SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 30, 1998
Date of Report (Date of earliest event reported)
Hungarian Telephone and Cable Corp.
(Exact name of Registrant as Specified in Charter)
Delaware 1-11484 13-3652685
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number Identification No.)
100 First Stamford Place, Suite 204, Stamford, CT 06902
(Address of principal executive offices including zip code)
(203) 348-9069
(Registrant's telephone number, including area code)
Not applicable
(Former name or address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events
As announced on September 11, 1998 and October 2, 1998 (see Exhibits
99.1 and 99.2 attached hereto) Hungarian Telephone and Cable Corp., a Delaware
corporation (AMEX: HTC - the "Registrant"), entered into certain agreements with
each of CU CapitalCorp and Citizens International Management Services Company;
each of which is a wholly-owned subsidiary of Citizens Utilities Company
(Citizens Utilities Company and its subsidiaries are hereinafter referred to as
"Citizens") pursuant to which the Registrant settled its disagreements with
Citizens regarding certain issues with respect to (i) 2.1 million shares of the
Registrant's common stock subject to Citizens' accrued preemptive rights and
(ii) the Registrant's Management Services Agreement with Citizens dated as of
May 31, 1995, as amended (the "Management Services Agreement").
HTCC and Citizens entered into a Certain Replacement and Termination
Agreement dated as of September 30, 1998 (the "Replacement Agreement") which
provides for, among other things, (i) the termination of the Master Agreement
dated as of May 31, 1995 between the Registrant and Citizens; (ii) the issuance
by the Registrant to Citizens of 100,000 shares of the Registrant's common stock
and a promissory note in the principal amount of $8,374,498 (the "Note") in
settlement of $9.6 million accrued fees and expenses due and payable to Citizens
under the Management Services Agreement; (iii) the termination of the Management
Services Agreement; (iv) payments by the Registrant to Citizens in the aggregate
amount of $21,000,000 payable in 28 quarterly installments of each year from
2004 through and including 2010 in part as consideration for Citizens' agreement
to terminate the Management Services Agreement and in part as consideration for
certain consulting services to be provided by Citizens to the Registrant from
2004 through and including 2010; (v) the grant by the Registrant to Citizens of
certain preemptive rights in connection with any public or private issuances by
the Registrant of shares of its common stock to purchase within 30 days for cash
such number of shares of the Registrant's common stock sufficient to maintain
Citizens' then existing percentage ownership interest of the Registrant's common
stock on a fully diluted basis; and (vi) the right of one Citizens designee to
the Registrant's Board of Directors to be renominated for reelection to the
Registrant's Board of Directors for so long as Citizens owns at least 300,000
shares of the Registrant's common stock.
The principal on the Note is payable in full on September 15, 2004 and
bears interest at a varying rate per annum which is 2-1/2% per annum above the
one-year Libor rate with monthly adjustments in such varying rate. Accrued
interest shall be payable annually.
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The Registrant and Citizens also entered into an Amended, Restated and
Consolidated Stock Option Agreement dated as of September 30, 1998 (the
"Restated Stock Option Agreement") pursuant to which the Registrant granted
Citizens an option to purchase 2,110,896 shares of the Registrant's common stock
at a price of $13.00 per share with an expiration date of July 1, 1999 in
settlement of Citizens' accrued preemptive rights. The Restated Stock Option
agreement also acknowledged Citizens existing options to date to purchase an
aggregate of 4,511,322 shares of the Registrant's common stock at exercise
prices ranging from $12.75 to $18.00 per share with an expiration date of
September 12, 2000. In the aggregate, Citizens presently owns approximately
18.6% of the Registrant's outstanding common stock and 59.2% of the Registrant's
common stock on a fully diluted basis.
The summary information regarding the transactions and the Replacement
Agreement, Note and the Restated Stock Option Agreement discussed above is
qualified in its entirety by reference to the Replacement Agreement, Note and
the Restated Stock Option Agreement, which are attached hereto as Exhibits
10.69, 10.70 and 10.71, respectively, and are incorporated by reference into
this response to Item 5.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a), (b) - Not applicable.
(c) Exhibits.
10.69 Replacement and Termination Agreement, dated as of
September 30, 1998, between the Registrant and Citizens
International Management Services Company and CU
CapitalCorp.
10.70 Form of Promissory Note dated September 30, 1998
issued by the Registrant payable to Citizens International
Management Services Company.
10.71 Amended, Restated and Consolidated Stock Option
Agreement dated as of September 30, 1998, between the
Registrant and CU CapitalCorp.
99.1 Press Release issued by the Registrant on September
11, 1998.
99.2 Press Release issued by the Registrant on October 2,
1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HUNGARIAN TELEPHONE AND CABLE CORP.
100 First Stamford Place, Suite 204
Stamford, CT 06902
(Registrant)
By: /s/Peter T. Noone
-------------------------
Peter T. Noone
General Counsel and Secretary
Dated: October 21, 1998
Stamford, CT
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INDEX TO EXHIBITS
Exhibit No. Description
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10.69 Replacement and Termination Agreement, dated as of September 30,
1998, between the Registrant and Citizens International Management
Services Company and CU CapitalCorp.
10.70 Form of Promissory Note dated September 30, 1998 issued the
Registrant payable to Citizens International Management Services
Company.
10.71 Amended, Restated and Consolidated Stock Option Agreement dated as
of September 30, 1998, between the Registrant and CU CapitalCorp.
99.1 Press Release issued by the Registrant on September 11, 1998.
99.2 Press Release issued by the Registrant on October 2, 1998.
Exhibit 10.69
REPLACEMENT AND TERMINATION AGREEMENT
THIS REPLACEMENT AND TERMINATION AGREEMENT is dated as of September 30,
1998, by and among Hungarian Telephone and Cable Corp., a Delaware corporation
("HTCC"), Citizens International Management Services Company, a Delaware
corporation ("CIMS"), and CU CapitalCorp., a Delaware corporation ("CUCC").
W I T N E S S E T H :
WHEREAS, HTCC and CUCC are parties to that certain Master Agreement
dated as of May 31, 1995 (the "Master Agreement");
WHEREAS, HTCC and CIMS are parties to that certain Management Services
Agreement dated as of May 31, 1995, as amended by the First Amendment to
Management Services Agreement dated as of September 28, 1995 and the Second
Amendment to Management Services Agreement dated as of February 26, 1996 (as
amended, the "Management Services Agreement");
WHEREAS, HTCC and CUCC desire to terminate the Master Agreement and
enter into certain replacement agreements as set forth herein; and
WHEREAS, HTCC and CIMS desire to terminate the Management Services
Agreement and enter into certain replacement agreements as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual promises,
representations and warranties herein contained, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
TERMINATION OF MANAGEMENT SERVICES AGREEMENT
1.1. Termination. For the consideration described in Section 1.2 below,
CIMS hereby agrees to terminate, and by their execution hereof CIMS and HTCC
hereby terminate, the Management Services Agreement, effective as of the date
hereof.
1.2. Consideration.
(a) Delivery of Common Stock. Contemporaneously with the
execution hereof, HTCC has issued and delivered to CIMS 100,000 shares (the
"Shares") of common stock, par value $.001 per share ("Common Stock"), of HTCC
in final settlement and payment of $1,200,000 of accrued fees and expenses due
and payable to CIMS under the Management Services Agreement.
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(b) Delivery of Promissory Note. Contemporaneously with the
execution hereof, HTCC has issued and delivered to CIMS a promissory note in the
form attached hereto as Exhibit A in the principal amount of $8,374,498 (the
"Note"), evidencing HTCC's obligation to pay such amount of accrued fees and
expenses due and payable to CIMS under the Management Services Agreement.
(c) Additional Payments to CIMS; Additional Consulting
Services. In part as consideration for CIMS' agreement to terminate the
Management Services Agreement and in part as consideration for the consulting
services described below in this Section 1.2(c), HTCC promises to pay to CIMS
the aggregate amount of Twenty-One Million Dollars ($21,000,000), payable in
twenty-eight (28) quarterly installments of $750,000 each on January 1, April 1,
July 1 and October 1 of each year from 2004 through and including 2010, with the
first installment due and payable on January 1, 2004 (the "Additional
Payments"). For each calendar year in which HTCC is required to make and is
making the Additional Payments, CIMS, at the written request of HTCC, will
provide HTCC up to three hundred (300) hours of consulting services during such
calendar year. Such consulting services may relate only to strategic,
operational or business planning and advice and counsel regarding financing and
budgeting. HTCC shall reimburse CIMS for reasonable travel and incidental
out-of-pocket expenses incurred by CIMS or its employees in providing any
consulting services that may be requested by HTCC.
