UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 8)*
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)
SEPTEMBER 30, 1998
(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. [ ]
Note: Schedules filed in paper format shall include a signed original and five
copies of the Schedule, including all exhibits. See Subsection: 240.13d-7(b)
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. 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*
Not Applicable (See Item 4)
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
7,625,126 Common Stock
8. Shared Voting Power
0 Common Stock
9. Sole Dispositive Power
7,625,126 Common Stock
10. Shared Dispositive Power
0 Common Stock
11. Aggregate Amount Beneficially Owned By Each
Reporting Person
7,625,126 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)
63.4% Common Stock
14. Type Of Reporting Person*
CO
<PAGE>
The 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; Amendment No. 6 to
Schedule 13D filed on April 16, 1996; and Amendment No. 7 to Schedule 13D filed
on October 24, 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
further amended as follows (as amended, this "Schedule 13D").
Item 3. Source and Amount of Funds or Other Consideration
The Reporting Person's response to Item 3 in this Schedule 13D is
hereby amended by deleting the previous response in its entirety and
substituting the following:
On May 31, 1995, CU CapitalCorp. ("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 to CUCC in connection with financial support
provided to the Issuer by CUCC, as previously described in the Reporting
Person,s Amendment No. 7 to Schedule 13D in response to Item 4.
Through a series of open-market purchases between July, 1997 and
November, 1997, the Reporting Person acquired 100,000 shares of Common Stock.
The Reporting Person used $1,175,987 of its working capital to fund the
purchases of such shares.
On September 30, 1998, pursuant to the Replacement and Termination
Agreement (see Exhibit B hereto), the Issuer issued and delivered to Citizens
International Management Services Company ("CIMS") 100,000 shares of Common
Stock. (see response to Item 4 below).
<PAGE>
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
$95,469,406 (see response to Item 4 below for a summary description of possible
purchases pursuant to such transactions), subject to adjustment pursuant to
customary anti-dilution protections.
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
- --------------------------------
The Reporting Person's response to Item 4 in this Schedule 13D is
hereby amended by adding the following information to its responses to
subsections (a), (c), (d), (e) and (g).
On September 30, 1998, CUCC, CIMS and the Issuer entered into a
Replacement and Termination Agreement (the "Replacement and Termination
Agreement") (see Exhibit B hereto), pursuant to which (i) CUCC and the Issuer
terminated the Master Agreement; (ii) CIMS and the Issuer terminated the
Management Services Agreement; (iii) the Issuer issued and delivered to CIMS
100,000 shares of Common Stock in final settlement and payment of accrued fees
and expenses due and payable to CIMS under the Management Services Agreement;
(iv) the Issuer issued and delivered to CIMS a promissory note, a copy of which
is attached to the Replacement and Termination Agreement filed herewith as
Exhibit B, in the principal amount of $8,374,498, evidencing the Issuer's
obligation to pay such amount of accrued fees and expenses due and payable to
CIMS under the Management Services Agreement; (v) in part as consideration for
CIMS' agreement to terminate the Management Services Agreement and in part as
consideration for certain consulting services which may be provided by CIMS to
the Issuer at the Issuer's request, the Issuer promised to pay to CIMS an
aggregate of $21 million, payable in equal quarterly installments from 2004
through and including 2010; and (vi) entered into certain replacement
agreements.
The Replacement and Termination Agreement provides that in connection
with any public or private issuance of shares of Common Stock (the "Issuance"),
and provided CUCC and its affiliates collectively hold at least 300,000 shares
of Common Stock as of the date of the Issuance, the Issuer shall grant CUCC the
right for a thirty day period following any such Issuance to purchase such
number of shares of Common Stock sufficient to maintain CUCC's then existing
percentage ownership interest of Common Stock on a fully diluted basis, with
such percentage ownership interest to be calculated immediately prior to the
Issuance and with the number of shares subject to such purchase right to be
calculated after giving effect to the Issuance.
<PAGE>
The Replacement and Termination Agreement also provides that for so
long as CUCC and its affiliates collectively hold at least 300,000 shares of
Common Stock, the Issuer will cause the Board of Directors to be comprised of at
least six members and will not create an executive committee of such Board or
permit such Board to be divided into classes having staggered terms. The
Replacement and Termination Agreement also provides that for so long as CUCC and
its affiliates collectively hold at least 300,000 shares of Common Stock, the
Issuer shall take such actions as are necessary to maintain on the Board one
person designated by CUCC.
Contemporaneously with the execution of the Replacement and Termination
Agreement, CUCC and the Issuer entered into an Amended, Restated and
Consolidated Stock Option Agreement, dated as of September 30, 1998 (the
Amended and Restated Stock Option Agreement") (see Exhibit C hereto), pursuant
to which the Issuer (i) granted to CUCC the irrevocable option to purchase an
additional 2,110,896 shares of Common Stock for an initial purchase price of
$13.00 per share (subject to adjustment pursuant to customary anti-dilution
protections), (ii) amended, restated and consolidated therein and replaced in
their entirety the Warrant, as amended by the First Amendment to the Warrant,
the Stock Option Agreement, as amended by the First Amendment to Stock Option
Agreement, the Second Stock Option Agreement and the Third Stock Option
Agreement (collectively, the "Existing Option Agreements"), and (iii)
acknowledged and agreed with CUCC that the Amended and Restated Stock Option
Agreement shall evidence the existing irrevocable options under the Existing
Option Agreements to purchase the number of shares of Common Stock set forth
below, at the initial purchase price per share set forth below:
(a) Option to purchase 299,219 shares of Common Stock at
$13.00 per share (representing shares previously purchasable pursuant to the
Warrant, as amended by the First Amendment to the Warrant).
(b) Option to purchase 101,550 shares of Common Stock at
$13.00 per share (representing shares previously purchasable pursuant to the
Stock Option Agreement, as amended by the First Amendment to Stock Option
Agreement).
(c) Option to purchase 869,516 shares of Common Stock at
$15.00 per share (representing shares previously purchasable pursuant to the
Stock Option Agreement, as amended by the First Amendment to Stock Option
Agreement).
(d) Option to purchase 869,516 shares of Common Stock at
$16.50 per share (representing shares previously purchasable pursuant to the
Stock Option Agreement, as amended by the First Amendment to Stock Option
Agreement).
<PAGE>
(e) Option to purchase 869,516 shares of Common Stock at
$18.00 per share (representing shares previously purchasable pursuant to the
Stock Option Agreement, as amended by the First Amendment to Stock Option
Agreement).
(f) Option to purchase 626,155 shares of Common Stock at
$13.75 per share (representing shares previously purchasable pursuant to the
Second Stock Option Agreement).
