amounts owed to CNA
by October 15, 1996 in connection with the CNA Credit Facility;
WHEREAS, CUCC or an affiliate thereof has negotiated the
extension of a $750,000 contingent commitment fee payable by the
Company to CNA in connection with the CNA Credit Facility and a
$2,000,000 interest credit payable to a subsidiary of the Company
by Postabank in connection with the Postabank Credit Facility;
WHEREAS, CUCC has insisted, as compensation for providing such
additional financial support to the Company and its subsidiaries
and for obtaining such financial benefits for the Company and its
subsidiaries, that the Company (i) extend the exercise periods of
the Warrant, the Two-Year Option, the Three-Year Option and the
Four-Year Option to coincide with the exercise period of the Five-
Year Option (as such terms are defined in the Stock Option
Agreement between the parties dated May 31, 1995, as amended (the
"First Stock Option Agreement")), (ii) grant to CUCC the option to
purchase an additional 875,850 shares of Common Stock at an
exercise price of $12.75, exercisable at any time through
September 12, 2000, and (iii) pay to CUCC $750,000;
WHEREAS, the Company believes that the receipt of such
additional financial support from CUCC and the receipt of the
financial benefits arising from CUCC's negotiations with CNA and
Postabank was and would be in the best interests of all
stockholders of the Company and, therefore, in order to compensate
CUCC for obtaining such financial benefits for the Company and its
subsidiaries and for providing such additional financial support in
connection with the CNA Credit Facility, and to induce CUCC to
proceed to provide such additional financial support in connection
with the Postabank Credit Facility, the Company is willing
(i) concurrently with the execution of this Agreement, to amend
each of the Warrant and the First Stock Option Agreement to extend
the exercise periods of the Warrant, the Two-Year Option, the
<PAGE>
Three-Year Option and the Four-Year Option to coincide with the
exercise period of the Five-Year Option, (ii) to enter into this
Agreement to grant to CUCC the option to purchase 875,850
additional shares of Common Stock, and (iii) to pay CUCC $750,000;
and
WHEREAS, the Company now desires to grant CUCC irrevocable
options to purchase authorized but unissued shares of Common Stock
of the Company, which stock options currently would amount to
875,850 shares of Common Stock, on the terms and conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the premises, and intending
to be legally bound hereby, the parties hereby agree as follows:
1. Grant of Additional Stock Options.
(a) The Company hereby grants to CUCC the irrevocable option
(the "Option") to purchase 875,850 shares of Common Stock (the
"Option Shares") at an initial purchase price of $12.75 per share
(subject to adjustment), payable either in cash or in exchange for
evidences of indebtedness of the Company to CUCC, directly or
through a subsidiary thereof, in an aggregate outstanding amount
equal to the aggregate purchase price for such portion or all of
the Option then being exercised. The Option may be exercised at
any time and from time to time from the date hereof through
September 12, 2000. Exercise of the Option may be in whole (at one
time or in multiple parts aggregating the whole) or in part and
shall be effectuated by delivering written notice of such exercise
to the Company at any time and from time to time during such
exercise period. Any and each such notice of exercise shall set
forth the number of Option Shares to be acquired, the closing date,
and the time and place of the closing.
(b) The Company hereby acknowledges and agrees with CUCC that
the Option Shares acquired by CUCC pursuant to exercise of the
Option are and shall be "Registrable Securities," as such term is
defined in that certain Registration Agreement dated as of May 31,
1995, by and between the Company and CUCC (the "Registration
Agreement"), and the terms and conditions of the Registration
Agreement shall apply to such Option Shares.
2. Closing Date. The closing date with respect to the
purchase of any of the Option Shares (the "Closing Date") shall be
not less than three nor more than ten days after the date any
notice of exercise with respect to the Option is given unless a
waiting period under the Hart-Scott-Rodino Antitrust Improvement
Act of 1976 (the "HSR Act"), if applicable, has not expired and/or
all necessary approvals, if any, applicable to such exercise of the
Option pursuant to such exercise notice have not been obtained, in
which case the Closing Date shall be not more than ten days after
the last to occur of such waiting period expiration or the
obtaining of the last such approval. In addition, in the event
that, after any notice of exercise with respect to the Option is
given, any preliminary or permanent injunction or other order by
2
<PAGE>
any court of competent jurisdiction prohibiting or otherwise
restraining such exercise of the Option is entered, the Closing
Date shall be extended until ten days after the date such order is
dissolved or otherwise ceases to be in effect. On the Closing
Date, the aggregate purchase price for the Option Shares that are
the subject of the exercise notice shall be delivered to the
Company and the Company shall issue and deliver one or more
certificates evidencing such Option Shares, and registered in such
manner as the holder of the Option shall direct.
