HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Financial Statements
For the quarterly period ended March 31, 1996
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996 Commission file number 1-11484
-------------- -------
HUNGARIAN TELEPHONE AND CABLE CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-652685
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
227 Rt. 206 Bldg. 1 Unit 11, Flanders, NJ 07836
(Address of principal executive offices)
(212) 571-7400
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the lastest possible date:
Common Stock, $.001 par value 4,268,055 Shares
- - ------------------------------ ----------------
(Class) (Outstanding at April 30, 1996 )
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Table of Contents
Part I. Financial Information
Consolidated Condensed Balance Sheets 2
Consolidated Condensed Statements of Operations 3
Consolidated Condensed Statements of
Stockholders' Equity 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operatons 9
Part II. Other Information 14
Signature 15
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands, except share data)
Assets
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
Current assets:
Cash and cash equivalents $ 13,716 $ 16,192
Restricted cash 2,242 1,757
Accounts receivable 4,494 1,399
VAT receivable, net 5,185 4,432
Prepayments and other 4,256 4,449
Other current assets 1,614 1,598
----------- -----------
Total current assets 31,507 29,827
----------- -----------
Property, plant, and equipment 57,752 55,353
Less accumulated depreciation 1,621 1,131
----------- -----------
Net property, plant and equipment 56,131 54,222
----------- -----------
Goodwill and intangibles, less
accumulated amortization 17,286 19,768
Other assets 8,277 6,570
------- -----------
Total Assets $ 113,201 $ 110,387
============= ===========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 0 $ 300
Current installments of
long-term debt 6,236 9,699
Short term loans 32,580 33,982
Accounts payable 6,521 8,835
Due to related parties 14,412 3,075
Accruals 3,143 5,564
Other current liabilities 6,853 1,953
----------- -----------
Total current liabilities 69,745 63,408
Long-term debt, excluding current
installments 29,805 23,467
Advance subscriber payments, long term 0 2,136
----------- -----------
Total liabilities 99,550 89,011
----------- -----------
Commitments and contingencies
Minority interest 3,016 5,637
----------- -----------
Stockholders' equity:
Common stock, $.001 par value.
Authorized 10,000,000 shares;
issued 4,265,039 shares
in 1996 and 4,015,039 shares
in 1995 4 4
Additional paid-in capital 48,577 45,358
Accumulated deficit (31,959) (26,192)
Foreign currency translation
adjustment (5,046) (2,381)
Deferred compensation (941) (1,050)
------------ ------------
Total stockholders' equity 10,635 15,739
----------- -----------
Total liabilities and stockholders'
equity $ 113,201 $ 110,387
=========== ===========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
For the Three Month Periods Ended March 31, 1996 and 1995
(In thousands, except share and per share data)
(unaudited)
1996 1995
---- ----
TELEPHONE SERVICES REVENUES, NET $ 5,159 407
Operating expenses:
Operating and maintenance expenses 4,964 1,031
Depreciation and amortization 2,195 456
Management fees 1,342 725
----------- --------
Total operating expenses 8,501 2,212
----------- --------
LOSS FROM OPERATIONS (3,342) (1,805)
Other income (expenses):
Foreign exchange (1,412) 322
Interest expense (1,735) (245)
Interest income 192 136
Other, net 211
-----------
LOSS BEFORE MINORITY INTEREST (6,086) (1,592)
MINORITY INTEREST 318 374
----------- --------
NET LOSS $ (5,768) (1,218)
============ =========
LOSS PER SHARE OF COMMON STOCK $ (1.41) (.45)
=============== =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,080,079 2,724,431
=========== =========
See accompanying notes to consolidated condensed financial statements. The
Company ceased to be a development stage company on April 1, 1995.
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Stockholders' Equity
(In thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Foreign
Additional Currency Total
Common Paid-in Accumulated Translation Deferred Stockholders
Shares Stock Capital Deficit Adjustment Compensation equity
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 4,015,039 $ 4 $ 45,358 $ (26,192) $ (2,381) $ (1,050) $ 15,739
Common stock issuance 250,000 3,219 3,219
Net Loss (5,767) (5,767)
Foreign currency translation adjustment (2,665) (2,665)
Earned compensation 109 109
- - -------------------------------------------------------------------------------------------------------------------------
Balances at March 31, 1996 4,265,039 $ 4 $ 48,577 $ (31,959) $ (5,046) $ (941) $ 10,635
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
For the Three Month Periods Ended March 31, 1996 and 1995
(In thousands)
(unaudited)
1996 1995
Net cash used in operating activities $ (7,659) (2,053)
--------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (5,031) (9,395)
Cash received from sale of
subsidiaries stock 1,464
Acquisition of interests in subsidiar (330) 641
Decrease in intangible assets 37
Loan receivable (136)
Net cash used in investing activities (5,361) (7,389)
--------- ----------
Cash flows from financing activities:
Borrowings under long-term debt 108 5,771
Proceeds from short-term loans 1,167
Proceeds from issuance of common stock 105
Repayment of short-term debt (4,865)
Proceeds from borrowings from related
parties 16,430
---------
Net cash provided by financing
activities 11,673 7,043
-------- ---------
Effect of foreign exchange rate changes on
cash (1,129) 322
--------- ---------
Net decrease in cash and cash equivalents (2,476) (2,077)
Cash and cash equivalents at beginning
period 16,192 6,966
-------- ---------
Cash and cash equivalents at end period $ 13,716 4,889
======== =========
See accompanying notes to consolidated condensed financial statements. The
Company ceased to be a development stage company on April 1, 1995.
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
The accompanying condensed consolidated financial have been
prepared without audit and in the opinion of management include
all adjustments, consisting mainly of normal recurring accruals
necessary for fair presentation. Results for the interim periods
are not necessarily indicative of the results for a full year.
(2) Cash and Cash Equivalents and Restricted Cash
At March 31, 1996 cash of $2,752,000 denominated in U.S. dollars
was on deposit with a major money center bank and a U.S. Treasury
money market fund in the United States. In
addition, at March 31,1996 $10,964,000 ($1,764,000 denominated in
U.S. dollars, the equivalent of $1,872,000 denominated in German
Deutsche Marks and the equivalent of $7,328,000 denominated in
Hungarian Forints) was on deposit with Hungarian government-owned
banks and a foreign bank in Hungary.
Approximately $2,242,000 at March 31, 1996 of cash denominated in
Hungarian Forints is restricted under concession contract
fulfilment guarantees with restrictions to be removed upon the
successful attainment of certain operational requirements as
prescribed in the
concession agreements and other operational requirements. The
Company expects to satisfy the other operational requirements in
1996 and therefore the restricted cash is shown as a current
asset.
(3) Related Parties
Due to related parties at March 31, 1996 is comprised of the
following: $37,000 due to Hungarian Teleconstruct Corp.
("Teleconstruct") for rent and other services, plus interest;
$904,000 due to TeleDanmark A/S ("TDI") for management fees
chargeable under the management agreement; and $13,471,000 due to
Citizens Utilites Company ("Citizens") for loans, reimbursable
management costs, management fees chargeable under the management
services agreement and interest charged under the terms of the
Citizens Loan Agreement.
During the three months ended March 31, 1996 and 1995, the Company
also paid legal fees of approximately $21,000 and $30,000,
respectively, to an officer.
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIE
Notes to Consolidated Financial Statements
(unaudited)
On March 26, 1996, the Company agreed to purchase from
Teleconstruct Kft, the Hungarian subsidiary of Teleconstruct,
premises used as offices by the Company and its subsidiary HTCC
Consulting Rt, in Budapest, Hungary for a price of $250,000 or
such lesser amount as can be substantiated as cost to
Teleconstruct. $125,000 of the purchase price has been paid as a
deposit, carrying interest at the rate of 8% per annum. In the
event that the Company does not complete the purchase for any
reason within 60 days, the deposit paid, and all accrued interest,
is returnable by Teleconstruct to the Company.
Included in Long-term debt at March 31, 1996 is approximately $6.2
million borrowed from TDI by subsidiaries under the subordinated
loan agreement.
(4) Credit Facility
On March 29, 1996, the Company entered into a $75 million Secured
Term Loan Credit Facility ("Credit Facility") and, together with
HTCC Consulting, a related Pledge and Security Agreement with
Citicorp North America, Inc. ("Citicorp"). Advances under the
Credit Facility may be requested through December 31, 1996 and
will bear interest rates of 3.5% and 6.5% above LIBOR or
Citicorp's announced base rate. The loan is repayable by December
31, 1996. On April 3, 1996, the Company used $50,753,000 from the
Credit Facility to repay all the funds advanced or guaranteed by
Citizens and Chemical Bank pursuant to the Citizens Loan
Agreement. In April, 1996 the Company will record a non-cash
charge of approximately $8 million representing the remaining
unamortized deferred financing costs pertaining to the Citizens
Loan Agreement.
The Company has engaged an investment bank to serve as lead
underwriter for the placement of approximately $150 million in
debt securities of the Company, which is anticipated to close in
mid-1996.
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(5) Construction Commitments
In 1995 Ro ba-Com and Kelet-NUgro d Com entered into contracts
with an unrelated corporation which provide for the construction
of the local telephone exchanges in the two primary districts on a
turnkey basis. The minimum contract price for the two districts is
HUF 7,778 million (approximately $53 million) of which the
contractor will finance DM 20,000,000 (approximately $13.5 million
at March 31, 1996) representing 85% of the contract price of the
equipment. The financing is for an eight-year period with
semi-annual instalments beginning July 1, 1995, including interest
at DM-LIBOR (Deutsche mark London interbank offered rate) plus 1%.
The contractor will hold a security interest in all financed
property until the payment of the last instalment. On March 31,
1996, HUF 983 million (approximately $6,700,000 at the March 31,
1996 exchange rate) was owed to the contractor under the
financing arrangement. The balance sheet at March 31, 1996
includes $4.2 million of advance payments to the contractor.
This advance will be applied against future costs to be
incurred during the remaining term of the contracts.
On May 10, 1996 the Company entered into a contract with an
unrelated corporation which provides for the construction of the
local telephone exchange in the Papo primary region on a turnkey
basis, at a fixed price of approximately $13.2 million, including
$2 million for settlement of all past obligations. The contract
requires full completion of construction in 1996.
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company earns substantially all its telecommunications revenue from
connections fees, monthly line rental fees, toll usage, public pay telephone
services and ancillary services (including charges for additional services
purchased at the customer's discretion). The ability of the Company to generate
sufficient revenues to cover cash expenditures and to become profitable will
depend upon a number of factors, including the Company's ability to attract
customers, revenues per customer, churn rates and construction costs. These
factors are expected to be primarily influenced by the success of the Company's
operation and marketing strategies as well as market acceptance of
telecommunications services in the Company's Operating Areas. In addition, the
Company's profitability may be affected by changes in the Company's regulatory
environment.
The success of the Company's strategy is measured to some extent by its
ability to add new subscribers. Since March 31, 1995, the Company has installed
or commenced operating over 55,000 access lines. During this same period, the
Company's churn has been negligible. The Company does not believe that such
rates of subscriber addition will be sustainable in the future, especially after
its exclusivity period for the provision of basic telephone services ends in
2002.
Results of Operations
Revenues
The Company commenced operations in its subsidiary's respective concession
areas as of the following dates:
Access lines in service at
Subsidiary Acquisition Date Acquisition date March 31, 1996
Raba-Com January 1, 1995 2,480 7,007
Kelet-Nograd March 1, 1995 13,050 16,511
Hungarotel January 1, 1996 40,591 43,068
Papatel January 1, 1996 3,823 4,204
59,944 70,790
====== =======
The Company was in the development stage through March 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (continued)
Revenues for the three months ended March 31, 1996 increased as compared to the
three months ended March 31, 1995 primarily due to the acquisitions of
additional concession areas and customer growth (see table above). This increase
resulted principally from the connection of 4,527 and 3,461 new access lines in
the Raba-Com and KNC operating areas, respectively, and the inclusion of results
for the Papatel and Hungarotel operating regions which added 3,823 and 40,591
access lines in these new areas, respectively, to the Company's operations in
Papatel and Hungarotel operating regions. Since assumption of operations the
Company has installed 381 and 2,477 new access lines in the Hungarotel and
Papatel concession areas, respectively, in the quarter ended March 31, 1996.
For the three months ended March 31, 1995, the Company recorded revenues of
$407,000 primarily related to measured services in Kelet-Nograd and Raba-Com.
For the three months ended March 31, 1996 the Company recorded measured service
revenues of $1,083,000 for Kelet-Nograd, $320,000 for Raba-Com, $3,243,000 for
Hungarotel and $389,000 for Papatel. Measured services for the three months
ended March 31, 1996 totalled $5,035,000 or approximately $74 per average access
line in operation for the period as compared to $53 per average access line for
the three months ended March 31, 1995.
The Company recorded $1,715,000 in connection and subscription fees and other
revenues of $546,000, for the three months ended March 31, 1996. Revenues were
offset in part by net interconnect charges of $2,137,000 and $194,000, for the
three months ended March 31, 1996 and 1995, respectively.
Operating and Maintenance Expenses
Operating and maintenance expenses increased by approximately $3.9 million, or
381%, primarily due to the inclusion of the full three month period results in
1996 of Kelet-Nograd, Hungarotel and Papatel. Operating and maintenance expenses
per average access line in operation for the period decreased from $151 in the
three months ended March 31, 1995 to $73 for the three months ended March 31,
1996. This decrease resulted from the achievement by the Company of certain
productivity improvements, largely resulting from decreased use of manual
switchboards and increased use of modern digital switches.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (continued)
Depreciation and Amortization Expense
Depreciation expense increased $1,739,000, or 381%, primarily due to the
inclusion of the full three month period results in 1996 of Kelet-Nograd,
Hungarotel and Papatel and increased property, plant and equipment due to
acquisitions and construction. As the Company continues to add network assets,
depreciation and amortization expense will increase.
Management Fees
Management fees payable to Citizens and TDI, pursuant to their respective
management agreements, increased $617,000, or 85%. The increase in management
fees reflects the continued commitment of the parties involved to supporting
management infrastructure and assistance required to control accelerating
activities and growth, and an increase in certain reimbursable costs and
financing charges as provided under specific terms of the respective agreements
relating to the payment of such fees.
Loss from Operations
Loss from operations increased $1,537,000 or 85%. This increase was principally
due to the additional expenses incurred by the Company while it expands
management, project oversight, engineering design, and systems improvement
capacities which will be needed to achieve rapid line growth and revenue
increases, and provide for the introduction and control of new services.
Foreign Exchange Losses
The Company's foreign exchange losses were $1,412,000 for the three months
ended March 31, 1996 as compared to foreign exchange gains of $322,000 for the
three months ended March 31, 1995. This increased expense occurred as the result
of the ongoing devaluation of the Hungarian forint against the US dollar and the
German mark as certain of the Company's obligations, including loans and
outstanding vendor contracts, are denominated in US dollars and German marks.
The ongoing devaluation of the forint, approximately 1.2% per month based on the
Hungarian government's crawling peg devaluation scheme, will result in
additional foreign exchange expenses for the foreseeable future which will
increase as the Company's non-forint denominated obligations continue to
increase.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (continued)
The rate of devaluation is expected, however, to be lower than the rate of
inflation which regulates the increase in tariff rates charged by the Company,
during the next two years.
Net Interest Expense
Interest income increased $56,000, or 41%, primarily due to an increase in funds
on deposit for the period.
Interest expense increased $1,490,000, or 609%, due to the additional financing
requirements primarily used to pay for the concession area acquisitions and
construction expenditures. The Company expects that interest expense will
increase in the future to the degree it continues to borrow funds in order to
implement its capital expenditure plans.
Other, net
Other income, net, increased $211,000, primarily due to the sale of the
Company's investment in Pilistav.
Minority Interests
Minority interests represent the pro-rata share of net losses of subsidiaries
for the period, attributed to the subsidiaries' issued share capital that the
Company does not own. The balance sheet value of minority interests represents
such pro-rata share of net assets at March 31, 1996. Minorities exist in
Raba-Com, Kelet-Nograd Com, and Papatel, ranging between 20% and 35%.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (continued)
Liquidity and Capital Resources
On March 29, 1996, the Company entered into a $75 million Secured Term
Loan Credit facility ("Credit Facility") and, together with HTCC Consulting, a
related Pledge and Security Agreement with Citicorp North America, Inc. Advances
under the Credit Facility may be requested through December 31, 1996 and will
bear interest rates of 3.5% and 6.5% above LIBOR or Citicorp's announced base
rate. The Loan is repayable by December 31, 1996. On April 3, 1996, the Company
used $50,753,000 from the Credit Facility to repay all the funds advanced or
guaranteed by Citizens and Chemical Bank pursuant to the Citizens Loan
Agreement; accordingly, in the second quarter, the Company will record a
non-cash charge of approximately $8 million representing the remaining
unamortized deferred financing costs pertaining to the Citizens Loan Agreement.
The Company borrowed approximately $10.2 million from Citizens pursuant
to the Citizens loan agreement and approximately $6.2 million from TDI. The
proceeds from these borrowings were used to pay for construction, repay
short-term debt and other operating expenses.
The Company experienced an increase in its working capital deficit due
to the use of short-term borrowings to finance construction.
The Company has engaged an investment bank to serve as lead underwriter
for the placement of approximately $150 million in debt securities of the
Company, which is anticipated to close in mid-1996.
Through March 31, 1996, the Company had an accumulated
deficit of approximately $31,959,000. Since March 1995, the Company has provided
telecommunications services through its majority-owned subsidiaries, Raba-Com
and Kelet-Nograd. As of January 1, 1996, the Company commenced providing
telecommunications services in the Papatel and Hungarotel Concessions Areas.
While the revenues generated by the Company's telecommunications activities have
increased in each subsequent quarterly period since March 31, 1995, in part due
to the increased number of lines placed in service during each such period, the
Company is still unprofitable and is expected to remain so while it completes
the modernization and construction of its telecommunications networks.
The development and installation of the network in each of the
Company's Concessions Areas requires significant capital expenditures. These
expenditures, together with associated operating expenses, will continue to
result in substantial cash flow requirements at least until a customer base
large enough to provide sufficient revenue and operating cash flow is
established.
<PAGE>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Forms 8-K
(a) Exhibits 10.60 Secured Term Loan Credit Facility between
Hungarian Telephone and Cable Corp.
and Citicorp North America, Inc.
et al. dated as of March 29, 1996
Exhibits 10.61 Pledge and Security Agreement dated as
of March 29, 1996 between Hungarian
Telephone and Cable Corp., HTCC Consulting
Rt., and Citicorp North America, Inc.
(b) Reports on Forms 8-K
The Company filed on form 8-K dated December 30, 1995, under
Item 2 "Acquisition or Disposition of Assets" the aquisitions
of the operating assets in the Bekescasaba and Oroshaza service
areas in the Republic of Hungary
The Company filed on form 8-K dated February 26, 1996, reporting
the Third Agreement to Amend and Restate with CU CapitialCorp.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized, in the
City of New York, on the 15 th day of May 1996.
HUNGARIAN TELEPHONE AND CABLE CORP.
(Registrant)
By: /s/ Frank R. Cohen
---------------------
Frank R. Cohen
Treasurer and Chief Financial Officer
DRAFT: May 14, 1996 3:56PM H:\WPCDOCS\315\106051
SECURED TERM LOAN CREDIT FACILITY
among
HUNGARIAN TELEPHONE AND CABLE CORP.
and
CITICORP NORTH AMERICA, INC.
AS AGENT and COLLATERAL AGENT
and
THE LENDING INSTITUTIONS LISTED HEREIN
--------------------
Dated as of March 29, 1996
--------------------
U.S. $75,000,000
<PAGE>
Page D
DRAFT: May 14, 1996 3:56PM H:\WPCDOCS\315\106051
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-i-
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit.........................
1.01 Commitments........................................
1.02 Minimum Borrowing Amount...........................
1.03 Notice of Borrowings..............................
1.04 Disbursement of Funds..............................
1.05 Notes..............................................
1.06 Conversions........................................
1.07 Interest.........................................
1.08 Interest Periods...................................
1.09 Provisions Governing LIBOR Loans...................
1.10 Capital Requirements...............................
SECTION 2. Payments........................................