(g) Option to purchase 875,850 shares of Common Stock at
$12.75 per share (representing shares previously purchasable pursuant to the
Third Stock Option Agreement).
The number of shares and price per share for each of the above options
are subject to adjustment pursuant to customary anti-dilution protections.
The descriptions and summaries of the agreements in this Item 4 above
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).
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:
<PAGE>
(a) As a result of (i) the purchase of 300,000 shares of Common Stock
made on May 31, 1995; (ii) the issuance by the Issuer to CUCC of 2,908 shares of
Common Stock on October 3, 1995 in lieu of the payment of cash to satisfy
certain interest obligations on the Loan; (iii) the issuance by the Issuer to
CUCC of 250,000 shares of Common Stock on October 30, 1995 pursuant to the
Second Agreement to Amend and Restate; (iv) the issuance by the Issuer to CUCC
of 250,000 shares of Common Stock on February 26, 1996 pursuant to the Third
Agreement to Amend and Restate; (v) the purchase of 100,000 shares of Common
Stock through open-market transactions made between July, 1997 and November,
1997; (vi) the issuance by the Issuer to CIMS of 100,000 shares of Common Stock
on September 30, 1998 pursuant to the Replacement and Termination Agreement; and
(vii) the issuance by the Issuer to CUCC of options to purchase 6,622,218 shares
of Common Stock (including 4,511,322 options previously granted pursuant to the
Warrant, the Stock Option Agreement, the Second Stock Option Agreement and the
Third Stock Option Agreement) pursuant to the Amended and Restated Stock Option
Agreement, the Reporting Person may be deemed to have beneficial ownership of
7,625,126 shares of Common Stock, of which 6,622,218 shares are subject to
purchase pursuant to presently exercisable options beneficially held by the
Reporting Person. Accordingly, the Reporting Person beneficially owns 63.4% of
all Common Stock presently reported by the Issuer to be outstanding, together
with shares of Common Stock that CUCC would have the right to purchase pursuant
to the Amended and Restated Stock Option Agreement.
(b) Common Stock
(i) Sole power to vote or direct the vote of
7,625,126 shares of Common Stock.
(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 7,625,126 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
- -----------------------------------------------------------------
The Reporting Person's response to Item 6 in this Schedule 13D is
hereby amended by deleting the previous response in its entirety and
substituting the following:
<PAGE>
Except as otherwise described in the response to Item 4, as amended
hereby, 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 B and C attached hereto and the Registration
Agreement attached as Exhibit G to the Reporting Person's Amendment No. 1 to
Schedule 13D filed June 6, 1995, which are incorporated herein by reference.
Item 7. Materials to be Filed as Exhibits
- -------------------------------------------
Exhibit A Power of Attorney, dated September 26, 1995.(1)
Exhibit B B Replacement and Termination Agreement,
dated September 30, 1998, among the Issuer,
CUCC and CIMS (which includes the form of
the Promissory Note as Exhibit A
thereto)(filed herewith)
Exhibit C Amended, Restated and Consolidated Stock
Option Agreement, dated September 30, 1998,
between the Issuer and CUCC (filed herewith)
- --------------------------
(1) Previously filed with the Reporting Person's Amendment No. 2 to
Schedule 13D filed September 28, 1995.
<PAGE>
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 9, 1998 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 (retired)
Building #14
60 Connolly Parkway
Hamden, CT 06514
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
Adesso, Inc. Adesso, Inc.
5110 E. Goldleaf Circle, Ste. 50 (computer hardware manufacturing)
Los Angeles, CA 90056
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
John L. Schroeder Director
Citizens Utilities Company Dean Witter Funds
3 High Ridge Park (investment services)
Stamford, CT 06905
Robert D. Siff Consultant
Citizens Utilities Company Regional Banks
3 High Ridge Park (banking services)
Stamford, CT 06905
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
Citizens Utilities Company 31 Corporation
3 High Ridge Park (investment services)
Stamford, CT 06905
Edwin Tornberg President and Director
Edwin Tornberg & Co., Inc. Edwin Tornberg & Co., Inc.
7251 15th Place, N.W. (management and brokerage
Washington, D.C. 20012 services in the radio industry)
<PAGE>
Claire L. 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 and
Citizens Utilities Company Chief Executive Officer
3 High Ridge Park Citizens Utilities Company
Stamford, CT 06905
NAMES AND ADDRESSES POSITIONS
------------------- ---------
EXECUTIVE OFFICERS
Leonard Tow Chairman of the Board and
Citizens Utilities Company Chief Executive Officer
3 High Ridge Park
Stamford, CT 06905
Daryl A. Ferguson President and Chief Operating Officer
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Robert J. DeSantis Vice President, Chief Financial Officer
Citizens Utilities Company and Treasurer
3 High Ridge Park
Stamford, CT 06905
J. Michael Love Vice President
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
L. Russell Mitten II Vice President and General Counsel
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
David B. Sharkey
Citizens Utilities Company President and Chief Operating Officer,
3 High Ridge Park Electric Lightwave, Inc.
Stamford, CT 06905
Livingston E. Ross Vice President and Controller
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
O. Lee Jobe Vice President
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Donald P. Weinstein Vice President
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
<PAGE>
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, Chief Financial Officer
Citizens Utilities Company and Treasurer
3 High Ridge Park Citizens Utilities Company
Stamford, CT 06905
Daryl A. Ferguson President and Chief Operating Officer,
Citizens Utilities Company Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Peter C. Fulweiler Vice President, PNC Bank, Delaware
PNC Bank, Delaware
222 Delaware Avenue
Wilmington, DE 19899
Leonard Tow Chairman of the Board and
Citizens Utilities Company Chief Executive Officer
3 High Ridge Park Citizens Utilities Company
Stamford, CT 06905
NAMES AND ADDRESSES POSITIONS
------------------- ---------
EXECUTIVE OFFICERS
L. Russell Mitten, II Vice President,
Citizens Utilities Company General Counsel and Assistant Secretary
3 High Ridge Park
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 President
Citizens Utilities Company
3 High Ridge Park
Stamford, CT 06905
Daryl A. Ferguson President and Chief Operating Officer
Citizens Utilities Company
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
<PAGE>
Exhibit B
REPLACEMENT AND TERMINATION AGREEMENT
THIS REPLACEMENT AND TERMINATION AGREEMENT is dated as of September 30,
1998, by and among Hungarian Telephone and Cable Corp., a Delaware corporation
("HTCC"), Citizens International Management Services Company, a Delaware
corporation ("CIMS"), and CU CapitalCorp., a Delaware corporation ("CUCC").