3. Changes in the Option Shares; Anti-Dilution Provisions;
Purchase Price Reset.
(a) For all purposes of this Agreement, the Option Shares
shall mean the Option Shares as if presently outstanding and all
securities or other consideration issued or exchanged with respect
to the Option Shares on any recapitalization, reclassification,
merger, consolidation, share exchange, spin-off, partial or
complete liquidation, stock dividend, split-up or combination of
the securities of the Company or any other change in its capital
structure.
(b) Anti-Dilution Provisions. The respective purchase price
per Option Share from time to time in effect under this Agreement,
and the number and character of HTCC securities covered hereby,
shall be subject to adjustment from time to time in certain
instances hereinafter set forth. The term "Purchase Price" shall
mean the initial purchase price per share for the Option originally
set forth in this Agreement or any price resulting from adjustments
pursuant to the terms hereof. The number of Option Shares
purchasable upon the exercise of the Option and the Purchase Price
shall be subject to adjustment as follows:
(i) In case the Company shall at any time after the date
of execution of this Agreement (A) declare or pay a dividend
in shares of Common Stock or make a distribution in shares of
Common Stock to holders of Common Stock, (B) subdivide its
outstanding shares of Common Stock, (C) combine its
outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (D) issue any shares of its capital
stock in a reclassification of the Common Stock (including any
such reclassification in connection with a consolidation or
merger in which the Company is the continuing entity), the
number of Option Shares purchasable upon exercise of the
Option immediately prior thereto shall be adjusted so that the
holder of the Option shall be entitled to receive the kind and
number of Option Shares or other securities of the Company
which he would have owned or have been entitled to receive
after the happening of any of the events described above, had
the Option been exercised immediately prior to the happening
of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (i) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
3
<PAGE>
(ii) In case the Company shall issue rights, options or
warrants to all holders of its outstanding Common Stock
entitling them (for a period of within 45 days after the
record date mentioned below) to subscribe for or purchase
shares of Common Stock at a price per share which is lower at
the record date mentioned below than the Base Value per share
of Common Stock (as defined in paragraph (v) below), the
number of Option Shares then purchasable upon exercise of the
Option shall be determined by multiplying the number of Option
Shares then purchasable upon exercise of the Option by a
fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of shares which
the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at the Base Value per
share of Common Stock at such record date. Such adjustment
shall be made whenever such rights, options or warrants are
issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(iii) In case the Company shall distribute to all
holders of its shares of Common Stock evidences of its
indebtedness or assets (including cash dividends or other
distributions in an amount in excess of 25% of
consolidated earnings or earned surplus legally available
for payment of dividends at the time of the declaration
of any such dividend or distribution payable out of
consolidated earnings or earned surplus, but excluding
dividends or distributions payable in stock for which
adjustment is made pursuant to paragraph (i) above or in
the paragraph immediately following this paragraph) or
rights, options or warrants, or convertible or
exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock (excluding those
referred to in paragraph (ii) above), then in each case
the number of Option Shares thereafter purchasable upon
the exercise of the Option shall be determined by
multiplying the number of Option Shares theretofore
purchasable upon the exercise of the Option by a
fraction, of which the numerator shall be the then
current market price per share of Common Stock (as
defined in paragraph (v) below) on the last trading date
preceding the ex-dividend date with respect to such
distribution, and of which the denominator shall be such
market price per share of Common Stock less then fair
value (as reasonably determined by the Board of Directors
of the Company in good faith, whose determination shall
be conclusive) of the portion of the assets or evidences
of indebtedness so distributed or of such subscription
rights, options or warrants, or of such convertible or
4
<PAGE>
exchangeable securities applicable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the
date of distribution retroactive to the record date for
the determination of shareholders entitled to receive
such distribution.
