HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Financial Statements
For the quarterly period ended March 31, 1999
<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, 1999 Commission file number 1-11484
--------------
HUNGARIAN TELEPHONE AND CABLE CORP.
(Exact name of registrant as specified in its charter)
Delaware 13-3652685
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
100 First Stamford Place, Stamford, CT 06902
(Address of principal executive offices)
(203) 348-9069
(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 12 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 latest possible date:
Common Stock, $.001 par value 11,981,579 Shares
(Class) (Outstanding at May 17, 1999)
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Table of Contents
Part I. Financial Information: Page No.
Consolidated Condensed Balance Sheets 2
Consolidated Condensed Statements of Operations and
Comprehensive Loss 3
Consolidated Condensed Statements of Stockholders' Deficiency 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 Operations 12
Part II. Other Information 24
Signature 26
- 1 -
<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
(In thousands, except share data)
<TABLE>
<S> <C> <C>
Assets March 31, 1999 December 31, 1998
------ -------------- -----------------
(unaudited)
Current assets:
Cash $ 11,822 $ 8,489
Restricted cash 47 64
Accounts receivable, net 6,678 6,703
Inventories 1,027 1,111
Prepayments and other current assets 164 187
------------ ------------
Total current assets 19,738 16,554
Net property, plant and equipment 122,446 136,489
Goodwill, less accumulated amortization 8,848 10,000
Other intangibles, less accumulated amortization 4,991 5,592
Other assets 7,876 8,432
------------ ------------
Total assets $ 163,899 $ 177,067
============ ============
Liabilities and Stockholders' Deficiency
Current liabilities:
Current installments of long-term debt $ 35,550 $ 31,804
Accounts payable 842 2,061
Accruals 12,241 3,552
Other current liabilities 1,057 932
Due to related parties 1,196 1,011
------------ ------------
Total current liabilities 50,886 39,360
Long-term debt, excluding current installments 164,777 202,881
Due to related parties 22,365 22,372
Deferred credits and other liabilities 16,062 1,491
------------ ------------
Total liabilities 254,090 266,104
------------ ------------
Stockholders' deficiency:
Common stock, $.001 par value. Authorized
25,000,000 shares; issued 5,395,864 shares
in 1999 and 1998 5 5
Additional paid-in capital 71,467 71,467
Accumulated deficit (175,823) (167,809)
Accumulated other comprehensive income 14,160 7,300
------------ ------------
Total stockholders' deficiency (90,191) (89,037)
------------ ------------
Total liabilities and stockholders' deficiency $ 163,899 $ 177,067
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations and Comprehensive Loss
For the Three Month Periods Ended March 31, 1999 and 1998
(In thousands, except share and per share data)
(unaudited)
<TABLE>
<S> <C> <C>
1999 1998
---- ----
Telephone service revenues, net $ 11,205 $ 9,372
Operating expenses:
Operating and maintenance expenses 4,396 5,592
Depreciation and amortization 2,853 2,740
Management fees - 1,504
---------- -----------
Total Operating Expenses 7,249 9,836
---------- -----------
Income (loss) from operations 3,956 (464)
Other income (expenses):
Foreign exchange losses (333) (267)
Interest expense (11,860) (11,109)
Interest income 243 108
Other, net (20) 32
----------- -----------
Net loss $ (8,014) $ (11,700)
Comprehensive income 6,860 1,832
---------- -----------
Comprehensive loss $ (1,154) $ (9,868)
=========== ============
Net loss per common share - basic $ (1.49) $ (2.22)
======= ======
Weighted average number of common shares
Outstanding - basic and diluted 5,395,864 5,272,865
========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Stockholders' Deficiency
(In thousands, except share data)
(unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Accumulated
Additional Other Total
Common Paid-in Accumulated Comprehensive Stockholders'
Shares Stock Capital Deficit Income Deficiency
- - ---------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 5,395,864 $ 5 71,467 (167,809) 7,300 $ (89,037)
Net loss (8,014) (8,014)
Foreign currency translation adjustment 6,860 6,860
Balances at March 31, 1999 5,395,864 $ 5 71,467 (175,823) 14,160 $ (90,191)
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
For the Three Month Periods Ended March 31, 1999 and 1998
(In thousands)
(unaudited)
<TABLE>
<S> <C> <C>
1999 1998
---- ----
Net cash provided by operating activities 3,828 1,662
---------- -----------
Cash flows from investing activities:
Construction of telecommunication networks (877) (8,667)
Decrease in construction deposits 20 499
Proceeds from sale of assets 15 10
---------- -----------
Net cash used in investing activities (842) (8,158)
---------- -----------
Cash flows from financing activities:
Borrowings under debt agreements 16,391 10,328
Repayment of long-term debt (90) (1,820)
Payments in connection with settlement and
refinancing of long-term debt (15,000)
Proceeds from exercise of options 224
---------- -----------
Net cash provided by financing activities 1,301 8,732
---------- -----------
Effect of foreign exchange rate changes on cash (954) (318)
----------- -----------
Net increase in cash and cash equivalents 3,333 1,918
Cash and cash equivalents at beginning of period 8,489 4,031
---------- -----------
Cash and cash equivalents at end of period 11,822 5,949
========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying condensed consolidated financial statements of
Hungarian Telephone and Cable Corp. ("HTCC" or the "Registrant"
and, together with its consolidated subsidiaries, the "Company")
have been prepared without audit and, in the opinion of
management, include all adjustments consisting mainly of normal
recurring accruals necessary for a fair presentation. Results for
the interim periods are not necessarily indicative of the results
for a full year.
The unaudited condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial
statements of Hungarian Telephone and Cable Corp. and Subsidiaries
for the year ended December 31, 1998, including the notes thereto,
set forth in the Company's Form 10-K.
The Company has suffered recurring losses from operations, has a
net capital deficiency, and did not have sufficient funds on hand
to meet its current debt service obligations as of December 31,
1998.
As discussed in Notes 4 and 5, the Company has refinanced and
restructured its debt and equity. As a part of the Company's debt
refinancing, the Company has entered into a one-year $138 million
dual currency bridge loan with Postabank. The Company is currently
evaluating various alternatives to refinance the bridge loan
provided by Postabank as the loan is repayable on May 10, 2000.
While the availability of long-term financing sources cannot be
predicted with certainty, the Company believes that it will be
able to resolve this issue during the next twelve months. However,
there can be no assurance that the Company will be able to obtain
long-term financing on commercially acceptable terms, or at all.
These factors raise substantial doubt about the Company's ability
to continue as a going concern. The Consolidated Condensed
Financial Statements do not include any adjustments that might
result from the outcome of this uncertainty.
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
(b) Net Loss Per Share
Basic earnings per share ("EPS") is computed by dividing income or
loss attributable to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution from the exercise or conversion of
securities into common stock.
Net loss and weighted average shares outstanding used for
computing diluted loss per common share were the same as that used
for computing basic loss per common share for each of the periods
ended March 31, 1999 and 1998.
The Company had potentially dilutive common stock equivalents of
7,599,905 and 7,449,242 for the periods ended March 31, 1999 and
1998, respectively, which were not included in the computation of
diluted net loss per common share because they were antidilutive
for the periods presented.
(2) Cash and Restricted Cash
(a) Cash
At March 31, 1999, cash of $11,822,000 comprised the following:
$11,449,000 consisting of $117,000 denominated in U.S. dollars and
the equivalent of $11,332,000 denominated in Hungarian Forints on
deposit with banks in Hungary, and; $373,000 on deposit in the
United States.
(b) Restricted Cash
At March 31, 1999, approximately $22,000 of cash denominated in
U.S. Dollars was deposited in escrow accounts under terms of
construction contracts. In addition, approximately $25,000 was
restricted pursuant to certain arrangements with other parties.
(3) Related Parties
Current and long-term amounts due to related parties totalling
$23,561,000 at March 31, 1999 is comprised of the following:
$34,000 due to Hungarian Teleconstruct Corp. ("Teleconstruct") for
rent and other services, plus interest; a $8,374,000 promissory
note plus accrued interest of $317,000 due to a subsidiary of
Citizens Utilities Company (Citizens Utilities Company and its
subsidiaries are hereinafter referred to as "Citizens") (see Note
4 below), $11,556,000 representing the present
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
value of payments due to Citizens under a certain replacement and
termination agreement (see Note 4 below); and $3,280,000
representing payments due to certain former officers under
separate termination, consulting and non-competition agreements.
The Company paid approximately $302,000 during the first quarters
of 1999 and 1998 to three former officers under these agreements.
(4) Transactions with Citizens
On May 12, 1999, the Company and Citizens entered into a Stock Purchase
Agreement (the "Citizens Stock Purchase Agreement') pursuant to which the
Company issued to Citizens 1,300,000 shares of the Company's common stock
and 30,000 shares of the Company's Series A Preferred Stock, par value
$0.001 (the "Preferred Shares"). In consideration for such shares,
Citizens (i) transferred to the Company for cancellation the $8,374,000
promissory note issued by the Company to Citizens which was to mature in
2004, and (ii) agreed to renounce and forego any rights whatsoever to any
payment of the $21 million which was payable by the Company to Citizens
in quarterly installments of $750,000 each from 2004 through and
including 2010. Citizens, as the holder of the Preferred Shares, is
entitled to receive cumulative cash dividends at an annual rate of 5%,
compounded annually on the liquidation value of $70 per share. The
Company may redeem the Preferred Shares at any time. Citizens can convert
each of the Preferred Shares into shares of the Company's common stock on
a one for ten basis. The Citizens Stock Purchase Agreement provides that
if the average closing price of the Company's common stock for the twenty
(20) trading days ending March 31, 2000 is less than $7.00 per share,
then HTCC shall issue such number of HTCC Preferred Shares (with a value
of $70 per share) equal in value to (i) 1,600,000 times (ii) $7.00 less
the average closing price of HTCC common stock for such twenty (20)
trading day period. The Citizens Stock Purchase Agreement also requires
Citizens not to transfer any shares of HTCC common stock which it may
hold prior to May 15, 2000 without the prior written consent of the
Company and Postabank. Citizens also waived any and all preemptive and
anti-dilution rights in connection with the transactions described in
Note 5 below.
(5) Credit Facilities
During 1996 and 1997, the Company entered into several construction
contracts with a Hungarian contractor which totalled $59.0 million in the
aggregate, $47.5 million of which was financed by a contractor financing
facility. The contractor financed the financing
- 8 -
<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
facility through a facility provided by Postabank es Takarekpenztar
("Postabank"), a Hungarian commercial bank. As of December 31, 1998, the
balance owed under the contractor financing facility was $36.6 million.
The Company and the contractor have a disagreement with respect to
several issues relating to the quality and quantity of the work done by
the contractor. In an attempt to resolve these issues and as a part of
its overall refinancing plan with Postabank, on March 30, 1999, the
Company purchased HUF 4 billion (approximately $16.8 million) of loans
the contractor had with Postabank for HUF 900 million (approximately $3.8
million). The purchase of these loans was financed by Postabank. The
Company has attributed no value to the loans due from the contractor in
the accompanying financial statements. Simultaneously with the loan
purchase transaction, Postabank assumed HUF 7 billion plus accrued
interest of HUF 348 million (approximately $30.9 million) of the
Company's liability under the contractor financing facility from the
contractor, due to the contractor's financial difficulties, and sold this
debt back to the Company for HUF 3 billion (approximately $12.6 million).
The purchase of the debt was financed by Postabank. As a result of the
above transactions, the Company has recorded a deferred credit of HUF 3.5
billion (approximately $14.7 million) which reflects the extinguishment
of all but HUF 900 million (approximately $3.8 million) of amounts due
under the contractor financing facility as of March 31, 1999, and is
included in deferred credits and other liabilities. This transaction was
the first of a series of transactions involving Postabank aimed at
revising the Company's capital and debt structure, the remainder of which
were completed on May 12, 1999 and are described below. Upon completion
of the overall series of transactions, the Company expects to recognize a
gain on settlement of indebtedness, net of previously capitalized
financing costs associated with the Original Postabank Credit Facility
(as defined below).
On October 15, 1996, the Company and its subsidiaries entered into a $170
million 10-year Multi-Currency Credit Facility with Postabank (the
"Original Postabank Credit Facility"). The Company utilized the funding
provided by the Original Postabank Credit Facility to continue
construction of its telecommunications networks, provide working capital,
and repay other debt obligations. The Company did not have sufficient
funds to meet the required repayment obligations under the Original
Postabank Credit Facility as of March 31, 1999. On May 12, 1999, the
Company entered into various agreements as part of a revision of its
capital structure with the following parties: Postabank; Tele Danmark A/S
("Tele Danmark"); and the Danish Investment Fund for Central and Eastern
Europe (the "Danish Fund"). As a result of such agreements, the Company
extinguished all of its obligations to Postabank under the Original
Postabank Credit Facility in the amount of approximately $193 million and
the amounts borrowed to settle a portion due under the contractor
financing facility described above. As of May 12, 1999, the Company
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
borrowed from Postabank $138 million under a one-year dual currency
bridge loan agreement in Hungarian Forints and Euros and $25 million
pursuant to certain unsecured notes payable in 2007. The loan is
repayable on May 10, 2000 and bears interest at an initial rate of 2.25%
(the "Margin") plus the Budapest Bank Offering Rate or Euro LIBOR Rate
(currently approximately 15% and 2.5%, respectively) which Margin
increases incrementally to 4.25%, in quarterly increments of 1% over the
next year. HTCC and one of its subsidiaries, HTCC Consulting Rt. are
guarantors for the HTCC subsidiaries under the Bridge Loan Agreement. The
Company has pledged all of its intangible and tangible assets, including
HTCC's ownership interests in its subsidiaries, and its real property to
secure all of the obligations under the Bridge Loan Agreement. The
Company and Postabank entered into a series of agreements to secure such
obligations under the Bridge Loan Agreement.
(6) Segment Disclosures
The Company operates in a single industry segment, communications
services. The Company's operations involve developing and constructing a
modern telecommunications infrastructure in order to provide a full range
of the Company's products and services in its five concession areas in
Hungary. While the Company's chief operating decision maker monitors the
revenue streams of the various products and services, operations are
managed and financial performance is evaluated based on the delivery of
multiple services to customers over an integrated network. Substantially
all of the Company's assets are located in Hungary and all of its
revenues are generated in Hungary.
Products and Services
The Company groups its products and services into the following
categories:
Telephone Services - local dial tone and switched products and services
that provide incoming and outgoing calls over the public switched
network. This category includes reciprocal compensation revenues and
expenses (i.e. interconnect).
Network Services - point-to-point dedicated services that provide a
private transmission channel for the Company's customers' exclusive use
between two or more locations, both in local and long distance
applications.
Other Service and Product Revenues - PBX hardware sales and service
revenues, as well as miscellaneous other telephony service revenues.
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
(unaudited)
The revenues generated by these products and services for the periods ended
March 31 were as follows:
($ in thousands) 1999 1998
Telephone services $10,492 $8,951
Network services 524 206
Other service and product
revenue 189 215
-------- -------
$11,205 $9,372
======= =======
Included in telephone services are connection fee revenues
amounting to $331,000 and $556,000 for the periods ended March 31, 1999
and 1998, respectively.
Major Customers
For the periods ended March 31, 1999 and 1998, none of the Company's
customers accounted for more than 10% of the Company's total revenue.
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<PAGE>
Part I. Financial Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Hungarian Telephone and Cable Corp. ("HTCC" or the "Registrant" and,
together with its consolidated subsidiaries, the "Company") is engaged primarily
in the provision of telecommunications services through its majority-owned
operating subsidiaries, Kelet-Nograd Com Rt. ("KNC"), Raba Com Rt. ("Raba-Com"),
Papa es Tersege Telefon Koncesszios Rt. ("Papatel") and Hungarotel Tavkozlesi
Rt. ("Hungarotel"). The Company earns substantially all of its
telecommunications revenue from measured service fees, monthly line rental fees,
connection fees, public pay telephone services and ancillary services (including
charges for additional services purchased at the customer's discretion).
During 1996 and 1997, the Company embarked on a significant network
development program which met its substantial demand backlog, increased the
number of basic telephone access lines in service and modernized existing
facilities. The development and installation of the network in each of the
Company's operating areas required significant capital expenditures.
As a result of the Company's development program, the Company achieved
EBITDA1 of $6.8 million during the quarter ended March 31, 1999, up from EBITDA
of $2.3 million for the quarter ended March 31, 1998. The ability of the Company
to generate sufficient revenues to satisfy cash requirements and become
profitable will depend upon a number of factors, including the Company's ability
to attract additional customers, revenues per customer and construction costs.
These factors are expected to be primarily influenced by the success of the
Company's operating 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 and other factors that are beyond the Company's control.
The success of the Company's strategy is dependent upon its ability to
increase revenues through the increased usage and the addition of new
subscribers. Since commencing the provision of telecommunications services in
the first quarter of 1995, the Company's network construction and expansion
program has added approximately 127,000 access lines through March 31, 1999 to
the approximately 60,000 access lines acquired directly from Magyar Tavkozlesi
Rt. ("MATAV"), the former State-controlled monopoly telephone company.
- - --------
1 EBITDA is defined as net revenue less operating and maintenance expenses and
management fees. The Company has included information concerning EBITDA because
it understands that it is used by certain investors as one measure of the
Company's ability to service or incur indebtedness. EBITDA is not a measure of
financial performance under generally accepted accounting principles and is not
necessarily comparable to similarly titled measures used by other companies.
EBITDA should not be construed as an alternative to operating income (as
determined in accordance with generally accepted accounting principles) or to
cash flows from operating activities (as determined in accordance with generally
accepted accounting principles) as a measure of liquidity.
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<PAGE>
Comparison of Three Months Ended March 31, 1999 and Three Months Ended
March 31, 1998
<TABLE>
Net Revenues
<S> <C> <C>
Quarter ended
(dollars in millions) 1999 1998 % change
Measured service revenues 8.7 7.8 12
Subscription revenues 2.8 2.7 4
Net interconnect charges (1.6) (2.4) (33)
Net measured service and subscription revenues 9.9 8.1 22
Connection fees 0.3 0.6 (50)
Other operating revenues, net 1.0 0.7 43
Telephone Service Revenues, Net 11.2 9.4 19
</TABLE>
The Company recorded a 19% increase in telephone service revenues to
$11.2 million for the three months ended March 31, 1999 from $9.4 million for
the three months ended March 31, 1998.
Net measured service and subscription revenues increased 22% to $9.9
million for the three months ended March 31, 1999 from $8.1 million for the
three months ended March 31, 1998. Measured service revenues increased 12% to
$8.7 million during the three months ended March 31, 1999 from $7.8 million
during the three months ended March 31, 1998. Subscription revenues increased 4%
to $2.8 million during the three months ended March 31, 1999 from $2.7 million
during the three months ended March 31, 1998. These increases in measured
service and subscription revenues are the result of a 6% increase in average
access lines in service from approximately 175,800 lines for the three months
ended March 31, 1998 to approximately 185,900 lines during the three months
ended March 31, 1999. Also contributing to the increases in measured service and
subscription revenues is an average 11% increase in tariff rates, effective
January 1, 1999 in the operating subsidiaries' functional currency, offset by an
approximate 8% devaluation of the functional currency during the period.
These revenues have been reduced by net interconnect charges which
totalled $1.6 million during the three months ended March 31, 1999 compared to
$2.4 million during the three months ended March 31, 1998. As a percentage of
call and subscription revenues, net interconnect charges have declined from 23%
for the three months ended March 31, 1997 to 14% for the three months ended
March 31, 1999, due to a higher proportion of local traffic as additional access
lines are placed in service plus a negotiated reduction in interconnect fees
effective January 1, 1999.
Connection fees for the three month period ended March 31, 1999
totalled $0.3 million as compared to $0.6 million for the three months ended
March 31, 1998. This decrease reflects a reduction in the number of new access
lines connected and the devaluation of the Hungarian Forint. Connection fees
were expected to decline substantially during the quarter as the majority of
wait-listed customers have been provided with access lines.
The Company expects connection fees to continue to decline.
-13-
<PAGE>
Other operating revenues increased 43% to $1.0 million during the three
months ended March 31, 1999 compared to $0.7 million during the three months
ended March 31, 1998 due to revenues generated from the provision of direct
lines and to a lesser extent, revenues generated from Lucent PBX sales and
related maintenance services.
Operating and Maintenance Expenses
Operating and maintenance expenses decreased 21% to $4.4 million for
the three months ended March 31, 1999 as compared to $5.6 million for the three
months ended March 31, 1998. On a per line basis, operating and maintenance
expenses decreased to approximately $24 per average access line for the three
months ended March 31, 1999 from $32 for the three months ended March 31, 1998
as the Company achieved productivity improvements and increased its focus on
reducing operating expenses, particularly through reductions in the number of
ex-patriates working for the Company.
Depreciation and Amortization
Depreciation and amortization charges increased $0.2 million to $2.9
million for the three months ended March 31, 1999 from $2.7 million for the
three months ended March 31, 1997. The relative consistency in depreciation and
amortization expense between the periods is due to the devaluation of the
operating subsidiaries' functional currency. Depreciation and amortization
expense increased in functional currency terms by 13% due to additional capital
expenditures, however, due to the devaluation of the Hungarian Forint during the
period, depreciation and amortization expense for the three months ended March
31, 1999 has remained consistent in U.S. Dollar terms with 1998 amounts.
Management Fees
There was no management fee expense for the three months ended March
31, 1999 as compared to $1.5 million for the three months ended March 31, 1998.
This decrease is due to the termination of the management services agreement
between the Company and Citizens International Management Services Company
during 1998. The Company does not have any continuing management services
agreements.
Income from Operations
Income from operations increased to $4.0 million for the three months
ended March 31, 1999 from a loss from operations of $0.5 million for the three
months ended March 31, 1998. Contributing to such improvements were higher
revenues, lower operating and maintenance expenses and the elimination of the
management fees described above during the three months ended March 31, 1999 as
compared to the three months ended March 31, 1998, offset by increased
depreciation and amortization charges during the period.
-14-
<PAGE>
Foreign Exchange Losses
Foreign exchange losses remained constant at $0.3 million for the three
months ended March 31, 1999 and March 31, 1998. Such foreign exchange losses
resulted from the devaluation of the Hungarian Forint against the U.S. Dollar
and the German Mark.
Interest Expense
Interest expense increased to $11.9 million for the three months ended
March 31, 1999 from $11.1 million for the three months ended March 31, 1998.
This increase was attributable to higher average debt levels during the three
months ended March 31, 1999 as compared to the three months ended March 31,
1998. Interest expense increased in functional currency terms by 13% due to the
higher average debt levels during the period, however, due to the devaluation of
the Hungarian Forint during the period, interest expense for the three months
ended March 31, 1999 increased 7% in U.S. Dollar terms. The Company has
restructured its debt obligations and expects interest expense to decrease. See
"Liquidity and Capital Resources" section below for additional discussion about
the Company's debt restructuring.
Interest Income
Interest income increased to $0.2 million for the three months ended
March 31, 1999 from $0.1 million for the three months ended March 31, 1998 due
to higher average cash balances outstanding during the three months ended March
31, 1999.
Net Loss
As a result of the factors discussed above, the Company recorded a net
loss of $8.0 million, or $1.49 per share, during the three months ended March
31, 1999 as compared to a net loss of $11.7 million, or $2.22 per share, during
the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its capital requirements primarily
through a combination of debt, equity and vendor financing. The development of
the network in each of the Company's operating areas required significant
capital expenditures. The Company's networks now have the capacity, with some
additional capital expenditures, to provide basic telephone services to
virtually all of the potential subscribers within its operating areas.
Net cash provided by operating activities totalled $3.8 million during
the three months ended March 31, 1999 compared to $1.7 million during the three
months ended March 31, 1998. For the three months ended March 31, 1999 and 1998,
the Company used $0.8 million and $8.2 million, respectively, in investing
activities, which was primarily used to fund the construction of the Company's
telecommunications networks. Financing activities provided net cash of $1.3
million and $8.7 million for the three months ended March 31, 1999 and 1998,
respectively.
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<PAGE>
As announced on May 11, 1999, the Company entered into various
agreements as part of a revision of its capital structure with the following
parties: Postabank es Takarekpenztar Rt. ("Postabank"); Tele Danmark A/S ("Tele
Danmark"); the Danish Investment Fund for Central and Eastern Europe (the
"Danish Fund"); and 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"). As a result of such agreements, the
Company extinguished all of its obligations (i) to Postabank under the Company's
October 1996 Credit Facility to Postabank (the "Original Postabank Credit
Facility") in the amount of approximately $193 million and the amounts borrowed
to settle a portion due under a contractor financing facility in the amount of
approximately $16 million; (ii) to one of its contractors under a contractor
financing facility in the amount of approximately $35 million; and (iii) to
Citizens under a $8.4 million promissory note which was payable in 2004 and an
obligation to pay Citizens $21 million in 28 quarterly installments of $750,000
each from 2004 through and including 2010. The effect of these transactions has
been a significant reduction in the financial obligations of the Company
subsequent to the end of the quarter ended March 31, 1999. Going forward, the
Company has borrowed from Postabank $138 million under a one-year dual currency
bridge loan agreement in Hungarian Forints and Euros and $25 million pursuant to
certain unsecured notes which mature in 2007. Some of the various agreements
which were entered into as of May 10, 1999 are described herein. (The
descriptions and summaries herein do not purport to be complete, and are subject
to, and qualified in their entirety by, reference to each such agreement, copies
of which are filed as exhibits hereto. See Item 6 below).
The Company and Postabank entered into a Dual Currency Bridge Loan
Agreement (the "Bridge Loan Agreement") pursuant to which HTCC's subsidiaries
borrowed the equivalent of $111 million in Hungarian Forints and $27 million in
Euros which funds were applied to the repayment of the Original Postabank Credit
Facility. The loan is repayable on May 10, 2000 and bears interest at an initial
rate of 2.25% (the "Margin") plus the Budapest Bank Offering Rate or Euro LIBOR
Rate (currently approximately 15% and 2.5%, respectively) which Margin increases
incrementally to 4.25%, in quarterly increments of 1% over the next year. HTCC
and one of its subsidiaries, HTCC Consulting Rt. are guarantors for the HTCC
subsidiaries under the Bridge Loan Agreement. The Company has pledged all of its
intangible and tangible assets, including HTCC's ownership interests in its
subsidiaries, and its real property to secure all of the obligations under the
Bridge Loan Agreement. The Company and Postabank entered into a series of
agreements to secure such obligations under the Bridge Loan Agreement.
The Company and Postabank also entered into a Securities Purchase
Agreement (the "Securities Purchase Agreement") pursuant to which Postabank
purchased 2,428,572 shares of the Company's common stock for an aggregate
purchase price of $34 million. The Securities Purchase Agreement provides for
one person designated by Postabank to be nominated for election to the Company's
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<PAGE>
Board of Directors. Postabank cannot transfer its shares until the earlier of
(x) the repayment in full of all the obligations under the Bridge Loan Agreement
or (y) May 10, 2000, and then Postabank can only transfer such shares
incrementally through 2003 subject to the Company's right of first refusal. The
Company's right of first refusal expires in January 2003 and is assignable by
the Company to any beneficial holder of more than 10% of the Company's
outstanding common stock. The Company applied the proceeds from the stock
issuance to the repayment of the Original Postabank Credit Facility. Pursuant to
the Securities Purchase Agreement, the Company issued notes to Postabank in an
aggregate amount of $25 million (the "Notes") with detachable warrants (the
"Warrants"). The Notes accrue interest, which is payable semi-annually, at 4%
plus the LIBOR rate for the applicable six month interest period. The Notes
which mature in 2007 are transferable subject to applicable security laws. The
Warrants which were issued pursuant to a series of Warrant Agreements between
the Company and Postabank enable Postabank to purchase 2,500,000 shares of the
Company's common stock at an exercise price of $10 per share. The exercise
period commences on January 1, 2004 and terminates on March 31, 2007. The
Company has the right to terminate the Warrants in full or proportionately prior
to January 1, 2004 provided that the Company repays a proportionate amount of
the Notes and up to 7-1/2% of the aggregate principal amount of the Notes repaid
concurrently with the termination of the Warrants.
The Company and Tele Danmark entered into a Stock Purchase Agreement
(the "TD Stock Purchase Agreement") pursuant to which the Company issued
1,571,429 shares of the Company's common stock in exchange for $11 million. The
Company applied the proceeds from the TD Stock Purchase Agreement to the
repayment of the Original Postabank Credit Facility. Tele Danmark agreed not to
transfer the shares to any party prior to May 11, 2000 without the prior written
consent of the Company.
The Company and the Danish Fund entered into a Stock Purchase Agreement
(the "Fund Stock Purchase Agreement") pursuant to which the Company issued
1,285,714 shares of the Company's common stock in exchange for $9 million. The
Company applied the proceeds from the Fund Stock Purchase Agreement to the
repayment of the Original Postabank Credit Facility. The Danish Fund agreed not
to transfer the shares to any party except for Tele Danmark prior to May 11,
2000 without the prior written consent of the Company.
The Company and Citizens entered into a Stock Purchase Agreement (the
"Citizens Stock Purchase Agreement') pursuant to which the Company issued to
Citizens 1,300,000 shares of the Company's common stock and 30,000 shares of the
Company's Series A Preferred Stock, par value $0.001 (the "Preferred Shares").
In consideration for such shares, Citizens (i) transferred to the Company for
cancellation a $8.4 million promissory note issued by the Company to Citizens
which was to mature in 2004, and (ii) agreed to renounce and forego any rights
whatsoever to any payment of the $21 million which was payable by the Company to
Citizens in quarterly installments of $750,000 from 2004 through and including
2010. Citizens, as the holder of the Preferred Shares, is entitled to receive
cumulative cash dividends at an annual rate of 5%, compounded annually on the
liquidation value of $70 per share. The Company may redeem the Preferred Shares
at any time. Citizens can convert each of the Preferred Shares into shares of
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<PAGE>
the Company's common stock on a one for ten basis. The Citizens Stock Purchase
Agreement provides that if the average closing price of the Company's common
stock for the twenty (20) trading days ending March 31, 2000 is less than $7.00
per share, then HTCC shall issue such number of HTCC Preferred Shares (with a
value of $70 per share) equal in value to (i) 1,600,000 times (ii) $7.00 less
the average closing price of HTCC common stock for such twenty (20) trading day
period. The Citizens Stock Purchase Agreement also requires Citizens not to
transfer any shares of HTCC common stock which it may hold prior to May 15, 2000
without the prior written consent of the Company and Postabank. Citizens also
waived any and all preemptive and anti-dilution rights in connection with the
transactions described above.
During 1996 and 1997, the Company entered into several construction
contracts with a Hungarian contractor which totalled $59.0 million in the
aggregate, $47.5 million of which was financed by a contractor financing
facility. The contractor financed the financing facility through a facility
provided by Postabank. As of December 31, 1998, the balance owed under the
contractor financing facility was $36.6 million. The Company and the contractor
have a disagreement with respect to several issues relating to the quality and
quantity of the work done by the contractor. In an attempt to resolve these
issues and as a part of the Company's overall refinancing plan with Postabank,
on March 30, 1999, the Company purchased HUF 4 billion (approximately $16.8
million) of loans the contractor had with Postabank for HUF 900 million
(approximately $3.8 million). The purchase of these loans was financed by
Postabank. The Company has attributed no value to the loans due from the
contractor in the March 31, 1999 financial statements. Simultaneously with the
loan purchase transaction, Postabank assumed HUF 7 billion plus accrued interest
of HUF 348 million (approximately $30.9 million) of the Company's liability
under the contractor financing facility from the contractor, due to the
contractor's financial difficulties, and sold this debt back to the Company for
HUF 3 billion (approximately $12.6 million). The purchase of the debt was
financed by Postabank. As a result of the above transactions, the Company has
recorded a deferred credit of HUF 3.5 billion (approximately $14.7 million)
which reflects the extinguishment of all but HUF 900 million (approximately $3.8
million) of amounts due under the contractor financing facility as of March 31,
1999. This transaction was the first of a series of transactions involving
Postabank aimed at revising the Company's capital and debt structure, the
remainder of which were completed on May 12, 1999 as previously described. Upon
completion of the overall series of transactions, the Company expects to
recognize a gain on settlement of indebtedness, net of previously capitalized
financing costs associated with the Original Postabank Credit Facility.
As a result of the agreements above, the Company will have 11,981,579
shares of common stock outstanding. Of such shares, the following parties hold
the following percentages of such shares: Postabank 20.3%; Tele Danmark 21.4%;
the Danish Fund 10.7%; Citizens 19.3; and others 28.3%. On a fully-diluted
basis, the Company has 22,381,484 shares outstanding. Of such shares, the
following parties hold the following percentage of such shares: Postabank 22.0%;
Tele Danmark 11.5%; the Danish Fund 5.7%; Citizens 41.2%; and others 19.6%.
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The Company has suffered recurring losses from operations, has a net
capital deficiency, and did not have sufficient funds on hand to meet its
current debt service obligations as of December 31, 1998.
As discussed above, the Company has refinanced and restructured its
debt and equity. As a part of the Company's debt refinancing, the Company has
entered into a one-year $138 million dual currency bridge loan with Postabank.
The Company is currently evaluating various alternatives to refinance the bridge
loan provided by Postabank as the loan is repayable on May 10, 2000. While the
availability of long-term financing sources cannot be predicted with certainty,
the Company believes that it will be able to resolve this issue during the next
twelve months. However, there can be no assurance that the Company will be able
to obtain long-term financing with commercially acceptable terms, or at all.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. The Consolidated Condensed Financial Statements do
not include any adjustments that might result from the outcome of this
uncertainty.
INFLATION AND FOREIGN CURRENCY
Due to the recent strengthening of the U.S. Dollar on international
currency markets, the Hungarian Forint/U.S. Dollar exchange rate increased to
237.94 as of March 31, 1999, an effective year to date devaluation of 9.90%.
The Company's Hungarian operations generate revenues in Hungarian
Forints and incur operating and other expenses, including capital expenditures,
predominately in Hungarian Forints but also in U.S. Dollars. The Company's
resulting foreign currency exposure is difficult to hedge due to the significant
costs involved and the lack of a market for such hedging. In addition, certain
of the Company's balance sheet accounts are expressed in foreign currencies
other than the Hungarian Forint, the Company's functional currency. Accordingly,
when such accounts are converted into Hungarian Forints, the Company is subject
to foreign exchange gains and losses which are reflected as a component of net
income or loss. When the Company and its subsidiaries' Forint-denominated
accounts are translated into U.S. Dollars for financial reporting purposes, the
Company is subject to translation adjustments, the effect of which is reflected
as a component of stockholders' deficiency.
While the Company has the ability to increase the prices it charges for
its services commensurate with increases in the Hungarian Consumer Price Index
("CPI") pursuant to its licenses from the Hungarian government, it may choose
not to implement the full amount of the increase permitted due to competitive
and other concerns. In addition, the rate of increase in the Hungarian CPI may
be less than the rate at which the Hungarian Forint devalues. As a result, the
Company may be unable to generate cash flows to the degree necessary to meet its
obligations in currencies other than the Hungarian Forint.
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<PAGE>
MARKET RISK EXPOSURE
The Company is exposed to various types of risk in the normal course of
its business, including the impact of foreign currency exchange rate
fluctuations and interest rate changes. Company operations, including all
revenues and approximately 75% of operational costs are Hungarian Forint based
and are therefore subject to exchange rate variability between the Hungarian
Forint and U.S. Dollar. This variability is mitigated by several factors,
including the Hungarian National Bank policy to peg the Hungarian Forint to a
currency basket and the telecommunications pricing law. The "crawling peg"
policy of the National Bank of Hungary maintains a scheduled daily devaluation
of the Hungarian Forint through a currency basket consisting of 70% Euros and
30% U.S. Dollars. The Hungarian Forint is allowed to trade within 2.25% of the
mid-point of this trading band. As of Mid-May 1999, the Hungarian government
devaluation policy is 0.6% per month through June, 0.5% per month through
September and 0.4% per month thereafter, totaling approximately 6.5% for the
year. It should be noted however, that due to the recent strengthening of the
U.S. Dollar on international currency markets, the Hungarian Forint/U.S. Dollar
exchange rate increased to 233.28 as of May 10, 1999, an effective year to date
devaluation of 7.75%. The telecommunications pricing law allows prices to
increase by the Consumer Price Index (CPI) adjusted for an efficiency factor of
up to 2%. Thus, to the extent that adjusted CPI follows devaluation, revenues
are somewhat insulated from exchange rate risk.
The debt obligations of the Company, as discussed in the "Liquidity and
Capital Resources" section above, have been restructured. The restructured debt
obligations are now Hungarian Forint, Euro and U.S. Dollar denominated. The
interest rate on the Hungarian Forint debt obligations is based on the Budapest
Bank Offer Rate (BUBOR). The interest rates on the Euro and U.S. Dollar
denominated obligations are based on LIBOR. Over the medium to long term, the
BUBOR rate is expected to follow inflation and devaluation trends and the
Company does not currently believe it has any material interest rate risk on any
of its Hungarian Forint denominated debt obligations. If a 1% change in the
BUBOR interest rate were to occur, the Company's interest expense would increase
or decrease by approximately $1.1 million based upon the Company's restructured
debt level. If a 1% change in the LIBOR interest rate were to occur, the
Company's interest expense would increase or decrease by approximately $500,000.
The Company is also exposed to exchange rate risk in so far as the
Company has debt obligations in other than the functional currency of its
majority owned Hungarian subsidiaries. Given the restructured debt obligations,
which include Euro and U.S. Dollar denominated debt, if a 1% change in Hungarian
Forint/Euro exchange rates were to occur, the Company's exchange rate risk would
increase or decrease by approximately $268,000. If a 1% change in Hungarian
Forint/U.S. Dollar exchange rates were to occur, the Company's exchange rate
risk would increase or decrease by approximately $250,000.
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<PAGE>
YEAR 2000
In 1998 the Company initiated a project designed to identify and
mitigate Year 2000 computer deficiencies. The Company formed a Year 2K project
team (the "Project Team") with the mandate to identify problems, set
methodologies for resolution, and budget expenses all in order to minimize the
impact of any Y2K problems from the Company's computer systems.
The Project Team consists of employees from senior and mid-level
management from various business units within the Company. The Project Team also
includes several of the Company's computer technicians and representatives from
the systems' vendors. The Project Team has 10 permanent members from the Company
and 3 permanent members from the switching and billing system vendors. Other
vendors are consulted on an "as needed" basis. The Company also formed an
oversight committee comprised of senior management to oversee the Y2K issue.
The Project Team is examining the Company's telecommunications
networks, IT business systems, and miscellaneous support systems. These systems
include computers that support telephone services, bill production, customer
accounting, plant records, payroll, and a variety of systems such as air
conditioners and building entry systems. The project has five primary phases:
(I) inventory, (II) assessment, (III) remediation, (IV) testing and (V)
contingency planning and certification. Phase I is complete and consisted of the
development of a comprehensive working list which documents all software and
microprocessor reliant materials used by the Company to ensure that phase II
covers the entire population of potential Y2K issues. Phase II consisted of
evaluating the inventory list developed during Phase I and determining which
systems need replacement, modification or retirement during 1999. Phase II is
complete. Phase III is currently underway and consists of replacing those
hardware and software components identified as non-compliant and should be
completed by the middle of the second quarter 1999. At this time, some systems
have already been modified to make them Y2K compliant and other systems have
been placed on retirement schedules. Major components of the billing system have
already been upgraded and certified as Y2K compliant under the manufacturer's
warranty. Major switching components are scheduled for replacement in May, June
and July of this year. All switching upgrades should be installed by July of
this year. Phase IV will consist of testing of existing and new hardware and
software components and will be completed between May and August of this year.