2.01 Voluntary Prepayments............................
2.02 Mandatory Prepayments
2.03 Repayments
2.04 Method and Place of Payment
2.05 Net Payments
2.06 Commitment Commission
2.07 Funding Fee
2.08 Use of Proceeds
SECTION 3. Conditions Precedent
3.01 Conditions Precedent to Initial Loans.............
3.02 Conditions Precedent to All Loans.................
SECTION 4. Representations, Warranties and Agreements.........
4.01 Corporate Matters..................................
4.02 Company Reports; Financial Statements..............
4.03 Litigation and Other Matters.......................
4.04 Title to Property..................................
4.05 Investments and Guarantees.........................
4.06 Compliance with Laws...............................
4.07 Governmental Licenses.............................
4.08 Material Contracts.................................
4.09 Accuracy of Disclosure............................
4.10 Restricted Actions.................................
4.11 Transactions with Affiliates.......................
4.12 Financial Advisors.................................
4.13 Solvency...........................................
4.14 Tax Returns and Payments...........................
4.15 Reliance by Lenders................................
SECTION 5. Covenants..........................................
5.01 Information Covenants..............................
5.02 Books, Records and Inspections.....................
5.03 Insurance........................................
5.04 Payment of Taxes..................................
5.05 Compliance with Statutes, etc.....................
5.06 Use of Proceeds...................................
5.07 Maintenance of Business..........................
5.08 Security Interests...............................
5.09 Cash Accounts....................................
5.10 Take-Out Financing...............................
5.11 Board Resolutions, etc...........................
SECTION 6. Events of Default................................
6.01 Payments.........................................
6.02 Representations, etc.............................
6.03 Covenants........................................
6.04 Default Under Other Agreements...................
6.05 Bankruptcy, etc..................................
6.06 Security Documents...............................
6.07 Judgments........................................
6.08 Ownership........................................
6.09 Telecommunications Concession....................
6.10 Material Adverse Effect..........................
SECTION 7. Definitions......................................
SECTION 8. The Agent........................................
8.01 Appointment......................................
8.02 Delegation of Duties.............................
8.03 Exculpatory Provisions...........................
8.04 Reliance by the Agent............................
8.05 Notice of Default................................
8.06 Non-Reliance on Agent and Other Lenders..........
8.07 Indemnification..................................
8.08 The Agent in Its Individual Capacity.............
8.09 Successor Agent..................................
8.10 Resignation by Agent.............................
8.11 Collateral Matters...............................
SECTION 9. Miscellaneous..................................
9.01 Payment of Expenses, etc.......................
9.02 Right of Set-off...............................
9.03 Notices........................................
9.04 Benefit of Agreement...........................
9.05 No Waiver; Remedies Cumulative.................
9.06 Payments Pro Rata...........................
9.07 Calculations; Computations..................
9.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE............................................
9.09 Counterparts.....................................
9.10 Effectiveness....................................
9.11 Headings Descriptive.............................
9.12 Amendment or Waiver..............................
9.13 Survival.........................................
9.14 Domicile of Loan.................................
9.15 WAIVER OF JURY TRIAL.............................
9.16 Independence of Covenants.......................
Annex I - List of Lenders
Annex II - Lender Addresses
Schedule 3.01(j) - Consents Outstanding
Schedule 4.01(b) - Securities
Schedule 4.01(f) - Subsidiaries
Schedule 4.01(g) - Bank Accounts
Schedule 4.03 - Litigation
Schedule 4.04 - Liens
Schedule 4.06 - Compliance with Laws
Schedule 4.08 - Contractual Disputes
Schedule 4.10 - Restricted Actions
Schedule 5.07(iv) - Existing Indebtedness
Exhibit A - Form of Notice of Borrowing
Exhibit B - Form of Promissory Note
Exhibit C - Form of Notice of Conversion/Continuation
Exhibit D - Form of Officer's Certificate Regarding Conditions
Precedent
Exhibit E-1 - Form of Opinion of Cohen & Cohen
Exhibit E-2 - Form of Opinion of Clifford Chance
Exhibit E-3 - Form of Opinion of Cahill Gordon & Reindel
Exhibit F - Form of Intercompany Promissory Note
Exhibit G - Form of Officers' Solvency Certificate
Exhibit H - Citizens Utilities Company Letter
Exhibit I - Form of Compliance Certificate
Exhibit J - Form of Pledge and Security Agreement
Exhibit K - Management Agreement
<PAGE>
DRAFT: May 14, 1996 3:56PM H:\WPCDOCS\315\106051
DRAFT: May 14, 1996 3:56PM H:\WPCDOCS\315\106051
SECURED TERM LOAN CREDIT FACILITY, dated as of March 29, 1996
(the "Credit Agreement"), among HUNGARIAN TELEPHONE AND CABLE CORP., a Delaware
corporation (the "Borrower"), the lending institutions listed in Annex I (each a
"Lender" and, collectively, the "Lenders") and CITICORP NORTH AMERICA, INC.
("Citicorp") as the agent and collateral agent for the Lenders (in such
capacity, the "Agent"). Unless otherwise defined herein, all capitalized terms
used herein and defined in Section 7 are used herein as so defined.
WITNESSETH:
WHEREAS, the Borrower desires to borrow, from time to time,
up to U.S. $75,000,000 under this Agreement; and
WHEREAS, the Lenders are willing to make available the credit
facility provided for herein on the terms and conditions set forth herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. Subject to and upon the terms and conditions
herein set forth and in reliance upon the representations and warranties herein
made by the Borrower and the other agreements and documents referred to herein,
each Lender severally agrees to make, on and after the Initial Funding Date and
prior to the Final Maturity Date, term loans (the "Loans") to the Borrower in
aggregate amounts up to those indicated on the signature pages hereto, the
aggregate of which, for all Lenders, shall be no greater than U.S.
$75,000,000. Once repaid, Loans may not be reborrowed.
1.02 Minimum Borrowing Amount. The minimum aggregate
principal amount of a Borrowing of Loans shall be $1,000,000 and Borrowings in
excess thereof shall be in integral multiples of $1,000,000.
1.03 Notice of Borrowings. Whenever the Borrower desires that
the Lenders make Loans hereunder it shall give the Agent at the Agent's Office
(i) prior to 11:00 A.M. (New York time) at least three Business Days' prior
written notice substantially in the form of Exhibit A hereto (or telephonic
notice promptly confirmed in writing) of each Borrowing of LIBOR Loans and (ii)
at least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Base Rate Loans; provided that if
written notice (or telephonic notice promptly confirmed in writing) is given
prior to 10:00 A.M. (New York time) on the day of a requested Borrowing,
Borrowings of Base Rate Loans may be made available on a same-day basis. Each
such notice (each a "Notice of Borrowing") shall be irrevocable, shall be deemed
a representation by the Borrower that all conditions precedent to such Borrowing
have been satisfied and shall specify (a) the aggregate principal amount in U.S.
dollars of the Loans to be made pursuant to such Borrowing, (b) the requested
date of Borrowing (which shall be a Business Day), (c) whether such Loan shall
be a Base Rate Loan or a LIBOR Loan and, if a LIBOR Loan, the requested Interest
Period to be initially applicable thereto, (d) a general description of the use
of the proceeds of such Loans which if to be made available to a Permitted
Subsidiary of the Borrower shall be accompanied by an Intercompany Note of such
Permitted Subsidiary duly completed and to be pledged to the Collateral Agent,
on behalf of the Lenders, under the Pledge and Security Agreement and (e) the
signature of an officer of Citizens International Management Services Company
indicating that the requested use of proceeds for such Borrowing is consistent
with the Borrower's Forecast. The Agent shall as promptly as practicable give
each Lender written notice (or telephonic notice promptly confirmed in writing)
of each proposed Borrowing, of such Lender's proportionate share thereof and of
the other matters covered by the Notice of Borrowing.
1.04 Disbursement of Funds. (a) No later than 11:00 A.M. (New
York time) on the date specified in each Notice of Borrowing, each Lender will
make available to the Agent in New York City its pro rata portion of each
Borrowing requested to be made on such date in the manner provided below.
(b) Each Lender shall make available all amounts it is to fund
in immediately available funds in U.S. Dollars to the Agent to the account
specified therefor by the Agent, and the Agent will make such funds available to
the Borrower by no later than 1:00 P.M. (New York time) on or after the Initial
Funding Date by depositing such funds in the account specified therefor by the
Borrower.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of and interest on the portion of the Loan made to it by each Lender shall also
be evidenced by a promissory note (each, a "Note" and, collectively, the
"Notes") duly executed and delivered by the Borrower, substantially in the form
of Exhibit B hereto, each with blanks appropriately completed in conformity
herewith.
(b) The Note issued to each Lender shall (i) be executed by
the Borrower, (ii) be payable to the order of such Lender and be dated the
Initial Funding Date, (iii) be in a stated principal amount equal to the Loan
Commitment to the Borrower of such Lender and be payable in the principal amount
of the portion of the Loan evidenced thereby, (iv) mature on the Final Maturity
Date, (v) be subject to mandatory prepayment as provided in Section 2.02, (vi)
bear interest as provided in Section 1.07, and (vii) be entitled to the benefits
of this Agreement and the other applicable Credit Documents.
(c) Each Lender will note on its internal records the portion
of the Loan made by it and each payment in respect thereof and will, prior to
any transfer of its Note, endorse on the reverse side thereof the outstanding
principal amount of the portion of the Loan evidenced thereby. Failure to make
any such notation shall not affect the Borrower's obligations hereunder or under
the other applicable Credit Documents in respect of such portion of the Loan.
1.06 Conversions. Subject to the provisions of Section 1.09
hereof, the Borrower shall have the option, (x) with respect to Base Rate Loans
at any time and (y) with respect to LIBOR Loans, upon the expiration of any
Interest Period applicable to such LIBOR Loans, to convert and/or continue all
or any portion of such Loans equal to at least the Minimum Borrowing Amount and
integral multiples thereof as LIBOR Loans, and succeeding Interest Period(s) of
such continued Loans shall commence on the last day of the Interest Period of
the Loans to be continued. Each such continuation or conversion shall be
effected by the Borrower by giving the Agent at the Agent's Office prior to
11:00 A.M. (New York time) at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) (each a "Notice of
Conversion/Continuation"), substantially in the form of Exhibit C hereto,
specifying the Loans to be so continued, the proposed continuation date and the
requested Interest Period. Notwithstanding the foregoing or the provisions of
Section 1.08, if a Default or Event of Default is in existence at the time any
Interest Period in respect of any Borrowing of LIBOR Loans is to expire, such
Loans may not be continued as LIBOR Loans but instead shall be automatically
converted on the last day of such Interest Period into Base Rate Loans. If no
Notice of Conversion/Continuation has been duly delivered with respect to a
LIBOR Loan on or before the third Business Day prior to the last day of the
Interest Period applicable thereto, such LIBOR Loan shall be automatically
converted into a Base Rate Loan.
Except as provided in Section 1.09 hereof, a Notice of
Conversion/Continuation for continuation of LIBOR Loans shall be irrevocable.
The giving to the Agent of a Notice of Conversion/
Continuation with respect to Loans which are to be continued as LIBOR Loans
shall be deemed to be a representation by the Borrower on the date of such
Notice of Conversion/Continuation that no Default or Event of Default has
occurred and is continuing under this Agreement.
1.07 Interest. (a) Subject to Section 1.08 hereof, the unpaid
principal amount of each (i) Base Rate Loan shall bear interest at a rate per
annum which shall at all times be equal to the Base Rate in effect from time to
time and (ii) LIBOR Loan shall bear interest at a rate per annum which shall at
all times be equal to the applicable Adjusted LIBOR Rate for such LIBOR Loan in
effect from time to time. The Loans shall bear interest from the date of
Borrowing until maturity (whether by acceleration or otherwise) at a rate per
annum equal to the Adjusted LIBOR Rate.
(b) The unpaid principal amount of the Loans, upon the
occurrence and during the continuance of an Event of Default, overdue principal
and, to the extent permitted by law, overdue interest in respect of the Loans
shall bear interest (i) if a LIBOR Loan, at a rate per annum equal to the
Adjusted LIBOR Rate then in effect plus 2% and (ii) if a Base Rate Loan, at a
rate per annum equal to the Base Rate plus 2% (each of (i) and (ii), "Default
Interest").
(c) Interest shall accrue from and including the date of
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in arrears on the last day of each Interest Period applicable
thereto, and (ii) on any prepayment (on the amount prepaid), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
Notwithstanding the foregoing, interest payable at the rate provided in Section
1.06(b) shall be payable on demand.
(d) All computations of interest hereunder shall be made
in accordance with Section 9.07(b).
1.08 Interest Periods. The Interest Period applicable to any
LIBOR Borrowing shall, at the Borrower's option, be a one- or three-month
period. Notwithstanding anything to the contrary contained above:
(a) the initial Interest Period for any LIBOR Borrowing shall
commence on the date of such LIBOR Borrowing and each Interest Period
occurring thereafter (including continuations thereof) in respect of
such LIBOR Borrowing shall commence on the date on which the next
preceding Interest Period expires;
(b) if any such Interest Period begins on a date for which
there is no numerically corresponding date in the calendar month in
which such Interest Period ends, such Interest Period shall end on the
last Business Day of such calendar month;
(c) if any such Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day; provided that if any Interest Period
in respect of a Loan would otherwise expire on a day which is not a
Business Day but is a day of the month after which no further Business
Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day; and
(d) no such Interest Period shall extend beyond the
Final Maturity Date.
1.09 Provisions Governing LIBOR Loans. The following
provisions shall govern with respect to LIBOR Loans as to the matters covered:
(a) As soon as practicable after 10:00 A.M. (New York time) on
an Interest Rate Determination Date, the Agent shall determine (which
determination shall, absent Manifest Error, be final, conclusive and
binding upon all parties hereto) the interest rate which shall apply to
the LIBOR Loans for which an interest rate is then being determined for
the applicable Interest Period and shall promptly give notice thereof
(in writing or by telephone confirmed in writing) to the Borrower and
to each Lender.
(b) In the event that (x) in the case of clause (i) below, the
Agent or (y) in the case of clause (ii) or (iii) below, any Lender
shall have determined (which determination shall, absent Manifest
Error, be final, conclusive and binding upon all parties hereto):
(i) on any Interest Rate Determination Date that,
by reason of any changes arising on or after the Effective
Date affecting the interbank eurodollar market, adequate and
fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition of
LIBOR;
(ii) at any time that such Lender shall incur
increased costs or reductions in the amounts received or
receivable hereunder with respect to any LIBOR Loans or its
obligation to make LIBOR Loans because of (x) any change since
the Effective Date (including changes proposed or published
prior to the Initial Funding Date but taking effect
thereafter) in any applicable law, governmental rule,
regulation, guideline or order, whether or not having the
force of law, or in the interpretation or administration
thereof and including the introduction of any new law or
governmental rule, regulation, guideline or order, such as,
for example, but not limited to: (A) a change in the basis of
taxation of payments to any Lender of the principal of or
interest on the Notes or any other amounts payable hereunder
(except for changes in the rate of tax on the net income or
profits of such Lender pursuant to the laws of the
jurisdiction in which its principal office or applicable
lending office is located) or (B) a change in official reserve
requirements, but, in all events, excluding reserves required
under Regulation D to the extent included in the computation
of the Adjusted LIBOR Rate, and/or (y) other circumstances
since the date of this Agreement affecting such Lender or the
London interbank eurodollar market or the position of such
Lender in such market; or
(iii) at any time that the making or continuance of
any LIBOR Loan has become unlawful by compliance by such
Lender in good faith with any law, governmental rule,
regulation, guideline or order (or would conflict with any
such governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply
therewith would not be unlawful), or has become impracticable
as a result of a contingency occurring after the Effective
Date which materially and adversely affects the interbank
eurodollar market;
then, and in any such event, the Agent in the case of clause (i) above
or such Lender in the case of clause (ii) or (iii) above shall on such
date give notice (by telephone confirmed in writing) to the Borrower of
the Loan affected and in the case of clause (ii) or (iii) to the Agent
of such determination (which notice the Agent shall promptly transmit
to each of the other Lenders). Thereafter (x) in the case of clause (i)
above, LIBOR Loans shall no longer be available until such time as the
Agent notifies the Borrower and the Lenders that the circumstances
giving rise to such notice by the Agent no longer exist, and any Notice
of Borrowing or Notice of Conversion/Continuation given by the Borrower
with respect to the borrowing of or continuance of LIBOR Loans which
have not yet been incurred shall be deemed rescinded by the Borrower,
(y) in the case of clause (ii) above, the Borrower of the Loan affected
shall pay to such Lender, upon written demand therefor, such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender in its reasonable
discretion shall determine) as shall be required to compensate such
Lender for such increased costs or reductions in amounts receivable
hereunder (a written notice as to the additional amounts owed to such
Lender, showing the basis for the calculation thereof, submitted to the
Borrower of the Loan affected by such Lender shall, absent Manifest
Error, be final, conclusive and binding upon all parties hereto) and
(z) in the case of clause (iii) above, the Borrower of the Loan
affected shall take one of the actions specified in Section 1.09(c) as
promptly as possible and, in any event, within the time period required
by law.
(c) At any time that any LIBOR Loan is affected by the
circumstances described in Section 1.09(b)(ii) or (iii), the Borrower
may (and in the case of a LIBOR Loan affected pursuant to Section
1.09(b)(iii) shall) either (i) if a Notice of Borrowing or Notice of
Conversion/Continuation has been given with respect to the affected
LIBOR Loan, cancel said Notice of Borrowing or Notice of Continuation
by giving the Agent telephonic notice (confirmed promptly in writing)
thereof on the same date that such Borrower was notified by a Lender
pursuant to Section 1.09(b)(ii) or (iii), or (ii) if the affected LIBOR
Loan is then outstanding, upon at least three Business Days' notice to
the Agent, require the affected Lender to convert each such LIBOR Loan
into a Base Rate Loan, or prepay such LIBOR Loan; provided that if more
than one Lender is affected at any time, then all affected Lenders must
be treated the same pursuant to this Section 1.09(c); and provided,
further, that the Borrower shall compensate any such affected Lenders
as set forth in Section 1.09(f).
(d) Anything herein to the contrary notwithstanding, if on any
Interest Rate Determination Date no LIBOR rate is available by reason
of the inability of the Agent to determine such interest rate in
accordance with the definition thereof, the Agent shall give the
Borrower and each Lender prompt notice thereof and the Loans requested
to be made as LIBOR Loans shall, subject to the applicable notice
requirements, be made as Base Rate Loans.
(e) Each Lender agrees that, as promptly as practicable after
it has actual knowledge of the occurrence of any event or the existence
of a condition that would cause it to be an affected Lender under
Section 1.09(b)(ii) or (iii), it will, to the extent not inconsistent
with such Lender's internal policies, use reasonable efforts to make,
fund or maintain the affected LIBOR Loans of such Lender through
another lending office of such Lender if as a result thereof the
additional moneys which would otherwise be required to be paid in
respect of such Loans pursuant to Section 1.09(b)(ii) would be reduced
or the illegality or other adverse circumstances which would otherwise
require prepayment of such Loans pursuant to Section 1.09(b)(iii) would
cease to exist, and if, as determined by such Lender, in its reasonable
discretion, the making, funding or maintaining of such Loans through
such other lending office would not otherwise adversely affect such
Loans or such Lender. The Borrower hereby agrees to pay all reasonable
expenses incurred by any Lender in utilizing another lending office of
such Lender pursuant to this Section 1.09(e).