In the event of a distribution by the Company to all
holders of its shares of Common Stock of stock of a subsidiary
or securities convertible into or exercisable for such stock,
then in lieu of an adjustment in the number of Option Shares
purchasable upon the exercise of the Option, the holder of the
Option, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company,
such subsidiary or both, as the Company shall reasonably
determine, the stock or other securities to which such holder
would have been entitled if such holder had exercised the
Option immediately prior thereto, all subject to further
adjustment as provided in this subsection (b); provided,
however, that no adjustment in respect of dividends or
interest on such stock or other securities shall be made
during the term of the Option or upon the exercise of the
Option other than an adjustment which would be required
pursuant to this Agreement.
(iv) In case the Company shall issue shares of Common
Stock or rights, options or warrants containing the right to
subscribe for or purchase shares of Common Stock or securities
convertible into Common Stock (including amendments and
modifications to the price, nature or number of any existing
rights, options or warrants containing the right to subscribe
for or purchase shares of Common Stock or securities
convertible into Common Stock other than due to reset, anti-
dilution or adjustment rights presently contained therein, and
excluding (A) shares, rights, options, warrants or convertible
securities issued in any of the transactions described in
paragraphs (i), (ii) or (iii) above, (B) shares of Common
Stock issued upon any exercise of any options or warrants to
purchase shares of Common Stock granted to CUCC or any
affiliate thereof or (C) securities issued in exchange for or
on exercise or conversion of any rights, options or warrants
described in this paragraph (iv)) for a price per share of
Common Stock, in the case of the issuance of Common Stock, or
for the price per share of Common Stock initially deliverable
upon conversion or exchange of such securities, less than the
Base Value per share of Common Stock (as defined in paragraph
(v) below) on the date the Company fixed the offering,
conversion or exchange price of such additional shares, the
number of Option Shares thereafter purchasable upon the
exercise of the Option shall be determined by multiplying the
number of Option Shares theretofore purchasable upon exercise
of the Option by a fraction, of which the numerator shall be
the number of shares of Common Stock so outstanding on such
date plus the aggregate number of shares of Common Stock so
issued or offered for subscription or purchase, and of which
5
<PAGE>
the denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares which the
aggregate offering price of the total number of shares of
Common Stock so issued or offered would purchase at the Base
Value per share of Common Stock at such record date. Such
adjustment shall be made whenever such shares, rights,
options, or warrants are issued or so amended or modified, and
shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such
event.
(v) For the purpose of any computation under paragraphs
(ii), (iii) and (iv) of this subsection (b), "Base Value per
share of Common Stock" at any date means the greater of (A)
the current market price per share of Common Stock on such
date (computed as described below) or (B) the Purchase Price
in effect on such date. The current market price per share of
Common Stock at any date shall be the average of the daily
closing prices for 20 consecutive trading days commencing 30
trading days before the date of such computation. The closing
price for each day shall be the last such reported sales price
regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices
regular way for such day, in each case on the principal
national securities exchange or in the NASDAQ/NMS to which the
shares of Common Stock are listed or admitted to trading or,
if not listed or admitted to trading, the average of the
closing bid and asked prices of the Common Stock quoted on
NASDAQ/NMS or any comparable system. In the absence of one or
more such quotations, the Company shall determine the current
market price on the basis of such quotations as it considers
reasonably appropriate.
(vi) No adjustment in the number of Option Shares
purchasable hereunder shall be required unless such adjustment
would result in an increase or decrease of at least one
percent of the Purchase Price; provided, however, that any
adjustments which by reason of this paragraph (vi) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall
be made to the nearest cent or to the nearest one-thousandth
of a share, as the case may be.
(vii) Whenever the number of Option Shares purchasable
upon the exercise of the Option is adjusted, as herein
provided, the Purchase Price payable upon exercise of each the
Option shall be adjusted by multiplying the appropriate
Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Option
Shares purchasable upon the exercise of the applicable the
Option immediately prior to such adjustment, and of which the
denominator shall be the number of such Option Shares
purchasable thereunder immediately thereafter.
6
<PAGE>
(viii) No adjustment in the number of Option Shares
purchasable upon the exercise of the Option need be made under
paragraphs (ii), (iii) or (iv) of this subsection (b) if the
Company issues or distributes to the holder of the Option the
shares, rights, options, warrants, or convertible or
exchangeable securities, or the evidences of indebtedness or
assets referred to in those paragraphs which the holder of the
Option would have been entitled to receive had the Option been
exercised prior to the happening of such event or the record
date with respect thereto. No adjustment in the number of
Option Shares purchasable upon the exercise of the Option need
be made for sales or issuances of Common Stock or rights,
options or warrants to purchase Common Stock pursuant to (A)
a Company plan for Company shareholders generally for
reinvestment of dividends, (B) rights, options or warrants, or
convertible or exchangeable securities or agreements to issue
rights, options or warrants or convertible or exchangeable
securities, outstanding on the date hereof and not
subsequently modified or amended in any manner that would
otherwise cause the number of Option Shares to be adjusted
hereunder, or (C) options for the purchase of Common Stock
granted by the Company from time to time pursuant to its
employee stock option plans approved by Company stockholders,
with such number of shares subject to adjustment as provided
in the plans.