W I T N E S S E T H :
WHEREAS, HTCC and CUCC are parties to that certain Master
Agreement dated as of May 31, 1995 (the "Master Agreement");
WHEREAS, HTCC and CIMS are parties to that certain Management Services
Agreement dated as of May 31, 1995, as amended by the First Amendment to
Management Services Agreement dated as of September 28, 1995 and the Second
Amendment to Management Services Agreement dated as of February 26, 1996 (as
amended, the "Management Services Agreement");
WHEREAS, HTCC and CUCC desire to terminate the Master Agreement and
enter into certain replacement agreements as set forth herein; and
WHEREAS, HTCC and CIMS desire to terminate the Management Services
Agreement and enter into certain replacement agreements as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual promises,
representations and warranties herein contained, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
TERMINATION OF MANAGEMENT SERVICES AGREEMENT
1.1. Termination. For the consideration described in Section 1.2 below,
CIMS hereby agrees to terminate, and by their execution hereof CIMS and HTCC
hereby terminate, the Management Services Agreement, effective as of the date
hereof.
1.2. Consideration.
(a) Delivery of Common Stock. Contemporaneously with the
execution hereof, HTCC has issued and delivered to CIMS 100,000 shares (the
"Shares") of common stock, par value $.001 per share ("Common Stock"), of HTCC
in final settlement and payment of $1,200,000 of accrued fees and expenses due
and payable to CIMS under the Management Services Agreement.
<PAGE>
(b) Delivery of Promissory Note. Contemporaneously with the
execution hereof, HTCC has issued and delivered to CIMS a promissory note in the
form attached hereto as Exhibit A in the principal amount of $8,374,498 (the
"Note"), evidencing HTCC's obligation to pay such amount of accrued fees and
expenses due and payable to CIMS under the Management Services Agreement.
(c) Additional Payments to CIMS; Additional Consulting
Services. In part as consideration for CIMS' agreement to terminate the
Management Services Agreement and in part as consideration for the consulting
services described below in this Section 1.2(c), HTCC promises to pay to CIMS
the aggregate amount of Twenty-One Million Dollars ($21,000,000), payable in
twenty-eight (28) quarterly installments of $750,000 each on January 1, April 1,
July 1 and October 1 of each year from 2004 through and including 2010, with the
first installment due and payable on January 1, 2004 (the "Additional
Payments"). For each calendar year in which HTCC is required to make and is
making the Additional Payments, CIMS, at the written request of HTCC, will
provide HTCC up to three hundred (300) hours of consulting services during such
calendar year. Such consulting services may relate only to strategic,
operational or business planning and advice and counsel regarding financing and
budgeting. HTCC shall reimburse CIMS for reasonable travel and incidental
out-of-pocket expenses incurred by CIMS or its employees in providing any
consulting services that may be requested by HTCC.
1.3 Release and Waiver. HTCC and CIMS each hereby releases, waives and
absolutely discharges, without reservation of any nature, type or kind, the
other and its officers, directors, servants, agents, attorneys, employees,
consultants, successors in interest, affiliates and related companies, past,
present and future, from any and all claims, actions, causes of action, demands,
suits, debts, accounts, controversies, damages, costs (including attorneys'
fees), losses, expenses, obligations, agreements, promises, and all liabilities
whatsoever, in each case of every nature, type or kind whatsoever, whether
matured or unmatured, contingent or absolute, known or unknown, suspected or
unsuspected, and whenever arising or accruing, under the Management Services
Agreement.
ARTICLE II
TERMINATION OF THE MASTER AGREEMENT
2.1 Termination. HTCC and CUCC hereby agree that the Master Agreement
shall be terminated, and by their execution hereof HTCC and CUCC hereby
terminate the Master Agreement, effective as of the date hereof.
<PAGE>
2.2 Release and Waiver. HTCC and CUCC each hereby releases, waives and
absolutely discharges, without reservation of any nature, type or kind, the
other and its officers, directors, servants, agents, attorneys, employees,
consultants, successors in interest, affiliates and related companies, past,
present and future, from any and all claims, actions, causes of action, demands,
suits, debts, accounts, controversies, damages, costs (including attorneys'
fees), losses, expenses, obligations, agreements, promises, and all liabilities
whatsoever, in each case of every nature, type or kind whatsoever, whether
matured or unmatured, contingent or absolute, known or unknown, suspected or
unsuspected, and whenever arising or accruing, under the Master Agreement.
2
ARTICLE III
AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT
Contemporaneously with the execution hereof, HTCC and CUCC have duly
executed and delivered to each other the Amended, Restated and Consolidated
Stock Option Agreement in the form attached hereto as Exhibit B (the "Amended
and Restated Option Agreement").
ARTICLE IV
CERTAIN ADDITIONAL COVENANTS OF HTCC
For so long as CUCC and its affiliates collectively hold at least
300,000 shares of Common Stock, HTCC covenants to CUCC as follows:
4.1 HTCC's Board Composition. CUCC and HTCC hereby acknowledge that one
person nominated by CUCC currently serves as CUCC's designee to the HTCC Board
of Directors. CUCC's designee, or his successor(s), shall be entitled to be
re-nominated for re-election to the HTCC Board of Directors for so long as CUCC
and its affiliates collectively hold at least 300,000 shares of Common Stock.
HTCC also agrees, unless CUCC otherwise consents in writing, (a) to take all
actions as are necessary to cause the Board of Directors of HTCC to be comprised
of at least six (6) members for so long as CUCC has the right to designate a
person to serve on the HTCC Board of Directors, (b) not to create an executive
committee of such Board, and (c) not to permit such Board to be divided into
classes having staggered terms.
4.2 Preemptive Rights. In connection with any public or private
issuance of shares of Common Stock (an "Issuance") and provided CUCC continues
to own at least 300,000 shares of HTCC Common Stock as of the date of the
Issuance, HTCC shall grant CUCC the right for a thirty (30) day period following
any such Issuance to purchase such number of shares of HTCC Common Stock
sufficient to maintain CUCC's then existing percentage ownership interest of
Common Stock on a fully diluted basis, with such percentage ownership interest
to be calculated immediately prior to the Issuance and with the number of shares
subject to such purchase right to be calculated after giving effect to the
Issuance.
For purposes of this Section 4.2, references to CUCC's then existing
percentage ownership interest of Common Stock on a fully diluted basis shall
include shares of Common Stock issuable, without regard to the exercise or
purchase price therefor being higher, lower or the same as then market prices,
(a) to CUCC or any of its affiliates upon exercise of the Options (as defined in
the Amended and Restated Option Agreement) to the extent then exercisable and
(b) to any other person
3
<PAGE>
upon exercise of options and warrants or other securities convertible into, or
exchangeable or exercisable for, shares of Common Stock or other securities of
HTCC outstanding on the date hereof or hereinafter issued or granted.
