SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 15, 1996
Date of Report (Date of earliest event reported)
Hungarian Telephone and Cable Corp.
(Exact name of Registrant as Specified in Charter)
Delaware 1-11484 13-3652685
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
100 First Stamford Place, Stamford, Connecticut 06902
(Address of principal executive offices including zip code)
(203) 348-9069
(Registrant's telephone number, including area code)
Not applicable
(Former name or address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
A. As previously announced on October 16, 1996 (see Exhibit 99.5
filed herewith), Hungarian Telephone and Cable Corp. and its
subsidiaries (AMEX: HTC; the "Registrant") entered into a $170
million 10-year Multi-Currency Credit Facility with Postabank
es Takarekpenztar Rt. ("Postabank"), a Hungarian commercial
bank (the "Postabank Credit Facility"). (See Exhibits 10.84
through 10.87 filed herewith.) Pursuant to the Postabank
Credit Facility, each of the Registrant's subsidiaries (the
"Subsidiaries"): HTCC Consulting Rt. ("Consulting"),
Hungarotel Tavkozlesi Rt. ("Hungarotel"), Kelet-Nograd Com Rt.
("KNC"), Papa es Tersege Telefon Koncesszios Rt. ("Papatel")
and Raba Com Rt. ("Raba") entered into a separate loan
agreement, with such Subsidiaries as borrowers and the
Registrant as guarantor, for $37,300,000, $37,300,000,
$27,500,000, $25,500,000 and $20,200,000,
respectively, and $22,000,000 to be allocated among the
Subsidiaries. (See Exhibit 10.85 filed herewith). The
proceeds from the initial drawdown (approximately $82.8
million) were used by the Registrant to (i) pay a $5.6 million
management fee to Postabank and (ii) repay Citicorp North
America, Inc. $77.2 million under the Secured Term Loan Credit
Facility dated as of March 29, 1996, as amended (the "CNA
Credit Facility") (see Exhibit 10.60 to the Registrant's Form
10-Q for the quarter ended March 31, 1996 filed on May 23,
1996). The remainder of the Postabank Credit Facility will be
used to fund the build out of the Registrant's Subsidiaries' telephone
concession areas in the Republic of Hungary, to provide
working capital, and to refinance or repay other existing
debt. The Postabank Credit Facility and the related
agreements are described herein. (The descriptions and
summaries herein do not purport to be complete, and are
subject to, and qualified in their entirety by, reference to
each such agreement, copies of which are filed as exhibits
hereto. See Item 7 below.)
I. The Postabank Credit Facility and each Subsidiary's
individual loan agreement with Postabank (collectively,
the "Postabank Loan Agreements," and together with the
Postabank Credit Facility, the "Postabank Facility") (see
Exhibits 10.84 and 10.85 filed herewith) provide for a
guarantee by the Registrant of the entire amount owed
under the Postabank Facility. Loans under the Postabank
Credit Facility may be drawn down entirely in Hungarian
Forints and up to 20% of the principal can be drawn down
in U.S. Dollars. Loans may be drawn down through March
31, 1999. Interest on the Postabank Credit Facility
accrues at a rate of 2.5% above the average of the six-
2
<PAGE>
and twelve-month Hungarian T-Bill rate, for the Hungarian
Forint portion of the facility, and a rate of 2.5% above
LIBOR, for the U.S. Dollar portion of the facility. Interest
for the first two years may be deferred at the option of the
Registrant. Amounts outstanding, including any interest
deferred, is payable in 32 equal quarterly installments
beginning on March 31, 1999 and continuing through December
31, 2006, except for the U.S. Dollar portion, which is payable
in equal quarterly installments through December 31, 2002.
II. Concurrently with, and pursuant to, the Postabank Facility,
each Subsidiary entered into a Mortgage and Pledge Agreement
Securing Bank Loan (see Exhibit 10.86 hereto) pursuant to
which each Subsidiary granted a security interest to Postabank
in all assets acquired or to be acquired with the funds
provided under the Postabank Facility.
Concurrently with, and pursuant to, the Postabank Facility,
each of the Registrant and Consulting entered into a Security
Agreement pursuant to which they pledged their ownership
interests in Hungarotel, Papatel, KNC and Raba as collateral
for the Postabank Loan Agreements. The Security Agreements
provide for the release of certain shares of Hungarotel,
Papatel and KNC, currently pledged to Matav Rt., upon the
repayment with funds from the Postabank Facility of the $11.2
million owed by the Registrant to Matav Rt. All such pledged
shares are to be deposited with ABN-AMRO Rt., as Escrow Agent.
The consent of Telecom Danmark A/S ("Tele Danmark") and The
Danish Investment Fund for Central and Eastern Europe (the
"Danish Fund")is required in order to refinance approximately
$20 million in certain debt owed to such parties by KNC and
Raba. Accordingly, KNC's and Raba's Postabank Loan Agreements
are conditioned upon receipt of the required consent, which is
expected by the end of October 1996. While such consent is
pending, however, the Registrant organized an interim,
wholly-owned Channel Islands subsidiary, Telebud (CI) Limited
("Telebud"), to which Postabank loaned approximately $20
million under the Postabank Credit Facility. Such funds have
been advanced to the Registrant and are scheduled to be repaid
when KNC and Raba repay their debt to Tele Danmark and The
Danish Fund upon receipt of the required consent. At such
time, the Telebud loan will be converted into Hungarian
Forints and become the obligation of KNC and Raba. The Telebud
loan is secured by a guarantee from the Registrant.
3
<PAGE>
B. In connection with the Postabank Credit Facility, on October
18, 1996, the Registrant entered into certain agreements with
CU CapitalCorp., a Delaware corporation ("CUCC") and a wholly-
owned subsidiary of Citizens Utilities Company, a Delaware
corporation ("Citizens") pursuant to which, among other
things, the Registrant (i) extended to September 12, 2000 the
exercise periods of a Warrant and certain Stock Options to
purchase shares of the Registrant's common stock, par value
$.001 ("Common Stock") held by CUCC (see Exhibit 10.88 and
10.89 attached hereto), (ii) granted CUCC the option to
purchase an additional 875,850 shares of Common Stock at an
exercise price of $12.75, exercisable at any time through
September 12, 2000 (see Exhibit 10.90 hereto) and (z) paid
CUCC $750,000. Entering into such agreements and paying such
fees by the Registrant was in consideration of CUCC, or an
affiliate of CUCC, (i) issuing CNA a letter of comfort and a
letter indemnifying CNA against all events of political
currency exchange and other cross-border risks in connection
with the CNA Credit Facility (ii) negotiating the effective
cancellation of a $750,000 contingent commitment fee payable
by the Registrant to CNA in connection with the CNA Credit
Facility to a date beyond the repayment of the CNA Credit
Facility resulting in a $750,000 savings to the Registrant,
(iii) negotiating a $2,000,000 interest credit payable to
Hungarotel by the Postabank Credit Facility, (iv) issuing a
letter of support to Postabank in connection with the
Postabank Credit Facility and (v) providing assurances to CNA
of the repayment by the Registrant of any and all amounts
owned to CNA by October 15, 1996 in connection with the CNA
Credit Facility. Certain provisions of the agreements between
the Registrant and CUCC are described below. (The
descriptions and summaries herein do not purport to be
complete, and are subject to, and qualified in their entirety
by, reference to each such agreement, copies of which are
filed as exhibits hereto. See Item 7 below.)
The First Amendment to Warrant between the Registrant and CUCC entered
into as of October 18, 1996 between the Registrant and CUCC (see
Exhibit 10.88 hereto) amended the Warrant to Purchase Shares of Common
Stock of Hungarian Telephone and Cable Corp. dated May 31, 1995, issued
by the Registrant to CUCC (see Exhibit 10(c)(c) to the Registrant's
Current Report on Form 8-K filed June 5, 1995) to extend the exercise
period of the Warrant to purchase 299,219 shares of Common Stock from
May 31, 1997 to September 12, 2000.
The First Amendment to Stock Option Agreement entered into as of
October 18, 1996 between the Registrant and CUCC (see Exhibit 10.89
hereto) amended the Stock Option Agreement between the Registrant and
CUCC dated as of May 31, 1995 (see Exhibit 10(e)(e) to the Registrant's
Current Report on Form 8- K filed on June 5, 1995) to extend the
exercise period for
4
<PAGE>
each of the Two-Year Option, Three-Year Option and Four-Year Option
from September 12, 1997, September 12, 1998 and September 12, 1999,
respectively, to September 12, 2000.
The Third Stock Option Agreement entered into as of October 18, 1996
between the Registrant and CUCC (see Exhibit 10.90) provided for the
grant by the Registrant to CUCC of an option to purchase 875,850 shares
of Common Stock at an exercise price of $12.75 exercisable at any time
through September 12, 2000.
C. The Registrant has changed the location of its principal
United States office to 100 First Stamford Place, Suite 204,
Stamford, Connecticut 06902.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a), (b) - Not Applicable.
(c) Exhibits.
10.84 Multi-Currency Credit Facility among Postabank
es Takarekpenztar Rt., as Lender, Hungarian
Telephone and Cable Corp., as Guarantor, HTCC
Consulting Rt., Hungarotel Tavkozlesi Rt.,
Kelet-Nograd Com Rt. and Papa es Tersege
Telefon Koncesszios Rt. and Raba Com Rt., as
Borrowers entered into as of October 15, 1996
10.85 Form of Loan Agreement entered into as of
October 15, 1996 among Postabank Rt., as
Lender, Hungarian Telephone and Cable Corp.,
as Borrower, and each Subsidiary
10.86 Form of Mortgage and Pledge Agreement Securing
Bank Loan entered into as of October 15, 1996
between Postabank Rt. and each Subsidiary
10.87 Form of Security Agreement entered into as
of October 15, 1996 among Postabank Rt., as
the secured party, ABN AMRO Rt., as the
Escrow Agent, and Hungarian Telephone and
Cable Corp. and HTCC Consulting Rt., as the
pledgors
10.88 First Amendment to Warrant between Hungarian
Telephone and Cable Corp. and C.U. CapitalCorp
dated as of October 18, 1996
10.89 First Amendment to Stock Option Agreement
between Hungarian Telephone and Cable Corp.
5
<PAGE>
and CU CapitalCorp. dated as of October 18,
1996
10.90 Third Stock Option between Hungarian Telephone
and Cable Corp. and CU CapitalCorp. dated as
of October 18, 1996
99.5 Press Release dated October 16, 1996
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HUNGARIAN TELEPHONE AND CABLE CORP.
100 First Stamford Place
Stamford, CT 06902
(Registrant)
By: /s/ James G. Morrison
-----------------------------
James G. Morrison
President and Chief Executive
Officer
Dated: October 22, 1996
Budapest, Hungary
7
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description
- ------- -----------
10.84 Multi-Currency Credit Facility among Postabank Rt., as
Lender, Hungarian Telephone and Cable Corp., as
Guarantor, HTCC Consulting Rt., Hungarotel Tavkozlesi
Rt., Kelet-Nograd Com Rt. and Papa es Tersege Telefon
Koncesszios Rt. and Raba Com Rt., as Borrowers entered
into as of October 15, 1996
10.85 Form of Loan Agreement entered into as of October 15, 1996
among Postabank Rt., as Lender, Hungarian Telephone and Cable
Corp., as Borrower, and each Subsidiary
10.86 Form of Mortgage and Pledge Agreement Securing Bank Loan
entered into as of October 15, 1996 between Postabank Rt.
and each Subsidiary
10.87 Form of Security Agreement entered into as of October 15, 1996
among Postabank Rt., as the secured party, ABN AMRO Rt., as
the Escrow Agent, and Hungarian Telephone and Cable Corp. and
HTCC Consulting Rt., as the pledgors
10.88 First Amendment to Warrant between Hungarian Telephone
and Cable Corp. and CU CapitalCorp. dated as of October
18, 1996
10.89 First Amendment to Stock Option Agreement between
Hungarian Telephone and Cable Corp. and CU CapitalCorp.
dated as of October 18, 1996
10.90 Third Stock Option between Hungarian Telephone and Cable
Corp. and CU CapitalCorp. dated as of October 18, 1996
99.5 Press Release dated October 16, 1996
8
Exhibit 10.84
POSTABANK ES TAKAREKPENZTAR RT.
as Lender
HUNGAROTEL RT.
PAPATEL RT.
KNC
RABA-COM RT.
HTCC CONSULTING RT.
as Borrowers
HUNGARIAN TELEPHONE AND CABLE CORP.
as Guarantor
-----------------------------------------------------------------
HUF equivalent of U.S.$170,000,000
MULTI CURRENCY CREDIT FACILITY AGREEMENT
-----------------------------------------------------------------
<PAGE>
THIS AGREEMENT is made on October 10, 1996, effective as of October 15, 1996.
BETWEEN
(1) Postabank es Takarekpenztar Rt. ("the Bank"), 1132 Budapest,
Vaci ut 48.
as Lender ("Lender" or "Bank").
and
(2) Hungarotel Tavkozlesi Rt. ("Hungarotel"), 1126 Budapest,
Kiralyhago u.2.
(3) Papa es Tersege Telefon Koncesszios Reszvenytarsasag
("Papatel"), 8500 Papa, Major u. 2.
(4) Kelet-Nograd Com. ("KNC"), 3100 Salgotarjan, Munkasotthon ter
1.
(5) RABA-Com Tavkozlesi es Telekommunikacios Koncesszios Rt.
("Raba-Com."), 9600 Sarvar, Ady Endre u. 1.
(6) HTCC Consulting Rt. ("HTCC Consulting"), 1126 Budapest,
Kiralyhago u. 2.
(2) to (6) together hereinafter referred to as "Borrowers",
and any one of them a "Borrower")
and
(7) Hungarian Telephone and Cable Corp. ("HTCC USA"), Hungarian
address: 1126 Budapest, Kiralyhago u. 2., ("the Guarantor")
Lender, Borrowers and Guarantor are hereinafter referred as to
"Parties",
WHEREAS
The Lender has issued a commitment letter dated September 30, 1996 which was
amended the same day (the "Commitment Letter") in which the Lender irrevocably
stated and confirmed that it would finance the telecommunication development of
the HTCC subsidiaries, Hungarotel, KNC, Raba-Com, Papatel - (hereinafter: "HTCC
Subsidiaries"), and according to the terms and conditions of the Commitment
Letter with the cooperation of enterprises jointly appointed by Fazis Rt. and
the Lender, and the Lender shall accept full responsibility for the provision of
the facility.
<PAGE>
NOW, IT IS AGREED AS FOLLOWS:
PART 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS AND INTERPRETATION
The following terms have the meanings given to them in this Clause 1.1.
"Agreement" means this MULTI CURRENCY Credit Facility
Agreement.
"Advance" means, except as otherwise provided herein, an advance made
or to be made by the Bank hereunder.
"Available Facility" means, at any time, the aggregate amount
of the Facility at such time.
"Business Day" means a day (other than a Saturday or Sunday) on which
banks generally are open for business in Budapest.
"Event of Default" means any circumstances described as such in Part 8
(Events of Default).
"Encumbrance" means (a) a mortgage, charge, pledge, lien or other
encumbrance securing any obligation of any person, (b) any arrangement
under which money or claims to, or the benefit of, a bank or other
account may be applied, set-off or made subject to a combination of
accounts so as to effect payment of sums owed or payable to any person
or (c) any other type of preferential arrangement (including title
transfer and retention arrangements) having a similar effect.
"Exchange Rate" means, save as otherwise provided herein, the
USD/HUF commercial sell exchange rate of the Bank on the
<PAGE>
relevant date.
"Facility" means the MULTI CURRENCY loan facility in an
aggregate amount of the HUF equivalent of USD 170,000,000.
(one hundred and seventy million) as established by this
Agreement.
"Final Maturity Date of HUF Loan" means December 31, 2006.
"Final Maturity Date of USD Loan" means December 31, 2002.
"Group" means the Guarantor and the Borrowers for the time
being.
"HUF or forint" means the lawful currency of the Republic of
Hungary.
"HUF Loan" means the aggregate of all Advances drawn down in
HUF.
"LIBOR" means, in relation to any amount owed by an Obligor hereunder
on which interest for a given period is to accrue, the rate per annum
equal to the arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-sixteenth of one per
cent.) of the rates at which Barclays Bank was offering to prime banks
in the London Interbank Market deposits in the currency of such amount
for such period at or about 11.00 a.m. (London time) on the relevant
date for such period.
"Loan" means the aggregate principal amount for the time being
outstanding hereunder.
"Notice of Drawdown" means a notice substantially in the form set out
in the Fourth Schedule (Notice of Drawdown).
<PAGE>
"Permitted Lien" means (i) liens of vendors, carriers and mechanics
arising by law in the ordinary course of business for sums not yet due
or contested in good faith, (ii) liens for taxes not yet due and
payable, and (iii) Postabank's liens.
"Obligors" means the Borrowers and the Guarantor and "Obligor"
means any one of them.
"Repayment Date" means, in relation to any Advance, the last
day of the Term thereof.
"Term" means, except as otherwise provided herein, in relation to any
Advance, the period for which such Advance is borrowed as specified in
the Notice of Drawdown relating thereto.
"Transfer Certificate" means a certificate signed by the Bank
and a Transferee whereby:
(a) the Bank seeks to procure the transfer to Transferee of all or
a part of the Bank's rights, benefits and obligations
hereunder as contemplated in clause 12.3 (Assignments and
Transfers by Bank); and
(b) such Transferee undertakes to perform the obligations it will
assume as a result of delivery of such certificate to the
Borrower as is contemplated in Clause 12.3.
"Transfer Date" means, in relation to any Transfer Certificate, the
date for the making of the transfer as specified in the schedule to
such Transfer Certificate.
"Transferee" means any third party, to which the Bank seeks to transfer
all or part of its rights, benefits and obligations hereunder pursuant
to the provisions of clause 12.3.
<PAGE>
"USD or US Dollars" means the lawful currency of the United
States of America.
"USD Loan" means the aggregate of all Advances drawn down in
USD.
1.2 INTERPRETATION ANY REFERENCE IN THIS AGREEMENT TO:
the "equivalent" on any given date in one currency (the "first
currency") of an amount denominated in another currency (the "second
currency") is a reference to the amount of the first currency which
could be purchased with the amount of the second currency at the
commercial sell exchange rate of the Lender on such date for the
purchase of the first currency with the second currency;
"indebtedness" shall be construed so as to include any obligation
(whether incurred as principal or as surety) for the payment or
repayment of money borrowed, whether present or future, actual or
contingent;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
succeeding calendar month that, where any such period would otherwise
end on a day which is not a business day, it shall end on the next
succeeding business day, unless that day falls in the calendar month
succeeding that in which it would otherwise have ended, in which case
it shall end on the immediately preceding business day, and references
to "months" shall be construed accordingly.
A "quarter" means any quarter of the calendar year starting at January
1 and ending at March 31, or starting at April 1 and ending at June 30,
or starting at July 1 and ending at September 30, or starting at
October 1, and ending at December 31.
<PAGE>
"subsidiary" of a company or corporation means any company or
corporation:
(a) which is controlled, directly or indirectly, by the
first-mentioned company or corporation;
(b) more than half the issued share capital of which is
beneficially owned, directly or indirectly, by the
first-mentioned company or corporation; or
(c) which is a subsidiary of another subsidiary of the
first-mentioned company or corporation
and, for these purposes, a company or corporation shall be treated as
being controlled by another if that other company or corporation is
able to direct its affairs and/or to control the composition of its
board of directors or equivalent body.
"tax" shall be construed so as to include any tax, levy, impost, duty
or other charge of a similar nature (including any penalty or interest
payable in connection with any failure to pay or any delay in paying
any of the same) imposed by the relevant authorities of the Republic of
Hungary.