1.3 Release and Waiver. HTCC and CIMS each hereby releases, waives and
absolutely discharges, without reservation of any nature, type or kind, the
other and its officers, directors, servants, agents, attorneys, employees,
consultants, successors in interest, affiliates and related companies, past,
present and future, from any and all claims, actions, causes of action, demands,
suits, debts, accounts, controversies, damages, costs (including attorneys'
fees), losses, expenses, obligations, agreements, promises, and all liabilities
whatsoever, in each case of every nature, type or kind whatsoever, whether
matured or unmatured, contingent or absolute, known or unknown, suspected or
unsuspected, and whenever arising or accruing, under the Management Services
Agreement.
ARTICLE II
TERMINATION OF THE MASTER AGREEMENT
2.1 Termination. HTCC and CUCC hereby agree that the Master Agreement
shall be terminated, and by their execution hereof HTCC and CUCC hereby
terminate the Master Agreement, effective as of the date hereof.
2.2 Release and Waiver. HTCC and CUCC each hereby releases, waives and
absolutely discharges, without reservation of any nature, type or kind, the
other and its officers, directors, servants, agents, attorneys, employees,
consultants, successors in interest, affiliates and related companies, past,
present and future, from any and all claims, actions, causes of action, demands,
suits, debts, accounts, controversies, damages, costs (including attorneys'
fees), losses, expenses, obligations, agreements, promises, and all liabilities
whatsoever, in each case of every nature, type or kind whatsoever, whether
matured or unmatured, contingent or absolute, known or unknown, suspected or
unsuspected, and whenever arising or accruing, under the Master Agreement.
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ARTICLE III
AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT
Contemporaneously with the execution hereof, HTCC and CUCC have duly
executed and delivered to each other the Amended, Restated and Consolidated
Stock Option Agreement in the form attached hereto as Exhibit B (the "Amended
and Restated Option Agreement").
ARTICLE IV
CERTAIN ADDITIONAL COVENANTS OF HTCC
For so long as CUCC and its affiliates collectively hold at least
300,000 shares of Common Stock, HTCC covenants to CUCC as follows:
4.1 HTCC's Board Composition. CUCC and HTCC hereby acknowledge that one
person nominated by CUCC currently serves as CUCC's designee to the HTCC Board
of Directors. CUCC's designee, or his successor(s), shall be entitled to be
re-nominated for re-election to the HTCC Board of Directors for so long as CUCC
and its affiliates collectively hold at least 300,000 shares of Common Stock.
HTCC also agrees, unless CUCC otherwise consents in writing, (a) to take all
actions as are necessary to cause the Board of Directors of HTCC to be comprised
of at least six (6) members for so long as CUCC has the right to designate a
person to serve on the HTCC Board of Directors, (b) not to create an executive
committee of such Board, and (c) not to permit such Board to be divided into
classes having staggered terms.
4.2 Preemptive Rights. In connection with any public or private
issuance of shares of Common Stock (an "Issuance") and provided CUCC continues
to own at least 300,000 shares of HTCC Common Stock as of the date of the
Issuance, HTCC shall grant CUCC the right for a thirty (30) day period following
any such Issuance to purchase such number of shares of HTCC Common Stock
sufficient to maintain CUCC's then existing percentage ownership interest of
Common Stock on a fully diluted basis, with such percentage ownership interest
to be calculated immediately prior to the Issuance and with the number of shares
subject to such purchase right to be calculated after giving effect to the
Issuance.
For purposes of this Section 4.2, references to CUCC's then existing
percentage ownership interest of Common Stock on a fully diluted basis shall
include shares of Common Stock issuable, without regard to the exercise or
purchase price therefor being higher, lower or the same as then market prices,
(a) to CUCC or any of its affiliates upon exercise of the Options (as defined in
the Amended and Restated Option Agreement) to the extent then exercisable and
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(b) to any other person upon exercise of options and warrants or other
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock or other securities of HTCC outstanding on the date hereof or
hereinafter issued or granted.
The above rights shall exist with respect to shares of Common Stock
originally authorized, shares of Common Stock hereafter authorized, or treasury
shares, but shall not exist with respect to shares of Common Stock issued to
Tele Danmark A/S ("Tele Danmark") upon exercise of its preemptive rights with
respect to the Issuance, if and to the extent that Tele Danmark shall have
irrevocably waived its preemptive rights with respect to shares of Common Stock
issued in connection with the exercise by CUCC and its affiliates of their
preemptive rights under this Section 4.2. Provided that Tele Danmark irrevocably
waives its preemptive rights in connection with the following Issuances, the
above rights also shall not exist with respect to the following Issuances:
(i) Shares of Common Stock issued on exercise of the Options
(as defined in the Amended and Restated Option Agreement);
(ii) Options issued by HTCC pursuant to its Employee Stock
Option Plan and its Director Stock Option Plan, and shares of Common Stock
issued in connection with the exercise of such options, and the other options or
warrants outstanding on the date of this Agreement and listed on Schedule 4.2
hereto;
(iii) Shares of Common Stock offered to CUCC pursuant to the
first paragraph of this Section 4.2 which are not purchased by CUCC; and
(iv) Shares of Common Stock issued to effect a duly authorized
(x) merger or consolidation, (y) acquisition of the shares of another
corporation, or (z) plan of reorganization; provided that the HTCC Board of
Directors that duly authorized and approved such issuance was constituted as
required by Section 4.1.
Each holder of Common Stock, Options (as defined in the Amended and
Restated Option Agreement) or other securities convertible into, or exchangeable
or exercisable for, shares of Common Stock that is an affiliate of CUCC shall
have the rights set forth in this Section 4.2 as if CUCC held the shares of
Common Stock or the shares of Common Stock then issuable on conversion, exchange
or exercise of the Options (as defined in the Amended and Restated Option
Agreement) and any other securities convertible into, or exchangeable or
exercisable into, shares of Common Stock then held by such holder.
CUCC must exercise such right within 30 days of such Issuance and must
pay the purchase price for such shares in cash (U.S. Dollars) concurrently with
the exercise of such right; provided that any individual issuance of shares of
Common Stock by HTCC of less than 50,000 shares (a "50,000 Issuance") shall be
aggregated and CUCC's preemptive rights as to such Issuance(s) shall become
effective at the earlier of (x) the date of any aggregate issuance by HTCC of
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shares of Common Stock equal to or greater than a 50,000 Issuance (the
"Aggregate Date") or (y) the day that is 30 calendar days prior to the record
date for any meeting of shareholders of HTCC (the "Pre-Record Date"). On such
Aggregate Date or Pre-Record Date, as the case may be, CUCC shall have 30 days
from such date to maintain its preemptive right to purchase such number of
shares at such prices as it would have been entitled to purchase on the date of
such Issuance(s) as set forth in this Section 4.2. HTCC shall promptly notify
CUCC upon the occurrence of the Aggregate Date or Pre-Record Date, as the case
may be, and the amount of shares which CUCC shall have the right to purchase and
at what price(s). When calculating such number of shares, the parties shall
assume that CUCC would have exercised all of its preemptive rights as to any
Issuance under a 50,000 Issuance.
The purchase price per share for shares of Common Stock purchasable
pursuant to Section 4.2 shall be the greater of (x) the cash paid per share in
the Issuance, (y) the value assigned per share in the Issuance in a non-cash
transaction, or (z) the fair market value per share of HTCC Common Stock on the
date of issuance. The "fair market value" of a Common Stock means the average of
the high and low quoted sales price on the date in question (or, if there is no
reported sale on such date, on the last preceding date on which any reported
sale occurred) of a share on the American Stock Exchange, or, if the shares are
not listed or admitted to trading on such Exchange, on the principal United
States securities exchange registered under the Securities Act of 1934, as
amended, on which the shares as listed or admitted to trading, or if the shares
are not listed or admitted to trading on any such exchange, the mean between the
closing high bid and low asked quotations with respect to a share on such date
on the National Association of Securities Dealers, Inc. Automated Quotation
System, or any similar system then in use, or if no such quotations are
available, the fair market value on such date of a shares as the HTCC Board of
Directors shall determine. Customary adjustments may be made in the number of
shares offered in order to eliminate fractional shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HTCC
HTCC hereby represents and warrants to CUCC and CIMS as follows:
5.1 Organization. HTCC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified as a foreign corporation in all jurisdictions in which it is
required to be so qualified.