(f) The Borrower shall compensate each Lender, upon written
request by that Lender, for all reasonable losses, expenses and
liabilities (including, without limitation, such factors as any
interest paid by that Lender to lenders of funds borrowed by it to make
or carry its LIBOR Loans and any loss sustained by that Lender in
connection with re-employment of such funds (based upon the difference
between the amount earned in connection with the re-employment of such
funds and the amount payable by the Borrower if such funds had been
borrowed or remained outstanding)) which that Lender may sustain with
respect to the Borrower's LIBOR Loans: (i) if for any reason (other
than a default or error by that Lender) a Borrowing of any LIBOR Loan
does not occur on a date specified therefor in a Notice of Borrowing or
a Notice of Conversion/Continuation or a successive Interest Period
does not commence after notice therefor is given pursuant to Section
1.08 hereof (whether or not withdrawn by the Borrower or deemed
withdrawn pursuant to Section 1.09(b)(i)); or (ii) if any prepayment or
repayment (as required by Section 2.01 or 2.02 hereof, by acceleration
or otherwise) occurs on a date which is not the last day of the
Interest Period applicable to that Loan; or (iii) if any prepayment or
repayment of any such Lender's LIBOR Loans is not made on any date
specified in a notice of prepayment or repayment given by the Borrower;
or (iv) as a consequence of (x) any other failure by the Borrower to
repay such Lender's LIBOR Loans when required by the terms of this
Agreement or (y) any election made pursuant to Section 1.09(b)(ii).
Compensation owing under this Section 1.09(f) shall be equal to the
amount of interest which would have accrued on the amount of principal
prepaid or repaid or converted or not borrowed for the period from the
date of such prepayment or repayment or conversion or failure to borrow
or prepay or repay to the last day of the then current Interest Period
for the relevant LIBOR Loan (or, in the case of a failure to borrow,
the Interest Period for such LIBOR Loan which would have commenced on
the date of such failure to borrow) at the applicable rate of interest
for such LIBOR Loan provided for herein minus any amount such Lender,
in good faith and in its sole discretion, determines is realizable upon
the re-employment of such funds. A certificate as to the amount of such
losses, expenses and liabilities submitted to the Borrower by such
Lender shall, absent Manifest Error, be final, conclusive and binding
for all purposes.
(g) Any Lender may make, carry or transfer LIBOR Loans at, to
or for the account of any of its branch offices or the office of an
Affiliate of that Lender; provided that any increased costs associated
therewith shall be borne by such Lender.
1.010 Capital Requirements. If any Lender shall have
determined that the adoption or effectiveness after the Effective Date of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender or such
Lender's parent with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency (including in each case any such change proposed or published
prior to the date hereof but taking effect thereafter), has or would have the
effect of reducing the rate of return on such Lender's or such Lender's parent's
capital or assets as a consequence of such Lender's obligations hereunder to a
level below that which such Lender or such Lender's parent could have achieved
but for such adoption, effectiveness or change or as a consequence of an
increase in the amount of capital required to be maintained by such Lender
(including in each case, without limitation, with respect to any Lender's Loan),
then from time to time, within 15 days after demand by such Lender (with a copy
to the Agent), the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender or such Lender's parent, as the case may
be, for such reduction. Each Lender, upon determining in good faith that any
additional amounts will be payable pursuant to this Section 1.10, will give
prompt written notice thereof to the Borrower, which notice shall set forth in
reasonable detail the basis of the calculation of such additional amounts,
although any delay in giving any notice shall not release or diminish any of the
Borrower's obligations to pay additional amounts pursuant to this Section 1.10.
If any Lender has demanded payment under this Section 1.10, the Borrower shall
have the right, with the assistance of the Agent, to seek a mutually
satisfactory substitute commercial bank or financial institution to purchase the
Note of such Lender.
<PAGE>
SECTION 2. Payments.
2.1 Voluntary Prepayments. The Borrower shall have the right
to prepay the Loan in whole or in part from time to time, without premium or
penalty (other than LIBOR breakage costs, if any, which shall be reimbursed by
the Borrower in accordance with Section 9.01(b) hereof), on the following terms
and conditions: (i) the Borrower shall give the Agent at the Agent's Office
written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay the Loan and the amount of such prepayment, which notice shall
be given by the Borrower at least one Business Day prior to the date of such
prepayment and which notice shall promptly be transmitted by the Agent to each
of the Lenders, and (ii) each partial prepayment shall be in an aggregate
principal amount of at least $500,000 and integral multiples of $100,000 in
excess of that amount.
<PAGE>
2.02 Mandatory Prepayments.
(A) Requirements: On the date of receipt by the Borrower or
any of its Subsidiaries of Net Financing Proceeds, an amount equal to such Net
Financing Proceeds shall be applied as provided in Section 2.02(B).
With respect to each prepayment of the Loan required by this
Section 2.02(A), the Borrower shall give the Agent two Business Days notice.
(B) Application: All prepayments shall include payment of
accrued interest on the principal amount so prepaid and shall be applied as
follows:
First, to the payment of all reasonable costs and expenses,
fees, commissions and taxes of such sale, collection or other
realization, including, without limitation, reasonable compensation to
Agent and its agents and counsel, and all reasonable expenses,
liabilities and advances made or incurred by Agent in connection
therewith, together with interest on each such amount at the Base Rate
then in effect from and after the date such amount is due, owing or
unpaid until paid in full;
Second, to the payment of all reasonable other costs and
expenses of such sale, collection or other realization, including,
without limitation, reasonable compensation to the Lenders and their
agents and counsel and all reasonable expenses, liabilities and
advances made or incurred by the Lenders in connection therewith,
together with interest on each such amount at the Base Rate then in
effect from and after the date such amount is due, owing or unpaid
until paid in full;
Third, to the indefeasible payment in full in cash of interest
and all amounts other than principal of the Loans at any time and from
time to time owing by Borrower under or in connection with this
Agreement, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts so due and payable;
Fourth, to the indefeasible payment in full in cash of
principal at any time and from time to time owing by Borrower under or
in connection with the this Agreement, ratably according to the unpaid
amounts thereof, without preference or priority of any kind, among
amounts of principal so due and payable; and
Fifth, to the Borrower, or its successors or assigns or to
whomsoever may be lawfully entitled to receive the same or as a court
of competent jurisdiction may direct, or any surplus then remaining
from such proceeds.
2.03 Repayments. The Loans and all other Obligations shall
be repaid in full on the Final Maturity Date.
2.04 Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Agent, for the ratable account of the Lenders entitled thereto, not later
than 1:00 P.M. (New York time) on the date when due and shall be made in
immediately available funds in lawful money of the United States of America to
the account specified therefor by the Agent or if no account has been so
specified at the Agent's Office, it being understood that written notice by the
Borrower to the Agent to make a payment from the funds in the Borrower's account
at the Agent's Office shall constitute the making of such payment to the extent
of such funds held in such account. The Agent will thereafter cause to be
distributed on the same day (if payment is actually received by the Agent in New
York prior to 1:00 P.M. (New York time) on such day) funds relating to the
payment of principal or interest ratably to the Lenders entitled to receive any
such payment in accordance with the terms of this Agreement. If and to the
extent that any such distribution shall not be so made by the Agent in full on
the same day (if payment is actually received by the Agent prior to 1:00 P.M.
(New York time) on such day), the Agent shall pay to each Lender its ratable
amount thereof and each such Lender shall be entitled to receive from the Agent,
upon demand, interest on such amount at the Base Rate for each day from the date
such amount is paid to the Agent until the date the Agent pays such amount to
such Lender.
(b) Any payments under this Agreement which are made by the
Borrower later than the close of business (New York time) shall be deemed to
have been made on the next succeeding Business Day. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest shall be payable during such
extension at the applicable interest rate in effect immediately prior to such
extension.
2.05 Net Payments. All payments by the Borrower under this
Agreement and/or the Notes shall be made without setoff or counterclaim and in
such amounts as may be necessary in order that all such payments (after
deduction or withholding for or on account of any present or future taxes,
levies, imposts, duties or other charges of whatsoever nature imposed by any
Governmental Authority, other than any tax on or measured by the net income of a
Lender pursuant to the income tax laws of the jurisdictions where such Lender's
principal or lending office is located (collectively, "Taxes")) shall not be
less than the amounts otherwise specified to be paid under this Agreement and/or
the Notes. If the Borrower is required by law to make any deduction or
withholding on account of Taxes from any payment due hereunder or under the
Notes, then (a) the Borrower shall timely remit such Taxes to the Governmental
Authority imposing the same and (b) the amount payable hereunder or under the
Notes will be increased to such amount which, after deduction from such
increased amount of all amounts required to be deducted or withheld therefrom,
will not be less than the amount otherwise due and payable. Without prejudice to
the foregoing, if any Lender or the Agent is required to make any payment on
account of Taxes, the Borrower will, upon notification by the Lender or the
Agent, promptly indemnify such person against such Taxes, together with any
interest, penalties and expenses payable or incurred in connection therewith.
The Borrower shall also reimburse each Lender, upon the written request of such
Lender, for taxes imposed on or measured by the net income of such Lender
pursuant to the laws of the jurisdiction in which the principal office or
lending office of such Lender is located or under the laws of any political
subdivision or taxing authority of any such jurisdiction as such Lender shall
determine are payable by such Lender in respect of Taxes paid to or on behalf of
such Lender pursuant to this Section 2.05. For purposes of this Section, the
term "Taxes" includes interest, penalties and expenses payable or incurred in
connection therewith. A certificate as to any additional amounts payable to a
Lender under this Section 2.05 submitted to the Borrower by such Lender shall,
absent Manifest Error, be final, conclusive and binding for all purposes upon
all parties hereto. With respect to each deduction or withholding for or on
account of any Taxes, the Borrower shall promptly furnish to each Lender such
certificates, receipts and other documents as may be required (in the judgment
of such Lender) to establish any tax credit to which such Lender may be
entitled.
2.06 Commitment Commission. The Borrower agrees to pay the
Agent (i) on the Initial Funding Date a commitment commission for the ratable
accounts of the Lenders equal, in the aggregate, to 1.50% of the Total
Commitment and (ii) on September 25, 1996 (unless, on or before such date, all
Obligations have been paid in full and the Total Commitment has been terminated)
a commitment commission for the ratable account of the Lenders equal to 1.00% of
the Total Commitment. The Borrower hereby irrevocably instructs the Agent to
deduct payment in respect of clause (i) hereof from the Initial Loans to be made
on the Initial Funding Date.
2.07 Funding Fee. The Borrower agrees to pay the Agent, on the
date of each Borrowing, a funding fee for the ratable accounts of the Lenders
equal, in the aggregate, to 1.00% of the amount of such Borrowing. The Borrower
hereby irrevocably instructs the Agent to deduct such payment from the proceeds
of each applicable Borrowing.
2.08 Use of Proceeds. The use of proceeds of the Initial Loans
shall be used to repay all existing Indebtedness of the Borrower owed to
Chemical Bank and CU CapitalCorp., a Delaware corporation ("CUCC") (the
"Refinancings"). The use of proceeds of any other Loans shall be used to provide
working capital for and to finance capital expenditure requirements of Permitted
Subsidiaries of the Borrower; provided that (i) no Loans may be borrowed for the
purposes set forth in this sentence of this Section 2.08 until the consent of
the Hungarian Monetary Authority, in form and substance satisfactory to the
Agent, has been received with respect to the execution and issuance of the
Intercompany Notes by the Permitted Subsidiaries and the incurrence of
Indebtedness thereunder and (ii) until the consent of MATAV with respect to the
pledge or future pledge of shares of Kelet-Nograd has been obtained or the
secured Indebtedness of Kelet-Nograd owed to MATAV has been repaid and the
shares of Kelet-Nograd pledged thereunder have been returned to the Borrower,
each as contemplated by clause (i) of Section 5.08(b), the Borrower shall
maintain an unutilized Commitment of at least $2,500,000.
SECTION 3. Conditions Precedent.
3.01 Conditions Precedent to Initial Loans. The obligation of
the Lenders to make the Initial Loans to the Borrower on the Initial Funding
Date is subject, at the time of the making of such Loans, to the substantially
contemporaneous satisfaction of the following conditions:
(a) Officers' Certificates. The Agent shall have received a
certificate, dated the Initial Funding Date, signed by the Chief
Executive Officer and Chief Financial Officer of the Borrower stating
that all of the representations and warranties contained in the Credit
Documents are true and correct in all material respects as if made on
such date and that all conditions set forth in this Section 3.01 (in
each case disregarding any reference therein that such condition be
deemed satisfactory by the Agent and/or the Required Lenders) have been
satisfied or waived as of such date, substantially in the form set
forth as Exhibit D.
(b) Opinions of Counsel. The Agent shall have received an
opinion or opinions addressed to each of the Lenders and dated the
Initial Funding Date, each in form and substance satisfactory to the
Agent, from Cohen & Cohen, counsel to the Borrower and its
Subsidiaries, which opinion shall address the matters contained in
Exhibit E-1, from Clifford Chance, Hungarian counsel to the Borrower
and its Subsidiaries, which opinion shall address the matters contained
in Exhibit E-2, and from Cahill Gordon & Reindel, counsel to the Agent,
which opinion shall address the matters contained in Exhibit E-3.
(c) Corporate Proceedings. All corporate and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by the Credit Documents shall be satisfactory in form and
substance to the Agent, and the Agent shall have received all
information and copies of all certificates, documents and papers,
including records of corporate proceedings and governmental approvals,
if any, which the Agent reasonably may have requested from the Borrower
and its Subsidiaries and Affiliates in connection therewith, such
documents and papers where appropriate to be certified by proper
corporate or governmental authorities.
(d) Organizational Documents. The Lenders shall have received
copies (in form and substance satisfactory to them) of (i) the
Certificate of Incorporation of the Borrower certified by the Secretary
of State of the state of its incorporation as of a recent date, (ii)
the By-laws of the Borrower certified as true and complete as of such
date by its secretary, (iii) resolutions of the Board of Directors of
the Borrower approving the execution and delivery of the Credit
Documents and the performance of the transactions contemplated thereby
to be performed by it and approving the Take-out Financing, certified
as true and complete as of such date by its secretary, and (iv) copies
of any engagement or retention letters regarding the Take-Out
Financing.
(e) Notes. There shall have been delivered to the Agent for
the account of each of the Lenders the Notes executed by the Borrower
in the amounts and maturities and as otherwise provided herein.
(f) Certain Fees. All costs, fees and expenses (including,
without limitation, legal fees and expenses) payable to Citicorp by the
Borrower pursuant to the letter agreement between Borrower and Citicorp
dated March 26, 1996 shall have been paid in full with the proceeds of
the Loans and the Borrower shall have paid or caused to be paid the
commitment, funding and other fees and expenses (including, without
limitation, legal fees and expenses) contemplated hereby and/or in
connection with the other Credit Documents.
(g) Credit Documents. Each of the Credit Documents shall
have been duly executed and delivered by the Borrower and the other
parties thereto and shall be satisfactory to the Lenders.
(h) Financial Statements; Forecasts. The Agent shall have
received (i) the Borrower's Annual Reports on Form 10-K for the three
fiscal years ended December 31, 1995, each in the form (including
exhibits and amendments on Form 8) filed or substantially in the form
to be filed with the SEC (collectively, the "Financial Statements"),
including the reports of KPMG Peat Marwick contained therein, (ii) a
reasonably detailed financial forecast of the type customarily prepared
by the Borrower for internal purposes (the "Forecast"), satisfactory in
form and substance to the Agent, itemizing the capital expenditures and
other uses proposed to be made with the proceeds of the Loans,
certified by the Chief Financial Officer or Controller of the Borrower,
and (iii) an annual plan for the three fiscal years commencing January
1, 1996, in each case, in form, scope and substance satisfactory to the
Agent, prepared in accordance with Borrower's normal accounting
procedures applied on a consistent basis, including (a) forecasted
balance sheets and statements of operations, stockholders' equity and
cash flows of Borrower for such period and (b) the amount of forecasted
capital expenditures for such fiscal period. Each of the items
delivered pursuant to this Section 3.01(h) shall be satisfactory to the
Agent in its sole discretion.
(i) Pledged Collateral. The Borrower shall have duly executed
and delivered the Pledge and Security Agreement, together with all
Pledged Collateral as contemplated by such Pledge and Security
Agreement, which Pledged Collateral shall include, without limitation,
(x) certificates representing all of the Borrower's direct and indirect
interests in each of its pledged Hungarian Subsidiaries in which the
Collateral Agent has a security interest superior to all other parties
and all necessary consents and waivers have been obtained and (y) all
Intercompany Notes. The Intercompany Notes shall have been executed and
delivered to the Borrower by the Permitted Subsidiaries, in sufficient
amounts to reflect the total amount of the proceeds of the Loans
together with any other loans by the Borrower permitted hereunder to be
loaned to the Permitted Subsidiaries from time to time, and shall be
substantially in the form of Exhibit F hereto. The Agent shall also
have received evidence satisfactory to it that the matters contemplated
by Sections 5.08(a) and 5.09 can be completed within the time periods
contemplated by such Sections.
(j) Consents, etc. (i) Subject to the provisions of the Pledge
and Security Agreement and this Agreement, all material governmental
and third party approvals and consents, if any, in connection with the
transactions contemplated by the Credit Documents, and in any case
otherwise referred to therein to be completed on or before the
Effective Date shall have been obtained and remain in effect. There
shall not be pending or threatened any judgment, order, injunction or
other restraint issued or filed with respect to the making of the Loan
hereunder.
(ii) Except as set forth in the Company Reports or Schedule
3.01(j), the Borrower shall have delivered to the Agent all consents
and approvals necessary in connection with the grant and perfection of
the security interests contemplated by the Pledge and Security
Agreement and the foreclosure and exercise of all rights thereunder.
(k) Material Adverse Effect. There shall not have
occurred any event or circumstance or development that would have a
Material Adverse Effect both before and after giving effect to the
making of the Loans hereunder.
(l) Solvency. On the Initial Funding Date the Agent and the
Lenders shall have received an Officer's Solvency Certificate from the
Borrower, substantially in the form of Exhibit G, in form and substance
satisfactory to the Agent and the Required Lenders, supporting the
conclusions that, after giving effect to the contemplated borrowings of
the full amounts which will be available under the Total Commitment and
the Security Documents, none of the Borrower or its Subsidiaries will
be insolvent, will be rendered insolvent by the indebtedness or
obligations incurred or which may be incurred in connection therewith,
will be left with unreasonably small capital with which to engage in
its business or will have incurred debts, including Contingent
Obligations, beyond its ability to pay such debts as they mature. Such
Officer's Solvency Certificate shall be signed by the Borrower's
Controller or Chief Financial Officer and such other appropriate
officer as shall comply with the terms of this Agreement.
(m) No Injunction. There shall not exist any temporary or
permanent judgment, order, injunction or other restraint issued or
filed by a court of competent jurisdiction with respect to the making
of the Loans or any of the other transactions contemplated by any of
the other Credit Documents.
(n) No Defaults. Before and after giving effect to the Loans,
(i) no Default or Event of Default shall have occurred and be
continuing and (ii) except as set forth in the Company Reports or
Schedule 4.08, no default shall have occurred, and no event shall have
occurred and no condition shall exist that with the lapse of time or
notice or both would constitute a default, with respect to any
indebtedness for money borrowed or any other material obligation of the
Borrower or any of its Subsidiaries.
(o) Citizens Utilities Company Letter. The Borrower
shall have received a letter of support from Citizens Utilities Company
in form and substance satisfactory to the Agent, substantially in the
form of Exhibit H hereto.
(p) Refinancing. The Agent shall have received evidence
satisfactory to it that all the obligations being refinanced with the
Initial Borrowings will be repaid in full and all agreements relating
to such obligations shall have been terminated, and all collateral and
other security relating to such refinancing shall have been released,
all on terms satisfactory to the Agent.
The acceptance of the proceeds of the Initial Loans shall
constitute a representation and warranty by the Borrower to each of the Lenders
that all of the applicable conditions specified above have been satisfied or
waived in writing as of that time. All of the certificates, legal opinions and
other documents and papers referred to in this Section 3.01, unless otherwise
specified, shall be delivered to the Agent at the Agent's Office (or such other
location as may be specified by the Agent) for the account of each of the
Lenders and in sufficient counterparts for each of the Lenders and shall be
satisfactory in form and substance to the Agent.