Test documents will be used to verify vendor certificates and certify systems
not covered by vendor contracts. Phase V consists of developing a written plan
for alternative methods of completing critical processes should failure occur at
the turn of the century. Contingency plans are being developed currently for all
systems. Contingency plans will be documented using test results from the
systems testing occurring between now and August 1999. Written contingency plans
will be provided to the employees by September. The Company has begun awareness
campaigns to draw employee and customer attention to the potential problems
associated with Y2K.
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<PAGE>
The Company relies upon its network construction vendors to provide
compliant hardware and software. The Project Team believes that compliance of
the telephone switching systems and the automatic message accounting interface
with the billing system present the most significant Y2K exposure for the
Company. In cooperation with representatives from the switch manufacturers who
are active members of the Project Team, the Project Team has developed a plan
for Y2K Compliance of the switching systems. One switching system vendor has
already provided the Company with switch upgrades and the other vendor will
provide the switch upgrades by the end of June 1999. Compliance certificates by
the vendors are expected to be obtained by the end of July of this year. Once
the switch upgrades have been obtained, testing of the switching/billing system
Automatic Message Accounting ("AMA") interface will take place during June and
July.
The Company relies upon MATAV's telecommunication network for all
long-distance interconnections. Should MATAV's telephone switching systems be
non-Y2K compliant, the systems could fail resulting in lost revenue for the
Company. The Company is working directly with MATAV to reduce the risk of
failure. A member of the Project Team employed by one of the Company's
telecommunications switching vendors also sits on MATAV's Y2K committee and is
actively involved in the issue. MATAV is expected to provide the Company with
certification for the 2 Megabyte ("2MB") backbone of the Company's internal wide
area network by July. Testing of the 2MB backbone will be done during the second
half of 1999. The project team believes that the Company will incur only minimal
testing costs, approximately $5,000, related to MATAV's Y2K compliance program.
The Company's recently implemented Billing and Customer Care system
(BACC) is Y2K compliant according to its vendor, representatives of which
participate on the Project Team. During phase IV of the program, which began in
May, and following the upgrades of the Company's switching systems, the BACC
system will be fully tested in cooperation with the vendor to ensure Y2K
compliance has been reached. The vendor will issue a compliance certificate
following successful completion of these tests.
Various other IT systems have been identified to be replaced or
upgraded in association with the Company's efforts to become Y2K compliant. The
Company believes that all such systems will have completed all phases of the
project by the end of the third quarter of 1999. The Company maintains
approximately 2 million lines of computer code developed internally which will
be tested and modified by the end of the third quarter. These programs, while
providing convenience features for many departments within the company, are not
critical to the Company's business processes.
The Company currently estimates that the total costs of remediation
will be approximately $785,000, which includes the replacement and/or upgrade of
certain equipment. $630,000 of such cost will allow the Company to provide
additional services in addition to bringing the Company into Y2K compliance. At
this time, no material costs have been incurred for remediation of the Y2K
problem. It is expected that most costs will be incurred during the second and
third quarters of 1999. Management cannot provide assurance that the result of
the project or that the remediation costs will not be materially different from
estimates. Accordingly, contingency plans are currently being developed to
address high-risk systems. The contingency plans are expected to be in place by
the third quarter of 1999.
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<PAGE>
The Company is dependent on network switch manufacturers to provide
compliant hardware and software in a timely manner. Within IT, the Company is
dependent on the development of software by external experts, and the
availability of critical resources with the requisite skill sets. At worst case,
failure by the Company or by certain of its vendors to remediate Y2K compliance
issues could result in disruption of the Company's operations, possibly
impacting its telecommunication network and the Company's ability to bill and
collect revenues. However, management believes that this worst case scenario is
unlikely, and that its efforts to mitigate Y2K issues will be successful.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The information required by this Item is contained under the heading
"Market Risk Exposure" under Item 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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<PAGE>
Part II. Other Information
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Item 1. Legal Proceedings
KNC settled its dispute as reported in the Company's 1998 Annual
Report on Form 10-K with the Hungarian taxing authorities by agreeing
to pay approximately $110,000 in taxes.
As reported in the Company's 1998 Annual Report on Form 10-K, the
Company and one of its contractors have a dispute with respect to
several issues relating to the quality and quantity of the work done
by such contractor. The contractor financed a portion of the
construction contracts with a contractor financing facility. The
contractor financed the facility through Postabank. As of December
31, 1998, the balance owed by the Company on the contractor financing
facility was approximately $36.6 million. In an attempt to resolve
these issues, the Company purchased from Postabank the receivables
owed by the contractor to Postabank with respect to the contractor
financing facility. The Company also purchased from Postabank some of
the obligations which the Company owed to the contractor under the
contractor financing facility which were assumed by Postabank. As a
result of the above, the contractor's liabilities to the Company
exceeded the Company's liabilities to such contractor. The Company
then set off all of its liabilities to the contractor against the
amounts owed to the Company by the contractor. The Company is
reviewing its options with respect to a final legal settlement with
the contractor (see Note 5 of Notes to Consolidated Condensed
Financial Statements).
Item 2. Change in Securities and Use of Proceeds
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Certificate of Designations of Series A - Preferred
Stock of Hungarian Telephone and Cable Corp.
10.1 Dual Currency Bridge Loan Agreement between
Hungarian Telephone and Cable Corp. and its
subsidiaries and Postabank es Takarekpenztar
Reszvenytarsasag, as Lender, Facility Agent and
Security Agent dated as of May 12, 1999.
10.2 Securities Purchase Agreement between Hungarian
Telephone and Cable Corp., as Seller and Postabank
es Takarekpenztar Reszvenytarsasag, as Buyer, dated
as of May 12, 1999.
10.3 Form of Warrant to Purchase Common Stock of
Hungarian Telephone and Cable Corp., dated as of
May 12, 1999.
10.4 Form of Unsecured Note issued by Hungarian
Telephone and Cable Corp. to Postabank es
Takarekpenztar Reszvenytarsasag, dated as of May
12, 1999.
10.5 Stock Purchase Agreement between Hungarian
Telephone and Cable Corp., as Seller, and Tele
Danmark A/S, as Buyer, dated as of May 12, 1999.
10.6 Stock Purchase Agreement between Hungarian
Telephone and Cable Corp., as Seller, and the
Danish Investment Fund for Central and Eastern
Europe, as Buyer, dated as of May 12, 1999.
10.7 Stock Purchase Agreement among Hungarian Telephone
and Cable Corp., as Seller, and Citizens
International Management Services Company, as
Buyer, and CU CapitalCorp., dated as of May 12,
1999.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hungarian Telephone and Cable Corp.
(Registrant)
May 17, 1999 By: /s/Francis J. Busacca, Jr.
--------------------------
Francis J. Busacca, Jr.
Chief Financial Officer and
Executive Vice President
May 17, 1999 By: /s/William McGann
William McGann
Chief Accounting Officer,
Controller and Treasurer
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<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP. AND SUBSIDIARIES
Index to Exhibits
Exhibit No. Description
4.1 Certificate of Designations of Series A - Preferred Stock of
Hungarian Telephone and Cable Corp.
10.1 Dual Currency Bridge Loan Agreement between Hungarian
Telephone and Cable Corp. and its subsidiaries and Postabank
es Takarekpenztar Reszvenytarsasag, as Lender, Facility Agent
and Security Agent dated as of May 12, 1999.
10.2 Securities Purchase Agreement between Hungarian Telephone and
Cable Corp., as Seller and Postabank es Takarekpenztar
Reszvenytarsasag, as Buyer, dated as of May 12, 1999.
10.3 Form of Warrant to Purchase Common Stock of Hungarian
Telephone and Cable Corp., dated as of May 12, 1999.
10.4 Form of Unsecured Note issued by Hungarian Telephone and
Cable Corp. to Postabank es Takarekpenztar Reszvenytarsasag,
dated as of May 12, 1999.
10.5 Stock Purchase Agreement between Hungarian Telephone and Cable
Corp., as Seller, and Tele Danmark A/S, as Buyer, dated as of
May 12, 1999.
10.6 Stock Purchase Agreement between Hungarian Telephone and Cable
Corp., as Seller, and the Danish Investment Fund for Central
and Eastern Europe, as Buyer, dated as of May 12, 1999.
10.7 Stock Purchase Agreement among Hungarian Telephone and Cable
Corp., as Seller, and Citizens International Management
Services Company, as Buyer, and CU CapitalCorp., dated as of
May 12, 1999.
27.1 Financial Data Schedule
CERTIFICATE OF DESIGNATIONS
OF
SERIES A PREFERRED STOCK
OF
HUNGARIAN TELEPHONE AND CABLE CORP.
(Pursuant to Section 151 of the Delaware General Corporation Law)
The undersigned, being the President and Secretary of Hungarian
Telephone and Cable Corp., a Delaware corporation (the "Corporation"), certify
that pursuant to authority granted to and vested in the Board of Directors of
the Corporation by the provisions of the Certificate of Incorporation of the
Corporation, the Board of Directors has adopted the following resolution
creating a series of Preferred Stock of the Corporation designated as the Series
A Preferred Stock:
RESOLVED, that a series of Preferred Stock, par value $0.01 per share,
consisting of Two Hundred Thousand (200,000) shares, is hereby authorized and
the designation, amount, voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof (in addition to any other
rights applicable to the Preferred Stock of all series set forth in the
Certificate of Incorporation of the Corporation) are hereby fixed as follows:
<PAGE>
(1) Designation and Amount.
The shares of such series shall be designated as Series A Preferred
Stock (the "Series A Preferred Stock"), and the number of shares constituting
the Series A Preferred Stock shall be 200,000. Such number of shares may be
increased or decreased by a resolution duly adopted by the Board of Directors;
provided, that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights, or warrants or upon the conversion of any outstanding
securities issued by the Corporation that are convertible into Series A
Preferred Stock.
(2) Dividends.
(a) For purposes of this Section 2, each June 30 and December
31 on which any share of Series A Preferred Stock shall be outstanding shall be
deemed to be a "Dividend Payment Date." Commencing on the Dividend Payment Date
next following the issuance of Series A Preferred Stock (the "Initial Payment
Date"), the holders of shares of Series A Preferred Stock shall be entitled to
receive cumulative cash dividends, whether or not declared and whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends, out of funds legally available therefor, payable
in arrears at the annual rate of 5%, compounded annually, on the liquidation
value per share of Seventy Dollars ($70.00) (as adjusted for any stock
dividends, combinations, or splits with respect to such shares). Notwithstanding
the foregoing, if the date of issuance of the Series A Preferred Stock is 15 or
fewer days prior to a Dividend Payment Date, the Corporation may, at its option,
defer the initial dividend payment to the second Dividend Payment Date following
the date of issuance. Dividends payable on the initial Dividend Payment Date
shall be pro rated based on the number of days that shall have elapsed since the
date of original issue of the Series A Preferred Stock. Dividends payable on the
Series A Preferred Stock for any period greater or less than a full dividend
period shall be computed on the basis of a 360 day year consisting of twelve
30-day months.
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(b) The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be not
more than 45 days prior to the date fixed for the payment thereof.
(c) Except as provided in Subsections 2(a) above, on each
Dividend Payment Date, all dividends which shall have accrued on each share of
Series A Preferred Stock outstanding on such Dividend Payment Date shall
accumulate and be deemed to become "due." Any dividend which shall not be paid
on the Dividend Payment Date on which it shall become due shall be deemed to be
"past due" until such dividend shall be paid or until the share of Series A
Preferred Stock with regard to which such dividend became due shall no longer be
outstanding, whichever is the earlier to occur. No interest or sum of money in
lieu of interest shall be payable with regard to any dividend payment or
payments which are past due. Dividends paid on shares of Series A Preferred
Stock in an amount less than the total amount of such dividends at the time
accumulated and payable on such share shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
(d) If there shall be outstanding shares of any other series of
Preferred Stock of the Corporation ranking junior to the Series A Preferred
Stock as to dividends, no dividends shall be declared or paid or set apart for
payment on any such other series for any period unless full cumulative dividends
have been, or contemporaneously are, declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series A
Preferred Stock for all dividend payment periods terminating on or prior to the
date of payment of such full cumulative dividends. When dividends are not paid
in full or are past due on the shares of the Series A Preferred Stock and on any
other series of Preferred Stock ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends declared on all outstanding shares of
the Series A Preferred Stock and shares of such other series of Preferred Stock
shall be declared pro rata so that the amount of dividends declared per share on
the Series A Preferred Stock and such other Preferred Stock shall in all cases
bear to each other the same ratio that accrued and unpaid dividends per share on
the shares of the Series A Preferred stock and such other Preferred Stock to the
date of such dividend payment bear to each other. Holders of shares of Series A
Preferred Stock shall not be entitled to any dividend, whether payable in cash,
property or securities, in excess of full cumulative dividends, as herein
provided, on the Series A Preferred Stock.
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(e) So long as any shares of the Series A Preferred Stock are
outstanding, no dividend (other than a dividend or distribution payable pro rata
on the Common Stock payable solely in the form of additional shares of Common
Stock) shall be declared or paid or set aside for payment or other distribution
declared or made upon the Common Stock or upon any other stock ranking junior
to, or on a parity with, the Series A Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, nor shall any Common Stock or any other
stock of the Corporation ranking junior to, or on a parity with, the Series A
Preferred Stock as to dividends or upon liquidation, dissolution or winding up,
be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Corporation (except for the conversion of such
junior or parity stock into, or the exchange of such junior or parity stock for,
stock of the Corporation ranking junior to the Series A Preferred Stock as to
dividends and upon liquidation, dissolution, or winding up) unless, in each
case, the full cumulative dividends on all outstanding shares of the Series A
Preferred Stock shall have been paid or declared and set aside for payment for
all past dividend payment periods.
(3) Voting Rights.
'
Except as otherwise from time to time required by applicable law or the
Certificate of Incorporation of the Corporation, the Series A Preferred Stock
shall have no voting rights.
(4) Redemption.
(a) Except as otherwise provided below, all (but not less than
all) shares of Series A Preferred Stock then issued and outstanding may be
redeemed by the Corporation in cash at the redemption price of Seventy Dollars
($70.00) per share of Series A Preferred Stock, plus accrued and unpaid
dividends thereon up to but excluding the date fixed for redemption.
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(b) The Corporation shall give notice of such redemption to
the holders of record of shares of the Series A Preferred Stock being so
redeemed, not less than 30 nor more than 60 days prior to such redemption, by
first class mail, postage prepaid, at their addresses as shown on the stock
registration books of the Corporation; provided, that without limiting the
obligation of the Corporation hereunder to give the notice provided in this
Subsection 4(b), the failure of the Corporation to give such notice shall not
invalidate any corporate action by the Corporation. Each such notice shall state
(i) the redemption date; (ii) the number of shares of Series A Preferred Stock
to be redeemed; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; (v) that dividends on the shares to be redeemed will cease to accrue on
such redemption date; and (vi) that such holder has the right to convert such
shares into a number of shares of Common Stock of the Corporation prior to the
close of business on the date fixed for the redemption.
(c) Notice having been mailed as aforesaid, from and after the
applicable redemption date (unless the Corporation shall default in providing
money for the payment of the redemption price), dividends on the shares of
Series A Preferred Stock to be redeemed on such redemption date shall cease to
accrue and said shares shall no longer be deemed to be issued and outstanding,
and all rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price) shall cease;
provided, however, that notwithstanding the foregoing, if notice of redemption
has been given pursuant to this Section 4 and any holder of shares of Series A
Preferred Stock shall, prior to the close of business on the redemption date,
surrender for conversion any or all of the shares to be redeemed held by such
holder in accordance with Section 5 hereof, then the conversion of such shares
to be redeemed shall become effective as provided in Section 5 and this Section
4 shall not apply to such converted shares. Upon surrender of the certificates
for any shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the redemption price
aforesaid.
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(d) Any shares of Series A Preferred Stock which at any time
shall have been redeemed shall have, after such redemption, the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, until such shares are once more designated as part of a particular
series by the Board of Directors of the Corporation.
(e) Notwithstanding the foregoing provisions of this Section
4, if any dividends on Series A Preferred Stock are past due, no shares of
Series A Preferred Stock shall be redeemed unless all outstanding shares of
Series A Preferred Stock are simultaneously redeemed, and the Corporation shall
not purchase or otherwise acquire any shares of Series A Preferred Stock;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of Series A Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Series A Preferred Stock.
(5) Conversions.
The holders of shares of Series A Preferred Stock shall have
the following conversion rights:
5A Right to Convert. Subject to the terms and
conditions of this paragraph 5, the holder of any share or shares of Series A
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Series A Preferred Stock (except that upon any liquidation of the
Corporation the right of conversion shall terminate at the close of business on
the business day fixed for payment of the amount distributable on the Series A
Preferred Stock) into such number of fully paid and nonassessable shares of
Common Stock as is obtained by (i) multiplying the number of shares of Series A
Preferred Stock so to be converted by the original purchase price of $70.00 per
share (the "Original Purchase Price") and (ii) dividing the result by the
conversion price of $7.00 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this paragraph 5, then by the
conversion price as last adjusted and in effect at the date any share or shares
of such Series A Preferred Stock are surrendered for conversion (such price, or
such price as last adjusted, being referred to as the "Conversion Price"). Such
rights of conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert a stated number of shares of Series A
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Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series A
Preferred Stock) at any time during its usual business hours on the date set
forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
5B Issuance of Certificates; Time Conversion
Effected. Promptly after the receipt of the written notice referred to in
subparagraph 5A and surrender of the certificate or certificates for the share
or shares of Series A Preferred Stock to be converted, the Corporation shall
issue and deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such share or shares of Series A Preferred Stock. To the extent
permitted by law, such conversion shall be deemed to have been effected and the
Conversion Price shall be determined as of the close of business on the date on
which such written notice shall have been received by the Corporation and the
certificate or certificates for such share or shares shall have been surrendered
as aforesaid, and at such time the rights of the holder of such share or shares
of Series A Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby.
5C Fractional Shares; Dividends; Partial
Conversion. No fractional shares shall be issued upon conversion of Series A
Preferred Stock into Common Stock and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends declared and unpaid on the shares of
Series A Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 5B. In case the
number of shares of Series A Preferred Stock represented by the certificate or
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certificates surrendered pursuant to subparagraph 5A exceeds the number of
shares converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Series A Preferred Stock represented by
the certificate or certificates surrendered which are not to be converted. If
any fractional share of Common Stock would, except for the provisions of the
first sentence of this subparagraph 5C, be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share, shall pay to the
holder surrendering the Series A Preferred Stock for conversion an amount in
cash equal to the current market price of such fractional share as determined in
good faith by the Board of Directors of the Corporation.
5D Adjustment of Price Upon Issuance of Common
Stock. Except as provided in subparagraph 5E, if and whenever the Corporation
shall issue or sell, or is, in accordance with subparagraphs 5D(1) through
5D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the lesser of the Conversion Price with
respect to the Series A Preferred Stock or market price with respect to Common
Stock in effect immediately prior to the time of such issue or sale, then,
forthwith upon such issue or sale, the Conversion Price with respect to the
Series A Preferred Stock shall be reduced to the price determined by dividing
(i) an amount equal to the sum of (a) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Conversion Price with respect to the Series A Preferred Stock and (b)
the consideration, if any, received by the Corporation upon such issue or sale,
by (ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
For purposes of this subparagraph 5D, the following
subparagraphs 5D(1) to 5D(7) shall also be applicable:
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5D1 Issuance of Rights or Options. In case at
any time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to subscribe
for or to purchase, or any options for the purchase of, Common Stock or any
stock or security convertible into or exchangeable for Common Stock, other than
options issued to employees or directors of the Corporation pursuant to a stock
option plan duly adopted by the Corporation's Board of Directors, (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such Options,
plus, in the case of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the lesser of the Conversion Price with respect to the Series A Preferred
Stock or market price with respect to Common Stock in effect immediately prior
to the time of the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be deemed to
be outstanding. Except as otherwise provided in subparagraph 5D(3), no
adjustment of the Conversion Price with respect to the Series A Preferred Stock
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities.
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5D(2) Issuance of Convertible Securities. In case
the Corporation shall in any manner issue (whether directly or by assumption in
a merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the lesser of the Conversion Price with respect to the Series
A Preferred Stock or market price with respect to Common Stock in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding, provided that (a) except as
otherwise provided in subparagraph 5D(3), no adjustment of the Conversion Price
with respect to the Series A Preferred Stock shall be made upon conversion or
exchange of such Convertible Securities and (b) if any such issue or sale of
such Convertible Securities is made upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Conversion Price with
respect to the Series A Preferred Stock have been or are to be made pursuant to
other provisions of this subparagraph 5D, no further adjustment of the
Conversion Price with respect to the Series A Preferred Stock shall be made by
reason of such issue or sale.
5D(3) Change in Option Price or Conversion Rate.
Upon the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 5D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 5D(1) or 5D(2), or the rate
at which Convertible Securities referred to in subparagraph 5D(1) or 5D(2) are
convertible into or exchangeable for Common Stock shall change at any time
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(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price with respect to the
Series A Preferred Stock in effect at the time of such event shall be readjusted
to the Conversion Price with respect to the Series A Preferred Stock which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold, but only if as a result of such adjustment the
Conversion Price with respect to the Series A Preferred Stock then in effect
hereunder is thereby reduced; and on the termination of any such Option or any
such right to convert or exchange such Convertible Securities, the Conversion
Price with respect to the Series A Preferred Stock then in effect hereunder
shall be increased to the Conversion Price with respect to the Series A
Preferred Stock which would have been in effect at the time of such termination
had such Option or Convertible Securities, to the extent outstanding immediately
prior to such termination, never been issued.
5D(4) Stock Dividends. In case the Corporation
shall declare a dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or distributions upon
the Common Stock), Options or Convertible Securities, any Common Stock, Options
or Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
5D(5) Consideration for Stock. In case any shares
of Common Stock, Options or Convertible Securities
shall be issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor, after deduction
therefrom of reasonable underwriting commissions or concessions (and reasonable
expenses incurred) paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be deemed to be
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the fair market value of such consideration as determined in good faith by the
Board of Directors of the Corporation, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any Options shall be issued in
connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific consideration
is allocated to such options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
5D(6) Record Date. In case the Corporation shall
take a record of the holders of its Common Stock for the purpose of entitling
them (i) to receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (ii) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
5D(7) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the purpose of
this subparagraph 5D.
5E Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price with respect to the Series A Preferred Stock in
effect immediately prior to such subdivision shall be proportionately reduced,
and, conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares, the Conversion Price with respect to
the Series A Preferred Stock in effect immediately prior to such combination
shall be proportionately increased. In case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 5D(4) by reason thereof.
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5F Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Series A Preferred Stock shall thereupon have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore receivable upon the conversion of
such share or shares of Series A Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
5G Notice of Adjustment. Upon any adjustment of the Conversion
Price, then and in each such case the Corporation shall give written notice
thereof, by delivery in person, certified or registered mail, return receipt
requested, telecopier or telex, addressed to each holder of shares of Series A
Preferred Stock affected by such adjustment at the address or telecopier number
of such holder as shown on the books of the Corporation, which notice shall
state the Conversion Price resulting from such adjustment, setting forth in
reasonable detail the method upon which such calculation is based.
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5H Other Notice. In case at any time:
(1) the Corporation shall declare any dividend
upon its Common Stock payable in cash or
stock or make any other distribution to the
holders of its Common Stock;
(2) the Corporation shall offer for subscription
pro rata to the holders of its Common Stock
any additional shares of stock of any class
or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the
Corporation, or a consolidation or merger of
the Corporation with or into another entity
or entities, or a sale, lease, abandonment,
transfer or other disposition of all or
substantially all of the assets of the
Corporation; or
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of
the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Series A Preferred Stock at the
address or telecopier number of such holder as shown on the books of the
Corporation, (a) at least 20 days' prior written notice of the date on which the
books of the Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto and such notice in accordance with the foregoing
clause (b) shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, as the case may be.
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5I Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series A Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Series A Preferred Stock. The
Corporation covenants that all shares of Common Stock which shall be so issued
shall be duly and validly issued and fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Corporation covenants that it will
from time to time take all such action as may be requisite to assure that the
par value per share of the Common Stock is at all times equal to or less than
the Conversion Price in effect at the time. The Corporation will take all such
action as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange upon which the Common Stock may
be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Series A Preferred
Stock would exceed the total number of shares of Common Stock then authorized by
this Certificate of Incorporation.
5J No Reissuance of Series A Preferred Stock. Shares of Series
A Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
5K Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Series A Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Series A Preferred
Stock which is being converted.
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5L Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Series A Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series A Preferred Stock in any manner which interferes with the timely
conversion of such Series A Preferred Stock, except as may otherwise be required
to comply with applicable securities laws.
5M Definition of Common Stock. As used in this paragraph 5,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $0.001 per share, as constituted on the date of filing
of these terms of the Series A Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
neither be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends nor entitled to a preference in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Series A Preferred Stock shall
include only shares designated as Common Stock of the Corporation on the date of
filing of this instrument, or in case of any reorganization or reclassification
of the outstanding shares thereof, the stock, securities or assets provided for
in subparagraph 5F.
(6) Liquidation.
(a) In the event of any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation (for the purposes of this Section
6, a "Liquidation"), before any payments or distribution of assets shall be made
to the holders of the Common Stock or the holders of other stock that ranks
junior to the Series A Preferred Stock in respect of distributions upon the
liquidation of the Corporation, the holder of each share of Series A Preferred
Stock then outstanding shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its stockholders, an amount equal to
Seventy Dollars ($70.00) per share plus all dividends (whether or not declared
or due) accrued (subject to equitable adjustment to reflect stock splits, stock
dividends, stock combinations, recapitalization and like occurrences) and unpaid
on such share on the date fixed for the distribution of assets of the
Corporation to the holders of Series A Preferred Stock.
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(b) If, upon any Liquidation of the Corporation, the assets
available for distribution to the holders of Series A Preferred Stock and any
other stock of the Corporation ranking on a parity with the Series A Preferred
Stock upon Liquidation issued by the Corporation which shall then be outstanding
(hereinafter in this paragraph called the "Total Amount Available") shall be
insufficient to pay the holder of all outstanding shares of Series A Preferred
Stock and all other such parity stock the full amounts (including all dividends
accrued and unpaid) to which they shall be entitled by reason of such
Liquidation of the Corporation, then there shall be paid to the holders of the
Series A Preferred Stock in connection with such Liquidation of the Corporation
an amount equal to the product derived by multiplying the Total Amount Available
times a fraction of which the numerator shall be the full amount to which the
holders of the Series A Preferred Stock shall be entitled under the terms of
Subsection (a) by reason of such Liquidation of the Corporation and of which the
denominator shall be the total amount which would have been distributed by
reason of such Liquidation of the Corporation with respect to the Series A
Preferred Stock and all other stock ranking on a parity with the Series A
Preferred Stock upon Liquidation then outstanding had the Corporation possessed
sufficient assets to pay the maximum amount which the holders of all such stock
would be entitled to receive in connection with such Liquidation of the
Corporation.
(c) The voluntary sale, conveyance, lease, exchange or
transfer of the property of the Corporation as an entirety or substantially as
an entirety, or the merger or consolidation of the Corporation into or with any
other corporation, or the merger of any other corporation into the Corporation,
or any purchase or redemption of some or all of the shares of any class or
series of stock of the Corporation shall be deemed to be a Liquidation of the
Corporation for the purposes of this Section 6.
(d) The holder of any shares of Series A Preferred Stock shall
not be entitled to receive any payment owed for such shares under this Section 6
until such holder shall cause to be delivered to the Corporation (i) the
certificate or certificates representing such shares of Series A Preferred Stock
and (ii) a transfer instrument or instruments satisfactory to the Corporation
and sufficient to transfer such shares of Series A Preferred Stock to the
Corporation free of any adverse interest. As in the case of the redemption
price, no interest shall accrue on any payment upon Liquidation after the due
date thereof.
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<PAGE>
(e) After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of Series A
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation.
(7) Payments.
(a) The Corporation may provide funds for any payment of the
redemption price for any shares of Series A Preferred Stock or any amount
distributable with respect to any Series A Preferred Stock under Section 6
hereof by depositing such funds with a bank or trust company selected by the
Corporation having a net worth of at least $100,000,000 and organized under the
laws of the United States or any state thereof or such other financial
institution satisfactory to the Corporation in trust for the benefit of the
holder of such shares of Series A Preferred Stock under arrangements providing
irrevocably for payment upon satisfaction of any conditions to such payment by
the holder of such shares of Series A Preferred Stock which shall reasonably be
required by the Corporation. The Corporation shall be entitled to make any
deposit of funds contemplated by this Section 7 under arrangements designated to
permit such funds to generate interest or other income for the Corporation, and
the Corporation shall be entitled to receive all interest and other income
earned by any funds while they shall be deposited as contemplated by this
Section 7, provided that the Corporation shall maintain on deposit funds
sufficient to satisfy all payments which the deposit arrangement shall have been
established to satisfy. If the conditions precedent to the disbursement of any
funds deposited by the Corporation pursuant to this Section 7 shall not have
been satisfied within two years after the establishment of the trust for such
funds, then (i) such funds shall be returned to the Corporation upon its
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<PAGE>
request; (ii) after such return, such funds shall be free of any trust which
shall have been impressed upon them; (iii) the person entitled to the payment
for which such funds shall have been originally intended shall have the right to
look only to the Corporation for such payment, subject to applicable escheat
laws; and (iv) the trustee which shall have held such funds shall be relieved of
any responsibility for such funds upon the return of such funds to the
Corporation.
(b) Any payment which may be owed in payment of the redemption
price for any shares of Series A Preferred Stock pursuant to Section 4 or in
payment of any amount distributable with respect to the shares of Series A
Preferred Stock under Section 6 shall be deemed to have been paid or properly
provided for upon the earlier to occur: (i) the date upon which funds sufficient
to make such payment shall be deposited in a manner contemplated by Subsection
(a) hereof; or (ii) the date upon which a check payable to the person entitled
to receive such payment shall be delivered to such person or mailed to such
person at the address of such person then appearing on the books of the
Corporation.
(8) Legal Holidays.
In any case where any Dividend Payment Date, redemption date or the
last date on which a holder of Series A Preferred Stock has the right to convert
such holder's shares of Series A Preferred Stock shall not be a Business Day (as
defined below), then notwithstanding any other provision hereof, payment of a
dividend due or a redemption price or conversion of the shares of Series A
Preferred Stock need not be made on such date but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Dividend Payment Date or redemption date or the last day for conversion;
provided, that for purposes of computing such payment, no interest shall accrue
for the period from and after such Dividend Payment Date or redemption date, as
the case may be. As used in this Section 10, "Business Day" means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
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<PAGE>
IN WITNESS WHEREOF, we have executed this Certificate of Designations
and affirm that the statements made herein are true under the penalties of
perjury, this 10th day of May, 1999.
HUNGARIAN TELEPHONE AND CABLE CORP.
By: /s/Ole Bertram
Name: Ole Bertram
Title: President and Chief Executive Officer
By: /s/Peter T. Noone
Name: Peter T. Noone
Title: General Counsel and Secretary
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HUF 33,700,000,000
Dual Currency Bridge Loan Agreement
dated May 1999
between
HUNGAROTEL TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
RABA-COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
PAPA ES TERSEGE TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
KNC KELET-NOGRAD COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
as Borrowers
and
POSTABANK ES TAKAREKPENZTAR RESZVENYTARSASAG
as Arranger
and
POSTABANK ES TAKAREKPENZTAR RESZVENYTARSASAG
as Facility Agent
and
POSTABANK ES TAKAREKPENZTAR RESZVENYTARSASAG
as Security Agent
and
THE FINANCIAL INSTITUTIONS
named in this Agreement as the Banks
and
HUNGARIAN TELEPHONE AND CABLE CORP.
HTCC TANACSADO RESZVENYTARSASAG
as Countersignors
Ormai es Tarsai Cameron McKenna
Citibank Tower, 4th Floor
Bank Center
Szabadsag ter 7.
H-1944 Budapest
Hungary
Tel: +36 1 302 9302
Fax: +36 1 302 9300
<PAGE>
CONTENTS
Clause Page No.
PART 1 - DEFINITIONS AND INTERPRETATION
1. Definitions and Interpretation 2
PART 2 - THE FACILITY
2. The Facility 25
3. Availability of the Facility 25
PART 3 - INTEREST
4. Interest Periods 27
5. Payment and Calculation of Interest 27
6. Alternative Interest Rates 27
PART 4 - REPAYMENT AND PREPAYMENT
7. Repayment 30
8. Prepayment 30
PART 5 - CHANGES IN CIRCUMSTANCES
9. Taxes 31
10. Tax Receipts 32
11. Increased Costs 33
PART 6 - REPRESENTATIONS, COVENANTS AND EVENTS OF DEFAULT
12. Representations 36
13. Financial Information 40
14. Financial Covenants 42
15. Covenants 43
16. Events of Default 49
PART 7 - DEFAULT INTEREST AND INDEMNITY
17. Default Interest and Indemnity 54
PART 8 - PAYMENTS
18. Currency of Account and Payment 56
19. Payments 56
20. Set-Off 58
21. Sharing 59
PART 9 - FEES, COSTS AND EXPENSES
22. Arrangement Fees 61
23. Costs and Expenses 61
PART 10 - AGENCY PROVISIONS
24. The Facility Agent, the Security Agent, the Arranger and the Banks 63
PART 11 - ASSIGNMENTS AND TRANSFERS
25. Assignments and Transfers 69
PART 12 - MISCELLANEOUS
26. Calculations and Evidence of Debt 71
27. Remedies and Waivers, Partial Invalidity 72
(i)
<PAGE>
28. Notices 72
29. Amendments 73
PART 13 - LAW, ARBITRATION AND LANGUAGE
30. Law 75
31. Arbitration 75
32. Language 76
THE SCHEDULES
The First Schedule : The Banks 77
The Second Schedule : Form of Transfer Certificate 78
The Third Schedule : The Notice of Drawdown 81
The Fourth Schedule : Conditions Precedent Documents 83
(ii)
<PAGE>
THIS DUAL CURRENCY BRIDGE LOAN AGREEMENT (the "Agreement") is made on May 1999
BETWEEN:
(1) HUNGAROTEL TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG;
(2) RABA-COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG;
(3) PAPA ES TERSEGE TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG;
(4) KNC KELET-NOGRAD COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG;
(5) POSTABANK ES TAKAREKPENZTAR RESZVENYTARSASAG as arranger (the
"Arranger");
(6) POSTABANK ES TAKAREKPENZTAR RESZVENYTARSASAG as facility agent (the
"Facility Agent");
(7) POSTABANK ES TAKAREKPENZTAR RESZVENYTARSASAG as security agent (the
"Security Agent ");
(8) THE BANKS (as defined below);
and countersigned by:
(9) HUNGARIAN TELEPHONE AND CABLE CORP.; and
(10) HTCC TANACSADO RESZVENYTARSASAG.
IT IS AGREED as follows:
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<PAGE>
PART 1 - DEFINITIONS AND INTERPRETATION
1. Definitions and Interpretation
1.1 Definitions In this Agreement the following terms have the meanings
given to them in this Clause 1.1.
"10K Document" means the 10K filing made by Hungarian Telephone and
Cable Corp. to the Securities and Exchange Commission of the United
States of America in respect of the period ending on 31 December 1998.
"10Q Document" means any 10Q filing made by Hungarian Telephone and
Cable Corp. to the Securities and Exchange Commission of the United
States of America in respect of any quarter financial year of Hungarian
Telephone and Cable Corp.
"1996 Credit Facility Agreement" means the HUF equivalent of one
hundred and seventy million dollars (U.S.$ 170,000,000) multi-currency
credit facility agreement dated 10 October 1996 made between: (1)
Postabank es Takarekpenztar Reszvenytarsasag as lender; (2) Hungarotel
Tavkozlesi Reszvenytarsasag as borrower; (3) Papa es Tersege Telefon
Koncesszios Reszvenytarsasag as borrower; (4) Kelet-Nograd Com.
Reszvenytarsasag as borrower; (5) RABA-Com Tavkozlesi es
Telekommunikacios Koncesszios Reszvenytarsasag as borrower; (6) HTCC
Consulting Reszvenytarsasag as borrower; and (7) Hungarian Telephone
and Cable Corp. as guarantor, and this definition shall be deemed to
include any and all bilateral loan agreements made under the framework
of and pursuant to such multi-currency credit facility agreement.
"Advance" means, save as otherwise provided in this Agreement, any
advance (as from time to time reduced by repayment) made (or deemed to
be made) or to be made (or to be deemed to be made) by the Banks to a
Borrower under or pursuant to this Agreement.
"Annual Operating Budget" means, in respect of any person at any time,
the annual operating budget of such person at such time, in each case
approved in advance in writing by the Facility Agent, acting
reasonably.
"Articles of Association" means the articles of association or the deed
of foundation, as applicable, of any person as at the date of this
Agreement.
"Assignment of Contractual Rights No. 1 Agreement" means the assignment
of contractual rights agreement dated on or about the date of this
Agreement made between: (1) Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag as assignor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as assignee and Security Agent; (3) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and
(5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
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<PAGE>
"Assignment of Contractual Rights No. 2 Agreement" means the assignment
of contractual rights agreement dated on or about the date of this
Agreement made between: (1) RABA-COM Tavkozlesi Koncesszios
Reszvenytarsasag as assignor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as assignee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and
(5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
"Assignment of Contractual Rights No. 3 Agreement" means the assignment
of contractual rights agreement dated on or about the date of this
Agreement made between: (1) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag as assignor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as assignee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
"Assignment of Contractual Rights No. 4 Agreement" means the assignment
of contractual rights agreement dated on or about the date of this
Agreement made between: (1) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as assignor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as assignee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) Papa
es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Assignment of Contractual Rights No. 5 Agreement" means the assignment
of contractual rights agreement dated on or about the date of this
Agreement made between: (1) HTCC Tanacsado Reszvenytarsasag as
assignor; (2) Postabank es Takarekpenztar Reszvenytarsasag as assignee
and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; (5) Papa es Tersege Tavkozlesi
Koncesszios Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd
COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Assignment of Contractual Rights Agreements" means, at any time, each
of the Assignment of Contractual Rights No. 1 Agreement, the Assignment
of Contractual Rights No. 2 Agreement, the Assignment of Contractual
Rights No. 3 Agreement, the Assignment of Contractual Rights No. 4
Agreement, the Assignment of Contractual Rights No. 5 Agreement and any
other assignment of contractual rights agreement at such time
designated as such in writing jointly by the Facility Agent, the
Security Agent and any Obligor.
"Availability Period" means the period commencing on the date of this
Agreement and ending on the Termination Date.
"Available Commitment" means, in relation to a Bank at any time and
save as otherwise provided in this Agreement, the amount set opposite
its name in the First Schedule (The Banks) less the aggregate amount
which it has advanced under this Agreement at such time.
"Available Facility" means, at any time, the aggregate amount of the
Available Commitments at such time.