The above rights shall exist with respect to shares of Common Stock
originally authorized, shares of Common Stock hereafter authorized, or treasury
shares, but shall not exist with respect to shares of Common Stock issued to
Tele Danmark A/S ("Tele Danmark") upon exercise of its preemptive rights with
respect to the Issuance, if and to the extent that Tele Danmark shall have
irrevocably waived its preemptive rights with respect to shares of Common Stock
issued in connection with the exercise by CUCC and its affiliates of their
preemptive rights under this Section 4.2. Provided that Tele Danmark irrevocably
waives its preemptive rights in connection with the following Issuances, the
above rights also shall not exist with respect to the following Issuances:
(i) Shares of Common Stock issued on exercise of the
Options (as defined in the Amended and Restated Option Agreement);
(ii) Options issued by HTCC pursuant to its Employee Stock
Option Plan and its Director Stock Option Plan, and shares of Common Stock
issued in connection with the exercise of such options, and the other options or
warrants outstanding on the date of this Agreement and listed on Schedule 4.2
hereto;
(iii) Shares of Common Stock offered to CUCC pursuant to the
first paragraph of this Section 4.2 which are not purchased by CUCC; and
(iv) Shares of Common Stock issued to effect a duly authorized
(x) merger or consolidation, (y) acquisition of the shares of another
corporation, or (z) plan of reorganization; provided that the HTCC Board of
Directors that duly authorized and approved such issuance was constituted as
required by Section 4.1.
Each holder of Common Stock, Options (as defined in the Amended and
Restated Option Agreement) or other securities convertible into, or exchangeable
or exercisable for, shares of Common Stock that is an affiliate of CUCC shall
have the rights set forth in this Section 4.2 as if CUCC held the shares of
Common Stock or the shares of Common Stock then issuable on conversion, exchange
or exercise of the Options (as defined in the Amended and Restated Option
Agreement) and any other securities convertible into, or exchangeable or
exercisable into, shares of Common Stock then held by such holder.
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CUCC must exercise such right within 30 days of such Issuance and must
pay the purchase price for such shares in cash (U.S. Dollars) concurrently with
the exercise of such right; provided that any individual issuance of shares of
Common Stock by HTCC of less than 50,000 shares (a "50,000 Issuance") shall be
aggregated and CUCC's preemptive rights as to such Issuance(s) shall become
effective at the earlier of (x) the date of any aggregate issuance by HTCC of
shares of Common Stock equal to or greater than a 50,000 Issuance (the
"Aggregate Date") or (y) the day that is 30 calendar days prior to the record
date for any meeting of shareholders of HTCC (the "Pre-Record Date"). On such
Aggregate Date or Pre-Record Date, as the case may be, CUCC shall have 30 days
from such date to maintain its preemptive right to purchase such number of
shares at such prices as it would have been entitled to purchase on the date of
such Issuance(s) as set forth in this Section 4.2. HTCC shall promptly notify
CUCC upon the occurrence of the Aggregate Date or Pre-Record Date, as the case
may be, and the amount of shares which CUCC shall have the right to purchase and
at what price(s). When calculating such number of shares, the parties shall
assume that CUCC would have exercised all of its preemptive rights as to any
Issuance under a 50,000 Issuance.
The purchase price per share for shares of Common Stock purchasable
pursuant to Section 4.2 shall be the greater of (x) the cash paid per share in
the Issuance, (y) the value assigned per share in the Issuance in a non-cash
transaction, or (z) the fair market value per share of HTCC Common Stock on the
date of issuance. The "fair market value" of a Common Stock means the average of
the high and low quoted sales price on the date in question (or, if there is no
reported sale on such date, on the last preceding date on which any reported
sale occurred) of a share on the American Stock Exchange, or, if the shares are
not listed or admitted to trading on such Exchange, on the principal United
States securities exchange registered under the Securities Act of 1934, as
amended, on which the shares as listed or admitted to trading, or if the shares
are not listed or admitted to trading on any such exchange, the mean between the
closing high bid and low asked quotations with respect to a share on such date
on the National Association of Securities Dealers, Inc. Automated Quotation
System, or any similar system then in use, or if no such quotations are
available, the fair market value on such date of a shares as the HTCC Board of
Directors shall determine. Customary adjustments may be made in the number of
shares offered in order to eliminate fractional shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HTCC
HTCC hereby represents and warrants to CUCC and CIMS as follows:
5.1 Organization. HTCC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified as a foreign corporation in all jurisdictions in which it is
required to be so qualified.
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5.2 Capitalization. The authorized capital stock of HTCC consists of
25,000,000 shares of Common Stock, of which 5,395,864 shares, including the
Shares, are issued and outstanding, and 7,473,915 shares 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, including the Options (as
defined in the Amended and Restated Option Agreement). All of the outstanding
shares of Common Stock, including without limitation the Shares, have been duly
authorized, validly issued, and are fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities laws.
Except as disclosed in Schedule 4.2 or 5.2 hereto, there are no existing
warrants, options, conversion rights, calls or commitments of any character
pursuant to which HTCC is or may become obligated to issue or repurchase any
shares of capital stock or other securities other than with respect to the
Amended and Restated Option Agreement. Except CUCC, CIMS and Tele Danmark, no
shareholder of HTCC has any pre-emptive right to acquire any securities of HTCC.
Since May 31, 1995, HTCC has repurchased none of its outstanding capital stock.
Except as disclosed on Schedule 5.2, there are no agreements or understandings
with respect to the voting, sale, transfer or registration of any shares of
capital stock of HTCC or any of its subsidiaries to which HTCC or any subsidiary
is a party other than in favor of CUCC and CIMS.
5.3 Corporate Authority. HTCC has all corporate authority necessary to
execute and deliver this Agreement, the Note, and the Amended and Restated
Option Agreement (the "HTCC Documents"). Prior to the date of this Agreement,
the Board of Directors of HTCC approved the execution of definitive
documentation on terms as set forth in the HTCC Documents and the arrangements
and actions contemplated hereby and thereby. The execution, delivery and
performance of the HTCC Documents and the arrangements and actions contemplated
hereby and thereby (including without limitation the issuance of the Shares and
the Note to CIMS and the issuance of the Additional Options (as defined in the
Amended and Restated Option Agreement) to CUCC) have been duly and validly
authorized by all necessary corporate action on the part of HTCC. The HTCC
Documents are the valid and binding obligations of HTCC enforceable in
accordance with their terms.