3.02 Conditions Precedent to All Loans. The obligation of the
Lenders to make any Loans (which term shall include the Initial Loans, but shall
not include a continuation of a Loan) is subject, at the time of each such Loan,
to the satisfaction of the following conditions:
(a) No Default; Representations and Warranties. At the time of
the making of each Loan and also after giving effect thereto, (i) there
shall exist no Default or Event of Default and (ii) all representations
and warranties contained herein and in each of the other Credit
Documents in effect at such time shall be true and correct in all
material respects with the same effect as though such representations
and warranties had been made on and as of the date of the making of
such Loan, unless such representation and warranty expressly indicates
that it is being made as of any other specific date, in which case on
and as of such other date.
(b) Material Adverse Effect, etc. There shall not have
occurred any event or circumstance or development that would have a
Material Adverse Effect, both before and after giving effect to the
making of the Loans hereunder.
(c) Judgments, etc. There shall not exist any judgment, order,
injunction or other restraint issued or filed with respect to the
making of any Loans hereunder the effect of which judgment, order,
injunction or restraint is adverse to any Lender.
(d) Documentation and Opinions of Counsel. The Agent shall
have received such documentation and opinion or opinions, addressed to
each of the Lenders, (i) from counsel to the Borrower as may be
reasonably required, with reasonable notice under the circumstances,
which shall be reasonably satisfactory to the Agent, and (ii)
appropriate local counsel, which opinions shall cover such matters as
reasonably requested by, and be in form and substance reasonably
satisfactory to, the Agent.
(e) Margin Rules. On the date of each Borrowing of Loans,
neither the making of any Loan nor the use of the proceeds thereof will
violate the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(f) Management Agreement. The Management Agreement shall
be in full force and effect.
The acceptance of the proceeds of each Borrowing of Loans
shall constitute a representation and warranty by the Borrower to each of the
Lenders that all of the applicable conditions specified in Section 3.02 have
been satisfied or waived in writing as of that time. All of the certificates,
legal opinions and other documents and papers referred to in this Section 3.02,
unless otherwise specified, shall be delivered to the Agent at its Office (or
such other location as may be specified by the Agent) for the account of each of
the Lenders and in sufficient counterparts for each of the Lenders and shall be
satisfactory in form and substance to the Agent.
SECTION 4. Representations, Warranties and Agreements. In
order to induce the Lenders to enter into this Agreement and to make the Loans
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Lenders, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans:
4.01 Corporate Matters. (a) The Borrower is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified as a foreign corporation in all
jurisdictions in which it is required to be so qualified.
(b) The authorized capital stock of the Borrower consists of
10,000,000 shares of Common Stock, par value $.001 per share ("Common Stock"),
of which as of March 29, 1996, 4,162,539 shares were issued and outstanding and
4,558,316 shares were reserved for issuance upon the exercise of currently
outstanding rights, warrants and options to purchase shares of Common Stock. All
of the outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable, and were issued in compliance with all
applicable federal and state securities laws. Except as disclosed in Schedule
4.01(b) hereto, there are no existing warrants, options, conversion rights,
calls or commitments of any character pursuant to which the Borrower is or may
become obligated to issue or repurchase any shares of capital stock or other
securities. No shareholder of the Borrower, other than CUCC, has any pre-emptive
right to acquire any securities of the Borrower. The Borrower has repurchased
none of its outstanding capital stock. There are no agreements or understandings
with respect to the voting, sale, transfer or registration of any shares of
capital stock of the Borrower or any of its Subsidiaries to which the Borrower
or any Subsidiary is a party other than (i) in favor of CUCC or in favor of
certain employees of the Borrower (as to 102,500 shares of Common Stock), (ii)
arising under the Stock Purchase Agreement dated as of August 31, 1995 between
the Borrower, Alcatel Austria AG, Central Euro TeleKom, Inc. and US Telecom
East, Inc. or (iii) registration rights granted to Bell of Canada in connection
with warrants to purchase 25,000 shares of common stock of the Borrower.
(c) The Borrower has all corporate authority necessary to
execute and deliver the Credit Documents. The execution and delivery of the
Credit Documents and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of the Borrower. The Credit Documents are or, when executed
and delivered, will be the valid and binding obligations of the Borrower
enforceable in accordance with their terms.
(d) The Credit Documents and the transactions contemplated
under each do not violate any provisions of the Borrower's corporate charter or
bylaws, or any contract, agreement, law or regulation to which the Borrower or
any of its properties is party or subject, and the same do not require the
consent or approval of any regulatory authority or Governmental Authority or of
any other person, except CUCC.
(e) There have been delivered to the Agent true and correct
copies of the Certificate of Incorporation and Bylaws, as amended to the date
hereof, of the Borrower (certified by its corporate secretary).
(f) Schedule 4.01(f) lists all Subsidiaries of the Borrower
and the percentage of capital stock or other ownership interests owned directly
or indirectly by the Borrower. Except as set forth on Schedule 4.01(f), the
Borrower does not own, directly or indirectly, any interest in any corporation,
partnership or other legal entity. Each such Subsidiary of the Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, as indicated on Schedule 4.01(f) next
to the name of each such Subsidiary. Except as disclosed on Schedule 4.01(f),
the aggregate direct and indirect ownership interests of the Borrower in each
Subsidiary of the Borrower have been duly authorized and validly issued, are
fully paid and nonassessable, were issued in compliance with all Governmental
Laws and are validly held, beneficially and of record, by the Borrower or by a
Wholly Owned Subsidiary of the Borrower. Except as disclosed in the Company
Reports (as defined in Section 4.02) or Schedule 4.01(f), all of the shares of
the Capital Stock of Subsidiaries of the Borrower owned, either directly or
indirectly, by the Borrower are owned free and clear of all Liens, pledges,
security interests, claims or other encumbrances.
(g) Schedule 4.01(g) lists all banking, investment and other
accounts maintained by or on behalf of the Borrower or any of its Subsidiaries,
including any and all disbursements, concentration, investment or other similar
accounts.
4.02 Company Reports; Financial Statements. The Borrower has
made available to the Agent true and complete copies of (i) each registration
statement, report on Form 8-K, proxy statement or information statement filed or
issued by it since December 31, 1992, and all amendments thereto, and (ii) the
Borrower's Annual Report on Form 10-K for the fiscal year ended December 31,
1995, substantially in the form (including exhibits and amendments on Form 8) to
be filed with the SEC (collectively, the "Company Reports"). Each Company Report
was prepared and filed in accordance with all applicable rules and regulations
of the SEC and at the time of its filing was otherwise in compliance with such
rules and regulations in all material respects. As of their respective dates,
the Company Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, except as the same was corrected or
superseded in a subsequent report or statement filed with the SEC, which
subsequent report or statement has been delivered to the Agent. Each of the
consolidated balance sheets included in or incorporated by reference in the
Company Reports (including the related notes and schedules) presents fairly the
consolidated financial position of the Borrower and its Subsidiaries as of its
date and each of the consolidated statements of operations and cash flows
included in or incorporated by reference into the Company Reports (including any
related notes and schedules) presents fairly the results of operations and cash
flows, as the case may be, of the Borrower and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to the omission
of certain notes not ordinarily accompanying unaudited financial statements, and
to normal year-end audit adjustments which will not be material to the Borrower
and its Subsidiaries, taken as a whole, in amount or effect), in each case in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except as may be noted therein. Such
balance sheets and the notes thereto disclose all material liabilities which are
required by GAAP to be shown on financial statements or disclosed in the notes
thereto. There are no other material liabilities, direct or contingent, of the
Borrower and its Subsidiaries, as of the dates of such financial statements,
which are not disclosed therein or in the Company Reports. Except as disclosed
in such Company Reports, since December 31, 1995, there has not occurred any
event or circumstance or development that would have a Material Adverse Effect.
4.03 Litigation and Other Matters. Except as set forth in the
Company Reports or Schedule 4.03 hereto, there is no litigation or any other
action or proceeding of any nature pending or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of its Subsidiaries which,
singly or in the aggregate, would likely, singly or in the aggregate, have a
Material Adverse Effect.
4.04 Title to Property. The Borrower and each of its
Subsidiaries has good and marketable title to all of its properties and assets,
free and clear of all mortgages, liens and encumbrances, other than those
disclosed in the Company Reports or Schedule 4.04 hereto. The Borrower and each
of its Subsidiaries enjoys sufficient peaceful and undisturbed possession under
the leases to which it is a party so as to enable it to realize the practical
benefits of such leases and all such leases are valid and subsisting, with no
default on the part of the Borrower or any of its Subsidiaries existing
thereunder.
4.05 Investments and Guarantees. Neither the Borrower nor any
of its Subsidiaries has made any investments in, advances to or guarantees of
the obligations of any company, individual or other entity, except as disclosed
in the Company Reports, other than investments of surplus cash with or through
banks, insurance companies or other financial institutions in the ordinary
course of business and except that the Borrower has made investments in,
advances to or guarantees of the obligations of certain of its Subsidiaries.
4.06 Compliance with Laws. Except as set forth in the Company
Reports or Schedule 4.06, the Borrower and each of its Subsidiaries has
substantially complied with all Governmental Laws (including, without
limitation, Environmental Laws and laws relating to the telecommunications
industry, including as to ownership interests therein, regulations, ordinances,
franchises, licenses and orders applicable to it, its assets or its business, as
currently conducted and as proposed to be conducted).
4.07 Governmental Licenses. The Borrower and each of its
Subsidiaries has all material licenses, permits and other authorizations from
all Governmental Authorities necessary for the conduct of its business, as
currently conducted and as proposed to be conducted, and such licenses, permits
and authorizations are in full force and effect and have been and are now being
fully complied with by the Borrower or the appropriate Subsidiary of the
Borrower.
4.08 Material Contracts. The Company Reports accurately
describe all material contracts, licenses, telecommunications concessions and
franchises relating to the business of the Borrower and each of its
Subsidiaries, as currently conducted and as proposed to be conducted, copies of
which will be delivered to the Agent upon request. All such contracts, licenses,
telecommunications concessions and franchises are in full force and effect, no
default has occurred thereunder (except as disclosed in the Company Reports or
Schedule 4.08) and neither the Borrower nor any of its Subsidiaries has
threatened and, to the Borrower's knowledge, the other parties thereto have not
threatened to terminate or cancel any such contract, license, telecommunications
concession or franchise.
4.09 Accuracy of Disclosure. Neither this Agreement nor any
other document, certificate, opinion or statement furnished to the Agent by or
on behalf of the Borrower in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements contained herein and therein not
misleading. There is no fact known to the Borrower which materially and
adversely affects, or will materially and adversely affect, the assets,
business, operations or condition, financial or otherwise, of the Borrower and
its Subsidiaries which has not been specifically set forth in this Agreement,
the Annexes hereto or otherwise disclosed by the Borrower to the Agent in
writing.
4.010 Restricted Actions. Except as disclosed on Schedule
4.10 hereto or in the Company Reports, or as contemplated by this Agreement,
since December 31, 1995, neither the Borrower nor any of its Subsidiaries has:
<PAGE>
(a) issued any additional shares of its Capital Stock
other than shares of common stock to
CUCC;
(b) amended its Certificate of Incorporation or Bylaws, except
for the amendments to its Certificate of Incorporation contemplated in
the preliminary proxy statement of the Borrower filed with the SEC on
March 6, 1996;
(c) incurred any Indebtedness or other liabilities
(except in the ordinary course of business);
(d) declared or paid any dividends, or authorized or made
any distributions of assets upon or with respect to its Capital Stock,
or purchased any shares of its Capital Stock;
(e) sold, exchanged, leased or otherwise disposed of, or
mortgaged or encumbered, any of its material Assets;
(f) entered into any transaction with any director, officer or
stockholder of the Borrower, or any person related to or indirectly
owned or controlled in whole or in part by a director, officer or
stockholder of the Borrower;
(g) made any material alteration in the manner of
keeping its books, accounts or records;
(h) received any notice or evidence that any license or other
right is subject to contest or that it will not be able to complete the
buildout of any of the telephone systems on the terms, for the capital
expenditures, and within the time periods contemplated by the materials
previously supplied to the Lenders.
(i) entered into any transaction outside the ordinary
course of its business; or
(j) agreed to do any of the foregoing.
4.11 Transactions with Affiliates. Except to the extent
described in the Company Reports, no director or officer of the Borrower or
stockholder holding more than 10% of the voting securities of the Borrower or,
to the Borrower's knowledge, any member of the immediate family or any other
affiliate of any of the foregoing, owns or has an ownership interest in any
corporation or other entity that is a party to, or in any property which is the
subject of, business arrangements or relationships of any kind with the Borrower
or any of its Subsidiaries.
4.12 Financial Advisors. None of the Borrower, any of its
Subsidiaries or any of their officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated herein.
4.13 Solvency. The Borrower and each of its Subsidiaries is
Solvent. For purposes of this Section 4.13, "Solvent" shall mean that on the
date hereof (a) the fair value of the property of such Person is not less than
the total amount of the liabilities (including, without limitation, liabilities
on all claims, whether or not reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured) of such Person, (b) the present fair salable value of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its existing debts as they become
absolute and matured, (c) such Person is able to realize upon its assets and pay
its debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (d) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature and (e) such Person is not
engaged in business or a transaction, and is not about to engage in business or
a transaction, for which its property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in the
industry in which such Person is engaged, it being understood that in applying
the foregoing criteria:
(i) the value of the property and assets of such Person
includes the value of its interest in its Subsidiaries and any rights
to contribution (whether by equity or loan) from any of its affiliates,
and
(ii) its ability to pay its debts and liabilities may be
measured by reference to, among other things, amounts received or to be
received in respect of any such property or assets.
4.14 Tax Returns and Payments. The Borrower and its
Subsidiaries have filed all material tax returns required to be filed by it
(which are true, correct and complete in all material respects) and has paid all
material taxes and assessments shown to be due thereon, other than those not yet
delinquent and except for those contested in good faith and for which adequate
reserves have been established. The Borrower and its Subsidiaries have paid, or
have provided adequate reserves (in accordance with GAAP) for the payment of,
all federal, state, local and foreign income taxes (including, without
limitation, frachise taxes based upon income) applicable for all prior fiscal
years and for the current fiscal year to the date hereof. Neither the Borrower
nor any of its Subsidiaries knows of any proposed tax assessment against any
such Person that could reasonably be expected to have a Materially Adverse
Effect which is not being actively contested in good faith by such Person to the
extent affected thereby in good faith and by appropriate proceedings; provided
that such reserves or other appropriate provisions, if any, as shall be required
in conformity with GAAP shall have been made or provided therefor.
4.15 Reliance by Lenders. The foregoing representations and
warranties made herein are made by the Borrower with the knowledge and
understanding that each Lender is placing complete reliance thereon and is
thereby induced to enter into this Agreement and to provide the Loans
contemplated hereby.
SECTION 5. Covenants. The Borrower covenants and agrees that
on the Initial Funding Date and thereafter for so long as this Agreement is in
effect and until the Loans together with interest, fees and all other
Obligations incurred hereunder are paid in full:
5.1 Information Covenants. The Borrower will furnish to each
Lender:
PAGE>
(a) Financial Statements. As soon as available to the
management of the Borrower, any revised Forecasts of the Borrower.
(b) As soon as available and in any event within 60 days after
the close of each of the first three quarterly accounting periods in
each fiscal year of Borrower, commencing with the first fiscal quarter
following the Initial Funding Date, the consolidated and consolidating
balance sheet of Borrower and its Subsidiaries as at the end of such
quarterly period and the related consolidated statements of operations,
of cash flows and of stockholders' equity for such quarterly period and
for the elapsed portion of the fiscal year ended with the last day of
such quarterly period, in each case prepared in conformity with GAAP
applied on a basis consistent with prior years (subject to normal
year-end audit adjustments and footnote disclosure), and in each case
setting forth comparative consolidated figures for the related periods
in the prior fiscal year, subject to normal year-end audit adjustments.
(c) Compliance Certificates. On or before April 15, 1996 and
within 15 days of the end of each month thereafter, an Officer's
Certificate, in form and substance satisfactory to the Required
Lenders, to the effect that no Default or Event of Default exists or,
if any Default or Event of Default does exist, specifying the nature
and extent thereof and the action the Borrower has taken or proposes to
take with respect thereto, substantially in the form of Exhibit I
hereto, appropriately completed; provided that the Officer's
Certificate required to be delivered on or before April 15, 1996 shall
not include consolidating financial information.
(d) Notice of Default or Litigation. Promptly, and in any
event within three (3) days after the Borrower obtains knowledge
thereof, notice of (x) the occurrence of any event or the existence of
any condition that constitutes a Default or Event of Default, which
notice shall specify the nature thereof, the period of existence
thereof (to the extent known) and what action the Borrower proposes to
take with respect thereto, (y) any pending action, suit or proceeding
that would, if in existence on the date hereof, result in the
representations and warranties in Section 4.03 being incorrect (if
being made as of such date) and (z) failure to meet, or notice of any
alleged failure to meet, any material term or condition in any
telecommunications concession agreement, license, franchise or
stockholders' agreement or failure to substantially comply with, or
notice of failure to substantially comply with, any Governmental Law
(including, without limitation, as to ownership of entities holding
telecommunications concession agreements).
(e) Other Information. Promptly upon transmission thereof,
copies of any public filings and registrations with, and public reports
to, the SEC by the Borrower with respect to its securities (other than
registration statements on Form S-8, filings under Section 16(a) of the
Exchange Act and routine filings relating to employee benefit plans)
and, to the extent not previously provided to the Lenders, copies of
all financial statements, proxy statements, material notices and
reports provided by the Borrower to its shareholders and, with
reasonable promptness, such other information or documents (financial
or otherwise) as the Required Lenders may reasonably request from time
to time.
5.02 Books, Records and Inspections. The Borrower will keep,
and will cause each of its Subsidiaries to keep, proper records and books of
account. The Borrower will, and will cause each of its Subsidiaries to, upon
reasonable prior notice to the chief financial officer, controller or any other
authorized officer of the Borrower, permit officers and designated
representatives of the Lenders to visit and inspect any of the properties or
assets of the Borrower or its Subsidiaries, and to examine the books of account
of the Borrower or its Subsidiaries and discuss the affairs, finances and
accounts of the Borrower or its Subsidiaries with, and be advised as to the same
by, their officers and independent accountants, all at such reasonable times and
intervals and to such reasonable extent as the Lenders may desire.
5.03 Insurance. The Borrower will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance
(including bonding insurance) with financially sound and reputable insurers in
such amounts, covering such risks and liabilities and with such deductibles or
self-insured retentions as are in effect at the date hereof with respect to its
respective businesses. Notwithstanding the foregoing, the Borrower shall
maintain such insurance as required pursuant to the Security Documents and shall
otherwise comply with all provisions of the Collateral Documents relating to
insurance.
5.04 Payment of Taxes. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all material
taxes, assessments and governmental charges or levies imposed upon it or, to the
extent the Borrower or such Subsidiary, respectively, is liable therefor, upon
its income or profits, or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and all claims which, if unpaid, might become
a Lien or charge upon any properties of the Borrower or such Subsidiary;
provided, however, that the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
proper proceedings with adequate reserves maintained in respect thereof to the
extent required by GAAP.
5.05 Compliance with Statutes, etc. The Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
Governmental Authorities.
5.06 Use of Proceeds. (a) The Borrower will use all
proceeds of the Loan only as described in Section 2.08 of this Agreement.
(b) Neither the making of any Loan hereunder nor the use of
the proceeds therefrom will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
5.07 Maintenance of Business. The Borrower will do, and will
cause each of its Subsidiaries to do, or cause to be done, all things necessary
to preserve and keep in full force and effect its existence, material corporate
rights, corporate licenses, corporate franchises and authority. The Borrower
will, and will cause each of its Subsidiaries to, use its respective best
efforts to preserve intact its current business organization, keep its assets in
serviceable condition, preserve the relationships with its customers, suppliers,
contractors, subcontractors and others having business dealings with it and pay
its trade accounts (including with contractors and subcontractors) in the
ordinary course of business. The Borrower shall, and shall cause each of its
Subsidiaries to, meet all of the material terms and conditions of the
telecommunications concession agreements, shareholders' agreements and other
contractual agreements and Governmental Laws applicable to their respective
businesses (including, without limitation, tax franchise, license or other
payments), and shall continue to construct and finance the telecommunications
systems owned, operated and/or managed by the Borrower and/or its Subsidiaries.