"value date" shall be construed as a reference to the day when a
transfer to a particular bank account is completed and the transferred
funds have been credited to that particular bank account and are at the
full disposal of the bank account holder.
"VAT" shall be construed as a reference to value added tax including
any similar tax which may be imposed in place thereof from time to time
by the relevant authorities of the Republic of Hungary.
"wholly-owned subsidiary" shall be construed as a reference to
any company or corporation which has no other members or
<PAGE>
shareholders except that other company or corporation and that other
company's or corporation's wholly-owned subsidiaries or persons acting
on behalf of that other company or corporation or its wholly-owned
subsidiaries; and
"winding-up", "dissolution" or "administration" of a company or
corporation shall be construed so as to include any equivalent or
analogous proceedings under the law of the Republic of Hungary
including the seeking of liquidation, winding-up, reorganisation,
dissolution, administration, arrangement, adjustment, protection or
relief of debtors.
PART 2
THE FACILITY
2.1 THE FACILITY
2.1.1 GRANT OF THE FACILITY The Bank grants to the Borrowers,
upon the terms and subject to the conditions hereof, a
MULTI CURRENCY credit facility in an aggregate amount of
the HUF equivalent of USD 170,000,000. (one hundred
seventy million) calculated using the Exchange Rate. A
maximum of 20 (twenty) percent of the facility may be
drawn down in USD. At the option of the Borrowers, the
amount of interest due in the two year period following
the date of execution of this Agreement may be
capitalized, thereby automatically increasing the amount
of the Facility as specified in this section.
2.1.2 In respect of any Advance that is drawn down in USD (subject
to the limit referred to above in clause 2.1.1) which the
relevant Borrower, immediately upon receipt of the USD, wishes
to convert to HUF, the relevant exchange rate for the
conversion to be applied by the Lender is the USD/HUF
commercial buy rate.
<PAGE>
2.1.3 MATURITY OF THE FACILITY The final maturity date of the
Facility is December 31, 2006. The final maturity date of the
USD Loan portion of the Facility is December 31, 2002.
2.1.4 PURPOSE AND APPLICATION The Facility is intended for the
refinancing of a portion of the existing indebtedness of
the Borrowers, for the telecommunication development of
the Borrowers, and for general working capital purposes,
and accordingly, the Borrowers shall apply all amounts
raised by it hereunder in or towards satisfaction of its
refinancing and development financing requirements and
for general working capital purposes.
2.1.5 INDIVIDUAL LOAN AGREEMENTS The Lender and each Borrower shall
enter into individual loan agreements for the amounts set out
in the First Schedule to this Agreement next to their
respective names, which individual loan agreements will
reflect the terms and conditions of this Agreement.
2.1.6 SEVERAL LIABILITY AND NOT JOINT The liability of the Borrowers
under this Agreement shall be several and not joint.
PART 3
UTILISATION OF THE FACILITY
3.1 DELIVERY OF NOTICE OF DRAWDOWN
In accordance with the Notice of Drawdown attached to this Agreement as
the Fourth Schedule, a Borrower may from time to time request the
making of an Advance according to the Second Schedule ("Proposed Draw
Down Schedule") under the individual loan agreements by the delivery to
the Bank, not more than ten nor less than five Business Days before the
proposed date for
<PAGE>
the making of such Advance, of a duly completed Notice of Drawdown
therefor. This Clause shall not apply for the first Advance which is
dealt with in Clause 3.4.
3.2 DRAWDOWN DETAILS
Each Notice of Drawdown delivered to the Bank pursuant to Clause 3.1
shall be irrevocable and shall specify:
a) the proposed date for the making of the Advance
requested;
b) the currency of denomination of the Advance requested,
which shall be in HUF or USD (subject to the limit on USD
Advances set out in clause 2.1.1);
c) the amount of the Advance requested, which shall be an
amount of the integral multiple of HUF 10,000,000 (or,
if the Advance is to be denominated in USD, such
comparable and convenient amount thereof) and the amount
of which shall not exceed the Available Facility adjusted
to take account of the amounts in USD of any Advances
which are scheduled to be made or repaid on or before the
date of drawdown of the proposed Advance; and
d) the account to which the proceeds of the proposed
drawdown is to be paid.
3.3 DRAWDOWN CONDITIONS
If the Borrower requests an Advance in accordance with the preceding
provisions of this Clause 3 and, on the proposed date for the making of
such Advance:
a) if the request is for an Advance in USD, the amount in
USD of such Advance does not exceed the maximum USD
<PAGE>
portion of the Available Facility and if the request is for an
Advance in HUF, the amount in HUF of such Advance does not
exceed the Available Facility; and
b) no Event of Default has occurred and the representations
set out in Clause 7 (Representations) are true on and as
of the proposed date for the making of such Advance; and
c) the proposed date for the making of such Advance is no
later than 31 March 1999
then, except as otherwise provided herein, such Advance will be made in
accordance with the provisions hereof.
3.4 FIRST ADVANCE
The first Advance, which shall be used (i) to repay loans provided by
the Guarantor to the Borrowers from, among other sources, funds
borrowed by the Guarantor from Citicorp North America, Inc.
("Citicorp") and other lenders, and (ii) to pay the management fee of
the Lender as set out in clause 5, will be transferred to and deposited
in the relevant Borrowers' accounts, and the Borrowers hereby instruct
the Bank to transfer the deposited first Advances in USD to the Bank
account of the Guarantor. The Lender hereby agrees to exchange HUF
amounts of the loan into USD using the Exchange Rate without charging
further fees. The Guarantor hereby instructs the Bank to transfer to
and deposit in the appropriate Citicorp account the amount due to
settle the Citicorp loan made to the Guarantor. The Parties agree and
the Lender undertakes that the above mentioned transfers shall be
completed in such a way that the Citicorp Loan Settlement Account and
the bank accounts of the other relevant creditors of the Guarantor will
be credited on value date October 15, 1996.
<PAGE>
3.5 CURRENCY OF DRAWDOWN
The Bank shall disburse the Advance to a Borrower, in USD or HUF at the
option of the Borrower, but in USD only to the extent set out in Clause
2.1, - pursuant to statutory regulation from time to time. If the
Advance is disbursed in HUF, the Bank shall disburse the loan applying
the Exchange Rate in force on the day of the disbursement.
3.6 DOCUMENTING OF THE FACILITY DISBURSEMENT
The Bank shall inform the Borrowers of all financial transactions by
sending an account statement. The account statement contains the
facility settlement account number, the account number for handling
other financial transactions in relation to the Facility.
3.7 DAY OF DRAWDOWN
The day of the Advance drawdown is the day when the Bank debits its
facility settlement account number specified in point 3.6 with the
amount of the Advance according to the Notice of Drawdown and the Bank
is entitled to transfer the amount of the Advance to the relevant
Borrower's account on the same day without further instructions.
PART 4
INTEREST
4.1 PAYMENT DATE OF INTEREST
A Borrower shall pay accrued interest on all Advances it receives
quarterly on the last day of each quarter, or at the option of the
Borrower, interest may be capitalized thereby automatically increasing
the amount of the facility above USD 170,000,000 as specified under
section 1. This option is only
<PAGE>
available in respect of the interest due in the period up to December
31 1998. In case the loan matures or expires during the quarter, the
due date is the date of maturity and expiration, respectively.
4.2 THE RATE OF INTEREST
The rate of interest applicable to an Advance for a quarter
during its Term shall be
a) in respect of Advances in HUF, the weighted arithmetical
average of the yield on six and twelve month discounted
Hungarian treasury bills during the previous quarter plus
2.5 per cent.
The weighted arithmetical average is calculated by reference
to the average of the published yield of all 6 and 12 month
Treasury Bills issued in the quarter, weighted for the amount
of such issues.
If the issuance of the discounted treasury bills is terminated
during the term of the Facility, then the interest of the loan
shall be calculated on the basis of securities representing
Hungarian government debt of the same term as the above, and
in the absence of such securities the parties shall agree with
regard to the calculation of the interest within 30 days. If
they fail to do so, the Bank is entitled to terminate the
Agreement on 360 days notice. Until the notice period expires,
the last applicable interest rate, calculated on the basis of
the above, shall prevail.
b) in respect of Advances in USD, the LIBOR rate on the
first day of the quarter for the six months term plus 2.5
per cent. Interest maintained in USD but paid in HUF
shall be paid by the Borrowers to the Bank calculated by
<PAGE>
applying the Exchange Rate in force at the time the
payment is due.
4.3 CALCULATION OF INTEREST
Interest shall be calculated only in respect of amounts which have
actually been drawn down. The Bank shall inform the Borrower of the
extent of the interest 10 days before the interest payment date.
Interest calculation - by applying the annual interest rate, daily
interest calculation on a 365/360 day basis - is done according to the
following formula:
outstanding amount * term shown in calendar days * interest rate
360 * 100
The Bank shall calculate interest on the amount of the Loan from the
date of drawdown until the day preceding the date when payment
obligations of the Borrower are fulfilled.
4.4 INTEREST DEDUCTION
The Bank shall pay to Hungarotel an interest rate deduction of USD
2,000,000 (two million) (or the HUF equivalent thereof, at the option
of Hungarotel) in cash in quarterly installments of USD 250,000 (or the
HUF equivalent thereof, at the option of Hungarotel) beginning on the
first quarter following execution of this Agreement and terminating on
the second anniversary thereof. The Parties agree that this interest
deduction in cash shall be due to Hungarotel regardless of whether the
interest is paid by Hungarotel or capitalised according to Clause 4.1.
<PAGE>
PART 5
MANAGEMENT FEES
5.1 A management fee equal to the HUF equivalent of USD 5,600,000 (five
million six hundred thousand), to be split equally among the Borrowers,
is payable to the Bank. The portion of the management fee to be paid by
a Borrower becomes payable at the time of the first Advance made to the
relevant Borrower and will be deducted from such first Advance.
5.2 Apart from those set out in Clause 5.1 the Bank shall charge no further
fees in relation to the Facility including but not limited to any kind
of arranging fee, administration fee, etc.
PART 6
REPAYMENT
6.1 MATURITY OF THE FACILITY
The final maturity date of the Facility is December 31, 2006. The final
maturity of the USD Loan portion of the Facility is December 31, 2002.
6.2 REPAYMENT OF THE FACILITY
6.2.1 The repayment of the aggregate of the Advances drawn down by
March 31, 1999 is due in equal quarterly installments between
March 31, 1999 and December 31, 2006.
6.2.2 The Borrowers must provide sufficient funds on their
respective accounts without special notice from the Bank
to the extent and at maturity dates specified herein
covering the loan amount and interest due; the Borrowers
acknowledge that the Bank is entitled to transfer funds
from the above described accounts to the facility
settlement account on due dates without any special
<PAGE>
instructions.
6.2.3 The day when the Bank credits the repaid amount to the
facility settlement account is the day when a Borrower
satisfies its payment obligations.
6.3. PREPAYMENT
A Borrower shall be entitled to repay each or all Advances in full at
any time prior to the maturity of the Facility on 30 days notice.
6.4. CURRENCY OF THE REPAYMENT
A Borrower shall repay the Advances in the same currency as that in
which they were drawn down, with the HUF equivalent of USD calculated
by applying the Exchange Rate in force at the due date.
PART 7
REPRESENTATIONS, COVENANTS
7.1 REPRESENTATIONS OF THE BORROWERS
Each of the Borrowers makes the representations and warranties set out
in Clause 7.1.1. to Clause 7.1.9. The liability of the Borrowers under
these representations and warranties is several and not joint.
7.1.1 LIABILITIES TOWARDS MATAV
The Borrowers declare that they have no further indebtedness
towards MATAV other than the indebtedness set out opposite
their respective names in the Third Schedule equal to a total
of USD 11.2 million in connection with the transfer of the
MATAV assets in the
<PAGE>
concession areas.
7.1.2 TOTAL DEBT
The Borrowers declare that other than in the ordinary course
of business they have no further indebtedness toward any third
parties other than those listed in the Third Schedule to this
Agreement.
7.1.3 TAXES
The Borrowers declare that they have no material overdue taxes
owing other than those included in the Third Schedule in this
Agreement. The Borrowers are obliged to provide proof of
fulfillment of the obligations included in this point and to
report non-fulfilment within 3 working days following such
events.
7.1.4 THE GUARANTOR'S OBLIGATIONS AND COMMITMENTS
The Guarantor represents that, to the best of its knowledge,
it has no further significant and known obligations and
commitments concerning HTCC Subsidiaries other than listed in
the Six Schedule.
7.1.5 STATUS AND DUE AUTHORIZATION
Each Borrower is a corporation duly organized under the laws
of the Republic of Hungary, and the Guarantor is a Delaware,
U.S. Company with power to enter into this Agreement and to
exercise its rights and perform its obligations hereunder and
all corporate and other action required to authorize its
execution of this Agreement and its performance of its
obligations hereunder has been duly taken, subject to: the
approval of Tele Danmark A/S and the Investment Fund for
Eastern and Central Europe in
<PAGE>
respect of KNC and Raba-Com, full payment of Citicorp and
MATAV in respect of all share, and, in relation to the deposit
of the shares in the Borrowers, the Hungarian Ministry of
Telecommunication and Water Management has
given its consent.
7.1.6 CLAIMS PARI PASSU
Under the laws of the Republic of Hungary, the claims of the
Bank against it under this Agreement will rank at least pari
passu with the claims of all its other unsecured creditors
except those whose claims are preferred solely by any
bankruptcy, insolvency, liquidation or other similar laws of
general application.
7.1.7 NO FILING OR STAMP TAXES
Under the laws of the Republic of Hungary, it is not necessary
that this Agreement be filed, recorded or enrolled with any
court or other authority in such jurisdiction or that any
stamp, registration or similar tax be paid on or in relation
to this Agreement.
7.1.8 OWNERSHIP OF THE BORROWERS
The Borrowers are subsidiaries of the Guarantor.
7.1.9 OWNERSHIP OF THE GUARANTOR
The Guarantor is a U.S. public company with its shares
traded on the American Stock Exchange.
<PAGE>
7.2 COVENANTS
7.2.1 MAINTENANCE OF LEGAL VALIDITY
Each of the Obligors shall obtain, comply with the terms of
and do all that is necessary to maintain in full force and
effect all authorisations, approvals, licences and consents
required in or by the laws and regulations of its jurisdiction
of incorporation to enable it lawfully to enter into and
perform its obligations under this Agreement and the relating
Agreement and to ensure the legality, validity, enforceability
or admissibility in evidence in its jurisdiction of
incorporation of this Agreement.
7.2.2 CLAIMS PARI PASSU
Each of the Obligors shall ensure that at all times the claims
of the Bank against it under this Agreement rank at least pari
passu with the claims of all its other unsecured creditors
except those whose claims are preferred by any bankruptcy,
insolvency, liquidation or other similar laws of general
application. Furthermore, each Borrower states and represents,
that it will not enter into any other loan agreement -except
the individual loan agreements mentioned in Clause 2.1.4 of
this Agreement - before the repayment all the made Advances
without the prior written notice to the Bank.
7.2.3 NEGATIVE PLEDGE
Each Borrower hereby undertakes that, without the prior
written consent of the Bank, it shall not create or permit to
subsist any encumbrance except for a Permitted Lien over all
or any of its present or future revenues or assets purchased
or constructed from the proceeds of the
<PAGE>
Facility, or other debt repaid out of the Facility.
7.2.4 REPORTING
The Borrowers undertake to send to the Bank the quarterly
report of its parent company, the Guarantor in a 10-Q format,
the annual reports in a 10-k format and the quarterly
cash-flow reports and the monthly statistical reports, and
their balance sheets for the respective quarter, and any other
reasonable request of the Bank from time to time.
PART 8
EVENTS OF DEFAULT
8.1 Each of Clause 8.1.1 to Clause 8.1.12 describes circumstances which
constitute an Event of Default for the purposes of the individual loan
agreements to be concluded with each Borrower. Clause 8.2 and Clause
8.3, and Clause 8.4 deal with the rights of the Bank after the
occurrence of an Event of Default.
8.1.1 FAILURE TO PAY
A Borrower fails to pay any sum due from it hereunder at the
time, in the currency and in the manner specified in its
respective individual loan agreement.
8.1.2 TERMINATING ACCOUNT AGREEMENTS
A Borrower or the Guarantor terminates its Bank accounts held
with the Bank during the term of the Facility provided under
this Agreement.
<PAGE>
8.1.3 MORTGAGING OR SELLING OF ASSETS
Mortgaging or selling of assets as defined in 11.1.2 or in
case of announcing bankruptcy or liquidation, selling the
asset(s) earmarked as security in different ways from what is
specified in the mortgage agreement without consent of the
Bank.
8.1.4 MISREPRESENTATION
Any representation or statement made by any of the Obligors in
this Agreement or in any notice or other document, certificate
or statement delivered by it pursuant hereto or in connection
herewith is or proves to have been incorrect or misleading in
any material respect when made.
8.1.5 OTHER OBLIGATIONS
Any Obligor fails duly to perform or comply with any other
obligation expressed to be assumed by it in this Agreement or
in any security agreement and such failure is not remedied
within thirty days after the Lender has given notice in
writing thereof to such Obligor.
8.1.6 CROSS DEFAULT
Any indebtedness of a Borrower in an amount in excess of USD
1,000,000 is not paid when due, any indebtedness in an amount
in excess of USD 1,000,000 of that Borrower is declared to be
or otherwise becomes due and payable prior to its specified
maturity or any creditor or creditors of the Borrower become
entitled to declare any indebtedness in an amount in excess of
USD 1,000,000 of the Borrower due and payable prior to its
specified maturity, and no waiver has been obtained or is
contented in good faith by
<PAGE>
the Borrower. For the avoidance of doubt, the default of a
Borrower under its separate individual loan agreement does not
have any effect on the status of the individual loan
agreements of the other Borrowers.
8.1.7 INSOLVENCY AND RESCHEDULING
A Borrower is unable to pay its debts as they fall due,
commences negotiations with any one or more of its creditors
with a view to the general readjustment or rescheduling of its
indebtedness or makes a general assignment for the benefit of
or a composition with its creditors.
8.1.8 WINDING-UP
A Borrower takes any corporate action or other steps are taken
or legal proceedings are started for its winding-up,
dissolution, administration or re-organisation or for the
appointment of a liquidator, receiver, administrator,
administrative receiver, conservator, custodian, trustee or
similar officer of it or of any or all of its revenues and
assets.
8.1.9 VALIDITY AND ADMISSIBILITY
At any time any material act, condition or thing required to
be done, fulfilled or performed in order (a) to enable any of
the Obligors lawfully to enter into, exercise its rights under
and perform the obligations expressed to be assumed by it in
this Agreement, (b) to ensure that the obligations expressed
to be assumed by any of the Obligors in this Agreement are
legal, valid and binding or (c) to make this Agreement
admissible in evidence in each Obligor's jurisdiction of
incorporation is not done, fulfilled or performed.
<PAGE>
8.1.10 ILLEGALITY
At any time it is or becomes unlawful for any of the Obligors
to perform or comply with any or all of its obligations
hereunder or any of the obligations of any of the Obligors
hereunder are not or cease to be legal, valid and binding.
8.1.11 TERMINATION OF THE CONCESSION CONTRACTS
At any time the Concession Contract of a Borrower is finally
terminated and the termination comes into effect.
8.2. NOTICE TO THE BORROWERS
Upon the occurrence of an Event of Default at any time, the Bank shall
by a 60 days written notice to the relevant Borrower request that the
Borrower cure such Event of Default according to the relevant
individual loan agreement.