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<PAGE>
"Bank" means any financial institution:
(a) named in the First Schedule (The Banks) (other than one which
has ceased to be a party to this Agreement in accordance with
the terms of this Agreement); or
(b) which has become a party to this Agreement in accordance with
the provisions of Clause 25.4 (Assignments by Banks) or Clause
25.5 (Transfers by Banks);
Provided that any transfer made by Postabank es Takarekpenztar
Reszvenytarsasag as original Bank under this Agreement shall be made
subject to the requirements expressed in Clause 25.3 (Assignments and
Transfer by Banks).
"Bankruptcy Act" means Act IL of 1991 on Bankruptcy, Liquidation and
Final Accounting, as amended, of Hungary.
"Basle Paper" means the paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988 and prepared
by the Basle Committee on Banking Regulations and Supervision, as
amended in November 1991.
"Borrowers" means each of Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag, RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag,
Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag and KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag and "Borrower"
means any and each of them.
"Borrowers' Auditors" means, at any time, the auditors of the Borrowers
at such time, being, as at the date of this Agreement KPMG Hungaria
Konyvvizsgalo Ado- es Kozgazdasagi Tanacsado Kft. or any of Ernst &
Young Konyvszakerto Kft., Pricewaterhouse Coopers Konyvvizsgalo es
Gazdasagi Tanacsado Kft., Arthur Andersen & Co. Konyvszakerto Ado- es
Vezetesi Tanacsado Kft. or such other internationally recognised firm
of independent auditors licensed to practice in Hungary, duly appointed
by each of the Borrowers to replace such firm and approved in advance
in writing by the Facility Agent, such approval not to be unreasonably
withheld or delayed.
"Bridge Loan Agreement" means this Agreement.
"BUBOR" means:
(a) the rate per annum which is the offered rate in HUF for the
applicable interest period which appears on the Reuters
Screen at Page BUBOR= (or such other page as may replace page
BUBOR= for the purposes of displaying the Budapest Interbank
Offered Rates) at or about 11.00 a.m. Budapest time) or,
if such page or such service shall cease to be available, such
other page or such other service (as the case may be) for the
purpose of displaying Budapest Interbank Offered Rates for
HUF as the Facility Agent, after consultation with the Banks
and the Borrowers,
shall select; and
(b) if no quotation for HUF and the relevant period for which
interest is to accrue are displayed and the Facility Agent
has not selected an alternative service on which two or more
such quotations are displayed, "BUBOR" shall mean the
arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-sixteenth
of one per cent. (0.0625%)) of the rates (as notified to the
Facility Agent) at which each of the Reference Banks was
offering to prime banks in Budapest Interbank Market deposits
in HUF and for such period at or about 11.00 a.m. (Budapest
time) on the Quotation Date for such period for which
interest is to accrue.
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<PAGE>
"Business Plan" means, in respect of any person at any time, the
business plan of such person at such time.
"Capital Adequacy Requirement" means a request or requirement relating
to the maintenance of capital, including one which makes any change to,
or is based on any alteration in, the interpretation of the Basle Paper
or which increases the amounts of capital required thereunder, other
than a request or requirement made by way of implementation of the
Basle Paper in the manner in which it is being implemented at the date
of this Agreement.
"Citizens International Management Services Company" means Citizens
International Management Services Company, a company duly incorporated
under the laws of State of Delaware, United States of America, whose
principal place of business is at 3 High Ridge Park, Stamford,
Connecticut, CT06902, United States of America.
"Citizens Utilities Company" means Citizens Utilities Company, a
corporation incorporated under the laws of the State of Delaware,
United States of America, whose principal place of business is at 3
High Ridge Park, Stamford, Connecticut, CT06902, United States of
America.
"Civil Code" means Act IV of 1959 on the Civil Code, as amended, of
Hungary.
"Closing Agent" means Postabank es Takarekpenztar Reszvenytarsasag in
its capacity as Closing Agent under the Master Closing Agreement.
"Companies Act" means Act CXLIV of 1997 on Business Associations, as
amended, of Hungary.
"Concession Contract" means, in respect of:
(i) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, the
concession contract dated 6 May 1994 made between: (1)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag; and (2)
the Ministry, as amended on 16 June 1996;
(ii) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, the
concession contract dated 6 May 1994 made between: (1)
RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag; and (2) the
Ministry;
(iii) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, the
concession contract dated 6 May 1994 made between: (1) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag; and (2) the
Ministry, as amended on 16 June 1996; and
(iv) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag,
the concession contract dated 6 May 1994 made between: (1) KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag; and
(2) the Ministry.
"Constitutional Documents" means, in respect of any person at any time,
the then current and up-to-date constitutional documents of such person
at such time (including, inter alia, such person's articles of
association or deed of foundation, as applicable, internal rules of
organisation and operation, rules of procedure of board of directors
meetings, if applicable, rules of procedure of supervisory board
meetings, if applicable, register of quotaholder(s) or shareholder(s),
as appropriate, and all similar and/or analogous documents whatsoever).
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<PAGE>
"Direct Suretyship No. 1 Agreement" means the direct suretyship
agreement dated on or about the date of this Agreement made between:
(1) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as guarantor;
(2) Postabank es Takarekpenztar Reszvenytarsasag as beneficiary and
Security Agent; (3) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; (4) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Direct Suretyship No. 2 Agreement" means the direct suretyship
agreement dated on or about the date of this Agreement and made
between: (1) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
guarantor; (2) Postabank es Takarekpenztar Reszvenytarsasag as
beneficiary and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Direct Suretyship No. 3 Agreement" means the direct suretyship
agreement dated on or about the date of this Agreement and made
between: (1) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
guarantor; (2) Postabank es Takarekpenztar Reszvenytarsasag as
beneficiary and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Direct Suretyship No. 4 Agreement" means the direct suretyship
agreement dated on or about the date of this Agreement and made
between: (1) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as guarantor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as beneficiary and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) Papa
es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Direct Suretyship No. 5 Agreement" means the direct suretyship
agreement dated on or about the date of this Agreement made between:
(1) HTCC Tanacsado Reszvenytarsasag as guarantor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as beneficiary and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(5) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Direct Suretyship No. 6 Agreement" means the direct suretyship
agreement dated on or about the date of this Agreement made between:
(1) Hungarian Telephone and Cable Corp. as guarantor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as beneficiary and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(5) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Direct Suretyship Agreements" means, at any time, each of the Direct
Suretyship No. 1 Agreement, the Direct Suretyship No. 2 Agreement, the
Direct Suretyship No. 3 Agreement, the Direct Suretyship No. 4
Agreement, the Direct Suretyship No. 5 Agreement, the Direct Suretyship
No. 6 Agreement and any other direct suretyship agreement at such time
designated as such in writing jointly by the Facility Agent and any
Obligor.
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<PAGE>
"Distribution" means, at any time, any dividend or distribution or
other payment whatsoever duly paid by, or on behalf of, any Obligor to
or for the benefit of its shareholders excluding for the avoidance of
doubt any payments to the former management of Hungarian Telephone and
Cable Corp., duly disclosed in the 10K Document.
"Enforcement of Judicial Decisions Act" means Act LIII of 1994 on the
Enforcement of Judicial Decisions, as amended, of Hungary.
"EURIBOR" means, in relation to any amount to be advanced to, or owing
by, any Borrower under this Agreement in euro on which interest for a
given period is to accrue:
(a) the percentage rate per annum equal to the offered quotation
which appears on the page of the Telerate Screen which
displays an average rate of the Banking Federation of
the European Union for the euro (being currently page 248)
for such period at or about 11.00 a.m. (Brussels time) on the
Quotation Date for such period or, if such page or such
service shall cease to be available, such other page or
such other service for the purpose of displaying an average
rate of the Banking Federation of the European Union as the
Facility Agent, after consultation with the Banks and the
Borrower, shall select; or
(b) if no quotation for the euro for the relevant period is
displayed and the Facility Agent has not selected an
alternative service on which a quotation is displayed, the
arithmetic mean (rounded upwards to four decimal places) of
the rates (as notified to the Facility Agent) at which each of
the Reference Banks was offering to prime banks in the
European interbank market deposits in the euro of an
equivalent amount and for such period at or about 11.00 a.m.
(Brussels time) on the Quotation Date.
"Event of Default" means any circumstances described as such in
Clause 16 (Events of Default).
"Facility" means the term loan facility granted to the Borrowers in
this Agreement.
"Facility Office" means, in relation to each Finance Party, the office
identified with its signature below (or, in the case of a Transferee,
at the end of the Transfer Certificate to which it is a party as
Transferee) or such other office as it may from time to time select.
"Fee Letter" means the letter dated on or about the date of this
Agreement, from the Arranger to the Borrowers, setting out the upfront
fee and the fees, costs and expenses of the Arranger to be duly
reimbursed or discharged, as appropriate, by the Borrower from the
first Advance(s) made under this Agreement and in any event no later
than the earlier of the Closing (as defined in the Master Close
Agreement) and three (3) days after the date of this Agreement.
"Final Maturity Date" means the date twelve (12) months after the date
of this Agreement.
"Finance Documents" means, at any time, each of this Agreement, the
Deferral Agreement, the Fee Letter, the Letter of Borrowings and
Encumbrances, the Master Closing Agreement, the Security Agreements,
the Securities Purchase Agreement, the Warrant Agreement and any other
document, notice, instrument or agreement entered into or delivered
pursuant to any of the foregoing and each and every other document
detailed in the Fourth Schedule (Conditions Precedent Documents) and
any other document, notice, instrument or agreement at such time
designated as such in writing jointly by the Facility Agent and any
Obligor, and "Finance Document" shall mean any or each such document,
notice, instrument or agreement.
"Finance Parties" means each of the Arranger, the Facility Agent, the
Security Agent and each Bank and "Finance Party" shall mean any or each
of them.
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"Financial Indebtedness" means any indebtedness for or in respect of:
(a) any documentary credit facility;
(b) any interest rate swap, currency swap, forward foreign
exchange transaction, cap, floor, or option transaction or any
other transaction entered into in connection with protection
against or benefit from fluctuation in any rate or price (and
the amount of the Financial Indebtedness in relation to any
such transaction shall be calculated by reference to the
mark-to-market valuation of such transaction at the relevant
time);
(c) any guarantee, indemnity, bond, standby letter of credit or
any other instrument issued in connection with the performance
of any contract or other obligation;
(d) monies borrowed;
(e) any amount raised by acceptance under any acceptance credit
facility;
(f) any amount raised pursuant to any note purchase facility or
the issue of bonds, notes, debentures, loan stock or any
similar instrument;
(g) any amount raised pursuant to any issue of shares which
are expressed to be redeemable;
(h) the amount of any liability in respect of any lease or hire
purchase contract which would, in accordance with US GAAP
and/or IAS and/or HAS, as consistently applied in the relevant
jurisdiction, be treated as a finance or capital lease;
(i) the amount of any liability in respect of any advance or
deferred purchase agreement if one of the primary reasons for
entering into such agreement is to raise finance;
(j) receivables, sold or discounted (other than on a non-recourse
basis);
(k) any agreement or option to re-acquire an asset if one of the
primary reasons for entering into such agreement or option is
to raise finance;
(l) any amount raised under any other transaction (including any
forward sale or purchase agreement) having the commercial
effect of a borrowing; and
(m) the amount of any liability in respect of any guarantee or
indemnity for any of the items referred to in paragraphs (d)
to (l) above.
"Fixed Charge No. 1 Agreement" means the fixed charge agreement dated
on or about the date of this Agreement made between: (1) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as pledgee and Security Agent; (3)
RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4)
Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
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"Fixed Charge No. 2 Agreement" means the fixed charge agreement dated
on or about the date of this Agreement made between: (1) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as pledgee and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Fixed Charge No. 3 Agreement" means the fixed charge agreement dated
on or about the date of this Agreement made between: (1) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2)
Postabank es Takarekpenztar Reszvenytarsasag as pledgee and Security
Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Fixed Charge No. 4 Agreement" means the fixed charge agreement dated
on or about the date of this Agreement made between: (1) KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as pledgor;
(2) Postabank es Takarekpenztar Reszvenytarsasag as pledgee and
Security Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag
as countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag
as countersignor; and (5) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Fixed Charge No. 5 Agreement" means the fixed charge agreement dated
on or about the date of this Agreement made between: (1) HTCC Tanacsado
Reszvenytarsasag as pledgor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as pledgee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (5) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and
(6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
"Fixed Charge Agreements" means, at any time, each of the Fixed Charge
No. 1 Agreement, the Fixed Charge No. 2 Agreement, the Fixed Charge No.
3 Agreement, the Fixed Charge No. 4 Agreement, the Fixed Charge No. 5
Agreement and any other fixed charge agreement at such time designated
as such in writing jointly by the Facility Agent and any Obligor.
"Floating Charge No. 1 Agreement" means the floating charge agreement
dated on or about the date of this Agreement made between: (1)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2)
Postabank es Takarekpenztar Reszvenytarsasag as pledgee and Security
Agent; (3) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; (4) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Floating Charge No. 2 Agreement" means the floating charge agreement
dated on or about the date of this Agreement made between: (1) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as pledgee and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
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"Floating Charge No. 3 Agreement" means the floating charge agreement
dated on or about the date of this Agreement made between: (1) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2)
Postabank es Takarekpenztar Reszvenytarsasag as pledgee and Security
Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Floating Charge No. 4 Agreement" means the floating charge agreement
dated on or about the date of this Agreement made between: (1) KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as pledgor;
(2) Postabank es Takarekpenztar Reszvenytarsasag as pledgee and
Security Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag
as countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag
as countersignor; and (5) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Floating Charge No. 5 Agreement" means the floating charge agreement
dated on or about the date of this Agreement made between: (1) HTCC
Tanacsado Reszvenytarsasag as pledgor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as pledgee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (5) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and
(6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
"Floating Charge Agreements" means, at any time, each of the Floating
Charge No. 1 Agreement, the Floating Charge No. 2 Agreement, the
Floating Charge No. 3 Agreement, the Floating Charge No. 4 Agreement,
the Floating Charge No. 5 Agreement and any other floating charge
agreement designated at such time as such in writing jointly by the
Facility Agent and any Obligor.
"Foreign Exchange Act" means Act XCV of 1995 on Foreign Exchange, as
amended, of Hungary.
"Good Industry Practice" means the exercise of that degree of skill,
diligence, prudence, foresight and operating practice which would
reasonably and ordinarily be expected from a skilled and experienced
international operator engaged in the same type of undertaking as the
Group.
"Government Decree" means government decree number 7 of 1997
(I.22.) issued by the Hungarian Government pursuant to the Civil Code.
"Group" means, at any time, each of Hungarian Telephone and Cable
Corp. and its subsidiaries at such time.
"Guarantors" means each of Hungarian Telephone and Cable Corp.
and HTCC Tanacsado Reszvenytarsasag and "Guarantor" means each and
any of them.
"HTCC Tanacsado Reszvenytarsasag" means HTCC Tanacsado
Reszvenytarsasag, a company duly incorporated under the laws of
Hungary, with its registered office at Kiralyhago utca 2, H-1126
Budapest, Hungary and registered at the Metropolitan Court of
Registration with registration number 01-10-042606.
"Hungarian Telephone and Cable Corp." means Hungarian Telephone and
Cable Corp., a company registered under the laws of the State of
Delaware, United States of America and whose registered office is at 90
West Street, New York NY10006, United States of America, with the seat
of the company being 100 First Stamford Place Suite, 204 Stamford,
CT06902, Connecticut, United States of America.
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<PAGE>
"Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag" means Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag, a company duly incorporated
under the laws of Hungary, with its registered office at Kiralyhago
utca 2, H-1126 Budapest, Hungary and registered at the Metropolitan
Court of Registration with registration number 01-10-043040.
"Hungary" means the Republic of Hungary.
"Income" means, in respect of any person at any time, the entire income
of and all cash and/or money and/or money equivalent receivables
whatsoever and howsoever arising of such person at such time.
"Income Accounts" means the bank accounts of the Obligors opened and
maintained with the Facility Agent, being, as at the date of this
Agreement, in respect of:
(i) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag,
account number 11991102-02177508 and any sub-accounts of
such account;
(ii) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, account
number 11991102-02177498 and any sub-accounts of such account;
(iii) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag,
account number 11991102-02177481 and any sub-accounts of such
account;
(iv) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag,
account number 11991102-02177522 and any sub-accounts of such
account; and
(v) HTCC Tanacsado Reszvenytarsasag, account number
11991102-02177515 and any sub-accounts of such account,
and/or any other account(s) and/or branch(es) as the Facility Agent may
reasonably require.
"Instructing Group" means:
(a) before any Advance has been made under this Agreement, a
Bank or group of Banks whose Available Commitments amount
in aggregate to more than sixty six and two-thirds per
cent. (662/3 %) of the Available Facility; and
(b) thereafter, a Bank or group of Banks to whom in aggregate
more than sixty six and two-thirds per cent. (662/3 %) of
the Loan is (or, immediately prior to its repayment, was
then) owed.
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"Interest Period" means, save as otherwise provided in this Agreement,
any of those periods mentioned in Clause 4.1 (Interest Periods).
"IO Fund" means the Danish Investment Fund of Central and Eastern
Europe an entity organised under the laws of Denmark.
"KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag" means
KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag, a company
duly incorporated under the laws of Hungary, with its registered office
at Dozsa Gy. utca 15., H-3162 Sagujfalu, Hungary and registered at the
Nograd County Court of Registration with registration number
12-10-001503.
"Letter of Borrowings and Encumbrances" means the letter dated on or
about the date of this Agreement, addressed to the Facility Agent and
signed by each of Hungarian Telephone and Cable Corp., HTCC Tanacsado
Reszvenytarsasag, Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag,
RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, Papa es Tersege
Tavkozlesi Koncesszios Reszvenytarsasag and KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag setting out, in reasonable
detail, particulars of: (i) all of their respective indebtedness,
(whether incurred as principal or surety), whether present or future,
actual or contingent; (ii) all encumbrances (if any), whether present
or future, actual or contingent, over any of their respective assets
(other than Permitted Encumbrances); and (iii) if not already provided
for in the Master Closing Agreement, an explanation as to how such
indebtedness and encumbrances will be repaid, eliminated, discharged,
released, replaced and/or consolidated, as applicable, on the basis
agreed in advance in writing prior to the date of this Agreement by
each member of the Group and the Facility Agent.
"Letters of Intent" means each of the Letters of Intent provided to
Hungarian Telephone and Cable Corp. by each of three (3) international
prime banks (or by their Hungarian subsidiaries), in each case, confirm
their strong interest in refinancing, or arranging the refinancing of,
the amounts outstanding under this Agreement.
"LIBOR" means, in relation to any amount denominated in any currency
other than HUF or euro owed by the Borrower under this Agreement on
which interest for a given period is to accrue, the rate per annum
determined by the Facility Agent to be equal to the arithmetic mean
(rounded upwards, if not already such a multiple, to the nearest whole
multiple of one-sixteenth of one per cent. (0.0625%)) of the offered
quotations which appear on the relevant page (as defined in Clause 1.6
(Screen Rates)) for such period for which interest is to accrue at or
about 11.00 a.m. (London time) on the Quotation Date for such period.
"Loan" means, at any time, the aggregate principal amount for the time
being outstanding under this Agreement, at such time, expressed in HUF,
and where an Advance is denominated in the Optional Currency, the HUF
equivalent of the amount of such Advance is to be determined by
reference to the date on which such Advance was first drawn down.
"Margin" means:
(i) for the period commencing on the date of this Agreement
and ending on (and including) 30 September 1999, two point
two-five per cent. (2.25%);
(ii) for the period commencing 1 October 1999 and ending on (and
including) 31 December 1999, three point two-five per cent.
(3.25%); and
(iii) for the period commencing 1 January 2000 and ending on (and
including) the Final Maturity Date, four point two-five per
cent. (4.25%).
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"Master Closing Agreement" means the master closing agreement dated on
or about the date of this Agreement made between: (1) Hungarian
Telephone and Cable Corp.; (2) HTCC Tanacsado Reszvenytarsasag; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag; (5) Papa es Tersege Tavkozlesi
Koncesszios Reszvenytarsasag; (6) KNC Kelet-Nograd COM Tavkozlesi
Koncesszios Reszvenytarsasag; (7) Postabank es Takarekpenztar
Reszvenytarsasag as Arranger; (8) Postabank es Takarekpenztar
Reszvenytarsasag as Facility Agent; (9) Postabank es Takarekpenztar
Reszvenytarsasag as Security Agent; (10) Postabank es Takarekpenztar
Reszvenytarsasag as Bank; and (11) Postabank es Takarekpenztar
Reszvenytarsasag as Closing Agent.
"Minister" means, at any time, the Minister appointed at such time to
head the Ministry.
"Ministry" means the Ministry of Transport, Communication and Water
Management of Hungary.
"Mortgage No. 1 Agreement" means the mortgage agreement dated on or
about the date of this Agreement made between: (1) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as mortgagor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as mortgagee and Security Agent; (3)
RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4)
Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (5) KNC Kelet-Nograd
COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Mortgage No. 2 Agreement" means the mortgage agreement dated on or
about the date of this Agreement made between: (1) RABA-COM Tavkozlesi
Koncesszios Reszvenytarsasag as mortgagor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as mortgagee and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Mortgage No. 3 Agreement" means the mortgage agreement dated on or
about the date of this Agreement made between: (1) Papa es Tersege
Tavkozlesi Koncesszios Reszvenytarsasag as mortgagor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as mortgagee and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
"Mortgage No. 4 Agreement" means the mortgage agreement dated on or
about the date of this Agreement made between: (1) KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag as mortgagor; (2) Postabank es
Takarekpenztar Reszvenytarsasag as mortgagee and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
and (5) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
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"Mortgage No. 5 Agreement" means the mortgage agreement dated on or
about the date of this Agreement made between: (1) HTCC Tanacsado
Reszvenytarsasag as mortgagor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as mortgagee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (5) Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and
(6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor.
"Mortgage Agreements" means, at any time, each of the Mortgage No. 1
Agreement, the Mortgage No. 2 Agreement, the Mortgage No. 3 Agreement,
the Mortgage No. 4 Agreement, the Mortgage No. 5 Agreement and any
other mortgage agreement at such time designated as such
in writing jointly by the Facility Agent and any Obligor.
"NBH" means the National Bank of Hungary.
"NBH Permission" means the permission of the NBH issued to Postabank es
Takarekpenztar Reszvenytarsasag to acquire the Warrants pursuant to the
Securities Purchase Agreement.
"Notaries Public Act" means Act XLI of 1991 on Notaries Public, as
amended, of Hungary.
"Notary Public" means a notary public of Hungary, duly operating under
the Notaries Public Act who, amongst other matters, is entitled to
notarise and enter details of applicable collateral securities into the
Register of Pledges.
"Note" means any note dated on or about the date of this Agreement
made between: (1) Hungarian Telephone and Cable Corp. as issuer;
and (2) Postabank es Takarekpenztar Reszvenytarsasag as purchaser.
"Notice of Drawdown" means the notice of drawdown substantially in the
form set out in the Third Schedule (Notice of Drawdown).
"Obligors" means each of the Borrowers and each member of the Group and
"Obligor" shall mean any or each of them.
"Optional Currency" means euro.
"Original Financial Statements" means, in respect of:
(i) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, its
financial statements for its financial year ended 31 December
1998 audited by the Borrowers' Auditors;
(ii) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, its
financial statements for its financial year ended 31 December
1998 audited by the Borrowers' Auditors;
(iii) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, its
financial statements for its financial year ended 31 December
1998 audited by the Borrowers' Auditors;
(iv) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag,
its financial statements for its financial year ended 31
December 1998 audited by the Borrowers' Auditors;
(v) Hungarian Telephone and Cable Corp., the 10K Document; and
(vi) HTCC Tanacsado Reszvenytarsasag, its financial statements for
its financial year ended 31 December 1998 audited by the
Borrowers' Auditors.
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<PAGE>
"Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag" means Papa es
Tersege Tavkozlesi Koncesszios Reszvenytarsasag, a company duly
incorporated under the laws of Hungary, with its registered office at
Major utca 2., H-8500 Papa, Hungary and registered at the Veszprem
County Court of Registration with registration number 19-10-500090.
"Permitted Disposal" means any sale, lease, transfer or other disposal
of, by one or more transactions or series of transactions (whether
related or not), by any person of any of its revenues and/or assets
which is made by such person:
(a) in the ordinary course of such person's business;
(b) on an arm's length and open market basis;
(c) in respect of assets duly certified by such person in writing
in advance as being redundant and/or obsolete; and
(d) which when aggregated with all other such disposals made by
any member of the Group (and not already falling within the
scope of paragraphs (a) to (c) above do not exceed an amount
equivalent to three hundred million Forints (HUF 300,000,000).
"Permitted Distribution" means
(i) any Distribution made by any Borrower to Citizens
International Management Services Company which when
aggregated with all other such Distributions do not, in any
twelve (12) month period, exceed an amount equivalent to one
hundred and five thousand dollars (U.S.$ 105,000); and
(ii) for the avoidance of doubt, any payment duly made to the
former management of Hungarian Telephone and Cable Corp. which
has been duly disclosed and provided for in the 10K Document.
"Permitted Encumbrance" means:
(i) any encumbrance disclosed and/or provided for in the Letter
of Borrowings and Encumbrances;
(ii) any encumbrance in respect of any assets of any Obligor arising
by mandatory operation of laws and regulations of Hungary;
(iii) any encumbrance in respect of any assets of any Borrower arising
in the ordinary course of business of such Borrower and not by
reason of default which when aggregated with all other such
encumbrances does not exceed an amount equivalent to five
hundred million forints (HUF 500,000,000);
(iv) any title retention or similar arrangement created under or
pursuant to any contract for the purchase of goods by any
Borrower in the ordinary course of its business; and
(v) any encumbrance approved in advance in writing by the Facility
Agent.
"Pledge Over Bank Accounts No. 1 Agreement" means the pledge over bank
accounts agreement dated on or about the date of this Agreement made
between: (1) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
pledgor; (2) Postabank es Takarekpenztar Reszvenytarsasag as pledgee
and Security Agent; (3) RABA-COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
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<PAGE>
"Pledge Over Bank Accounts No. 2 Agreement" means the pledge over bank
accounts agreement dated on or about the date of this Agreement made
between: (1) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
pledgor; (2) Postabank es Takarekpenztar Reszvenytarsasag as pledgee
and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Pledge Over Bank Accounts No. 3 Agreement" means the pledge over bank
accounts agreement dated on or about the date of this Agreement made
between: (1) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
pledgor; (2) Postabank es Takarekpenztar Reszvenytarsasag as pledgee
and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Pledge Over Bank Accounts No. 4 Agreement" means the pledge over bank
accounts agreement dated on or about the date of this Agreement made
between: (1) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as pledgor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as pledgee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) Papa
es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.
"Pledge Over Bank Accounts No. 5 Agreement" means the pledge over bank
accounts agreement dated on or about the date of this Agreement made
between: (1) HTCC Tanacsado Reszvenytarsasag as pledgor; (2) Postabank
es Takarekpenztar Reszvenytarsasag as pledgee and Security Agent; (3)
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
(5) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Pledge Over Bank Accounts Agreements" means, at any time, each of the
Pledge Over Bank Accounts No. 1 Agreement, the Pledge Over Bank
Accounts No. 2 Agreement, the Pledge Over Bank Accounts No. 3
Agreement, the Pledge Over Bank Accounts No. 4 Agreement, the Pledge
Over Bank Accounts No. 5 Agreement and any other pledge over bank
accounts agreement at such time designated as such in writing jointly
by the Facility Agent and any Obligor.
"Potential Event of Default" means any event which would become (with
the passage of time, the giving of notice, the making of any
determination under this Agreement or any combination thereof) an Event
of Default.
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"Qualifying Bank" means any bank or financial institution which:
(a) is resident pursuant to the terms of the relevant double tax
treaty in a state which has concluded a double tax treaty with
Hungary in force at the date of this Agreement (or in relation
to a Bank which becomes a party to this Agreement at any time
after the date of this Agreement, in force at the time that
Bank becomes a party to this Agreement) which provides that
interest arising in Hungary which is paid to a resident of the
other contracting state shall be taxable only in that other
state; or
(b) is resident in Hungary for tax purposes under applicable laws
and regulations of Hungary.
"Quotation Date" means, in relation to any period for which an interest
rate is to be determined under this Agreement:
(a) in respect of an amount denominated in the Optional Currency,
the day on which quotations would ordinarily be given by prime
banks in the London Interbank Market for deposits in the
Optional Currency; and
(b) in respect of an amount denominated in HUF, the day on which
quotations would ordinarily be given by prime banks in the
Budapest Interbank Market for deposits in HUF;
in each case for delivery on the first day of that period for which
interest is to accrue Provided that, if, for any such period for which
interest is to accrue, quotations would ordinarily be given on more
than one date, the Quotation Date for that period shall be the last of
those dates.
"RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag" means RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag, a company duly incorporated
under the laws of Hungary, with its registered office at Ady Endre utca
1., H-9600 Sarvar, Hungary and registered at the Vas County Court of
Registration with registration number 18-10-100512.
"Reference Banks" means, in the case of an amount denominated in: (i)
the Optional Currency, the principal London offices of ABN AMRO Bank
N.V., Citibank N.A. and ING Bank N.V.; or (ii) in the case of an amount
denominated in HUF the principal Budapest offices of ABN AMRO (Magyar)
Bank Rt., Citibank Rt. and Orszagos Takarekpenztar es Kereskedelmi Bank
Rt. or such other bank or banks as may from time to time be agreed
between the Borrowers and the Facility Agent, such agreement not to be
unreasonably withheld or delayed.
"Register of Pledges" means the register of pledges maintained by the
Hungarian National Chamber of Notaries Public, as provided for by the
Government Decree.
"Security Agreements" means, at any time, each of the Assignment of
Contractual Rights Agreements, the Direct Suretyship Agreements, the
Fixed Charge Agreements, the Floating Charge Agreements, the Mortgage
Agreements, the Pledge Over Bank Accounts Agreements, the Share Deposit
Agreements, the Sponsors' Support Agreement and any other document at
such time designated as such in writing jointly by the Facility Agent
and any Obligor.
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"Securities Purchase Agreement" means the securities purchase agreement
dated on or about the date of this Agreement made between: (1)
Hungarian Telephone and Cable Corp.; and (2) Postabank es
Takarekpenztar Reszvenytarsasag.
"Share Deposit No. 1 Agreement" means the share deposit agreement dated
on or about the date of this Agreement made between: (1) Hungarian
Telephone and Cable Corp. as depositor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as depositee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (5) KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; (6) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor; and (7) HTCC Tanacsado
Reszvenytarsasag as countersignor.
"Share Deposit No. 2 Agreement" means the share deposit agreement dated
on or about the date of this Agreement made between: (1) HTCC Tanacsado
Reszvenytarsasag as depositor; (2) Postabank es Takarekpenztar
Reszvenytarsasag as depositee and Security Agent; (3) Hungarotel
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (5) KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
countersignor; and (6) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag as countersignor.
"Share Deposit Agreements" means each of the Share Deposit No. 1
Agreement, the Share Deposit No. 2 Agreement and any other share
deposit agreement designated as such in writing jointly by the Facility
Agent and any Obligor.
"Sponsors" means each of Hungarian Telephone and Cable Corp., HTCC
Tanacsado Reszvenytarsasag and Tele Danmark and "Sponsor" means any and
each of them.
"Sponsors' Support Agreement" means each of the sponsors' support
agreement dated on or about the date of this Agreement made between:
(1) Hungarian Telephone and Cable Corp.; (2) HTCC Tanacsado
Reszvenytarsasag; and (3) Postabank es Takarekpenztar Reszvenytarsasag
as beneficiary and Security Agent and the sponsor's support letter
dated on or about the date of this Agreement by Tele Danmark to
Postabank es Takarekpenztar Reszvenytarsasag.
"Tele Danmark" means Tele Danmark, a corporation duly incorporated
under the laws of Denmark, whose principal place of business is at
Kannikegade 16, DK 8000, Arhus-C, Denmark.
"Termination Date" means the earlier of the day which is five (5) days
after the date of this Agreement and the first business day on which
the Available Commitment of each of the Banks is zero (0).
"Transfer Certificate" means a certificate substantially in the form
set out in the Second Schedule (Form of Transfer Certificate) signed by
a Bank and a Transferee whereby:
(a) such Bank seeks to procure the transfer to such Transferee of
all or a part of such Bank's rights, benefits and obligations
under this Agreement as contemplated in Clause 25.3
(Assignments and Transfers by Banks); and
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(b) such Transferee undertakes to perform the obligations it will
assume as a result of delivery of such certificate to the
Facility Agent as is contemplated in Clause 25.5 (Transfers by
Banks).
"Transfer Date" means, in relation to any Transfer Certificate, the
date for the making of the transfer as specified in the schedule to
such Transfer Certificate.
"Transferee" means a bank or other financial institution to which a
Bank seeks to transfer all or part of such Bank's rights, benefits and
obligations under this Agreement.
"US Auditors" means, at any time, the auditors of Hungarian Telephone
and Cable Corp. at such time, being, as at the date of this Agreement,
KPMG LLP or any firm associated with the Borrowers' Auditors at such
time or such other internationally recognised firm of independent
auditors licensed to practice in the United States of America, duly
appointed by Hungarian Telephone and Cable Corp. to replace such firm
and approved in advance in writing by the Facility Agent, acting
reasonably.
"Warrants" means each warrant dated on or about the date of this
Agreement made between: (1) Hungarian Telephone and Cable Corp.; and
(2) Postabank es Takarekpenztar Reszvenytarsasag, issued pursuant to
the Securities Purchase Agreement.
1.2 Interpretation
Any reference in this Agreement to:
an "affiliate" shall be construed as a reference to a subsidiary or a
holding company of a person and any other subsidiary of that holding
company;
the "Arranger", the "Facility Agent", the "Security Agent", any "Bank",
any "Finance Party", the "Finance Parties", "Citizens Utilities
Company", "Tele Danmark", "IO Fund", "Beneficiary" or to any "Sponsor"
shall be construed so as to include its (and any participant's) and any
subsequent successors, Transferees, transferees, assigns and/or
replacements in accordance with their respective interests;
"assets" shall be construed so as to include properties, revenues
and rights of every description;
an "authorisation" shall be construed so as to include an
authorisation, consent, approval, permit, resolution, licence,
exemption, filing, registration, notarisation and similar proceeding;
a "business day" shall be construed as a reference to a day (other than
a Saturday or Sunday) on which: (i) banks generally are open for
banking business in Budapest and London; and (ii) if such reference
relates to a date for the payment or purchase of any sum denominated in
the Optional Currency, a day on which TARGET is open and fully
operational;
an "encumbrance" shall be construed as a reference to: (a) a mortgage,
charge, pledge, lien or other encumbrance or security interest
whatsoever securing any obligation of any person; (b) any arrangement
under which money or claims to, or the benefit of, a bank or other
account may be applied, set-off or made subject to a combination of
accounts so as to effect payment of sums owed or payable to any person
or (c) any other type of preferential arrangement (including title
transfer and retention arrangements) having a similar effect;
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the "equivalent" on any given date in one currency (the "first
currency") of an amount denominated in another currency (the "second
currency") is a reference to the amount of the first currency which
could be purchased with the amount of the second currency at the
arithmetic mean of the spot rates of exchange quoted by the Reference
Banks in Budapest to the Facility Agent at or about 9.15 a.m. (Budapest
time) on such date for the purchase of the first currency with the
second currency;
"HAS" shall be construed as a reference to accounting principles,
standards and practices generally accepted and implemented in Hungary
from time to time, as determined by the Auditors (acting as experts,
not as arbitrators);
a "holding company" of a company or corporation shall be construed as a
reference to any company or corporation of which the first-mentioned
company or corporation is a subsidiary;
"IAS" shall be construed as a reference to international accounting
standards issued by the International Accounting Standards Committee
from time to time as such international accounting standards are
accepted and implemented in Hungary from time to time, as determined by
the Auditors (acting as experts, not as arbitrators);
"indebtedness" shall be construed so as to include any obligation
(whether incurred as principal or as surety) for the payment or
repayment of money, whether present or future, actual or contingent;
"laws and regulations of Hungary" mean laws and regulations adopted in
accordance with Act XI of 1987 on law making, as amended, of Hungary;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
succeeding calendar month save that, where any such period would
otherwise end on a day which is not a business day, it shall end on the
next succeeding business day, unless that day falls in the calendar
month succeeding that in which it would otherwise have ended, in which
case it shall end on the immediately preceding business day Provided
that, if a period starts on the last business day in a calendar month
or if there is no numerically corresponding day in the month in which
that period ends, that period shall end on the last business day in
that later month (and references to "months" shall be construed
accordingly);
a "person" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing;
"repay" (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include "prepay" (or, as the case may be,
the corresponding derivative form thereof);
a "subsidiary" of a company or corporation shall be construed as a
reference to any company or corporation:
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(a) which is controlled, directly or indirectly, by the first-
mentioned company or corporation;
(b) more than half the issued share capital of which is
beneficially owned, directly or indirectly, by the
first-mentioned company or corporation; or
(c) which is a subsidiary of another subsidiary of the first-
mentioned company or corporation
and, for these purposes, a company or corporation shall be treated as
being controlled by another if that other company or corporation is
able to direct its affairs and/or to direct and/or control the
composition of its board of directors or equivalent body;
"tax" shall be construed so as to include any tax, levy, impost, duty
or other charge of a similar nature (including any penalty or interest
payable in connection with any failure to pay or any delay in paying
any of the same);
"US GAAP" shall be construed as a reference to the general accounting
principles generally accepted in the United States of America from time
to time;
"VAT" shall be construed as a reference to value added tax including
any similar tax which may be imposed in place thereof from time to
time; and
the "winding-up", "dissolution" or "administration" of a company or
corporation shall be construed so as to include any equivalent or
analogous proceedings under the law of the jurisdiction in which such
company or corporation is incorporated or any jurisdiction in which
such company or corporation carries on business including the seeking
of bankruptcy, liquidation, final accounting, winding-up,
reorganisation, dissolution, administration, arrangement, adjustment,
protection or relief of debtors.
1.3 Currency Symbols "HUF" "Forint" "Ft", "Ft." and "forint" denote lawful
currency of Hungary and "Euros", "Euro", "euros", "euro" and "EUR" have
the meaning provided for in Clause 1.8 (The Euro).
1.4 Agreements and Laws and Regulations Any reference in this Agreement to:
(a) this Agreement or any other agreement or document shall, in
the absence of express wording to the contrary, be construed
as a reference to this Agreement or, as the case may be, such
other agreement or document as the same may have been, or may
from time to time be amended, varied, notated or supplemented;
and
(b) a statute, law, regulation or treaty shall, in the absence of
express wording to the contrary, be construed as a reference
to such statute or treaty as the same may have been, or may
from time to time be, amended or, in the case of a statute or
law, re-enacted.
1.5 Headings Clause, Part and Schedule headings are for ease of reference only.
1.6 Screen Rates For the purposes of the definition of "LIBOR":
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(a) "relevant page" means the relevant Telerate Page of the
Telerate Service which displays a British Bankers Association
Interest Settlement Rate for the relevant currency or, if such
page or such service shall cease to be available, such other
page or such other service (as the case may be) for the
purpose of displaying London Interbank Offered Rates for such
currency as the Facility Agent, after consultation with the
Banks and the Borrowers, shall select; and
(b) if no quotation for such currency and the relevant period for
which interest is to accrue are displayed and the Facility
Agent has not selected an alternative service on which two
or more such quotations are displayed, "LIBOR" shall mean
the arithmetic mean (rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-sixteenth
of one per cent. (0.0625%)) of the rates (as notified to
the Facility Agent) at which each of the Reference Banks was
offering to prime banks in the London Interbank Market
deposits in such currency and for such period at or about
11.00 a.m. (London time) on the Quotation Date for such
period for which interest is to accrue.