5.2 Capitalization. The authorized capital stock of HTCC consists of
25,000,000 shares of Common Stock, of which 5,395,864 shares, including the
Shares, are issued and outstanding, and 7,473,915 shares are reserved for
issuance upon the exercise of currently outstanding rights, warrants and options
to purchase shares of Common Stock and the conversion of currently outstanding
securities convertible into shares of Common Stock, including the Options (as
defined in the Amended and Restated Option Agreement). All of the outstanding
shares of Common Stock, including without limitation the Shares, have been duly
authorized, validly issued, and are fully paid and nonassessable, and were
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issued in compliance with all applicable federal and state securities laws.
Except as disclosed in Schedule 4.2 or 5.2 hereto, there are no existing
warrants, options, conversion rights, calls or commitments of any character
pursuant to which HTCC is or may become obligated to issue or repurchase any
shares of capital stock or other securities other than with respect to the
Amended and Restated Option Agreement. Except CUCC, CIMS and Tele Danmark, no
shareholder of HTCC has any pre-emptive right to acquire any securities of HTCC.
Since May 31, 1995, HTCC has repurchased none of its outstanding capital stock.
Except as disclosed on Schedule 5.2, there are no agreements or understandings
with respect to the voting, sale, transfer or registration of any shares of
capital stock of HTCC or any of its subsidiaries to which HTCC or any subsidiary
is a party other than in favor of CUCC and CIMS.
5.3 Corporate Authority. HTCC has all corporate authority necessary to
execute and deliver this Agreement, the Note, and the Amended and Restated
Option Agreement (the "HTCC Documents"). Prior to the date of this Agreement,
the Board of Directors of HTCC approved the execution of definitive
documentation on terms as set forth in the HTCC Documents and the arrangements
and actions contemplated hereby and thereby. The execution, delivery and
performance of the HTCC Documents and the arrangements and actions contemplated
hereby and thereby (including without limitation the issuance of the Shares and
the Note to CIMS and the issuance of the Additional Options (as defined in the
Amended and Restated Option Agreement) to CUCC) have been duly and validly
authorized by all necessary corporate action on the part of HTCC. The HTCC
Documents are the valid and binding obligations of HTCC enforceable in
accordance with their terms.
5.4 No Violation. The HTCC Documents and the arrangements and actions
contemplated hereby and thereby do not violate any provisions of HTCC's
corporate charter or bylaws, or any contract, agreement, law or regulation to
which HTCC or any of its properties is a party or subject, and the same do not
require the consent or approval of any regulatory authority or governmental body
of the Republic of Hungary or of the United States of America or of any state or
subdivision thereof or of any other person that has not been obtained.
5.5 Reliance by CUCC and CIMS. The foregoing representations and
warranties are made by HTCC with the knowledge and understanding that CUCC and
CIMS are placing complete reliance thereon and are thereby induced to enter into
this Agreement and the other agreements contemplated hereby, and to agree to the
arrangements and actions contemplated hereby and thereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CUCC AND CIMS
CUCC and CIMS hereby jointly and severally represent and warrant to
HTCC as follows:
6.1 Organization and Authority. Each of CUCC and CIMS is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with the power and authority to carry on the business in
which it is engaged and to execute, deliver and perform its obligations under
this Agreement and the Amended and Restated Option Agreement (the "Citizens
Agreements"). The execution, delivery and performance of the Citizens Agreements
and the arrangements and actions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action of CUCC and CIMS, as
applicable, and are the valid and binding obligations of CUCC and CIMS
enforceable in accordance with their terms.
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6.2 Purchase for Investment. The Shares and the Additional Options (as
defined in the Amended and Restated Option Agreement) are being acquired by CIMS
and CUCC, respectively, for their own accounts for investment and not with a
view to, or for resale in connection with, the distribution thereof, nor with
any intention of distributing or selling any shares of Common Stock, including
any shares of Common Stock that may be issued in accordance with the Amended and
Restated Option Agreement. If either CUCC or CIMS should in the future decide to
dispose of shares of Common Stock, it understands and agrees that it may do so
only in accordance with Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"), or otherwise in compliance with the Securities Act, as
then in effect. If either CUCC or CIMS should decide to dispose of any such
shares of Common Stock (other than shares which have been registered under the
Securities Act), it will, at its expense, designate counsel acceptable to HTCC
in connection with such disposition, who shall provide an opinion to HTCC as to
whether the proposed sale or other distribution of any such shares of Common
Stock would require registration under the Securities Act as then in effect. If
the opinion of such counsel is to the effect that the proposed sale or other
distribution does not require any registration under the Securities Act as then
in effect, CUCC or CIMS shall be entitled to effect such sale or other
disposition. If the opinion of such counsel is to the effect that the proposed
sale or other disposition requires such registration, such sale or other
disposition may not be made unless such registration is duly effected in
accordance with the opinion of such counsel.
6.3 Accredited Investor. Each of CUCC and CIMS is an "accredited
investor," as that term is defined in Regulation D promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Act.
6.4 No Violations. The Citizens Agreements and the arrangements and
actions contemplated under each do not violate any provisions of CUCC's or CIMS'
corporate charter or bylaws, or any contract, agreement, law or regulation to
which CUCC, CIMS or any of their respective properties is party or subject and
the same do not require the consent or approval of any regulatory authority or
governmental body of the United States or of any state or subdivision thereof or
of any other person.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of CUCC and CIMS by HTCC. HTCC hereby agrees to
defend, indemnify and hold harmless CUCC, CIMS and their affiliates from and
against any and all claims, demands, causes of action, liabilities, losses,
damages, costs and expenses, including litigation costs and reasonable
attorneys' fees, not otherwise recovered from insurance carriers (all of the
foregoing are hereinafter referred to as "losses") which losses may accrue to or
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be sustained by CUCC or CIMS by, or arising out of, or as a result of, any of
HTCC's representations, warranties, covenants or agreements contained in any of
the HTCC Documents being incorrect, untrue, or breached notwithstanding the fact
that CUCC or CIMS knew or should have known that any such representation,
warranty, covenant or agreement was incorrect, untrue or breached at the time it
was made, and whether or not HTCC has knowledge of any such non-compliance and
whether or not any such non-compliance is material with respect to CUCC or CIMS.
7.2 Indemnification of HTCC by CUCC and CIMS. CUCC and CIMS hereby
jointly and severally agree to defend, indemnify and hold harmless HTCC and its
affiliates from and against any and all claims, demands, causes of action,
liabilities, losses, damages, costs and expenses, including litigation costs and
reasonable attorneys' fees, not otherwise recovered from insurance carriers (all
of the foregoing are hereinafter referred to as "losses") which losses may
accrue to or be sustained by HTCC by, or arising out of, or as a result of, any
of CUCC or CIMS's representations, warranties, covenants or agreements contained
in any of the Citizens Agreements being incorrect, untrue, or breached
notwithstanding the fact that HTCC knew or should have known that any such
representation, warranty, covenant or agreement was incorrect, untrue or
breached at the time it was made, and whether or not CUCC or CIMS has knowledge
of any such non-compliance and whether or not any such non-compliance is
material with respect to HTCC.
ARTICLE VIII
GENERAL
8.1 Further Assurances. Each party to this Agreement shall at the
request of the other furnish, execute and deliver such schedules, documents,
instruments, opinions of counsel, certificates, notices or other further
assurances as counsel for the requesting party shall reasonably require as
necessary to effect complete consummation of this Agreement and the arrangements
and actions contemplated herein.
8.2 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and shall be
deemed to have been duly given on the next business day after the same is sent,
if delivered personally or sent by telecopy or overnight delivery, or five
calendar days after the same is sent, if sent by registered or certified mail,
return receipt requested, postage prepaid, as set forth below, or to such other
persons or addresses as may be designated in writing in accordance with the
terms hereof by the party to receive such notice.
(a) If to CUCC or CIMS, to it care of:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/614-4651
Attn: President
with required copy to:
Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/614-4651
Attn: General Counsel
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(b) If to HTCC, to:
Hungarian Telephone and Cable Corp.
1126 Budapest
Kiralyhago u.2.
Budapest, Hungary
Facsimile No.: 011-361-202-4778
Attention: Chief Executive Officer
with required copy to:
Hungarian Telephone and Cable Corp.
100 First Stamford Place
Stamford, CT 06902
Facsimile No.: 203/348-0128
Attention: General Counsel
8.3 Amendment. This Agreement may be amended only by a written
instrument duly executed by or on behalf of all of the parties hereto.
8.4 Binding Effect of this Agreement. This Agreement, together with
each agreement, instrument, schedule, exhibit and certificate referred to in
this Agreement, shall constitute the entire contract between the parties hereto
and no party shall be liable or bound to the other in any manner by any
warranties or representations except as specifically set forth herein or
therein. This Agreement supersedes all prior agreements and understandings of
the parties hereto in connection herewith, including, without limitation, the
Management Services Agreement and the Master Agreement.