5.4 No Violation. The HTCC Documents and the arrangements and actions
contemplated hereby and thereby do not violate any provisions of HTCC's
corporate charter or bylaws, or any contract, agreement, law or regulation to
which HTCC or any of its properties is a party or subject, and the same do not
require the consent or approval of any regulatory authority or governmental body
of the Republic of Hungary or of the United States of America or of any state or
subdivision thereof or of any other person that has not been obtained.
5.5 Reliance by CUCC and CIMS. The foregoing representations and
warranties are made by HTCC with the knowledge and understanding that CUCC and
CIMS are placing complete reliance thereon and are thereby induced to enter into
this Agreement and the other agreements contemplated hereby, and to agree to the
arrangements and actions contemplated hereby and thereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CUCC AND CIMS
CUCC and CIMS hereby jointly and severally represent and warrant to
HTCC as follows:
6.1 Organization and Authority. Each of CUCC and CIMS is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with the power and authority to carry on the business in
which it is engaged and to execute, deliver and perform its obligations under
this Agreement and the Amended and Restated Option Agreement (the "Citizens
Agreements"). The execution, delivery and performance of the Citizens Agreements
and the arrangements and actions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action of CUCC and CIMS, as
applicable, and are the valid and binding obligations of CUCC and CIMS
enforceable in accordance with their terms.
6
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6.2 Purchase for Investment. The Shares and the Additional Options (as
defined in the Amended and Restated Option Agreement) are being acquired by CIMS
and CUCC, respectively, for their own accounts for investment and not with a
view to, or for resale in connection with, the distribution thereof, nor with
any intention of distributing or selling any shares of Common Stock, including
any shares of Common Stock that may be issued in accordance with the Amended and
Restated Option Agreement. If either CUCC or CIMS should in the future decide to
dispose of shares of Common Stock, it understands and agrees that it may do so
only in accordance with Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"), or otherwise in compliance with the Securities Act, as
then in effect. If either CUCC or CIMS should decide to dispose of any such
shares of Common Stock (other than shares which have been registered under the
Securities Act), it will, at its expense, designate counsel acceptable to HTCC
in connection with such disposition, who shall provide an opinion to HTCC as to
whether the proposed sale or other distribution of any such shares of Common
Stock would require registration under the Securities Act as then in effect. If
the opinion of such counsel is to the effect that the proposed sale or other
distribution does not require any registration under the Securities Act as then
in effect, CUCC or CIMS shall be entitled to effect such sale or other
disposition. If the opinion of such counsel is to the effect that the proposed
sale or other disposition requires such registration, such sale or other
disposition may not be made unless such registration is duly effected in
accordance with the opinion of such counsel.
6.3 Accredited Investor. Each of CUCC and CIMS is an "accredited
investor," as that term is defined in Regulation D promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act.
6.4 No Violations. The Citizens Agreements and the arrangements and
actions contemplated under each do not violate any provisions of CUCC's or CIMS'
corporate charter or bylaws, or any contract, agreement, law or regulation to
which CUCC, CIMS or any of their respective properties is party or subject and
the same do not require the consent or approval of any regulatory authority or
governmental body of the United States or of any state or subdivision thereof or
of any other person.
<PAGE>
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of CUCC and CIMS by HTCC. HTCC hereby agrees to
defend, indemnify and hold harmless CUCC, CIMS and their affiliates from and
against any and all claims, demands, causes of action, liabilities, losses,
damages, costs and expenses, including litigation costs and reasonable
attorneys' fees, not otherwise recovered from insurance carriers (all of the
foregoing are hereinafter referred to as "losses") which losses may accrue to or
be sustained by CUCC or CIMS by, or arising out of, or as a result of, any of
HTCC's representations, warranties, covenants or agreements contained in any of
the HTCC Documents being incorrect, untrue, or breached notwithstanding the fact
that CUCC or CIMS knew or should have known that any such representation,
warranty, covenant or agreement was incorrect, untrue or breached at the time it
was made, and whether or not HTCC has knowledge of any such non-compliance and
whether or not any such non-compliance is material with respect to CUCC or CIMS.
7.2 Indemnification of HTCC by CUCC and CIMS. CUCC and CIMS hereby
jointly and severally agree to defend, indemnify and hold harmless HTCC and its
affiliates from and against any and all claims, demands, causes of action,
liabilities, losses, damages, costs and expenses, including litigation costs and
reasonable attorneys' fees, not otherwise recovered from insurance carriers (all
of the foregoing are hereinafter referred to as "losses") which losses may
accrue to or be sustained by HTCC by, or arising out of, or as a result of, any
of CUCC or CIMS's representations, warranties, covenants or agreements contained
in any of the Citizens Agreements being incorrect, untrue, or breached
notwithstanding the fact that HTCC knew or should have known that any such
representation, warranty, covenant or agreement was incorrect, untrue or
breached at the time it was made, and whether or not CUCC or CIMS has knowledge
of any such non-compliance and whether or not any such non-compliance is
material with respect to HTCC.
ARTICLE VIII
GENERAL
8.1 Further Assurances. Each party to this Agreement shall at the
request of the other furnish, execute and deliver such schedules, documents,
instruments, opinions of counsel, certificates, notices or other further
assurances as counsel for the requesting party shall reasonably require as
necessary to effect complete consummation of this Agreement and the arrangements
and actions contemplated herein.
8.2 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 or CIMS, to it care of:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/614-4651
Attn: President
8
<PAGE>
with required copy to:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/614-4651
Attn: General Counsel
(b) If to HTCC, to:
Hungarian Telephone and Cable Corp.
1126 Budapest
Kiralyhago u.w.
Budapest, Hungary
Facsimile No.: 011-361-202-4778
Attention: Chief Executive Officer
with required copy to:
Hungarian Telephone and Cable Corp.
100 First Stamford Place
Stamford, CT 06902
Facsimile No.: 203/348-0128
Attention: General Counsel
8.3 Amendment. This Agreement may be amended only by a written
instrument duly executed by or on behalf of all of the parties hereto.
8.4 Binding Effect of this Agreement. This Agreement, together with
each agreement, instrument, schedule, exhibit and certificate referred to in
this Agreement, shall constitute the entire contract between the parties hereto
and no party shall be liable or bound to the other in any manner by any
warranties or representations except as specifically set forth herein or
therein. This Agreement supersedes all prior agreements and understandings of
the parties hereto in connection herewith, including, without limitation, the
Management Services Agreement and the Master Agreement.