(ix) For the purpose of this subsection (b), the term
"shares of Common Stock" shall mean (A) the class of stock
designated as the Common Stock of the Company at the date
hereof, or (B) any other class(es) of stock resulting from
successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the
event that at any time, as a result of an adjustment made
pursuant to paragraph (i) above, the holder hereof shall
become entitled to purchase any securities of the Company
other than shares of Common Stock, thereafter the number of
such other shares so purchasable upon exercise of the Option
and the Purchase Price of such shares shall be subject to
adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with
respect to the Option Shares contained in paragraphs (i)
through (viii), inclusive, above, and to the extent
appropriate the other provisions of this Agreement that are
applicable, with respect to the Option Shares, shall apply on
like terms to any such other securities.
(x) Upon the expiration of any rights, options, warrants
or conversion or exchange privileges, if any thereof shall not
have been exercised, the Purchase Price and the number of
shares of Common Stock purchasable upon the exercise of the
Option shall, upon such expiration, be readjusted and shall
thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (A) the only shares of
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Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange privileges and (B)
such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion or exchange
privileges whether or not exercised; provided, however, that
no such readjustment shall have the effect of increasing the
Purchase Price or decreasing the number of shares of Common
Stock purchasable upon the exercise of the Option by an amount
in excess of the amount of the adjustment initially made in
respect to the issuance, sale or grant of such rights,
options, warrants or conversion or exchange privilege.
(c) Rights Upon Certain Corporate Transactions. If,
prior to the expiration of the Option by exercise or by its terms,
the Company shall be recapitalized by reclassifying its outstanding
Common Stock into shares with a different par value or by changing
its outstanding Common Stock with par value to shares without par
value, or the Company or a successor corporation shall consolidate
or merge with or convey all or substantially all of its or of any
successor corporation's property and assets to any other
corporation or corporations, or the Company or a successor
corporation or corporations shall distribute Common Stock or other
assets pursuant to, without limitation, any spin-off, split-off, or
other distribution of assets, the holder of the Option shall
thereafter have the right to purchase, upon the basis and on the
terms and conditions and during the time specified in this
Agreement, in lieu of the Common Stock of the Company theretofore
purchasable upon the exercise of the Option, such shares,
securities or assets as may be issued or payable with respect to,
or in exchange for, the number of share of Common Stock of the
Company theretofore purchasable upon the exercise of the Option had
the Option been exercised immediately prior to such
recapitalization, consolidation, merger, conveyance or
distribution.
(d) Rights Upon Liquidation. If, at any time while the
Option shall remain unexpired and unexercised, the Company shall
dissolve, liquidate or wind up its affairs, the holder of the
Option may in connection with such event receive, upon exercise
hereof, in lieu of each share of Common Stock of the Company which
it would have been entitled to receive the same kind and amount of
any securities or assets as may be issuable, distributable or
payable upon any such dissolution, liquidation or winding up with
respect to each share of Common Stock of the Company.
(e) Notice of Changes. In the event (i) the Company
shall issue any shares of Common Stock, options or rights to
subscribe for shares of Common Stock, or any securities convertible
into or exchangeable for shares of Common Stock, or adjust or reset
the conversion price of any such options, rights or convertible
securities, or the nature or number thereof, other than pursuant to
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the terms thereof as in effect on the date of this Agreement, (ii)
the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend payable
otherwise than in cash or any other distribution in respect of the
Common Stock pursuant to, without limitation, any spin-off,
split-off, or distribution of the Company's assets, (iii) the
Company shall take a record of the holders of its Common Stock for
the purpose of entitling them to subscribe for or purchase any
shares of any class or to receive any other rights, (iv) of any
classification, reclassification or other reorganization or
recapitalization of the shares which the Company is authorized to
issue, consolidation or merger of the Company with or into another
corporation, or conveyance of all or substantially all of the
assets of the Company, or (v) of the voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, and in
such event, the Company shall mail to the holder of the Option a
notice, at least ten (10) days prior to the record date for, or if
no record date, then at least thirty (30) days prior to the date or
expected date on which such event is to take place, stating the
nature and relevant dates for such event, including the date or
expected date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to exchange their Common Stock
for securities or other property deliverable upon, and a
description of, such reclassification/reorganization,
consolidation, merger, conveyance, dissolution, liquidation or
winding up, as the case may be.