8.3 ACCELERATION AND CANCELLATION
Upon the occurrence of an Event of Default and the failure to cure such
Event of Default as set forth in Clause 8.2 above at any time
thereafter, the Bank shall by a 60 days written notice to the relevant
Borrower:
a) declare the Advances drawn down by the relevant Borrower
to be immediately due and payable (whereupon the same
shall become so payable together with accrued interest
thereon and any other sums then owed by the Borrower
hereunder); and/or
b) declare that the Facility shall be cancelled in respect
of the relevant Borrower, whereupon the same shall be
cancelled.
<PAGE>
8.4 LENGTH OF TERMS
If, pursuant to Clause 8.3 (Acceleration and Cancellation), the Bank
declares the Advances to be due and payable, the Term in respect of any
such Advance shall, if the Bank subsequently demands payment before the
scheduled Repayment Date in respect of such Advance, be deemed of such
length that it ends on the date that such demand is made.
PART 9
GUARANTEE
9.1. GUARANTEE
The Guarantor irrevocably and unconditionally guarantees to the Bank
the due and punctual observance and performance of all the terms,
conditions and covenants on the part of the Borrowers contained in this
Agreement and agrees to pay to the Bank from time to time on demand any
and every sum or sums of money which the Borrowers are at any time
liable to pay to the Bank under or pursuant to this Agreement and which
has become due and payable but has not been paid at the time such
demand is made with at least 60 days notice. The Guarantor shall
perform the above mentioned obligations on a 60 days prior written
notice of the Bank.
9.2. INDEMNITY
The Guarantor irrevocably and unconditionally agrees as a primary
obligation to indemnify the Bank from time to time on demand by the
Bank from and against any loss incurred by the Bank as a result of any
of the obligations of the Borrowers under or pursuant to this Agreement
being or becoming void, voidable, unenforceable or ineffective as
against the Borrower for any reason whatsoever, whether or not known to
the Bank or any of them or any other person, the amount of such loss
being
<PAGE>
the amount which the person or persons suffering it would otherwise
have been entitled to recover from the Borrowers.
9.3. ADDITIONAL SECURITY
The obligations of the Guarantor herein contained shall be in addition
to and independent of every other security which the Bank may at any
time hold in respect of any of the Borrower's obligations hereunder.
9.4. CONTINUING OBLIGATIONS
The obligations of the Guarantor herein contained shall constitute and
be continuing obligations notwithstanding any settlement of account or
other matter or thing whatsoever and shall not be considered satisfied
by any intermediate payment or satisfaction of all or any of the
obligations of the Borrowers under this Agreement and shall continue in
full force and effect until final payment in full of all amounts owing
by the Borrowers hereunder and total satisfaction of all the Borrowers'
actual obligations hereunder.
9.5. ASSIGNMENT OF CLAIM
If the Guarantor is obliged to make any payments under this Guarantee,
it will take over the Bank's right to claim repayment and interest and
other costs from the defaulting Borrower according to this Agreement,
to the extent of the amount the Guarantor actually paid, without any
further notice to or consent by the Bank.
9.6. COMFORT LETTER FROM CITIZENS UTILITIES COMPANY
Citizens Utilities Company shall issue a comfort letter to the Lender
in a form attached to this Agreement as the Fifth Schedule.
<PAGE>
PART 10
DEFAULT INTEREST AND INDEMNITY
10.1 DEFAULT INTEREST PERIODS
If any sum due (principal, interest) and payable by the Borrowers
hereunder is not paid on the due date therefor in accordance with the
provisions of Parts 4 and 6 or if any sum due and payable by the
Borrowers under any judgment of any court in connection herewith is not
paid on the date of such judgment, the period beginning on such due
date or, as the case may be, the date of such judgment and ending on
the date upon which the obligation of Borrowers to pay such sum (the
balance thereof for the time being unpaid being herein referred to as
an "unpaid sum") is discharged shall be divided into calendar days.
10.2 DEFAULT INTEREST
During each such period relating thereto as is mentioned in Clause 10.1
(Default Interest Periods) an unpaid sum shall bear interest at the
rate per annum which is 6 per cent above the interest rate defined in
Clause 4.2.a.
10.3 PAYMENT OF DEFAULT INTEREST
Any interest which shall have accrued under Clause 10.1 (Default
Interest) in respect of an unpaid sum shall be due and payable and
shall be paid by the Borrowers owing such unpaid sum at the end of the
period by reference to which it is calculated or on such other dates as
the Bank may specify by written notice to the Borrowers.
<PAGE>
10.4 CURRENCY OF DEFAULT INTEREST
In case of a failure to pay the amount maintained in USD when due, the
Bank shall convert the USD amount to HUF at the time it is due, thus
the interest on this shall be governed also by this clause.
PART 11
GUARANTEES OF THE LOAN REPAYMENT
11.1 The security for the repayment of any debt incurred by the Borrowers to
the Bank based on this Agreement shall include the following:
11.1.1 IMPUTATION RIGHT
Each Borrower shall authorize the Bank to debit at the due
date - by exercising its imputation right - any account of the
Borrower according to point No. 3.2 of the Business Regulation
of Loans of the Bank, provided the debt still exists, by the
amount of the matured facility and its interest and to enforce
it with a prompt collection order debiting the Borrower's
accounts held with the Bank, following the sequence for
fulfilling payment orders with prior ranking, but before all
other payment orders as specified in section (2) of paragraph
5 of Government Decree No. 39/1984. (XI.5.) pertaining to
financial transactions and loans. A Borrower shall not be
permitted to withdraw its authorization included in this point
while its debt to the Bank still exists.
11.1.2 THE MORTGAGING OF THE ASSETS OF THE BORROWERS
Each Borrower hereby agrees to grant a lien on all its assets
(i) purchased or constructed from the Facility provided
according to this Agreement and (ii) purchased
<PAGE>
or constructed from those loans which are refinanced by the
Facility provided in this Agreement, however the lien does not
cover any assets to be purchased or constructed from a
facility other than provided according to this Agreement.
The grant of a lien is subject to the approval of each
Borrower's Board of Directors. The mortgaging of the assets of
KNC and Raba-Com are also subject to the approval of Tele
Denmark and the Danish Investment Fund for Central and Eastern
Europe, and the repayment of Siemens Telefongyar Kft.
supplier's credit. The mortgaging of the assets of Hungarotel
is subject to the terms and conditions of the Turn-key
Construction Contract between Fazis Rt. and Hungarotel.
The Parties will enter into a separate Security Agreement to
establish these mortgages. Such Security Agreement will
provide an option to the Lender allowing it to register the
mortgaging of the assets in a public notary register upon the
coming into force of a law to that effect.
11.1.3 DEPOSITING THE SHARES IN BORROWERS OWNED BY THE GUARANTOR
FOR THE BENEFIT OF THE BANK
The Guarantor hereby agrees to deposit all of its shares held
in the Borrowers with ABN AMRO Bank Magyarorszag Rt. as an
escrow agent for the securing the repayment of the Facility
provided under this Agreement. The deposit/lien is subject to
the approval of Tele Denmark and the Danish Investment Fund
for Central and Eastern Europe with respect to the shares of
KNC and Raba-Com. It is understood that the shares in the
Borrowers are currently deposited for securing indebtedness
owed to MATAV and to Citicorp, therefore the deposit under
this clause can be
<PAGE>
effected only upon the full payment of the debt to MATAV. The
Parties will enter into a separate agreement to implement this
deposit.
11.1.4 INSURANCE POLICY COVERING THE ASSETS OF THE BORROWERS
Each Borrower shall be obliged to (i) obtain an insurance
policy covering the total value of the asset(s) earmarked for
security if no such policy is already in place, (ii) send the
policy, which must name the Bank as the beneficiary to the
Bank within 60 days and (iii) confirm payment of premiums at
the request of the Bank. A Borrower must not modify or
terminate such insurance policy without the Bank's consent.
11.1.5 BANK ACCOUNTS OF BORROWERS
Each Borrower and the Guarantor shall conduct all practical
financial transactions through settlement accounts opened for
this purposes exclusively with the Bank where available. In
those regions not having local Bank facilities, alternative
financial institutions may be used. Each Borrower and the
Guarantor shall use its best efforts to open all bank accounts
by December 31, 1996. The Bank shall charge a turnover fee of
0.125% for all debit transactions.
11.1.6 SUPERVISORY BOARD SEATS
The Guarantor agrees that, at the next General Meetings of
each Borrower (which each Borrower agrees to hold no later
than 60 days from the date of the execution of this Agreement)
it shall nominate and vote its shares in favour of a nominee
of the Bank as one member of the respective Supervisory boards
of the Borrowers.
<PAGE>
11.1.7 FINANCING SUPPORT AGREEMENT WITH THE MINISTRY OF
TRANSPORT, TELECOMMUNICATIONS AND WATER MANAGEMENT
Each Borrow undertakes to sign an agreement with the Lender
and the Hungarian Ministry of Transport, Telecommunications
and Water Management ("the Ministry") relating to its
concession agreement, and such agreement will cover the
following issues:
- the Ministry approves the grant of a mortgage on the
assets as set forth in Clause 11.1.2 and a lien on
the Guarantor's shares in each Borrower, to the
Lender, including the enforcement of these securities
by the Lender in the event of default;
- the Ministry approves the continuation of the
concession agreements if the Lender enforces its
rights as a secured party;
- the Ministry will not approve the grant of further
mortgage over the assets without consent of the
Lender in respect of assets that were
purchased/installed using the Facility or other
loans/supplier credits repaid from the Facility;
- the Lender will receive copies of all Notifications
sent by the Ministry to the Borrowers;
- if, after a Borrower is liquidated due to
bankruptcy, a new concession company is formed, the
Lender has the right to determine the new
shareholding structure. However, the Lender
undertakes to make all reasonable actions required
to avoid the liquidation of the Borrowers;
- if a concession agreement is terminated and a new
tender is announced, the new concession holder will
be obliged to buy all the assets of the relevant
Borrower at a price determined by the Lender and
accepted by an independent auditor,
<PAGE>
- the Ministry is not entitled to amend a concession
agreement when the relevant Borrower is in material
default (which has not been cured within 30 days
following written notice of such default by the
Lender) of its individual loan agreement without the
Lender's consent, which shall not be unreasonably
withheld.
This Agreement and any of the separate individual loan
agreements with the Borrowers are effective regardless of
whether the Ministry agrees to any or all of the points raised
in this clause 11.1.7, and the lack of Agreement because of
the Minister does not enter into such Agreement, does not
constitute an event of default.
PART 12
ASSIGNMENTS AND TRANSFERS
12.1 BINDING AGREEMENT
The Agreement shall be binding upon and enure to the benefit of each
party hereto and its or any subsequent successors, Transferees and
assigns.
12.2 NO ASSIGNMENTS AND TRANSFERS BY THE OBLIGORS
No Obligor shall be entitled to assign or transfer all or any of its
rights, benefits and obligations hereunder except in the event of a
merger or consolidation of the Obligors.
12.3 ASSIGNMENTS AND TRANSFERS BY BANK
The Bank may, at any time and by completing a Transfer Certificate,
assign all or any of its rights, benefits and obligations hereunder to
a consortium of banks. Any transfer to a third party who is not a
member of a consortium of banks
<PAGE>
requires the consent of the Guarantor, which can not to be unreasonably
withheld. In the event of such transfer, the Bank will remain bound by
its obligations under this Agreement and any individual loan agreements
with the Borrowers.
PART 13
SPECIAL AGREEMENTS REGARDING FAZIS RT.
13.1 RIGHT OF FIRST NEGOTIATION
The Guarantor hereby agrees to secure the right of first negotiation of
Fazis Rt. to purchase Guarantor's shares in the Borrowers in compliance
with current legal regulations subject to Tele Denmark's and the Danish
Fund for Central and Eastern Europe's rights of first refusal with
respect to the shares. This right of negotiation does not apply to any
change in the ownership of the Borrowers which is due to (i) a merger
or consolidation of the Borrowers, (ii) a merger or consolidation or
joint venture of the Borrowers (or the merged Borrowers) or with other
local Hungarian telephone concession companies or (iii) the transfer of
shares in the Borrowers to affiliates of the Guarantor.
13.2 CONSULTANCY
The Borrowers and the Guarantor hereby accept FAZIS Rt. as the
consultant of the Bank.
PART 14
LEGAL DISPUTE AND GOVERNING LAW
14.1 LEGAL DISPUTES
The Parties shall attempt to resolve all disputes pertaining to this
contract through mutual agreement, and in case of the failure of such
attempts the Permanent Arbitration Court
<PAGE>
attached to the Hungarian Chamber of Commerce and Industry will be
assigned exclusively to deal with the issue. The language of the
proceedings shall be Hungarian.
14.2 GOVERNING LAW
Issues not regulated in this contract shall be governed by the
following:
a) The bank account agreement to be signed between the Bank
and each Borrower;
b) General Business Conditions of the Bank and the Business
Regulations for Loans;
c) Provisions pertaining to bank loans of the Civil Code of
the Republic of Hungary;
d) other laws and statutes of the republic of Hungary on
money transactions and bank loans.
14.3 GOVERNING LANGUAGE
This Agreement is executed in both English and Hungarian. In the event
of any discrepancies, the Hungarian language version shall prevail,
except in respect of Part 9 (Guarantee) where the English language
version shall prevail.
<PAGE>
PART 15
MISCELLANEOUS
15.1 EFFECTIVENESS
This Agreement shall come into effect upon the authorized signing by
the Parties except in the case of Raba-Com and KNC, for whom it shall
come into effect only upon receipt of required approval from Tele
Denmark A/S and the Investment Fund for Eastern and Central Europe.
15.2 COMMUNICATIONS AND NOTICES
Each communication and notice to be made hereunder shall be made in
writing and, unless otherwise stated, shall be made by fax, and
confirmed by letter to the following addresses and fax numbers:
(1) Postabank es Takarekpenztar Rt., 1132 Budapest, Vaci ut
48.
To the attention of: Horvath Geza fax number: 270-2246
(2) Hungarotel Tavkozlesi Rt., 1126 Budapest, Kiralyhago u.2
To the attention of: Andrew E. Nicholson fax number: 202-
4778
(3) Papa es Tersege Telefon Koncesszios Reszvenytarsasag,
8500 Papa, Major u. 2. To the attention of: Andrew E.
Nicholson fax number:202-4778
(4) Kelet-Nograd Com., 3100 Salgotarjan, Munkasotthon ter 1.
To the attention of: Andrew E. Nicholson fax number:202-
4778
(5) Raba-Com Tavkozlesi es Telekommunikacios Koncesszios Rt.,
9600 Sarvar, Ady Endre u. 1.
<PAGE>
To the attention of: Andrew E. Nicholson fax number:202-
4778
(6) HTCC Consulting Rt., 1126 Budapest, Kiralyhago u. 2.
To the attention of: Andrew E. Nicholson fax number:202-
4778
(7) Hungarian Telephone and Cable Corp., 1126 Budapest,
Kiralyhago u. 2.,
To the attention of: Andrew E. Nicholson fax number: 202-
4778
All communications shall be copied to Dr. Peter Lakatos fax
number: 268-1610
15.3 LANGUAGE OF COMMUNICATION
Each communication and document made or delivered by one party to
another pursuant to this Agreement shall be in the English language or
accompanied by a translation thereof into English certified (by an
officer of the person making or delivering the same) as being a true
and accurate translation thereof. Bank account statements may be in
Hungarian.
15.4 COPIES
This Agreement is signed in 8 original copies.
<PAGE>
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first before written.
[Duly Executed by all of the parties]
Exhibit 10.85
POSTABANK ES TAKAREKPENZTAR RT.
as Lender
[RELEVANT SUBSIDIARY OF HUNGARIAN TELEPHONE AND CABLE CORP.]
as Borrower
HUNGARIAN TELEPHONE AND CABLE CORP.
as Guarantor
-----------------------------------------------------------------
HUF equivalent of U.S.$_________
LOAN AGREEMENT
-----------------------------------------------------------------
THIS AGREEMENT is made on October 15, 1996.
BETWEEN
(1) Postabank es Takarekpenztar Rt. ("the Bank"), 1132 Budapest,
Vaci ut 48.
as Lender ("Lender" or "Bank").
and
(2) [Relevant Subsidiary of Hungarian Telephone and Cable Corp.]
as Borrower ("Borrower")
and
(3) Hungarian Telephone and Cable Corp. ("HTCC USA"), Hungarian
address: 1126 Budapest, Kiralyhago u. 2.,
as Guarantor ("the Guarantor")
Lender, Borrower and Guarantor are hereinafter referred as to
"Parties",
WHEREAS
The Lender has issued a commitment letter dated September 30, 1996 which was
amended the same day (the "Commitment Letter") in which the Lender irrevocably
stated and confirmed that it would finance the telecommunication development of
the HTCC subsidiaries, Hungarotel, KNC, Raba-Com, Papatel - (hereinafter: "HTCC
Subsidiaries"), and according to the terms and conditions of the Commitment
Letter with the cooperation of enterprises jointly appointed by Fazis Rt. and
the Lender, and the Lender shall accept full responsibility for the provision of
the facility. Postabank, Hungarotel, Papatel, KNC, Rabacom, HTCC Consulting,
HTCC entered into a Multi Currency Credit Facility Agreement on October 15,
1996.
NOW, IT IS AGREED AS FOLLOWS:
PART 1
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS AND INTERPRETATION
The following terms have the meanings given to them in this Clause 1.1.
"Agreement" means this LOAN Agreement.
"Advance" means, except as otherwise provided herein, an advance made
or to be made by the Bank hereunder.
"Available Facility" means, at any time, the aggregate amount
of the Facility at such time.
"Business Day" means a day (other than a Saturday or Sunday)
on which banks generally are open for business in Budapest;
"Event of Default" means any circumstances described as such in Part 8
(Events of Default).
"Encumbrance" means (a) a mortgage, charge, pledge, lien or other
encumbrance securing any obligation of any person, (b) any arrangement
under which money or claims to, or the benefit of, a bank or other
account may be applied, set-off or made subject to a combination of
accounts so as to effect payment of sums owed or payable to any person
or (c) any other type of preferential arrangement (including title
transfer and retention arrangements) having a similar effect;
"Exchange Rate" means, save as otherwise provided herein, the USD/HUF
commercial sell exchange rate of the Bank on the relevant date;
"Facility" means the loan facility in an aggregate amount of the HUF
equivalent of USD _______________ as established by this Agreement.
"Final Maturity Date of HUF Loan" means December 31, 2006.
"Final Maturity Date of USD Loan" means December 31, 2002.
"Group" means the Guarantor and the Borrower for the time
being.
"HUF or forint" means the lawful currency of the Republic of
Hungary.
"HUF Loan" means the aggregate of all Advances drawn down in
HUF.
"LIBOR" means, in relation to any amount owed by an Obligor hereunder
on which interest for a given period is to accrue, the rate per annum
equal to the arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-sixteenth of one per
cent.) of the rates at which Barclays Bank was offering to prime banks
in the London Interbank Market deposits in the currency of such amount
for such period at or about 11.00 a.m. (London time) on the relevant
date for such period.
"Loan" means the aggregate principal amount for the time being
outstanding hereunder.
"Notice of Drawdown" means a notice substantially in the form set out
in the Third Schedule (Notice of Drawdown).
"Permitted Lien" means (i) liens of vendors, carriers and mechanics
arising by law in the ordinary course of business for sums not yet due
or contested in good faith, (ii) liens
<PAGE>
for taxes not yet due and payable, and (iii) Postabank's
liens.
"Obligors" means the Borrower and the Guarantor and "Obligor"
means any one of them.