8.5 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
9
<PAGE>
8.6 Assignment. No party hereto shall assign its rights or 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 parties, and any assignment made without such consent shall be void;
provided, however, that CUCC and CIMS may assign their respective rights and
obligations hereunder and their respective rights and obligations under the
Note, the Amended and Restated Option Agreement and the Registration Agreement,
together or separately, to any one or more direct or indirect wholly-owned
subsidiaries of Citizens Utilities Company, a Delaware corporation (including
any direct or indirect wholly-owned subsidiary of Citizens Utilities Company
that holds substantially all of the communications assets and properties of
Citizens Utilities Company, the stock of which may be distributed or otherwise
transferred to some or all of the shareholders of Citizens Utilities Company),
without the approval or consent of HTCC. CUCC and CIMS also may pledge or
otherwise grant a security interest in their respective rights under the
Citizens Agreements and the Note, and may pledge the Shares, the Note, any
interest in shares that may be issued in accordance with the Amended and
Restated Option Agreement, the shares of Common Stock received upon exercise of
the Options (as defined in the Amended and Restated Option Agreement) and all
proceeds thereunder, to any bank or group of banks without the approval or
consent of HTCC. 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.
8.7 Expenses. Except as otherwise provided herein, each party shall be
solely responsible for all expenses incurred by it in connection with this
Agreement and the agreements and actions contemplated hereby (including without
limitation, fees and expenses of its own counsel and accountants) and shall not
be entitled to any reimbursement therefor from the other party hereto except
pursuant to the indemnification provision of Article VII hereof.
8.8 Counterparts; Facsimile Signature Pages. 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. This Agreement shall be deemed to be
executed upon the exchange of executed facsimile signature pages (with original
executed signature pages to follow by mail).
8.9 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)
consents to submit to the exclusive jurisdiction of the courts of the State of
Delaware for any proceeding arising in connection with this Agreement and the
Note (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.
10
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8.10 Nature and Survival of Representations. All statements contained
in any certificate, instrument or document delivered by or on behalf of any of
the parties pursuant to this Agreement and the arrangements and actions
contemplated hereby shall be deemed representations and warranties by the
respective parties hereunder. All representations and warranties made by the
parties, each to the other, in this Agreement or pursuant hereto shall survive
the consummation of the transactions contemplated by this Agreement,
notwithstanding any investigation heretofore or hereafter made by any of them or
on behalf of any of them.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
HUNGARIAN TELEPHONE AND CABLE CORP.
By______________________________
Francis J. Busacca, Jr.
Acting President and CEO,
Chief Financial Officer
CU CAPITALCORP.
By_____________________________
Name:
Title:
CITIZENS INTERNATIONAL MANAGEMENT
SERVICES COMPANY
By_____________________________
Name:
Title:
12
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A Promissory Note
EXHIBIT B Amended, Restated and Consolidated Stock
Option Agreement
SCHEDULE 4.2 Outstanding Options and Warrants
SCHEDULE 5.2 Other Commitments
<PAGE>
PROMISSORY NOTE
$8,374,498.00 September 30, 1998
FOR VALUE RECEIVED, Hungarian Telephone and Cable Corp., a Delaware
corporation (the "Company"), promises to pay to the order of Citizens
International Management Services Company, a Delaware corporation (hereinafter
called the "Payee"), payable at the Payee's offices c/o Citizens Utilities
Company at High Ridge Park, Stamford, Connecticut, 06905, or such other place as
may be designated in writing to the Company by Payee, or any subsequent holder
of this Note (the "Holder"), the principal sum of Eight Million Three Hundred
Seventy-Four Thousand Four Hundred Ninety-Eight Dollars and No Cents
($8,374,498.00), with interest thereon during the period that any portion of the
principal balance due under this Note remains unpaid and outstanding at a
varying rate per annum which is two and one-half percent (2.50%) per annum above
the interest rate published by The Wall Street Journal from time to time as the
London Interbank Offered Rate for one-year dollar deposits, with adjustments in
such varying rate to be made on the first business day in the State of New York
of each calendar month. This Note is issued pursuant to the Replacement and
Termination Agreement, dated as of the date hereof, among the Company, Payee and
CU CapitalCorp.
Payment of Interest
Accrued interest on the principal amount outstanding hereunder shall be
payable annually in arrears on September 15th of each year, commencing September
15, 1999; provided, however, that if any such date on which interest is payable
on this Note is not a business day in the State of New York, then payment of
such interest will be made the next succeeding day which is a business day in
the State of New York.
Maturity Date
All principal remaining outstanding hereunder shall be due and payable
in full, together with accrued and unpaid interest thereon, on September 15,
2004.
Waiver
<PAGE>
The Company and any and each co-maker, guarantor, accommodation party,
endorser or other person or entity liable for the payment or collection of this
Note expressly waive demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, bringing of suit, and diligence
in taking any action to collect amounts called for hereunder, and in the
handling of property at any time existing as security in connection herewith,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for hereunder
or in connection with any right, lien, interest or property at any and all times
had or existing as security for any amount called for hereunder.
Costs of Collection
The Company agrees to pay all reasonable costs, including reasonable
attorney's fees, incurred by Payee of this Note or any subsequent Holder
thereof, in collection or enforcing payment of this Note in accordance with its
terms.
Prepayment
This Note may be prepaid in whole or in part at any time, upon
ten (10) days' written notice to the Payee.
Amendment
This Note may not be changed or terminated orally.
Assignment
Neither the Company nor Payee shall assign its rights or obligations
under this Note or any part thereof, nor shall the Company or Payee delegate any
of its rights or obligations hereunder without the prior written consent of the
other, and any assignment made without such consent shall be void; provided,
however, that Payee may assign this Note to any one or more direct or indirect
wholly-owned subsidiaries of Citizens Utilities Company (including any direct or
indirect wholly-owned subsidiary of Citizens Utilities Company that holds
substantially all of the communications assets and properties of Citizens
Utilities Company, the stock of which may be distributed or otherwise
transferred to some or all of the shareholders of Citizens Utilities Company),
without the approval or consent of the Company.
Governing Law; Forum; Consent to Jurisdiction
This Note 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. The Company hereby irrevocably and unconditionally (i)
consents to submit to the exclusive jurisdiction of the courts of the State of
Delaware for any proceeding arising in connection with this Note (and the
Company agrees not to commence any such proceeding, except in such courts), (ii)
to the extent the Company is not a resident of the State of Delaware, agrees to
appoint an agent in the State of Delaware as the Company's agent for acceptance
of legal process in any such proceeding against the Company with the same legal
force and validity as if served upon the Company personally within the State of
Delaware, and to notify promptly Payee 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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
a duly authorized officer and attested by its Secretary.