Without limiting the generality of the foregoing, the Borrower will not, and
will not cause or permit any of its Subsidiaries to, directly or indirectly:
(i) alter in a fundamental or substantial manner the
character or scope of the business of the Borrower and its Subsidiaries
taken as a whole from that conducted immediately prior to the Initial
Funding Date;
(ii) sell, transfer or otherwise dispose, in a single
transaction or series of related transactions, all or a substantial
portion of the Borrower's consolidated Assets, or enter into a
transaction of consolidation or merger or other transactions outside
the ordinary course of its business;
(iii) acquire, sell, lease, encumber or dispose of any Assets
or any shares or other equity interests in or securities of any
corporation, partnership, association or other business organization or
division thereof, other than purchases and sales of Assets in the
ordinary course of business of the Borrower or such Subsidiary;
(iv) create, incur, assume or suffer to exist any
Indebtedness or Contingent Obligations other than (A) advances to
Permitted Subsidiaries on the terms contemplated hereby, (B) the
Obligations, (C) Indebtedness existing on the date hereof as set forth
on Schedule 5.07(iv) hereto (including existing vendor financing
facilities between (x) Raba and Siemens consisting of a total
commitment of DM 6,700,000 of which DM 1,569,280 is available to be
drawn as of the date hereof and (y) Kelet-Nograd and Siemens consisting
of a total commitment of DM 13,000,000 of which DM 8,127,693 is
available to be drawn as of the date hereof), (D) subordinated loans
made by CUCC on terms acceptable to the Agent and (E) other Contingent
Obligations incurred in the ordinary course of business;
(v) create, incur, assume or suffer to exist any Lien upon
or with respect to any of its property or Assets (whether real or
personal, tangible or intangible and whether now owned or hereafter
acquired) other than Liens existing on the date hereof, all of which
are listed on Schedule 4.04 hereto;
(vi) (A) declare or pay any dividend or make any distribution
on shares of the Capital Stock of the Borrower or such Subsidiary to
holders of such Capital Stock (other than the Borrower), (B) purchase,
redeem or otherwise acquire or retire for value any Capital Stock of
the Borrower or such Subsidiary, or any warrants, rights or options to
acquire shares of any class of such Capital Stock, except for the
obligation to redeem, on the occurrence of certain events, warrants to
purchase 25,000 shares of common stock of the Borrower held by Bell of
Canada for a price not to exceed $300,000, (C) make any principal
payment on, or purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, any Indebtedness
of the Borrower or such Subsidiary (other than the Refinancings), or
(D) make any loan, advance or other extension of credit or capital
contribution; purchase or acquire Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued by
any other Person (whether by merger, consolidation, amalgamation or
otherwise and whether or not purchased directly from the issuer of such
securities or evidences of Indebtedness); or make any investments in
any other Person other than (x) investments in Cash or Cash
Equivalents, (y) loans to Permitted Subsidiaries of the Company to fund
capital expenditures, which loans shall be represented by Intercompany
Notes pledged to the Collateral Agent under the Pledge and Security
Agreement, and (z) loans to Subsidiaries under existing subordinated
promissory notes pledged to the Collateral Agent under the Pledge and
Security Agreement;
(vii) amend any employment or severance agreement or
arrangement (other than such amendments as are required to comply with
applicable law) or increase in any manner the compensation or fringe
benefits of, or modify the employment terms of, its directors or, in
the case of the Borrower, executive officers, or make any payments
under the Management Agreement other than reimbursement of
out-of-pocket expenses;
(viii) change its independent accountants, accounting periods
or, except to the extent required by a change in GAAP, accounting
methods, principles or practices;
(ix) sell, assign, transfer or license any intellectual
property, except for licenses of intellectual property in the ordinary
course of business of the Borrower or such Subsidiary;
(x) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive
any rights under, any material contract or agreement or any material
permit;
(xi) make or commit to make any material capital expenditures
in excess of the amounts (and within the time periods) contemplated by
the Forecasts;
(xii) enter into any transaction with any of its
Affiliates; or
(xiii) take any action or fail to take any reasonable action
permitted by this Agreement if such action or failure to take action
would result in any of the representations and warranties of the
Borrower set forth in this Agreement becoming untrue in any material
respect; or
(xiv) become a general partner in any partnership.
5.08 Security Interests. (a) The Borrower shall duly and
punctually perform any and all acts and, at its expense, will promptly execute,
and cause each of its Subsidiaries to promptly execute, any and all further
instruments and documents and take such action as the Lenders deem necessary to
obtain the full benefits of this Agreement and the Security Documents and of the
rights and powers herein and therein granted (including the recording and filing
of any Security Documents and any and all supplements and amendments thereto and
instruments of conveyance, transfer, assignment or further assurance, financing
statements and continuation statements under the applicable laws, rule or
regulation, as may, in the reasonable judgment of the Lenders, be necessary or
desirable in order to grant and/or maintain for the benefit of the Lenders valid
and perfected Liens on the Pledged Collateral as required by the Pledge and
Security Agreement, subject to no other Liens except as contemplated by the
Security Documents.
(b) The Borrower shall (i) on or prior to April 30, 1996,
either (A) cause to be delivered to the Agent the consent from MATAV with
respect to the grant or future grant of security interests in Kelet-Nograd;
provided that if such consent is not delivered to the Agent on or before April
15, 1996 the Borrower shall deliver to the Agent on April 15, 1996 a written
report detailing the efforts the Borrower has made to obtain such consent and
MATAV's responses to those efforts, or (B) cause Kelet-Nograd to repay all
outstanding secured Indebtedness owed by Kelet-Nograd to MATAV and cause
Kelet-Nograd to deliver to the Agent satisfactory evidence that such
Indebtedness has been repaid and all share certificates of Kelet-Nograd owned by
the Borrower pledged under such Indebtedness and maintain $2,500,000 of
availability under the Credit Agreement until the date of such repayment and
(ii) cause to be delivered to the Agent within 15 days of the Effective Date
consents of (A) the Minister of Transportation, Telecommunication and Water
Management of the Republic of Hungary to the pledge or future pledge of shares
of the Permitted Subsidiaries by the Borrower to the Collateral Agent and (B)
the National Bank of Hungary to the execution and pledge by the Borrower to the
Collateral Agent of the Intercompany Notes. All such consents and waivers under
this Section 5.08(b) shall be in the form approved by the Agent on or prior to
the Initial Funding Date.
(c) The Borrower shall undertake to deliver or cause to be
delivered to the Lenders from time to time such other documentation, consents,
authorizations, approvals and orders in form and substance satisfactory to the
Lenders as the Lenders shall deem reasonably necessary or advisable to perfect
or maintain the Liens for the benefit of the Lenders, including assets which are
required to become Collateral after the Initial Funding Date.
5.09 Cash Accounts. The Borrower shall use its best efforts to
cause, as soon as practicable after the Initial Funding Date, each of the
concentration and disbursement accounts set forth in Schedule 4.01.(g) hereto to
be transferred, on terms and conditions (including as to set-off) satisfactory
to the Agent, to other accounts established by the Borrower at Citibank, N.A.
and Citibank Budapest Rt.; provided, however, that the Borrower shall cause all
of its accounts to be transferred to Citibank N.A. and Citibank Budapest Rt. not
later than thirty (30) days after the Initial Funding Date (other than (i)
immaterial amounts required by Government Law to be maintained in local accounts
in the concession areas or (ii) immaterial amounts the transfer of which would
be impracticable for valid business reasons; provided, however, that in the case
of either (i) or (ii) the amounts in such accounts shall not exceed ten percent
of the Borrower's cash management business).
5.010 Take-Out Financing. The Borrower shall use its best
efforts to effect the Take-Out Financing as soon as practicable.
<PAGE>
5.11 Board Resolutions, etc. The Borrower shall use its best
efforts to cause, as soon as practicable after the Effective Date, (i) each of
the respective boards of directors of the Permitted Subsidiaries to adopt such
resolutions as are necessary to authorize such Permitted Subsidiaries to make
borrowings under the Intercompany Notes unless such authorizations can be
otherwise accomplished in a comparable time period through other means and (ii)
the board of directors of Hungarotel to adopt such resolutions as are necessary
to authorize the issuance of the Capital Stock of Hungarotel and (iii)
Hungarotel to register with the Hungarian Court of Registration.
SECTION 6. Events of Default. Upon the occurrence and
during the continuance of any of the following specified events (each an
"Event of Default"):
6.1 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loan, (ii) default in the payment when due of
any interest on the Loan or under any other Credit Document or (iii) fail to pay
any other amounts owing hereunder for five days after receiving notice from the
Agent or any Lender of such default; or
<PAGE>
6.02 Representations, etc. Any representation, warranty or
statement made by the Borrower herein or in any other Credit Document or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made; or
6.03 Covenants. The Borrower shall default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement or any Credit Document and such default shall
continue unremedied for a period of at least five Business Days after the date
of such default; or
6.04 Default Under Other Agreements. (a) The Borrower or any
of its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than Obligations and other than Indebtedness representing
trade payables being contested in good faith by the Borrower, other than
payments to MATAV in connection with the grant of the concessions) having a
principal amount in excess of $1,000,000 individually or $2,000,000 in the
aggregate for all such Persons, or (ii) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, which default or other event or
condition is continuing following the delivery of any applicable notice thereof
and expiration of any applicable grace period in respect thereof and the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause any such Indebtedness to become due prior to its
stated maturity; or (b) any such Indebtedness shall be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
6.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries
shall commence a voluntary case concerning itself under a Bankruptcy Law; or an
involuntary case is commenced against the Borrower or any of its Subsidiaries
and the petition is not controverted within 10 days, or is not dismissed within
60 days, after commencement of the case; or a custodian is appointed for, or
takes charge of, all or substantially all of the property of the Borrower or any
of its Subsidiaries; or the Borrower or any of its Subsidiaries commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or any
of its Subsidiaries; or there is commenced against the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed and unstayed for a
period of 60 days; or the Borrower or any of its Subsidiaries is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Borrower or any of its Subsidiaries
suffers any appointment of any custodian or the like for it or any substantial
part of its property to continue undischarged or unstayed for a period of 60
days; or the Borrower or any of its Subsidiaries makes a general assignment for
the benefit of creditors; or any corporate action is taken by the Borrower or
any of its Subsidiaries for the purpose of effecting any of the foregoing; or
6.06 Security Documents. Any Security Document shall cease to
be in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby, in favor
of the Collateral Agent, superior to and prior to the rights of all third
Persons except as otherwise expressly permitted by the applicable Security
Document and subject to no Liens other than Liens expressly permitted or
contemplated by the applicable Security Document or any third party (including,
without limitation, MATAV) takes any actions to foreclose, sell or otherwise
realize upon, repossess or dispose of any of the Collateral; or
6.07 Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving a liability of
$1,000,000 or more individually for any one such judgment or decree or
$2,000,000 in the aggregate for all such judgments and decrees for all such
Persons (in either case in excess of the amount covered by insurance as to which
the insurance company has acknowledged coverage) and (i) any such judgments or
decrees shall not have been vacated, discharged, bonded or enforcement thereof
stayed pending appeal within 60 days from the entry thereof or (ii) any
enforcement proceeding therefor shall have been commenced; or
6.08 Ownership. (i) Any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act) (other than CUCC or its
wholly-owned Subsidiaries or Citizens Utilities Company or its wholly owned
subsidiaries) is or becomes the "beneficial owner" (as such term is used in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have beneficial ownership of all shares that such person has a right
to acquire, whether such right is exercisable immediately or only after the
passage of time or which have been pledged to such person as collateral),
directly or indirectly, of more than 50% of the total voting power of the Voting
Stock of the Borrower; (ii) individuals who constituted the Board of Directors
of the Borrower on the Initial Funding Date (together with any new directors
whose proposal for election by the shareholders of the Borrower was approved by
a vote of 51% of the directors of the Borrower then still in office who either
were directors on the Initial Funding Date or whose election or nomination for
election was previously so approved) shall cease for any reason to constitute a
majority of the members of the Board of Directors of the Borrower still in
office; (iii) any "person" or "group" (as defined in clause (i) above) shall
have the right to designate or ability to appoint or nominate a greater number
of the members of the Board of Directors of the Borrower than the Existing
Holders shall have; (iv) the Borrower conveys, transfers or leases all or
substantially all of its assets to any Person; (v) the approval by stockholders
of the Borrower of any plan or proposal for the liquidation, dissolution or
winding up of the Borrower; (vi) termination or revocation, for any reason, of
the Management Agreement; or (vii) CUCC failing for any reason to own at least
802,908 shares of the Voting Stock of the Borrower; or
6.09 Telecommunications Concession. Any telecommunications
concession, franchise, license or other agreement that in the reasonable
judgment of the Lenders is material to the business of the Borrower or any of
its Subsidiaries is terminated or any Governmental Authority has taken the
position that the Borrower or any of its Subsidiaries is in material violation
of any such agreement, franchise agreement or license; or
6.010 Material Adverse Effect. There shall have occurred
any event, circumstance or development that would have a Material Adverse
Effect.
<PAGE>
Then, and in any such event, and at any time thereafter, if
any Event of Default shall then be continuing, the Agent may, and shall, upon
the written request of the Required Lenders, in each case with written notice to
the Borrower, take any or all of the following actions, without prejudice to the
rights of the Agent or any Lender to enforce its claims against the Borrower,
except as otherwise specifically provided for in this Agreement (provided that,
if an Event of Default specified in Section 6.05 shall occur, the result which
would occur upon the giving of written notice by the Agent as specified in
clauses (i) and (ii) below shall occur automatically without the giving of any
such notice): (i) terminate the Commitments, (ii) declare the principal of and
accrued interest in respect of all Loans and all Obligations owing hereunder and
thereunder to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; and/or (iii) enforce, as Collateral Agent (or
direct the Collateral Agent to enforce), any or all of the remedies created
pursuant to the Security Documents. If an Event of Default is cured or waived in
accordance with the terms of the Agreement, it ceases (and, if waived, pursuant
to the terms, and to the extent, of such waiver).
SECTION 7. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Adjusted LIBOR Rate" means, with respect to any LIBOR
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (i) the sum of (a)
the LIBOR in effect for such Interest Period for such LIBOR Borrowing and (b)
the applicable Interest Margin and (ii) Statutory Reserves, if any.
"Affiliate" means (i) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Borrower or any subsidiary of the Borrower or any officer, director or employee
of the Borrower or any subsidiary of the Borrower or of such Person, (ii) the
spouse, any immediate family member, or any other relative who has the same
principal residence of any Person described in clause (i) above, and any Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such spouse, family member or any other relative, and (iii)
any trust in which any Person described in clause (i) or (ii) above is a
fiduciary or has a beneficial interest. A Person shall be deemed to control a
Person for the purposes of this definition if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person or (ii) to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means Citicorp, or any successor thereto appointed in
accordance herewith, in its capacity as agent and collateral agent for the
Lenders.
"Agent's Office" means the office of the Agent located at 399
Park Avenue, New York, New York 10043, or such other office in New York as the
Agent may hereafter designate in writing as such to the other parties hereto.
"Agreement" means this Secured Term Loan Credit Facility, as
the same may after its execution be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof.
"Authorized Officer" means any president or vice president of
the Borrower designated as such in writing to the Agent.
"Bankruptcy Laws" means Title 11 of the United States Code or
any similar Governmental Law.
"Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall at
all times be equal to the sum of the applicable Interest Margin and the highest
of:
(a) the rate of interest announced publicly by Citicorp
in New York, New York, from time to time, as Citicorp's base rate;
(b) the sum (adjusted to the nearest 1/16 of one percent or,
if there is no nearest 1/16 of one percent, to the next higher 1/16 of
one percent) of (i) 1/2 of one percent per annum, plus (ii) the rate
per annum obtained by dividing (A) the latest three-week moving average
of secondary market morning offering rates in the United States for
three-month certificates of deposit of major United States money market
banks, such three-week moving average (adjusted to the basis of a year
of 365 or 366 days, as the case may be) being determined weekly on each
Monday (or, if any such day is not a Business Day, one the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citicorp on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by
Citicorp from three New York certificate of deposit dealers of
recognized standing selected by Citicorp, by (B) a percentage equal to
100% minus the average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal
Reserve System in New York City with respect to liabilities consisting
of or including (among other liabilities) three-month U.S. dollar
nonpersonal time deposits in the United States, plus (iii) the average
during such three-week period of the annual assessment rates estimated
by Citicorp for determining the then current annual assessment payable
by Citicorp to the Federal Deposit Insurance Corporation (or any
successor) for insuring U.S. dollar deposits of Citicorp in the United
States; and
(c) 1/2 of one percent per annum above the Federal Funds
Rate.
"Base Rate Loans" means any Loan bearing interest at a rate
determined by reference to the Base Rate in accordance with the provisions of
Section 1.07 hereof.
"Borrower" has the meaning provided in the preamble to this
Agreement.
"Borrowing" means the borrowing of a Loan on a given date by
the Borrower.
"Business Day" means any day excluding Saturday, Sunday and
any day which shall be in the City of New York a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close.
"Capital Stock" means, with respect to any Person, any capital
stock of such Person and shares, interests, participations, or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into corporate stock), warrants or options to purchase
any of the foregoing, including without limitation each class of common stock
and preferred stock of such Person if such Person is a corporation, and each
general or limited partnership interest or other equity interest of such Person,
if such Person is a partnership.
"Cash" means U.S. Dollars or Hungarian forints in a Deposit
Account.
"Cash Equivalents" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than one year from the date of acquisition, (ii) U.S. dollar denominated time
deposits, certificates of deposit and bankers' acceptances of (x) any Lender,
(y) any domestic commercial bank of recognized standing having capital and
surplus in excess of $250,000,000 or (z) any bank whose short-term commercial
paper rating (at the time of acquisition of such security) by Standard & Poor's
Corporation ("S&P") is at least A-1 or the equivalent thereof or by Moody's
Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof
(any such bank, an "Approved Lender"), in each case with maturities of not more
than six months from the date of acquisition, (iii) commercial paper and
variable or fixed rate notes issued by any Lender or Approved Lender or by the
parent company of any Lender or Approved Lender and commercial paper and
variable rate notes issued by, or guaranteed by, any industrial or financial
company with a short-term commercial paper rating (at the time of acquisition of
such security) of at least A-1 or the equivalent thereof by S&P or at least P-1
or the equivalent thereof by Moody's, or guaranteed by any industrial company
with a long-term unsecured debt rating (at the time of acquisition of such
security) of at least AA or the equivalent thereof by S&P or the equivalent
thereof by Moody's and in each case maturing within one year after the date of
acquisition and (iv) repurchase agreements with any Lender or any primary dealer
maturing within one year from the date of acquisition that are fully
collateralized by investment instruments that would otherwise be Cash
Equivalents; provided that the terms of such repurchase agreements comply with
the guidelines set forth in the Federal Financial Institutions Examination
Council Supervisory Policy -- Repurchase Agreements of Depository Institutions
With Securities Dealers and Others, as adopted by the Comptroller of the
Currency on October 31, 1985.
"Citicorp" has the meaning set forth in the preamble hereto.
"Citizens Utilities Company Letter" has the meaning set forth
in Section 3.01(o).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means all of the Pledged Collateral and Pledged
Securities.
"Collateral Agent" means Citicorp in its capacity as
collateral agent for the Lenders.
"Commitment" means, with respect to each Lender, the amount
set forth below such Lender's name on the signature pages hereto directly below
the column entitled "Loan Commitment".
"Commitment Commission" has the meaning set forth in Section
2.06 hereof.
"Company Reports" has the meaning set forth in Section 4.02
hereof.
"Compliance Certificate" means a certificate issued pursuant
to Section 5.01(c) signed by a chief financial officer, controller, chief
accounting officer or other Authorized Officer of the Borrower.
"Contingent Obligations" means, as to any Person, without
duplication, any obligation of such Person guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the maximum amount that such Person may be obligated to expend
pursuant to the terms of such Contingent Obligation or, if such Contingent
Obligation is not so limited, the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Credit Documents" means (i) this Agreement, (ii) each Note,
(iii) the Pledge and Security Agreement and (iv) the Intercompany Notes.