1.7 Singular and Plural In this Agreement, words imparting the singular
shall be deemed to include the plural and vice versa.
1.8 The Euro For the purposes of this Agreement:
"EMU" means European Economic and Monetary Union as contemplated by the
Treaty;
"EMU Legislation" means the legislative measures of the Council of
European Union for the introduction of, changeover to, or operation of,
a single European currency (whether or not known as the euro), being in
part the implementation of the third stage of EMU;
"Euro", "Euros", "euros", "euro" and "EUR" means the single currency of
Participating Members States introduced on 1st January 1999;
"euro unit" means currency unit of the euro as defined in EMU
Legislation and "euro" means any of the foregoing;
"Participating Member State" means a member state of the European Union
that adopts a single currency in accordance with the Treaty; and
"TARGET" means the Trans-European Automated Real-time Gross settlement
Express Transfer, being the settlement system for the euro.
"Treaty" means the Treaty establishing the European Community being the
Treaty of Rome of 25th March 1957, as amended by the Single European
Act 1986 and the Maastricht Treaty (which was signed at Maastricht on
7th February 1992 and came into force on 1st November 1993), as further
amended from time to time.
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PART 2 - THE FACILITY
2. The Facility
2.1 Grant of the Facility The Banks grant to the Borrowers, upon the terms
and subject to the conditions of this Agreement, a bridge loan facility
in an aggregate amount of the equivalent of HUF thirty three billion
seven hundred million forints (HUF 33,700,000,000).
2.2 Purpose and Application The Facility is intended to be applied, inter
alia, towards the refinancing of existing indebtedness of various
members of the Group and the payment of the fees provided for in the
Fee Letter and, accordingly, the Borrowers shall apply all amounts
raised by them under this Agreement in or towards satisfaction of such
purpose Provided that amounts drawn down under this Agreement shall be
held by the Closing Agent subject to the terms and conditions of the
Master Closing Agreement Provided Further that none of the Finance
Parties nor any of them shall be obliged to concern themselves with
such application, other than as required by mandatory laws and
regulations of Hungary.
2.3 Conditions Precedent Documents Save as the Banks may otherwise agree,
the Borrower may not deliver the Notice of Drawdown under this
Agreement unless the Facility Agent has confirmed to each of the
Borrowers and the Banks that it has received all of the documents
listed in the Fourth Schedule (Conditions Precedent Documents) and that
each is, in form and substance, satisfactory to the Facility Agent.
2.4 Banks' Obligations Several The obligations of each Bank under this
Agreement are several and the failure by a Bank to perform its
obligations under this Agreement shall not affect the obligations of
the Borrower towards any other party to this Agreement nor shall any
other party be liable for the failure by such Bank to perform its
obligations under this Agreement.
2.5 Banks Rights Several The rights of each Bank under this Agreement are
several. Any amount(s) owed to a Bank under this Agreement shall
constitute several and independent obligations of the Borrower and such
Bank may enforce its rights arising under this Agreement without the
prior consent or approval of any other person.
2.6 Communications Through the Facility Agent The Facility Agent will act
as facility agent with the intent of administering the Facility and
centralising all communications between the Borrowers and the Finance
Parties and such communications will normally only be made through the
Facility Agent and all communications from any of the Finance Parties
to the Borrower will also only normally be made through the Facility
Agent Provided that an Instructing Group may in exceptional
circumstances be entitled to communicate directly with the Borrower.
3. Availability of the Facility
3.1 Drawdown Conditions The Advances will be made by the Banks to the
Borrowers if:
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(a) not more than three (3) nor less than one (1) business days
before the proposed date for the making of such Advances, the
Facility Agent has received from the Borrowers the Notice of
Drawdown in respect of such Advances, receipt of which shall
irrevocably oblige the Borrowers to borrow the amounts
requested in such Notice of Drawdown on the date stated in
such Notice of Drawdown upon the terms and subject to the
conditions contained in this Agreement;
(b) the proposed date for the making of such Advances is a
business day which is or which precedes the Termination Date;
(c) the proposed amount and currency of each of such Advances is
in accordance with the amounts and currencies set out in the
Notice of Drawdown and in aggregate do not exceed the amount
of the Available Facility;
(d) the interest rate applicable to any such Advances during its
first Interest Period would not fall to be determined pursuant
to Clause 6.1 (Market Disruption); and
(e) (i) no Event of Default or Potential Event of Default has
occurred and is continuing unremedied and unwaived; and (ii)
the representations set out in Clause 12 (Representations) are
true on and as of the proposed date for the making of such
Advances.
3.2 Each Bank's Participation Each Bank will participate through its
Facility Office in each Advance made pursuant to Clause 3.1 (Drawdown
Conditions): (i) prior to the making of the Advances, in the proportion
borne by its Available Commitment to the Available Facility immediately
prior to the making of that Advance; (ii) thereafter, in equal
proportions, as provided for in the relevant Transfer Certificate to
which such Bank is a party as Transferee.
3.3 Automatic Cancellation of Available Commitments Any amount of the
Available Facility undrawn at the end of the Availability Period shall
be automatically cancelled and the Available Commitment of each Bank at
such time shall be reduced to zero (0).
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PART 3 - INTEREST
4. Interest Periods
4.1 Interest Periods The period for which each Advance is outstanding shall
be divided into successive periods each of which (other than the first)
shall start on the last day of the preceding such period.
4.2 Duration The duration of each Interest Period shall, save as otherwise
provided in this Agreement, be one (1), three (3) months or six (6)
months duration, in each case as the Borrowers (acting together) may,
by not less than five (5) business days' prior written notice to the
Facility Agent, select Provided that:
(a) the duration of the first interest period in respect of the
Advances made under this Agreement shall be such that it ends
on the date six (6) months after the date of this Agreement;
(b) where any interest period would otherwise extend beyond the
Final Maturity Date, it shall be of such duration that it
shall end on the Final Maturity Date; and
(c) if the Borrowers fail to give such notice of its selection in
relation to an Interest Period, the duration of that Interest
Period shall, subject to paragraphs (a) and (b) below, be
three (3) months.
5. Payment and Calculation of Interest
5.1 Payment of Interest On the last day of each Interest Period, each
Borrower shall pay accrued interest on the Advances made to it to which
such Interest Period relates.
5.2 Calculation of Interest The rate of interest applicable to each Advance
from time to time during an Interest Period relating thereto shall be
the rate per annum which is the sum of the Margin and, if the Advance
is denominated in: (i) HUF, BUBOR; (ii) the Optional Currency, LIBOR;
or (iii) in the case of a currency other than HUF or euro, EURIBOR, in
each case on the Quotation Date therefor.
6. Alternative Interest Rates
6.1 Market Disruption If, in relation to any Advance:
(a) denominated in the Optional Currency and any Interest Period
relating thereto:
(i) LIBOR is to be calculated in accordance with
paragraph (b) of Clause 1.6 (Screen Rates) and the
Facility Agent determines that at or about 11.00 a.m.
(London time) on the Quotation Date for such Interest
Period only one or none of the Reference Banks was
offering to prime banks in the London Interbank
Market deposits in the Optional Currency for the
proposed duration of such Interest Period; or
(ii) before the close of business in London on the
Quotation Date for such Interest Period in respect of
such Advance, the Facility Agent has been notified by
a Bank or each of a group of Banks to whom in
aggregate thirty-five per cent. (35%) or more of the
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Advance is (or, if the Advance is undrawn Advance, if
the Advance were then made, would be) owed that the
rate at which such deposits were being so offered
does not accurately reflect the cost to it of
obtaining such deposits; or
(b) denominated in HUF:
(i) BUBOR is to be calculated in accordance with
paragraph (b) of the definition thereof set out in
Clause 1.1 (Definitions) and the Facility Agent
determines that at or about 11.00 a.m. (Budapest
time) on the Quotation Date for such Interest Period
only one or none of the Reference Banks was offering
to prime banks in the Budapest Interbank Market
deposits in HUF for the proposed duration of such
Interest Period; or
(ii) before the close of business in Budapest on the
Quotation Date for such Interest Period in respect of
such Advance, the Facility Agent has been notified by
a Bank or each of a group of Banks to whom in
aggregate thirty-five per cent. (35%) or more of the
Advance is (or, if the Advance is undrawn Advance, if
the Advance were then made, would be) owed that the
rate at which such deposits were being so offered
does not accurately reflect the cost to it of
obtaining such deposits,
then, notwithstanding the provisions of Clause 4 (Interest Periods)
and Clause 5 (Payment and Calculation of Interest):
(1) the duration of that Interest Period shall be one (1) month
or, if less, such that it shall end on the Final Maturity
Date; and
(2) if either paragraph (a) or (b) above applies, the rate of
interest, in the case a paragraph (a) above, applicable to the
Advance and in the case of paragraph (b) above, that portion
of the Advance owed to those Banks which have given notice to
the Facility Agent in accordance with paragraph (b) above,
from time to time during such Interest Period shall be the
rate per annum which is the sum of the Margin and the rate per
annum determined by the Facility Agent to be the arithmetic
mean (rounded upwards, if not already such a multiple, to the
nearest whole multiple of one-sixteenth of one per cent.
(0.0625%)) of the rates notified by each Bank to the Facility
Agent as soon as practicable, but in any event before the last
day of such Interest Period to be those which express as a
percentage rate per annum the cost to each Bank of funding
from whatever sources it may reasonably select its portion of
the Advance during such Interest Period.
6.2 Substitute Basis or Repayment If: (i) either of those events mentioned
at paragraphs (a) and (b) in Clause 6.1 (Market Disruption) occurs in
relation to any Advance(s) and an Interest Period during which such
Advance is (or was) to be outstanding; or (ii) in the case of an
Advance denominated in the Optional Currency, by reason of
circumstances affecting the London Interbank Market during any period
of three (3) consecutive business days none of the Reference Banks
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offers deposits in the Optional Currency to prime banks in the London
Interbank Market; or (iii) in the case of an Advance denominated in
HUF, by reason of circumstances affecting the Budapest Interbank Market
during any period of three (3) consecutive business days none of the
Reference Banks offers deposits in HUF to prime banks in the Budapest
Interbank Market, then:
(a) the Facility Agent shall as quickly as practicable notify the
Borrowers and the Banks of such event;
(b) if the Facility Agent so requires, within five (5) days
of such notification, the Facility Agent and the Borrowers
shall enter into negotiations with a view to agreeing a
substitute basis: (i) for determining the rates of
interest from time to time applicable to such Advance;
and/or (ii) upon which such Advance may be maintained
thereafter and any such substitute basis that is agreed
shall take effect in accordance with its terms and be
binding on each party to this Agreement Provided that
the Facility Agent may not agree any such substitute
basis without the prior consent of each Bank; and
(c) if the Facility Agent has required the Borrowers to enter into
such negotiations and within thirty (30) days the parties have
been unable to agree a substitute basis, the Facility Agent
may declare (any such declaration to be binding on the
relevant Borrower) that such Advance shall become due and
payable on the last day of its then current Interest Period
unless by then a substitute basis has been agreed in relation
thereto.
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PART 4 - REPAYMENT AND PREPAYMENT
7. Repayment
Each Borrower shall repay its portion of the Loan outstanding as at the
Final Maturity Date in full on the Final Maturity Date.
8. Prepayment
8.1 Prepayment A Borrower may, if it has given to the Facility Agent not
less than ten (10) business days' prior written notice to that effect,
prepay the whole of an Advance or any part of an Advance made to it
(being an amount such that the amount of such Advance will be reduced
by an amount or integral multiple of or equivalent to two hundred
million Forints (HUF 200,000,000), on the last day of any Interest
Period relating to that Advance.
8.2 Notice of Prepayment Any notice of prepayment given by a Borrower
pursuant to Clause 8.1 (Prepayment) shall be irrevocable, shall specify
the date upon which such prepayment is to be made and the amount of
such prepayment and shall oblige such Borrower to make such prepayment
on such date.
8.3 Repayment of a Bank's Share of the Loan If any Bank claims
indemnification from a Borrower under Clause 9.2 (Tax Indemnity) or
Clause 11.1 (Increased Costs) or if paragraph (a) (ii) or (b) (ii) of
Clause 6.1 (Market Disruption) applies to one or more but not all Banks
and within thirty (30) days thereafter the Facility Agent receives from
a Borrower at least ten (10) business days' prior written notice (which
notice shall be irrevocable) of a Borrower's intention to repay such
Bank's share of the Loan, such Borrower shall, on either the last day
of the then current Interest Period or on such other day agreed in
advance with the Facility Agent (acting in consultation with the
relevant Bank(s) and subject to the provisions of this Agreement,
including, inter alia, Clause 17.4 (Broken Periods)), repay such Bank's
portion of the Loan.
8.4 Mandatory Prepayment If any Borrower incurs any further Financial
Indebtedness whatsoever which is not expressly permitted and provided
for in any Finance Document to which it is a party prior to the Final
Maturity Date, such Borrower shall immediately apply all amount(s)
arising from such Financial Indebtedness towards the repayment of any
Advance(s) then made to such Borrower, with any excess amount to be
applied towards the repayment of any other Advance(s) then made to any
other Borrower as the Facility Agent shall require and direct.
8.5 No Other Repayments and no Reborrowing The Borrower shall only repay
all or any part of the Loan at the times and in the manner expressly
provided for in this Agreement and shall not be entitled to reborrow
any amount repaid or prepaid.
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PART 5 - CHANGES IN CIRCUMSTANCES
9. Taxes
9.1 Tax Gross-up All payments to be made by a Borrower to any person under
this Agreement shall be made free and clear of and without deduction
for or on account of tax unless such Borrower is required to make such
a payment subject to the deduction or withholding of tax, in which case
the sum payable by such Borrower in respect of which such deduction or
withholding is required to be made shall be increased to the extent
necessary to ensure that, after the making of the required deduction or
withholding, such person receives and retains (free from any liability
in respect of any such deduction or withholding) a net sum equal to the
sum which it would have received and so retained had no such deduction
or withholding been made or required to be made Provided that such
Borrower shall not be obliged to pay any additional amount under this
Clause 9.1 to any Bank to the extent that such additional amount would
not have been payable but for the relevant Bank either not being or
having ceased to be a Qualifying Bank otherwise than as a result of any
change in, or in the interpretation or application of, any relevant
law, directive, treaty (including any applicable double taxation
treaty) or regulation or practice of any relevant taxing authority
Provided Further that such Borrower's obligations contained in this
Clause 9.1 shall not extend to include tax, imposed by any taxing
authority in Hungary or other applicable jurisdiction, on the profits
and/or capital gains of a Bank.
9.2 Tax Indemnity Without prejudice to the provisions of Clause 9.1 (Tax
Gross-up), if any person or the Facility Agent on its behalf, becomes
liable to make any payment of or on account of tax (not being a tax
imposed on and calculated by reference to its overall net income or the
net income paid to and received by its Facility Office by the
jurisdiction in which it is incorporated or in which its Facility
Office is located) on or in relation to any sum received or receivable
under this Agreement by such person or the Facility Agent on its behalf
(including without limitation any sum received or receivable under this
Clause 9 (Taxes)) or any liability in respect of any such payment is
asserted, imposed, levied or assessed against such person or the
Facility Agent on its behalf, the relevant Borrower shall, upon demand
of the Facility Agent, promptly indemnify such person against such
payment or liability, together with any interest, penalties, costs and
expenses payable or incurred in connection therewith.
9.3 Indemnification If an additional payment is made under Clause 9.1 (Tax
Gross-up) or Clause 9.2 (Tax Indemnity) by a Borrower for the benefit
of any person under this Agreement and such person has received or been
granted an identifiable credit against, a relief or remission for, or
repayment of, any tax, then, if and to the extent that such credit,
relief, remission or repayment is in respect of or calculated with
reference to the deduction or withholding giving rise to such
additional payment or in the case of an additional payment made
pursuant to Clause 9.2 (Tax Indemnity), with reference to the
liability, expense or loss to which the payment giving rise to the
additional payment relates, such person shall, without prejudice to the
retention of the amount of such credit relief, remission or repayment,
pay to such Borrower such amount as is in the reasonable opinion of
such person attributable to such deduction or withholding or, as the
case may be, such liability, expense or loss Provided that such person
shall not be obliged to make any payment under this Clause 9.3 in
respect of such credit, relief, remission or repayment until its tax
affairs (to the extent they relate to such credit, relief, remission or
repayment) have been finally settled. Nothing in this Agreement shall
interfere with the right of any Bank to arrange its tax affairs in
whatsoever manner it thinks fit and, in particular, no Bank shall be
obliged to disclose any information relating to its tax affairs.
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9.4 Claims by Banks A Bank intending to make a claim pursuant to Clause 9.2
(Tax Indemnity) shall notify and explain to the Facility Agent of the
event by reason of which it is entitled to do so, whereupon the
Facility Agent shall notify the relevant Borrower(s) thereof Provided
that nothing in this Agreement shall require such Bank to disclose any
confidential information relating to the organisation of its affairs.
9.5 Qualifying Bank Each Bank represents and warrants to the Borrowers
that, as at the date of this Agreement, it is a Qualifying Bank and
such representation and warranty by such Bank shall, even if such Bank
ceases to be a Bank under this Agreement and notwithstanding any other
provision to the contrary contained in this Agreement, remain fully
effective against such Bank. If, at any time after this Agreement is
entered into, any Bank is aware that it is not or will cease to be a
Qualifying Bank, it shall promptly so notify the Borrowers and the
Facility Agent.
9.6 Qualifying Bank Certification The Facility Agent and each Qualifying
Bank (and if applicable, any Transferee of such Qualifying Bank) which
is not a Bank resident in Hungary for tax purposes under applicable
laws and regulations of Hungary shall prior to the first payments of
interest paid by the Borrowers for the benefit of the Banks under this
Agreement, provide to the Facility Agent for onward delivery to the
Borrowers a written certificate, issued by the relevant tax authorities
in which such Qualifying Bank is tax resident under applicable laws and
regulations, confirming that such Qualifying Bank is tax resident and
pays tax in such jurisdiction, such written certificate to be dated not
more than thirty (30) days before such first payment of interest under
this Agreement and in addition the Facility Agent and each Qualifying
Bank (and if applicable, any Transferee of such Qualifying Bank) shall
during the term of this Agreement provide such other documentation in
respect of such Qualifying Bank as may at any time be required under
applicable laws and regulations of Hungary and/or by the relevant
Hungarian tax authorities to avoid the making of a payment (additional,
or otherwise) by the Borrower under this Clause 9 (Taxes) Provided that
if such Qualifying Bank is a Transferee, such written certificate must
be dated no more than thirty (30) days before the first payment of
interest made by the Borrowers following such Transferee becoming a
Qualifying Bank Provided Further that the Facility Agent shall not
incur any liability whatsoever in respect of the failure by any Bank to
duly comply with its obligations under this Clause 9.6 or in respect of
such certification.
10. Tax Receipts
10.1 Notification of Requirement to Deduct Tax If, at any time, a Borrower
becomes aware that it is required by law to make any deduction or
withholding from any sum payable by it under this Agreement (or if
thereafter there is any change in the rates at which or the manner in
which such deductions or withholdings are calculated), such Borrower
shall promptly notify the Facility Agent in writing.
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10.2 Evidence of Payment of Tax If a Borrower makes any payment under this
Agreement in respect of which it is required to make any deduction or
withholding, it shall pay the full amount required to be deducted or
withheld to the relevant taxation or other authority within the time
allowed for such payment under applicable law and shall deliver to the
Facility Agent for each Bank, within thirty (30) days after it has made
such payment to the applicable authority, an original receipt (or a
certified copy thereof) issued by such authority evidencing the payment
to such authority of all amounts so required to be deducted or withheld
in respect of that Bank's share of such payment.
11. Increased Costs
11.1 Increased Costs If, by reason of: (i) any change in relevant law or in
its interpretation or administration after the date of this Agreement;
and/or (ii) compliance with any Capital Adequacy Requirement or any
other request from or requirement of any relevant central bank or other
fiscal, monetary or other authority generally applicable to financial
institutions and/or banks:
(a) a Bank or any holding company of such Bank is unable to obtain
the rate of return on its capital which it would have been
able to obtain but for such Bank's entering into or assuming
or maintaining a commitment or performing its obligations
(including its obligation to participate in the making of an
Advance) under this Agreement;
(b) a Bank or any holding company of such Bank incurs a cost as a
result of such Bank's entering into or assuming or maintaining
a commitment or performing its obligations (including its
obligation to participate in the making of an Advance) under
this Agreement;
(c) there is any increase in the cost to a Bank or any holding
company of such Bank of funding or maintaining all or any of
the loans comprised in a class of loans formed by or including
such Bank's share of the Advance; or
(d) a Bank or any holding company of such Bank becomes liable to
make any payment on account of tax (not being a tax imposed on
and calculated by reference to its overall net income or the
net income paid to and received by such Bank's Facility Office
by the jurisdiction in which it is incorporated or in which
its Facility Office is located) on or calculated by reference
to the amount of such Bank's share of the Advance and/or to
any sum received or receivable by it under this Agreement,
then the Borrowers shall, subject to Section 11.2 (Increased Costs
Claims), from time to time on demand of the Facility Agent, promptly
pay to the Facility Agent for the account of that Bank amounts
sufficient to hold harmless and indemnify that Bank or such Bank's
holding company from and against, as the case may be: (1) such
reduction in the rate of return of capital; (2) such cost; (3) such
increased cost (or such proportion of such increased cost as is, in the
opinion of that Bank, attributable to its participating in the funding
or maintaining of the Advance); or (4) such liability Provided that the
Borrowers shall not be obliged to make such a payment to the Facility
Agent for the account of any such Bank in compensation for such a
reduction in the rate of return of capital, cost, increased cost or
liability, where such reduction, cost, increased cost or liability is:
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(A) one in respect of which such Bank has been fully compensated
for pursuant any other provision of this Agreement; or
(B) attributable to any breach by such bank of any law or any
request from or requirements of any central bank or other
monetary, fiscal or other authority (whether or not having the
force of law, but, if not having the force of law, compliance
with which is in accordance with the usual practice of persons
to whom such request or requirement is intended to apply) to
which it is subject; or
(C) attributable directly to any change in the Bank's Facility
Office or any transfer and/or assignment of all or any part of
a Bank's interest in an Advance except those arising as a
consequence of any circumstances not prevailing or reasonably
foreseeable at the time of such change or transfer and/or
assignment.
11.2 Increased Costs Claims A Bank intending to make a claim pursuant to
Clause 11.1 (Increased Costs) shall, as quickly as practicable, notify
and provide a certificate which shall set out in reasonable detail the
basis of any such claim, details of the calculations (and workings) of
such claim and, if appropriate, supporting documentary evidence, to the
Facility Agent of the event by reason of which it is entitled to do so,
whereupon the Facility Agent shall, as quickly as practicable, notify
the Borrowers thereof and provide to the Borrowers a copy of such
certificate Provided that nothing in this Agreement shall require such
Bank to disclose any confidential information relating to the
organisation of its affairs.
11.3 Illegality Where the introduction, imposition or variation of any
applicable law or regulation or any change in the interpretation of any
such law or regulation makes it unlawful for a Bank to make, fund or
allow to remain outstanding all or part of its share of an Advance,
then that Bank shall, promptly after becoming aware of the same,
deliver to the relevant Borrower(s) through the Facility Agent a
written notice to that effect such notice setting out in reasonable
detail the reasons for such unlawfulness and:
(a) such Bank shall not thereafter be obliged to participate in
the making of the Advance and the amount of its Available
Commitment shall be immediately reduced to the extent of any
such illegality; and
(b) if the Facility Agent on behalf of such Bank so requires, the
Borrower shall on such date as the Facility Agent shall have
specified repay such Bank's share of the outstanding
Advance(s) together with accrued interest thereon and all
other amounts owing to such Bank under this Agreement and any
repayment so made shall reduce rateably the remaining
obligations of the Borrower under Clause 7 (Repayment).
11.4 Mitigation If circumstances are such that a Borrower is required to
gross-up any payment pursuant to Clause 9.1 (Tax Gross-up) and/or a
Bank intends to claim indemnification from a Borrower under Clause 9.2
(Tax Indemnity) or Clause 11.1 (Increased Costs) then, without in any
way limiting, reducing or otherwise qualifying the rights of such Bank
or such Borrower's obligations under any of the above mentioned
provisions, such Bank shall promptly upon becoming aware of the same
notify the Facility Agent thereof in writing and in consultation with
the Facility Agent and such Borrower, take such steps as such Bank in
its bona fide opinion considers appropriate to avoid or mitigate the
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effects of such circumstances Provided that such Bank shall be under no
obligation to take any such action if, in the bona fide opinion of such
Bank, to do so would or might have more than nominal adverse effect
upon its business, operation, financial condition or is likely to
involve the Bank in any expense, loss or tax disadvantage which is more
than nominal other than, in respect of a transfer by a Bank to an
affiliate made pursuant to this Clause 11.4, any such effect arising
solely as a result of such affiliate then being liable to a higher rate
of taxation on the net profits and/or capital gains arising in respect
of such participation in the Loan following such transfer by such Bank
to such affiliate.
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PART 6 - REPRESENTATIONS, COVENANTS AND EVENTS OF DEFAULT
12. Representations
Each Borrower makes each of the representations and warranties set out
in Clause 12.1 (Status and Due Authorisation) to Clause 12.23
(Corporate Chart) (inclusive) and acknowledges that the Facility Agent,
the Security Agent, the Arranger and each Bank has entered into this
Agreement in reliance on those representations and warranties. Each of
the representations set out in this Clause 12 shall be deemed to be
repeated on the day that any Advance is made under this Agreement and
on the first day of any Interest Period by reference to the facts and
circumstances then subsisting as if made at such time but so that any
reference to "on the date of this Agreement" in any representation
shall be construed as a reference to the date on which such
representation is repeated and if by such date any Borrower has
delivered financial statements to the Facility Agent in accordance with
its obligations under Clause 13.1 (Annual Statements) and Clause 13.2
(Semi-Annual Statements), references to the "Original Financial
Statements" in this Clause 12 shall be deemed to be references to the
then most recent financial statements delivered by such Borrower(s) to
the Facility Agent in accordance with its respective obligations under
Clause 13.1 (Annual Statements) and Clause 13.2 (Semi-Annual
Statements).
12.1 Status and Due Authorisation Each Borrower is a corporation duly
organised, incorporated and validly existing under the laws of Hungary
and each is a separate legal entity with perpetual corporate existence,
capable of suing and being sued, with power to enter into the Finance
Documents to which it is a party and to exercise its rights and perform
its obligations under and the transactions contemplated by the Finance
Documents to which it is a party and all corporate and other action
required to authorise its execution of the Finance Documents to which
it is a party and its performance of its obligations under the Finance
Documents to which it is a party has been duly taken.
12.2 Tax Save as otherwise disclosed in the 10K Document:
(a) the Original Financial Statements in respect of the Borrowers
fully reflect the tax position of each Borrower as at the
respective dates dated thereof;
(b) each Borrower has complied in all material respects with all
taxation laws in all jurisdictions in which it is subject to
taxation and has paid all taxes due and payable by it and no
material claims are being asserted against it with respect to
taxes; and
(c) on the assumption that the representation of each of the Banks
set out in Clause 9.5 (Qualifying Bank) is correct, under the
laws and regulations of Hungary in force at the date of this
Agreement, all amounts payable by it under this Agreement, may
be made free and clear of and without deduction for or on
account of any tax.
12.3 Claims Pari Passu Under the laws and regulations of Hungary in force at
the date of this Agreement, the claims of each Finance Party against
any Borrower under each of the Finance Documents to which such Borrower
and such Finance Party are a party will rank at least pari passu with
all the present and future claims of all such Borrower's other
unsecured and unsubordinated creditors save those whose claims are
preferred by the operation of mandatory Hungarian law applying to
companies generally in Hungary.
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12.4 Validity and Admissibility in Evidence All acts, conditions and things
required to be done, fulfilled and performed in order: (a) to enable
each Borrower lawfully to enter into, exercise its respective rights
under and perform and comply with the obligations expressed to be
assumed by it in each of the Finance Documents to which it is a party;
and (b) to ensure that the obligations expressed to be assumed by it in
such Finance Document, are legal, valid, binding and enforceable
against it have been done, fulfilled and performed.
12.5 No Filing or Stamp Taxes Under the laws and regulations of Hungary in
force at the date of this Agreement, other than the due registration of
the Fixed Charge Agreements and the Floating Charge Agreements in the
Register of Pledges with a Notary Public and the registration of the
Mortgage Agreements against the relevant land at the relevant Land
Registry (and the payment of all appropriate charges, duties, fees,
costs and expenses in respect of such registration), it is not
necessary that any Finance Document be filed, recorded or enrolled with
any court or other authority in Hungary or that any stamp, documentary,
registration or similar tax or charges be paid on or in relation to any
of the Finance Documents or (other than the court duties ("illetek")
expressly provided for under applicable laws and regulations of
Hungary) their enforcement in the courts of Hungary.
12.6 Binding Obligations The obligations expressed to be assumed by each
Borrower in each of the Finance Documents to which it is a party, are
legal and valid obligations, binding on and enforceable against it in
accordance with the terms of such Finance Documents, as appropriate.
12.7 Insolvency No Borrower has taken any formal corporate action nor to its
best knowledge and belief, having made reasonable enquires thereto,
have any other formal steps been taken or legal proceedings been
started or threatened in accordance with the procedures detailed in the
Bankruptcy Act or in the Companies Act (or in accordance with similar
or analogous provisions or proceedings) against it or against any other
member of the Group for its or for any such other member of the Group's
bankruptcy, liquidation, winding-up, dissolution, administration or
reorganisation or final accounting (in each case pursuant to the
Bankruptcy Act, the Companies Act or otherwise).
12.8 No Material Defaults Save as expressly disclosed to the Facility Agent
in writing prior to the date of this Agreement, including, inter alia,
those matters set out in the 10K Document, no Borrower is in breach of
or in default under any agreement (including, but not limited to, the
relevant Concession Contract) to which it is a party or which is
binding on it or any of its respective assets to an extent or in a
manner which would reasonably be expected to have a material adverse
effect on its respective business or financial condition or on its
ability to duly perform and/or comply with its obligations arising
under any of the Finance Documents to which it is a party.
12.9 Litigation Save as expressly disclosed to the Facility Agent in writing
prior to the date of this Agreement, including, inter alia, those
matters set out in the 10K Document, no material litigation,
arbitration, administrative proceedings or other actions whatsoever
involving a Borrower are current or, to the best of each Borrower's
knowledge and belief, having made all reasonable enquires thereto,
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pending or threatened, which would reasonably be expected to have (and
no judgement or order of any court or agency is outstanding which has),
a material adverse effect on the business or financial condition of a
Borrower, or a material adverse effect on the business or financial
condition of the Group taken as a whole, or a material adverse effect
on the ability of the Borrower to duly perform and/or comply with any
of its respective obligations and/or liabilities arising under any of
the Finance Documents to which it is a party, or a material adverse
effect on the ability of the Group taken as a whole to duly perform
and/or comply with any of their respective obligations and/or
liabilities arising under any of the Finance Documents to which any of
them is a party.
12.10 Original Financial Statements The Original Financial Statements were
prepared in accordance with US GAAP, HAS and IAS, as applicable,
consistently applied in Hungary and the United States of America, as
appropriate, and give (in conjunction with the notes thereto) a true
and fair view of the financial condition of each Borrower and the Group
at the date as of which they were prepared and the results of each
Borrower's and the Group's operations during the financial period then
ended, as applicable.
12.11 No Material Adverse Change Save as otherwise disclosed in the 10K
Document, since publication of the Original Financial Statements, there
has been no material adverse change in the business or financial
condition of any Borrower or to each Borrower's best knowledge and
belief the Group.
12.12 No Undisclosed Liabilities As at the date as of which the Original
Financial Statements were prepared no Borrower or, to each Borrower's
best knowledge and belief, no member of the Group had any liabilities
(contingent or otherwise) which were not disclosed thereby (or by the
notes thereto) or reserved against therein or to each Borrower's best
knowledge and belief, having made all reasonable enquiries thereto any
unrealised or anticipated losses arising from commitments entered into
by it which were not so disclosed or reserved against.
12.13 Full Disclosure All of the written information supplied by a Borrower
and/or any member of the Group to any Finance Party in connection with
this Agreement is true, complete and accurate in all material respects,
no events, facts and/or circumstances have arisen and/or occurred which
would reasonably be expected to have a material impact on any of the
written information supplied by a Borrower and any member of the Group
to any Finance Party (other than any which have been disclosed in the
10K Document or otherwise expressly disclosed to the Facility Agent,
together with a reasonably detailed written explanation of the
significance of such events, facts and/or circumstances within the
context of this proposed Facility) and no Borrower is aware of any
material facts or circumstances that have not been disclosed to the
Finance Parties which would reasonably be expected to, if disclosed,
adversely affect the decision of a prudent commercial bank considering
whether or not to provide finance to the Borrowers or to the Group.
12.14 Encumbrances Save as expressly permitted pursuant to Clause 15.8
(Negative Pledge), other than a Permitted Encumbrance, no encumbrance
exists over all or any of the present or future assets of a Borrower,
nor to each Borrower's best knowledge and belief, having made all
reasonable enquiries thereto, those of any member of the Group.
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12.15 No Obligation to Create Security Each Borrower's execution of any of
the Finance Documents to which it is a party and the exercise of its
respective rights and performance of its respective obligations under
such Finance Documents will not result in the existence of nor oblige
it to create any encumbrance over all or any of its respective present
or future assets, other than as expressly provided for in and
contemplated by the Finance Documents.
12.16 Execution of this Agreement Each Borrower's execution of this Agreement
and any other Finance Document to which it is a party and its exercise
of its respective rights and performance of its respective obligations
under this Agreement or such Finance Document do not and will not:
(a) conflict with any agreement, mortgage, bond or other
instrument or treaty or other document whatsoever to which a
Borrower is a party or which is binding upon it or any of its
assets in a manner or to an extent that would reasonably be
expected to have a material adverse effect on the ability of
the Borrower to duly perform and/or comply with any of its
respective obligations under this Agreement or such Finance
Document;
(b) conflict with the Constitutive Documents and rules and
regulations of the Borrower, as appropriate; or
(c) conflict with any applicable law, regulation or official or
judicial order to which the Borrower is subject.
12.17 Compliance with Laws and Regulations Each Borrower and, to the best of
its respective knowledge and belief, having made all reasonable
enquiries thereto, each member of the Group, in carrying out its
respective activities, business and operations is in all material and
substantial respects doing so in compliance with the relevant laws and
regulations governing the same.
12.18 No Event of Default or Potential Event of Default No Borrower is,
having made all reasonable enquiries thereto, aware of any
circumstances whatsoever which might constitute an Event of Default or
a Potential Event of Default, howsoever described or provided for,
under the terms of any of the Finance Documents which has not prior to
the date of this Agreement already been disclosed fully in writing to
the Facility Agent.
12.19 Entire Agreement No Borrower is, and to the best of each Borrower's
knowledge and belief, having made all reasonable enquiries thereto, no
member of the Group is a party to any material agreement or contract
whatsoever (oral, written or otherwise) which is or which would
reasonably be expected to become material to the Facility and/or the
security interests created and/or constituted by the applicable
Security Agreements, which is not expressly provided for in any of the
Finance Documents and/or which has not been disclosed in the 10K
Document or otherwise fully and properly disclosed in writing prior to
the date of this Agreement to the Facility Agent.
12.20 Environment Each Borrower and, to the best of its knowledge and belief,
each member of the Group is in compliance in all material respects
with:
(a) all material applicable laws and regulations concerning the
protection of the environment and to the best of its knowledge
and belief, having made reasonable enquires thereto, there are
no circumstances which may prevent that compliance in the
future; and
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(b) the terms of all material permits and authorisation required
by any applicable environmental laws and regulations for the
ownership and operation of its businesses.
12.21 Year 2000 Compliance Save as otherwise disclosed in the 10K Document,
to the best of each Borrower's knowledge and belief, having made all
reasonable enquiries thereto, the so-called Year 2000 problem (that is,
the possibility that any computer hardware, computer software and/or
any other equipment or service whatsoever, operated and/or controlled
by electronic means, used, manufactured, sold, delivered or otherwise
provided to or by, any member of the Group may be unable to properly
recognise and/or properly perform date-sensitive functions, commands
and/or calculations involving a date before, on or after 31 December
1999) will not have a material adverse effect on the ability of any
member of the Group to duly perform and/or comply with each of its
respective obligations arising under any Finance Document to which such
member of the Group is a party.
12.22 Management of Business No Borrower has, nor to its best knowledge and
belief having made all reasonable enquiries thereto has any member of
the Group, entered into any management contract or similar arrangement
whereby a material part of its or the Group's business or operations
are managed or are to be managed by any other person which might have a
material adverse effect on the ability of any member of the Group to
duly perform and/or comply with any of its obligations under any
Finance Document to which it is a party except those management
contracts or similar arrangements which have been fully and fairly
disclosed in writing prior to the date of this Agreement to each of the
Finance Parties.
12.23 Corporate Chart The chart to be provided by the Borrowers, detailed
under paragraph numbered 31 in the Fourth Schedule (Conditions
Precedent Documents), showing the ownership of each member of the Group
and the relationship of the Group with the other Obligors is true and
correct in all respects as at the date of this Agreement and that no
member of the Group has any form of equity and/or ownership interest
whatsoever in any other person except as so disclosed in such chart.
13. Financial Information
13.1 Annual Statements Each Borrower shall, as soon as the same become
available, but in any event within one hundred and fifty (150) days
after the end of each of its financial years, deliver to the Facility
Agent in sufficient copies for the Banks its audited financial
statements (including, inter alia, balance sheet, profit and loss
statement and cash-flow movements statement) for such financial year,
prepared in accordance with HAS and, if they are being prepared,
promptly once they are available the foregoing prepared in accordance
with IAS and/or US GAAP. Each Borrower shall as soon as the same become
available, but in any event within sixty (60) days after the end of
each of its financial years, deliver to the Facility Agent in
sufficient copies for the Banks its unaudited financial statements
(including, inter alia, balance sheet, profit and loss statement and
cash-flow movements statement) for such financial year, prepared in
accordance with HAS and, if they are being prepared, promptly once they
are available the foregoing prepared in accordance with IAS and/or US
GAAP.
13.2 Semi-Annual Statements The Borrower shall, as soon as the same become
available, but in any event within sixty (60) days after the end of the
first half of each of its financial years, deliver to the Facility
Agent in sufficient copies for the Banks its financial statements
(including, inter alia, balance sheet and profit and loss statement)
for such half-year prepared in accordance with HAS and, if they are
being prepared, promptly once they are available the foregoing prepared
in accordance with IAS and/or US GAAP.
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13.3 Management Accounts Each Borrower shall, as soon as the same become
available but in any event within twenty (20) days, or earlier if
provided to Tele Danmark, after the end of each month and each quarter,
as applicable, of each of its financial years, deliver to the Facility
Agent in sufficient copies for the Banks, its monthly and its quarterly
management accounts for such period, such accounts to include adequate
detail to the satisfaction of the Facility Agent.