HUNGARIAN TELEPHONE AND CABLE CORP.
By: _____________________________
Francis J. Busacca, Jr.
Acting President and CEO,
Chief Financial Officer
<PAGE>
SCHEDULE 4.2
OUTSTANDING OPTIONS AND WARRANTS
Warrant Holders
Private Placement Agent (Reg S) Warrants
exercisable at $14 (expire 5/4/99)...................61,950
Bell of Canada Warrants
exercisable at $20 (expire 9/29/99)..................25,000
-------
86,950
Option Holders
Stock Option Plan (750,000 shares authorized
less 325,000 available and 167,500 exercised)
82,500 exercisable at $12.25 (expire 2/7/00)
200,000 exercisable at $14.00 (expire 7/26/01)
70,000 exercisable at $ 8.75 (expire 3/31/02)
10,000 exercisable at $ 9.44 (expire 5/15/02)
15,000 exercisable at $11.69 (expire 10/30/02)
120,000 exercisable at $ 8.00 (expire 3/31/03)
10,000 exercisable at $ 8.00 (expire 5/30/03).....................507,500
Director Stock Option Plan
40,000 exercisable at $ 9.44 (expire 5/15/07)
20,000 exercisable at $ 6.78 (expire 6/9/08)..........60,000
Employee Management Stock Options
197,247 exercisable at $ 4.00 (expire 8/16/04)..................197,247
-------
764,747
<PAGE>
SCHEDULE 5.2
OTHER COMMITMENTS
1) Tele Danmark A/S has the right to nominate and elect one member to the HTCC
Board of Directors.
2) The holders of the warrants listed an Schedule 4.2 hereto have registration
rights with respect to the shares of Common Stock to be issued upon
exercise of such warrants.
<PAGE>
EXHIBIT C
AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT
THIS AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT (this
"Agreement"), is made as of September 30, 1998, 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, the Company and CUCC are parties to that certain Stock Option
Agreement, dated as of May 31, 1995 (the "First Stock Option Agreement"),
pursuant to which the Company granted to CUCC the right to purchase such number
of shares of Common Stock of the Company, par value $.001 per share ("Common
Stock"), that, when exercised and combined with certain other shares of Common
Stock owned by CUCC and certain other rights to purchase shares of Common Stock
held by CUCC, was intended to result in CUCC holding in the aggregate fifty-one
percent (51%) of the shares of Common Stock then outstanding on a fully diluted
basis;
WHEREAS, on September 12, 1995, at a duly called meeting of the
shareholders of the Company, the shareholders of the Company approved the
Company's execution of the First Stock Option Agreement and the grant of the
stock options evidenced thereby;
WHEREAS, the Company has issued and delivered to CUCC that certain
Warrant to Purchase Shares of Common Stock, dated as of May 31, 1995 (the
"Warrant"), pursuant to which the Company granted to CUCC the right to purchase
299,219 shares of Common Stock for an initial purchase price of $13.00 per
share;
WHEREAS, the Company and CUCC are parties to that certain Second Stock
Option Agreement dated as of September 28, 1995, as amended by that certain
Second Agreement to Amend and Restate dated as of October 30, 1995 (as amended,
the "Second Stock Option Agreement"), pursuant to which the Company granted to
CUCC the right to purchase 626,155 shares of Common Stock for a purchase price
of $13.75 per share;
<PAGE>
WHEREAS, the Company and CUCC (i) entered into that certain First
Amendment to the Warrant, dated as of October 18, 1996 (the "First Amendment to
Warrant"), and that certain First Amendment to Stock Option Agreement, dated as
of October 18, 1996 (the "First Amendment to First Stock Option Agreement"),
pursuant to which the Company extended through September 12, 2000, the exercise
periods of the Warrant and certain of the options granted pursuant to the First
Stock Option Agreement, and (ii) entered into a Third Stock Option Agreement,
dated as of October 18, 1996 (the "Third Stock Option Agreement"), pursuant to
which the Company granted to CUCC the right to purchase 875,850 shares of Common
Stock for an initial purchase price of $12.75 per share;
WHEREAS, in settlement of a dispute between the Company and CUCC, the
Company has agreed to grant CUCC the right to purchase an additional 2,110,896
shares of Common Stock (the "Additional Stock Options") for an initial purchase
price of $13.00 per share and on the terms and conditions hereinafter set forth;
and
WHEREAS, the Company and CUCC now desire (a) to amend, restate and
consolidate herein (i) the First Stock Option Agreement, as amended by the First
Amendment to Stock Option Agreement, (ii) the Warrant, as amended by the First
Amendment to the Warrant, (iii) the Second Stock Option Agreement, and (iv) the
Third Stock Option Agreement (collectively, the "Existing Option Agreements");
and (b) to establish the terms and conditions applicable to the Additional Stock
Options.
NOW, THEREFORE, in consideration of the premises hereof, and intending
to be legally bound hereby, the parties hereby agree as follows:
1. Stock Options.
(a) Existing Option Agreements. Effective as of the date
hereof, each of the Existing Option Agreements is amended, restated,
consolidated herein and replaced in its entirety by this Agreement. The Company
and CUCC hereby acknowledge and agree that, pursuant to the applicable Existing
Option Agreement, the Company previously has granted to CUCC, that immediately
prior to the execution hereof CUCC continued to have and to hold, and that this
Agreement now evidences, the irrevocable options (the "Existing Options") to
purchase the number of shares of Common Stock set forth below (the "Existing
Option Shares"), at the initial purchase price per share set forth below
(subject to adjustment as set forth below), payable in cash:
(i) Option to purchase 299,219 shares of Common Stock at
$13.00 per share (representing Existing Option Shares previously purchasable
pursuant to the Warrant).
(ii) Option to purchase 101,550 shares of Common Stock at $13.00
per share(representing Existing Option Shares previously purchasable pursuant
to the First Stock Option Agreement).
(iii) Option to purchase 869,516 shares of Common Stock at $15.00
per share(representing Existing Option Shares previously purchasable pursuant
to the First Stock Option Agreement).
(iv) Option to purchase 869,516 shares of Common Stock at $16.50
per share(representing Existing Option Shares previously purchasable pursuant
to the First Stock Option Agreement).
2
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(v) Option to purchase 869,516 shares of Common Stock at $18.00
per share(representing Existing Option Shares previously purchasable pursuant
to the First Stock Option Agreement).
(vi) Option to purchase 626,155 shares of Common Stock at $13.75
per share(representing Existing Option Shares previously purchasable pursuant
to the Second Stock Option Agreement).