"Repayment Date" means, in relation to any Advance, the last
day of the Term thereof.
"Term" means, except as otherwise provided herein, in relation to any
Advance, the period for which such Advance is borrowed as specified in
the Notice of Drawdown relating thereto.
"Transfer Certificate" means a certificate signed by the Bank
and a Transferee whereby:
(a) the Bank seeks to procure the transfer to Transferee of all or
a part of the Bank's rights, benefits and obligations
hereunder as contemplated in clause 12.3 (Assignments and
Transfers by Bank); and
(b) such Transferee undertakes to perform the obligations it will
assume as a result of delivery of such certificate to the
Borrower as is contemplated in Clause 12.3.
"Transfer Date" means, in relation to any Transfer Certificate, the
date for the making of the transfer as specified in the schedule to
such Transfer Certificate.
"Transferee" means any third party, to which the Bank seeks to transfer
all or part of its rights, benefits and obligations hereunder pursuant
to the provisions of clause 12.3;
"USD or US Dollars" means the lawful currency of the United
States of America;
<PAGE>
"USD Loan" means the aggregate of all Advances drawn down in
USD.
1.2 INTERPRETATION ANY REFERENCE IN THIS AGREEMENT TO:
the "equivalent" on any given date in one currency (the "first
currency") of an amount denominated in another currency (the "second
currency") is a reference to the amount of the first currency which
could be purchased with the amount of the second currency at the
commercial sell exchange rate of the Lender on such date for the
purchase of the first currency with the second currency;
"indebtedness" shall be construed so as to include any obligation
(whether incurred as principal or as surety) for the payment or
repayment of money borrowed, whether present or future, actual or
contingent;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
succeeding calendar month that, where any such period would otherwise
end on a day which is not a business day, it shall end on the next
succeeding business day, unless that day falls in the calendar month
succeeding that in which it would otherwise have ended, in which case
it shall end on the immediately preceding business day, and references
to "months" shall be construed accordingly;
A "quarter" means any quarter of the calendar year starting at January
1 and ending at March 31, or starting at April 1 and ending at June 30,
or starting at July 1 and ending at September 30, or starting at
October 1, and ending at December 31.
"subsidiary" of a company or corporation means any company or
corporation:
<PAGE>
(a) which is controlled, directly or indirectly, by the
first-mentioned company or corporation;
(b) more than half the issued share capital of which is
beneficially owned, directly or indirectly, by the
first-mentioned company or corporation; or
(c) which is a subsidiary of another subsidiary of the
first-mentioned company or corporation
and, for these purposes, a company or corporation shall be treated as
being controlled by another if that other company or corporation is
able to direct its affairs and/or to control the composition of its
board of directors or equivalent body;
"tax" shall be construed so as to include any tax, levy, impost, duty
or other charge of a similar nature (including any penalty or interest
payable in connection with any failure to pay or any delay in paying
any of the same) imposed by the relevant authorities of the Republic of
Hungary;
"value date" shall be construed as a reference to the day when a
transfer to a particular bank account is completed and the transferred
funds have been credited to that particular bank account and are at the
full disposal of the bank account holder.
"VAT" shall be construed as a reference to value added tax including
any similar tax which may be imposed in place thereof from time to time
by the relevant authorities of the Republic of Hungary;
"wholly-owned subsidiary" shall be construed as a reference to any
company or corporation which has no other members or shareholders
except that other company or corporation and that
<PAGE>
other company's or corporation's wholly-owned subsidiaries or persons
acting on behalf of that other company or corporation or its
wholly-owned subsidiaries; and
"winding-up", "dissolution" or "administration" of a company or
corporation shall be construed so as to include any equivalent or
analogous proceedings under the law of the Republic of Hungary
including the seeking of liquidation, winding-up, reorganisation,
dissolution, administration, arrangement, adjustment, protection or
relief of debtors;
PART 2
THE FACILITY
2.1 THE FACILITY
2.1.1 GRANT OF THE FACILITY The Bank grants to the Borrower,
upon the terms and subject to the conditions hereof, a
loan facility in an aggregate amount of the HUF
equivalent of USD _____________ calculated using the
Exchange Rate. A maximum of 20 (twenty) percent of the
facility may be drawn down in USD. At the option of the
Borrower, the amount of interest due in the two year
period following the date of execution of this Agreement
may be capitalized, thereby automatically increasing the
amount of the Facility as specified in this section.
2.1.2 In respect of any Advance that is drawn down in USD (subject
to the limit referred to above in clause 2.1.1) which the
Borrower, immediately upon receipt of the USD, wishes to
convert to HUF, the relevant exchange rate for the conversion
to be applied by the Lender is the USD/HUF commercial buy
rate.
2.1.3 MATURITY OF THE FACILITY The final maturity date of the
Facility is December 31, 2006. The final maturity date of the
USD Loan portion of the Facility is December 31, 2002.
<PAGE>
2.1.4 PURPOSE AND APPLICATION The Facility is intended for the
refinancing of a portion of the existing indebtedness of
the Borrower, for the telecommunication development of
the Borrower, and for general working capital purposes,
and accordingly, the Borrower shall apply all amounts
raised by it hereunder in or towards satisfaction of its
refinancing and development financing requirements and
for general working capital purposes.
PART 3
UTILISATION OF THE FACILITY
3.1 DELIVERY OF NOTICE OF DRAWDOWN
In accordance with the Notice of Drawdown attached to this Agreement as
the Third Schedule, the Borrower may from time to time request the
making of an Advance according to the First Schedule ("Proposed Draw
Down Schedule") under the individual loan agreements by the delivery to
the Bank, not more than ten nor less than five Business Days before the
proposed date for the making of such Advance, of a duly completed
Notice of Drawdown therefor. This Clause shall not apply for the first
Advance which is dealt with in Clause 3.4.
3.2 DRAWDOWN DETAILS
Each Notice of Drawdown delivered to the Bank pursuant to Clause 3.1
shall be irrevocable and shall specify:
a) the proposed date for the making of the Advance
requested,
b) the currency of denomination of the Advance requested,
which shall be in HUF or USD (subject to the limit on USD
Advances set out in clause 2.1.1),
<PAGE>
c) the amount of the Advance requested, which shall be an
amount of the integral multiple of HUF 10,000,000 (or,
if the Advance is to be denominated in USD, such
comparable and convenient amount thereof) and the amount
of which shall not exceed the Available Facility adjusted
to take account of the amounts in USD of any Advances
which are scheduled to be made or repaid on or before the
date of drawdown of the proposed Advance; and
d) the account to which the proceeds of the proposed
drawdown is to be paid.
3.3 DRAWDOWN CONDITIONS
If the Borrower requests an Advance in accordance with the preceding
provisions of this Clause 3 and, on the proposed date for the making of
such Advance:
a) if the request is for an Advance in USD, the amount in
USD of such Advance does not exceed the maximum USD
portion of the Available Facility and if the request is
for an Advance in HUF, the amount in HUF of such Advance
does not exceed the Available Facility; and
b) no Event of Default has occurred and the representations
set out in Clause 7 (Representations) are true on and as
of the proposed date for the making of such Advance; and
c) the proposed date for the making of such Advance is no
later than 31 March 1999.
then, except as otherwise provided herein, such Advance will be made in
accordance with the provisions hereof.
<PAGE>
3.4 FIRST ADVANCE
The first Advance, which shall be used (i) to repay loans provided by
the Guarantor to the Borrower from, among other sources, funds borrowed
by the Guarantor from Citicorp North America, Inc. ("Citicorp") and
other lenders, and (ii) to pay the management fee of the Lender as set
out in clause 5, will be transferred to and deposited in the Borrower's
accounts, and the Borrower hereby instructs the Bank to transfer the
deposited first Advances in USD to the Bank account of the Guarantor.
The Lender hereby agrees to exchange HUF amounts of the loan into USD
using the Exchange Rate without charging further fees. The Guarantor
hereby instructs the Bank to transfer to and deposit in the appropriate
Citicorp account the amount due to settle the Citicorp loan made to the
Guarantor. The Parties agree and the Lender undertakes that the above
mentioned transfers shall be completed in such a way that the Citicorp
Loan Settlement Account and the bank accounts of the other relevant
creditors of the Guarantor will be credited on value date October 15,
1996.
3.5 CURRENCY OF DRAWDOWN
The Bank shall disburse the Advance to the Borrower, in USD or HUF at
the option of the Borrower, but in USD only to the extent set out in
Clause 2.1, - pursuant to statutory regulation from time to time. If
the Advance is disbursed in HUF, the Bank shall disburse the loan
applying the Exchange Rate in force on the day of the disbursement.
3.6 DOCUMENTING OF THE FACILITY DISBURSEMENT
The Bank shall inform the Borrower of all financial transactions by
sending an account statement. The account statement contains the
facility settlement account number, the account number for handling
other financial transactions in
<PAGE>
relation to the Facility.
3.7 DAY OF DRAWDOWN
The day of the Advance drawdown is the day when the Bank debits its
facility settlement account number specified in point 3.6 with the
amount of the Advance according to the Notice of Drawdown and the Bank
is entitled to transfer the amount of the Advance to the Borrower's
account on the same day without further instructions.
PART 4
INTEREST
4.1 PAYMENT DATE OF INTEREST
The Borrower shall pay accrued interest on all Advances it receives
quarterly on the last day of each quarter, or at the option of the
Borrower, interest may be capitalized thereby automatically increasing
the amount of the facility above USD _________ as specified under
section 1. This option is only available in respect of the interest due
in the period up to December 31 1998. In case the loan matures or
expires during the quarter, the due date is the date of maturity and
expiration, respectively.
4.2 THE RATE OF INTEREST
The rate of interest applicable to an Advance for a quarter
during its Term shall be
a) in respect of Advances in HUF, the weighted arithmetical
average of the yield on six and twelve month discounted
Hungarian treasury bills during the previous quarter plus
2.5 per cent;
<PAGE>
The weighted arithmetical average is calculated by reference
to the average of the published yield of all 6 and 12 month
Treasury Bills issued in the quarter, weighted for the amount
of such issues.
If the issuance of the discounted treasury bills is terminated
during the term of the Facility, then the interest of the loan
shall be calculated on the basis of securities representing
Hungarian government debt of the same term as the above, and
in the absence of such securities the parties shall agree with
regard to the calculation of the interest within 30 days. If
they fail to do so, the Bank is entitled to terminate the
Agreement on 360 days notice. Until the notice period expires,
the last applicable interest rate, calculated on the basis of
the above, shall prevail.
b) in respect of Advances in USD, the LIBOR rate on the first day
of the quarter for the six months term plus 2.5 per cent.
Interest maintained in USD but paid in HUF shall be paid by
the Borrower to the Bank calculated by applying the Exchange
Rate in force at the time the payment is due.
4.3 CALCULATION OF INTEREST
Interest shall be calculated only in respect of amounts which have
actually been drawn down.
The Bank shall inform the Borrower of the extent of the interest 10
days before the interest payment date.
Interest calculation - by applying the annual interest rate, daily
interest calculation on a 365/360 day basis - is done according to the
following formula:
<PAGE>
outstanding amount * term shown in calendar days * interest rate
360 * 100
The Bank shall calculate interest on the amount of the Loan from the
date of drawdown until the day preceding the date when payment
obligations of the Borrower are fulfilled.
PART 5
MANAGEMENT FEES
5.1 A management fee equal to the HUF equivalent of USD _________, is
payable to the Bank. The management fee to be paid by the Borrower
becomes payable at the time of the first Advance made and will be
deducted from such first Advance.
5.2 Apart from those set out in Clause 5.1 the Bank shall charge no further
fees in relation to the Facility including but not limited to any kind
of arranging fee, administration fee, etc.
PART 6
REPAYMENT AND CANCELLATION
6.1 MATURITY OF THE FACILITY
The final maturity date of the Facility is December 31, 2006. The final
maturity of the USD Loan portion of the Facility is December 31, 2002.
6.2 REPAYMENT OF THE FACILITY
6.2.1 The repayment of the aggregate of the Advances drawn down by
March 31, 1999 is due in equal quarterly installments between
March 31, 1999 and December 31, 2006.
6.2.2 The Borrower must provide sufficient funds on their
respective accounts without special notice from the Bank
<PAGE>
to the extent and at maturity dates specified here in covering
the loan amount and interest due; the Borrower acknowledges
that the Bank is entitled to transfer funds from the above
described accounts to the facility settlement account on due
dates without any special instructions.
6.2.3 The day when the Bank credits the repaid amount to the
facility settlement account is the day when the Borrower
satisfies its payment obligations.
6.3 PREPAYMENT
The Borrower shall be entitled to repay each or all Advances in full at
any time prior to the maturity of the Facility on 30 days notice.
6.4 CURRENCY OF THE REPAYMENT
The Borrower shall repay the Advances in the same currency as that in
which they were drawn down, with the HUF equivalent of USD calculated
by applying the Exchange Rate in force at the due date.
PART 7
REPRESENTATIONS, COVENANTS
7.1 REPRESENTATIONS OF THE BORROWER
The Borrower makes the representations and warranties set out
in Clause 7.1.1. to Clause 7.1.9.
7.1.1 LIABILITIES TOWARDS MATAV
The Borrower declares that it has no further indebtedness
towards MATAV other than the indebtedness set out in the
<PAGE>
Second Schedule equal to a total of USD _______ in connection
with the transfer of the MATAV assets in the concession areas.
7.1.2 TOTAL DEBT
The Borrower declares that other than in the ordinary course
of business it has no further indebtedness toward any third
parties other than those listed in the Second Schedule to this
Agreement.
7.1.3 TAXES
The Borrower declares that it has no material overdue taxes
owing other than those included in the Third Schedule in this
Agreement. The Borrower is obliged to provide proof of
fulfillment of the obligations included in this point and to
report non-fulfilment within 3 working days following such
events.
7.1.4 THE GUARANTOR'S OBLIGATIONS AND COMMITMENTS
The Guarantor represents that, to the best of its knowledge,
it has no further significant and known obligations and
commitments concerning HTCC Subsidiaries other than listed in
the Fourth Schedule.
7.1.5 STATUS AND DUE AUTHORIZATION
The Borrower is a corporation duly organized under the laws of
the Republic of Hungary, and the Guarantor is a Delaware, U.S.
Company with power to enter into this Agreement and to
exercise its rights and perform its obligations hereunder and
all corporate and other action required to authorize its
execution of this Agreement and its performance of its
obligations hereunder has been
<PAGE>
duly taken, subject to full payment of Citicorp and MATAV in
respect of all shares, and, in relation to the deposit of the
shares in the Borrower, the Hungarian Ministry of
Telecommunication and Water Management has given its consent.
7.1.6 CLAIMS PARI PASSU
Under the laws of the Republic of Hungary, the claims of the
Bank against it under this Agreement will rank at least pari
passu with the claims of all its other unsecured creditors
except those whose claims are preferred solely by any
bankruptcy, insolvency, liquidation or other similar laws of
general application.
7.1.7 NO FILING OR STAMP TAXES
Under the laws of the Republic of Hungary, it is not necessary
that this Agreement be filed, recorded or enrolled with any
court or other authority in such jurisdiction or that any
stamp, registration or similar tax be paid on or in relation
to this Agreement.
7.1.8 OWNERSHIP OF THE BORROWER
The Borrower is subsidiariy of the Guarantor.
7.1.9 OWNERSHIP OF THE GUARANTOR
The Guarantor is a U.S. public company with its shares
traded on the American Stock Exchange.
<PAGE>
7.2 COVENANTS
7.2.1 MAINTENANCE OF LEGAL VALIDITY
The Obligor shall obtain, comply with the terms of and do all
that is necessary to maintain in full force and effect all
authorisations, approvals, licences and consents required in
or by the laws and regulations of its jurisdiction of
incorporation to enable it lawfully to enter into and perform
its obligations under this Agreement and the relating
Agreement and to ensure the legality, validity, enforceability
or admissibility in evidence in its jurisdiction of
incorporation of this Agreement.
7.2.2 CLAIMS PARI PASSU
The Obligor shall ensure that at all times the claims of the
Bank against it under this Agreement rank at least pari passu
with the claims of all its other unsecured creditors except
those whose claims are preferred by any bankruptcy,
insolvency, liquidation or other similar laws of general
application. Furthermore, the Borrower states and represents,
that it will not enter into any other loan agreement before
the repayment all the made Advances without the prior written
notice to the Bank.
7.2.3 NEGATIVE PLEDGE
The Borrower hereby undertakes that, without the prior written
consent of the Bank, it shall not create or permit to subsist
any encumbrance except for a Permitted Lien over all or any of
its present or future revenues or assets purchased or
constructed from the proceeds of the Facility, or other debt
repaid out of the Facility.
<PAGE>
7.2.4 REPORTING
The Borrower undertakes to procure the sending to the Bank the
quarterly report of its parent company, the Guarantor in a
10-Q format, the annual reports in a 10-k format and the
quarterly cash-flow reports and the monthly statistical
reports, and their balance sheets for the respective quarter,
and any other reasonable request of the Bank from time to
time.
PART 8
EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT
Each of Clause 8.1.1 to Clause 8.1.12 describes circumstances which
constitute an Event of Default. Clause 8.2 and Clause 8.3, and Clause
8.4 deal with the rights of the Bank after the occurrence of an Event
of Default.
8.1.1 FAILURE TO PAY
The Borrower fails to pay any sum due from it hereunder at the
time, in the currency and in the manner specified in its
respective individual loan agreement.
8.1.2 TERMINATING ACCOUNT AGREEMENTS
The Borrower or the Guarantor terminates its Bank accounts
held with the Bank during the term of the Facility provided
under this Agreement.
8.1.3 MORTGAGING OR SELLING OF ASSETS
Mortgaging or selling of assets as defined in 11.1.2 or
in case of announcing bankruptcy or liquidation, selling
<PAGE>
the asset(s) earmarked as security in different ways from what
is specified in the mortgage agreement without consent of the
Bank.
8.1.4 MISREPRESENTATION
Any representation or statement made by any of the Obligors in
this Agreement or in any notice or other document, certificate
or statement delivered by it pursuant hereto or in connection
herewith is or proves to have been incorrect or misleading in
any material respect when made.
8.1.5 OTHER OBLIGATIONS
Any Obligor fails duly to perform or comply with any other
obligation expressed to be assumed by it in this Agreement or
in any security agreement and such failure is not remedied
within thirty days after the Lender has given notice in
writing thereof to such Obligor.
8.1.6 CROSS DEFAULT
Any indebtedness of the Borrower in an amount in excess of USD
1,000,000 is not paid when due, any indebtedness in an amount
in excess of USD 1,000,000 of the Borrower is declared to be
or otherwise becomes due and payable prior to its specified
maturity or any creditor or creditors of the Borrower become
entitled to declare any indebtedness in an amount in excess of
USD 1,000,000 of the Borrower due and payable prior to its
specified maturity, and no waiver has been obtained or is
contented in good faith by the Borrower.
<PAGE>
8.1.7 INSOLVENCY AND RESCHEDULING
The Borrower is unable to pay its debts as they fall due,
commences negotiations with any one or more of its creditors
with a view to the general readjustment or rescheduling of its
indebtedness or makes a general assignment for the benefit of
or a composition with its creditors.
8.1.8 WINDING-UP
The Borrower takes any corporate action or other steps are
taken or legal proceedings are started for its winding-up,
dissolution, administration or re-organisation or for the
appointment of a liquidator, receiver, administrator,
administrative receiver, conservator, custodian, trustee or
similar officer of it or of any or all of its revenues and
assets.