"CUCC" has the meaning set forth in Section 2.08 hereof.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Deposit Account" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Dividends" has the meaning provided in Section 6.06.
"Dollars" means United States Dollars.
"EBIDTA" means, for any period, operating income before taxes,
interests, depreciation, amortization, and all other non-cash charges, less
extraordinary items.
"Effective Date" has the meaning provided in Section 9.10.
"Environmental Law" means all government, local laws, codes,
ordinances, rules, regulations, requirements, directives, orders, common law,
and administrative interpretations thereof, now or hereafter in effect, that may
be enforced by any Governmental Authority or court, relating to pollution, the
protection of human health, the protection of the environment or the release or
threatened release of hazardous material in or into the environment.
"Event of Default" has the meaning provided in Section 6.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Maturity Date" means (i) September 30, 1996 or (ii)
December 31, 1996, if (A) a no Default or Event of Default has occurred and is
then continuing; (B) the Agent has received, on or before September 30, 1996 the
commitment fee referred to in clause (ii) of Section 2.06 and (C) the Agent has
received, on or before September 15, 1996 (in form and substance satisfactory to
it and from an insurer or insurers satisfactory to it), for the ratable benefit
of the Lenders, political risk insurance, in an amount in U.S. dollars equal to
the Total Commitment plus interest thereon from and including October 1, 1996 to
the Final Maturity at a rate per annum equal to 12.50%, such insurance to cover
risks of intransferability of currency, expropriation, nationalization and
political violence.
"Financial Statements" has the meaning provided in
Section 3.01(i).
"Financing Proceeds" means the gross proceeds received by the
Borrower or any of its Subsidiaries, directly or indirectly, from any financing
transaction of whatever kind or nature, including without limitation from any
issuances of capital stock or rights or options to purchase capital stock or
from the exercise by a third party of options to purchase capital stock, any
incurrence of Indebtedness, any mortgage or pledge of an asset or interest
therein (including a transaction which is the substantial equivalent of a
mortgage or pledge), from the sale of tax benefits, from a lease to a third
party and a pledge of the lease payments due thereunder to secure Indebtedness,
from a joint venture arrangement, from an exchange of assets and a sale of the
assets received in such exchange, or any other similar arrangement or technique.
"Forecasts" has the meaning set forth in Section 3.01(h).
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" shall mean any United States or other
federal, state, local or other governmental or administrative body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body.
"Governmental Laws" means any law, rule or regulation of any
governmental Authority.
"Hungarotel" means Hungarotel Tavkozlesi Rt., a Hungarian
corporation.
"Indebtedness" of any Person means, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by a first Person, whether or
not such Indebtedness has been assumed by such first Person, (v) all Capitalized
Lease Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all obligations of
such Person under Interest Rate Agreements or Currency Protection Agreements and
(viii) all Contingent Obligations of such Person; provided that Indebtedness
shall not include trade payables, accrued expenses, deferred taxes and accrued
income taxes, in each case arising in the ordinary course of business. For
purposes of clause (iv) above (where the relevant Indebtedness has not been
assumed by such first Person), the amount of Indebtedness is equal to the lesser
of the amount of Indebtedness secured or the fair market value of the property
subject to the Lien.
"Initial Funding Date" means the date of funding of the
Initial Loans.
"Initial Lender" means Citicorp North America, Inc.
"Initial Loans" means the initial Loans made under this
Agreement on the Initial Funding Date.
"Intercompany Notes" means the intercompany promissory notes,
substantially in the form of Exhibit F hereto, between the Borrower and the
Permitted Subsidiaries pledged by the Borrower under the Pledge and Security
Agreement.
"Interest Margin" means, in respect of (i) LIBOR Loans, (a)
from and including the Initial Funding Date to but not including June 30, 1996,
4.50% per annum, (b) from and including June 30, 1996 to but not including
September 30, 1996, 5.50% per annum and (c) from and including September 30,
1996, 6.50% per annum; and (ii) Base Rate Loans, (a) from and including the
Initial Funding Date to but not including June 30, 1996, 3.50% per annum, (b)
from and including June 30, 1996 to but not including September 30, 1996, 4.50%
per annum and (c) from and including September 30, 1996, 5.50% per annum.
"Interest Payment Date" means (i) with respect to any LIBOR
Loan, the last day of the Interest Period applicable thereto and, in addition,
the date of any refinancing or conversion of such LIBOR Loan and (ii) with
respect to any Base Rate Loan, the last day of each month commencing with the
first such day after the Initial Borrowing Date and, in addition, on the date of
refinancing or conversion of such Base Rate Loan.
"Interest Period" means, with respect to any LIBOR Loan,
either one or three months.
"Interest Rate Determination Date" means, with respect to a
LIBOR Loan, the date which is two Business Days prior to the commencement of the
Interest Period for such Borrowing.
"Interim Financials" has the meaning provided in
Section 3.01(i).
"Kelet-Nograd" means Kelet-Nograd Com Rt., a Hungarian
corporation.
"Lender" has the meaning provided in the first paragraph of
this Agreement and in Section 10.04.
"LIBOR" means, for any Interest Period for each LIBOR Loan
comprising part of the same Borrowing, an interest rate per annum equal to the
average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum,
if such average is not such a multiple) of the rate per annum at which deposits
in U.S. dollars are offered by the principal office of each Reference Bank in
London, England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount substantially equal to such Borrowing and for a period equal to such
Interest Period. LIBOR for any Interest Period for each LIBOR Loan comprising
part of the same Borrowing shall be determined by the Agent on the basis of
applicable rates furnished to and received by the Agent from each Reference Bank
two Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 1.09.
"LIBOR Loan" means any Loan bearing interest at a rate
determined by reference to the Adjusted LIBOR Rate in accordance with the
provisions of Section 1.07 hereof.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, claim, hypothecation, assignment for security or charge of
any kind (including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement or any lease in the nature thereof).
"Loan" has the meaning provided in Section 1.01.
"Management Agreement" means that certain management services
agreement dated as of May 31, 1995, as amended, between Citizens International
Management Services Company, a Delaware corporation, and the Borrower, a copy of
which is attached hereto as Exhibit K.
"Manifest Error" means an error that is obvious from the
document or notice in question or an error that is demonstrable from the
relevant account entries and other sources that were used or should have been
used to make the determination or calculation in question.
"MATAV" means Magyar Tavkozlesi Rt., a Hungarian corporation
limited by shares.
"Material Adverse Effect" means (i) any material adverse
effect or change (both before and after giving effect to the transactions
contemplated hereby and by the other Credit Documents) (x) with respect to the
operations, business, properties, assets, nature of assets, liabilities
(contingent or otherwise), financial condition or prospects of the Borrower or
any of its Subsidiaries or (y) with respect to the country in which the
Subsidiaries of the Borrower operate or the financial markets therein, (ii) any
fact or circumstance (whether or not the result thereof would be covered by
insurance) as to which singly or in the aggregate there is a reasonable
likelihood of (x) a material adverse change described in clause (i) with respect
to the Borrower or any of its Subsidiaries, (y) the inability of the Borrower to
perform in any material respect its Obligations hereunder or under any of the
other Credit Documents or the inability of the Lenders to enforce in any
material respect their rights purported to be granted hereunder or under any of
the other Credit Documents or the Obligations (including realizing on the
Collateral) or (z) a material adverse effect on the ability of the Borrower to
refinance all of its Obligations hereunder on or prior to the Final Maturity
Date or (iii) any fact or circumstance (x) relating to the Borrower or any of
its Subsidiaries or (y) with respect to the country in which the Subsidiaries of
the Borrower operate or the financial markets therein, as to which singly or in
the aggregate there is a reasonable likelihood of any significant liability on
the part of the Lenders or the Agent.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA with respect to which the Borrower or any of its
ERISA Affiliates is or has been required to contribute.
"Net Financing Proceeds" means Financing Proceeds, net of
direct reasonable expenses of the transaction payable to Persons other than
Affiliates of the Borrower and net of taxes (including income taxes) currently
paid or payable in cash as a result thereof in the current year or in the next
succeeding year with respect to the current year as a result of the transaction
generating Financing Proceeds.
"Notes" has the meaning provided in Section 1.03(a).
"Notice of Borrowing" has the meaning provided in
Section 1.03.
"Notice of Conversion/Continuation" has the meaning provided
in Section 1.06.
"Obligations" means all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Agent or any Lender pursuant to the terms of this Agreement or any
other Credit Document or secured by any of the Security Documents.
"Officers' Certificate" means, as applied to any corporation,
a certificate executed on behalf of such corporation by its Chairman of the
Board (if an officer) or its Chief Executive Officer and by its Chief Financial
Officer; provided that every Officers' Certificate with respect to compliance
with the conditions precedent to the making of the Loan hereunder shall include
(i) a statement that the officers making or giving such Officers' Certificate
have read such conditions and any definitions or other provisions contained in
this Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as they believe to be necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signers, such conditions
have been complied with.
"Papatel" means Papa es Tersege Telefon Koncesszios Rt., a
Hungarian company.
"Permitted Subsidiary" means each of Hungarotel,
Kelet-Nograd, Papatel and Raba.
"Person" means any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Pledge and Security Agreement" means the Pledge and Security
Agreement dated the date hereof between the Borrower and the Collateral Agent,
substantially in the form of Exhibit J hereto, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Pledged Collateral" means all the Pledged Collateral as
defined in the Pledge and Security Agreement.
"Raba" means Raba Com Rt., a Hungarian corporation.
"Real Property" means all right, title and interest of the
Borrower or its Subsidiaries (including, without limitation, any leasehold
estate) in and to a parcel of real property owned or operated by the Borrower or
its Subsidiaries together with, in each case, all improvements and appurtenant
fixtures, equipment, personal property, easements and other property and rights
incidental to the ownership, lease or operation thereof.
"Reference Banks" means Citibank, N.A.
"Regulation G" means Regulation G of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation T" means Regulation T of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
"Required Lenders" shall mean at any time Lenders holding at
least 66-2/3% of the Loans; provided that for the purposes of Section 3, the
requirement that any document, agreement, certificate or other writing is to be
satisfactory to the Required Lenders shall be satisfied if (x) such document,
agreement, certificate or other writing was delivered in its final form to the
Lenders prior to the Effective Date (or if amended or modified thereafter, the
Agent has reasonably determined such amendment or modification not to be
material), (y) such document, agreement, certificate or other writing is
satisfactory to the Agent and (z) Lenders holding more than 33-1/3% of the Loans
held by Lenders have not objected in writing to such document, agreement,
certificate or other writing to the Agent prior to the Initial Funding Date.
"SEC" means the Securities and Exchange Commission or any
successor thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Documents" means the Pledge and Security Agreement
and any other documents utilized to pledge as Collateral for the Obligations any
property or assets of whatever kind or nature.
"Statutory Reserves" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board of Governors of the Federal Reserve System
of the United States or by any other Governmental Authority, domestic or
foreign, with jurisdiction over the Agent or any Lender (including any branch,
Affiliate or other funding office thereof making or holding a Loan) with respect
to the Adjusted LIBOR Rate applicable to any Borrowing, for any category of
liabilities which includes deposits by reference to which the Adjusted LIBOR
Rate in respect of such Borrowing is determined. Such reserve percentages shall
include those imposed pursuant to Regulation D. For purposes of this definition,
LIBOR Loans shall be deemed to constitute "Eurocurrency Liabilities" within the
meaning of Regulation D and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets which may be available
from time to time to any Lender under such Regulation D. Statutory Reserves
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Subsidiary" or "subsidiary" of any Person means and includes
(i) any corporation more than 50% of whose stock of any class or classes having
by the terms thereof ordinary voting power to elect a majority of the directors
of such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than a 50% equity interest at the time.
"Takeout Financing" means the financing contemplated by the
resolutions of the Board of Directors of the Borrower contemplated by Section
3.01(d).
"Taxes" has the meaning provided in Section 2.05.
"Total Commitment" means U.S. $75,000,000.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"Voting Stock" means all classes of capital stock of a
corporation then outstanding and normally entitled to vote in the election of
directors.
"Written" or "in writing" means any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
SECTION 8. The Agent.
8.1 Appointment. Each Lender hereby irrevocably designates and
appoints Citicorp as Agent (such term to include the Agent acting as Collateral
Agent or in any other representative capacity under any other Credit Document)
of such Lender to act as specified herein and in the other Credit Documents and
each such Lender hereby irrevocably authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and the other Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Agreement and the other Credit Documents,
together with such other powers as are reasonably incidental thereto. The Agent
agrees to act as such upon the express conditions contained in this Section 8.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein or in the other Credit Documents, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Agent. The provisions of this Section 8 are solely for the benefit
of the Agent and the Lenders, and the Borrower shall not have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Agent shall act solely as agent
of the Lenders and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for the Borrower or
Refining.
<PAGE>
8.02 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 8.03.
8.03 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement (except for its or such
Person's own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties by the Borrower or any of its Affiliates or any of their respective
officers contained in this Agreement, any other Credit Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Credit Document or for any failure of the Borrower or any of its
Affiliates or any of their respective officers to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower or any of its Affiliates. The Agent
shall not be responsible to any Lender for the effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of this Agreement or any
Credit Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Lenders or by or on behalf of the Borrower to the Agent or any Lender or be
required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or
therein or as to the use of the proceeds of the Loans or of the existence or
possible existence of any Default or Event of Default.
8.04 Reliance by the Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the other Credit
Documents in accordance with a request of the Required Lenders (or to the extent
specifically provided in Section 9.12, all the Lenders), and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Lenders.
8.05 Notice of Default. The Agent shall not be deemed to have
knowledge of the occurrence of any Default or Event of Default, other than a
default in the payment of principal or interest on the Loans hereunder unless it
has received notice from a Lender or the Borrower, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall give prompt notice
thereof to the Lenders. The Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
8.06 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower or any of its
Affiliates, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrower
and any of its Affiliates and made its own decision to make its Loans hereunder
and enter into this Agreement and the other agreements contemplated hereby. Each
Lender also represents that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower and any of its Affiliates. Except
for notices, reports and other documents expressly required to be furnished to
the Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial and other
conditions, prospects or creditworthiness of the Borrower or any of its
Affiliates which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
8.07 Indemnification. The Lenders agree to indemnify the Agent
in its capacity as such or in any other representative capacity under any other
Credit Document ratably according to their pro rata portion of the Loan, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, incurred by or
asserted against the Agent in its capacity as such in any way relating to or
arising out of this Agreement or any other Credit Document, or any documents
contemplated by or referred to herein or the transactions contemplated hereby or
any action taken or omitted to be taken by the Agent under or in connection with
any of the foregoing, but only to the extent that any of the foregoing is not
paid by the Borrower; provided that no Lender shall be liable to the Agent for
the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the Agent's gross negligence or willful misconduct. If any indemnity
furnished to the Agent for any purpose shall, in the opinion of the Agent, be
insufficient or become impaired, the Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section 8.07 shall survive the
payment of all Obligations.
8.08 The Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower and Affiliates of the Borrower as though the
Agent were not the Agent hereunder. With respect to the portion of the Loan made
by it and all Obligations owing to it, the Agent shall have the same rights and
powers under this Agreement as any Lender and may exercise the same as though it
were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent
in its individual capacity.
8.09 Successor Agent. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, the term "Agent" shall include such
successor agent effective upon its appointment, and the resigning Agent's
rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement. After the retiring Agent's resignation hereunder as Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
8.010 Resignation by Agent. (a) The Agent may resign from the
performance of all its functions and duties hereunder at any time by giving 15
Business Days' prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to subsections (b) and (c) below or as otherwise provided
below.
<PAGE>
(b) Upon any such notice of resignation of the Agent, the
Required Lenders shall appoint a successor Agent acceptable to the Borrower and
which shall be an incorporated bank or trust company or other qualified
financial institution with operations in the United States and total assets of
at least $1 billion.
(c) If a successor Agent shall not have been so appointed
within said 15 Business Day period, the resigning Agent with the consent of the
Borrower (which consent shall not be unreasonably withheld) shall then appoint a
successor Agent (which shall be an incorporated bank or trust company or other
qualified financial institution with operations in the United States and total
assets of at least $1 billion) who shall serve as Agent until such time, if any,
as the Required Lenders appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to
subsection (b) or (c) by the 20th Business Day after the date such notice of
resignation was given by the resigning Agent, such Agent's resignation shall
become effective and the Required Lenders shall thereafter perform all the
duties of Agent hereunder until such time, if any, as the Required Lenders
appoint a successor Agent as provided above.
(e) Notwithstanding any of the foregoing, Citicorp may resign
at any time upon notice to the Borrower in connection with its assignment of its
duties as Agent hereunder to an Affiliate of Citicorp pursuant to Section 9.04.
8.11 Collateral Matters. (a) The Lenders hereby authorize the
Agent, at its option and in its discretion, to release any Lien granted to or
held by the Agent upon any Collateral (i) upon termination of the Commitments
and payment and satisfaction of all of the Obligations at any time arising under
or in respect of this Agreement or the Credit Documents or the transactions
contemplated hereby or thereby or (ii) if approved, authorized or ratified in
writing by the Required Lenders, unless such release is required to be approved
by all of the Lenders hereunder. Upon request by the Agent at any time, the
Lenders will confirm in writing the Agent's authority to release particular
types or items of Collateral pursuant to this Section 8.11.
(b) Upon at least five (5) Business Days' prior written
request by the Borrower, the Agent shall (and is hereby irrevocably authorized
by the Lenders to) execute such documents as may be necessary to evidence the
release of the Liens granted to the Agent for the benefit of the Lenders herein
or pursuant hereto upon the Collateral that was released pursuant to clause (a)
above; provided that (i) the Agent shall not be required to execute any such
document on terms which, in the Agent's opinion, would expose the Agent to
liability or create any obligation or entail any consequence other than the
release of such Liens without recourse or warranty and (ii) such release shall
not in any manner discharge, affect or impair the Obligations. In the event of
any disposition of Collateral, or any foreclosure with respect to any of the
collateral, the Agent shall be authorized to deduct all of the expenses
reasonably incurred by the Agent from the proceeds of any such sale, transfer or
foreclosure.
SECTION 9. Miscellaneous.
9.1 Payment of Expenses, etc. (a) The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
out-of-pocket costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of Cahill Gordon & Reindel and local counsel to the Lenders) and
of each of the Lenders in connection with the enforcement of the Credit
Documents (including in connection with any "work-out" or other restructuring of
the Borrower's Obligations or in connection with any bankruptcy, reorganization
or similar proceeding with respect to the Borrower) and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for each of the Lenders); (ii) pay and hold
each of the Lenders harmless from and against any and all present and future
stamp and other similar taxes with respect to the foregoing matters and hold
each of the Lenders harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to such Lender) to pay such taxes; and (iii) indemnify the Agent,
each Lender, their respective Affiliates and their respective officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not any Lender is a party thereto) related to the entering into and/or
performance of any Credit Document or the use of the proceeds of the Loan
hereunder or the consummation of any other transactions contemplated in any
Credit Document, including, without limitation, the fees and disbursements of
counsel incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified).
<PAGE>
(b) If any payment of principal of, or conversion of, any
LIBOR Loan is made by the Borrower to or for the account of a Lender other than
on the last day of the Interest Period for such LIBOR Loan, as a result of a
payment or conversion pursuant to Section 1.06, 1.09, 2.01 or 2.02, acceleration
of the maturity of the Notes pursuant to Section 6 or for any other reason, the
Borrower shall, upon demand by such Lender (with a copy of such demand to the
Agent), pay to the Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses which it may
incur as a result of such payment or conversion, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by any Lender to fund or maintain such LIBOR
Loan. A certificate as to such amounts, submitted to the Borrower and the Agent
by such Lender, shall be conclusive and binding for all purposes.