(vii) Option to purchase 875,850 shares of Common Stock at $12.75
per share(representing Existing Option Shares previously purchasable pursuant
to the Third Stock Option Agreement).
(b) Additional Stock Options. The Company hereby grants to
CUCC the irrevocable option (the "Additional Option" and, together with the
Existing Options, the "Options") to purchase 2,110,896 shares of Common Stock
(the "Additional Option Shares" and, together with the Existing Option Shares,
the "Option Shares") at an initial purchase price of $13.00 per share (subject
to adjustment as set forth below), payable in cash.
(c) Exercise Dates. The Additional Option may be exercised at
any time and from time to time from the date hereof through July 1, 1999. The
Existing Options may be exercised at any time and from time to time from the
date hereof through September 12, 2000. Exercise of the Options 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
exercise price per share of the Options Shares to be acquired, the closing date,
and the time and place of the closing.
(d) Registration Rights. The Company hereby acknowledges and
agrees with CUCC that any Option Shares acquired by CUCC pursuant to any
exercise of the Options 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 acquired Option
Shares.
<PAGE>
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 an Option is
given unless a waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), if applicable, has not expired and/or all necessary
approvals, if any, applicable to such exercise of such 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 such Option is given, any
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such exercise of such 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 related Option shall direct.
3
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 securities of the Company covered hereby, shall be
subject to adjustment from time to time in certain instances hereinafter set
forth. The term "Purchase Price" shall mean for each Option, the initial
purchase price per share for such Option set forth in this Agreement, as
adjusted pursuant to the terms hereof. The number of Option Shares purchasable
upon the exercise of each Option and the Purchase Price for such Option 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 Options immediately prior thereto shall be adjusted so that
the holder of the Options 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 Options 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.
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<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 each
Option shall be determined by multiplying the number of Option Shares then
purchasable upon exercise of such 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
each Option shall be determined by multiplying the number of Option Shares
theretofore purchasable upon the exercise of such 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 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 an Option,
the holder of such 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 such 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 such Option or upon the exercise of such
Option other than an adjustment which would be required pursuant to this
Agreement.
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<PAGE>
(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 an Option shall be determined by multiplying the number of Option Shares
theretofore purchasable upon exercise of such 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 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 the 20 consecutive trading day period commencing on the 29th
trading day before the date of such computation and ending on the 10th
trading day 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.
6
<PAGE>
(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 an Option is adjusted, as herein provided,
the Purchase Price payable upon exercise of such 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 Option immediately prior
to such adjustment, and of which the denominator shall be the number of
such Option Shares purchasable thereunder immediately thereafter.
(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 Options 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 Options
would have been entitled to receive had the Options 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
Options 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 director stock option plans approved by the
Board of Directors of the Company and 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 of
the Options 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 Options 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.
7
<PAGE>
(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 Options 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 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 Options
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 Options 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 Options
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
Options, 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 Options had the Options
been exercised immediately prior to such recapitalization, consolidation,
merger, conveyance or distribution.
(d) Rights Upon Liquidation. If, at any time while the Options
shall remain unexpired and unexercised, the Company shall dissolve, liquidate or
wind up its affairs, the holder of the Options may in connection with such event
receive, upon exercise thereof, 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 (after giving effect to the exercise of such
Options).
8
<PAGE>
(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 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 Options 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 of any of the Options, 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 hereby. The execution, delivery and
performance of this Agreement and the granting of the Options 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;
9
<PAGE>
(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, 5,395,864
shares are issued and outstanding and 7,473,915 shares 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 (including the Options), and
(ii) 5,000,000 shares of Preferred Stock, none of which is 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 the
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 Options
in obtaining any regulatory or governmental approvals necessary in order to
permit the issuance of the Option Shares upon exercise of the Options;
(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 Options such number of shares thereof as are issuable upon
exercise of the Options, and shall not issue any such shares, or make any
agreement, commitment or arrangement to issue any such shares, or issue any
option, warrant or other security exercisable for or convertible into any such
shares, other than the Options; and
10
<PAGE>
(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. CUCC agrees that any shares of Common Stock purchased
by the holder of the Options 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.: 203/614-4651
Attn: President
with required copies to:
CU CapitalCorp.
c/o Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/614-4651
Attn: General Counsel
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<PAGE>
(b) If to the Company, to:
Hungarian Telephone and Cable Corp.
1126 Budapest
Kiralyhago u.w.
Budapest, Hungary
Facsimile No.: 011-361-202-4778
Attention: Chief Executive Officer
with required copies to:
Hungarian Telephone and Cable Corp.
100 First Stamford Place
Stamford, CT 06902
Facsimile No.: 203/348-0128
Attn: General Counsel
9. Specific Enforcement. The Company acknowledges that the holder of
the Options 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 Options 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 Options 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
Options 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
<PAGE>
12. Counterparts; Facsimile Signature Pages. 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. This Agreement shall be deemed to be
executed upon the exchange of executed facsimile signature pages (with original
executed signature pages to follow by mail).
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, however, that without the consent of the Company, the rights and
obligations of CUCC hereunder may be assigned to and assumed by a direct or
indirect wholly-owned subsidiary of Citizens Utilities Company (including any
direct or indirect wholly-owned subsidiary of Citizens Utilities Company that
holds substantially all of the communications assets and properties of Citizens
Utilities Company, the stock of which may be distributed or otherwise
transferred to some or all of the shareholders of Citizens Utilities Company).
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 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 Options shall exercise any
of the Options 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
Options may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
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<PAGE>
16. Entire Agreement. This Agreement shall constitute the entire
contract between the parties hereto and no party shall be liable or bound to the
other in any manner by any warranties or representations except as specifically
set forth herein. This Agreement supersedes all prior agreements and
understandings of the parties hereto in connection herewith including, without
limitation, the Existing Option Agreements. The parties hereto acknowledge and
agree that as of the date hereof CUCC and its affiliates do not hold any
options, warrants or rights to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock, or any
preemptive rights to acquire shares of Common Stock or any stock options,
warrants, or other rights to purchase Common Stock, except for the Options as
set forth in this Agreement and the preemptive rights set forth in the
Replacement and Termination Agreement, dated as of the date hereof, among the
Company, CUCC, and Citizens International Management Services Company.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amended,
Restated and Consolidated Stock Option Agreement on the date first written
above.
HUNGARIAN TELEPHONE AND CABLE CORP.
By:
Francis J. Busacca, Jr.
Acting President and CEO, Chief Financial Officer
CU CAPITALCORP.
By:
Name:
Title:
[SIGNATURE PAGE TO AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT]
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