8.1.9 VALIDITY AND ADMISSIBILITY
At any time any material act, condition or thing required to
be done, fulfilled or performed in order (a) to enable any of
the Obligors lawfully to enter into, exercise its rights under
and perform the obligations expressed to be assumed by it in
this Agreement, (b) to ensure that the obligations expressed
to be assumed by any of the Obligors in this Agreement are
legal, valid and binding or (c) to make this Agreement
admissible in evidence in each Obligor's jurisdiction of
incorporation is not done, fulfilled or performed.
8.1.10 ILLEGALITY
At any time it is or becomes unlawful for any of the
Obligors to perform or comply with any or all of its
<PAGE>
obligations hereunder or any of the obligations of any of
the Obligors hereunder are not or cease to be legal,
valid and binding.
8.1.11 TERMINATION OF THE CONCESSION CONTRACTS
At any time the Concession Contract of the Borrower is finally
terminated and the termination comes into effect.
8.2 NOTICE TO THE BORROWER
Upon the occurrence of an Event of Default at any time, the Bank shall
by a 60 days written notice to the Borrower request that the Borrower
cures such Event of Default according to the relevant individual loan
agreement.
8.3 ACCELERATION AND CANCELLATION
Upon the occurrence of an Event of Default and the failure to cure such
Event of Default as set forth in Clause 8.2 above at any time
thereafter, the Bank shall by a 60 days written notice to the Borrower:
a) declare the Advances drawn down by the Borrower to be
immediately due and payable (whereupon the same shall become
so payable together with accrued interest thereon and any
other sums then owed by the Borrower hereunder) or declare
such Advances to be due and payable; and/or
b) declare that the Facility shall be cancelled in respect
of the Borrower, whereupon the same shall be cancelled.
8.4 LENGTH OF TERMS
If, pursuant to Clause 8.3 (Acceleration and Cancellation),
the Bank declares the Advances to be due and payable, the
<PAGE>
Term in respect of any such Advance shall, if the Bank subsequently
demands payment before the scheduled Repayment Date in respect of such
Advance, be deemed of such length that it ends on the date that such
demand is made.
PART 9
GUARANTEE
9.1 GUARANTEE
The Guarantor irrevocably and unconditionally guarantees to the Bank
the due and punctual observance and performance of all the terms,
conditions and covenants on the part of the Borrower contained in this
Agreement and agrees to pay to the Bank from time to time on demand any
and every sum or sums of money which the Borrower is at any time liable
to pay to the Bank under or pursuant to this Agreement and which has
become due and payable but has not been paid at the time such demand is
made with at least 60 days notice. The Guarantor shall perform the
above mentioned obligations on a 60 days prior written notice of the
Bank.
9.2 INDEMNITY
The Guarantor irrevocably and unconditionally agrees as a primary
obligation to indemnify the Bank from time to time on demand by the
Bank from and against any loss incurred by the Bank as a result of any
of the obligations of the Borrower under or pursuant to this Agreement
being or becoming void, voidable, unenforceable or ineffective as
against the Borrower for any reason whatsoever, whether or not known to
the Bank or any of them or any other person, the amount of such loss
being the amount which the person or persons suffering it would
otherwise have been entitled to recover from the Borrower.
<PAGE>
9.3 ADDITIONAL SECURITY
The obligations of the Guarantor herein contained shall be in addition
to and independent of every other security which the Bank may at any
time hold in respect of any of the Borrower's obligations hereunder.
9.4 CONTINUING OBLIGATIONS
The obligations of the Guarantor herein contained shall constitute and
be continuing obligations notwithstanding any settlement of account or
other matter or thing whatsoever and shall not be considered satisfied
by any intermediate payment or satisfaction of all or any of the
obligations of the Borrower under this Agreement and shall continue in
full force and effect until final payment in full of all amounts owing
by the Borrower hereunder and total satisfaction of all the Borrower's
actual obligations hereunder.
9.5 ASSIGNMENT OF CLAIM
If the Guarantor is obliged to make any payments under this Guarantee,
it will take over the Bank's right to claim repayment and interest and
other costs from the Borrower according to this Agreement, to the
extent of the amount the Guarantor actually paid, without any further
notice to or consent by the Bank.
PART 10
DEFAULT INTEREST AND INDEMNITY
10.1 DEFAULT INTEREST PERIODS
If any sum due (principal, interest) and payable by the
Borrower hereunder is not paid on the due date therefor in
<PAGE>
accordance with the provisions of Parts 4 and 6 or if any sum due and
payable by the Borrower under any judgment of any court in connection
herewith is not paid on the date of such judgment, the period beginning
on such due date or, as the case may be, the date of such judgment and
ending on the date upon which the obligation of Borrower to pay such
sum (the balance thereof for the time being unpaid being herein
referred to as an "unpaid sum") is discharged shall be divided into
calendar days.
10.2 DEFAULT INTEREST
During each such period relating thereto as is mentioned in Clause 10.1
(Default Interest Periods) an unpaid sum shall bear interest at the
rate per annum which is 6 per cent above the interest rate defined in
Clause 4.2.a.
10.3 PAYMENT OF DEFAULT INTEREST
Any interest which shall have accrued under Clause 10.1 (Default
Interest) in respect of an unpaid sum shall be due and payable and
shall be paid by the Borrower owings such unpaid sum at the end of the
period by reference to which it is calculated or on such other dates as
the Bank may specify by written notice to the Borrower.
10.4 CURRENCY OF DEFAULT INTEREST
In case of a failure to pay the amount maintained in USD when due, the
Bank shall convert the USD amount to HUF at the time it is due, thus
the interest on this shall be governed also by this clause.
<PAGE>
PART 11
GUARANTEES OF THE LOAN REPAYMENT
11.1 The security for the repayment of any debt incurred by the Borrower to
the Bank based on this Agreement shall include the following:
11.1.1 IMPUTATION RIGHT
The Borrower shall authorize the Bank to debit at the due date
- by exercising its imputation right - any account of the
Borrower according to point No. 3.2 of the Business Regulation
of Loans of the Bank, provided the debt still exists, by the
amount of the matured facility and its interest and to enforce
it with a prompt collection order debiting the Borrower's
accounts held with the Bank, following the sequence for
fulfilling payment orders with prior ranking, but before all
other payment orders as specified in section (2) of paragraph
5 of Government Decree No. 39/1984. (XI.5.) pertaining to
financial transactions and loans. The Borrower shall not be
permitted to withdraw its authorization included in this point
while its debt to the Bank still exists.
11.1.2 THE MORTGAGING OF THE ASSETS OF THE BORROWER
The Borrower hereby agrees to grant a lien on all its assets
(i) purchased or constructed from the Facility provided
according to this Agreement and (ii) purchased or constructed
from those loans which are refinanced by the Facility provided
in this Agreement, however the lien does not cover any assets
to be purchased or constructed from a facility other than
provided according to this Agreement.
<PAGE>
The mortgaging of the assets of the Borrower is subject to the
terms and conditions of the Turn-key Construction Contract
between Fazis Rt. and the Borrower.
The Parties will enter into a separate Security Agreement to
establish these mortgages. Such Security Agreement will
provide an option to the Lender allowing it to register the
mortgaging of the assets in a public notary register upon the
coming into force of a law to that effect.
11.1.3 DEPOSITING THE SHARES IN BORROWER OWNED BY THE GUARANTOR
FOR THE BENEFIT OF THE BANK GUARANTEE
The Guarantor hereby agrees to deposit all of its shares held
in the Borrower with ABN AMRO Bank Magyarorszag Rt. as an
escrow agent for the securing the repayment of the Facility
provided under this Agreement. It is understood that the
shares in the Borrower are currently deposited for securing
indebtedness owed to MATAV and to Citicorp, therefore the
deposit under this clause can be effected only upon the full
payment of the debt to MATAV. The Parties will enter into a
separate agreement to implement this deposit.
11.1.4 INSURANCE POLICY COVERING THE ASSETS OF THE BORROWER
The Borrower shall be obliged to (i) obtain an insurance
policy covering, to the extent that cover is commercially
available in the market the total value of the asset(s)
earmarked for security if no such policy is already in place,
(ii) send the policy, which must name the Bank as the
beneficiary to the Bank within 60 days and (iii) confirm
payment of premiums at the request of the Bank. The Borrower
must not modify or terminate such insurance policy without the
Bank's consent.
<PAGE>
11.1.5 BANK ACCOUNTS OF BORROWER
The Borrower and the Guarantor shall conduct all practical
financial transactions through settlement accounts opened for
this purposes exclusively with the Bank where available. In
those regions not having local Bank facilities, alternative
financial institutions may be used. The Borrower and the
Guarantor shall use its best efforts to open all bank accounts
by December 31, 1996. The Bank shall charge a turnover fee of
0.125% for all debit transactions.
11.1.6 SUPERVISORY BOARD SEAT
The Guarantor agrees that, at the next General Meetings of the
Borrower (which the Borrower agrees to hold no later than 60
days from the date of the execution of this Agreement) it
shall nominate and vote its shares in favour of a nominee of
the Bank as one member of the Supervisory board of the
Borrower.
11.1.7 FINANCING SUPPORT AGREEMENT WITH THE MINISTRY OF
TRANSPORT, TELECOMMUNICATIONS AND WATER MANAGEMENT
The Borrower undertakes to sign an agreement with the Lender
and the Hungarian Ministry of Transport, Telecommunications
and Water Management ("the Ministry") relating to its
concession agreement, and such agreement will cover the
following issues:
- the Ministry approves the grant of a mortgage on the
assets as set forth in Clause 11.1.2 and a lien on
the Guarantor's shares in the Borrower, to the
Lender, including the enforcement of these securities
by the Lender in the event of default;
<PAGE>
- the Ministry approves the continuation of the
concession agreement if the Lender enforces its
rights as a secured party;
- the Ministry will not approve the grant of further
mortgage over the assets without consent of the
Lender in respect of assets that were
purchased/installed using the Facility or other
loans/supplier credits repaid from the Facility;
- the Lender will receive copies of all Notifications
sent by the Ministry to the Borrower;
- if, after the Borrower is liquidated due to
bankruptcy, a new concession company is formed, the
Lender has the right to determine the new
shareholding structure. However, the Lender
undertakes to make all reasonable actions required
to avoid the liquidation of the Borrower;
- if a concession agreement is terminated and a new
tender is announced, the new concession holder will
be obliged to buy all the assets of the Borrower at a
price determined by the Lender and accepted by an
independent auditor,
- the Ministry is not entitled to amend the
concession agreement when the Borrower is in
material default (which has not been cured within
30 days following written notice of such default by
the Lender) of its individual loan agreement
without the Lender's consent, which shall not be
unreasonably withheld.
This Agreement is effective regardless of whether the
Ministry agrees to any or all of the points raised in
<PAGE>
this clause 11.1.7, and the lack of Agreement because of the
Minister does not enter into such Agreement, does not
constitute an event of default.
PART 12
ASSIGNMENTS AND TRANSFERS
12.1 BINDING AGREEMENT
The Agreement shall be binding upon and enure to the benefit of each
party hereto and its or any subsequent successors, Transferees and
assigns.
12.2 NO ASSIGNMENTS AND TRANSFERS BY THE OBLIGORS
No Obligor shall be entitled to assign or transfer all or any of its
rights, benefits and obligations hereunder except in the event of a
merger or consolidation of the Obligors.
12.3 ASSIGNMENTS AND TRANSFERS BY BANK
The Bank may, at any time and by completing a Transfer Certificate,
assign all or any of its rights, benefits and obligations hereunder to
a consortium of banks. Any transfer to a third party who is not a
member of a consortium of banks requires the consent of the Guarantor,
which can not to be unreasonably withheld. In the event of such
transfer, the Bank will remain bound by its obligations under this
Agreement with the Borrower.
PART 13
LEGAL DISPUTE AND GOVERNING LAW
<PAGE>
13.1 LEGAL DISPUTES
The Parties shall attempt to resolve all disputes pertaining to this
contract through mutual agreement, and in case of the failure of such
attempts the Permanent Arbitration Court attached to the Hungarian
Chamber of Commerce and Industry will be assigned exclusively to deal
with the issue. The language of the proceedings shall be Hungarian.
13.2 GOVERNING LAW
Issues not regulated in this contract shall be governed by the
following:
a) The bank account agreement to be signed between the Bank
and the Borrower;
b) General Business Conditions of the Bank and the Business
Regulations for Loans;
c) Provisions pertaining to bank loans of the Civil Code of
the Republic of Hungary;
d) other laws and statutes of the republic of Hungary on
money transactions and bank loans.
13.3 GOVERNING LANGUAGE
This Agreement is executed in both English and Hungarian. In the event
of any discrepancies, the Hungarian language version shall prevail,
except in respect of Part 9 (Guarantee) where the English language
version shall prevail.
<PAGE>
PART 14
MISCELLANEOUS
14.1 EFFECTIVENESS
This Agreement shall come into effect upon the authorized signing by
the Parties.
14.2 COMMUNICATIONS AND NOTICES
Each communication and notice to be made hereunder shall be made in
writing and, unless otherwise stated, shall be made by fax, and
confirmed by letter to the following addresses and fax numbers:
(1) Postabank es Takarekpenztar Rt., 1132 Budapest, Vaci ut
48.
To the attention of: Horvath Geza fax number: 270-2246
(2) [Relevant Subsidiary of Hungarian Telephone and Cable
Corp.] To the attention of: Andrew E. Nicholson fax
number:202-4778
(3) Hungarian Telephone and Cable Corp., 1126 Budapest,
Kiralyhago u. 2.,
To the attention of: Andrew E. Nicholson fax number: 202-
4778
All communications shall be copied to Dr. Peter Lakatos fax
number: 268-1610
14.3 LANGUAGE OF COMMUNICATION
Each communication and document made or delivered by one party to
another pursuant to this Agreement shall be in the English language or
accompanied by a translation thereof into English
certified (by an officer of the person making or delivering the same)
as being a true and accurate translation thereof. Bank account
statements may be in Hungarian.
14.4 COPIES
This agreement is signed in 8 original copies. AS WITNESS the hands of
the duly authorized representatives of the parties hereto the day and year first
before written.
[Duly Executed by all of the Parties]
Exhibit 10.86
[RELEVANT SUBSIDIARY OF HUNGARIAN TELEPHONE AND CABLE CORP.]
as Pledgor
and
POSTABANK ES TAKAREKPENZTAR RT.
as Pledgee
--------------------------------
MORTGAGE AND
PLEDGE AGREEMENT
SECURING BANK LOAN
--------------------------------
<PAGE>
THIS MORTGAGE AND PLEDGE AGREEMENT SECURING BANK LOAN ("Pledge Agreement") is
made on October 15, 1996
BETWEEN:
(1) [Relevant Subsidiary of Hungarian Telephone and Cable Corp.]
(the "PLEDGOR" or the "BORROWER"); and
(2) POSTABANK ES TAKAREKPENZTAR RT. 1132 Budapest, Vaci ut 48.
(the "PLEDGEE").
(the Pledgor and the Pledgee are hereinafter together referred
to as the "PARTIES").
WHEREAS:
(i) The Pledgee has issued a commitment letter dated September 30,
1996 which was amended the same day (the "Commitment Letter")
in which the Pledgee irrevocably stated and confirmed that it
would finance the telecommunication development of the
Pledgor, directly on one hand, and according to the terms and
conditions of the Commitment Letter with the cooperation of
enterprises jointly appointed by Fazis Rt. and the Pledgee on
the other, and the Pledgee shall accept full responsibility
for the provision of the facility;
(ii) Based on the Commitment Letter, the Parties entered into the
Borrower's Individual Loan Agreement on October 15, 1996;
(iii) In order to secure the Borrower's Individual Loan Agreement,
the Parties agreed to enter into security arrangements, i.e a
Security Agreement and this Pledge Agreement Securing Bank
Loan;
<PAGE>
NOW IT IS HEREBY AGREED AS FOLLOWS:
1 INTERPRETATION
Terms defined in the Borrower's Individual Loan Agreement shall have
the same meanings in this Pledge Agreement save as otherwise provided
herein.
"BORROWER'S INDIVIDUAL LOAN AGREEMENT" means the individual loan
agreement the Borrower has entered into between the Pledgee as lender,
the Borrower as borrower and and HTCC USA as guarantor;
"CIVIL CODE" means the Act No. IV of 1959 as amended;
"MULTI CURRENCY CREDIT FACILITY AGREEMENT" means the credit
facility agreement made between Hungarotel Rt., Papatel Rt.,
KNC Rt., Raba-Com Rt., HTCC Consulting Rt. as borrowers,
Postabank es Takarekpenztar Rt. as lender and Hungarian
Telephone and Cable Corp. as guarantor effective as of October
15, 1996;
"OUTSTANDING OBLIGATIONS" means collectively, all moneys and
liabilities in the currency in which such moneys and liabilities are
expressed to be payable which are now or may at any time hereafter be
due, owing or incurred and which remain outstanding from any of the
obligations incurred under the Borrower's Individual Loan Agreement to
the Pledgee;
"PLEDGE" means the pledge created by this Agreement;
"PLEDGED GOODS" means all movable and immovable assets owned by the
Pledgor (i) which were acquired and/or furnished by the Pledgor under
the previous credit facilities borrowed by the Pledgor which are to be
repaid by the proceeds of the Borrower's Individual Loan Agreement and
(ii) which are or
<PAGE>
will be acquired and/or furnished by using the Loan borrowed under the
Borrower's Individual Loan Agreement. A list of the immovable property
will be created in cooperation with the Pledgee within twenty one (21)
days of the execution of this Agreement and a list of the remaining
assets will be created within thirty (30) days of the execution of this
Agreement.
"REGISTRY OF ASSETS" means the registry to be kept by the Pledgor in
accordance with Section 42 of Act No. XVIII of 1991 on Accounting.
2 EXCLUDED GOODS
2.1 The Parties agree that the Pledged Goods do not include any assets
acquired by the Pledgor using funds other than those provided under the
Borrower's Individual Loan Agreement.
3 CREATION OF PLEDGE
3.1 The Pledgor hereby confirms its obligation to repay the Loan together
with interest thereon and any other sums, including interest in case of
late payment and execution costs, due in respect thereof under the
Borrower's Individual Loan Agreement.
3.2 The Parties hereby agree to create (i) a pledge securing the Loan over
the movable Pledged Goods and (ii) a mortgage over the immovable
Pledged Goods in order to secure the Outstanding Obligations of the
Pledgor in the amount of the HUF equivalent of USD __________ plus
interest and charges thereon.
3.3 The Parties agree that all of the Pledged Goods serve as
security for the total Outstanding Obligations.
<PAGE>
4 CONTINUING SECURITY
4.1 The Pledge constituted by this Agreement shall:
(i) be a continuing security for the payment,
satisfaction and discharge in full of the
Outstanding Obligations and shall not be considered
as satisfied or discharged or prejudiced by any
intermediate payment, satisfaction or settlement of
the whole or any part of the Outstanding
Obligations or any other matter or thing
whatsoever;
(ii) be in addition to and shall not operate so as in
any way to prejudice or affect or be prejudiced or
affected by any encumbrance, guarantee, indemnity
or other right or remedy which the Pledgee (or any
person on their behalf) may now or at any time
hereafter hold for or in respect of the Outstanding
Obligations or any part thereof; and
(iii) not be prejudiced by any time or indulgence granted
to any person, or any abstention or delay by the
Pledgee in perfecting or enforcing any encumbrance,
securities, guarantees, rights or remedies that the
Pledgee may now or hereafter have from or against the
Pledgor.
5 RIGHTS AND OBLIGATIONS OF THE PLEDGOR
5.1 The Pledgor shall enter the Pledge into the Registry of
Assets.