(f) Reduction of Purchase Price Below Par Value. As a
condition precedent to the taking of any action which would cause
an adjustment reducing the Purchase Price below then par value of
the shares of Common Stock issuable upon exercise hereof, the
Company will take such corporation action as may be necessary in
order that it may validly and legally issue fully paid and
nonassessable shares of such Common Stock at such adjusted Purchase
Price.
4. Representations and Warranties of the Company. The
Company represents to CUCC as follows:
(a) The Company has the full power and authority to
execute, deliver and carry out the terms and provisions of this
Agreement and to consummate the transactions contemplated here.
The execution, delivery and performance of this Agreement and the
granting of the Option have been approved by all requisite
corporate action on the part of the Company, and no further action
is necessary to authorize such acts.
(b) This Agreement has been duly and validly executed
and delivered by the Company, and constitutes a valid and binding
obligation of the Company, enforceable in accordance with its
terms;
(c) The authorized capital stock of the Company consists
of (i) 25,000,000 shares of Common Stock of which, as of the date
hereof, 4,171,626 are issued and outstanding and 4,742,540 shares
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are reserved for issuance upon the exercise of currently
outstanding rights, warrants and options to purchase shares of
Common Stock and the conversion of currently outstanding securities
convertible into shares of Common Stock other than the Option, and
(ii) 5,000,000 shares of Preferred Stock, none of which are
outstanding or reserved for issuance. There exist no liens,
claims, options, preemptive rights, proxies, voting agreements,
charges or encumbrances of whatever nature affecting the Option
Shares other than as provided in this Agreement;
(d) The execution and delivery of this Agreement and the
performance of this Agreement by the Company will not (i) require
the consent, waiver, approval, license or authorization of or any
filing with any person or governmental authority (other than
pursuant to the HSR Act), (ii) violate the certificate of
incorporation, by-laws, or other organizational documents of the
Company, (iii) with or without the giving of notice or the lapse of
time or both, conflict with or result in a breach of any terms or
provisions of, or constitute a default or give rise to a right of
acceleration under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Company
under any indenture, mortgage, agreement, note or other instrument
to which the Company is a party or by which its property is bound
or (iv) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental authority or court
having jurisdiction over Company or any of its property;
(e) Upon issuance by the Company of the Option Shares in
accordance herewith, such shares of Common Stock will be duly and
validly issued, fully paid and nonassessable and the holder of such
Option Shares will have good title to such Option Shares, free and
clear of all liens, claims, options, preemptive rights, proxies,
voting agreements, charges or encumbrances of whatever nature
affecting such Option Shares; and
(f) There exists no restriction on the Company's
issuance and delivery of the Option Shares, nor is the Company
required to obtain the approval of any person or governmental
authority (other than to the extent required under the HSR Act) to
effect the sale of the any of the Option Shares.
5. Covenants of the Company. The Company covenants with CUCC
that, during the term of this Agreement:
(a) The Company will cooperate with the holder of the
Option in obtaining any regulatory or governmental approvals
necessary in order to exercise the Option;
(b) The Company shall reserve and keep available from
its authorized but unissued shares of its Common Stock or other
capital stock as may be the subject of the Option such number of
shares thereof as are issuable upon exercise of the Option, and
shall not issue any such shares, or make any agreement, commitment
or arrangement to issue any such shares, or issue any option,
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warrant or other security exercisable for or convertible into any
such shares, other than the Option; and
(c) No fractional shares of Common Stock will be issued
in connection with any purchase hereunder but in lieu of such
fractional shares, the Company shall make a cash refund therefor
equal in amount to the product of the applicable fraction
multiplied by the Purchase Price then in effect and applicable to
the Option Shares being purchased.
6. Term. This Agreement shall be and remain in effect from
the date hereof until September 12, 2001.