13.4 Business Plan Each Borrower shall, as quickly as practicable, but in
any event within fourteen (14) days after the making of any amendment
to its Business Plan, deliver to the Facility Agent in sufficient
copies for the Banks, such amended Business Plan for the outstanding
term of this Agreement, together with a written explanation of the
rationale and effect of such change(s) to the reasonable satisfaction
of the Facility Agent.
13.5 Annual Operating Budget Each Borrower shall, as quickly as practicable,
but in any event within fourteen (14) days after the approval of the
Annual Operating Budget in respect of a financial year, deliver to the
Facility Agent in sufficient copies for the Banks of such Annual
Operating Budget(s), together with a written explanation of such Annual
Operating Budget(s).
13.6 Copies of Notifications to Shareholders Each Borrower shall, as soon as
the same become available, deliver to the Facility Agent in sufficient
copies for the Banks, copies of its annual budget and financial
projections prepared for its shareholders from time to time Provided
that were there is no significant discrepancy between such information
to be provided to its shareholders and that already provided to the
Facility Agent in accordance with other provisions in this Agreement,
such Borrower shall not be obliged to provide such annual budget and
financial projections to the Facility Agent under this Clause 13.6.
13.7 Other Financial Information Each Borrower shall, from time to time on
the request of the Facility Agent (or a Bank through the Facility
Agent), furnish the Facility Agent with such information (including but
not limited to its extract of general ledger ("fokonyvi kivonat"))
about its business and financial condition or that of any of its
subsidiaries as the Facility Agent may reasonably require Provided that
if such Borrower is able to immediately furnish such information albeit
in a format and/or presentational format then used by the relevant
internal functions of such Borrower, such Borrower will immediately
furnish such information to the Facility Agent (or such Bank through
the Facility Agent) in such format and/or presentational format
Provided Further that if such format and/or presentational format is
not acceptable to the Facility Agent or such Bank, acting reasonably,
such Borrower will as quickly as practicable and in any event within
fourteen (14) days, provide the Facility Agent or such Bank, as
applicable, such information in a format and/or presentational format
reasonably requested by the Facility Agent or such Bank, as applicable.
13.8 Requirements as to Financial Statements Each Borrower shall ensure that:
(a) each set of financial statements delivered by it pursuant to
this Clause 13 (Financial Information) is prepared on the same
basis as was used in the preparation of the Original Financial
Statements and in accordance with US GAAP, IAS or HAS, as
appropriate, consistently applied in Hungary;
(b) each set of financial statements delivered by it pursuant to
this Clause 13 (Financial Statements) is certified by a duly
authorised officer of such Borrower as giving a true and fair
view of its financial condition as at the end of the period to
which those financial statements relate and of the results of
its operations during such period; and
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(c) each set of audited financial statements delivered by it
pursuant to Clause 13.1 (Annual Statements) has been audited
by the Borrowers' Auditors.
13.9 Accounting Terms All accounting expressions which are not otherwise
defined in this Agreement shall be construed in accordance with US
GAAP, IAS and/or HAS, as appropriate, consistently applied in Hungary
and/or the United States of America, as applicable.
14. Financial Covenants
14.1 Financial Condition of the Group At: (a) the date of this Agreement the
Group's Debt to EBITDA Ratio shall not exceed 7.5:1; (b) the Group's
Debt to EBITDA Ratio shall not exceed 7.0:1 as at 30 September 1999;
and (c) as at 31 December 1999 the Group's Debt to EBITDA Ratio shall
not exceed 6.5:1 (in each case calculated by reference to the
applicable quarterly consolidated financial statements for the Group
delivered to the Facility Agent pursuant to this Agreement and/or the
Sponsor's Support Agreement).
14.2 Definitions of Financial Terms In Clause 14.1 (Financial Condition of
the Group), the Group's Debt to EBITDA Ratio shall be calculated as
follows:
A = B / C
where:
A = the Group's Debt to EBITDA Ratio at such time;
B = the amount of the Loan at such time plus the aggregate of
any other amount(s) then outstanding under any other of the
Group's indebtedness falling due and payable more than twelve
(12) months after such time (but expressly excluding any such
amount(s) which is (are) repayable under a Note; and
C = the amount of the Group's net earnings for the preceding
period of twelve (12) months plus the aggregate of any
and all amount(s) in respect of: (i) extraordinary items,
if any including, inter alia, any amount(s) in respect of the
termination of management services agreement charges
so deducted; (ii) depreciation and amortisation, if any;
(iii) foreign exchanges gains or losses, if any (such that
foreign exchange losses are applied as a positive number
and vice versa); (iv) taxes, if any; (v) net interest and
expenses paid by any member of the Group in respect of any
Financial Indebtedness; (in each case, such amount(s) to be
in respect of such preceding period of twelve (12) months)
Provided that for the avoidance of doubt, it is
expressly agreed that any Distribution(s) paid by any member
of the Group during such preceding period of twelve (12)
months is not to be added back for the purposes of
calculating the value of C in this formula.
14.3 Compliance with Financial Condition The Borrowers will procure the
delivery to the Facility Agent of written certificates, certified by
the Chief Financial Officer of the Group, confirming that the Group is
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in compliance with the requirements of Clause 14.1 (Financial Condition
of the Group), such certificates to be delivered to the Facility Agent
within forty five (45) days of 30 September 1999 and 31 December 1999.
By signing this Agreement and by issuing (or being deemed to have
issued) the Notice of Drawdown, each Borrower certifies (or is deemed
to certify) that the Group is in compliance with the requirements of
Clause 14.1 (Financial Condition of the Group) as at such date.
15. Covenants
15.1 Maintenance of Legal Validity Each Borrower shall obtain, comply with
the terms of and do or, as appropriate, procure the obtaining,
compliance with the terms of and the doing of all that is necessary to
maintain in full force and effect all authorisations, approvals,
licences and consents required in or by the laws and regulations of
Hungary or by other applicable laws to enable it lawfully to enter into
and perform its respective obligations under the Finance Documents to
which it is a party and to ensure the legality, validity,
enforceability or admissibility in evidence in Hungary of such Finance
Documents including, but not limited to, duly registering the Fixed
Charge Agreements and the Floating Charge Agreements with a Notary
Public and duly registering the Mortgage Agreements at the relevant
Land Registries.
15.2 Insurance Each Borrower shall take out and maintain insurances on and
in relation to its respective activities, business, operations and
assets with reputable underwriters or insurance companies against such
risks and to such extent as is usual and is available upon commercial
terms in Hungary for companies carrying on similar activities,
businesses and operations such as those carried on by it and its
subsidiaries whose practice is not to self-insure. Each Borrower as
quickly as practicable shall, upon it taking out any such insurance
pursuant to this Clause 15.2, notify the Facility Agent, providing
sufficient information on such insurance as reasonably required by the
Facility Agent and execute an assignment of contractual rights
agreement in respect of such material insurance, substantially in the
form of the Assignment of Contractual Rights Agreements, as
appropriate, if the Facility Agent (acting on the instructions of an
Instructing Group, acting reasonably) so requires. The Borrower shall
also not act or fail to act in any way which could by such action or
failure to act cause any material adverse effect on the validity and
enforceability of such insurances. In the event that circumstances
arise whereby a Borrower intends to make a material claim under such
insurance policies, such Borrower will promptly notify the Facility
Agent of such circumstances, together with an estimate of the amount of
the damage or loss and an estimate of the likely amount of such claim
and as soon as reasonably practicable thereafter enter into
negotiations in good faith with the Facility Agent in order to
determine an appropriate strategy for the use of any monies paid out as
a result of such a claim.
15.3 Untrue Representations After the delivery or deemed delivery of the
Notice of Drawdown and before the making of the Advances requested
therein, each Borrower shall immediately notify the Facility Agent of
the occurrence of any event or circumstance which results in or which
would reasonably be expected to result in any of the representations
contained in Clause 12 (Representations) being untrue at or before the
time of the making of such Advance.
15.4 Notification of Events of Default Each Borrower shall, promptly upon
becoming aware of such occurrence, inform the Facility Agent of the
occurrence of any Event of Default or Potential Event of Default,
howsoever described under any of the Finance Documents and, upon
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receipt of a written request to that effect from the Facility Agent,
confirm to the Facility Agent that, save as previously notified to the
Facility Agent or as notified in such confirmation, no Event of Default
or Potential Event of Default, howsoever described under any of the
Finance Documents, has, to the best of its knowledge and belief, having
made all reasonable enquiries thereto, occurred.
15.5 Claims Pari Passu Each Borrower shall, subject to any Permitted
Encumbrances, ensure that at all times the claims of each Finance Party
against it under the Finance Documents to which it is a party rank at
least pari passu with the claims of all its other unsecured and
unsubordinated creditors save those whose claims are preferred by the
operation of mandatory laws and regulations of Hungary, applying to
companies generally in Hungary.
15.6 Auditors No Borrower shall, without the prior written consent of the
Facility Agent (such consent not to be unreasonably withheld) change or
propose to/at such Borrower's founder or general meeting, as
applicable, the changing of such Borrower's Hungarian or other auditors
except as provided for in the definition of Borrowers' Auditors in
Clause 1.1 (Definitions).
15.7 Bank Accounts No Borrower shall, without the prior written consent of
the Facility Agent, open, have, maintain or otherwise operate at any
time a bank account (or similar account) with a bank or other financial
institution except for an Income Account or any other bank account with
the Facility Agent, or pay, or procure the payment of, or allow or fail
to take all necessary steps to prevent the payment of any or all of its
Income whatsoever into any bank account (or similar account) at and/or
with any other bank or financial institution other than the Income
Account held with the Facility Agent.
15.8 Negative Pledge No Borrower shall, without the prior written consent of
the Facility Agent, acting reasonably, create or permit to subsist any
encumbrance over all or any of its respective present or future
revenues or assets, other than as provided for in the Finance Documents
or an encumbrance which is a Permitted Encumbrance.
15.9 Loans and Guarantees No Borrower shall, without the prior written
consent of the Facility Agent, such consent not to be unreasonably
withheld or delayed, make any loans, grant any credit or give any
guarantee or indemnity whatsoever (except as required or provided for
under any Finance Document or to or in favour of an affiliate or made
in the ordinary course of business (which does not when aggregated with
all other such loans, credits, guarantees or indemnities given by any
Member of the Group at any time exceed the equivalent of five hundred
million Forints (HUF 500,000,000) or made in the context of such
Borrower's collective agreement made with the relevant trade union in
respect of such Borrower's employees) to or for the benefit of any
person whatsoever or otherwise voluntarily assume any liability
whatsoever, whether actual or contingent, in respect of any obligation
of any other person. Each Borrower shall, at all times, ensure that any
and all indebtedness of such Borrower with either or both of Hungarian
Telephone and Cable Corp. and/or HTCC Tanacsado Reszvenytarsasag is at
all times and in all respects fully subordinated to any indebtedness
and/or other obligation of such Borrower owing or expressed to be in
favour of any Finance Party Provided that it is expressly acknowledged
and agreed that any such subordinated indebtedness may be converted
into equity share capital of such Borrower, with such Borrower being
entitled to take all the appropriate legal and practical steps
necessary to effect such conversion.
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15.10 Shares No Borrower shall, without the prior written consent of the
Facility Agent, such consent not to be unreasonably withheld or
delayed, alter any rights attaching to its issued ordinary shares in
existence at the date of this Agreement.
15.11 Disposals No Borrower shall, sell, lease, transfer or otherwise dispose
of, by one or more transactions or series of transactions (whether
related or not) any of its revenues and/or assets, other than any such
transaction(s) being Permitted Disposal(s).
15.12 Distributions No Borrower shall, at any time, without the prior written
consent of the Facility Agent, acting reasonably, propose to/at such
Borrower's founder or general meeting, as applicable, the paying,
making or declaring of any Distribution other than a Permitted
Distribution. The Borrower acknowledges that the Obligors have also
undertaken in the Sponsors' Support Agreement that no Borrower will,
without the prior written consent of the Facility Agent, acting
reasonably, propose at/to a Borrower's founder or general meeting, as
applicable, the paying, making or declaring of any Distribution other
than a Permitted Distribution, in respect of any financial year of the
Borrower, or pass such resolution, and, in accordance with the terms of
the Sponsors' Support Agreement, each Borrower agrees that it shall
not, without the prior written consent of the Facility Agent, acting
reasonably, pay or make any Distribution other than a Permitted
Distribution, in respect of any financial year of such Borrower.
15.13 Merger No Borrower shall, without the prior written consent of the
Facility Agent, acting reasonably, merge or consolidate or be a party
to any similar transaction whatsoever with any other person other than
a Borrower.
15.14 Reduction of Capital No Borrower shall, without the prior written
consent of the Facility Agent, acting reasonably, propose to/at any
Borrower's founder or general meeting, as applicable, the reduction of
such Borrower's registered and paid-up share capital Provided that any
capital reduction which eliminates any negative equity of any Borrower
existing as at the date of this Agreement shall not breach this
covenant. Each Borrower acknowledges that certain Obligors have also
undertaken in the Sponsors' Support Agreement that such Obligors will
not, without the prior written consent of the Facility Agent, acting
reasonably, propose at/to any Borrower's founder or general meeting, as
applicable, the reduction of such Borrower's registered and paid-up
share capital, or pass such resolution and, in accordance with the
terms of such Sponsors' Support Agreement, each Borrower agrees that it
shall not take any action or steps whatsoever to facilitate the
reduction of its registered and paid-up share capital without the prior
written consent of the Facility Agent, acting reasonably.
15.15 Material Contracts No Borrower shall, without the prior written consent
of the Facility Agent, acting reasonably, enter into any material
agreement(s) and material contract(s) which is entered into on business
terms that are worse than at arm's-length and/or which would be
reasonably likely to have a material adverse effect on the ability of
any Borrower to perform its obligations under any of the Finance
Documents to which it is a party or a material adverse effect on the
ability of the Group, taken as a whole to perform any of their
respective obligations under any of the Finance Documents to which any
member of the Group is a party.
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15.16 Revocation No Borrower shall, without the prior written consent of the
Facility Agent, take any formal action or fail to perform any duty or
obligation which is likely to lead to the revocation of any Finance
Document to which such Borrower is a party or to the cancellation or
suspension of the rights of such Borrower included in any such
agreement.
15.17 New Business No Borrower shall, without the prior written consent of
the Facility Agent, acting reasonably, create any subsidiaries and/or
become a party to a joint venture agreement or arrangement and/or enter
or become involved in areas or types of activities or business in each
such case that would fall outside the scope of activities and business
specifically provided for pursuant to the Concession Contracts or
activities and business related to the telecommunications business
which are specified in Government Decree Number 48 of 1997 which are
significantly different to those currently being carried on by the
Borrowers and as envisaged in the Finance Documents, the overall effect
of which would be reasonably expected to change the overall nature of
the credit risk of the Borrowers, as determined by the Facility Agent,
acting reasonably.
15.18 Articles of Association No Borrower shall, without the prior written
consent of the Facility Agent, acting reasonably, propose to/at any
Borrower's founder or general meeting, as applicable, an amendment to
its Articles of Association which would reasonably be expected to have
a material adverse effect on the ability of such Borrower to duly
perform and comply with its obligations under any Finance Document to
which it is a party.
15.19 Mitigation of Interest Rate and Forex Risks Upon or prior to the
execution of this Agreement and continually throughout the term of this
Agreement, the Borrowers will, in accordance with sound and prudent
business practices, carefully consider and review the management of
interest rate and foreign exchange risks arising as a result of the
Borrowers' business and activities (including, but not limited to, the
Borrowers entering into this Agreement and receiving Advance(s) under
this Agreement), with a view to devising a strategy for the mitigation
of such risks. The Borrowers shall as soon as practical notify the
Facility Agent of their strategy for the management and mitigation of
such interest rate arising as a result of the Borrowers' business and
activities (including, but not limited to, the Borrowers entering into
this Agreement and receiving Advance(s) under this Agreement), and of
any and all subsequent amendments to that strategy and provide such
evidence as may be reasonably required by the Facility Agent that such
strategy has been duly and properly implemented. Each Borrower
expressly acknowledges and accepts the terms of this Clause 15.19.
15.20 Alteration or Amendment of Finance Documents No Borrower shall alter or
amend, or cause to be altered or amended, any of the Finance Documents
to which it is a party, without the prior written consent of the
Facility Agent or if expressly provided for in such a Finance Document,
all of the Banks Provided that each Borrower will take any actions or
other steps required under applicable laws and regulations to give full
force and effect to the Finance Documents (and to the rights, security
interests and encumbrances created therein) to which it is a party.
15.21 Filing of Tax Returns Each Borrower shall file or cause to be filed all
tax returns required to be filed in all jurisdictions in which it
and/or any of its subsidiaries is situated or carries on business or
otherwise subject to pay tax and will promptly pay all taxes which are
due and payable on such returns or any assessment made against it
except to the extent contested in good faith Provided that a Borrower
will notify the Facility Agent as soon as practicable after such
Borrower decides to contest the amount of tax due and/or payable by it.
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15.22 Amount of Advance Specified in the Notice of Drawdown Each Borrower
will ensure that the amounts specified in the issued or deemed to be
issued Notice of Drawdown is in full accordance with the amount(s) set
out in the Third Schedule (The Notice of Drawdown).
15.23 Environment Each Borrower shall comply in all material respects with:
(a) all material applicable laws and regulations concerning the
protection of the environment; and
(b) the terms of all material permits and authorisation required
by any applicable environmental laws and regulations for the
ownership and operation of its or such subsidiary's, as
appropriate, business.
15.24 Compliance with Laws and Regulations In carrying out its activities,
business and operations each Borrower will, in all material and
substantial respects, do so in compliance with the relevant laws and
regulations of Hungary or other applicable jurisdictions governing the
same.
15.25 No New Financial Indebtedness No Borrower shall make or enter into any
agreement or arrangement whatsoever whereby in aggregate any new
Financial Indebtedness will be created, established or incurred, by the
Borrowers or any of them, which is in excess of an amount equivalent to
one million dollars (U.S.$ 1,000,000), without the prior written
consent of the Facility Agent, such consent not to be unreasonably
withheld and a decision to be confirmed to such Borrower within thirty
(30) days after the date of receipt of such written request from such
Borrower Provided that any such new Financial Indebtedness is
immediately applied pursuant to Clause 8.4 (Mandatory Prepayment)
Provided Further that a Borrower, shall be entitled to incur additional
Financial Indebtedness in respect of the implementation of the risk
management strategy of the Borrower, which is in compliance with Clause
15.19 (Mitigation of Interest Rate and Forex Risks).
15.26 Stamp Taxes Each Borrower will as quickly as practicable upon becoming
aware of any requirement to do so (including following the receipt of
written notification by the Facility Agent in respect thereof) take
and/or procure the taking of all actions required to be done, fulfilled
or performed in order to pay any stamp, registration or similar tax or
charges arising under any of the Finance Documents, in Hungary.
15.27 Litigation Each Borrower will, promptly upon becoming aware of the
same, notify the Facility Agent in writing of any material litigation,
arbitration, administrative proceedings or other actions, whatsoever,
involving such Borrower not previously disclosed to each Finance Party
pursuant to this Agreement including, inter alia, in the 10K Document
which would reasonably be expected to have a material adverse effect on
the business or financial condition of such Borrower or a material
adverse effect on the business or financial condition of the Group
taken as a whole or a material adverse effect on the ability of such
Borrower to duly perform and/or comply with any of its obligations
arising under any of the Finance Documents to which it is a party, or a
material adverse effect on the ability of the Group taken as a whole to
duly perform and/or comply with any of their respective obligations
arising under any Finance Document to which any of them is a party.
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15.28 Year 2000 Compliance
(a) Each Borrower will take all best efforts to ensure that any
programming required to permit the proper functioning, in all
material respects, in and following the year 2000 of:
(i) such Borrower's computer systems; and
(ii) equipment of such Borrower containing embedded
microchips which is material to their respective
business,
and the testing of all such systems and equipment as so
reprogrammed will be completed by 30 November 1999; and
(b) each Borrower will inform the Facility Agent as quickly as
possible upon becoming aware that the cost to such Borrower
of such reprogramming and testing and the reasonably
foreseeable consequences to such Borrower of any errors
therein would in all reasonable likelihood give rise to an
Event of Default or have, in all reasonable likelihood,
a material adverse effect on the ability of such Borrower
to perform or comply with its obligations under the Finance
Documents to which it is a party or on the ability of the
Group, taken as a whole, to perform or comply with their
respective obligations under the Finance Documents to which
any of them are a party.
16. Events of Default
Each of Clause 16.1 (Failure to Pay) to Clause 16.19 (Failure to comply
with Final Judgment) (inclusive) describes circumstances which
constitute an Event of Default for the purposes of this Agreement.
Clause 16.20 (Acceleration and Cancellation) and Clause 16.21 (Advance
Due on Demand) deal with the rights of the Facility Agent and the Banks
after the occurrence of an Event of Default.
16.1 Failure to Pay Any Borrower fails to pay any sum due from it under this
Agreement at the time, in the currency and in the manner specified in
this Agreement and in the event that such failure arises for technical
or administrative reasons it continues for two (2) business days after
the Facility Agent has given notice thereof to the Borrower.
16.2 Misrepresentation Any representation or statement made by any Obligor
in any of the Finance Documents to which such Obligor is a party, or in
any notice or other document, certificate or written statement
delivered by it to the Facility Agent pursuant to this Agreement or in
connection with this Agreement is or proves to have been incorrect or
misleading when made or deemed to be made, in a manner which would
reasonably be expected to have a material adverse effect on the ability
of any Obligor to duly perform or comply with any of its obligations
under the Finance Documents to which it is a party or on its business
or financial condition and, if the fact that such representation or
statement is so incorrect or misleading is capable of remedy, such fact
is not remedied within fourteen (14) days or, if in order to effect
such remedy, an application must be made to an organ, agency or other
administrative or regulatory body of Hungary, then such period shall be
extended to thirty (30) days.
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16.3 Specific Covenants The Borrower fails duly to perform or comply with
any of the obligations expressed to be assumed by it in Clause 15
(Covenants) and such failure, if capable of remedy, is not remedied
within fourteen (14) days of such failure or, if in order to effect
such remedy, an application must be made to an organ, agency or other
administrative or regulatory body of Hungary, then such period shall be
extended to thirty (30) days.
16.4 Other Obligations Any Obligor fails duly to substantially and
materially perform or comply with any other obligation which is deemed
to be material by the Facility Agent, acting reasonably and in good
faith, expressed to be assumed by it in any of the Finance Documents to
which it is a party and such failure, if capable of remedy, is not
remedied within twenty-five (25) days or, if in order to effect such
remedy, an application must be made to an organ, agency or other
administrative or regulatory body of Hungary, then such period shall be
extended to thirty (30) days.
16.5 Litigation Any new litigation, arbitration, administrative proceedings
or other activities whatsoever are commenced against any Borrower
and/or any other member of the Group or the nature of any existing such
proceedings changes in any way whatsoever which would reasonably be
expected to, in the opinion of the Facility Agent, acting reasonably,
have a material adverse effect on the ability of such Borrower and/or
such other member of the Group to duly perform and/or comply with any
of its respective obligations and/or liabilities arising under any of
the Finance Documents to which it is a party and which such Borrower
and/or such other member of the Group fails within a reasonable period
of time (as determined by the Facility Agent, acting reasonably) to
demonstrate, to the reasonable satisfaction of the Facility Agent,
acting reasonably, that it is contesting such proceedings or activities
in good faith and that such contesting has a reasonable expectation of
being successful and/or that the reasonably anticipated monetary value,
cost or other expense of such claim(s) individually does not exceed the
equivalent of three hundred million Forints (HUF 300,000,000) and in
aggregate do(es) not exceed the equivalent of four hundred and fifty
million Forints (HUF 450,000,000) when aggregated with the amount, if
any, of Financial Indebtedness to which the operative provisions of
Clause 16.6 (Cross Default) then applies.
16.6 Cross Default Any Financial Indebtedness of an Obligor, is not paid
when due, any Financial Indebtedness of an Obligor is declared to be or
otherwise becomes due and payable prior to its specified maturity as a
result of the default (howsoever described or provided for) of such
Obligor or any creditor or creditors of an Obligor become entitled to
declare any Financial Indebtedness of such Obligor due and payable
prior to its specified maturity as a result of the default (howsoever
described or provided for) of such Obligor where the amount of such
Financial Indebtedness, in aggregate, exceeds the equivalent of one
hundred and fifty million Forints (HUF 150,000,000) when aggregated
with the anticipated monetary value, cost or other expense of all then
applicable claims provided for in Clause 16.5 (Litigation).
16.7 Insolvency and Rescheduling Any Obligor (notwithstanding whether or not
its insolvent or bankrupt status is declared in a decree judgement of a
competent court) is unable to pay its debts as they fall due, commences
negotiations (other than with the prior written consent of the Facility
Agent) with any one or more of its creditors with a view to the general
readjustment or rescheduling of its indebtedness or makes a general
assignment for the benefit of or a composition with its creditors, or
seeks any of the protections provided for in the Bankruptcy Act, or
becomes subject to any of the procedures provided for in the Bankruptcy
Act, and in the case of any such proceeding instituted against it (but
not instituted by it), either such proceeding shall remain undismissed
or unstayed for a period of forty five (45) days, or any of the actions
sought in such proceeding (including the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or
other similar official for it or for any part of its assets) shall
occur or any of the foregoing occurs in respect of any Obligor.
Provided that a mere claimant against an Obligor shall not be regarded
as a creditor until such claim is recognised by such Obligor pursuant
to applicable laws or otherwise.
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16.8 Winding-up Any Obligor takes any formal corporate action or other
formal steps are taken or legal proceedings are started for its
winding-up, dissolution or re-organisation or for the appointment of a
liquidator or similar officer of it or of any or all of its revenues
and assets.
16.9 Execution or Distress Any execution or distress is levied against, or
an encumbrancer takes possession of, the whole or any part of, the
property, undertaking or assets of any Obligor which when aggregated
with all other execution and distress exceeds an amount equivalent to
one hundred and fifty million Forints (HUF 150,000,000) which such
Obligor fails to demonstrate within a reasonable period of time (as
determined by the Facility Agent, acting reasonably) to the
satisfaction of the Facility Agent, acting reasonably, are frivolous or
vexatious and/or will be paid out and/or duly discharged within thirty
(30) business days, or such later date as the Facility Agent may agree.
16.10 Analogous Events Any event occurs in respect of an Obligor which under
the laws of any jurisdiction has a similar or analogous effect to any
of those events mentioned in Clause 16.7 (Insolvency and Rescheduling),
Clause 16.8 (Winding-up) or Clause 16.9 (Execution or Distress).
16.11 Governmental Intervention By or under the authority of any government:
(a) the management of any Obligor is wholly or partially displaced or
the authority of any Obligor in the conduct of its business is wholly
or partially curtailed; or (b) all or a majority of the issued shares
of any Obligor or the whole or any part of its respective revenues or
assets is seized, nationalised, expropriated or compulsorily acquired.
16.12 Ownership of Hungarian Telephone and Cable Corp. Other than as
expressly approved in advance in writing by the Facility Agent, acting
reasonably, or as expressly permitted in the Sponsors' Support
Agreement, Citizens Utilities Company, Tele Danmark and the IO Fund
sell, transfer or otherwise dispose of any of their issued share
capital of Hungarian Telephone and Cable Corp. following the
transactions contemplated in the Master Closing Agreement.
16.13 The Group's Business The Group ceases to carry on in any material
respect the business it carries on at the date of this Agreement or
enters into any unrelated business which might in the opinion of the
Facility Agent, acting reasonably, have a material adverse effect on
the financial condition of or on the ability of an Obligor to comply
with and/or perform its obligations and liabilities under any of the
Finance Documents to which it is a party and such circumstances, if
capable of remedy are not remedied within fourteen (14) days.
16.14 Repudiation Any Obligor repudiates any Finance Document to which it is
a party or does or causes to be done any act or thing evidencing an
intention to repudiate any Finance Document to which it is a party.
16.15 Validity and Admissibility At any time any act, condition or thing
required to be done, fulfilled or performed in order: (a) to enable an
Obligor lawfully to enter into, exercise its rights under and perform
the obligations expressed to be assumed by it under any of the Finance
Documents to which it is a party; or (b) to ensure that the obligations
expressed to be assumed by an Obligor under any of the Finance
Documents to which it is a party are legal, valid, in full force and
effect, binding on and enforceable against it; or (c) to make the
Finance Documents admissible in evidence in Hungary is not done,
fulfilled or performed and, if such failure to do, fulfil or perform is
capable of being remedied, the same is not so remedied within thirty
(30) days of the date of any written notice given by the Facility Agent
to the Borrowers in respect of such failure or, if in order to effect
such remedy, an application must be made to an organ, agency or other
administrative or regulatory body of Hungary, then such period shall be
extended to thirty (30) days.
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16.16 Illegality At any time it is or becomes unlawful and/or in conflict
with any applicable law, regulation or official or judicial order for
an Obligor to perform or comply with any or all of its respective
obligations, which in the opinion of the Facility Agent, acting
reasonably, are material, under applicable law or under any of the
Finance Documents to which it is a party or any of the obligations of
an Obligor under any of the Finance Documents to which it/they is/are a
party are not or cease to be legal, valid, binding and enforceable.
16.17 Performance of Obligations Any fact(s), event(s) or other
circumstance(s) arise(s) which in the opinion of the Facility Agent
acting on the instructions of an Instructing Group, acting reasonably,
has a material adverse effect on:
(a) the ability of any Obligor to duly perform and comply with all
its obligations under any Finance Document to which it is a
party as and when such obligations fall due; and/or
(b) the business, assets or financial condition of any Obligor or
the Group taken as a whole; and/or
(c) the ability of any Finance Party to exercise or enforce any
rights under any Finance Document.
16.18 Failure to Mitigate Interest Rate and Forex Risks A Borrower, at any
time, fails to duly and properly comply with the terms of Clause 15.19
(Mitigation of Interest Rate and Forex Risks) and/or in the reasonable
opinion of the Facility Agent, the strategy (if any) adopted by the
Borrowers in respect thereto is inappropriate and/or inadequate and
would reasonably be expected to cause any Borrower to be unable to meet
all its obligations arising under any of the Finance Documents to which
it is a party and such circumstances, if capable of remedy are not
remedied within fourteen (14) days.
16.19 Failure to Comply with Final Judgment Any Obligor fails to comply with
or pay any sum due from it under any final judgment or any final order
made or given by any court of competent jurisdiction.
16.20 Acceleration and Cancellation Upon the occurrence of an Event of
Default at any time thereafter where such Event of Default is not
remedied within the relevant cure period provided for in the relevant
Clause or waived, the Facility Agent may (and, if so instructed by an
Instructing Group, shall) by written notice to the Borrowers:
(a) declare the Advance(s) to be immediately due and payable
(whereupon the same shall become so payable together with
accrued interest thereon and any other sums then owed by the
Borrowers under this Agreement) or declare the Advance(s) to
be due and payable on demand of the Facility Agent; and/or
(b) declare that any undrawn portion of the Facility shall be
cancelled, whereupon the same shall be cancelled and the
Available Commitment of each Bank shall be reduced to zero
(0).
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16.21 Advance Due on Demand If, pursuant to Clause 16.20 (Acceleration and
Cancellation), the Facility Agent declares the Advance(s) to be due and
payable on demand of the Facility Agent, then, and at any time
thereafter, the Facility Agent may (and, if so instructed by an
Instructing Group, shall) by written notice to the Borrowers:
(a) require repayment of the Advance(s) on such date as it may
specify in such notice (whereupon the same shall become due
and payable on such date together with accrued interest
thereon and any other sums then owed by the Borrowers under
this Agreement) or withdraw its declaration with effect from
such date as it may specify in such notice; and/or
(b) select as the duration of any Interest Period which begins
whilst such declaration remains in effect a period of three
(3) months or less; and/or
(c) without prejudice to the provisions of any other Finance
Documents, declare that the Security Agreements (or any of
them) shall have become enforceable and enforce any or all of
the same.
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PART 7 - DEFAULT INTEREST AND INDEMNITY
17. Default Interest and Indemnity
17.1 Default Interest Periods If any sum due and payable by a Borrower under
this Agreement is not paid on the due date therefor in accordance with
the provisions of Clause 19 (Payments) or if any sum due and payable by
a Borrower under any judgement of any court in connection with this
Agreement is not paid on the date of such judgement, the period
beginning on such due date or, as the case may be, the date of such
judgement and ending on the date upon which the obligation of such
Borrower to pay such sum (the balance thereof for the time being unpaid
being in this Agreement referred to as an "unpaid sum") is discharged
shall be divided into successive periods, each of which (other than the
first) shall start on the last day of the preceding such period and the
duration of each of which shall (except as otherwise provided in this
Clause 17(Default Interest and Indemnity)) be selected by the Facility
Agent.
17.2 Default Interest During each such period relating thereto as is
mentioned in Clause 17.1 (Default Interest Periods) an unpaid sum shall
bear interest at the rate per annum which is the sum from time to time
of two point five per cent. (2.5%), the Margin and BUBOR or LIBOR, as
applicable, on the Quotation Date therefor Provided that:
(a) if, for any such period, BUBOR or LIBOR, as applicable,
cannot be determined, the rate of interest applicable to
such unpaid sum shall be the rate per annum which is the sum
of two point five per cent. (2.5%) the Margin and the
rate per annum determined by the Facility Agent to be
equal to the arithmetic mean (rounded upwards, if not
already such a multiple, to the nearest whole multiple
of one-sixteenth of one per cent. (0.0625%)) of the rates
notified by each Bank to the Facility Agent before the last
day of such period to be those which express as a percentage
rate per annum the cost to it of funding from whatever
sources it may select its portion of such unpaid sum for such
period; and
(b) if such unpaid sum is all or part of an Advance which became
due and payable on a day other than the last day of an
Interest Period relating thereto, the first such period
applicable thereto shall be of a duration equal to the
unexpired portion of that Interest Period and the rate of
interest applicable thereto from time to time during such
period shall be that which exceeds by two point five per cent.
(2.5%) the rate which would have been applicable to it had it
not so fallen due.
17.3 Payment of Default Interest Any interest which shall have accrued under
Clause 17.2 (Default Interest) in respect of an unpaid sum shall be due
and payable and shall be paid by the Borrowers at the end of the period
by reference to which it is calculated or on such other dates as the
Facility Agent may specify by written notice to the Borrowers Provided
that for the purposes of clarity, the parties to this Agreement confirm
that the rate of interest accruing and payable on any such unpaid sum
as default interest shall be the sum of from time to time of two point
five per cent. (2.5%), the Margin and BUBOR or LIBOR, as applicable, as
provided for in Clause 17.2 (Default Interest) and such unpaid sum will
not attract any further additional rate(s) of interest.
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17.4 Broken Periods If any Bank or the Facility Agent on its behalf receives
or recovers all or any part of such Bank's share of an Advance
otherwise than on the last day of an Interest Period relating to that
Advance, the Borrowers shall pay to the Facility Agent on demand for
account of such Bank an amount equal to the amount (if any) by which
the additional interest which would have been payable on the amount so
received or recovered had it been received or recovered on the last day
of that Interest Period exceeds the amount of interest which in the
opinion of the Facility Agent would have been payable to the Facility
Agent on the last day of that Interest Period in respect of a deposit
in the applicable currency equal to the amount so received or recovered
placed by it with a prime bank in London or Budapest, as applicable,
for a period starting on the third business day following the date of
such receipt or recovery and ending on the last day of that Interest
Period.
17.5 Borrowers' Indemnity Each Borrower undertakes to indemnify:
(a) each Finance Party against any cost, claim, loss, expense
(including legal fees) or liability together with any VAT
thereon, which any of them may reasonably and properly sustain
or reasonably and properly incur as a consequence of the
occurrence of any Event of Default or any default by any
Borrower in the performance of any of the obligations
expressed to be assumed by it in this Agreement up to an
aggregate amount equivalent to twelve million five hundred
thousand dollars (U.S.$. 12,500,000); and
(b) each Bank against any loss it may suffer or incur as a result
of its funding or making arrangements to fund its portion of
an Advance requested by the Borrower under a Notice of
Drawdown but not made by reason of the operation of any one or
more of the provisions of this Agreement.
17.6 Unpaid Sums as Advances Any unpaid sum shall for the purposes of this
Clause 17 (Default Interest and Indemnity) and, Clause 11.1 (Increased
Costs) be treated as an advance and accordingly in this Clause 17
(Default Interest and Indemnity) and Clause 11.1 (Increased Costs) the
term "Advance" includes any unpaid sum and the term "Interest Period",
in relation to an unpaid sum, includes each such period relating
thereto as is mentioned in Clause 17.1 (Default Interest Periods).
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PART 8 - PAYMENTS
18. Currency of Account and Payment
18.1 Currency of Account The HUF is the currency of account and payment for
each and every sum at any time due from the Borrower under this
Agreement Provided that:
(a) each repayment of an Advance or a part thereof shall be
made in the currency in which the same were incurred;
(b) each payment of interest shall be made in the currency in
which the sum in respect of which such interest is payable is
incurred;
(c) each payment in respect of costs and expenses shall be made in
the currency in which the same were incurred;
(d) each payment pursuant to Clause 9.2 (Tax Indemnity) or Clause
11.1 (Increased Costs) shall be made in the currency specified
by the party claiming under such clause(s); and
(e) other than as provided for above, any amount expressed to be
payable in a currency other than HUF shall be paid in that
other currency.
18.2 Currency Indemnity If any sum due from a Borrower under this Agreement
or any order or judgement given or made in relation to this Agreement
has to be converted from the currency (the "first currency") in which
the same is payable under this Agreement or under such order or
judgement into another currency (the "second currency") for the purpose
of: (a) making or filing a claim or proof against a Borrower; (b)
obtaining an order or judgement in any court or other tribunal; or (c)
enforcing any order or judgement given or made in relation to this
Agreement, each Borrower shall indemnify and hold harmless each of the
persons to whom such sum is due from and against any loss suffered or
incurred as a result of any discrepancy between: (i) the rate of
exchange used for such purpose to convert the sum in question from the
first currency into the second currency; and (ii) the rate or rates of
exchange at which such person may in the ordinary course of business
purchase the first currency with the second currency upon receipt of a
sum paid to it in satisfaction, in whole or in part, of any such order,
judgement, claim or proof.