5.2 The Pledgor at its cost shall enter into insurance contracts with
various insurance companies in accordance with Section 3.4 of the
Business Regulations for Loans of the Pledgee
<PAGE>
covering the Pledged Goods. The Pledgor undertakes that it shall,
forthwith upon the execution of this Pledge Agreement, notify the
relevant insurance companies of the interest of the Pledgee in the
policies. In the event of a claim, the Pledgor undertakes to instruct
the relevant insurance company that the proceeds are to be deposited in
a special account held by the Pledgee, and may only be used to replace
the lost or damaged assets giving rise to the claim. The Pledgor shall
furnish the Pledgee with access to the aforesaid insurance policies on
request.
5.3 The Pledgor is entitled to use the Pledged Goods for their proper
purpose and shall ensure that the Pledged Goods are always maintained
with due care. This right includes the right to sell, transfer or
assign the Pledged Goods or any part thereof in accordance with its
normal course of business or otherwise with the prior written consent
of the Pledgee.
5.4 The Pledgor shall inform the Pledgee on any material change incurred in
the value and saleability of the Pledged Goods other than in the
ordinary course of business.
5.5 The Pledgor agree that the Pledgee will register a mortgage over the
immovable Pledged Goods for the total amount of the Outstanding
Obligations into the Land Registry in favour of the Pledgee.
6 RIGHTS AND OBLIGATIONS OF THE PLEDGEE
6.1 The Pledgee is entitled to check at any time on the premises
of the Pledgor the existence, secure handling and proper use
of the Pledged Goods. A person properly authorised by the
Pledgee is entitled to carry out such verification on behalf
of the Pledgee. The person acting on behalf of the Pledgee
shall prove his authorisation with an authorisation document
duly signed by the Pledgee.
<PAGE>
6.2 The Pledgee may if, in its reasonable opinion, it considers it
necessary for securing the Outstanding Obligations, segregate at the
cost of the Pledgor the Pledged Goods from other assets of the Pledgor.
7 ENFORCEMENT OF PLEDGE
7.1 Upon the occurrence of an Event of Default and the expiry of the notice
period defined in clause 8.2 of the Borrower's Individual Loan
Agreement, and in the absence of waiver or any new agreement the
Pledgee may, during a period of 90 days, solicit offers for the Pledged
Goods.
7.1.1 If, at the end of the 90 day period, the Pledgee
has received a bona fide offer in writing (the
"Offer"), and which
(i) is backed with a bank guarantee from a bank
independent of the Lender; or
(ii) is backed with an unconditional irrevocable
guarantee from a company rated A by both Standard &
Poors and Moodys; or
(iii) is from a third party which itself is a company
rated A by both Standard & Poors and Moodys;
it will notify the Pledgor of all aspects of the
Offer and the Pledgor has 15 business days to make a
payment to the Bank equivalent to that of the Offer
in order to retain its ownership of the Pledged
Goods; if the Pledgor cannot match the payment terms
of the Offer within the 15 business day period, the
Bank is free to accept the Offer; the Pledgor will
take all actions necessary in order that the Pledgee
may perfect the sale of the Pledged Goods.
<PAGE>
7.1.2 If, at the end of the 90 day period, the Pledgee
has received no Offers definied in Clause 7.1.1,
the Pledgor will have a further 90 day period to
solicit offers for the Pledged Goods. If the
Pledgor receive a bona fide offer in writing (the
"Pledgor's Offer"), it will notify the Pledgee
thereof. The Pledgee will have 15 business days to
accept the Pledgor's Offer;
7.1.3 if the Pledgor receives no offers by the end of
this further 90 day period, the Pledgee may
purchase 50% of the Pledged Goods for a price of 1
HUF.
7.2 The Pledgee confirms that until the occurrence of an Event of Default
the Pledgor shall be entitled to sell or deal with the Pledged Goods in
accordance with its normal course of business and to the extent
provided by the Borrower's Individual Loan Agreement.
7.3 The Pledgee may for the repayment of the Outstanding Obligations
enforce the Pledge in accordance with Chapter 2 of the Government
Decree No 39/1984 (XI.5.) on Bank Credits. The Pledgee is entitled to
choose from among the Pledged Goods listed in Schedule 1 those on which
it will enforce the Pledge.
8 REPRESENTATION
8.1 The Pledgor represents that:
(i) it is the sole owner of Pledged Goods, and, other
than in regard to loans which will be repaid out of
the proceeds of the Loan, and it has not agreed to
sell or pledge or otherwise dispose of any of its
rights to the Pledged Goods to any third person.
<PAGE>
The Parties agree that the Pledgor shall not, without
the prior written consent of the Pledgee, sell the
Pledged Goods and create or permit to exist any
encumbrance over the Pledged Goods other than as set
out in the Agreement or as in the future required by
law;
(ii) there is no pending material litigation or third
party claims against the Pledged Goods;
(iii) it has all necessary power, has taken all necessary
corporate action and has obtained all necessary
consents of all government agencies and has taken all
action necessary or required by law to enable it to
execute and perform this Agreement.
8.2 The Pledgor hereby covenants with the Pledgee that it shall not take or
omit to take any action the taking or omission of which might result in
the alteration or impairment of any rights under the Pledged Goods or
which might permanently adversely affect or diminish the value of the
Pledged Goods.
9 REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of the
Pledgee any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or
remedy prevent any further or other exercise thereof or the exercise of
any other right or remedy. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
10 TERM OF THE PLEDGE AGREEMENT
This Pledge Agreement shall terminate when the Pledgee certifies to the
Pledgor, in writing, that the Outstanding
<PAGE>
Obligations have been fully and finally discharged. The Pledgee shall
take all actions necessary to ensure that the discharge of any mortgage
over the Pledged Goods is notified on the Land Register.
11 COSTS AND EXPENSES
11.1 The Parties agree that all costs incurred in connection with this
Agreement (insurance costs, registration costs, registration to the
mortgage registry kept by the public notaries) shall be born by the
Pledgor.
12 LEGAL DISPUTE AND GOVERNING LAW
12.1 LEGAL DISPUTES
The Parties shall attempt to resolve all disputes pertaining to this
Agreement through mutual consent, and in case of the failure of such
attempts the Permanent Arbitration Court attached to the Hungarian
Chamber of Commerce and Industry will be assigned exclusively to deal
with the issue.
12.2 GOVERNING LAW
This Agreement shall be governed by the laws of the Republic of
Hungary. This Agreement is executed in Hungarian and English, and the
Hungarian version will prevail in the event of any discrepancies.
13 MISCELLANEOUS
13.1 EFFECTIVENESS
This Agreement shall come into effect upon the authorized signing by
the Parties and receipt of the approval, if required, of the Minister
of Transport, Telecommunications and
<PAGE>
Water to the pledge of the Pledged Goods, and also subject to the
approval of Tele Denmark and the Danish Investment Fund for Central and
Eastern Europe, and the repayment of Siemens Telefongyar Kft.
supplier's credit and the full payment of MATAV.
13.2 COMMUNICATIONS AND NOTICES
Each communication and notice to be made hereunder shall be made in
writing and, unless otherwise stated, shall be made by fax, and
confirmed by letter to the following addresses and fax numbers:
(1) Postabank es Takarekpenztar Rt. 1132 Budapest, Vaci ut
48.
To the attention of: Geza Horvath Fax number: 270 2246
(2) [Relevant subsidiary of Hungarian Telephone and Cable
Corp.]
To the attention of: Andrew Nicholson Fax number: 202
4778
13.3 LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Agreement shall be in the Hungarian language
and accompanied by a translation thereof into English certified (by an
officer of the person making or delivering the same) as being a true
and accurate translation thereof.
13.4 COPIES
This Agreement is signed in 8 original copies.
<PAGE>
13.5 CHANGES IN LAW
The Parties agree that after coming into force of the modification of
the Civil Code on pledges and mortgages, at the written request of the
Pledgee, the Pledge will be registered into the mortgage registry kept
by a public notary.
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first before written.
[Duly Executed by all of the Parties]
Exhibit 10.87
HTCC CONSULTING RT.
HUNGARIAN TELEPHONE AND CABLE CORP.
POSTABANK ES TAKAREKPENZTAR RT.
[RELEVANT SUBSIDIARY OF HUNGARIAN TELEPHONE AND CABLE CORP.]
ABN AMRO (MAGYARORSZAG) RT.
-----------------------------------------------------------------
SECURITY AGREEMENT
-----------------------------------------------------------------
<PAGE>
THIS SECURITY AGREEMENT ("Security Agreement") is made on October
15, 1996
between
(1) HUNGARIAN TELEPHONE AND CABLE CORP. ("HTCC USA") having its
registered office at 1126 Budapest, Kiralyhago u. 2;
(2) HTCC CONSULTING RT. ("HTCC Consulting") having its registered
office at 1126 Budapest, Kiralyhago u. 2;
((1) and (2) together the "DEPOSITORS" and any one of them a
"DEPOSITOR")
(3) POSTABANK ES TAKAREKPENZTAR RT. having its registered office
at 1132 Budapest, Vaci ut 48 (the "BANK" or "LENDER"),
(4) [Relevant subsidiary of Hungarian Telephone and Cable Corp.]
(the "BORROWER")
(5) ABN AMRO (MAGYARORSZAG) RT. having its registered office at H-
1126 Budapest, Nagy Jeno u 12 (the "ESCROW AGENT")
(the Depositors, the Borrower, the Escrow Agent and the Bank are
hereinafter together referred to as the "PARTIES").
WHEREAS:
(i) The Bank has issued a commitment letter dated
September 30, 1996 which was amended the same day
(the "COMMITMENT LETTER") in which the Bank
irrevocably stated and confirmed that it would
finance the telecommunication development of the
Borrower, directly on one hand, and according to
the terms and conditions of the Commitment Letter,
with the cooperation of enterprises jointly
appointed by Fazis Rt. and the Bank on the other,
and the Bank shall accept full responsibility for
the provision of the facility;
(ii) Based on the Commitment Letter, the Multi Currency
Credit Facility Agreement was executed by the parties
and the Borrower has entered into the Borrower's
Individual Loan Agreement with the Bank;
(iii) As security for the Borrower's Individual Loan
Agreement, the Parties have agreed to enter into
various security arrangements, i.e a Pledge Agreement
with the Borrower securing the Loan and this Security
Agreement;
<PAGE>
NOW IT IS HEREBY AGREED AS FOLLOWS:
1 INTERPRETATION
Terms defined in the Borrower's Individual Loan Agreement shall have
the same meanings in this Security Agreement save as otherwise provided
herein.
In this Security Agreement:
"BORROWER'S INDIVIDUAL LOAN AGREEMENT" means the individual loan
agreement the Borrower has entered into between the Bank as lender, the
Borrower as borrower and HTCC USA as guarantor;
"CIVIL CODE" means the Act No. IV of 1959 as amended;
"MULTI CURRENCY CREDIT FACILITY AGREEMENT" means the credit
facility agreement made between Hungarotel Rt., Papatel Rt.,
KNC Rt., Raba-Com Rt., and HTCC Consulting Rt. as borrowers,
Postabank es Takarekpenztar Rt. as Lender and Hungarian
Telephone and Cable Corp. as guarantor, effective as of
October 15, 1996;
"OUTSTANDING OBLIGATIONS" means collectively, all moneys and
liabilities in the currency in which such moneys and liabilities are
expressed to be payable which are now or may at any time hereafter be
due, owing or incurred and which remain outstanding from any of the
obligations incurred under the Borrower's Individual Loan Agreement to
the Bank;
"SECURITY" means the security created by this Agreement;
"DEPOSITED SECURITIES" means the shares set out in column headed "Total
No. of Shares deposited with Escrow Agent" opposite the name of the
Borrower in Schedule 1 to this Security Agreement ("deposited security"
has the meaning set out in Section 270 and 271 of the Civil Code).
"PLEDGED GOODS" means all movable and immovable assets owned by the
Depositors (i) which were acquired and/or furnished by the Depositors
under the previous credit facilities borrowed by the Depositor which
are to be repaid by the proceeds of the Borrower's Individual Loan
Agreement and (ii) which are or will be acquired and/or furnished by
using the Loan borrowed under the Borrower's Individual Loan Agreement.
<PAGE>
2 EXISTING PLEDGE AGREEMENTS
2.1 All ordinary registered shares in the Borrower owned by HTCC
USA are currently pledged in favor of Matav Rt [Relevant only
to three of Hungarian Telephone and Cable
Corp.'s subsidiaries] for securing its claim under a security
agreement dated ________ between Matav Rt, HTCC USA and
various third parties. The loan to Matav Rt will be repaid by
the Borrower with the funds it receives from the Bank, at
which time the shares pledged to Matav Rt will be released.
Upon their release, these shares shall be deposted at the
Escrow Agent and be included in the Security created by this
Security Agreement.
3 DEPOSITING THE SECURITIES
3.1 Upon repayment of the loan to Matav Rt referred to above in
Clause 2.1, the Deposited Securities will be deposited at the
Escrow Agent and for the benefit of the Lender subject to the
terms of this Agreement. The Deposited Securities guarantee
the Outstanding Obligations of the Borrower under the
Borrower's Individual Loan Agreement.
3.2 The certificate of deposit is contained in Schedule 2 to this
Agreement. The declaration on delivery and handling of the
Deposited Securities is contained in Schedule 3 to this
Agreement.
3.3 The Depositors shall deposit the Deposited Securities
with a blank endorsement.
4 ENFORCING THE SECURITY
4.1 Upon the occurrence of an Event of Default and the expiry of
the notice period defined in Clause 8.2 of the Borrower's
Individual Loan Agreement, and in the absence of waiver or any
new agreement, the Bank may, during a period of 90 days,
solicit offers for the Deposited Securities.
4.2 If, at the end of the 90 day period, the Bank has received a
bona fide offer in writing which includes a conditional
agreement in respect of the Pledged Goods and which
(i) is backed with a bank guarantee from a bank
independent of the Lender; or
(ii) is backed with an unconditional irrevocable
guarantee from a company rated A by both
Standard & Poors and Moodys; or
(iii) is from a third party which itself is a
company rated A by both Standard & Poors and
Moodys;
(the "Offer"), it will notify the Depositors of all details of
the Offer and the Depositors have 15 business days in which to
match the Offer in order to retain its
<PAGE>
ownership of the Deposited Securities. For the avoidance of
doubt, matching the Offer means matching the total
consideration included in the Offer, including any repayment
of debt or increase in capital offered by the offeror. If the
Depositors cannot match the Offer within the 15 business day
period, the Bank is free to accept the Offer.
4.3 If, at the end of the 90 day period, the Bank has received no
Offers, the Depositors will have a further 90 day period to
solicit offers for the Deposited Securities. If the Depositors
receive a bona fide offer in writing which includes a
conditional agreement in respect of the Pledged Goods and
which
(i) is backed with a bank guarantee from a bank
independent of the Lender; or
(ii) is backed with an unconditional irrevocable
guarantee from a company rated A by both
Standard & Poors and Moodys; or
(iii) is from a third party which itself is a
company rated A by both Standard & Poors and
Moodys;
(the "Depositors' Offer"), they will notify the Bank thereof.
The Bank will have 15 business days to accept the Depositors'
Offer.
4.4 If the Depositors receive no offers by the end of this further
90 day period, or the Bank does not accept the offer, the Bank
may purchase 50% of the Deposited Securities for a price of 1
HUF per Share.
4.5 The Parties agrees that:
4.5.1 if the net proceeds from the sale of the Deposited
Securities are greater than the Outstanding
Obligations, the balance will be returned to the
Borrower or HTCC USA, as the case may be;
4.5.2 if the net proceeds from the sale of the Deposited
Securities are less than the Outstanding Obligations,
the amount of the shortfall will remain Outstanding
Obligations of the Borrower.
5 DIVIDENDS AND VOTING RIGHTS OF THE DEPOSITED SECURITIES
5.1 The Parties agree that all dividends from and voting rights
attaching to the Deposited Securities shall belong to the
Depositors. The Escrow Agent shall not be responsible in any
way for the handling of the dividends.
<PAGE>
6 WARRANTIES
6.1 The Depositors each warrant that it is the owner of the
Deposited Securities and that no third person has any rights
to them subject to the full repayment of the loan granted by
Citicorp North America Inc.
6.2 Each Depositor assumes the obligation:
(a) not to sell the Deposited Securities or any
interest relating to the same, in particular,
without limitation, it shall not sell, or otherwise
transfer or encumber under any title the Deposited
Securities; however this does not affect the right
of the Depositor to cede such secondary security
rights to a third person which do not affect the
Bank's primary security right in any manner and
which do not limit any right due to the Bank under
this Agreement;
(b) to refrain from any action or omission, whose
purpose or result may bring about the cancellation
of the Deposited Securities or permanently reduce
their value;
(c) to ensure that the Company enters in the register
of shares that the Depositor has granted security
over the Deposited Securities;
(d) to use its best endeavours, to carry out, or to cause
to be carried out, all actions which are necessary or
advised for the effective establishment of the
Security and which make it possible for the Bank to
exercise all of its rights relating to the Deposited
Securities under this Agreement.
7 PROVISIONS RELATING TO THE RELEASE OF THE DEPOSITED SECURITIES
7.1 If the Borrower or HTCC USA, as the case may be, complies with
all of its payment obligations due to the Bank under the
Borrower's Individual Loan Agreement, the Bank shall release
all the Deposited Securities to the Depositors and this
Security Agreement shall cease to exist.
7.2 The Bank and the Escrow Agent acknowledge that Andrew
Nicholson shall be the authorised person to take delivery of
the Deposited Securities on behalf of the Depositors, until
the Bank and the Escrow Agent are notified otherwise by the
Depositors.
<PAGE>
8 COSTS AND EXPENSES
8.1 The Parties agree that any costs incurred in connection with
this Agreement shall be born by the Depositors.
9 LEGAL DISPUTE AND GOVERNING LAW
9.1 LEGAL DISPUTES
The Parties shall attempt to resolve all disputes pertaining
to this Agreement through mutual consent, and in case of the
failure of such attempts the Permanent Arbitration Court
attached to the Hungarian Chamber of Commerce and Industry
will be assigned exclusively to deal with the issue.
9.2 GOVERNING LAW AND LANGUAGE
This agreement will be governed by the laws of the Republic of
Hungary. This agreement is executed in Hungarian and English
and the Hungarian version will prevail in the event of any
discrepancies.
10 LIABILITY OF ESCROW AGENT
10.1 The parties agree that the Escrow Agent will hold the
Deposited Securities on deposit on the terms set out in
this Security Agreement. The Escrow Agent will return
the Deposited Securities to the person named in clause
7.2 upon delivery to it of a request for the Deposited
Securities from the Depositors, accompanied by a letter
from the Bank confirming that (i) all existing payment
obligations due to the Bank from the Borrower have been
met or (ii) that the Bank does not object to the
Deposited Securities being returned to the Depositors.
10.2 The Bank, the Depositors and the Borrower agree to indemnify
the Escrow Agent from and against any losses which may arise
in connection with this Security Agreement, except where such
loss or damage results from the negligence or wilful default
of the Escrow Agent.
11 MISCELLANEOUS
11.1 EFFECTIVENESS
This Agreement shall come into effect upon the authorized
signing by the Parties and receipt of the approval of the
Minister of Transport, Telecommunications and Water to the
pledge of the Deposited Securities and also subject to the
approval of Tele Denmark and the Danish Investment
<PAGE>
Fund for Central and Eastern Europe [with respect to two of
Hungarian Telephone and Cable Corp.'s subsidiaries], and the
full payment of Matav.