7. Miscellaneous. Any shares of Common Stock purchased by
the holder of the Option pursuant to this Agreement will be
acquired for investment only and not with a view to any public
distribution thereof, and such person will not offer, sell or
otherwise dispose of such shares so acquired by it in violation of
the registration requirements of the Securities Act of 1933, as
amended, or any applicable state securities laws.
8. Notices. Any notice, request, instruction or other
document to be given hereunder by any party to the others shall be
in writing and shall be deemed to have been duly given on the next
business day after the same is sent, if delivered personally or
sent by telecopy or overnight delivery, or five calendar days after
the same is sent, if sent by registered or certified mail, return
receipt requested, postage prepaid, as set forth below, or to such
other persons or addresses as may be designated in writing in
accordance with the terms hereof by the party to receive such
notice.
(a) If to CUCC, to:
CU CapitalCorp.
c/o Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
Attn: General Counsel
with a required copy to:
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
Attn: Jeffry L. Hardin
(b) If to the Company, to:
Hungary Telephone and Cable Corp.
100 First Stamford Place
Stamford, CT 06902
Facsimile No.: 203/348-0128
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Attention: General Counsel
9. Specific Enforcement. The Company acknowledges that the
holder of the Option would be irrevocably damaged in the event that
any of the provisions of this Agreement were not performed by the
Company in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the holder of the Option
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and specifically to enforce this
Agreement and the terms and provisions thereof in addition to any
other remedy to which the holder of the Option may be entitled at
law or in equity.
10. Expenses. Except as otherwise provided herein, all fees
and expenses incurred by the Company, and all sales, transfer or
other similar taxes payable in connection with this Agreement
(including, but not limited to, any transfer taxes payable in
connection with the sale of the Option Shares), will be borne by
the Company, and all fees and expenses incurred by CUCC in
connection with this Agreement will be borne by CUCC.
11. Brokerage. CUCC and the Company each represents and
warrants to the other that neither it nor any of its affiliates has
entered into or will enter into any contract, agreement,
arrangement or understanding with any person or firm which will
result in the obligation of the other to pay any finder's fee,
brokerage commission or similar payment in connection with this
Agreement, the Option or the transaction contemplated hereby. CUCC
and the Company each agrees to indemnify and hold the other
harmless from and against any and all claims or liabilities for
finder's fees, brokerage commissions or similar payments incurred
by reason of any action taken by it or its affiliates.
12. Counterparts. This Agreement may be executed in one or
more counterparts, and each of such counterparts shall for all
purposes be deemed to be an original, but all such counterparts
together shall constitute but one instrument.
13. Assignment. No party hereto shall assign its rights and
obligations under this Agreement or any part thereof, nor shall any
party assign or delegate any of its rights or duties hereunder
without the prior written consent of the other party, and any
assignment made without such consent shall be void; provided, that
the rights and obligations of CUCC hereunder may be assigned to and
assumed by a subsidiary of CUCC. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns.
14. Governing Law; Forum; Consent to Jurisdiction. This
Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to the
principles of conflict of laws thereof. Each of the parties to
this Agreement hereby irrevocably and unconditionally (i) consent
to submit to the exclusive jurisdiction of the courts of the State
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of Delaware for any proceeding arising in connection with this
Agreement (and each such party agrees not to commence any such
proceeding, except in such courts), (ii) to the extent such party
is not a resident of the State of Delaware, agrees to appoint an
agent in the State of Delaware as such party's agent for acceptance
of legal process in any such proceeding against such party with the
same legal force and validity as if served upon such party
personally within the State of Delaware, and to notify promptly
each other party hereto of the name and address of such agent,
(iii) waives any objection to the laying of venue of any such
proceeding in the courts of the State of Delaware, and (iv) waives,
and agrees not to plead or to make, any claim that any such
proceeding brought in any court of the State of Delaware has been
brought in an improper or otherwise inconvenient forum.
15. Further Assurance. If the holder of the Option shall
exercise the Option in accordance with the terms of this Agreement,
from time to time and without additional consideration, then the
Company will execute and deliver, or cause to be executed and
delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as the holder of the
Option may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Third Stock Option Agreement on the date first written.
ATTEST: HUNGARIAN TELEPHONE AND CABLE CORP.
By:/s/ Richard P. Halka By:/s/ James G. Morrison
-------------------- ---------------------------
Richard P. Halka James G. Morrison
Controller Chief Executive Officer
CU CAPITALCORP.
By:/s/ Charles J. Weiss
--------------------------
Charles J. Weiss
Authorized Signatory
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