8.5 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
8.6 Assignment. No party hereto shall assign its rights or obligations
under this Agreement or any part thereof, nor shall any party assign or delegate
any of its rights or duties hereunder without the prior written consent of the
other parties, and any assignment made without such consent shall be void;
provided, however, that CUCC and CIMS may assign their respective rights and
obligations hereunder and their respective rights and obligations under the
Note, the Amended and Restated Option Agreement and the Registration Agreement,
together or separately, to any one or more direct or indirect wholly-owned
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subsidiaries of Citizens Utilities Company, a Delaware corporation (including
any direct or indirect wholly-owned subsidiary of Citizens Utilities Company
that holds substantially all of the communications assets and properties of
Citizens Utilities Company, the stock of which may be distributed or otherwise
transferred to some or all of the shareholders of Citizens Utilities Company),
without the approval or consent of HTCC. CUCC and CIMS also may pledge or
otherwise grant a security interest in their respective rights under the
Citizens Agreements and the Note, and may pledge the Shares, the Note, any
interest in shares that may be issued in accordance with the Amended and
Restated Option Agreement, the shares of Common Stock received upon exercise of
the Options (as defined in the Amended and Restated Option Agreement) and all
proceeds thereunder, to any bank or group of banks without the approval or
consent of HTCC. Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
8.7 Expenses. Except as otherwise provided herein, each party shall be
solely responsible for all expenses incurred by it in connection with this
Agreement and the agreements and actions contemplated hereby (including without
limitation, fees and expenses of its own counsel and accountants) and shall not
be entitled to any reimbursement therefor from the other party hereto except
pursuant to the indemnification provision of Article VII hereof.
8.8 Counterparts; Facsimile Signature Pages. This Agreement may be
executed in one or more counterparts, and each of such counterparts shall for
all purposes be deemed to be an original, but all such counterparts together
shall constitute but one instrument. This Agreement shall be deemed to be
executed upon the exchange of executed facsimile signature pages (with original
executed signature pages to follow by mail).
8.9 Governing Law; Forum; Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflict of laws thereof.
Each of the parties to this Agreement hereby irrevocably and unconditionally (i)
consents to submit to the exclusive jurisdiction of the courts of the State of
Delaware for any proceeding arising in connection with this Agreement and the
Note (and each such party agrees not to commence any such proceeding, except in
such courts), (ii) to the extent such party is not a resident of the State of
Delaware, agrees to appoint an agent in the State of Delaware as such party's
agent for acceptance of legal process in any such proceeding against such party
with the same legal force and validity as if served upon such party personally
within the State of Delaware, and to notify promptly each other party hereto of
the name and address of such agent, (iii) waives any objection to the laying of
venue of any such proceeding in the courts of the State of Delaware, and (iv)
waives, and agrees not to plead or to make, any claim that any such proceeding
brought in any court of the State of Delaware has been brought in an improper or
otherwise inconvenient forum.
-10-
<PAGE>
8.10 Nature and Survival of Representations. All statements contained
in any certificate, instrument or document delivered by or on behalf of any of
the parties pursuant to this Agreement and the arrangements and actions
contemplated hereby shall be deemed representations and warranties by the
respective parties hereunder. All representations and warranties made by the
parties, each to the other, in this Agreement or pursuant hereto shall survive
the consummation of the transactions contemplated by this Agreement,
notwithstanding any investigation heretofore or hereafter made by any of them or
on behalf of any of them.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
HUNGARIAN TELEPHONE AND CABLE CORP.
By /s/Francis J. Busacca, Jr.
------------------------------
Francis J. Busacca, Jr.
Acting President and CEO,
Chief Financial Officer
CU CAPITALCORP.
By /s/Daryl A. Ferguson
------------------------
Name: Daryl A. Ferguson
Title: President
CITIZENS INTERNATIONAL MANAGEMENT
SERVICES COMPANY
By /s/Daryl A. Ferguson
------------------------
Name: Daryl A. Ferguson
Title: President
[SIGNATURE PAGE TO REPLACEMENT AND TERMINATION AGREEMENT]
-12-
Exhibit 10.70
PROMISSORY NOTE
$8,374,498.00 September 30, 1998
FOR VALUE RECEIVED, Hungarian Telephone and Cable Corp., a Delaware
corporation (the "Company"), promises to pay to the order of Citizens
International Management Services Company, a Delaware corporation (hereinafter
called the "Payee"), payable at the Payee's offices c/o Citizens Utilities
Company at High Ridge Park, Stamford, Connecticut, 06905, or such other place as
may be designated in writing to the Company by Payee, or any subsequent holder
of this Note (the "Holder"), the principal sum of Eight Million Three Hundred
Seventy-Four Thousand Four Hundred Ninety-Eight Dollars and No Cents
($8,374,498.00), with interest thereon during the period that any portion of the
principal balance due under this Note remains unpaid and outstanding at a
varying rate per annum which is two and one-half percent (2.50%) per annum above
the interest rate published by The Wall Street Journal from time to time as the
London Interbank Offered Rate for one-year dollar deposits, with adjustments in
such varying rate to be made on the first business day in the State of New York
of each calendar month. This Note is issued pursuant to the Replacement and
Termination Agreement, dated as of the date hereof, among the Company, Payee and
CU CapitalCorp.
Payment of Interest
Accrued interest on the principal amount outstanding hereunder shall be
payable annually in arrears on September 15th of each year, commencing September
15, 1999; provided, however, that if any such date on which interest is payable
on this Note is not a business day in the State of New York, then payment of
such interest will be made the next succeeding day which is a business day in
the State of New York.
Maturity Date
All principal remaining outstanding hereunder shall be due and payable
in full, together with accrued and unpaid interest thereon, on September 15,
2004.
Waiver
The Company and any and each co-maker, guarantor, accommodation party,
endorser or other person or entity liable for the payment or collection of this
Note expressly waive demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, bringing of suit, and diligence
in taking any action to collect amounts called for hereunder, and in the
handling of property at any time existing as security in connection herewith,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for hereunder
or in connection with any right, lien, interest or property at any and all times
had or existing as security for any amount called for hereunder.
<PAGE>
Costs of Collection
The Company agrees to pay all reasonable costs, including reasonable
attorney's fees, incurred by Payee of this Note or any subsequent Holder
thereof, in collection or enforcing payment of this Note in accordance with its
terms.
Prepayment
This Note may be prepaid in whole or in part at any time, upon ten
(10) days' written notice to the Payee.
Amendment
This Note may not be changed or terminated orally.
Assignment
Neither the Company nor Payee shall assign its rights or obligations
under this Note or any part thereof, nor shall the Company or Payee delegate any
of its rights or obligations hereunder without the prior written consent of the
other, and any assignment made without such consent shall be void; provided,
however, that Payee may assign this Note to any one or more direct or indirect
wholly-owned subsidiaries of Citizens Utilities Company (including any direct or
indirect wholly-owned subsidiary of Citizens Utilities Company that holds
substantially all of the communications assets and properties of Citizens
Utilities Company, the stock of which may be distributed or otherwise
transferred to some or all of the shareholders of Citizens Utilities Company),
without the approval or consent of the Company.
Governing Law; Forum; Consent to Jurisdiction
This Note shall be governed by and construed in accordance with the
laws of the State of Delaware without giving effect to the principles of
conflict of laws thereof. The Company hereby irrevocably and unconditionally (i)
consents to submit to the exclusive jurisdiction of the courts of the State of
Delaware for any proceeding arising in connection with this Note (and the
Company agrees not to commence any such proceeding, except in such courts), (ii)
to the extent the Company is not a resident of the State of Delaware, agrees to
appoint an agent in the State of Delaware as the Company's agent for acceptance
of legal process in any such proceeding against the Company with the same legal
force and validity as if served upon the Company personally within the State of
Delaware, and to notify promptly Payee of the name and address of such agent,
(iii) waives any objection to the laying of venue of any such proceeding in the
courts of the State of Delaware, and (iv) waives, and agrees not to plead or to
make, any claim that any such proceeding brought in any court of the State of
Delaware has been brought in an improper or otherwise inconvenient forum.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
a duly authorized officer and attested by its Secretary.
HUNGARIAN TELEPHONE AND CABLE CORP.
By:
-----------------------------
Francis J. Busacca, Jr.
Acting President and CEO,
Chief Financial Officer
-3-
Exhibit 10.71
AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT
THIS AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT (this
"Agreement"), is made as of September 30, 1998, by and between Hungarian
Telephone and Cable Corp., a Delaware corporation (the "Company"), and CU
CapitalCorp., a Delaware corporation ("CUCC").