11.2 COMMUNICATIONS AND NOTICES
Each communication and notice to be made hereunder shall be
made in writing and, unless otherwise stated, shall be made by
fax, and confirmed by letter to the following addresses and
fax numbers:
(1) [Relevant subsidiary of Hungarian Telephone and
Cable Corp.]
(2) Kelet-Nograd Com. Tavkozlesi es Telekommunikacios
Magyar-Amerikai Koncesszios Rt. 3100 Salgotarjan,
Munkasotthon ter 1.
To the attention of: Andrew Nicholson Fax number:
202 4778
(3) HTCC Consulting Rt., 1126 Budapest, Kiralyhago u.
2. To the attention of: Andrew Nicholson Fax
number: 202 4778
(4) Hungarian Telephone and Cable Corp., 1126 Budapest,
Kiralyhago u. 2. To the attention of: Andrew
Nicholson Fax number: 202 4778
(5) ABN AMRO (Magyarorszag) Rt. H-1126 Budapest, Nagy
Jeno u 12. To the attention of: [ ]
Fax number: [ ]
All communication shall be copied to Peter Lakatos,
fax: 268-1610
11.3 LANGUAGE
Each communication and document made or delivered by one party
to another pursuant to this Agreement shall be in the English
language or accompanied by a translation thereof into English
certified (by an officer of the person making or delivering
the same) as being a true and accurate translation thereof.
11.4 COPIES
This Agreement is signed in 8 original copies.
<PAGE>
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first before written.
[Duly Executed by all of
the Parties]
EXHIBIT 10.88
FIRST AMENDMENT TO WARRANT
THIS FIRST AMENDMENT TO WARRANT ("First Amendment") is made and entered
into effective as of October 18, 1996, by and between CU CapitalCorp., a
Delaware corporation ("CUCC"), and Hungarian Telephone and Cable Corp., a
Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, the Company issued and delivered to CUCC that certain Warrant
to Purchase Shares of Common Stock of the Company, dated May 31, 1995 (the
"Warrant");
WHEREAS, CUCC or an affiliate thereof has furnished or has agreed to
furnish additional financial support to the Company and/or its subsidiaries,
including through the issuance to Citicorp North America, Inc. ("CNA") of a
letter of comfort and a letter indemnifying CNA against all events of political,
currency exchange and other cross-border risks in connection with a $75 million
Secured Term Loan Credit Facility for the Company from CNA, the issuance to
Postabank Rt. of a letter of support in connection with a $170 million Credit
Facility for the Hungarian subsidiaries of the Company from Postabank, and the
provision of assurance to CNA of the repayment by the Company of any and all
amounts owed to CNA by October 15, 1996 in connection with the CNA Credit
Facility;
WHEREAS, CUCC or an affiliate thereof has negotiated the extension of a
$750,000 contingent commitment fee payable by the Company to CNA in connection
with the CNA Credit Facility and a $2,000,000 interest credit payable to a
subsidiary of the Company by Postabank in connection with the Postabank Credit
Facility;
WHEREAS, CUCC has insisted, as compensation for providing such
additional financial support to the Company and its subsidiaries and for
obtaining such financial benefits for the Company and its subsidiaries, that the
Company (i) extend the exercise periods of the Warrant and certain of the Stock
Options through September 12, 2000, (ii) grant to CUCC the option to purchase an
additional 875,850 shares of Common Stock at an exercise price of $12.75,
exercisable at any time through September 12, 2000, and (iii) pay to CUCC
$750,000;
WHEREAS, the Company believes that the receipt of such additional
financial support from CUCC and the receipt of the financial benefits arising
from CUCC's negotiations with CNA and Postabank was and would be in the best
interests of all stockholders of the Company and, therefore, in order to
compensate CUCC for obtaining such financial benefits for the Company and its
subsidiaries and for providing such additional financial support in connection
with the CNA Credit Facility, and to induce CUCC to proceed to provide such
additional financial
<PAGE>
-2-
support in connection with the Postabank Credit Facility, the Company is willing
(i) to extend the exercise periods of the Warrant and certain of the Stock
Options through September 12, 2000, (ii) concurrently with the execution of this
First Amendment, to enter into a Third Stock Option Agreement with CUCC granting
to CUCC the option to purchase 875,850 additional shares of Common Stock (the
"Third Stock Option Agreement"), and (iii) to pay CUCC $750,000; and
WHEREAS, the parties now desire to amend the Warrant through execution
of this First Amendment.
NOW, THEREFORE, in consideration of the premises hereof, the parties
hereby agree as follows:
1. The first sentence of the Warrant is hereby amended to
provide for an exercise period for the Warrant that expires at
"5:00 p.m. on September 12, 2000" and that grants the Purchaser
"the right to purchase from the Company at any time before 5:00
p.m. on September 12, 2000."
2. Clause (B) of Paragraph (3)(b)(iv) of the Warrant is
hereby amended to read in its entirety as follows:
"(B) shares of Common Stock issued upon any exercise of any option or
warrant to purchase shares of Common Stock granted to CUCC or any
affiliate thereof."
3. All other provisions of the Warrant shall remain in
full force and effect, except as expressly amended herein.
4. Any capitalized term used in this First Amendment that is not
otherwise defined herein shall have the same meaning given to it in the Warrant.
5. This First Amendment shall in all respects be governed by and
construed in accordance with the internal laws of the State of Delaware (except
that no effect shall be given to any conflicts of law principles of the State of
Delaware that would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, the parties agree to the jurisdiction of the courts of Delaware and
to be served with legal process from any of such courts.
6. This First Amendment may be executed in counterparts, each of which
shall be an original, but such counterparts shall together constitute but one
and the same document.
<PAGE>
-3-
IN WITNESS WHEREOF, CUCC and the Company have caused this First
Amendment to Warrant to be duly executed by their authorized representatives,
all as of the day and year first written above.
ATTEST: HUNGARIAN TELEPHONE AND CABLE CORP.
/s/ Richard P. Halka By: /s/ James G. Morrison
- -------------------- -------------------------
Richard P. Halka James G. Morrison
Controller Chief Executive Officer
CU CAPITALCORP.
By: /s/ Charles J. Weiss
-------------------------
Charles J. Weiss
Authorized Signatory
EXHIBIT 10.89
FIRST AMENDMENT TO STOCK OPTION AGREEMENT
THIS FIRST AMENDMENT TO STOCK OPTION AGREEMENT ("First Amendment") is
made and entered into effective as of October 18, 1996, by and between CU
CapitalCorp., a Delaware corporation ("CUCC"), and Hungarian Telephone and Cable
Corp., a Delaware corporation (the "Company").
W I T N E S S E T H
WHEREAS, CUCC and the Company are parties to that certain Stock Option
Agreement dated as of May 31, 1995 (the "Original Agreement");
WHEREAS, requisite Stockholder Approval was obtained on September 12,
1996, and has not been rescinded, and no further action by the stockholders of
the Company is required in connection with the Original Agreement or this First
Amendment;
WHEREAS, CUCC or an affiliate thereof has furnished or has agreed to
furnish additional financial support to the Company and/or its subsidiaries,
including through the issuance to Citicorp North America, Inc. ("CNA") of a
letter of comfort and a letter indemnifying CNA against all events of political,
currency exchange and other cross-border risks in connection with a $75 million
Secured Term Loan Credit Facility for the Company from CNA, the issuance to
Postabank Rt. of a letter of support in connection with a $170 million Credit
Facility for the Hungarian subsidiaries of the Company from Postabank, and the
provision of assurance to CNA of the repayment by the Company of any and all
amounts owed to CNA by October 15, 1996 in connection with the CNA Credit
Facility;
WHEREAS, CUCC or an affiliate thereof has negotiated the extension of a
$750,000 contingent commitment fee payable by the Company to CNA in connection
with the CNA Credit Facility and a $2,000,000 interest credit payable to a
subsidiary of the Company by Postabank in connection with the Postabank Credit
Facility;
WHEREAS, CUCC has insisted, as compensation for providing such
additional financial support to the Company and its subsidiaries and for
obtaining such financial benefits for the Company and its subsidiaries, that the
Company (i) extend the exercise periods of the Warrant, the Two-Year Option, the
Three- Year Option and the Four-Year Option to coincide with the exercise period
of the Five-Year Option, (ii) grant to CUCC the option to purchase an additional
875,850 shares of Common Stock at an exercise price of $12.75, exercisable at
any time through September 12, 2000, and (iii) pay to CUCC $750,000;
WHEREAS, the Company believes that the receipt of such additional
financial support from CUCC and the receipt of the
<PAGE>
-2-
financial benefits arising from CUCC's negotiations with CNA and Postabank was
and would be in the best interests of all stockholders of the Company and,
therefore, in order to compensate CUCC for obtaining such financial benefits for
the Company and its subsidiaries and for providing such additional financial
support in connection with the CNA Credit Facility, and to induce CUCC to
proceed to provide such additional financial support in connection with the
Postabank Credit Facility, the Company is willing (i) to extend the exercise
periods of the Warrant, the Two-Year Option, the Three-Year Option and the Four-
Year Option to coincide with the exercise period of the Five-Year Option, (ii)
concurrently with the execution of this First Amendment, to enter into a Third
Stock Option Agreement with CUCC granting to CUCC the option to purchase 875,850
additional shares of Common Stock (the "Third Stock Option Agreement"), and
(iii) to pay CUCC $750,000; and
WHEREAS, the parties now desire to amend the Original Agreement through
execution of this First Amendment.
NOW, THEREFORE, in consideration of the premises hereof, the parties
hereby agree as follows:
1. The second and third sentences of Sections 1(a), (b) and (c) of the
Original Agreement are each hereby amended to provide for a five-year exercise
period for the Two-Year Option, the Three-Year Option and the Four-Year Option,
such that in each case the exercise period of such Stock Options would be "from
the date of Stockholder Approval through five (5) years after the date of
Stockholder Approval," and to provide for exercise of any or all of the Two-Year
Option, the Three-Year Option and the Four-Year Option by written notice to the
Company "at any time and from time to time during such five-year exercise
period."
2. Clause (B) of Section 3(b)(iv) of the Original
Agreement is hereby amended to read in its entirety as follows:
"(B) shares of Common Stock issued upon any exercise of any option or
warrant to purchase shares of Common Stock granted to CUCC or any
affiliate thereof."
3. The Company hereby confirms that the condition to exercisability of
the Stock Options set forth in Section 1(f) of the Original Agreement has been
satisfied and, therefore, that all of the Stock Options are exercisable in
accordance with the terms of the Original Agreement, as amended by this First
Amendment.
4. The Company hereby agrees that shares of Common Stock and options to
acquire shares of Common Stock that are issued or granted to CUCC or any
affiliate thereof as compensation for providing financial support or other
services to the Company,
<PAGE>
-3-
including without limitation the option granted to CUCC pursuant to the Third
Stock Option Agreement, together with any additional stock options granted to
CUCC or shares of Common Stock acquired by CUCC pursuant to Section 4.3(d) of
the Master Agreement to the extent relating to such compensation shares and
stock options, shall be excluded and not considered when calculating the number
of Three-Year Option Shares, Four-Year Option Shares and Five- Year Option
Shares in accordance with the Original Agreement.
5. All other provisions of the Original Agreement shall
remain in full force and effect, except as expressly amended
herein.
6. Any capitalized term used in this First Amendment that is not
otherwise defined herein shall have the same meaning given to it in the Original
Agreement.
7. This First Amendment shall in all respects be governed by and
construed in accordance with the internal laws of the State of Delaware (except
that no effect shall be given to any conflicts of law principles of the State of
Delaware that would require the application of the laws of any other
jurisdiction). In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, the parties agree to the jurisdiction of the courts of Delaware and
to be served with legal process from any of such courts.
8. This First Amendment may be executed in counterparts, each of which
shall be an original, but such counterparts shall together constitute but one
and the same document.
<PAGE>
-4-
IN WITNESS WHEREOF, CUCC and the Company have caused this First
Amendment to Stock Option Agreement to be duly executed by their authorized
representatives, all as of the day and year first written above.
ATTEST: HUNGARIAN TELEPHONE AND CABLE CORP.
/s/ Richard P. Halka By: /s/ James G. Morrison
- -------------------- -------------------------
Richard P. Halka James G. Morrison
Controller Chief Executive Officer
CU CAPITALCORP.
By: /s/ Charles J. Weiss
-------------------------
Charles J. Weiss
Authorized Signatory
EXHIBIT 10.90
THIRD STOCK OPTION AGREEMENT
THIS THIRD STOCK OPTION AGREEMENT (this "Agreement"), made as of
October 18, 1996, by and between Hungarian Telephone and Cable Corp., a Delaware
corporation (the "Company"), and CU CapitalCorp., a Delaware corporation
("CUCC").
W I T N E S S E T H
WHEREAS, CUCC or an affiliate thereof has furnished or has agreed to
furnish additional financial support to the Company and/or its subsidiaries,
including through the issuance to Citicorp North America, Inc. ("CNA") of a
letter of comfort and a letter indemnifying CNA against all events of political,
currency exchange and other cross-border risks in connection with a $75 million
Secured Term Loan Credit Facility for the Company from CNA, the issuance to
Postabank Rt. of a letter of support in connection with a $170 million Credit
Facility for the Hungarian subsidiaries of the Company from Postabank, and the
provision of assurance to CNA of the repayment by the Company of any and all
amounts owed to CNA by October 15, 1996 in connection with the CNA Credit
Facility;
WHEREAS, CUCC or an affiliate thereof has negotiated the extension of a
$750,000 contingent commitment fee payable by the Company to CNA in connection
with the CNA Credit Facility and a $2,000,000 interest credit payable to a
subsidiary of the Company by Postabank in connection with the Postabank Credit
Facility;
WHEREAS, CUCC has insisted, as compensation for providing such
additional financial support to the Company and its subsidiaries and for
obtaining such financial benefits for the Company and its subsidiaries, that the
Company (i) extend the exercise periods of the Warrant, the Two-Year Option, the
Three- Year Option and the Four-Year Option to coincide with the exercise period
of the Five-Year Option (as such terms are defined in the Stock Option Agreement
between the parties dated May 31, 1995, as amended (the "First Stock Option
Agreement")), (ii) grant to CUCC the option to purchase an additional 875,850
shares of Common Stock at an exercise price of $12.75, exercisable at any time
through September 12, 2000, and (iii) pay to CUCC $750,000;
WHEREAS, the Company believes that the receipt of such additional
financial support from CUCC and the receipt of the financial benefits arising
from CUCC's negotiations with CNA and Postabank was and would be in the best
interests of all stockholders of the Company and, therefore, in order to
compensate CUCC for obtaining such financial benefits for the Company and its
subsidiaries and for providing such additional financial support in connection
with the CNA Credit Facility, and to induce CUCC to proceed to provide such
additional financial
<PAGE>
-2-
support in connection with the Postabank Credit Facility, the Company is willing
(i) concurrently with the execution of this Agreement, to amend each of the
Warrant and the First Stock Option Agreement to extend the exercise periods of
the Warrant, the Two-Year Option, the Three-Year Option and the Four-Year Option
to coincide with the exercise period of the Five-Year Option, (ii) to enter into
this Agreement to grant to CUCC the option to purchase 875,850 additional shares
of Common Stock, and (iii) to pay CUCC $750,000; and
WHEREAS, the Company now desires to grant CUCC irrevocable options to
purchase authorized but unissued shares of Common Stock of the Company, which
stock options currently would amount to 875,850 shares of Common Stock, on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the parties hereby agree as follows:
1. Grant of Additional Stock Options.
(a) The Company hereby grants to CUCC the irrevocable option (the
"Option") to purchase 875,850 shares of Common Stock (the "Option Shares") at an
initial purchase price of $12.75 per share (subject to adjustment), payable
either in cash or in exchange for evidences of indebtedness of the Company to
CUCC, directly or through a subsidiary thereof, in an aggregate outstanding
amount equal to the aggregate purchase price for such portion or all of the
Option then being exercised. The Option may be exercised at any time and from
time to time from the date hereof through September 12, 2000. Exercise of the
Option may be in whole (at one time or in multiple parts aggregating the whole)
or in part and shall be effectuated by delivering written notice of such
exercise to the Company at any time and from time to time during such exercise
period. Any and each such notice of exercise shall set forth the number of
Option Shares to be acquired, the closing date, and the time and place of the
closing.
(b) The Company hereby acknowledges and agrees with CUCC that the
Option Shares acquired by CUCC pursuant to exercise of the Option are and shall
be "Registrable Securities," as such term is defined in that certain
Registration Agreement dated as of May 31, 1995, by and between the Company and
CUCC (the "Registration Agreement"), and the terms and conditions of the
Registration Agreement shall apply to such Option Shares.
2. Closing Date. The closing date with respect to the
purchase of any of the Option Shares (the "Closing Date") shall
be not less than three nor more than ten days after the date any
notice of exercise with respect to the Option is given unless a
<PAGE>
-3-
waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976
(the "HSR Act"), if applicable, has not expired and/or all necessary approvals,
if any, applicable to such exercise of the Option pursuant to such exercise
notice have not been obtained, in which case the Closing Date shall be not more
than ten days after the last to occur of such waiting period expiration or the
obtaining of the last such approval. In addition, in the event that, after any
notice of exercise with respect to the Option is given, any preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such exercise of the Option is entered, the
Closing Date shall be extended until ten days after the date such order is
dissolved or otherwise ceases to be in effect. On the Closing Date, the
aggregate purchase price for the Option Shares that are the subject of the
exercise notice shall be delivered to the Company and the Company shall issue
and deliver one or more certificates evidencing such Option Shares, and
registered in such manner as the holder of the Option shall direct.
3. Changes in the Option Shares; Anti-Dilution Provisions;
Purchase Price Reset.
(a) For all purposes of this Agreement, the Option Shares shall mean
the Option Shares as if presently outstanding and all securities or other
consideration issued or exchanged with respect to the Option Shares on any
recapitalization, reclassification, merger, consolidation, share exchange,
spin-off, partial or complete liquidation, stock dividend, split-up or
combination of the securities of the Company or any other change in its capital
structure.