9.02 Right of Set-off. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
a Default or an Event of Default, each Lender is hereby authorized at any time
or from time to time thereafter, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by such Lender (including, without limitation, by branches and agencies of
such Lender wherever located) to or for the credit or the account of the
Borrower against and on account of the Obligations and liabilities of the
Borrower to such Lender under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations of the
Borrower purchased by such Lender pursuant to Section 9.04(b), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Credit Document, irrespective of whether or not such
Lender shall have made any demand hereunder and although said Obligations,
liabilities or claims, or any of them, shall be contingent or unmatured and
provided, further, that the Borrower hereby expressly agrees that all rights
granted to the Lenders pursuant to this Section 9.02 shall be exercisable by
such Lenders against all deposits of the Borrower at any time held or
Indebtedness (as set forth above) at any time owing to the Borrower in any
Citibank or Citicorp account in Budapest, Hungary, whether or not the Citibank
or Citicorp entity holding such deposits or Indebtedness is considered a branch,
agency, Affiliate or separate legal entity of or from either Citibank, N.A. or
Citicorp North America, Inc.
9.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
and personally delivered, mailed, telegraphed, telexed, telecopied or cabled, if
to the Borrower, to Hungarian Telephone and Cable Corp., Northwest Professional
Building, 227 Route 206, Unit 11, Flanders, New Jersey 07836 (Fax: 201
927-7339), Attention: Robert Genova, with copies to: Cohen & Cohen, 445 Park
Avenue, New York, New York 10022 (Fax: 212 758-9896), Attention: Frank R. Cohen
and CU CapitalCorp, c/o Citizens Utilities Company,, P.O. Box 3801, High Ridge
Park, Stamford, Ct. 06905, (Fax: 203-329-4625), Attention: Robert J. DeSantis;
if to any Lender, at its address specified for such Lender on Annex II hereto;
or, at such other address as shall be designated by any party in a written
notice to the other parties hereto. All such notices and communications shall,
when mailed or personally delivered, be effective upon receipt, or when
telegraphed, telexed, telecopied, or cabled, be effective upon confirmation of
receipt by addressee or when sent by overnight courier, be effective one day
after delivery to such courier, except that notices and communications to the
Agent shall not be effective until received by the Agent.
9.04 Benefit of Agreement. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto, all
future holders of the Notes, and their respective successors and assigns;
provided that the Borrower may not assign or transfer any of its interests
hereunder without the prior written consent of the Lenders; and provided,
further, that the rights of each Lender to transfer, assign or grant
participations in its rights and/or obligations hereunder shall be limited as
set forth below in this Section 9.04; provided that nothing in this Section 9.04
shall prevent or prohibit any Lender from (i) pledging its portion of the Loan
hereunder to a Federal Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank, (ii) subject to Section 9.04(b)(B), granting
participations in or assignments of such Lender's portion of the Loan hereunder
to its parent company and/or to any Affiliate of such Lender that is at least
50% owned by such Lender or its parent company and (iii) in the case of
Citicorp, assigning the portion of the Loan made by Citicorp, or assigning its
duties and obligations as Agent to an Affiliate of Citicorp.
(b) Each Lender shall have the right to transfer, assign or
grant participations in all or any part of its remaining portion of the Loan
hereunder on the basis set forth below in this clause (b); provided that no
assignee or participant of any Lender's rights shall be entitled to receive any
greater payment hereunder than such Lender would have been entitled to receive
with respect to the rights transferred. Each Lender may furnish any information
concerning the Borrower in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
(A) Assignments. Each Lender, with the written consent of the
Agent, which shall not be unreasonably withheld, and with notice to the
Borrower, may assign pursuant to an assignment and assumption agreement
all or a portion of its portion of the Loan hereunder pursuant to this
clause (b)(A) to one or more Lenders or one or more commercial banks or
other financial institutions; provided that any such assignment
pursuant to this clause (b)(A) shall be (1) in the aggregate amount of
at least $5,000,000, or, if less, all of such Lender's remaining
portion of the Loan and (2) either to a commercial bank or a financial
institution with total assets at least equal to $250,000,000. Any
assignment pursuant to this clause (b)(A) will become effective five
Business Days after (i) the Borrower's receipt of a written notice from
the assigning Lender and the assignee Lender, (ii) the Agent's receipt
of a processing and recordation fee of $2,000 from the assigning Lender
in connection with its processing of such sale, assignment, transfer or
negotiation and (iii) compliance with the provisions of clause (b)(C)
below; provided that such fee shall only be payable if the assignment
is between a Lender and a party that is not a Lender prior to the
assignment. The Borrower shall issue a new Note to the assignee in
conformity with Section 1.03 and the assignor shall return the old Note
to the Borrower. Upon the effectiveness of any assignment in accordance
with this clause (b)(A) and clause (b)(C) below, the assignee will
become a "Lender" for all purposes of this Agreement and the other
Credit Documents and, to the extent of such assignment, the assigning
Lender shall be relieved of its obligations hereunder with respect to
the Commitments being assigned.
(B) Participations. Each Lender may transfer, grant or assign
participations in all or any part of such Lender's portion of the Loan
hereunder pursuant to this clause (b)(B) to any commercial bank or
other financial institution with notice to the Borrower; provided that
(i) such Lender shall remain a "Lender" for all purposes of this
Agreement and the transferee of such participation shall not constitute
a Lender hereunder and (ii) no participant under any such participation
shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such
amendment or waiver would (x) extend the scheduled final maturity date
of any portion of the Loan in which such participant is participating
or (y) reduce the principal amount, interest rate or fees applicable to
any portion of the Loan in which such participant is participating or
postpone the payment of any interest or fees or (z) release all or
substantially all of the Collateral (except as expressly permitted by
the Credit Documents). In the case of any such participation, the
participant shall not have any rights under this Agreement or any of
the other Credit Documents (the participant's rights against the
granting Lender in respect of such participation to be those set forth
in the agreement with such Lender creating such participation) and all
amounts payable by the Borrowers hereunder shall be determined as if
such Lender had not sold such participation; provided that such
participant shall be considered to be a "Lender" for purposes of
Sections 9.02 and 9.04(b) only.
(C) Register. The Borrower shall maintain a register (the
"Register") on which it will record the Loans made by each of the
Lenders and each repayment in respect of the principal amount of the
Loans of each Lender. Failure to make any such recordation, or any
error in such recordation, shall not affect the Borrower's obligation
in respect of such Loans. With respect to any Lender, the assignment of
the rights to the principal of, and interest on, any Loan made by such
Lender shall not be effective until the Borrower issues a registered
Note evidencing the assigned Obligations in accordance with the last
sentence of this clause (b)(C) with respect to ownership of such Loans,
and prior to such issuance all amounts owing to the transferor with
respect to such Loans shall remain owing to the transferor. The
registration of assignment of all or part of any Loans for a Lender
shall be recorded by the Borrower on the Register immediately following
receipt by the Agent of a properly executed and delivered assignment
and assumption agreement and the delivery of the Note evidencing such
Loans and notice of such assignment to the Borrower, in each case
pursuant to clause (b)(A) above. Coincident with the delivery of notice
of such an assignment to the Borrower for registration of assignment of
all or part of a Loan, or as soon thereafter as practicable, the
assigning or transferor Lender shall surrender the Note evidencing such
Loan to the Borrower, and thereupon one or more new Notes in the same
aggregate principal amount shall be issued by the Borrower to the
assigning or transferor Lender and/or the new Lender in accordance with
clause (b)(A) above.
9.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Agent or any Lender in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
the Borrower and the Agent or any Lender shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege hereunder
or under any other Credit Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder or
thereunder. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights or remedies which the Agent or any Lender would
otherwise have. No notice to or demand on the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Lenders
to any other or further action in any circumstances without notice or demand.
9.06 Payments Pro Rata. (a) The Agent agrees that promptly
after its receipt of each payment from or on behalf of the Borrower in respect
of any Obligations, it shall distribute such payment to the Lenders pro rata
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loan, of a sum which with respect to the related sum or sums received by
other Lenders is in a greater proportion than the total of such Obligations then
owed and due to such Lender bears to the total of such Obligations then owed and
due to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the Borrower
to such Lenders in such amount as shall result in a proportional participation
by all of the Lenders in such amount; provided that if all or any portion of
such excess amount is thereafter recovered from such Lender, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest.
9.07 Calculations; Computations. (a) The financial
statements to be furnished to the Lenders pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved.
(b) All computations of interest and fees hereunder shall be
made on the actual number of days elapsed over a year of 365 days; provided,
however, that all computations of interest on LIBOR Loans shall be made on the
actual number of days elapsed over a year of 360 days.
9.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a)THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY
THEREIN. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE BORROWER AND EACH OF THE LENDERS HEREBY
IRREVOCABLY ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE
BORROWER AND EACH OF THE LENDERS FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW YORK 10019 AND
THE AGENT, RESPECTIVELY, AS AGENT FOR SERVICE OF PROCESS, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE BORROWER AND EACH OF THE LENDERS
HEREBY IRREVOCABLY APPOINT CT CORPORATION SYSTEM AND THE AGENT, RESPECTIVELY, TO
SERVE AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER OR ANY LENDER IN ANY OTHER
JURISDICTION.
(b) THE BORROWER AND EACH OF THE LENDERS HEREBY IRREVOCABLY
WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
In addition, at the sole option of the Agent, any controversy
or claim arising out of or relating to this Agreement, or the breach thereof,
may be submitted by the Agent (or removed by the Agent) to and settled by
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules and judgment upon any award rendered by
the arbitrator or arbitrators may be entered in any applicable court.
9.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
9.010 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and each of the Lenders
shall have signed a copy hereof (whether the same or different copies) and shall
have delivered the same to the Agent at the Agent's Office or, in the case of
the Lenders, shall have given to the Agent telephonic (confirmed in writing),
written, telex or telecopy notice (actually received) at such office that the
same has been signed and mailed to it. The Agent will give the Borrower and each
Lender prompt notice of the occurrence of the Effective Date.
<PAGE>
9.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Agreement.
9.12 Amendment or Waiver. Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Required Lenders; provided that no such change, waiver,
discharge or termination shall, without the consent of each affected Lender and
the Agent, (i) extend the scheduled final maturity date of the Loan, or any
portion thereof, or reduce the rate or extend the time of payment of interest
thereon or fees or reduce the principal amount thereof, (ii) release all or
substantially all of the Collateral (except as expressly permitted by the Credit
Documents), (iii) amend, modify or waive any provision of Section 1.09, 1.10,
2.05, 6, 8.07, 9.01, 9.02, 9.04, 9.06, 9.07(b) or 9.12, (iv) reduce any
percentage specified in, or otherwise modify, the definition of Required
Lenders, or (v) consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement. No provision of Section 8 may
be amended without the consent of the Agent.
9.13 Survival. All indemnities set forth herein, including,
without limitation, in Section 1.10, 2.05, 8.07 or 9.01, shall survive the
execution and delivery of this Agreement and the making of the Loans and the
repayment of the Obligations.
9.14 Domicile of Loan. Each Lender may transfer and carry its
portion of the Loan at, to or for the account of any branch office, Subsidiary
or Affiliate of such Lender.
9.15 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
9.16 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Secured Term Loan Credit Facility to be duly executed and
delivered as of the date first above written.
HUNGARIAN TELEPHONE AND CABLE
CORP.
By: /s/ Mary E. Thomas
Name: Mary E. Thomas
Title: Attorney-In-Fact
<PAGE>
Secured Term Loan Credit Facility among Hungarian Telephone and Cable Corp.,
Citicorp North America, Inc. and the Lenders listed herein.
CITICORP NORTH AMERICA, INC.
as Agent and Collateral
Agent
By: /s/ Mary E. Thomas
Name: Mary E. Thomas
Title: Attorney-In-Fact
Loan Commitment: $75,000,000
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of March 29, 1996 made
by HUNGARIAN TELEPHONE AND CABLE CORP., a Delaware corporation ("HTCC") and HTCC
CONSULTING RT., a Hungarian corporation limited by shares ("Consulting" and,
together with HTCC, the "Pledgors"), in favor of CITICORP NORTH AMERICA, INC.
("Citicorp"), as collateral agent, as pledgee, assignee and secured party (the
"Collateral Agent") for the Lenders (as hereinafter defined).
WITNESSETH:
WHEREAS, HTCC owns all of the shares of Consulting (the
"Consulting Shares");
WHEREAS, HTCC owns 50.1% and Consulting owns 15.77% of the
shares of Raba Com Rt., a Hungarian corporation limited by shares ("Raba")
(together, the "Raba Shares"), and HTCC owns 50.1% and Consulting owns 19.88% of
the shares of Kelet-Nograd Com Rt., a Hungarian corporation limited by shares
("Kelet-Norgrad") (together, the "Kelet-Nograd Shares");
WHEREAS, HTCC owns, or has the right to receive when issued,
100% of the shares of Hungarotel Tavkozlesi Rt., a Hungarian corporation limited
by shares ("Hungarotel") (the "Hungarotel Interests"), and approximately 79% of
the shares of Papa es Tersege Telefon Koncesszios Rt., a Hungarian corporation
limited by shares ("Papatel") (the "Papatel Shares");
WHEREAS, HTCC, certain lending institutions (the "Lenders")
and the Collateral Agent have entered into that certain Secured Term Loan Credit
Facility, dated as of March 29, 1996 (the "Credit Agreement"), pursuant to which
Lenders have agreed to extend to HTCC certain loans. Capitalized terms not
defined herein have the meanings ascribed to such terms in the Credit Agreement;
WHEREAS, pursuant to the Credit Agreement, HTCC has agreed to
pledge to Collateral Agent all of its rights, title and interest in and to
Consulting, Raba, Kelet-Nograd, Papatel and Hungarotel (the "Pledged
Subsidiaries") as security for the payment of all of its obligations arising
under the Credit Agreement, the Promissory Note (the "Note") issued thereunder,
and this Pledge and Security Agreement (collectively, the "Obligations") and to
further secure the Obligations, Consulting has agreed to pledge to the
Collateral Agent all of its rights, title and interest in and to Raba and
Kelet-Nograd;
WHEREAS, HTCC will use a portion of the proceeds of the Loan
advances made pursuant to the Credit Agreement to make and fund loans to the
Pledged Subsidiaries (the "Pledged Subsidiary Loans") to be evidenced by
intercompany promissory notes payable to HTCC (the "Pledged Subsidiary Notes"),
which Pledged Subsidiary Loans and Pledged Subsidiary Notes along with other
intercompany indebtedness owed or owing by any Pledged Subsidiary to HTCC
whether documented or not ("Other Intercompany Indebtedness"), HTCC has agreed
to pledge to Collateral Agent as additional security for the payment of all of
the Obligations; and
WHEREAS, HTCC has entered into a certain Management Services
Agreement with Citizens International Management Services, Inc. dated May 31,
1995, as amended (the "Management Agreement") and pursuant to the Credit
Agreement, HTCC has agreed to grant a security interest in all contract rights
of any kind or character, including without limitation, all claims of every kind
and character (the "Contract Rights") under such Management Agreement to the
Collateral Agent as additional security for the payment of all of its
Obligations.
NOW, THEREFORE, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) for and in consideration of the Credit
Agreement and the premises and agreements herein and therein contained, and
(iii) for other good and valuable consideration, the receipt and sufficiency of
all of which are hereby acknowledged, the Pledgors and the Collateral Agent
hereby agree as follows:
Section .1. Grant of Security Interest.
As security for the full and punctual payment and performance
when due of the Obligations (which term shall include, without limitation, all
present and future indebtedness, obligations and liabilities of Pledgors to the
Collateral Agent under this Pledge and Security Agreement, the Credit Agreement
and the Note and reasonable attorney's fees incurred in the enforcement or
collection thereof, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several, whether now existing or hereafter arising), the Pledgors hereby assign,
transfer and deliver to the Collateral Agent, and grant to the Collateral Agent
a security interest in, a general lien upon, and a right of set-off against, all
of its rights, title and interest in (A) as to HTCC, its Contract Rights under
the Management Agreement and (B) as to Pledgors, each of the Pledged
Subsidiaries, including without limitation (i) all shares of such Hungarian
corporations, now owned or hereafter acquired, directly or indirectly, by the
Pledgors (collectively, the "Shares"), and any additional shares or securities
or other property at any time receivable or otherwise distributable in respect
of, in exchange for, or in substitution of, the Shares, together with any and
all of the proceeds of or accruing thereto, provided that (a) the consent, if
necessary, of the Minister of Transportation, Telecommunications and Water
Management of the Republic of Hungary (the "Ministry") with respect to the
pledge of the Raba Shares, the Kelet-Nograd Shares, the Papatel Shares and the
Hungarotel Interests has been obtained, (b) the consent and waiver of any rights
of first refusal of Telecom Denmark A/S ("TD") and The Investment Fund for
Central and Eastern Europe (the "Fund") with respect to the pledge of the Raba
Shares and the Kelet-Nograd Shares have been obtained provided that if such
consents and waivers are not obtained or until such consents and waivers are
obtained, the Pledgors will not grant any security interests to the Collateral
Agent in the Raba Shares and the Kelet-Nograd Shares and the Raba Shares and
Kelet-Nograd Shares will be excluded Shares until such consents and waivers are
obtained, (c) the consent of Magyar Tavkozlesi Rt., a Hungarian corporation
limited by shares ("MATAV") with respect to the pledge of the Kelet-Nograd
Shares has been obtained provided that if such consent is not obtained or until
such consent is obtained, the Pledgors will not grant any security interests to
the Collateral Agent in the Kelet-Nograd Shares and the Kelet-Nograd Shares will
be excluded Shares until such consent is obtained and (d) the consent of the
National Bank of Hungary with respect to the execution and pledge of the Pledged
Subsidiary Loans and the execution by Consulting of this Pledge and Security
Agreement (collectively, the "Required Consents"), and (ii) the Pledged
Subsidiary Notes, the Pledged Subsidiary Loans, and the Other Intercompany
Indebtedness, together with all instruments, agreements or other documents
relating to the Pledged Subsidiary Loans or the Other Intercompany Indebtedness
(collectively, the "Pledged Subsidiary Loan Documentation") and any other
property at any time receivable or otherwise distributable in respect of, in
exchange for, or in substitution of, the Pledged Subsidiary Loan Documentation,
together with any and all of the proceeds of or accruing thereto. In order to
perfect such security interest, the Pledgors hereby agree, subject to the above,
to (A) deliver to the Collateral Agent as soon as practicable the certificates
representing the Shares (the "Certificates"), duly endorsed for transfer in
blank, provided that the Kelet-Nograd Shares, the Hungarotel Interests and the
Papatel Shares are, as of the date hereof, subject to the first priority
security interest of MATAV and any delivery of such Kelet-Nograd Shares,
Hungarotel Interests and Papatel Shares is contingent upon the release of
MATAV's first security interest in any of the Kelet-Nograd Shares, Hungarotel
Interests and Papatel Shares and the consents and waivers of TD and the Fund set
forth in clause (b) above and following any such release, consent and waiver
HTCC shall deliver all such released Kelet-Nograd Shares, Hungarotel Interests
and Papatel Shares to the Collateral Agent, (B) deliver to the Collateral Agent
the Pledged Subsidiary Notes and all other Pledged Subsidiary Loan Documentation
in suitable form for transfer by endorsement or accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
reasonably satisfactory to the Collateral Agent, (C) cause each of the Pledged
Subsidiaries to make complete and proper notations of Pledgor's pledge of the
Shares and the Pledged Subsidiary Loan Documentation to the Collateral Agent
hereunder in all appropriate stock transfer ledgers or other share registry and
loan records maintained by each of the Pledged Subsidiaries and (D) take, and to
cause each of the Pledged Subsidiaries to take, such other actions and execute
and deliver to the Collateral Agent, and cause each of the Pledged Subsidiaries
to execute and deliver to the Collateral Agent, such other agreements, documents
and instruments as may be necessary or desirable (x) to perfect the security
interest in the Shares, the Certificates, the Pledged Subsidiary Notes, and the
other Pledged Subsidiary Loan Documentation and the Contract Rights (hereinafter
collectively referred to as the "Pledged Collateral") hereby granted by Pledgors
to Collateral Agent and (y) to obtain the Required Consents if and to the extent
required. If any of the Certificates evidencing any of the Shares or any of the
Pledged Subsidiary Loan Documentation required to be pledged to the Collateral
Agent hereunder are hereafter received by Pledgors, Pledgors agree to transfer
and deliver to the Collateral Agent as quickly as is practicable such
Certificates so received (with appropriate stock powers executed in blank) and
such Pledged Subsidiary Loan Documentation so received (in suitable form for
transfer by endorsement or accompanied by duly executed instruments of transfer
or assignment in blank), all of which thereafter shall be held by the Collateral
Agent, pursuant to the terms of this Pledge and Security Agreement, as part of
the Collateral. Pledgors hereby appoint the Collateral Agent as their
representative for all purposes hereof. All notices to or from the Pledgors or
Pledged Subsidiaries shall be given to the Collateral Agent representative and
the Pledgors hereby agree that any notice given by the Collateral Agent
representative or any action taken by the Collateral Agent representative shall
have been fully authorized. All Pledged Collateral at any time delivered to the
Collateral Agent shall be held by the Collateral Agent subject to the terms,
covenants and conditions set forth herein. The Collateral Agent shall have all
the rights of a secured party under the Uniform Commercial Code as adopted in
the State of Delaware.