19. Payments
19.1 Payments to the Facility Agent On each date on which this Agreement
requires:
(a) an amount denominated in the Optional Currency to be paid by:
(i) any of the Banks under this Agreement, such Bank
shall make the same available to the Facility Agent,
by payment in the Optional Currency and in same day
funds to such account or bank as the Facility Agent
may have specified for this purpose; or
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(ii) a Borrower, where such amount is denominated in
the Optional Currency, such Borrower shall: (i)
three (3) business days prior to such date hold in,
or transfer to, the relevant account, the HUF
equivalent of the amount to be so paid, together
with any bank charges payable to the Facility
Agent who shall convert such HUF into the optional
currency (at the best rate (or rates) of exchange
which the Facility Agent is offering to customers
for such amounts at such time) and hold such Optional
Currency amount in the relevant account of the
Borrower before promptly forwarding such funds on to
the Facility Agent's bank account, with in the
case of Hungarotel Tavkozlesi Koncesszios
Reszvenytarsasag, the Facility Agent's account number
11991102-02177508-00070003, in the case of RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag, the
Facility Agent's account number 11991102-02177498-
00070003, in the case of Papa es Tersege
Tavkozlesi Koncesszios Reszvenytarsasag, the
Facility Agent's account number 11991102-02177481-
00070003, in the case of KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag, the
Facility Agent's account number 11991102-02177522-
00070003 (or such other account or bank as the
Facility Agent may have specified for this
purpose); or (ii) where permitted under the Foreign
Exchange Act, pay the required amount of the Optional
Currency into the above bank account for value on
such date,
Provided that each Borrower expressly acknowledges and accepts
that notwithstanding the respective roles, responsibilities
and duties of the Facility Agent under this Agreement, each
Borrower's obligations under this Agreement shall not be
discharged until the relevant amount of the Optional Currency
required to be paid under this Agreement at such time is
actually received in the Facility Agent's bank account, as
detailed above, (or such other account or bank as the Facility
Agent may have specified for this purpose) and otherwise than
by reason of its own material negligence or wilful misconduct,
the Facility Agent will not be liable to the Borrower for any
problems with such currency conversions and/or transfers; or
(b) an amount denominated in HUF to be paid by:
(i) any of the Banks under this Agreement, such Bank
shall make the same available to the Facility Agent
by payment in HUF and in same day funds (or in such
other funds as may for the time being be customary in
Budapest for the settlement in Budapest of banking
transactions in HUF) to the Facility Agent's account
number as the Facility Agent may have specified for
this purpose); or
(ii) a Borrower, under this Agreement, such Borrower
shall make the same available to the Facility
Agent by payment in HUF and in same day funds (or in
such other funds as may for the time being be
customary in Budapest for the settlement in Budapest
of banking transactions in HUF) to in the case of
Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag,
the Facility Agent's account number 11991102-
02177508-00070010, in the case of RABA-COM
Tavkozlesi Koncesszios Reszvenytarsasag, the
Facility Agent's account number 11991102-02177498-
00070010, in the case of Papa es Tersege
Tavkozlesi Koncesszios Reszvenytarsasag, the
Facility Agent's account number 11991102-02177481-
00070010, in the case of KNC Kelet-Nograd COM
Tavkozlesi Koncesszios Reszvenytarsasag, the
Facility Agent's account number 11991102-02177522-
00070010 (or such other account or bank as the
Facility Agent may have specified for this purpose).
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19.2 Alternative Payment Arrangements If, at any time, it shall become
impracticable (by reason of any action of any governmental authority or
any change in law, exchange control regulations or any similar event)
for the Borrowers to make any payments under this Agreement in the
manner specified in Clause 19.1 (Payments to the Facility Agent), then
the Borrowers may agree with each or any of the Banks alternative
arrangements for the payment direct to such Bank of amounts due to such
Bank under this Agreement Provided that, in the absence of any such
agreement with any Bank, the Borrowers shall be obliged to make all
payments due to such Bank in the manner specified in this Agreement.
Upon reaching such agreement the Borrowers and such Bank shall
immediately notify the Facility Agent of such agreement and shall
thereafter promptly notify the Facility Agent of all payments made
direct to such Bank.
19.3 Payments by the Facility Agent Save as otherwise provided in this
Agreement, each payment received by the Facility Agent for the account
of another person pursuant to Clause 19.1 (Payments to the Facility
Agent) shall be made available by the Facility Agent to such other
person (in the case of a Bank, for the account of its Facility Office)
for value the same day by transfer to such account of such person with
such bank as such person shall have previously notified to the Facility
Agent.
19.4 No Set-off All payments required to be made by any Borrower under this
Agreement shall be calculated without reference to any set-off or
counterclaim and shall be made free and clear of and without any
deduction for or on account of any set-off or counterclaim.
19.5 Clawback Where a sum is to be paid under this Agreement to the Facility
Agent for account of another person, the Facility Agent shall not be
obliged to make the same available to that other person until it has
been able to establish to its satisfaction that it has actually
received such sum, but if it does so and it proves to be the case that
it had not actually received such sum, then the person to whom such sum
was so made available shall on request refund the same to the Facility
Agent together with an amount sufficient to indemnify the Facility
Agent against any cost or loss it may have suffered or incurred by
reason of its having paid out such sum.
20. Set-Off
20.1 Contractual Set-off At any time after the occurrence of an Event of
Default and without prejudice to the other rights or the Banks under
applicable law or the terms and conditions governing any account which
would permit the exercise of any such rights at any other time, each
Borrower authorises each Bank to apply any credit balance to which such
Borrower is entitled on any account of such Borrower with that Bank in
satisfaction of any sum due and payable from any Borrower to such Bank
under this Agreement but unpaid; for this purpose, each Bank is
authorised to purchase with the moneys standing to the credit of any
such account such other currencies as may be necessary to effect such
application.
20.2 Set-off not Mandatory No Bank shall be obliged to exercise any right
given to it by Clause 20.1 (Contractual Set-off).
21. Sharing
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21.1 Redistribution of Payments Subject to Clause 21.3 (Recoveries Through
Legal Proceedings), if at any time, the proportion which any Bank (a
"Recovering Bank") has received or recovered (whether by payment, the
exercise of a right of set-off or combination of accounts or otherwise)
in respect of its portion of any payment (a "relevant payment") to be
made under this Agreement by any Borrower for account of such
Recovering Bank and one or more other Banks is greater (the portion of
such receipt or recovery giving rise to such excess proportion being in
this Agreement called an "excess amount") than the proportion thereof
so received or recovered by the Bank or Banks so receiving or
recovering the smallest proportion thereof, then:
(a) such Recovering Bank shall inform the Facility Agent of such
receipt or recovery and pay to the Facility Agent an amount
equal to such excess amount;
(b) there shall thereupon fall due from each Borrower to such
Recovering Bank an amount equal to the amount paid out by such
Recovering Bank pursuant to paragraph (a) above, the amount so
due being, for the purposes of this Agreement, treated as if
it were an unpaid part of such Recovering Bank's portion of
such relevant payment; and
(c) the Facility Agent shall treat the amount received by it from
such Recovering Bank pursuant to paragraph (a) above as if
such amount had been received by it from a Borrower in respect
of such relevant payment and shall pay the same to the persons
entitled thereto (including such Recovering Bank) pro rata to
their respective entitlements thereto.
21.2 Repayable Recoveries If any sum (a "relevant sum") received or
recovered by a Recovering Bank in respect of any amount owing to it by
any Borrower becomes repayable and is repaid by such Recovering Bank,
then:
(a) each Bank which has received a share of such relevant sum by
reason of the implementation of Clause 21.1 (Redistribution of
Payments) shall, upon request of the Facility Agent, pay to
the Facility Agent for account of such Recovering Bank an
amount equal to its share of such relevant sum together with
such amount (if any) as is necessary to reimburse the
Recovering Bank the appropriate proportion of any interest it
shall have been obliged to pay when repaying such relevant sum
to such Borrower as aforesaid; and
(b) there shall thereupon fall due from the Borrowers to each such
Bank an amount equal to the amount paid out by it pursuant to
paragraph (a) above, the amount so due being, for the purposes
of this Agreement, treated as if it were the sum payable to
such Bank against which such Bank's share of such relevant sum
was applied.
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21.3 Recoveries Through Legal Proceedings If any Bank shall commence any
action or proceeding in any court to enforce its rights under this
Agreement after consultation with the other Banks and, as a result of
such action or proceedings or in connection with such action or
proceedings, shall receive any excess amount (as defined in Clause 21.1
(Redistribution of Payments)), then such Bank shall not be required to
share any portion of such excess amount with any Bank which has the
legal right to, but does not, join in such action or proceeding or
commence and diligently prosecute a separate action or proceeding to
enforce its rights in another court.
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PART 9 - FEES, COSTS AND EXPENSES
22. Arrangement Fees
Each Borrower shall pay to the Arranger the upfront fee specified in
the Fee Letter.
23. Costs and Expenses
23.1 Transaction Expenses The Borrowers shall, on the basis of joint and
several liability, from time to time on demand of the Facility Agent,
reimburse the Facility Agent for all legal costs, legal fees and legal
expenses together with any VAT, if any, thereon, reasonably and
properly incurred by it in connection with the negotiation,
documentation and preparation, signing of the Finance Documents on the
basis set out in the Fee Letter.
23.2 Preservation and Enforcement of Rights The Borrowers shall, on the
basis of joint and several liability, from time to time on demand of a
Finance Party, reimburse such Finance Party for all costs and expenses
(including, inter alia, legal fees and the fees of any financial
adviser retained to advise the Banks, if any) together with any VAT
thereon properly incurred in or in connection with the preservation
and/or enforcement of any of the rights of the Finance Parties under
any of the Finance Documents up to an aggregate amount equivalent to
twelve million five hundred thousand dollars (U.S.$. 12,500,000).
23.3 Stamp Taxes The Borrowers shall, on the basis of joint and several
liability, pay all stamp, registration and other taxes to which the
Finance Documents or any judgement given in connection with the Finance
Documents is or at any time may be subject and shall, from time to time
on demand of a Finance Party, indemnify such Finance Party against any
liabilities, costs, claims and expenses resulting from any failure to
pay or any delay in paying any such tax.
23.4 Facility Agent's and Security Agent's Costs Each Borrower shall, on the
basis of joint and several liability, from time to time on demand of
the Facility Agent and/or the Security Agent (and without prejudice to
the provisions of Clause 23.2 (Preservation and Enforcement of Rights)
and Clause 29.2 (Amendment Costs) compensate the Facility Agent and/or
the Security Agent, as applicable, at such daily and/or hourly rates as
the Facility Agent and/or the Security Agent, as applicable, shall in
the context of market rates in Hungary from time to time reasonably
determine for the time and expenditure, all costs and expenses
(including telephone, fax, copying, travel and personnel costs)
incurred by the Facility Agent and/or the Security Agent, as
applicable, in connection with its taking such action as it may deem
appropriate or in complying with any instructions from an Instructing
Group or any request by a Borrower in connection with:
(a) the granting or proposed granting of any waiver or consent
requested under this Agreement by a Borrower;
(b) (i) in the case of an instruction from an Instructing Group
any breach by a Borrower of its obligations under this
Agreement; and (ii) in the case of any request from a
Borrower, any actual, potential or suspected breach by the
Borrower of its obligations under this Agreement;
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(c) the occurrence of any event which is an Event of Default or
a Potential Event of Default; or
(d) any amendment or proposed amendment to this Agreement
requested by Borrower.
23.5 Banks' Liabilities for Costs If the Borrowers fail to perform any of
their respective obligations under this Clause 23 (Costs and Expenses),
each Bank shall, in the proportion borne by its share of the Loan (or,
if no Advance has been made, its Available Commitment) to the amount of
the Loan (or, if no Advance have been made, the Available Facility) for
the time being (or, if the Loan has been repaid in full, immediately
prior to the final repayment thereof), indemnify each of the Arranger,
the Facility Agent and the Security Agent against any loss incurred by
any of them as a result of such failure and each Borrower shall, on the
basis of joint and several liability, forthwith reimburse each Bank for
any payment made by it pursuant to this Clause 23.5.
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PART 10 - AGENCY PROVISIONS
24. The Facility Agent, the Security Agent, the Arranger and the Banks
24.1 Appointment of the Facility Agent and the Security Agent The Arranger
and each Bank hereby appoints:
(a) the Facility Agent to act as its agent in connection with
this Agreement and authorises the Facility Agent to exercise
such rights, powers, authorities and discretions as are
specifically delegated to the Facility Agent by the terms of
this Agreement together with all such rights, powers,
authorities and discretions as are reasonably incidental
thereto as well as acting to ensure that, so far as
reasonably possible, all communications between the
Borrowers and the Banks are made through the Facility Agent
(so that all communications from the Borrowers to the
Arranger, the Security Agent or to any Bank (being a member
of an Instructing Group or otherwise) will only be made
through the Facility Agent and all communications from
the Arranger, the Security Agent, an Instructing Group or any
Bank (being a member of an Instructing Group or otherwise)
to the Borrowers will also only be made through the Facility
Agent) Provided that an Instructing Group may in exceptional
circumstances be entitled to communicate directly with the
Borrowers; and
(b) the Security Agent to:
(i) act in connection with certain encumbrances created by
and constituted in the Security Agreements, given by
the Obligors in respect of this Agreement and
authorises the Security Agent to exercise such rights,
powers, authorities and discretions as are
specifically delegated to the Security Agent by the
terms of this Agreement and those contained in such
documents together with all such rights, powers,
authorities and discretions as are reasonably
incidental thereto; and
(ii) upon the enforcement of any of the rights constituted
in such Security Agreements, act in respect of the
holding of the Optional Currency and HUF of the
Borrowers, the conversion of such HUF into the
Optional Currency or the Optional Currency into HUF
and upon the conversion of HUF into the Optional
Currency the subsequent transfer of such Optional
Currency to the bank account specified by the Facility
Agent.
24.2 Facility Agent's and the Security Agent's Discretions Each of the
Facility Agent and the Security Agent may:
(a) assume, unless it has, in its capacity as agent for the Banks,
received notice to the contrary from any other party to this
Agreement, that: (i) any representation made by a Borrower in
connection with this Agreement is true; (ii) no Event of
Default or Potential Event of Default has occurred; (iii) no
Borrower is in breach of or default under its obligations
under this Agreement; and (iv) any right, power, authority or
discretion vested in this Agreement upon an Instructing Group,
the Banks or any other person or group of persons has not been
exercised;
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(b) assume that the Facility Office of each Bank is that
identified with its signature below (or, in the case of a
Transferee, at the end of the Transfer Certificate to which it
is a party as Transferee) until it has received from such Bank
a notice designating some other office of such Bank to replace
its Facility Office and act upon any such notice until the
same is superseded by a further such notice;
(c) engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or
services may to it seem necessary, expedient or desirable and
rely upon any advice so obtained;
(d) rely as to any matters of fact which might reasonably be
expected to be within the knowledge of a Borrower upon a
certificate signed by or on behalf of such Borrower;
(e) rely upon any communication or document believed by it to be
genuine;
(f) refrain from exercising any right, power or discretion vested
in it as agent under this Agreement unless and until
instructed by an Instructing Group as to whether or not such
right, power or discretion is to be exercised and, if it is to
be exercised, as to the manner in which it should be
exercised; and
(g) refrain from acting in accordance with any instructions of an
Instructing Group to begin any legal action or proceeding
arising out of or in connection with this Agreement until it
shall have received such security as it may require (whether
by way of payment in advance or otherwise) for all costs,
claims, losses, expenses (including legal fees) and
liabilities together with any VAT thereon which it will or may
expend or incur in complying with such instructions.
24.3 Facility Agent's and the Security Agent's Obligations Each of the
Facility Agent and the Security Agent shall:
(a) promptly inform each Bank of the contents of any notice or
document received by it in its capacity as Facility Agent or
Security Agent (as appropriate) from a Borrower under this
Agreement;
(b) promptly notify each Bank of the occurrence of any Event of
Default or any default by a Borrower in the due performance of
or compliance with its obligations under this Agreement of
which the Facility Agent or Security Agent (as appropriate)
has notice from any other party to this Agreement;
(c) save as otherwise provided in this Agreement, act as agent
under this Agreement in accordance with any instructions given
to it by an Instructing Group, which instructions shall be
binding on the Arranger and the Banks;
(d) if so instructed by an Instructing Group, refrain from
exercising any right, power or discretion vested in it as
agent under this Agreement; and
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(e) in respect of any amount of the Loan repaid or prepaid, or
arising as a result of the enforcement of any rights or
benefits arising under this Agreement or under the Security
Agreements, and subject to the terms therein, distribute such
amount(s) between the Banks in accordance with each Bank's
participation in the Loan at such time.
24.4 Excluded Obligations Notwithstanding anything to the contrary expressed
or implied in this Agreement, none of the Arranger, the Facility Agent
or the Security Agent shall:
(a) be bound to enquire as to: (i) whether or not any
representation made by any Borrower in connection with this
Agreement is true; (ii) the occurrence or otherwise of any
Event of Default or Potential Event of Default; (iii) the
performance by any Borrower of its obligations under this
Agreement; or (iv) any breach of or default by the Borrower of
or under its obligations under this Agreement;
(b) be bound to account to any Bank for any sum or the profit
element of any sum received by it for its own account;
(c) be bound to disclose to any other person any information
relating to a Borrower if such disclosure would or might in
its opinion constitute a breach of any law or regulation or be
otherwise actionable at the suit of any person; or
(d) be under any obligations other than those for which express
provision is made in this Agreement.
24.5 Indemnification Each Bank shall, from time to time on demand by the
Facility Agent and/or the Security Agent indemnify the Facility Agent
and/or the Security Agent in the proportion its share the Loan (or, if
no Advance has been made, its Available Commitment) bears to the amount
of the Loan (or, if no Advance has been made, the Available Facility)
at the time of such demand (or, if the Loan has then been repaid in
full, immediately prior to the final repayment thereof), against any
and all costs, claims, losses, expenses (including legal fees) and
liabilities together with any VAT thereon which the Facility Agent
and/or the Security Agent may incur, otherwise than by reason of its
own gross negligence or wilful misconduct, in acting in its capacity as
agent under this Agreement.
24.6 Exclusion of Liabilities None of the Arranger, the Facility Agent or
the Security Agent nor any of them accepts any responsibility for the
accuracy and/or completeness of any information supplied by the
Borrowers in connection with this Agreement or for the legality,
validity, effectiveness, adequacy or enforceability of any of the
Finance Documents and none of the Arranger, the Facility Agent or the
Security Agent nor any of them shall be under any liability to the
Banks as a result of taking or omitting to take any action in relation
to this Agreement, save in the case of gross negligence or wilful
misconduct.
24.7 No Actions Each of the Banks agrees that it will not assert or seek to
assert against any director, officer or employee of the Arranger, the
Facility Agent or the Security Agent any claim it might have against
any of them in respect of the matters referred to in Clause 24.6
(Exclusion of Liabilities).
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24.8 Business with the Borrower The Arranger, the Facility Agent and the
Security Agent may accept deposits from, lend money to and generally
engage in any kind of banking or other business with any Borrower or
with any of its affiliates.
24.9 Resignation of the Facility Agent The Facility Agent may resign its
appointment under this Agreement at any time without assigning any
reason therefor by giving not less than thirty (30) days' prior written
notice to that effect to each of the other parties to this Agreement
Provided that no such resignation shall be effective until a successor
for the Facility Agent is appointed in accordance with the succeeding
provisions of this Clause 24 (The Facility Agent, the Security Agent,
the Arranger and the Banks).
24.10 Successor Facility Agent If the Facility Agent gives notice of its
resignation pursuant to Clause 24.9 (Resignation of the Facility
Agent), then subject to the prior written consent of Borrowers (such
consent not to be unreasonably withheld or delayed), any reputable and
experienced bank or other financial institution may be appointed as a
successor to the Facility Agent by an Instructing Group during the
period of such notice but, if no such successor is so appointed, the
Facility Agent may appoint such a successor itself.
24.11 Rights and Obligations of the Facility Agent If a successor to the
Facility Agent is appointed under the provisions of Clause 24.10
(Successor Facility Agent), then: (a) the retiring Facility Agent shall
be discharged from any further obligation under this Agreement but
shall remain entitled to the benefit of the provisions of this Clause
24 (The Facility Agent, the Security Agent, the Arranger and the
Banks), and (b) its successor and each of the other parties to this
Agreement shall have the same rights and obligations amongst themselves
as they would have had if such successor had been a party to this
Agreement.
24.12 Resignation of the Security Agent The Security Agent may resign its
appointment under this Agreement at any time without assigning any
reason therefor by giving not less than thirty (30) days' prior written
notice to that effect to each of the other parties to this Agreement
Provided that no such resignation shall be effective until a successor
for the Security Agent is appointed in accordance with the succeeding
provisions of this Clause 24 (The Facility Agent, the Security Agent,
the Arranger and the Banks).
24.13 Successor Security Agent If the Security Agent gives notice of its
resignation pursuant to Clause 24.12 (Resignation of the Security
Agent), then subject to the prior written consent of Borrowers (such
consent not to be unreasonably withheld or delayed), any reputable and
experienced bank or other financial institution may be appointed as a
successor to the Security Agent by an Instructing Group during the
period of such notice but, if no such successor is so appointed, the
Security Agent may appoint such a successor itself.
24.14 Rights and Obligations of the Security Agent If a successor to the
Security Agent is appointed under the provisions of Clause 24.13
(Successor Security Agent), then: (a) the retiring Security Agent shall
be discharged from any further obligation under this Agreement but
shall remain entitled to the benefit of the provisions of this Clause
24 (The Facility Agent, the Security Agent, the Arranger and the
Banks), and (b) its successor and each of the other parties to this
Agreement shall have the same rights and obligations amongst themselves
as they would have had if such successor had been a party to this
Agreement.
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24.15 Own Responsibility It is understood and agreed by each Bank that it has
itself been, and will continue to be, solely responsible for making its
own independent appraisal of and investigations into the financial
condition, creditworthiness, condition, affairs, status and nature of
each of the Borrowers and, accordingly, each Bank represents and
warrants to each of the Arranger, the Facility Agent and the Security
Agent that it has not relied on and will not hereafter rely on the
Arranger, the Facility Agent or the Security Agent nor any of them:
(a) to check or enquire on its behalf into the adequacy, accuracy
or completeness of any information provided by the Borrowers
in connection with this Agreement or the transactions
contemplated by this Agreement (whether or not such
information has been or is hereafter circulated to such Bank
by the Arranger, the Facility Agent, the Security Agent or any
of them); or
(b) to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or
nature of the Borrowers.
24.16 Agency Division Separate In acting as agent under this Agreement for
the Banks, the Facility Agent and the Security Agent shall be regarded
as acting through their respective agency divisions which shall be
treated as separate entities from any other of their divisions or
departments and, notwithstanding the foregoing provisions of this
Clause 24 (The Facility Agent, the Security Agent, the Arranger and the
Banks), any information received by some other division or department
of the Facility Agent or the Security Agent may be treated as
confidential and shall not be regarded as having been given to the
Facility Agent's or the Security Agent's agency division.
24.17 Confidential Information Notwithstanding anything to the contrary
expressed or implied in this Agreement and without prejudice to the
provisions of Clause 24.16 (Agency Division Separate), the Facility
Agent and the Security Agent shall not as between each of themselves
and the Banks be bound to disclose to any Bank or other person any
information which is supplied by a Borrower to the Facility Agent or
the Security Agent in its capacity as agent under this Agreement for
the Banks and which is identified by such Borrower at the time it is so
supplied as being confidential information Provided that the consent of
any Borrower to such disclosure shall not be required in relation to
any information which in the opinion of the Facility Agent or the
Security Agent relates to an Event of Default or Potential Event of
Default or in respect of which the Banks have given a confidentiality
undertaking in a form satisfactory to the Facility Agent, the Security
Agent and the Borrowers.
24.18 Borrower's Reliance Nothing contained in this Agreement shall be
interpreted to impose, nor shall the Borrowers have, any obligation to
inquire into the authority of the Facility Agent or the Security Agent
in its performance of their respective duties under this Agreement or
any other Finance Documents to which they are a party and the Borrowers
shall be entitled to rely upon any notice, certificate, permission,
consent or other document received by such Borrower from the Facility
Agent or the Security Agent for any purpose under this Agreement.
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24.19 Security Agreements Each Borrower and each Finance Party acknowledges
and unconditionally and irrevocably agrees that the Security Agent
shall be entitled to hold the encumbrances created by and constituted
in the Security Agreements for the benefit of each Finance Party and
that the Security Agent shall be freely entitled to consider the
allocation and to then allocate the proceeds arising from the
enforcement of such encumbrances or from any sale or other disposal of
the applicable assets, as provided for in the Finance Documents,
towards discharging any Borrower's obligations arising under this
Agreement and/or any other Finance Document as the Security Agent in
its sole discretion may see fit.
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PART 11 - ASSIGNMENTS AND TRANSFERS
25. Assignments and Transfers
25.1 Binding Agreement This Agreement shall be binding upon and enure to the
benefit of each party to this Agreement and its or any subsequent
successors, Transferees and assigns.
25.2 No Assignments and Transfers by the Borrowers No Borrower shall be
entitled to assign or transfer all or any of its rights, benefits and
obligations under this Agreement.
25.3 Assignments and Transfers by Banks Any Bank may, at any time, (i)
assign all or any of its rights and benefits under this Agreement to an
affiliate or to another office of such Bank which is at such time a
Qualifying Bank; or (ii) subject to the prior written consent, with
attached conditions, if any, of the Borrowers, such consent not to be
unreasonably withheld or delayed, transfer in accordance with Clause
25.5 (Transfers by Banks) to any other bank or financial institution
which at such time does not have a material direct equity and/or other
ownership interest in any person which is a direct competitor of the
Group's business and operations in Hungary all or any of its rights,
benefits and obligations under this Agreement.
25.4 Assignments by Banks If any Bank assigns all or any of its rights and
benefits under this Agreement in accordance with Clause 25.3
(Assignments and Transfers by Banks), then, unless and until the
assignee has agreed with the Facility Agent, the Security Agent, the
Arranger and the other Banks that it shall be under the same
obligations towards each of them as it would have been under if it had
been an original party to this Agreement as a Bank (whereupon such
assignee shall become a party to this Agreement as a "Bank"), the
Facility Agent, the Security Agent, the Arranger and the other Banks
shall not be obliged to recognise such assignee as having the rights
against each of them which it would have had if it had been such a
party to this Agreement.
25.5 Transfers by Banks If any Bank wishes to transfer all or any of its
rights, benefits and/or obligations under this Agreement as
contemplated in Clause 25.3 (Assignments and Transfers by Banks), then
such transfer may be effected by the delivery to the Facility Agent of
a duly completed and duly executed Transfer Certificate in which event,
on the later of the Transfer Date specified in such Transfer
Certificate and the fifth business day after (or such earlier business
day endorsed by the Facility Agent on such Transfer Certificate falling
on or after) the date of delivery of such Transfer Certificate to the
Facility Agent:
(a) to the extent that in such Transfer Certificate the Bank party
thereto seeks to transfer its rights, benefits and obligations
under this Agreement, the Borrowers and such Bank shall be
released from further obligations towards one another under
this Agreement and their respective rights against one another
shall be cancelled (such rights and obligations being referred
to in this Clause 25.5 as "discharged rights and
obligations");
(b) the Borrowers and the Transferee party thereto shall assume
obligations towards one another and/or acquire rights against
one another which differ from such discharged rights and
obligations only insofar as the Borrowers and such Transferee
have assumed and/or acquired the same in place of the
Borrowers and such Bank;
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(c) the Facility Agent, the Security Agent, the Arranger, such
Transferee and the other Banks shall acquire the same rights
and benefits and assume the same obligations between
themselves as they would have acquired and assumed had such
Transferee been an original party to this Agreement as a Bank
with the rights, benefits and/or obligations acquired or
assumed by it as a result of such transfer; and
(d) such Transferee shall become a party to this Agreement as a "Bank".
25.6 Transfer Fees On the date upon which a transfer takes effect pursuant
to Clause 25.5 (Transfers by Banks) the Transferee in respect of such
transfer shall pay to the Facility Agent for its own account a transfer
fee of U.S.$ 750.
25.7 Disclosure of Information Any Finance Party (or a person acting on its
behalf) may disclose to any actual or potential assignee, transferee,
replacement or successor of such Finance Party, or to any of such
person's advisers, or with the prior written consent of the Borrowers
(such consent not to be unreasonably withheld or delayed), to any
person who may otherwise enter into contractual relations with such
Finance Party in relation to this Agreement, such information about the
Borrowers as such Finance Party shall consider appropriate Provided
that each such actual or potential assignee, transferee, replacement or
successor of such Finance Party or person or participant in this
Agreement first provides such Finance Party and/or person with a
confidentiality undertaking in favour of the Borrowers and such Finance
Party, Security Agent and/or person, requiring such actual or potential
assignee, transferee, replacement or successor of such Finance Party or
person or participant in this Agreement, or other person to maintain
the same level of confidentiality required from such Finance Party at
such time Provided Further that any person shall be freely entitled to,
at all times, and without being in breach of this Clause 25.7: (i)
comply with any order of a court of competent jurisdiction (whether in
pursuance of any procedure for discovering documents or otherwise);
(ii) act in accordance with the requirements of any competent
governmental, banking, or taxation authority; and (iii) freely disclose
any information that is, at such time, already in the public domain,
otherwise than by a breach by any person of the provisions of this
Clause 25.7 and, in case of a disclosure under (i) to (iii) (inclusive)
above, such person shall to the extent practicable at such time, give
prior notice to the Borrowers and shall, in any event, notify the
Borrowers of such disclosure (subject to compliance with any orders or
express requirements to the contrary).
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PART 12 - MISCELLANEOUS
26. Calculations and Evidence of Debt
26.1 Basis of Accrual Interest and commitment commission shall accrue from
day to day and shall be calculated on the basis of a year of 360 days
(or, in any case where market practice differs, in accordance with
market practice) and the actual number of days elapsed.
26.2 Quotations If on any occasion a Reference Bank or Bank fails to supply
the Facility Agent with a quotation required of it under the foregoing
provisions of this Agreement, the rate for which such quotation was
required shall be determined from those quotations which are supplied
to the Facility Agent.
26.3 Evidence of Debt Each Bank shall maintain in accordance with its usual
practice accounts evidencing the amounts from time to time lent by and
owing to it under this Agreement.
26.4 Control Accounts The Facility Agent shall maintain on its books a
control account or accounts in which shall be recorded: (a) the amount
of any Advance made or arising under this Agreement and each Bank's
share therein; (b) the amount of all principal, interest and other sums
due or to become due from each Borrower to any of the Banks under this
Agreement and each Bank's share therein; and (c) the amount of any sum
received or recovered by the Facility Agent under this Agreement and
each Bank's share therein.
26.5 Prima Facie Evidence In any legal action or proceeding arising out of
or in connection with this Agreement, the entries made in the accounts
maintained pursuant to Clause 26.3 (Evidence of Debt) and Clause 26.4
(Control Accounts) shall be prima facie evidence of the existence and
amounts of the specified obligations of each of the Borrowers.
26.6 Certificates of Banks A certificate of a Bank as to: (a) the amount by
which a sum payable to it under this Agreement is to be increased under
Clause 9.1 (Tax Gross-up); or (b) the amount for the time being
required to indemnify it against any such cost, payment or liability as
is mentioned in Clause 9.2 (Tax Indemnity) or Clause 11.1 (Increased
Costs), shall, in the absence of manifest error, be prima facie
evidence of the existence and amounts of the specified obligations of
the Borrowers and such certificate shall be provided to the Borrower
and shall set out in reasonable detail the basis of any such claim,
details of the calculations (and workings) of such claim and if
appropriate, supporting documentary evidence Provided that nothing in
this Agreement shall require any Bank to disclose any confidential
information whatsoever relating to the organisation of its affairs.
26.7 Claims A Bank intending to make a claim pursuant to this Agreement
shall, otherwise than as already expressly provided for in this
Agreement, notify and provide a certificate to the Facility Agent
setting out in reasonable detail the event by reason of which it is
entitled to do so, the basis of its claim, details of the calculations
(and workings) of such claim and, if appropriate, supporting
documentary evidence, whereupon the Facility Agent shall notify the
Borrowers thereof and provide a copy of such certificate Provided that
nothing in this Agreement shall require such Bank to disclose any
confidential information relating to the organisation of its affairs.
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27. Remedies and Waivers, Partial Invalidity
27.1 Remedies and Waivers No failure to exercise, nor any delay in
exercising, on the part of the Facility Agent, the Security Agent, the
Arranger and the Banks or any of them, any right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right or remedy prevent any further or other
exercise thereof or the exercise of any other right or remedy. The
rights and remedies in this Agreement provided are cumulative and not
exclusive of any rights or remedies provided by law.
27.2 Partial Invalidity If, at any time, any provision of this Agreement is
or becomes illegal, invalid or unenforceable in any respect under the
law of any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Agreement nor the
legality, validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or impaired
thereby.
28. Notices
28.1 Communications in Writing Each communication to be made under this
Agreement shall be made in writing and, unless otherwise stated, shall
be made by fax or letter.
28.2 Delivery Any communication or document to be made or delivered by one
person to another pursuant to this Agreement shall (unless that other
person has by fifteen (15) days' written notice to the Facility Agent
specified another address) be made or delivered to that other person at
the address identified with its signature below (or, in the case of a
Transferee, at the end of the Transfer Certificate to which it is a
party as Transferee) and shall be deemed to have been made or delivered
in the case of any communication made:
(a) by letter, when left at that address or (as the case may be)
ten (10) days after being deposited in the post postage
prepaid in an envelope addressed to it at that address;
(b) by facsimile, when dispatched Provided that: (a) a
confirmation of uninterrupted transmission by a
transmission report is received; and (b) there having been
no telephonic communication by the recipient to the sender
(any such telephonic communication to be confirmed in
writing) that the facsimile has not been received in legible
form within 3 hours after sending, if sent on a business day
between the hours of 9:00 a.m. and 4:00 p.m. in the
recipient's time zone or if sent other than between the hours
of 9:00 a.m. and 4:00 p.m. in the recipient's time zone
on a business day, by noon on the next following business day.
For the purposes of this sub-clause, a business day is a day
(other than a Saturday or Sunday) on which banks
(generally) are open for business in the places where both the
sender and the recipient of the facsimile are situated
Provided that any communication or document to be made or delivered to
the Facility Agent or to the Security Agent shall be effective only
when received by the Facility Agent or the Security Agent (as
appropriate) and then only if the same is expressly marked for the
attention of the department or officer identified with the Facility
Agent's or Security Agent's signature below (or such other department
or officer as the Facility Agent or the Security Agent shall from time
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to time specify for this purpose) Provided Further that in respect of
any communication or document to be made or delivered under this
Agreement to any Obligor by any Finance Party, such Finance Party will
take all reasonable and practicable efforts to procure and ensure that
such communication or document is delivered as indicated with such
Obligor's signature below.
28.3 Hungarian Language Each communication and document made or delivered by
one party to another pursuant to this Agreement shall be in the
Hungarian language Provided that any Finance Party receiving such
communication or document shall be entitled to require the prompt
translation of such communication or document into English, failing
which such Finance Party shall be entitled to procure such translation
into English at the Borrowers' cost and expense.
29. Amendments
29.1 Amendment Procedures The Facility Agent (together with the Security
Agent), if it (they) has (have) the prior written consent of an
Instructing Group, and each of the Borrowers may from time to time
agree in writing to amend this Agreement or to waive, prospectively or
retrospectively, any of the requirements of this Agreement and any
amendments or waivers so agreed shall be binding on all the Banks, the
Arranger and each of the Borrowers Provided that:
(a) no such waiver or amendment shall subject any party to this
Agreement to any new or additional obligations without the
consent of such party;
(b) without the prior written consent of all the Banks, no such
amendment or waiver shall:
(i) amend or waive any provision of Clause 21 (Sharing)
or this Clause 29 (Amendments);
(ii) reduce the proportion of any amount received or
recovered (whether by way of set-off, combination of
accounts or otherwise) in respect of any amount due
from a Borrower under this Agreement to which any
Bank is entitled;
(iii) change the principal amount of or currency of any
Advance, or defer the Final Maturity Date;
(iv) change the Margin, change the amount or currency or
defer the date for any payment of interest, fees or
any other amount payable under this Agreement to all
or any of the Finance Parties;
(v) defer the Termination Date;
(vi) amend the definition of Instructing Group; or
(vii) amend any provision which contemplates the need for
the consent or approval of all the Banks; or
(viii) in respect of the Security Agreements, when taken
with any other relevant amendments and/or waivers,
have an overall material adverse effect on the
position of the Banks; and
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(c) notwithstanding any other provisions of this Agreement, the
Facility Agent (and/or the Security Agent) shall not be
obliged to agree to any such amendment or waiver if the same
would:
(i) amend or waive any provision of this Clause 29
(Amendments), Clause 23 (Costs and Expenses) or Part
10 (Agency Provisions); or
(ii) otherwise amend or waive any of the Facility Agent's
or the Security Agent's rights under this Agreement
or subject the Facility Agent, the Security Agent or
the Arranger to any additional obligations under this
Agreement.
29.2 Amendment Costs If any Borrower requests any amendment or waiver in
accordance with Clause 29.1 (Amendment Procedures) then the Borrowers
shall, on the basis of joint and several liability on demand of the
Facility Agent, reimburse each Finance Party for all reasonable costs
and expenses (including legal fees) together with any VAT thereon
incurred by such Finance Party in responding to or complying with such
request.
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PART 13 - LAW, ARBITRATION AND LANGUAGE
30. Law
This Agreement shall be governed by, and shall be construed in
accordance with, Hungarian law.
31. Arbitration
31.1 Arbitration If any dispute, as between any Borrower and one or more of
the Arranger, the Facility Agent, the Security Agent, or any Bank(s),
arises in respect of this Agreement, including, but not limited to, any
question as to its existence, validity or termination, such dispute
shall be referred to and finally resolved by arbitration in accordance
with the Arbitration Rules of the United Nations Commission on
International Trade Law ("UNCITRAL") which are applicable at the time
of reference to such arbitration and which are deemed to be
incorporated by reference into this Clause 31.1. Any arbitration
proceedings commenced pursuant to this Clause 31.1 shall be conducted
by a tribunal comprising three (3) arbitrators, the first arbitrator
selected by the relevant Borrower(s), the second arbitrator selected by
the relevant Arranger, Facility Agent, the Security Agent, or Bank(s)
and the third arbitrator selected by agreement by the first and second
arbitrator, or failing such agreement such third arbitrator shall be
appointed by the Court of Arbitration attached to the Hungarian Chamber
of Commerce and Industry. The place and seat of any arbitration
proceedings commenced pursuant to this Clause 31.1 shall be Budapest,
Hungary. The language in which such arbitration shall be conducted
shall be Hungarian. Any judgement or determination rendered shall be
final and binding on the parties thereto and may be entered in any
court having jurisdiction or application may be made to such court for
an order of enforcement as the case may require. No failure or delay in
exercising any rights of any of the Arranger, the Facility Agent, the
Security Agent or the Bank(s) under this Agreement shall operate as a
waiver, or preclude the further exercise of such rights.
31.2 Service of Process for Arbitration Proceedings Each Borrower agrees
that the process by which any arbitration proceedings are begun may be
served on it by being delivered to the address identified with its
signature below or other its registered office for the time being. If
the appointment of the person(s) mentioned in this Clause 31.2 ceases
to be effective the relevant Borrower(s) shall immediately appoint a
further person in Hungary to act on its behalf in Hungary as agent for
the commencement of arbitration proceedings and, failing such
appointment within fifteen (15) days, the Facility Agent shall be
entitled to appoint such a person by notice to the Borrower. Nothing
contained in this Agreement shall affect the right to serve process in
any other manner permitted by law.
31.3 Consent to Enforcement Each Borrower hereby consents generally in
respect of any proceedings to the giving of any relief or the issue of
any process in connection with such proceedings including the making,
enforcement or execution against any property whatsoever (irrespective
of its use or intended use) of any order or judgement which may be made
or given in such proceedings.
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32. Language
This Agreement shall be executed in the English language. This
Agreement may be translated into the Hungarian language. In the event
that any dispute or question of interpretation arises, the English
language version shall prevail.
AS WITNESS the hands of the duly authorised representatives of the parties to
this Agreement the day and year first before written.
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HUNGARIAN TELEPHONE AND CABLE CORP.