W I T N E S S E T H
WHEREAS, the Company and CUCC are parties to that certain Stock Option
Agreement, dated as of May 31, 1995 (the "First Stock Option Agreement"),
pursuant to which the Company granted to CUCC the right to purchase such number
of shares of Common Stock of the Company, par value $.001 per share ("Common
Stock"), that, when exercised and combined with certain other shares of Common
Stock owned by CUCC and certain other rights to purchase shares of Common Stock
held by CUCC, was intended to result in CUCC holding in the aggregate fifty-one
percent (51%) of the shares of Common Stock then outstanding on a fully diluted
basis;
WHEREAS, on September 12, 1995, at a duly called meeting of the
shareholders of the Company, the shareholders of the Company approved the
Company's execution of the First Stock Option Agreement and the grant of the
stock options evidenced thereby;
WHEREAS, the Company has issued and delivered to CUCC that certain
Warrant to Purchase Shares of Common Stock, dated as of May 31, 1995 (the
"Warrant"), pursuant to which the Company granted to CUCC the right to purchase
299,219 shares of Common Stock for an initial purchase price of $13.00 per
share;
WHEREAS, the Company and CUCC are parties to that certain Second Stock
Option Agreement dated as of September 28, 1995, as amended by that certain
Second Agreement to Amend and Restate dated as of October 30, 1995 (as amended,
the "Second Stock Option Agreement"), pursuant to which the Company granted to
CUCC the right to purchase 626,155 shares of Common Stock for a purchase price
of $13.75 per share;
WHEREAS, the Company and CUCC (i) entered into that certain First
Amendment to the Warrant, dated as of October 18, 1996 (the "First Amendment to
Warrant"), and that certain First Amendment to Stock Option Agreement, dated as
of October 18, 1996 (the "First Amendment to First Stock Option Agreement"),
pursuant to which the Company extended through September 12, 2000, the exercise
periods of the Warrant and certain of the options granted pursuant to the First
Stock Option Agreement, and (ii) entered into a Third Stock Option Agreement,
dated as of October 18, 1996 (the "Third Stock Option Agreement"), pursuant to
which the Company granted to CUCC the right to purchase 875,850 shares of Common
Stock for an initial purchase price of $12.75 per share;
<PAGE>
WHEREAS, in settlement of a dispute between the Company and CUCC, the
Company has agreed to grant CUCC the right to purchase an additional 2,110,896
shares of Common Stock (the "Additional Stock Options") for an initial purchase
price of $13.00 per share and on the terms and conditions hereinafter set forth;
and
WHEREAS, the Company and CUCC now desire (a) to amend, restate and
consolidate herein (i) the First Stock Option Agreement, as amended by the First
Amendment to Stock Option Agreement, (ii) the Warrant, as amended by the First
Amendment to the Warrant, (iii) the Second Stock Option Agreement, and (iv) the
Third Stock Option Agreement (collectively, the "Existing Option Agreements");
and (b) to establish the terms and conditions applicable to the Additional Stock
Options.
NOW, THEREFORE, in consideration of the premises hereof, and intending
to be legally bound hereby, the parties hereby agree as follows:
1. Stock Options.
(a) Existing Option Agreements. Effective as of the date
hereof, each of the Existing Option Agreements is amended, restated,
consolidated herein and replaced in its entirety by this Agreement. The Company
and CUCC hereby acknowledge and agree that, pursuant to the applicable Existing
Option Agreement, the Company previously has granted to CUCC, that immediately
prior to the execution hereof CUCC continued to have and to hold, and that this
Agreement now evidences, the irrevocable options (the "Existing Options") to
purchase the number of shares of Common Stock set forth below (the "Existing
Option Shares"), at the initial purchase price per share set forth below
(subject to adjustment as set forth below), payable in cash:
(i) Option to purchase 299,219 shares of Common
Stock at $13.00 per share (representing Existing Option Shares previously
purchasable pursuant to the Warrant).
(ii) Option to purchase 101,550 shares of Common
Stock at $13.00 per share (representing Existing Option Shares previously
purchasable pursuant to the First Stock Option Agreement).
(iii) Option to purchase 869,516 shares of Common
Stock at $15.00 per share (representing Existing Option Shares previously
purchasable pursuant to the First Stock Option Agreement).
(iv) Option to purchase 869,516 shares of Common
Stock at $16.50 per share (representing Existing Option Shares previously
purchasable pursuant to the First Stock Option Agreement).
(v) Option to purchase 869,516 shares of Common
Stock at $18.00 per share (representing Existing Option Shares previously
purchasable pursuant to the First Stock Option Agreement).
-2-
<PAGE>
(vi) Option to purchase 626,155 shares of Common
Stock at $13.75 per share (representing Existing Option Shares previously
purchasable pursuant to the Second Stock Option Agreement).
(vii) Option to purchase 875,850 shares of Common
Stock at $12.75 per share (representing Existing Option Shares previously
purchasable pursuant to the Third Stock Option Agreement).
(b) Additional Stock Options. The Company hereby grants to
CUCC the irrevocable option (the "Additional Option" and, together with the
Existing Options, the "Options") to purchase 2,110,896 shares of Common Stock
(the "Additional Option Shares" and, together with the Existing Option Shares,
the "Option Shares") at an initial purchase price of $13.00 per share (subject
to adjustment as set forth below), payable in cash.
(c) Exercise Dates. The Additional Option may be exercised at
any time and from time to time from the date hereof through July 1, 1999. The
Existing Options may be exercised at any time and from time to time from the
date hereof through September 12, 2000. Exercise of the Options may be in whole
(at one time or in multiple parts aggregating the whole) or in part and shall be
effectuated by delivering written notice of such exercise to the Company at any
time and from time to time during such exercise period. Any and each such notice
of exercise shall set forth the number of Option Shares to be acquired, the
exercise price per share of the Options Shares to be acquired, the closing date,
and the time and place of the closing.
(d) Registration Rights. The Company hereby acknowledges and
agrees with CUCC that any Option Shares acquired by CUCC pursuant to any
exercise of the Options are and shall be "Registrable Securities," as such term
is defined in that certain Registration Agreement dated as of May 31, 1995, by
and between the Company and CUCC (the "Registration Agreement"), and the terms
and conditions of the Registration Agreement shall apply to such acquired Option
Shares.
2. Closing Date. The closing date with respect to the purchase of any
of the Option Shares (the "Closing Date") shall be not less than three nor more
than ten days after the date any notice of exercise with respect to an Option is
given unless a waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), if applicable, has not expired and/or all necessary
approvals, if any, applicable to such exercise of such Option pursuant to such
exercise notice have not been obtained, in which case the Closing Date shall be
not more than ten days after the last to occur of such waiting period expiration
or the obtaining of the last such approval. In addition, in the event that,
after any notice of exercise with respect to such Option is given, any
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such exercise of such Option
is entered, the Closing Date shall be extended until ten days after the date
such order is dissolved or otherwise ceases to be in effect. On the Closing
Date, the aggregate purchase price for the Option Shares that are the subject of
the exercise notice shall be delivered to the Company and the Company shall
issue and deliver one or more certificates evidencing such Option Shares, and
registered in such manner as the holder of the related Option shall direct.
-3-
<PAGE>
3. Changes in the Option Shares; Anti-Dilution Provisions; Purchase
Price Reset.
(a) For all purposes of this Agreement, the Option Shares
shall mean the Option Shares as if presently outstanding and all securities or
other consideration issued or exchanged with respect to the Option Shares on any
recapitalization, reclassification, merger, consolidation, share exchange,
spin-off, partial or complete liquidation, stock dividend, split-up or
combination of the securities of the Company or any other change in its capital
structure.
(b) Anti-Dilution Provisions. The respective purchase price
per Option Share from time to time in effect under this Agreement, and the
number and character of securities of the Company covered hereby, shall be
subject to adjustment from time to time in certain instances hereinafter set
forth. The term "Purchase Price" shall mean for each Option, the initial
purchase price per share for such Option set forth in this Agreement, as
adjusted pursuant to the terms hereof. The number of Option Shares purchasable
upon the exercise of each Option and the Purchase Price for such Option shall be
subject to adjustment as follows:
(i) In case the Company shall at any time after the
date of execution of this Agreement (A) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of
Common Stock, (B) subdivide its outstanding shares of Common Stock, (C) combine
its outstanding shares of Common Stock into a smaller number of shares of Common
Stock, or (D) issue any shares of its capital stock in a reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing entity), the
number of Option Shares purchasable upon exercise of the Options immediately
prior thereto shall be adjusted so that the holder of the Options shall be
entitled to receive the kind and number of Option Shares or other securities of
the Company which he would have owned or have been entitled to receive after the
happening of any of the events described above, had the Options been exercised
immediately prior to the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this paragraph (i) shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(ii) In case the Company shall issue rights, options
or warrants to all holders of its outstanding Common Stock entitling them (for a
period of within 45 days after the record date mentioned below) to subscribe for
or purchase shares of Common Stock at a price per share which is lower at the
record date mentioned below than the Base Value per share of Common Stock (as
defined in paragraph (v) below), the number of Option Shares then purchasable
upon exercise of each Option shall be determined by multiplying the number of
Option Shares then purchasable upon exercise of such Option by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase, and of
which the denominator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options or warrants plus the number of
shares which the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at the Base Value per share of Common
Stock at such record date. Such adjustment shall be made whenever such rights,
options or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights, options or warrants.