Section .2. Obligations Secured.
The assignment, pledge, transfer and delivery to the
Collateral Agent of the Pledged Collateral and the security interest in, general
lien upon, and right of set-off against the Pledged Collateral are granted to
secure performance of the Obligations. This Pledge and Security Agreement
constitutes a security agreement.
Section .3. Representations and Warranties of Pledgors.
(a) Except for (i) the security interest of the Collateral
Agent, (ii) the security interests of CU CapitalCorp. in the Pledged Collateral
which shall be subordinated to the security interests of the Collateral Agent in
the Pledged Collateral and which shall be terminated on the Initial Funding
Date, (iii) the prior interest and/or transfer restrictions in favor of MATAV in
the Kelet-Nograd Shares, the Papatel Shares and the Hungarotel Interests and
(iv) the rights of first refusal on the Raba Shares and the Kelet-Nograd Shares
granted by Pledgors in favor of TD and the Fund, Pledgors are, or to the extent
that certain of the Pledged Collateral is to be acquired after the date hereof,
will be, the owner of the Pledged Collateral, free from any adverse lien,
security interest or encumbrance, and the Pledgors will defend the Pledged
Collateral against all claims and demands of all other persons at any time
claiming any interest therein.
(b) The Pledged Collateral pledged by the Pledgors pursuant
hereto shall at all times consist of all of (i) the Pledgors' rights, title and
interest in and to any and all shares, promissory notes and other debt
obligations of each of the Pledged Subsidiaries then owned by the Pledgors and
(ii) HTCC's Contract Rights in the Management Agreement. The Consulting Shares
constitute one hundred percent (100%) of the issued and outstanding capital
stock of Consulting, Consulting has issued no shares of voting or capital stock
other than the Consulting Shares, and there are no currently outstanding
subscription agreements, warrants, rights or options to acquire any of the
Consulting Shares or other capital stock of Consulting.
(c) Except with respect to the Hungarotel Interests, all of
the Shares were duly authorized and validly issued and are validly outstanding.
Except with respect to the Hungarotel Interests, the Shares are fully paid and
non-assessable, and were not issued in violation of the preemptive rights of any
person or entity or of any agreement by which the Pledgors or any of the Pledged
Subsidiaries is bound.
(d) All Pledged Subsidiary Loans, Pledged Subsidiary Notes,
Other Intercompany Indebtedness and Pledged Subsidiary Loan Documentation have
been or will be duly authorized by the relevant Pledged Subsidiary.
(e) This Pledge and Security Agreement has been duly executed
and delivered by the Pledgors and is a valid and binding agreement enforceable
against the Pledgors in accordance with its terms. Subject to receipt of the
Required Consents, the execution, delivery and performance by the Pledgors of
this Pledge and Security Agreement in accordance with its terms, and the grant
of the pledge contemplated hereby, will not (i) violate any provision of, or
result in the breach of, or constitute a default under, any federal, state or
local law, statute, ordinance, rule or regulation or order of any regulatory
body that is or may be applicable to the Pledgors or any of the Pledged
Subsidiaries, (ii) violate any order, writ, injunction, judgment or decree of
any foreign, federal, state or local court, arbitration tribunal, governmental
agency, or foreign regulatory body to which the Pledgors or any of the Pledged
Subsidiaries is or may be subject, (iii) violate any contract, indenture,
agreement, instrument, note, mortgage, lease, license, franchise, permit or
other authorization, right, restriction or obligation to which the Pledgors or
any of the Pledged Subsidiaries is a party or is or may be bound, (iv)
constitute an act of bankruptcy, preference, insolvency or fraudulent conveyance
under any bankruptcy act or other law for the protection of debtors or
creditors, or (v) conflict with or result in any breach or violation of the
terms, conditions or provisions of the Articles of Association of any of the
Pledged Subsidiaries.
Section .4. Covenants of Pledgors.
.4.1 Subject to the provisions of Delaware and Hungarian law,
Pledgors hereby covenant and agree with the Collateral Agent that, for so long
as the Pledged Collateral is subject to this Pledge and Security Agreement and
except if the Collateral Agent otherwise may approve in writing, the Pledgors
will not, and will not enter into any contract or agreement to, vote any Shares
owned by it, or otherwise take any action to approve (x) an amendment to the
Articles of Association or Bylaws of any of the Pledged Subsidiaries except for
Hungarotel which amendments have been approved by the Pledgors, (y) an act of
any of the Pledged Subsidiaries, or (z) a transaction involving any of the
Pledged Subsidiaries in each case that would:
(a) Amend the Articles of Association or Bylaws of any of the
Pledged Subsidiaries to in any way adversely affect the relative rights
and interests of the Shares or the Pledged Subsidiary Notes issued by
such company;
(b) Cause any of the Pledged Subsidiaries to redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of
the Shares or the Pledged Subsidiary Notes;
(c) Change the capital structure of any of the Pledged
Subsidiaries including, without limitation, (i) increasing or
decreasing the aggregate number of authorized shares of any of the
Pledged Subsidiaries, provided that Papatel and Hungarotel may increase
the number of authorized shares outstanding for any issuances of shares
to TD; (ii) issuing any additional shares of any of the Pledged
Subsidiaries (or issuing or have outstanding any subscription
agreements, warrants, rights or options to acquire any shares of any
class of stock of any of the Pledged Subsidiaries), provided that
Papatel and Hungarotel may issue additional shares to TD; (iii)
effecting an exchange, reclassification or cancellation of all or part
of the stock of any of the Pledged Subsidiaries; (iv) changing, in a
manner prejudicial to the stockholders of any of the Pledged
Subsidiaries, the designations, preferences, limitations or relative
rights of the stock of any of the Pledged Subsidiaries; (v) creating a
new class of stock of any of the Pledged Subsidiaries; or (vi)
authorizing the payment of a dividend in the form of shares of any of
the Pledged Subsidiaries;
(d) Cause any of the Pledged Subsidiaries to sell or offer to
sell or otherwise assign, transfer or dispose of any of its assets or
any interest therein and, except for the existing liens on the assets
of Kelet-Nograd and Raba in favor of the Fund and any existing or
future liens on the assets of any Pledged Subsidiary that are the
subject of any equipment vendor financing in favor of such equipment
vendor, will keep such assets free from any adverse lien, security
interest or encumbrance;
(e) Remove the books and records of any of the Pledged
Subsidiaries from the principal offices of any such company in the
Republic of Hungary, or such other place or places of business that are
approved in writing by Collateral Agent; or
(f) Cause any of the Pledged Subsidiaries to enter into
any agreement to do any of the foregoing.
.4.2 The Pledgors further covenant and agree that for so long
as the Pledged Collateral is subject to this Agreement, the Pledgors will not
sell, transfer or otherwise dispose of any of the Pledged Collateral.
.4.3 The Pledgors shall notify the Collateral Agent upon
default by any of the Pledged Subsidiaries under any agreement, arrangement,
contract, lease or commitment applicable to any of such companies or its
properties, the consequences of which could materially and adversely affect the
properties or operations of any of such companies.
.4.4 The Pledgors agree that from time to time, at their
expense, they will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary, or that the
Collateral Agent may reasonably request, in order to perfect and protect the
assignment, pledge and security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce the rights and
remedies provided hereunder with respect to any of the Pledged Collateral.
Without limiting the generality of the foregoing, the Pledgors will defend the
Pledged Collateral against any and all liens, charges or encumbrances howsoever
arising (other than the pledge provided for herein).
.4.5 The Pledgors shall promptly pay any and all taxes,
assessments and governmental charges upon the Pledged Collateral prior to the
date penalties are attached thereto.
.4.6 Each Pledged Subsidiary Loan shall be represented by a
Pledged Subsidiary Note, in form reasonably satisfactory to the Collateral
Agent, payable to HTCC and duly executed and authorized by the relevant Pledged
Subsidiary. HTCC shall maintain true, correct and current copies of all advances
and payments under each Pledged Subsidiary Note and shall report such advances
and payments to the Collateral Agent no less frequently than monthly. HTCC shall
promptly notify the Collateral Agent of any default under any Pledged Subsidiary
Loan or Other Intercompany Indebtedness and shall not take any action to
accelerate or enforce any such Pledged Subsidiary Note without the prior written
consent of the Collateral Agent.
Section .5. Default.
A default under this Pledge and Security Agreement (a
"Default") shall have occurred if any of the Events of Default set forth in
Section 6 of the Credit Agreement shall have occurred.
Section .6. Term.
The term of this Pledge and Security Agreement shall commence
on the date hereof, and this Pledge and Security Agreement shall continue in
full force and effect thereafter until the Obligations are paid, performed and
satisfied in full, whereupon the Pledged Collateral shall be released and
returned to the Pledgor unless the Pledged Collateral has been sold or retained
by the Collateral Agent pursuant to the provisions of Section 7 hereof.
Section .7. Remedies.
.7.1 If any Default shall have occurred and be continuing, all
rights that the Pledgors had to exercise any rights and powers regarding the
Pledged Collateral shall cease and the Collateral Agent may exercise all the
rights and remedies of a Secured Party under the Uniform Commercial Code (the
"Code") (whether or not the Code is in effect in the jurisdiction where such
rights and remedies are exercised), including, without limitation, (i) retaining
the Pledged Collateral in satisfaction of the Obligations or (ii) selling the
Pledged Collateral, or any part thereof, at public or private sale, for cash, on
credit or for future delivery, and at such price or prices as the Collateral
Agent may deem satisfactory, and, to the extent permitted by law, the exercise
of sole and exclusive voting, consensual and other powers of ownership
pertaining to the Pledged Collateral pledged hereunder in such manner as the
Collateral Agent, in its sole discretion, shall determine to be necessary,
appropriate or advisable; provided that the Collateral Agent shall notify the
Pledgors in writing at least ten (10) days prior to the date on which the
Collateral Agent will exercise its rights pursuant to this Pledge and Security
Agreement by retaining, foreclosing on, or otherwise disposing of, any such
Pledged Collateral. The Pledgors and the Collateral Agent agree that such notice
constitutes "reasonable notification" within the meaning of Section 9-504(3) of
the Uniform Commercial Code.
.7.2 The Pledgors, to the extent permitted by law, hereby
specifically waive all rights of redemption, stay or appraisal that they have or
may have under any rule of law or statute now existing or hereafter adopted.
.7.3 The Collateral Agent shall not be obligated to make any
such sale pursuant to any such notice. The Collateral Agent may, without notice
or publication, adjourn from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be adjourned.
.7.4 In case of any sale of all or any part of the Pledged
Collateral on credit or for future delivery, the Pledged Collateral so sold may
be retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Pledged
Collateral so sold and, in case of any such failure, such Pledged Collateral may
again be sold upon like notice.
.7.5 The Collateral Agent, instead of exercising the powers of
sale or retention herein conferred upon it, may proceed by a suit or suits at
law or in equity to foreclose on the security interests granted to it in equity
to foreclose on the security interests granted to it hereunder and sell the
Pledged Collateral, or any portion thereof, under a judgment, decree or order of
a court or courts of competent jurisdiction.
.7.6 Upon the occurrence of a Default, the Collateral Agent
shall have the right and power to take possession of all or any part of the
Pledged Collateral, exclude Pledgors and all persons claiming under the Pledgors
wholly or partly therefrom, and, thereafter, hold and control the same. In any
such case, the Collateral Agent shall have the right to manage and control the
Pledged Collateral and to exercise all rights and powers of the Pledgors in
respect thereof, as the Collateral Agent shall deem best, and the Collateral
Agent shall be entitled to collect and receive all issues, profits, fees,
revenues and other income of the same and every part thereof. Such issues,
profits, fees, revenues and other income shall be applied to pay the expenses of
holding the Pledged Collateral and to make all payments that the Collateral
Agent may be required or may elect to make, if any, for taxes, assessments and
other charges upon the Pledged Collateral or any part thereof, and all other
payments which the Collateral Agent may be required or authorized to make under
any provision of this Pledge and Security Agreement (including legal costs and
attorney's fees). The remainder of such issues, profits, fees, revenues and
other income shall be applied to the payment of the Obligations in such order of
priority as the Collateral Agent shall determine (subject to the provisions of
Section 8 hereof) and, unless otherwise provided by law or by court of competent
jurisdiction, any surplus shall be paid over to the Pledgors.
.7.7 The Collateral Agent shall incur no liability as a result
of the manner of sale of the Pledged Collateral, or any part thereof, at any
private sale conducted in a commercially reasonable manner. The Pledgors hereby
waive, to the full extent permitted by applicable law, any claims against the
Collateral Agent arising by reason of the fact that the price at which the
Pledged Collateral, or any part thereof, may have been sold at a private sale
was less than the price that might have been obtained at a public sale or was
less than the aggregate amount of the Obligations, even if the Collateral Agent
accepts the first offer received that the Collateral Agent in good faith deems
to be commercially reasonable under the circumstances and does not offer the
Collateral to more than one offeree. To the extent permitted by law, the
Pledgors shall have the burden of proving that any such sale of the Pledged
Collateral was not conducted in a commercially reasonable manner.
.7.8 If the exercise of any rights, powers or remedies granted
hereunder to the Collateral Agent requires the prior approval of any foreign,
federal or state governmental or regulatory body or third party, including the
Required Consents, the Collateral Agent shall obtain such approval or Required
Consents before exercising such rights or powers or availing itself of such
remedies. The Pledgors shall cooperate fully with the Collateral Agent, to the
extent and in the manner reasonably requested by the Collateral Agent, in the
preparation, execution, filing and prosecution of any application or submission
requesting any such approval or any such Required Consent.
Section .8. Application of Pledged Collateral and Proceeds.
The proceeds of any sale of, or other realization upon, all or
any part of the Pledged Collateral shall be applied in the following order of
priority:
(a) First, to pay the expenses of such sale or other
realization, including reasonable expenses, liabilities and advances incurred or
made by the Collateral Agent in connection therewith, and any other unreimbursed
expenses for which the Collateral Agent is to be reimbursed pursuant to Section
9 hereof;
(b) Second, to the payment of the Obligations in such other
manner as the Collateral Agent, in its sole discretion, shall determine; and
(c) Finally, to pay to the Pledgors, or their successors or
assigns, or as a court of competent jurisdiction may direct, any surplus then
remaining from such proceeds.
Section .9. Payment of Expenses.
Pledgors agree to pay upon demand to the Collateral Agent:
(a) the amounts of any taxes that the Collateral Agent may
have been required to pay by reason of the security interests established
pursuant to this Pledge and Security Agreement (including any applicable
transfer taxes) or to free any of the Pledged Collateral from any lien thereon;
and
(b) the amount of any and all reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of its counsel and of
any agents not regularly in its employ, that the Collateral Agent may incur in
connection with (i) the administration of this Pledge and Security Agreement,
(ii) the collection, sale or other disposition of any of the Pledged Collateral,
(iii) the exercise by the Collateral Agent of any of the powers conferred upon
it hereunder or (iv) any default by the Pledgors hereunder.
Section .10. General.
.10.1 So long as no Default hereunder shall have occurred and
be continuing, the Pledgors shall have the exclusive right to vote the Shares in
the manner the Pledgors deem appropriate in its sole discretion, subject to the
provisions of Sections 4 and 7 hereof.
.10.2 The security interests granted pursuant to this Pledge
and Security Agreement are granted as security only and shall not subject the
Collateral Agent to, or transfer or in any way affect or modify, any obligation
or liability of the Pledgors under any of the Pledged Collateral or any
transaction that gave rise to such obligation or liability.
.10.3 Upon the repayment and performance in full of all the
Obligations, the security interests created under this Pledge and Security
Agreement shall terminate and the Collateral Agent shall reassign and deliver to
the Pledgors the Pledged Collateral. Upon any such termination of such security
interests or release of Pledged Collateral, the Collateral Agent will, at the
Pledgors' expense to the extent permitted by law, execute and deliver to the
Pledgors such documents as the Pledgors shall reasonably request to evidence the
termination of such security interests or the release of such Pledged
Collateral, as the case may be.
.10.4 No failure on the part of the Collateral Agent to
exercise, and no delay in exercising, and no course of dealing with respect to,
any right, power or remedy under this Pledge and Security Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Collateral Agent of any right, power or remedy under this Agreement preclude any
other right, power or remedy. The remedies in this Pledge and Security Agreement
are cumulative and are not exclusive of any other remedies provided by law.
.10.5 No party hereto shall assign its rights and obligations
under this Pledge and Security 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 the Collateral Agent
may be assigned to the extent permitted by the Credit Agreement. Except as
otherwise provided herein, this Pledge and Security Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
.10.6 This Pledge and Security Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
giving effect to the principles of conflict of laws thereof. Each of the parties
to this Pledge and Security Agreement hereby irrevocably and unconditionally (i)
consents to submit to the exclusive jurisdiction of the courts of the State of
New York for any proceeding arising in connection with this Pledge and Security
Agreement (and each such party agrees not to commence any such proceeding,
except in such courts), (ii) to the extent such party is not a resident of the
State of New York, agrees to appoint an agent in the State of New York 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 New York, 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 New York,
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 New York has been brought in an
improper or otherwise inconvenient forum.
In addition, at the sole option of the Agent, any controversy
or claim arising out of or relating to this Agreement, or the breach thereof,
may be submitted by the Agent (or removed by the Agent) to and settled by
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules and judgment upon any award rendered by
the arbitrator or arbitrators may be entered in any applicable court.
.10.7 If any provision hereof is invalid or unenforceable in
any jurisdiction, the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in favor of the
Collateral Agent.
.10.8 The headings in this Pledge and Security Agreement are
for the purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
.10.9 This Pledge and Security 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.
.10.10 All notices and other communications hereunder shall be
given as set forth in the Credit Agreement.
.10.11 No amendment, modification, supplement, termination or
waiver of or to any provision of this Pledge and Security Agreement, nor consent
to any departure by Pledgors therefrom, shall be effective unless the same shall
be done in accordance with the terms of the Credit Agreement and unless in
writing and signed by the Collateral Agent. Any amendment, modification, or
supplement of or to any provision of this Pledge and Security Agreement, any
waiver of any provision of this Pledge and Security Agreement and any consent to
any departure by Pledgors from the terms of any provision of this Pledge and
Security Agreement shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Pledge and Security Agreement or any other Credit Document, no
notice to or demand on Pledgors in any case shall entitle Pledgors to any other
or further notice or demand in similar or other circumstances.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Pledge and Security Agreement on the date first set forth above.
ATTEST: HUNGARIAN TELEPHONE AND CABLE CORP.
By: /s/ Frank R. Cohen By: /s/ Robert Genova
Secretary Name: Robert Genova
Title: President
ATTEST: HTCC CONSULTING RT.
By: /s/ Frank R. Cohen By: /s/ Robert Genova
Secretary Name: Robert Genova
Title: President
CITICORP NORTH AMERICA, INC.,
as Collateral Agent
By: /s/ Mary E. Thomas
Name: Mary E. Thomas
Title: Attorney-In-Fact
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 15,958
<SECURITIES> 0
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0
0
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</TABLE>