2,428,572 SHARES OF COMMON STOCK
AND
$25,000,000 AGGREGATE PRINCIPAL AMOUNT
OF
FLOATING RATE UNSECURED NOTES DUE 2007
WITH
WARRANTS TO PURCHASE
2,500,000 SHARES OF COMMON STOCK
SECURITIES PURCHASE AGREEMENT
DATED MAY 12, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.....................................................................1
SECTION 1.1. AUTHORIZATION OF THE SECURITIES.............................1
SECTION 1.2. SALE AND PURCHASE OF THE SHARES, THE NOTES AND WARRANTS......2
ARTICLE II....................................................................2
ARTICLE III...................................................................3
SECTION 3.1. ORGANIZATION AND EXISTENCE...................................3
SECTION 3.2. SUBSIDIARIES.................................................3
SECTION 3.3. CAPITALIZATION...............................................3
SECTION 3.4. AUTHORIZATION; BINDING OBLIGATIONS...........................4
SECTION 3.5. COMPLIANCE WITH INSTRUMENTS, ETC.............................5
SECTION 3.6. LITIGATION...................................................5
SECTION 3.7. FINANCIAL STATEMENTS; TAXES..................................5
SECTION 3.8. TAXES........................................................6
SECTION 3.9. OFFERING.....................................................6
SECTION 3.10. PERMITS; GOVERNMENTAL AND OTHER APPROVALS...................6
SECTION 3.11. FORM 10-K...................................................6
SECTION 3.12. REGISTRATION RIGHTS.........................................6
SECTION 3.13. ORDINARY COURSE; NO MATERIAL ADVERSE CHANGE.................7
SECTION 3.14. DISCLOSURE..................................................7
SECTION 3.15. REPRESENTATIONS AND WARRANTIES IN THE BRIDGE LOAN AGREEMENT.7
ARTICLE IV....................................................................7
SECTION 4.1. REPRESENTATIONS AND WARRANTIES CORRECT.......................7
SECTION 4.2. PERFORMANCE..................................................7
SECTION 4.3. COMPLIANCE CERTIFICATE.......................................8
SECTION 4.4. NO IMPEDIMENTS...............................................8
SECTION 4.5. NO MATERIAL ADVERSE CHANGE...................................8
SECTION 4.6. LEGAL INVESTMENT.............................................8
SECTION 4.7. QUALIFICATIONS...............................................8
SECTION 4.8. ISSUANCE TAXES...............................................8
SECTION 4.9. PROCEEDINGS AND OTHER DOCUMENTS..............................8
SECTION 4.10. OPINION OF COUNSEL..........................................8
SECTION 4.11. CONSENTS, WAIVERS, ETC......................................9
SECTION 4.12. OTHER MATTERS...............................................9
SECTION 4.13. CONDITIONS IN THE BRIDGE LOAN AGREEMENT.....................9
ARTICLE V.....................................................................9
SECTION 5.1. PAYMENT OF PURCHASE PRICE....................................9
SECTION 5.2. PERFORMANCE..................................................9
ARTICLE VI...................................................................10
SECTION 6.1. REPORTS.....................................................10
SECTION 6.2. ACCOUNTS AND RECORDS........................................12
SECTION 6.3. INSPECTION..................................................12
SECTION 6.4. INDEPENDENT ACCOUNTANTS.....................................12
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SECTION 6.5. RULE 144A INFORMATION.......................................13
SECTION 6.6. USE OF PROCEEDS.............................................13
SECTION 6.7. SEAT ON BOARD OF DIRECTORS..................................13
SECTION 6.7. FURTHER ASSURANCES..........................................13
ARTICLE VII..................................................................14
SECTION 7.1 SURVIVAL......................................................14
SECTION 7.2 INDEMNIFICATION...............................................14
SECTION 7.3 CERTAIN DEFINITIONS AND LIMITATIONS...........................14
SECTION 7.4 PROCEDURES...................................................15
ARTICLE VIII.................................................................16
SECTION 8.1 RESTRICTIONS OF TRANSFER OF SHARES...........................16
SECTION 8.2. RIGHT OF FIRST REFUSAL......................................16
ARTICLE IX...................................................................17
SECTION 9.1 AMENDMENT AND WAIVER.........................................17
SECTION 9.2. BINDING EFFECT..............................................17
ARTICLE X....................................................................18
ARTICLE XI...................................................................18
ARTICLE XII..................................................................18
ARTICLE XIII.................................................................19
SECTION 13.1 GOVERNING LAW...............................................19
SECTION 13.2 CONSENT OF JURISDICTION....................................19
SECTION 13.3 SUCCESSORS AND ASSIGNS......................................20
SECTION 13.4 ENTIRE AGREEMENT............................................20
SECTION 13.5 NOTICES, ETC................................................20
SECTION 13.6 DELAYS OR OMISSIONS.........................................21
SECTION 13.7 SEVERABILITY................................................22
SECTION 13.8 AGENT'S FEES................................................22
SECTION 13.9 EXPENSES....................................................22
SECTION 13.10 TITLES AND SUBTITLES.......................................22
SECTION 13.11 COUNTERPARTS...............................................22
EXHIBITS AND SCHEDULES
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Form of Legal Opinion
Schedule 3.2 - Subsidiaries
Schedule 3.3(a) - Derivative Securities
Schedule 3.3(b) - Preemptive Rights
Schedule 3.5 - Conflicts, Breaches
Schedule 3.6 - Litigation
Schedule 3.10 - Permits
Schedule 3.11 - Registration Rights
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<PAGE>
SECURITIES PURCHASE AGREEMENT dated as of May 12, 1999 (this
"Agreement"), between Hungarian Telephone and Cable Corp., a Delaware
corporation (the "Company"), and Postabank es Takarekpenztar Rt., a Hungarian
commercial bank (the "Bank").
WHEREAS, the Bank, as lender, Hungarotel Tavkozlesi Rt. ("Hungarotel"),
Papa es Tersege Telefon Koncesszios Rt. ("Papatel"), Kelet-Nograd Com.
("Kelet-Nograd"), RABA-Com Tavkozlesi es Telekommunikacios Koncesszios Rt.
("Rabatel") and HTCC Consulting Rt. ("HTCC Consulting"), as borrowers
(collectively the "Borrowers"), and the Company, as guarantor, entered into a
Multi-Currency 1996 Credit Facility Agreement, dated October 10, 1996, as well
as individual Loan Agreements between the Bank and each of the Borrowers
(collectively, the "1996 Credit Facility Agreement"); and
WHEREAS, the parties desire to negotiate a restructuring of the
Borrowers' and the Company's obligations under the 1996 Credit Facility
Agreement; and
WHEREAS, as part of such restructuring, the Bank, as lender, and each
of Hungarotel, Papatel, Kelet-Nograd and Rabatel, as borrowers respectively,
have entered into individual Loan Agreements dated the date hereof
(collectively, "Bridge Loan Agreement"), with respect to which the Company and
HTCC Consulting will act as guarantors; and
WHEREAS, as part of such restructuring, the Bank wishes to purchase
from the Company, and the Company wishes to issue and sell to the Bank, (i)
2,428,572 shares of the Common Stock, par value $.001 per share, of the Company
(the "Common Stock"), and (ii) $25,000,000 aggregate principal amount of
Floating Rate Unsecured Notes due 2007 of the Company (the "Notes") with
detachable warrants (the "Warrants") to purchase an aggregate of 2,500,000
shares of Common Stock; and
WHEREAS, the proceeds from the issuance and sale of the Common Stock
and the Notes with detachable Warrants will be provided by the Company to one or
more of the Borrowers to be applied to the repayments of amounts outstanding
under the 1996 Credit Facility Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
ARTICLE I
AUTHORIZATION, AND, AS APPLICABLE, SALE AND PURCHASE, OF THE
SHARES, THE NOTES AND THE WARRANTS
SECTION 1.1. Authorization of the Securities; Detachability.
(a) The Company has authorized (i) the issue and sale of up to
2,428,572 shares of Common Stock (the "Shares") and (ii) the issue of the Notes,
the terms of which shall be substantially as set forth on Exhibit A attached
hereto, with detachable Warrants, the terms of which shall be substantially as
set forth on Exhibit B attached hereto. The Shares, the Notes and the Warrants
are collectively referred to herein as the "Securities"; the term "Warrant"
means a Warrant to purchase one share of Common Stock.
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(b) The Notes and the Warrants shall be sold in units (each, a "Unit").
Each Unit shall consist of (i) $1,000,000 aggregate principal amount of Notes
and (ii) one hundred thousand (100,000) Warrants. Immediately following the
Closing (as such term is defined in Article III), the Units shall automatically
dissolve and the Bank may dispose of Notes and Warrants separately, subject to
the terms of this Agreement, the Notes and the Warrants.
SECTION 1.2. Sale and Purchase of the Shares, the Notes and Warrants.
Subject to the terms and conditions hereof and in reliance on the
representations and warranties contained herein, or made pursuant hereto, on the
Closing Date (as hereinafter defined), the Company will issue and sell to the
Bank and the Bank will purchase from the Company the Securities for a purchase
price per Share of $14.00, with the aggregate purchase price for all the Shares
being $34,000,000, and the aggregate purchase price for the Units being
$25,000,000.
ARTICLE II
CLOSING
The closing of the purchase and sale of the Securities (the "Closing")
will take place at the offices of Cameron McKenna Ormai, Bank Center, Citibank
Tower, 4F, Szabadsag ter 7, H-1944 Budapest, Hungary at 10:00 a.m., local time,
on May 12, 1999, or such other time and date or place as shall be mutually
agreed to by the Company and the Bank. Such time and date are hereinafter
referred to as the "Closing Date."
At the Closing, (a) the Company will deliver to the Bank (i) stock
certificates (in definitive form) representing the Shares to be purchased by the
Bank registered in the name of the Bank or in the name of the Bank's nominee,
(ii) twenty five (25) Units, each Unit consisting of $1,000,000 aggregate
principal amount of Notes (in definitive form) registered in the name of the
Bank or in the name of the Bank's nominee and one hundred thousand (100,000)
Warrants (in definitive form) registered in the name of the Bank or in the name
of the Bank's nominee and (iii) all other documents, instruments and writings
required to have been delivered at or prior to the Closing by the Company
pursuant to this Agreement, and (b) the Bank shall deliver to the Company the
Purchase Price in United States dollars in immediately available funds by wire
transfer to an account of the Company maintained at the Bank, which account
shall be established by the Company at least two (2) business days prior to the
Closing and designated as the applicable account for purposes of this Article
III.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Bank as follows:
SECTION 3.1. Organization and Existence. The Company (i) is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite power and authority to
carry on its business as now conducted and proposed to be conducted, and (ii) is
duly qualified to do business as a foreign corporation and is in good standing
(or the equivalent thereof under applicable law) in each jurisdiction in which
the conduct of its business requires such qualification by reason of the
ownership or leasing of property or otherwise (except for those jurisdictions in
which the failure so to qualify has not had and will not have a Material Adverse
Effect). "Material Adverse Effect" means, when used in connection with the
Company, any development, change or effect that is materially adverse to the
business, properties (including, without limitation, Intellectual Property (as
defined in Section 3.11), assets, net worth, condition (financial or other),
results of operations or prospects of the Company. The Company has furnished the
Bank with true, correct and complete copies of the bylaws (including any
amendments to date of any thereof) of the Company.
SECTION 3.2. Subsidiaries. The Company has subsidiaries as described in
Schedule 3.2. Each of the Subsidiaries is (i) duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, and has all requisite power and authority to
carry on its business as now conducted and proposed to be conducted, and (ii) is
duly qualified to do business as a foreign corporation or limited liability
company and is in good standing (or the equivalent thereof under applicable law)
in each jurisdiction in which conduct of its business requires such
qualification by reason of ownership or leasing of property or otherwise (except
for those jurisdictions in which the failure to so qualify has not and will not
have a Material Adverse Effect).
SECTION 3.3. Capitalization.
(a) As of the date hereof, (i) the Company's authorized
capital stock consists of (1) 5,000,000 shares of preferred stock, of which no
shares are issued and outstanding and (2) 25,000,000 shares of Common Stock, of
which 5,395,864 shares are validly issued and outstanding, fully paid and
nonassessable and; (ii) the Company has outstanding the securities set forth on
Schedule 3.3(a) which are convertible into or exercisable or exchangeable for
Common Stock (the "Derivative Securities"). From the date hereof to the Closing,
there will be no changes in such authorized capital stock or Derivative
Securities, except as contemplated by this Agreement or upon the exercise of
Derivative Securities.
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(b) Except as set forth on Schedule 3.3(b), all the issued and
outstanding shares of capital stock are free of preemptive and similar rights
and have been offered, issued, sold and delivered by the Company in transactions
either in compliance with applicable federal, state and foreign securities laws,
or as to which all limitation periods that are applicable have expired. Other
than as set forth in Schedule 3.3(b), there are no outstanding agreements or
commitments requiring the Company to issue capital stock or Derivative
Securities.
SECTION 3.4. Authorization; Binding Obligations.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement, and such other documents furnished or to be
furnished by the Company hereunder. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, subject to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity. The issuance, offering and sale of the Securities pursuant
to this Agreement, the compliance by the Company with the provisions of this
Agreement and the Securities, and the consummation of the other transactions
herein contemplated will not result in the creation or imposition of any lien,
charge, security interest or encumbrance upon any of the assets of the Company
pursuant to the terms or provisions of, or result in a breach or violation of or
conflict with any of the terms or provisions of, or constitute a default under,
or give any other party a right to terminate any of its obligations under, or
result in the acceleration of any obligation under, (i) the organizational and
governing documents of the Company, (ii) any contract or other agreement to
which the Company is a party or by which the Company or any of its respective
properties is bound or affected, or (iii) any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or body,
domestic or foreign, applicable to the business or properties of the Company.
(b) The Shares have been duly authorized for issuance prior to
the Closing, and, when issued and delivered in accordance with the provisions of
this Agreement, will be validly issued, fully paid and nonassessable.
(c) The Notes have been duly authorized and when the Notes
have been duly executed and delivered by the Company, the Notes will constitute
valid and legally binding obligations of the Company enforceable against the
Company in accordance with their terms, subject to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(d) The Warrants have been duly authorized prior to the
Closing and the shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") will be duly authorized and reserved for issuance prior
to the Closing and when the Warrants have been duly executed and delivered by
the Company, (i) the Warrants will constitute valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, reorganization and other laws of
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<PAGE>
general applicability relating to or affecting creditors' rights and to general
principles of equity, (ii) the Warrants will be exercisable for the Warrant
Shares in accordance with their terms, and (iii) the Warrant Shares, when issued
and delivered in accordance with the provisions of the Warrants, will be validly
issued, fully paid and nonassessable.
SECTION 3.5. Compliance with Instruments, etc. Except as set forth on
Schedule 3.5 hereto, neither the Company (nor the manner in which it conducts
its business) is in breach or violation of, or in default under, any term or
provision of (i) its organizational and governing documents, (ii) any indenture,
mortgage, deed of trust, voting trust agreement, stockholders agreement, note
agreement or other agreement or instrument to which it is a party or by which it
is or may be bound or to which any of its property is or may be subject, or any
indebtedness, the effect of which breach, violation or default, individually or
in the aggregate, may have a Material Adverse Effect, or (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company or of any
arbitrator, court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of its respective activities or properties and the effect of
which breach, violation or default, individually or in the aggregate, could have
a Material Adverse Effect.
SECTION 3.6. Litigation. Except as set forth on Schedule 3.6 hereto,
there is no action, suit, proceeding or investigation pending, or, to the
knowledge of the Company, threatened, against the Company before or by any
court, regulatory body or administrative agency or any other governmental agency
or body, domestic or foreign, or any action, suit, proceeding or investigation
pending, or, to the knowledge of the Company, threatened, which, individually or
in the aggregate, could have a Material Adverse Effect, or which challenges the
validity of any action taken or to be taken pursuant to or in connection with
this Agreement or the issuance of the Shares, the Notes, the Warrants and the
Warrant Shares. As it pertains to the Company, when used herein, the phrases "to
the knowledge of," "to the best knowledge of" or derivatives thereof shall mean
the actual knowledge of the chief executive officer and the chief financial
officer of the Company, and the knowledge that a reasonable person serving in
the same or substantially similar capacities as such persons, acting prudently
under similar circumstances, would be expected to have. The Company is not
involved in any proceeding under the United States Bankruptcy Code or any other
applicable national, federal or state bankruptcy law or similar law and has
taken no action to seek relief under such Code or any such laws.
SECTION 3.7. Financial Statements. The Company has previously
delivered to the Bank or the Bank's representative true, correct and complete
copies of its financial statements for the years ended December 31, 1996, 1997
and 1998 (all such financial statements being collectively referred to as the
"Financial Statements"). The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles ("US
GAAP") and fairly present, in all material respects, the financial position of
the Company and its Subsidiaries on a consolidated basis as of the dates thereof
and the results of their operations and cash flows for the periods then ended.
The Financial Statements as are audited have been examined by KPMG LLP, who are
independent public accountants within the meaning of the Securities Act of 1933,
as amended (the "Securities Act") and the rules and regulations promulgated
thereunder and they have expressed their opinions thereon, which are
unqualified, except to the extent set forth in the opinion of KPMG LLP in the
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1998 Form 10-K, as such term is hereinafter defined, and in the Annual Report on
Form 10-K of the Company for the fiscal year ended December 31, 1997. As of
their respective dates, the Company had no liabilities or obligations of any
nature (absolute, accrued, contingent or otherwise) which would normally be
reflected on a balance sheet or disclosed in the notes thereto and which are not
reflected on any balance sheet contained in the Financial Statements or
disclosed in such notes.
SECTION 3.8. Taxes. The Company has filed all necessary income,
franchise and other material tax returns, domestic and foreign, and has paid all
taxes shown as due thereunder, and the Company has no knowledge of any tax
deficiency which might be assessed against the Company.
SECTION 3.9. Offering. Subject to the Bank's representations and
warranties in Article IV of this Agreement, the offer, sale and issuance of the
Securities as contemplated by this Agreement are not subject to the registration
requirements of the Securities Act and neither the Company nor anyone acting on
its behalf, has taken or will take any action that would cause such registration
requirements to be applicable.
SECTION 3.10. Permits; Governmental and Other Approvals. Except as
set forth on Schedule 3.10 hereto, the Company has such licenses, permits,
consents, orders, approvals and other authorizations necessary for the conduct
of its business as now being conducted and proposed to be conducted, except such
licenses, permits, consents, orders, approvals, and other authorizations the
absence of which has not and will not have a Material Adverse Effect. Except as
set forth on Schedule 3.10 hereto, no approval, consent, authorization or other
order of, and no designation, filing, registration, qualification or recording
with any governmental authority, domestic or foreign, is required for the
Company's performance of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 3.11. Form 10-K. The Annual Report on Form 10-K of the Company
for the fiscal year ended December 31, 1998 (the "1998 Form 10-K") complies as
to form in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and does not
contain any untrue statement of a material fact or omit to state a material fact
necessary on order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
SECTION 3.12. Registration Rights. Except as set forth on Schedule 3.12
hereto, the Company is not under any obligation to register under the Securities
Act any of its currently outstanding securities or any of its securities which
may hereafter be issued.
SECTION 3.13. Ordinary Course; No Material Adverse Change. Since
December 31, 1998, the Company, has conducted its business in the ordinary
course, has not incurred any material obligation, absolute or contingent, or
entered into any material transactions not in the ordinary course of business,
and has not declared or paid any dividends or distributions on their capital
shares or reacquired any of such shares; and, since that date, there has been no
change which would, individually or in the aggregate, have a Material Adverse
Effect, except as disclosed in the 1998 Form 10-K.
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<PAGE>
SECTION 3.14. Disclosure. The written information with respect to the
Company heretofore provided and to be provided by the Company pursuant to this
Agreement, including the Schedules and Exhibits hereto, and each of the
agreements, documents, certificates and writings to be delivered to the Bank or
its representatives at the Closing, do not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or therein or necessary in order to make the statements and
writings contained herein and therein not false or misleading in the light of
the circumstances under which they were made.
SECTION 3.15. Representations and Warranties in the Bridge Loan
Agreement. The representations and warranties contained in Clause 12
(Representations) of the Bridge Loan Agreement are true and correct.
ARTICLE IV
CONDITIONS OF OBLIGATIONS OF THE BANK
The obligations of the Bank under this Agreement are subject to the
fulfillment to their reasonable satisfaction on or prior to the Closing Date of
each of the following conditions:
SECTION 4.1. Representations and Warranties Correct. The
representations and warranties of the Company in Article III hereof shall be
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the Closing Date with the same force
and effect as if they had been made on and as of the Closing Date.
SECTION 4.2. Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with on or prior to the
Closing Date by the Company shall have been substantially performed or complied
with by the Company in all respects on or prior to the Closing Date.
SECTION 4.3. Compliance Certificate. The Company shall have delivered
to the Bank a certificate, dated the Closing Date and signed by an executive
officer of the Company, certifying the accuracy of the Company's representations
and warranties as of such Closing Date and certifying the compliance by the
Company with the conditions precedent set forth in this Article IV as of the
Closing Date and such other matters as the Bank shall reasonably request.
SECTION 4.4. No Impediments. No statute, judgment, order, decree of any
court, regulatory body, administrative agency or any other governmental agency
or body shall be in effect which would impose any material limitation on the
ability of the Bank to exercise full rights of ownership of the Securities.
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SECTION 4.5. No Material Adverse Change. Except as disclosed in
1998 Form 10-K, since December 31, 1998, there shall have been no development,
change or effect that would have a Material Adverse Effect on the Company and
there shall have been no material adverse change in the Company's financial
condition from that indicated in the Financial Statements.
SECTION 4.6. Legal Investment. At the time of the Closing, the
purchase of the Securities by the Bank hereunder shall be legally permitted by
all statutes, rules and regulations to which the Bank is subject.
SECTION 4.7. Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body that are now required
in connection with the lawful issuance and sale of the Securities by the Company
and the acquisition of the Securities by the Bank pursuant to this Agreement
shall have been duly obtained and shall be in full force and effect on and as of
the Closing Date.
SECTION 4.8. Issuance Taxes. All taxes imposed by law in connection
with the initial issuance, sale and delivery of the Securities shall have been
fully paid by the Company, and all laws imposing such taxes shall have been
fully complied with.
SECTION 4.9. Proceedings and Other Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
shall have been taken and the Bank shall have received such other documents and
instruments in form and substance reasonably satisfactory to them and their
counsel, as to such other matters incident to the transaction contemplated
hereby as they may reasonably request.
SECTION 4.10. Opinion of Counsel. The Bank shall have received the
opinion of Peter T. Noone, Esq., counsel for the Company, dated the Closing
Date, substantially in the form attached hereto as Exhibit C.
SECTION 4.11. Consents, Waivers, Etc. Prior to the Closing, the Company
shall have obtained all consents or waivers, necessary to execute and deliver
this Agreement and carry out the transactions contemplated hereby, and all such
consents and waivers shall be in full force and effect.
SECTION 4.12. Other Matters. The Company shall have delivered to the
Bank (i) certificates (in definitive form) in the denominations specified by the
Bank and registered in its name (or in the names of its nominees) representing
the Common Stock, (ii) Subordinated Notes (in definitive form) in the
denominations specified by the Bank and registered in its name (or in the names
of its nominees), (iii) Warrants (in definitive form) in the denominations
specified by the Bank and registered in its name (or in the names of its
nominees) and (iv) the following:
(a) A certified copy of the Company's articles of
incorporation and all amendments thereto, appropriately authenticated;
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(b) A copy of the Company's by-laws, as amended to date,
certified as being true by a principal officer of the Company; and
(c) A certificate of good standing and tax status of the
Company certified as of a recent date by the Secretary of State of the
State of Delaware, and from every jurisdiction in which the Company is
qualified to do business.
Each of the conditions precedent set forth in Clause 2.3 (Conditions Precedent
Documents) and the Third Schedule (Conditions Precedent Documents) of the Bridge
Loan Agreement shall have been fulfilled to the reasonable satisfaction of the
Bank.
ARTICLE V
CONDITIONS OF OBLIGATIONS OF THE COMPANY
The Company's obligations under this Agreement are subject to the
fulfillment to its reasonable satisfaction on or prior to the Closing Date of
each of the following conditions:
SECTION 5.1. Payment of Purchase Price. The Company shall have
received payment in full of the aggregate purchase price required to be paid
under Article I.
SECTION 5.2. Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with on or prior to the
Closing Date by the Bank shall have been performed or complied with in all
respects on or prior to the Closing Date.
ARTICLE VI
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as the Bank is the
holder of any of the Securities, as follows:
SECTION 6.1. Reports. The Company will deliver to the Bank:
(a) Financial Information.
(i) within forty-five (45) days after the end of each of the
first three fiscal quarters of each fiscal year, consolidated and
consolidating statements of income and retained earnings and cash flows
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of the Company and its subsidiaries, if any, for the period from the
beginning of the fiscal year to the end of such fiscal quarter, and
consolidated and consolidating balance sheets as at the end of such
fiscal quarter, setting forth in each case in comparative form
corresponding figures for the preceding fiscal year, which statements
will be prepared in accordance with US GAAP, consistently applied and
will be accompanied by a certificate of the Chief Financial Officer of
the Company certifying that such financial statements were prepared in
accordance with US GAAP consistently applied and present fairly in all
material respects the results of operations and financial condition of
the Company for such period and as of the last day of such period.
(ii) within ninety (90) days after the end of each fiscal
year, consolidated and consolidating statements of income and retained
earnings and cash flows of the Company and its subsidiaries, if any,
for the period from the beginning of each fiscal year to the end of
such fiscal year, and consolidated and consolidating balance sheets as
at the end of such fiscal year, setting forth in each case in
comparative form corresponding figures for the preceding fiscal year,
which statements will be prepared in accordance with US GAAP,
consistently applied (except as approved by the accounting firm
examining such statements and disclosed by the Company) and will be
accompanied by:
(A) an unqualified report on the consolidated
statements of the US Auditors, as such term is defined in the
Bridge Loan Agreement; and
(B) a report from such accounting firm, addressed to
each Bank, stating that in making the audit necessary to
express their opinion on such financial statements, nothing
has come to their attention which would lead them to believe
that the Company is not in compliance with all the financial
covenants contained in any material agreements to which the
Company or its subsidiaries, if any, is a party or by which it
is bound, including, without limitation, Notes (an "Event of
Noncompliance") or, if such accountants have reason to believe
that any Event of Noncompliance has occurred, a letter
specifying the nature thereof; and
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(C) the management letter of such accounting firm if
one is issued;
(iii) within twenty (20) days after the end of each quarterly
accounting period in each fiscal year, a certificate of the Chief
Financial Officer of the Company stating that the Company is in
compliance in all material respects with the terms of this Agreement
and/or each of the Company and its subsidiaries, if any, is in
compliance with every other material contract or commitment to which
the Company or any of such subsidiaries is a party, as the case may be,
or if a material Event of Noncompliance has occurred, specifying the
nature and period of noncompliance, and what actions the Company or
such subsidiary has taken and/or proposes to take with respect thereto.
Notwithstanding the foregoing, the certificate delivered at the end of
each fiscal year of the Company shall be signed by both the Chief
Executive Officer and the Chief Financial Officer of the Company and
shall be delivered within sixty (60) days after the end of the fiscal
year;
(iv) promptly upon receipt thereof, any additional reports or
other detailed information concerning significant aspects of the
operations and condition, financial or otherwise, of the Company and
its subsidiaries, if any, given to the Company by its independent
accountants;
(v) within ten (10) days after transmission or receipt
thereof, copies of all financial statements, proxy statements, reports
and other communications which the Company sends to its stockholders,
and copies of all registration statements and all regular, special or
periodic reports which it files with the Securities and Exchange
Commission (the "SEC") or with any securities exchange on which any of
the securities of the Company are then listed or proposed to be listed,
copies of all press releases and other statements made generally
available by the company to the public concerning material developments
in the business of the Company and its subsidiaries, if any, and copies
of all material communications sent to and received from any lender to
the Company or any subsidiary of the Company; and
(vi) with reasonable promptness such other information and
financial data concerning the Company as the Bank may reasonably
request, including, without limitation, information and financial data
with respect to the use of proceeds by the Company from the sale of the
Securities.
(b) Notice of Adverse Change. Promptly after the occurrence
thereof (but in any event within seven (7) days after such occurrence is known
to the Company) notice of any condition or event which constitutes, or the
occurrence of, any of the following:
(i) any Event of Noncompliance;
(ii) the institution or threatened institution of an action,
suit or proceeding against the Company or any of its
subsidiaries by or before any court, regulatory authority,
administrative agency or any other governmental agency or
body, domestic or foreign, which, if adversely decided, could
have a Material Adverse Effect; or
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(iii) any information relating to any event, development or
circumstance with respect to or affecting the Company or any
of its subsidiaries which, in the Company's reasonable
judgment, could be expected to have a Material Adverse Effect
or materially and adversely affect the ability of the Company
to perform its obligations under this Agreement and the
transactions contemplated hereby. Any notice given under this
Section 7.1(b)(iii) shall specify the nature and period of
existence of the condition, event, information, development or
circumstance, the anticipated effect thereof and what actions
the Company has taken and/or proposes to take with respect
thereto.
SECTION 6.2. Accounts and Records. The Company shall keep true records
and books of account in which entries will be made of all dealings or
transactions in relation to the business and affairs of the Company and its
subsidiaries, if any, in accordance with US GAAP applied on a consistent basis.
SECTION 6.3. Inspection. The Company shall permit any officers,
employees, representatives or such other person as the Bank may designate (the
"Bank Representative") during regular business hours of the Company, upon
reasonable notice and as often as such Bank Representative may reasonably
request, to visit and inspect the offices and properties of the Company and to
(i) make extracts or copies of the books, accounts and records of the Company,
and (ii) discuss the affairs, finances and accounts of the Company, with the
Company's directors and officers, independent public accountants, consultants
and attorneys.
SECTION 6.4. Independent Accountants. The Company will retain an US
Auditors to audit the Company's financial statements at the end of each fiscal
year. In the event the services of the US Auditors shall be terminated, the
Company shall promptly notify the Bank of the occurrence of such event and shall
promptly thereafter request the firm of independent public accountants whose
services are terminated to deliver to the Bank a letter of such firm setting
forth its understanding as to the reasons for the termination of its services
and whether there were, during the two most recent fiscal years or such period
during which said firm had been retained by the Company, any disagreements
between it and the Company on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. In its notice,
the Company shall state whether the change of accountants was recommended or
approved by the Board of Directors or any committee thereof. In the event of
such termination, the Company will promptly thereafter engage another US
Auditors approved by the Bank which approval shall not be unreasonably withheld.
SECTION 6.5. Rule 144A Information. In the event that the Company
ceases to be subject to Section 13 or 15(d) of the Exchange Act, the Company
will (i) make available, upon request, to any holder of Notes and any
prospective purchaser thereof designated by such a holder, upon the request of
such holder or prospective purchaser, the information required to be provided to
such holder or prospective purchaser by Rule 144A(d)(4) under the Securities Act
and (ii) update such information from time to time in order to prevent such
information from becoming false and misleading and will take such other actions
as are necessary to ensure that the safe harbor exemption from the registration
requirements of the Securities Act under Rule 144A is and will be available for
resales of the Notes conducted in accordance with Rule 144A.
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SECTION 6.6. Use of Proceeds. The Company shall use the proceeds from
transactions contemplated in this Agreement to make capital contributions to the
Subsidiaries to be used for the repayment of the indebtedness of the
Subsidiaries under the 1996 Credit Facility Agreement and to pay fees and
expenses in connection with the Bridge Loan Agreement.
SECTION 6.7. Seat on Board of Directors.
(a) The Company shall take all action legally possible to
cause a person designated by the Bank to be at all times a member of the Board
of Directors of the Company, including, without limitation, the inclusion of a
person designated by the Bank on the slate of nominees proposed by the Company
for election to the Board of Directors of the Company and the endorsement of
such person for election as a director of the Company. The director of the
Company designated by the Bank pursuant to this Section 6.7(a) shall be referred
to hereinafter as the "Bank Director".
(b) If at any time the Board of Directors designates a
committee or committees to act on behalf of the Board of Directors, the Bank
Director shall be a member of such committee or committees.
(c) The Company shall pay fees to the Bank Director in an
amount not less than the fees paid to any other director of the Company
representing one or more institutional investors, and shall reimburse such
director for his or her reasonable expenses incurred in attending each Board of
Directors or committee meeting or otherwise serving as a director.
SECTION 6.8. Further Assurances. From time to time the Company shall
execute and deliver to the holders of Securities such other instruments,
certificates, agreements and documents and take such other action and do all
other things as may be reasonably requested by such holders in order to
implement or effectuate the terms and provisions of this Agreement.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
SECTION 7.1 Survival. The representations and warranties of
the parties contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith will survive any
investigation made at any time by or on behalf of any party hereto and will
survive the Closing until the third anniversary of the Closing Date; provided,
however, that the representations and warranties contained in Sections 3.3 and
3.4 will survive until expiration of the statute of limitations applicable to
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the matters covered thereby (giving effect to any waiver, mitigation or
extension thereof), if later. Notwithstanding the preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement will survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if written notice of the inaccuracy or
breach thereof giving rise to such right of indemnity shall have been given to
the party against whom such indemnity may be sought prior to such time;
provided, however, that the applicable representation or warranty will survive
only with respect to the particular inaccuracy or breach specified in said
written notice. All covenants and agreements of the parties contained in this
Agreement will survive the Closing indefinitely.
SECTION 7.2 Indemnification.
(a) The Company will indemnify the Bank against and hold
harmless from any and all Indemnifiable Losses incurred or suffered by the Bank
and relating to, resulting from or arising out of: (i) any misrepresentation or
breach of any representation or warranty of the Company contained in this
Agreement, or (ii) any breach by the Company of any covenant or undertaking made
or to be performed by the Company pursuant to this Agreement.
(b) The Bank will indemnify the Company against and hold each
of them harmless from any and all Indemnifiable Losses incurred or suffered by
the Company and relating to, resulting from or arising out of: (i) any
misrepresentation or breach of any representation or warranty of the Bank
contained in this Agreement, or (ii) any breach by the Bank of any covenant or
undertaking made or to be performed by the Bank pursuant to this Agreement.
SECTION 7.3 Certain Definitions and Limitations.
(a) For purposes of this Agreement, (i) "Damages" means any
and all damages, losses, liabilities or expenses, including in the case of Taxes
any interest, penalties and additions to Taxes (including without limitation
expenses of investigation and attorneys' fees and expenses) incurred in
connection with any pending or threatened claims, demands or suits, (ii)
"Indemnifiable Loss" means (A) with respect to the Bank, any Damages incurred or
suffered by the Bank arising out of or any misrepresentation or breach of any
representation or warranty, covenant or agreement made or to be performed by the
Company and (B) with respect to the Company, any Damages incurred or suffered by
the Company arising out of any misrepresentation or breach of any representation
or warranty, covenant or agreement made or to be performed by the Bank, (iii)
"Indemnified Party" means any person entitled to indemnification under this
Agreement, and (iv) "Indemnifying Party" means any person required to provide
indemnification under this Agreement.
(b) No Indemnified Party will be entitled to assert a claim
against an Indemnifying Party under this Article VII in respect of any
misrepresentation or breach of any representation or warranty unless and until
the aggregate amount of claims which may be asserted for Indemnifiable Losses
exceeds $175,000 (the "Threshold Amount"), at which time the Indemnified Party
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will be entitled to assert a claim for the amount of such Indemnifiable Losses
in excess of the Threshold Amount; provided, however, that this Section 8.3(b)
shall not apply to claims with respect to any misrepresentation or breach of the
representations contained in Sections 3.3 or 3.4.
(c) The Company shall not have any obligation to indemnify the
Bank for Indemnifiable Losses in excess of $ 59,000,000.
SECTION 7.4. Procedures. In case any proceeding (including any
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to Section 7.2, such Person will
promptly notify the Person against whom such indemnity may be sought in writing
and the Indemnifying Party upon request of the Indemnified Party will retain
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Indemnifying Party may designate in such
proceeding and will pay the fees and disbursements of such counsel relating to
the proceeding. In any such proceeding, any Indemnified Party will have the
right to retain its own counsel, but the fees and expenses of such counsel will
be at the expense of such Indemnified Party unless (i) the Indemnifying Party
and the Indemnified Party shall have mutually agreed to the retention of such
counsel, or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying Party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them, in which case fees
and expenses of such counsel will be paid by the Indemnifying Party. It is
understood that the Indemnifying Party will not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for all such Indemnified Parties, and that all
such fees and expenses will be reimbursed as they are incurred. In each case of
any such separate firm for the Indemnified Parties, such firm will be designated
in writing by the Indemnified Parties. The Indemnifying Party will not be liable
for any settlement of any proceeding effected without its consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party will indemnify and hold harmless such Indemnified Parties
from and against any loss or liability (to the extent stated above) by reason of
such settlement or judgment.
ARTICLE VIII
RESTRICTIONS ON TRANSFER OF SHARES; RIGHT OF FIRST REFUSAL
SECTION 8.1 Restrictions of Transfer of Shares. The Bank
agrees not to dispose of any of the Shares prior to the earlier to occur of (i)
the repayment of the Senior Secured Bridge Loan, dated as of the date hereof, by
and between the Bank and certain of the Subsidiaries and (ii) March 31, 2000.
The Bank may dispose in any twelve month period beginning April 1, 2000 up to
25% of the aggregate number of Shares originally issued without the consent of
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the Company and in accordance with the provisions of Section 8.2. Any
disposition of Shares in excess of the amount set forth in the preceding
sentence shall require the consent of the Company. All restrictions in this
Agreement on the Bank's right to dispose of any of the Shares shall expire on
January 1, 2003.
SECTION 8.2. Right of First Refusal.
(a) Should the Bank receive a bona fide offer for any of the
Shares and desire to accept such offer, the Bank agrees to give the Company
written notice of its intention, describing the Shares to be offered (the
"Offered Securities"), the price (the "Offered Price") and the general terms
which the Bank received with respect to the sale of the Offered Securities. The
Company shall have twenty (20) business days from the date of receipt of any
such notice (the "Exercise Period") to agree to purchase all or a portion of the
Offered Securities for the Offered Price and upon the general terms specified in
the notice by giving written notice to the Bank, which notice shall state the
quantity of Offered Securities to be purchased by the Company and the date on
which such purchase shall occur (which shall be not less than fifteen (15) nor
more than twenty (20) business days after the date of receipt of such notice).
(b) In the event the Company's right of first refusal is not
exercised within the Exercise Period as to all of the Offered Securities, the
Bank shall have one hundred and twenty (120) days thereafter (the "Offering
Period") to sell or enter into an agreement (pursuant to which the sale of the
Offered Securities covered thereby shall be closed, if at all, within ninety
(90) days from the date of said agreement) to sell the Offered Securities at the
Offered Price and upon general terms no more favorable to the purchasers thereof
than specified in the Company's notice. In the event the Bank has not sold
within the Offering Period or entered into an agreement to sell the Offered
Securities within the Offering Period (or sold and issued Offered Securities in
accordance with the foregoing within 90 days from the date of said agreement),
the Bank shall not thereafter sell any Offered Securities, without first
offering to the Company the right to purchase such Offered Securities, in the
manner provided above. Offered Securities sold during the Offering Period shall
cease to be subject to this Section 8.2.