-4-
<PAGE>
(iii) In case the Company shall distribute to all
holders of its shares of Common Stock evidences of its indebtedness or assets
(including cash dividends or other distributions in an amount in excess of 25%
of consolidated earnings or earned surplus legally available for payment of
dividends at the time of the declaration of any such dividend or distribution
payable out of consolidated earnings or earned surplus, but excluding dividends
or distributions payable in stock for which adjustment is made pursuant to
paragraph (i) above or in the paragraph immediately following this paragraph) or
rights, options or warrants, or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock
(excluding those referred to in paragraph (ii) above), then in each case the
number of Option Shares thereafter purchasable upon the exercise of each Option
shall be determined by multiplying the number of Option Shares theretofore
purchasable upon the exercise of such Option by a fraction, of which the
numerator shall be the then current market price per share of Common Stock (as
defined in paragraph (v) below) on the last trading date preceding the
ex-dividend date with respect to such distribution, and of which the denominator
shall be such market price per share of Common Stock less then fair value (as
reasonably determined by the Board of Directors of the Company in good faith,
whose determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights, options
or warrants, or of such convertible or exchangeable securities applicable to one
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled to
receive such distribution.
In the event of a distribution by the Company to
all holders of its shares of Common Stock of stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an adjustment in
the number of Option Shares purchasable upon the exercise of an Option, the
holder of such Option, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company, such subsidiary or
both, as the Company shall reasonably determine, the stock or other securities
to which such holder would have been entitled if such holder had exercised such
Option immediately prior thereto, all subject to further adjustment as provided
in this subsection (b); provided, however, that no adjustment in respect of
dividends or interest on such stock or other securities shall be made during the
term of such Option or upon the exercise of such Option other than an adjustment
which would be required pursuant to this Agreement.
(iv) In case the Company shall issue shares of Common
Stock or rights, options or warrants containing the right to subscribe for or
purchase shares of Common Stock or securities convertible into Common Stock
(including amendments and modifications to the price, nature or number of any
existing rights, options or warrants containing the right to subscribe for or
purchase shares of Common Stock or securities convertible into Common Stock
other than due to reset, anti-dilution or adjustment rights presently contained
-5-
<PAGE>
therein, and excluding (A) shares, rights, options, warrants or convertible
securities issued in any of the transactions described in paragraphs i), (ii) or
(iii) above, (B) shares of Common Stock issued upon any exercise of any options
or warrants to purchase shares of Common Stock granted to CUCC or any
affiliate thereof or (C) securities issued in exchange for or on exercise or
conversion of any rights, options or warrants described in this paragraph (iv))
for a price per share of Common Stock, in the case of the issuance of Common
Stock, or for the price per share of Common Stock initially deliverable upon
conversion or exchange of such securities, less than the Base Value per share of
Common Stock (as defined in paragraph (v) below) on the date the Company fixed
the offering, conversion or exchange price of such additional shares, the number
of Option Shares thereafter purchasable upon the exercise of an Option shall be
determined by multiplying the number of Option Shares theretofore purchasable
upon exercise of such Option by a fraction, of which the numerator shall be the
number of shares of Common Stock so outstanding on such date plus the aggregate
number of shares of Common Stock so issued or offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding on such date plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock so issued or
offered would purchase at the Base Value per share of Common Stock at such
record date. Such adjustment shall be made whenever such shares, rights,
options, or warrants are issued or so amended or modified, and shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(v) For the purpose of any computation under
paragraphs (ii), (iii) and (iv) of this subsection (b), "Base Value per share of
Common Stock" at any date means the greater of (A) the current market price per
share of Common Stock on such date (computed as described below) or (B) the
Purchase Price in effect on such date. The current market price per share of
Common Stock at any date shall be the average of the daily closing prices for
the 20 consecutive trading day period commencing on the 29th trading day before
the date of such computation and ending on the 10th trading day before the date
of such computation. The closing price for each day shall be the last such
reported sales price regular way or, in case no such reported sale takes place
on such day, the average of the closing bid and asked prices regular way for
such day, in each case on the principal national securities exchange or in the
NASDAQ/NMS to which the shares of Common Stock are listed or admitted to trading
or, if not listed or admitted to trading, the average of the closing bid and
asked prices of the Common Stock quoted on NASDAQ/NMS or any comparable system.
In the absence of one or more such quotations, the Company shall determine the
current market price on the basis of such quotations as it considers reasonably
appropriate.
(vi) No adjustment in the number of Option Shares
purchasable hereunder shall be required unless such adjustment would result in
an increase or decrease of at least one percent of the Purchase Price; provided,
however, that any adjustments which by reason of this paragraph (vi) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.
-6-
<PAGE>
(vii) Whenever the number of Option Shares
purchasable upon the exercise of an Option is adjusted, as herein provided, the
Purchase Price payable upon exercise of such Option shall be adjusted by
multiplying the appropriate Purchase Price immediately prior to such adjustment
by a fraction, of which the numerator shall be the number of Option Shares
purchasable upon the exercise of the applicable Option immediately prior to such
adjustment, and of which the denominator shall be the number of such Option
Shares purchasable thereunder immediately thereafter.
(viii) No adjustment in the number of Option Shares
purchasable upon the exercise of the Option need be made under paragraphs (ii),
(iii) or (iv) of this subsection (b) if the Company issues or distributes to the
holder of the Options the shares, rights, options, warrants, or convertible or
exchangeable securities, or the evidences of indebtedness or assets referred to
in those paragraphs which the holder of the Options would have been entitled to
receive had the Options been exercised prior to the happening of such event or
the record date with respect thereto. No adjustment in the number of Option
Shares purchasable upon the exercise of the Options need be made for sales or
issuances of Common Stock or rights, options or warrants to purchase Common
Stock pursuant to (A) a Company plan for Company shareholders generally for
reinvestment of dividends, (B) rights, options or warrants, or convertible or
exchangeable securities or agreements to issue rights, options or warrants or
convertible or exchangeable securities, outstanding on the date hereof and not
subsequently modified or amended in any manner that would otherwise cause the
number of Option Shares to be adjusted hereunder, or (C) options for the
purchase of Common Stock granted by the Company from time to time pursuant to
its director stock option plans approved by the Board of Directors of the
Company and its employee stock option plans approved by Company stockholders,
with such number of shares subject to adjustment as provided in the plans.
(ix) For the purpose of this subsection (b), the term
"shares of Common Stock" shall mean (A) the class of stock designated as the
Common Stock of the Company at the date hereof, or (B) any other class(es) of
stock resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to paragraph (i) above, the holder of the Options shall
become entitled to purchase any securities of the Company other than shares of
Common Stock, thereafter the number of such other shares so purchasable upon
exercise of the Options and the Purchase Price of such shares shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Option Shares contained in
paragraphs (i) through (viii), inclusive, above, and to the extent appropriate
the other provisions of this Agreement that are applicable, with respect to the
Option Shares, shall apply on like terms to any such other securities.
(x) Upon the expiration of any rights, options,
warrants or conversion or exchange privileges, if any thereof shall not have
been exercised, the Purchase Price and the number of shares of Common Stock
purchasable upon the exercise of the Options shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
-7-
<PAGE>
case may be) as if (A) the only shares of Common Stock so issued were the shares
of Common Stock, if any, actually issued or sold upon the exercise of such
rights, options, warrants or conversion or exchange privileges and (B) such
shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for the issuance, sale
or grant of all such rights, options, warrants or conversion or exchange
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the Purchase Price or
decreasing the number of shares of Common Stock purchasable upon the exercise of
the Options by an amount in excess of the amount of the adjustment initially
made in respect to the issuance, sale or grant of such rights, options, warrants
or conversion or exchange privilege.