(b) Anti-Dilution Provisions. The respective purchase price per Option
Share from time to time in effect under this Agreement, and the number and
character of HTCC securities covered hereby, shall be subject to adjustment from
time to time in certain instances hereinafter set forth. The term "Purchase
Price" shall mean the initial purchase price per share for the Option originally
set forth in this Agreement or any price resulting from adjustments pursuant to
the terms hereof. The number of Option Shares purchasable upon the exercise of
the Option and the Purchase Price shall be subject to adjustment as follows:
(i) In case the Company shall at any time after the date of
execution of this Agreement (A) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to
holders of Common Stock, (B) subdivide its outstanding shares of Common
Stock, (C) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or (D) issue any shares of
its capital stock in a reclassification of the
<PAGE>
-4-
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing entity),
the number of Option Shares purchasable upon exercise of the Option
immediately prior thereto shall be adjusted so that the holder of the
Option shall be entitled to receive the kind and number of Option
Shares or other securities of the Company which he would have owned or
have been entitled to receive after the happening of any of the events
described above, had the Option been exercised immediately prior to the
happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (i) shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(ii) In case the Company shall issue rights, options or
warrants to all holders of its outstanding Common Stock entitling them
(for a period of within 45 days after the record date mentioned below)
to subscribe for or purchase shares of Common Stock at a price per
share which is lower at the record date mentioned below than the Base
Value per share of Common Stock (as defined in paragraph (v) below),
the number of Option Shares then purchasable upon exercise of the
Option shall be determined by multiplying the number of Option Shares
then purchasable upon exercise of the Option by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights,
options or warrants plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock so offered
would purchase at the Base Value per share of Common Stock at such
record date. Such adjustment shall be made whenever such rights,
options or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(iii) In case the Company shall distribute to all holders of
its shares of Common Stock evidences of its indebtedness or
assets (including cash dividends or other distributions in an
amount in excess of 25% of consolidated earnings or earned
surplus legally available for payment of dividends at the time
of the declaration of any such dividend or distribution
payable out of consolidated earnings or earned surplus, but
excluding dividends or distributions payable in stock for
which adjustment is made pursuant to paragraph (i) above or in
the paragraph immediately
<PAGE>
-5-
following this paragraph) or rights, options or warrants, or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding
those referred to in paragraph (ii) above), then in each case
the number of Option Shares thereafter purchasable upon the
exercise of the Option shall be determined by multiplying the
number of Option Shares theretofore purchasable upon the
exercise of the Option by a fraction, of which the numerator
shall be the then current market price per share of Common
Stock (as defined in paragraph (v) below) on the last trading
date preceding the ex- dividend date with respect to such
distribution, and of which the denominator shall be such
market price per share of Common Stock less then fair value
(as reasonably determined by the Board of Directors of the
Company in good faith, whose determination shall be
conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible or exchangeable
securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is
made, and shall become effective on the date of distribution
retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
In the event of a distribution by the Company to all holders
of its shares of Common Stock of stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an
adjustment in the number of Option Shares purchasable upon the exercise
of the Option, the holder of the Option, upon the exercise thereof at
any time after such distribution, shall be entitled to receive from the
Company, such subsidiary or both, as the Company shall reasonably
determine, the stock or other securities to which such holder would
have been entitled if such holder had exercised the Option immediately
prior thereto, all subject to further adjustment as provided in this
subsection (b); provided, however, that no adjustment in respect of
dividends or interest on such stock or other securities shall be made
during the term of the Option or upon the exercise of the Option other
than an adjustment which would be required pursuant to this Agreement.
(iv) In case the Company shall issue shares of Common Stock or
rights, options or warrants containing the right to subscribe for or
purchase shares of Common Stock or securities convertible into Common
Stock (including amendments and modifications to the price, nature or
number of any existing rights, options or warrants containing the right
to subscribe for or purchase shares of Common Stock or
<PAGE>
-6-
securities convertible into Common Stock other than due to reset,
anti-dilution or adjustment rights presently contained therein, and
excluding (A) shares, rights, options, warrants or convertible
securities issued in any of the transactions described in paragraphs
(i), (ii) or (iii) above, (B) shares of Common Stock issued upon any
exercise of any options or warrants to purchase shares of Common Stock
granted to CUCC or any affiliate thereof or (C) securities issued in
exchange for or on exercise or conversion of any rights, options or
warrants described in this paragraph (iv)) for a price per share of
Common Stock, in the case of the issuance of Common Stock, or for the
price per share of Common Stock initially deliverable upon conversion
or exchange of such securities, less than the Base Value per share of
Common Stock (as defined in paragraph (v) below) on the date the
Company fixed the offering, conversion or exchange price of such
additional shares, the number of Option Shares thereafter purchasable
upon the exercise of the Option shall be determined by multiplying the
number of Option Shares theretofore purchasable upon exercise of the
Option by a fraction, of which the numerator shall be the number of
shares of Common Stock so outstanding on such date plus the aggregate
number of shares of Common Stock so issued or offered for subscription
or purchase, and of which the denominator shall be the number of shares
of Common Stock outstanding on such date plus the number of shares
which the aggregate offering price of the total number of shares of
Common Stock so issued or offered would purchase at the Base Value per
share of Common Stock at such record date. Such adjustment shall be
made whenever such shares, rights, options, or warrants are issued or
so amended or modified, and shall become effective immediately after
the effective date of such event retroactive to the record date, if
any, for such event.
(v) For the purpose of any computation under paragraphs (ii),
(iii) and (iv) of this subsection (b), "Base Value per share of Common
Stock" at any date means the greater of (A) the current market price
per share of Common Stock on such date (computed as described below) or
(B) the Purchase Price in effect on such date. The current market price
per share of Common Stock at any date shall be the average of the daily
closing prices for 20 consecutive trading days commencing 30 trading
days before the date of such computation. The closing price for each
day shall be the last such reported sales price regular way or, in case
no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way for such day, in each case on
the principal national securities exchange or in the NASDAQ/NMS to
which the shares of Common Stock are listed or admitted to trading or,
if not listed or admitted to trading, the average of the closing bid
and
<PAGE>
-7-
asked prices of the Common Stock quoted on NASDAQ/NMS or any comparable
system. In the absence of one or more such quotations, the Company
shall determine the current market price on the basis of such
quotations as it considers reasonably appropriate.
(vi) No adjustment in the number of Option Shares purchasable
hereunder shall be required unless such adjustment would result in an
increase or decrease of at least one percent of the Purchase Price;
provided, however, that any adjustments which by reason of this
paragraph (vi) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall
be made to the nearest cent or to the nearest one-thousandth of a
share, as the case may be.
(vii) Whenever the number of Option Shares purchasable upon
the exercise of the Option is adjusted, as herein provided, the
Purchase Price payable upon exercise of each the Option shall be
adjusted by multiplying the appropriate Purchase Price immediately
prior to such adjustment by a fraction, of which the numerator shall be
the number of Option Shares purchasable upon the exercise of the
applicable the Option immediately prior to such adjustment, and of
which the denominator shall be the number of such Option Shares
purchasable thereunder immediately thereafter.
(viii) No adjustment in the number of Option Shares
purchasable upon the exercise of the Option need be made under
paragraphs (ii), (iii) or (iv) of this subsection (b) if the Company
issues or distributes to the holder of the Option the shares, rights,
options, warrants, or convertible or exchangeable securities, or the
evidences of indebtedness or assets referred to in those paragraphs
which the holder of the Option would have been entitled to receive had
the Option been exercised prior to the happening of such event or the
record date with respect thereto. No adjustment in the number of Option
Shares purchasable upon the exercise of the Option need be made for
sales or issuances of Common Stock or rights, options or warrants to
purchase Common Stock pursuant to (A) a Company plan for Company
shareholders generally for reinvestment of dividends, (B) rights,
options or warrants, or convertible or exchangeable securities or
agreements to issue rights, options or warrants or convertible or
exchangeable securities, outstanding on the date hereof and not
subsequently modified or amended in any manner that would otherwise
cause the number of Option Shares to be adjusted hereunder, or (C)
options for the purchase of Common Stock granted by the Company from
time to time pursuant to its employee stock option plans approved by
Company stockholders, with such
<PAGE>
-8-
number of shares subject to adjustment as provided in the
plans.
(ix) For the purpose of this subsection (b), the term "shares
of Common Stock" shall mean (A) the class of stock designated as the
Common Stock of the Company at the date hereof, or (B) any other
class(es) of stock resulting from successive changes or
reclassifications of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment made
pursuant to paragraph (i) above, the holder hereof shall become
entitled to purchase any securities of the Company other than shares of
Common Stock, thereafter the number of such other shares so purchasable
upon exercise of the Option and the Purchase Price of such shares shall
be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Option Shares contained in paragraphs (i) through (viii), inclusive,
above, and to the extent appropriate the other provisions of this
Agreement that are applicable, with respect to the Option Shares, shall
apply on like terms to any such other securities.
(x) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges, if any thereof shall not have been
exercised, the Purchase Price and the number of shares of Common Stock
purchasable upon the exercise of the Option shall, upon such
expiration, be readjusted and shall thereafter be such as they would
have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (A) the only
shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (B) such shares of
Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for the
issuance, sale or grant of all such rights, options, warrants or
conversion or exchange privileges whether or not exercised; provided,
however, that no such readjustment shall have the effect of increasing
the Purchase Price or decreasing the number of shares of Common Stock
purchasable upon the exercise of the Option by an amount in excess of
the amount of the adjustment initially made in respect to the issuance,
sale or grant of such rights, options, warrants or conversion or
exchange privilege.
(c) Rights Upon Certain Corporate Transactions. If,
prior to the expiration of the Option by exercise or by its
<PAGE>
-9-
terms, the Company shall be recapitalized by reclassifying its outstanding
Common Stock into shares with a different par value or by changing its
outstanding Common Stock with par value to shares without par value, or the
Company or a successor corporation shall consolidate or merge with or convey all
or substantially all of its or of any successor corporation's property and
assets to any other corporation or corporations, or the Company or a successor
corporation or corporations shall distribute Common Stock or other assets
pursuant to, without limitation, any spin-off, split-off, or other distribution
of assets, the holder of the Option shall thereafter have the right to purchase,
upon the basis and on the terms and conditions and during the time specified in
this Agreement, in lieu of the Common Stock of the Company theretofore
purchasable upon the exercise of the Option, such shares, securities or assets
as may be issued or payable with respect to, or in exchange for, the number of
share of Common Stock of the Company theretofore purchasable upon the exercise
of the Option had the Option been exercised immediately prior to such
recapitalization, consolidation, merger, conveyance or distribution.
(d) Rights Upon Liquidation. If, at any time while the Option
shall remain unexpired and unexercised, the Company shall dissolve, liquidate or
wind up its affairs, the holder of the Option may in connection with such event
receive, upon exercise hereof, in lieu of each share of Common Stock of the
Company which it would have been entitled to receive the same kind and amount of
any securities or assets as may be issuable, distributable or payable upon any
such dissolution, liquidation or winding up with respect to each share of Common
Stock of the Company.
(e) Notice of Changes. In the event (i) the Company shall
issue any shares of Common Stock, options or rights to subscribe for shares of
Common Stock, or any securities convertible into or exchangeable for shares of
Common Stock, or adjust or reset the conversion price of any such options,
rights or convertible securities, or the nature or number thereof, other than
pursuant to 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
<PAGE>
-10-
voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, and in such event, the Company shall mail to the holder of the Option a
notice, at least ten (10) days prior to the record date for, or if no record
date, then at least thirty (30) days prior to the date or expected date on which
such event is to take place, stating the nature and relevant dates for such
event, including the date or expected date, if any is to be fixed, as of which
holders of Common Stock of record shall be entitled to exchange their Common
Stock for securities or other property deliverable upon, and a description of,
such reclassification/reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up, as the case may be.
(f) Reduction of Purchase Price Below Par Value. As a
condition precedent to the taking of any action which would cause
an adjustment reducing the Purchase Price below then par value of
the shares of Common Stock issuable upon exercise hereof, the
Company will take such corporation action as may be necessary in
order that it may validly and legally issue fully paid and
nonassessable shares of such Common Stock at such adjusted
Purchase Price.
4. Representations and Warranties of the Company. The
Company represents to CUCC as follows:
(a) The Company has the full power and authority to execute,
deliver and carry out the terms and provisions of this Agreement and to
consummate the transactions contemplated here. The execution, delivery and
performance of this Agreement and the granting of the Option have been approved
by all requisite corporate action on the part of the Company, and no further
action is necessary to authorize such acts.
(b) This Agreement has been duly and validly executed and
delivered by the Company, and constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms;
(c) The authorized capital stock of the Company consists of
(i) 25,000,000 shares of Common Stock of which, as of the date hereof, 4,171,626
are issued and outstanding and 4,742,540 shares are reserved for issuance upon
the exercise of currently outstanding rights, warrants and options to purchase
shares of Common Stock and the conversion of currently outstanding securities
convertible into shares of Common Stock other than the Option, and (ii)
5,000,000 shares of Preferred Stock, none of which are outstanding or reserved
for issuance. There exist no liens, claims, options, preemptive rights, proxies,
voting agreements, charges or encumbrances of whatever nature affecting the
Option Shares other than as provided in this Agreement;
<PAGE>
-11-
(d) The execution and delivery of this Agreement and the
performance of this Agreement by the Company will not (i) require the consent,
waiver, approval, license or authorization of or any filing with any person or
governmental authority (other than pursuant to the HSR Act), (ii) violate the
certificate of incorporation, by-laws, or other organizational documents of the
Company, (iii) with or without the giving of notice or the lapse of time or
both, conflict with or result in a breach of any terms or provisions of, or
constitute a default or give rise to a right of acceleration under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of Company under any indenture, mortgage, agreement, note or other
instrument to which the Company is a party or by which its property is bound or
(iv) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental authority or court having jurisdiction over Company
or any of its property;
(e) Upon issuance by the Company of the Option Shares in
accordance herewith, such shares of Common Stock will be duly and validly
issued, fully paid and nonassessable and the holder of such Option Shares will
have good title to such Option Shares, free and clear of all liens, claims,
options, preemptive rights, proxies, voting agreements, charges or encumbrances
of whatever nature affecting such Option Shares; and
(f) There exists no restriction on the Company's issuance and
delivery of the Option Shares, nor is the Company required to obtain the
approval of any person or governmental authority (other than to the extent
required under the HSR Act) to effect the sale of the any of the Option Shares.
5. Covenants of the Company. The Company covenants with
CUCC that, during the term of this Agreement:
(a) The Company will cooperate with the holder of the
Option in obtaining any regulatory or governmental approvals
necessary in order to exercise the Option;
(b) The Company shall reserve and keep available from its
authorized but unissued shares of its Common Stock or other capital stock as may
be the subject of the Option such number of shares thereof as are issuable upon
exercise of the Option, and shall not issue any such shares, or make any
agreement, commitment or arrangement to issue any such shares, or issue any
option, warrant or other security exercisable for or convertible into any such
shares, other than the Option; and
(c) No fractional shares of Common Stock will be issued in
connection with any purchase hereunder but in lieu of such fractional shares,
the Company shall make a cash refund therefor equal in amount to the product of
the applicable
<PAGE>
-12-
fraction multiplied by the Purchase Price then in effect and applicable to the
Option Shares being purchased.
6. Term. This Agreement shall be and remain in effect from
the date hereof until September 12, 2001.
7. Miscellaneous. Any shares of Common Stock purchased by the holder of
the Option pursuant to this Agreement will be acquired for investment only and
not with a view to any public distribution thereof, and such person will not
offer, sell or otherwise dispose of such shares so acquired by it in violation
of the registration requirements of the Securities Act of 1933, as amended, or
any applicable state securities laws.
8. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and shall be
deemed to have been duly given on the next business day after the same is sent,
if delivered personally or sent by telecopy or overnight delivery, or five
calendar days after the same is sent, if sent by registered or certified mail,
return receipt requested, postage prepaid, as set forth below, or to such other
persons or addresses as may be designated in writing in accordance with the
terms hereof by the party to receive such notice.
(a) If to CUCC, to:
CU CapitalCorp.
c/o Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/329-4651
Attn: General Counsel
with a required copy to:
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N.W.
Washington, D.C. 20036
Facsimile No.: 202/745-0916
Attn: Jeffry L. Hardin
(b) If to the Company, to:
Hungary Telephone and Cable Corp.
100 First Stamford Place
Stamford, CT 06902
Facsimile No.: 203/348-0128
Attention: General Counsel
9. Specific Enforcement. The Company acknowledges that the
holder of the Option would be irrevocably damaged in the event
that any of the provisions of this Agreement were not performed
by the Company in accordance with their specific terms or were
<PAGE>
-13-
otherwise breached. It is accordingly agreed that the holder of the Option shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and specifically to enforce this Agreement and the terms and
provisions thereof in addition to any other remedy to which the holder of the
Option may be entitled at law or in equity.
10. Expenses. Except as otherwise provided herein, all fees and
expenses incurred by the Company, and all sales, transfer or other similar taxes
payable in connection with this Agreement (including, but not limited to, any
transfer taxes payable in connection with the sale of the Option Shares), will
be borne by the Company, and all fees and expenses incurred by CUCC in
connection with this Agreement will be borne by CUCC.
11. Brokerage. CUCC and the Company each represents and warrants to the
other that neither it nor any of its affiliates has entered into or will enter
into any contract, agreement, arrangement or understanding with any person or
firm which will result in the obligation of the other to pay any finder's fee,
brokerage commission or similar payment in connection with this Agreement, the
Option or the transaction contemplated hereby. CUCC and the Company each agrees
to indemnify and hold the other harmless from and against any and all claims or
liabilities for finder's fees, brokerage commissions or similar payments
incurred by reason of any action taken by it or its affiliates.
12. Counterparts. This Agreement may be executed in one or
more counterparts, and each of such counterparts shall for all
purposes be deemed to be an original, but all such counterparts
together shall constitute but one instrument.
13. Assignment. No party hereto shall assign its rights and obligations
under this Agreement or any part thereof, nor shall any party assign or delegate
any of its rights or duties hereunder without the prior written consent of the
other party, and any assignment made without such consent shall be void;
provided, that the rights and obligations of CUCC hereunder may be assigned to
and assumed by a subsidiary of CUCC. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
14. Governing Law; Forum; Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflict of laws thereof.
Each of the parties to this Agreement hereby irrevocably and unconditionally (i)
consent to submit to the exclusive jurisdiction of the courts of the State 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
<PAGE>
-14-
party is not a resident of the State of Delaware, agrees to appoint an agent in
the State of Delaware as such party's agent for acceptance of legal process in
any such proceeding against such party with the same legal force and validity as
if served upon such party personally within the State of Delaware, and to notify
promptly each other party hereto of the name and address of such agent, (iii)
waives any objection to the laying of venue of any such proceeding in the courts
of the State of Delaware, and (iv) waives, and agrees not to plead or to make,
any claim that any such proceeding brought in any court of the State of Delaware
has been brought in an improper or otherwise inconvenient forum.
15. Further Assurance. If the holder of the Option shall exercise the
Option in accordance with the terms of this Agreement, from time to time and
without additional consideration, then the Company will execute and deliver, or
cause to be executed and delivered, such additional or further transfers,
assignments, endorsements, consents and other instruments as the holder of the
Option may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
<PAGE>
-15-
IN WITNESS WHEREOF, the parties hereto have duly executed this Third
Stock Option Agreement on the date first written.
ATTEST: HUNGARIAN TELEPHONE AND CABLE CORP.
By:/s/ Richard P. Halka By:/s/ James G. Morrison
- ----------------------- -------------------------
Richard P.Halka James G. Morrison
Controller Chief Executive Officer
CU CAPITALCORP.
By:/s/ Charles J. Weiss
-------------------------
Charles J. Weiss
Authorized Signatory
Exhibit 99.5
HUNGARIAN TELEPHONE AND CABLE CORP.
FOR IMMEDIATE RELEASE
Contact: Arthur Dague Andrew Nicholson
203/329-5094 011-361-212-1100
[email protected] (Budapest, Hungary)
HUNGARIAN TELEPHONE AND CABLE CORP. ANNOUNCES
CREDIT FACILITY AGREEMENT WITH HUNGARIAN BANK
Stamford, CT, October 16, 1996 -- Hungarian Telephone and Cable Corp.
(AMEX: HTC) announced today that it has entered into a $170 million 10-year
credit facility agreement with Postabank Rt, a Hungarian commercial bank. The
proceeds of the credit facility will be used to repay an existing $75 million
Secured Term Credit Facility entered into in March of this year. The remainder
of the credit facility will be used to fund the build out of the Company's
telephone concession areas in the Republic of Hungary, provide working capital,
and to refinance other existing debt.
"This credit facility agreement represents an important step forward
for HTC and its shareholders," explained Jim Morrison, HTC's president and chief
executive officer. "We believe HTC's operating areas offer a significant
potential market for basic and advanced telecommunications services. We are
committed to continuing the development of our telecommunications network and,
through this credit facility agreement, are pleased to be doing so in a
cost-effective manner."
HTC is a rapidly growing provider of telephone services in five
concession areas in Hungary, currently serving approximately 80,000 access lines
in its service territories.
###