(c) Rights Upon Certain Corporate Transactions. If, prior to
the expiration of the Options by exercise or by its terms, the Company shall be
recapitalized by reclassifying its outstanding Common Stock into shares with a
different par value or by changing its outstanding Common Stock with par value
to shares without par value, or the Company or a successor corporation shall
consolidate or merge with or convey all or substantially all of its or of any
successor corporation's property and assets to any other corporation or
corporations, or the Company or a successor corporation or corporations shall
distribute Common Stock or other assets pursuant to, without limitation, any
spin-off, split-off, or other distribution of assets, the holder of the Options
shall thereafter have the right to purchase, upon the basis and on the terms and
conditions and during the time specified in this Agreement, in lieu of the
Common Stock of the Company theretofore purchasable upon the exercise of the
Options, such shares, securities or assets as may be issued or payable with
respect to, or in exchange for, the number of share of Common Stock of the
Company theretofore purchasable upon the exercise of the Options had the Options
been exercised immediately prior to such recapitalization, consolidation,
merger, conveyance or distribution.
(d) Rights Upon Liquidation. If, at any time while the Options
shall remain unexpired and unexercised, the Company shall dissolve, liquidate or
wind up its affairs, the holder of the Options may in connection with such event
receive, upon exercise thereof, in lieu of each share of Common Stock of the
Company which it would have been entitled to receive, the same kind and amount
of any securities or assets as may be issuable, distributable or payable upon
any such dissolution, liquidation or winding up with respect to each share of
Common Stock of the Company (after giving effect to the exercise of such
Options).
(e) Notice of Changes. In the event (i) the Company shall
issue any shares of Common Stock, options or rights to subscribe for shares of
Common Stock, or any securities convertible into or exchangeable for shares of
Common Stock, or adjust or reset the conversion price of any such options,
rights or convertible securities, or the nature or number thereof, other than
pursuant to the terms thereof as in effect on the date of this Agreement, (ii)
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable otherwise than in cash
or any other distribution in respect of the Common Stock pursuant to, without
limitation, any spin-off, split-off, or distribution of the Company's assets,
(iii) the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to subscribe for or purchase any shares of any class
or to receive any other rights, (iv) of any classification, reclassification or
other reorganization or recapitalization of the shares which the Company is
authorized to issue, consolidation or merger of the Company with or into another
-8-
<PAGE>
corporation, or conveyance of all or substantially all of the assets of the
Company, or (v) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, and in such event, the Company shall mail to
the holder of the Options a notice, at least ten (10) days prior to the record
date for, or if no record date, then at least thirty (30) days prior to the date
or expected date on which such event is to take place, stating the nature and
relevant dates for such event, including the date or expected date, if any is to
be fixed, as of which holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon,
and a description of, such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or winding up, as the case may be.
(f) Reduction of Purchase Price Below Par Value. As a
condition precedent to the taking of any action which would cause an adjustment
reducing the Purchase Price below then par value of the shares of Common Stock
issuable upon exercise of any of the Options, the Company will take such
corporation action as may be necessary in order that it may validly and legally
issue fully paid and nonassessable shares of such Common Stock at such adjusted
Purchase Price.
4. Representations and Warranties of the Company. The Company
represents to CUCC as follows:
(a) The Company has the full power and authority to execute,
deliver and carry out the terms and provisions of this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the granting of the Options have been approved
by all requisite corporate action on the part of the Company, and no further
action is necessary to authorize such acts.
(b) This Agreement has been duly and validly executed and
delivered by the Company, and constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms;
(c) The authorized capital stock of the Company consists of
(i) 25,000,000 shares of Common Stock of which, as of the date hereof, 5,395,864
shares are issued and outstanding and 7,473,915 shares are reserved for issuance
upon the exercise of currently outstanding rights, warrants and options to
purchase shares of Common Stock and the conversion of currently outstanding
securities convertible into shares of Common Stock (including the Options), and
(ii) 5,000,000 shares of Preferred Stock, none of which is outstanding or
reserved for issuance. There exist no liens, claims, options, preemptive rights,
proxies, voting agreements, charges or encumbrances of whatever nature affecting
the Option Shares other than as provided in this Agreement;
(d) The execution and delivery of this Agreement and the
performance of this Agreement by the Company will not (i) require the consent,
waiver, approval, license or authorization of or any filing with any person or
governmental authority (other than pursuant to the HSR Act), (ii) violate the
certificate of incorporation, by-laws, or other organizational documents of the
Company, (iii) with or without the giving of notice or the lapse of time or
both, conflict with or result in a breach of any terms or provisions of, or
constitute a default or give rise to a right of acceleration under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of Company under any indenture, mortgage, agreement, note or other
instrument to which the Company is a party or by which its property is bound or
(iv) violate any existing applicable law, rule, regulation, judgment, order or
decree of any governmental authority or court having jurisdiction over the
Company or any of its property;
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<PAGE>
(e) Upon issuance by the Company of the Option Shares in
accordance herewith, such shares of Common Stock will be duly and validly
issued, fully paid and nonassessable and the holder of such Option Shares will
have good title to such Option Shares, free and clear of all liens, claims,
options, preemptive rights, proxies, voting agreements, charges or encumbrances
of whatever nature affecting such Option Shares; and
(f) There exists no restriction on the Company's issuance and
delivery of the Option Shares, nor is the Company required to obtain the
approval of any person or governmental authority (other than to the extent
required under the HSR Act) to effect the sale of the any of the Option Shares.
5. Covenants of the Company. The Company covenants with CUCC that,
during the term of this Agreement:
(a) The Company will cooperate with the holder of the Options
in obtaining any regulatory or governmental approvals necessary in order to
permit the issuance of the Option Shares upon exercise of the Options;
(b) The Company shall reserve and keep available from its
authorized but unissued shares of its Common Stock or other capital stock as may
be the subject of the Options such number of shares thereof as are issuable upon
exercise of the Options, and shall not issue any such shares, or make any
agreement, commitment or arrangement to issue any such shares, or issue any
option, warrant or other security exercisable for or convertible into any such
shares, other than the Options; and
(c) No fractional shares of Common Stock will be issued in
connection with any purchase hereunder but in lieu of such fractional shares,
the Company shall make a cash refund therefor equal in amount to the product of
the applicable fraction multiplied by the Purchase Price then in effect and
applicable to the Option Shares being purchased.
6. Term. This Agreement shall be and remain in effect from the date
hereof until September 12, 2001.
7. Miscellaneous. CUCC agrees that any shares of Common Stock purchased
by the holder of the Options pursuant to this Agreement will be acquired for
investment only and not with a view to any public distribution thereof, and such
person will not offer, sell or otherwise dispose of such shares so acquired by
it in violation of the registration requirements of the Securities Act of 1933,
as amended, or any applicable state securities laws.
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<PAGE>
8. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and shall be
deemed to have been duly given on the next business day after the same is sent,
if delivered personally or sent by telecopy or overnight delivery, or five
calendar days after the same is sent, if sent by registered or certified mail,
return receipt requested, postage prepaid, as set forth below, or to such other
persons or addresses as may be designated in writing in accordance with the
terms hereof by the party to receive such notice.
(a) If to CUCC, to:
CU CapitalCorp.
c/o Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/614-4651
Attn: President
with required copies to:
CU CapitalCorp.
c/o Citizens Utilities Company
High Ridge Park
Stamford, CT 06905
Facsimile No.: 203/614-4651
Attn: General Counsel
(b) If to the Company, to:
Hungarian Telephone and Cable Corp.
1126 Budapest
Kiralyhago u.2.
Budapest, Hungary
Facsimile No.: 011-361-202-4778
Attention: Chief Executive Officer
with required copies to:
Hungarian Telephone and Cable Corp.
100 First Stamford Place
Stamford, CT 06902
Facsimile No.: 203/348-0128
Attn: General Counsel
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<PAGE>
9. Specific Enforcement. The Company acknowledges that the holder of
the Options would be irrevocably damaged in the event that any of the provisions
of this Agreement were not performed by the Company in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
holder of the Options shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and specifically to enforce this Agreement
and the terms and provisions thereof in addition to any other remedy to which
the holder of the Options may be entitled at law or in equity.
10. Expenses. Except as otherwise provided herein, all fees and
expenses incurred by the Company, and all sales, transfer or other similar taxes
payable in connection with this Agreement (including, but not limited to, any
transfer taxes payable in connection with the sale of the Option Shares), will
be borne by the Company, and all fees and expenses incurred by CUCC in
connection with this Agreement will be borne by CUCC.
11. Brokerage. CUCC and the Company each represents and warrants to the
other that neither it nor any of its affiliates has entered into or will enter
into any contract, agreement, arrangement or understanding with any person or
firm which will result in the obligation of the other to pay any finder's fee,
brokerage commission or similar payment in connection with this Agreement, the
Options or the transaction contemplated hereby. CUCC and the Company each agrees
to indemnify and hold the other harmless from and against any and all claims or
liabilities for finder's fees, brokerage commissions or similar payments
incurred by reason of any action taken by it or its affiliates.
12. Counterparts; Facsimile Signature Pages. This Agreement may be
executed in one or more counterparts, and each of such counterparts shall for
all purposes be deemed to be an original, but all such counterparts together
shall constitute but one instrument. This Agreement shall be deemed to be
executed upon the exchange of executed facsimile signature pages (with original
executed signature pages to follow by mail).
13. Assignment. No party hereto shall assign its rights and obligations
under this Agreement or any part thereof, nor shall any party assign or delegate
any of its rights or duties hereunder without the prior written consent of the
other party, and any assignment made without such consent shall be void;
provided, however, that without the consent of the Company, the rights and
obligations of CUCC hereunder may be assigned to and assumed by a direct or
indirect wholly-owned subsidiary of Citizens Utilities Company (including any
direct or indirect wholly-owned subsidiary of Citizens Utilities Company that
holds substantially all of the communications assets and properties of Citizens
Utilities Company, the stock of which may be distributed or otherwise
transferred to some or all of the shareholders of Citizens Utilities Company).
Except as otherwise provided herein, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
14. Governing Law; Forum; Consent to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflict of laws thereof.
Each of the parties to this Agreement hereby irrevocably and unconditionally (i)
consent to submit to the exclusive jurisdiction of the courts of the State of
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<PAGE>
Delaware for any proceeding arising in connection with this Agreement (and each
such party agrees not to commence any such proceeding, except in such courts),
(ii) to the extent such party is not a resident of the State of Delaware, agrees
to appoint an agent in the State of Delaware as such party's agent for
acceptance of legal process in any such proceeding against such party with the
same legal force and validity as if served upon such party personally within the
State of Delaware, and to notify promptly each other party hereto of the name
and address of such agent, (iii) waives any objection to the laying of venue of
any such proceeding in the courts of the State of Delaware, and (iv) waives, and
agrees not to plead or to make, any claim that any such proceeding brought in
any court of the State of Delaware has been brought in an improper or otherwise
inconvenient forum.
15. Further Assurance. If the holder of the Options shall exercise any
of the Options in accordance with the terms of this Agreement, from time to time
and without additional consideration, then the Company will execute and deliver,
or cause to be executed and delivered, such additional or further transfers,
assignments, endorsements, consents and other instruments as the holder of the
Options may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
16. Entire Agreement. This Agreement shall constitute the entire
contract between the parties hereto and no party shall be liable or bound to the
other in any manner by any warranties or representations except as specifically
set forth herein. This Agreement supersedes all prior agreements and
understandings of the parties hereto in connection herewith including, without
limitation, the Existing Option Agreements. The parties hereto acknowledge and
agree that as of the date hereof CUCC and its affiliates do not hold any
options, warrants or rights to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock, or any
preemptive rights to acquire shares of Common Stock or any stock options,
warrants, or other rights to purchase Common Stock, except for the Options as
set forth in this Agreement and the preemptive rights set forth in the
Replacement and Termination Agreement, dated as of the date hereof, among the
Company, CUCC, and Citizens International Management Services Company.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Amended,
Restated and Consolidated Stock Option Agreement on the date first written
above.
HUNGARIAN TELEPHONE AND CABLE CORP.
By: /s/Francis J. Busacca
-------------------------
Francis J. Busacca, Jr.
Acting President and CEO,
Chief Financial Officer
CU CAPITALCORP.
By: /s/Daryl A. Ferguson
-------------------------------
Name: Daryl A. Ferguson
Title: President
[SIGNATURE PAGE TO AMENDED, RESTATED AND CONSOLIDATED STOCK OPTION AGREEMENT]
-14-
Exhibit 99.1
Hungarian Telephone and Cable Corp.
================================================================================
100 First Stamford Place, Suite 204 Kiralyhago U.2.
Stamford, CT 06902 - U.S.A. H-1126 Budapest, Hungary
Phone (203) 348-9069 Phone (36-1) 457-6300
Fax (203) 348-9128 Fax (36-1) 202-4778
================================================================================
FOR: HUNGARIAN TELEPHONE AND CABLE CORP.
COMPANY
CONTACT: Frank J. Busacca, Jr.
Chief Financial Officer
Hungary: (011) 361-457-6300
U.S.: (203) 348-9069
FOR IMMEDIATE RELEASE
HUNGARIAN TELEPHONE AND CABLE
REPORTS AN AGREEMENT WITH CITIZENS UTILITIES
STAMFORD, Conn., September 11, 1998 - Hungarian Telephone and Cable Corp.
(AMEX:HTC) reported today that its Board of Directors has reached an agreement
with Citizens Utilities Company ("Citizens") (NYSE: CZN) to settle the
disagreements with Citizens with respect to the future of Hungarian Telephone's
management services agreement with Citizens and Citizens' preemptive rights with
respect to HTC common stock.
The settlement, which is subject to the execution of definitive
documentation, provides for the issuance by Hungarian Telephone to Citizens of
100,000 shares of HTC common stock and an $8.4 million note maturing in 2004 for
the settlement of the past management services fees in the amount of $9.6
million accrued through June 30, 1998. The management services agreement will be
terminated. Hungarian Telephone will enter into a consulting services agreement
with Citizens. Hungarian Telephone will pay a combined termination fee and
consulting retainer to Citizens in the aggregate amount of $21 million in
quarterly installments of $750,000 each beginning in 2004 and continuing through
2010.
(more)
<PAGE>
HUNGARIAN TELEPHONE REPORTS
Page 2
Furthermore, going forward, Citizens' only preemptive right will be a
30-day right to purchase for cash such number of shares of HTC common stock
necessary to maintain Citizens' existing 58.9% ownership interest on a
fully-diluted basis. Citizens will maintain its accrued preemptive rights to
purchase 2.1 million shares of HTC common stock at $13 per share, which rights
will expire on July 1, 1999. Citizens will also keep its options and warrant to
purchase an aggregate of 4,511,322 shares of HTCC common stock at prices per
share ranging from $12.75 to $18.00, which options and warrant shall expire on
September 12, 2000.
Commenting on the settlement, Frank J. Busacca, Chief Financial Officer
and Acting President and Chief Executive Officer said, "We are extremely pleased
with the settlement with Citizens. We believe this is a major event for our
Company. The settlement not only vastly improves Hungarian Telephone's current
cash flow, but it also enhances flexibility as we review strategic alternatives
with ABN-AMRO. This is the accomplishment of the first critical step in our
renewed effort to maximize shareholder value. We have also initiated discussions
regarding a restructuring of our existing vendor and credit facilities and
continue to be optimistic about a successful conclusion of those negotiations as
well."
Hungarian Telephone and Cable Corp. is a provider of basic telephone
services in five defined operating regions of the Republic of Hungary. The
Company operates through four Hungarian subsidiaries which have been granted
25-year telecommunications concessions by the Hungarian government. These
concessions are exclusive through 2002.
# # #
Exhibit 99.2
Hungarian Telephone and Cable Corp.
================================================================================
100 First Stamford Place, Suite 204 Kiralyhago U.2.
Stamford, CT 06902 - U.S.A. H-1126 Budapest, Hungary
Phone (203) 348-9069 Phone (36-1) 457-6300
Fax (203) 348-9128 Fax (36-1) 202-4778
================================================================================
FOR: HUNGARIAN TELEPHONE AND CABLE CORP.
COMPANY
CONTACT: Frank J. Busacca, Jr.
Chief Financial Officer
Hungary: (011) 361-457-6300
U.S.: (203) 348-9069
FOR IMMEDIATE RELEASE
HUNGARIAN TELEPHONE AND CABLE
FINALIZES ITS AGREEMENT WITH CITIZENS UTILITIES
STAMFORD, Conn., October 2, 1998 - Hungarian Telephone and Cable Corp.
(AMEX:HTC) reported today that it has finalized the tentative agreement with
Citizens Utilities Company ("Citizens") (NYSE: CZN) previously announced on
September 11, 1998 to settle the disagreements with Citizens with respect to the
future of Hungarian Telephone's management services agreement with Citizens and
Citizens' preemptive rights with respect to HTC common stock. The final
agreement was on substantially the same terms as those previously announced.
Hungarian Telephone and Cable Corp. is a provider of basic telephone
services in five defined operating regions of the Republic of Hungary. The
Company operates through four Hungarian subsidiaries which have been granted
25-year telecommunications concessions by the Hungarian government. These
concessions are exclusive through 2002.
# # #