(c) The Company's right of first refusal set forth in this
Section 8.2 shall expire on January 1, 2003.
(d) Any time the Company exercises its right of first refusal
in accordance with this Section, it shall pay the Bank a fee in the amount of
$250,000 (subject to a maximum of $250,000 in any twelve month period).
(e) Notwithstanding the foregoing, in the event a tender offer
is made for the Common Stock (including the Shares) by a third party, then the
Bank shall be free to accept the terms of such tender offer, subject to
compliance with Section 8.2(a) and (b); provided, however, that the Exercise
Period shall be deemed to end on the date which is three (3) Business Days prior
to the last date on which the Bank may accept the offer to purchase its Shares.
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For purposes of this Section 8.2, a "Business Day" is a day which is not a
Saturday, a Sunday or a legal holiday in Budapest, Hungary or New York, New
York, United State of America. The Bank agrees that it will not induce a tender
offer for the Common Stock prior to January 1, 2003.
(f) The Company may assign its rights under Section 8.2 (a)
and (b) to any stockholder of the Company to any beneficial holder of more than
ten percent (10.0 %) of the then outstanding Common Stock.
ARTICLE IX
AMENDMENT AND WAIVER
SECTION 9.1. Amendment and Waiver. This Agreement may not be
amended or modified (or any provision hereof waived), except that the Company
and the Bank (and assignees of the Bank) holding at least a majority of the
Shares, a majority in principal amount of the Notes and a majority of the
Warrants and Warrant Shares issued upon exercise of the Warrants may by written
instrument amend or waive any term or condition of this Agreement relating to
the rights or obligations of such holders, but in no event shall the obligation
of any holder of the Shares, the Notes, the Warrants or the Warrant Shares
hereunder be increased, except upon the written consent of each such holder.
SECTION 9.2. Binding Effect. The Company and each holder of
Securities (and any Warrant Shares) shall be bound by any amendment or waiver
effected in accordance with the provisions of this Article IX, whether or not
such Securities shall have been marked to indicate such modification, but any
Securities issued thereafter shall bear a notation as to any such modification.
Promptly after obtaining the written consent of the holders herein provided, the
Company shall transmit a copy of such modification to all holders of Securities.
ARTICLE X
LOST OR MUTILATED CERTIFICATES
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate for Securities and, in the
case of any such loss, theft, or destruction, upon delivery of a bond of
indemnity satisfactory to the Company (provided that if the holder is a
financial institution, its own agreement will be satisfactory), or in the case
of any such mutilation, upon surrender and cancellation of such certificate, the
Company will issue a new certificate of like tenor as if the lost, stolen,
destroyed or mutilated certificate were then surrendered for exchange in lieu of
such lost, stolen, destroyed or mutilated certificate.
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ARTICLE XI
TRANSFER OF SECURITIES
No sale or other disposition shall be made with respect to any
Securities or any other securities issued in respect of the Securities, upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event unless (i) the holder shall have supplied to the Company an opinion of
counsel for the holder reasonably acceptable to the Company to the effect that
no registration under the Securities Act or other applicable law is required
with respect to such sale or other disposition, or (ii) an appropriate
registration statement with respect to such sale or other disposition shall have
been filed by the Company and declared effective by the SEC. The Company may
endorse on all certificates for such Securities the legend on the form of Note
in Exhibit A and on the form of Warrant in Exhibit B., and provided, further,
that if an opinion of counsel satisfactory to the Company concludes that the
legend is no longer necessary, the Company will deliver upon transfer such
Securities without such legends. Any transfer of Warrants or Notes shall be
subject to any further restrictions contained therein.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Company that (i) it is an
"accredited investor" as that term is defined in Rule 501(a) promulgated under
the Securities Act, (ii) it has the requisite knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of an investment in the Company, (iii) it has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, (iv) it is acquiring the Securities for investment for its own
account and not with a view to, or for resale in connection with, any
distribution thereof; nor with any present intention of distributing or selling
the same and, except as contemplated by this Agreement, such Purchaser has no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof and (v) it
understands that the Securities and the shares of Common Stock issuable upon
exercise of the Warrants have not been registered under the Securities Act and
it will not offer, sell, transfer, pledge, hypothecate or otherwise dispose of
any Securities except pursuant to an exemption from, or otherwise in a
transaction not subject to, the registration requirements of the Securities Act
or pursuant to an effective registration statement under the Securities Act,
and, in each case, in accordance with any applicable state securities or "blue
sky" laws. The Bank further represents and warrants that (i) it is a company
limited by shares duly incorporated, validly existing and in good standing under
the laws of Hungary, (ii) the execution, delivery and performance of this
Agreement and the consummation of the transactions effected hereby by the Bank
are within its corporate powers and have been duly authorized by all necessary
corporate action, including the approval by its board of directors, (iii) this
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Agreement constitutes a valid and binding agreement of the Bank, (iv) the
execution, delivery and performance of this Agreement by the Bank requires no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than actions or filings which have been taken or
made on or prior to the date hereof, (v) no consent, approval, waiver or other
action by any Person under any contract, agreement, indenture, lease, instrument
or other document to which it is a party or by which it is bound is required or
necessary for the execution, delivery and performance by the Bank of this
Agreement or the consummation of the transactions effected hereby by the Bank,
(vi) the execution, delivery and performance of this Agreement by the Bank does
not (A) contravene or conflict with the charter documents of the Bank or (B)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Bank or (C) contravene or conflict with any contract to which
the Bank is a party.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Governing Law. This Agreement and the rights of the
parties hereunder shall be governed in all respects by the laws of the State of
New York, United States of America, without giving effect to the provisions
thereof relating to conflicts of law.
SECTION 13.2. Consent to Jurisdiction.
(a) The Company hereby irrevocably submits to the jurisdiction
of any New York State or Federal court sitting in New York City in any action or
proceeding arising out of or relating to this Agreement, and hereby irrevocably
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State court or, to the extent permitted by law,
in such Federal court. The Company hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Company irrevocably consents to
the service of any and all process in any such action or proceeding by the
mailing, or delivery, of copies of such process to the Company at its address
specified in Section 13.5. The Company agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 13.2 shall affect the right of the
Bank to serve legal process in any other manner permitted by law or affect the
right of the Bank to bring any action or proceeding against the Company or its
property in the courts of other jurisdictions.
SECTION 13.3. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon and enforceable by and against, the successors, assigns, heirs,
executors and administrators of the parties hereto; provided, however, that the
Company may not assign its rights hereunder, except to an affiliated corporation
as a result of a merger or consolidation in which the Company is not the
surviving corporation.
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SECTION 13.4. Entire Agreement. This Agreement (including the Schedules
and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof.
SECTION 13.5. Notices, etc. All notices, demands or other
communications given hereunder shall be in writing and shall be sufficiently
given if delivered either personally or by a United States nationally recognized
courier service marked for next business day delivery or sent by facsimile or in
a sealed envelope by first class mail, postage prepaid and either registered or
certified, addressed as follows:
(a) if to the Company;
Hungarian Telephone and Cable Corp.
100 First Stamford Place
Stamford, CT 06902
United States of America
Attention: Chief Executive Officer
Telephone: (203) 348-9069
Facsimile: (203) 348-2198
with a copy (which shall not constitute notice) to:
Hungarian Telephone and Cable Corp.
1126 Budapest
Kiralyhago u. 2.
Hungary
Attention: Chief Executive Officer
Telephone: (36-1) 457-6300
Facsimile: (36-1) 202-4778
(b) if to the Bank:
Postabank es Takarekpenztar Rt.
H-1920
Jozsef nador ter 1.
Hungary
Attention: Chief Executive Officer
Telephone: (36-1) 318-0855
Facsimile: (36-1) 317-1369
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with a copy (which shall not constitute notice) to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
United States of America
Attention: George R. Shockey, Jr.
Telephone: (212) 806-5400
Facsimile: (212) 806-6006
or to such other address with respect to any party hereto as such party may from
time to time notify (as provided above) the other parties hereto. Any such
notice, demand or communication shall be deemed to have been received (i) on the
date of delivery, if delivered personally, (ii) one business day after delivery
to a nationally recognized overnight courier service, if marked for next day
delivery, (iii) five business days after the date of mailing, if mailed or (iv)
on the date of transmission, if sent by facsimile.
SECTION 13.6. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Securities or Warrant
Shares upon any breach or default of the Company under this Agreement shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence, therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement must be, made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
SECTION 13.7. Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 13.8. Agent's Fees. The Company hereby represents and warrants
to the Bank that it has not retained a finder or broker in connection with the
transactions contemplated by this Agreement. The Bank hereby represents and
warrants to the Company that it has retained no finder or broker in connection
with the transactions contemplated by this Agreement.
SECTION 13.9. Expenses. The Company shall bear its own expenses and
legal fees incurred on its behalf with respect to the negotiation, execution and
consummation of the transactions contemplated by this Agreement, and the Company
will pay all of the legal fees and disbursements of counsel and any other
reasonable out-of-pocket expenses for the Bank in connection therewith.
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SECTION 13.10. Titles and Subtitles. The titles of the articles,
sections and subsections of this Agreement are for convenience of reference only
and are not to be considered in construing this Agreement.
SECTION 13.11. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company and the Bank have caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized.
Very truly yours,
POSTABANK ES TAKAREKPENZTAR RT.
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
HUNGARIAN TELEPHONE AND CABLE CORP.
By: /s/Ole Bertram
Name: Ole Bertram
Title: President and Chief
Executive Officer
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THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE TRANSFERRED, PLEDGED, HYPOTHECATED, SOLD
OR OTHERWISE DISPOSED OF OR OFFERED FOR SALE EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT AND
THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M., NEW YORK TIME, ON MARCH 31, 2007, OR IF
NOT A BUSINESS DAY, AS DEFINED HEREIN, AT 5:00 P.M., NEW YORK
TIME, ON THE NEXT FOLLOWING BUSINESS DAY.
Warrant to Purchase
__________ Shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
OF
HUNGARIAN TELEPHONE AND CABLE CORP.
--------------------------
This certifies that, for value received, ____________ or
registered assigns ("Warrantholder"), is entitled to purchase from Hungarian
Telephone & Cable Corp., a Delaware corporation (the "Company"), subject to the
terms set forth below, at any time on or after the Commencement Date and prior
to the Expiration Date, after which time this Warrant shall become void,
________ Warrant Shares at the Warrant Price. The Warrant Price and the number
of Warrant Shares purchasable hereunder are subject to adjustment from time to
time as provided herein.
This Warrant is one of the Warrants evidencing the right to
purchase shares of Common Stock of the Company issued pursuant to a certain
Securities Purchase Agreement (the "Securities Purchase Agreement"), dated as of
May 12, 1999, by and between the Company and the persons named therein, a copy
of which agreement is on file at the principal office of the Company, and the
holder of this Warrant shall be entitled to all of the benefits of and be bound
by all of the applicable obligations of the Securities Purchase Agreement, as
provided therein.
<PAGE>
ARTICLE I
DEFINED TERMS
Section 1.1. Definition of Terms. As used in this Warrant,
the following capitalized terms shall have the following respective meanings:
(a) "Business Day" shall mean a day other than a Saturday,
Sunday or other day on which banks in the State of New York are authorized by
law to remain closed.
(b) "Commencement Date" shall mean January 1, 2004.
(c) "Common Stock" shall mean the Common Stock, par value
$0.001 per share, of the Company.
(d) "Closing Price" shall mean, with respect to any day, the
last reported sales price of the Common Stock, regular way, or in case no sale
takes place on such day, the average of the reported closing bid and asked
prices of the Common Stock, regular way, in either case as reported on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to trading
on any national securities exchange, but is traded in the over-the-counter
market, the closing sale price of the Common Stock or in case no sale is
publicly reported, the average of the representative closing bid and asked
quotations for the Common Stock on the over-the-counter market, or, if bid and
asked prices for such day shall not have been reported on the over-the-counter
market, the average of the bid and asked prices for the Common Stock as
furnished by any New York Stock Exchange, Inc. member firm regularly making a
market in the Common Stock and selected for such purpose by the Board of
Directors of the Company.
(e) "Expiration Date" shall mean March 31, 2007, or if such
day is not a Business Day, the next succeeding day which is a Business Day.
(f) "Fair Market Value" with respect to the date of any
exercise by the Warrantholder of all or a portion of this Warrant, shall mean
the average daily Closing Price of the Common Stock for thirty (30) consecutive
trading days commencing forty-five (45) calendar days before the date of such
exercise by the Warrantholder of all or a portion of this Warrant, provided,
however, that where no public market exists for the Common Stock at the time of
the exercise of all or a portion of this Warrant, the fair market value per
share of Common Stock shall be determined by the Company's Board of Directors in
good faith.
(g) "Notes" shall mean the Company's Floating Rate Unsecured
Notes due 2007 issued pursuant to the Agreement.
(h) "Person" shall mean any individual, corporation,
association, company, business trust, partnership, limited liability company,
joint venture, joint-stock company, trust, unincorporated organization,
association or any other entity or government or any agency or political
subdivision thereof.
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(i) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(j) "Warrant Price" shall mean ten dollars ($10.00) per
Warrant Share, as such price may be adjusted from time to time pursuant to
Article III hereof.
(k) "Warrant Shares" shall mean the shares of Common Stock
purchasable upon exercise of this Warrant.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.1. Exercise of Warrant. This Warrant may be
exercised at any time after January 1, 2004 and prior to the Expiration Date.
The Warrantholder may exercise this Warrant, in whole or in part, by
presentation and surrender of this Warrant at the address of the Company set
forth in Section 4.10 hereof or at such other address as the Company may
designate by notice in writing to the Warrantholder with the Subscription Form
annexed hereto duly executed, accompanied by payment of the Warrant Price in
effect on the date of such exercise multiplied by the number of Warrant Shares
to be purchased. Upon receipt thereof, the Company shall cause to be issued
certificates for the Warrant Shares so purchased in such denominations as are
requested for delivery to the Warrantholder. Such certificates shall be
delivered as promptly as practicable to the Warrantholder. Upon any partial
exercise of this Warrant, the Company shall execute and deliver a new Warrant of
like tenor and date for the balance of the Warrant Shares purchasable hereunder.
Upon exercise, the Warrantholder shall be deemed to be the holder of record of
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Warrantholder. If at the time this Warrant is exercised, a registration
statement is not in effect to register under the Securities Act the Warrant
Shares issuable upon exercise of this Warrant, the Company may require the
Warrantholder to make such representations, and may place such legends on
certificates representing the Warrant Shares, as may be reasonably required to
permit the Warrant Shares to be issued without such registration. The Company
shall pay any and all stock transfer and similar taxes which may be payable in
respect of the issue of the Warrant or in respect of the issue of any of the
Warrant Shares, except the Company shall not pay such transfer taxes if the
Warrant Shares are issued to a Person other than the Warrantholder.
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Section 2.2. Reservation of Shares. The Company hereby agrees
that at all times there shall be reserved for issuance and delivery upon
exercise of this Warrant such number of shares of Common Stock or other shares
of capital stock of the Company as may be from time to time issuable upon
exercise of this Warrant. All such shares shall be duly authorized, and when
issued upon such exercise, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions, other than those restrictions imposed by the
Securities Act of 1933, and free and clear of all preemptive and similar rights.
Section 2.3. Fractional Shares. The Company shall not be
required to issue any fraction of a share of its capital stock in connection
with the exercise of this Warrant, and in any case where the Warrantholder
would, except for the provisions of this Section 2.3, be entitled under the
terms of this Warrant to receive a fraction of a share upon the exercise of this
Warrant, the Company shall, upon the exercise of this Warrant and receipt of the
Warrant Price (as adjusted to cover the balance of the share), issue the largest
number of whole shares purchasable upon exercise of this Warrant, but in no
event shall the Company issue more than such number of shares of Common Stock as
are issuable pursuant to the exercise of this Warrant. The Company shall not be
required to make any cash or other adjustment in respect of such fraction of a
share to which the Warrantholder would otherwise be entitled.
Section 2.4. Payment for Warrant Shares.
(a) Payment of the aggregate Warrant Price for Warrant Shares
to be purchased upon exercise of all or a portion of this Warrant shall be made
in full by delivery to the Company, at its address set forth in Section 4.10
hereof or at such other address as the Company may designate by notice in
writing to the Warrantholder, of a certified or bank cashier's check or by wire
transfer to an account in the United States designated by the Company.
(b) Payment of the aggregate Warrant Price may also be made in
full by delivery to the Company of Notes plus accrued interest thereon, in an
aggregate principal amount equal to the aggregate Warrant Price or a combination
of cash (payable by wire transfer or certified or bank check) and Notes
beneficially owned by such Warrantholder and such accumulated dividends or
accrued interest, as the case may be, in an aggregate principal amount equal to
the aggregate Warrant Price. Any Notes surrendered for exchange hereunder shall
be, if so required by the Company, accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company duly delivered by
the Warrantholder.
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<PAGE>
ARTICLE III
ADJUSTMENT OF WARRANT PRICE OR WARRANT SHARES
Section 3.1. Adjustment of Warrant Price.
(a) Except as provided in Section 3.1(c), in case the Company
shall at any time after the date hereof issue or sell any shares of Common
Stock, for a consideration per share less than the then Fair Market Value of the
Common Stock, or without consideration, then, and thereafter successively upon
each issuance or sale, the Warrant Price in effect immediately prior to each
such issuance or sale shall forthwith be reduced to a price determined by
dividing (i) an amount equal to (X) the total number of shares of Common Stock
outstanding immediately prior to such issuance or sale multiplied by the Warrant
Price in effect immediately prior to such issuance or sale, plus (Y) the
consideration, if any, received by the Company upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issuance or sale.
For the purposes of any computation to be made in
accordance with the provisions of this paragraph (a), the following shall be
applicable:
(i) In case of the issuance or sale of shares of
Common Stock for a consideration part or all of which shall be cash,
the amount of the cash consideration therefor shall be deemed to be the
amount of cash received by the Company for such shares (or, if such
shares of Common Stock are offered by the Company for subscription, the
subscription price, or, if shares of Common Stock shall be sold to
underwriters or dealers for public offering without a subscription
offering, the public offering price) before deducting therefrom any
commissions or other expenses paid or incurred by the Company for any
underwriting of, or otherwise in connection with the issuance of such
shares;
(ii) In case of the issuance or sale of shares of
Common Stock for a consideration part or all of which shall be other
than cash (otherwise than as a dividend or other distribution on any
shares of Common Stock of the Company or on conversion, exercise or
exchange of other securities of the Company or upon acquisition of the
assets or securities of another company or upon merger or consolidation
with another entity), the amount of consideration therefor other than
cash shall be the value of such consideration as of the date of the
issuance or sale of the shares of Common Stock, irrespective of
accounting treatment, but as determined by the Board of Directors of
the Company in good faith. The reclassification of securities other
than Common Stock into Common Stock shall be deemed to involve the
issuance for a consideration other than cash of such Common Stock
immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such Common
Stock;
(iii) In case of the issuance of shares of Common
Stock upon conversion or exchange of any obligations or of any
securities of the Company that shall be convertible into or
exchangeable for shares of Common Stock or upon the exercise of rights
or options to subscribe for or to purchase shares of Common Stock
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<PAGE>
(other than upon exercise of this Warrant), the amount of consideration
received by the Company for such shares of Common Stock shall be deemed
to be the sum of (A) the amount of the consideration received by the
Company upon the original issuance of such obligations, shares, rights
or options, as the case may be, plus (B) the consideration, if any,
other than such obligations, shares, rights or options, received by the
Company upon such conversion, exchange, or exercise except in
adjustment of interest and dividends. The amount of the consideration
received by the Company upon the original issuance of the obligations,
shares, rights or options so converted, exchanged or exercised and the
amount of the consideration, if any, other than such obligations,
shares, rights or options, received by the Company upon such
conversion, exchange or exercise shall be determined in the same manner
provided in subparagraphs (i) and (ii) above with respect to the
consideration received by the Company in case of the issuance of shares
of Common Stock; if such obligations, shares, rights or options shall
have been issued as a dividend upon any securities of the Company, the
amount of the consideration received by the Company upon the original
issuance thereof shall be deemed to be zero. In case of the issuance of
Warrant Shares upon exercise of this Warrant, the Company shall be
deemed to have received the Warrant Price then in effect as the
consideration for each share of Common Stock so issued;
(iv) Shares of Common Stock issuable by way of
dividend or other distribution on any securities of the Company shall
be deemed to have been issued and to be outstanding at the close of
business on the record date fixed for the determination of security
holders entitled to receive such dividend or other distribution and
shall be deemed to have been issued without consideration. Shares of
Common Stock issued otherwise than as a dividend, shall be deemed to
have been issued and to be outstanding at the close of business on the
date of issue;
(v) The number of shares of Common Stock at any time
outstanding shall not include any shares then owned or held by or for
the account of the Company, but shall include the aggregate number of
shares deliverable in respect of options, rights and exercisable,
convertible and exchangeable securities at all times while such
options, rights or securities remain outstanding and unexercised,
unconverted or unexchanged, as the case may be; and
(vi) No adjustment shall be made to the Warrant Price
in effect upon conversion or exchange of (i) securities convertible or
exercisable or exchangeable for Common Stock or for other securities
that are subsequently exercisable for Common Stock that are outstanding
as of the date of the Securities Purchase Agreement, or (ii) any
obligations or any securities of the Company that shall be convertible
into or exercisable or exchangeable for shares of Common Stock or upon
the exercise of rights or options to subscribe for or to purchase
shares of Common Stock for which an adjustment in the Warrant Price has
previously been made in accordance with paragraph (b) of this Section
3.1.
(b) In case the Company shall at any time after the date
hereof issue options or rights to subscribe for shares of Common Stock, or issue
any obligations or securities convertible into or exchangeable for shares of
Common Stock, otherwise than as contemplated by Section 3.1(a)(vi) or pursuant
to Section 3.3 hereof, for a consideration per share less than the then Fair
Market Value of the Common Stock, or without consideration, the Warrant Price in
effect immediately prior to the issuance of such options or rights or securities
shall be reduced to a price determined by making a computation in accordance
with the provisions of paragraph (a) of this Section 3.1, provided that:
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(i) the aggregate maximum number of shares of Common
Stock deliverable under such options or rights shall be considered to
have been delivered at the time such options or rights were issued, and
for a consideration equal to the minimum purchase price per share of
Common Stock provided for in such options or rights, plus the
consideration (determined in the same manner as consideration received
on the issue or sale of Common Stock), if any, received by the Company
for such options or rights;
(ii) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or exchange for any such
obligations or securities shall be considered to have been delivered at
the time of issuance of such securities, and for a consideration equal
to the consideration (determined in the same manner as consideration
received on the issue or sale of Common Stock) received by the Company
for such securities, plus the consideration, if any, to be received by
the Company upon the exchange or conversion thereof; and
(iii) on the expiration of such options or rights, or
an increase in the minimum exercise price thereof, or a decrease in the
maximum number of shares of Common Stock deliverable upon exercise or
conversion of such options, rights or convertible or exchangeable
securities pursuant to the terms thereof (and not as a result of
exercise or conversion), or the termination of such right to convert or
exchange, the Warrant Price in effect shall forthwith be readjusted to
such Warrant Price as would have obtained (A) in the case of the
expiration or termination of options or rights or the termination of
the right to convert or exchange convertible or exchangeable
securities, had no adjustments been made upon the issuance of such
options, rights or convertible or exchangeable securities, or (B) in
the case of an increase in the minimum exercise price thereof, or a
decrease in the maximum number of shares deliverable thereunder, had
the adjustments made upon the issuance of such options, rights or
convertible or exchangeable securities been made upon the basis of the
delivery of only the number of shares of Common Stock (A) actually
deliverable upon the exercise of such options or rights or upon
conversion or exchange of such securities, or (B) deliverable by reason
of such increase in price or decrease in number of shares.
(c) No adjustment to the Warrant Price shall be made in
connection with the issuance of
(i) shares of Common Stock issuable pursuant to the
options, agreements and or warrants outstanding as of the date of the
Securities Purchase Agreement and listed on Schedule 3.1(c)(i); and
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(ii) up to 100,000 shares per calendar year of Common
Stock or rights, options or warrants to acquire Common Stock issued to
directors, employees or consultants of the Company pursuant to a stock
option plan or agreement (and, in the case of rights, options, or
warrants, the Common Stock issued or issuable upon exercise thereof)
and approved by the Board of Directors.
(d) In case the Company shall at any time after the date
hereof subdivide or combine the outstanding shares of Common Stock, the Warrant
Price in effect shall forthwith be proportionately decreased in the case of the
subdivision or proportionately increased in the case of combination to the
nearest one cent. Any such adjustment shall become effective at the close of
business on the date that such subdivision or combination shall become
effective.
Section 3.2. Adjustment of Warrant Shares. In the event of an
adjustment of the Warrant Price, the number of shares of Common Stock (or
reclassified or recapitalized stock) issuable upon exercise of this Warrant
after such adjustment shall be equal to the number determined by multiplying the
number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment by a fraction, of which the numerator is
the Warrant Price in effect immediately prior to such adjustments, and the
denominator is the Warrant Price in effect immediately after such adjustment.
Section 3.3. Certain Dividends. In case the Company shall
declare a dividend upon the Common Stock payable otherwise than out of
consolidated earnings or consolidated earned surplus, determined in accordance
with generally accepted accounting principles, including the making of
appropriate deductions for minority interests, if any, in subsidiaries (except
in Common Stock or convertible securities or rights or options or warrants to
purchase Common Stock or convertible securities, but including other
securities), the Warrant Price in effect immediately prior to the declaration of
such dividend shall be reduced (to the extent payable otherwise than out of
consolidated earnings or consolidated earned surplus) by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per share of the
Common Stock, or in the case of any other dividend, to the fair value thereof
per share of the Common Stock as determined by the Board of Directors of the
Company. For the purpose of the foregoing a dividend other than in cash shall be
considered payable out of earnings or surplus (other than revaluation or
paid-in-surplus) only to the extent that such earnings or surplus are charged an
amount equal to the fair value of such dividend as determined by the Board of
Directors of the Company. Such reductions shall take effect as of the date on
which a record is taken for the purpose of such dividend, or, if a record is not
taken, the date as of which the holders of Common Stock of record entitled to
such dividend are to be determined.
Section 3.4. Mergers, Consolidations, Reclassifications. In
the case of any reorganization or reclassification of the outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination) or in the case of any consolidation of the Company into, or merger
of the Company with another corporation in which it is not the surviving entity
(or it is the surviving entity, but its shares of Common Stock become shares of
another corporation), or in the case of any sale, lease or conveyance of all, or
substantially all, of the property, assets, business and goodwill of the Company
as an entirety, the Warrantholder shall thereafter until the Expiration Date
have the right upon exercise of this Warrant to receive the kind and amount of
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shares of stock and other securities, cash and property receivable upon such
reorganization, reclassification, consolidation, merger or disposition by a
holder of the number of shares of Common Stock which the Warrantholder would
have received had it exercised this Warrant immediately prior to such
reorganization, reclassification, consolidation, merger or disposition, at a
price equal to the aggregate Warrant Price then in effect for exercising this
Warrant in full (the kind, amount and price of such stock and other securities
to be subject to adjustment as herein provided). The foregoing provisions of
this Section 3.4 shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers and dispositions.
Section 3.5. Notice of Adjustment. Whenever the Warrant Price
or the number of Warrant Shares shall be adjusted pursuant to the provisions of
Article III, the Company shall prepare and deliver forthwith to the
Warrantholder a certificate signed by the President of the Company and by its
Chief Financial Officer, setting forth the adjusted number of Warrant Shares
purchasable upon the exercise of this Warrant and the Warrant Price calculated
to the nearest cent and setting forth in reasonable detail the method of
calculation and the facts requiring such adjustment and upon which such
calculation is based.
Section 3.6. Notice of Certain Corporate Action. In case at
any time:
(A) the Company shall declare any
dividend (or any other distribu-
tions) on shares of Common Stock; or
(B) the Company shall authorize the
granting to all holders of its
Common Stock of rights to subscribe
for or purchase any shares of stock
of any class or of any other rights;
or
(C) there shall be any reclassification
of the capital stock of the Company;
or
(D) there shall be any capital reorgan-
ization by the Company; or
(E) there shall be any (i) consolidation
or merger involving the Company or
(ii) sale, transfer or other
disposition of all or substantially
all of the Company's property,
assets or business (except a merger
or other reorganization in which the
Company shall be the surviving
corporation and its shares of
capital stock shall continue to be
outstanding and unchanged and except
a consolidation, merger, sale,
transfer or other disposition
involving a wholly-owned
subsidiary); or
(F) there shall be a voluntary or
involuntary dissolution, liquidation
or winding-up of the Company or any
partial liquidation of the Company
or distribution to holders of Common
Stock;
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then, in each of such cases, the Company shall give written notice to the
Warrantholder of the date on which (i) the books of the Company shall close or a
record date shall be fixed for such dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding-up, as the case may be, shall
take place. Such notice also shall specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their certificates for
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be. Such notice shall be
given at least twenty (20) days prior to the action in question and not less
than twenty (20) days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
Section 3.7. Form of Warrant after Adjustments. The form of
this Warrant need not be changed because of any adjustments in the Warrant Price
or the number or kind of the Warrant Shares.
Section 3.8. Certain Limitations. The Company shall not issue
or grant warrants, options, rights or other obligations or securities
convertible into or exchangeable for shares of Common Stock having an exercise
price, conversion price or exchange price per share less than the Warrant Price
in effect immediately prior to the issuance of such warrants, options, rights or
other obligations or securities convertible into or exchangeable for shares of
Common Stock, except to the extent contemplated by Section 3.1(c)(ii).
ARTICLE IV
MISCELLANEOUS
Section 4.1. Cancellation of the Warrant.
(a) The Company may cancel this Warrant in whole or in part at
any time and from time to time before the Commencement Date, subject to the
following conditions:
(i) any partial cancellation of this Warrant shall be
such that thereafter the number of Warrant Shares shall be a whole
number;
(ii) concurrently with any such cancellation, the
Company shall repay the principal of the Notes in an amount equal to (i)
the then outstanding aggregate principal amount of the Notes multiplied
by (ii) a fraction, the numerator of which is the reduction in the number
of Warrant Shares under all outstanding Warrants attributable to such
cancellation and the denominator of which is 2,500,000;
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(iii) concurrently with such calculation, the Company
shall pay to the Warrantholders, per rata in accordance with the number
of Warrant Shares immediately preceding such cancellation, an amount
equal to seven and one-half percent (7.5%) of the amount of the
principal of the Notes repaid pursuant to Section 4.2(a)(ii); provided,
however, that such amount shall equal five percent (5.0%) of the amount
of the principal of the Notes repaid pursuant to Section 4.2(a)(ii) if
such repayment is made before September 30, 1999.
(b) The Company shall deliver to each Warrantholder an
irrevocable cancellation notice in the form annexed hereto of each proposed
cancellation of all or a portion of the Warrants not later than twenty (20) days
prior to the proposed date of cancellation. Such notice shall state (i) the
amount of the Warrant of such Warrantholder to be canceled, expressed in terms
of Warrant Shares, (ii) the aggregate principal amount of the Notes to be repaid
pursuant to Section 4.1(a)(ii) and (iii) the amount of the payment to be made to
such Warrantholder pursuant to Section 4.1(a)(iii). On the date set forth for
cancellation in such notice, the Warrants shall be canceled as provided in such
notice and the amounts payable to the Warrantholders shall be due and payable in
immediately available funds. Upon any partial cancellation of the Warrants, the
Company shall execute and deliver a new Warrant of like terms and date for the
balance of the Warrant Shares purchasable hereunder promptly upon receipt of the
Warrant subject to cancellation; provided, however, that the issuance of a new
Warrant as aforesaid shall not be necessary in order for a Warrantholder to
exercise a Warrant which has been partially canceled for the balance of Warrant
Shares purchasable thereunder.
Section 4.2. Transfer.
(a) Subject to the provisions of paragraph (f) below and
Article XI of the Securities Purchase Agreement, this Warrant and all rights
hereunder are transferable by the Warrantholder, at any time, and from time to
time, on or after January 1, 2004, in whole or in part, with the consent of the
Company, which consent shall not be unreasonably withheld or delayed, upon
surrender of this Warrant with a properly executed assignment at the principal
office of the Company at any time on or after the Commencement Date.
(b) Any transferee to whom rights hereunder are transferred
shall, as a condition to such transfer, deliver to the Company a written
instrument by which such transferee agrees to be bound by the obligations
imposed upon the Warrantholder under this Warrant to the same extent as if such
transferee was the Warrantholder.
(c) The Company will maintain a register containing the names
and addresses of the Warrantholders of the Warrants. Any Warrantholder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
(d) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Warrantholder as the absolute owner hereof
for all purposes; provided, however, that if and when this Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer hereof as the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.
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(e) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act or (ii) the Company first shall have been furnished with an
opinion of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements of the
Securities Act.
(f) Each certificate representing Warrant Shares shall bear a
legend substantially in the following form:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, PLEDGED
HYPOTECATED, SOLD OR OTHERWISE DISPOSED OF OR OFFERED
FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SHARES OF COMMON STOCK
REPRESENTED BY THIS CERTIFICATE UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
The foregoing legend shall be removed from the certificates
representing any Warrant Shares, at the request of the holder thereof, at such
time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act.
Section 4.3. Exchanges of Warrants. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at such office or
agency of the Company, for new Warrants of like tenor representing in the
aggregate the right to purchase the number of Warrant Shares which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of Warrant Shares as shall be designated by said holder
hereof at the time of such surrender.
Section 4.4. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the event of any default or
threatened default by the Company in the performance of or compliance with any
of the terms of this Warrant are not and will not be adequate, and that such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
Section 4.5. Successors and Assigns. The terms of this Warrant
shall be binding upon, inure to the benefit of and be enforceable by and against
any successors or assigns of the Company and of the Warrantholder; provided,
however, that the Company may not assign its rights or obligations hereunder.
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<PAGE>
Section 4.6. Rights as Stockholder. Except as provided herein,
the Warrantholder, as such, shall not be entitled to vote or be deemed to be a
stockholder of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Warrantholder, as such, any rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action or receive notice of meetings.
Section 4.7. Acceptance by Warrantholder. Receipt of this
Warrant by the Warrantholder shall constitute acceptance of an agreement to the
foregoing terms and conditions.
Section 4.8. Governing Law. This Warrant and the rights of the
parties hereunder shall be governed in all respects by the laws of the State of
New York, without giving effect to the provisions thereof relating to conflicts
of law.
Section 4.9. Severability. In case any provision of this
Warrant shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 4.10. Notices. Any notices or certificates by the
Company to the Warrantholder and by the Warrantholder to the Company shall be
deemed delivered if in writing and delivered in person or by registered mail
(return receipt requested) to the Warrantholder, at its address in the registry
of Warrantholders maintained by the Company, and if to the Company, at 100 First
Stamford Place, Stamford Connecticut 06902, Attention: Chief Executive Officer.
The Company may change its address by written notice to the Warrantholder.
Section 4.11. Amendment. This Warrant may be amended or
modified (or any provision hereof waived) only if the Company and Warrantholders
holding at least fifty percent (50.0%) of the Warrant Shares (assuming exercise
of all the Warrants) shall approve such amendment, modification or waiver in
writing; provided, however, that no amendment that adversely affects the rights
of any Warrantholder in a manner different from the rights of the other
Warrantholders shall be effective against such Warrantholder unless approved in
writing by such Warrantholder. After an amendment, modification or waiver of a
provision the Warrants becomes effective, the Company shall mail to the
Warrantholders a notice briefly describing the amendment, modification or
waiver.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed by the
Company as of the 12th day of May 1999.
HUNGARIAN TELEPHONE AND CABLE CORP.
By: /s/Ole Bertram
Name: Ole Bertram
Title: President and Chief Executive
Officer
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- - --------------------------------------------------------------------------------
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATES
SECURITIES LAWS. NEITHER THIS NOTE NOR ANY PORTION THEREOF MAY BE SOLD,
TRANSFERRED, PLEDGED HYPOTHETICATED OTHERWISE DISPOSED OF OR OFFERED FOR SALE
UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT IS
AVAILABLE WHICH IS ACCOMPANIED BY AN OPINION OF COMPANY COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
- - --------------------------------------------------------------------------------
U.S.$ 1,000,000 UNSECURED NOTE
OF
HUNGARIAN TELEPHONE AND CABLE CORP.
(incorporated with limited liability under the laws of
the State of Delaware, U.S.A)
(the "Issuer")
Issue Date: May 1999 Expiration Date: 31 March 2007
This note certificate ("Note Certificate") certifies that Postabank es
Takarekpenztar Reszvenytarsasag (the "Noteholder") is recorded in the register
(the "Register") maintained by the Issuer as the registered holder of this Note
in the face amount of U.S.$ 1,000,000.
This Note Certificate is one of a series of twenty-five notes (the "Notes")
which have been constituted by the Issuer pursuant to a securities purchase
agreement (the "Securities Purchase Agreement") dated May 1999 made between: (1)
the Issuer; and (2) Postabank es Takarekpenztar Reszvenytarsasag. The Notes are
subject to the terms and conditions (the "Conditions") a copy of which is
attached hereto.
The Issuer for value received promises, in accordance with the Conditions, to
pay to the Noteholder the principal amount of this Note outstanding on the date
and in the amount specified in the Conditions and any additional amounts payable
thereunder.
Upon any redemption of the principal amount outstanding of this Note in
accordance with the Conditions, the amount so redeemed shall be recorded by the
Issuer in the Register and the principal amount outstanding of this Note from
time to time shall be as recorded in the Register. The Issuer will promptly upon
written request from a Noteholder provide free of charge to such Noteholder a
certified copy of the Register indicating the aggregate principal amount of the
Notes redeemed on or prior to the date of such copy.
This Note is issued in registered form and then is not transferable in part.
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<PAGE>
AS WITNESS the signature of a duly authorised officer on behalf of the Issuer:
HUNGARIAN TELEPHONE AND CABLE CORP. - as Issuer
By:
- - -----------------------------------
duly authorised signatory
ISSUED as of May 1999
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<PAGE>
Terms and Conditions of the Notes
The issue (the "Note Issue") of the notes (the "Notes") of Hungarian Telephone
and Cable Corp. (the "Issuer") are constituted by these terms and conditions
(the "Conditions"). The Noteholders (as defined below) are bound by, and are
deemed to have notice of, all the Conditions contained herein applicable to
them.
1. Defined Terms and Interpretations
In the Securities Purchase Agreement (including the attached
Exhibits) and in respect of the certificates for and terms and
conditions of the Notes (unless otherwise defined therein):
"Bridge Loan Agreement" means the HUF 33,700,000,000 bridge loan
agreement dated May 1999 made between: (1) Hungarotel Tavkozlesi
Koncesszios Reszvenytarsasag as Borrower; (2) RABA-COM Tavkozlesi
Koncesszios Reszvenytarsasag as Borrower; (3) Papa es Tersege
Tavkozlesi Koncesszios Reszvenytarsasag as Borrower; (4) KNC
Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as Borrower;
(5) Postabank es Takarekpenztar Reszvenytarsasag as Arranger; (6)
Postabank es Takarekpenztar Reszvenytarsasag as Facility Agent; (7)
Postabank es Takarekpenztar Reszvenytarsasag as Security Agent; (8)
the financial institutions defined in such loan agreement as the
Banks; (9) Hungarian Telephone and Cable Corp. as Countersignor; and
(10) HTCC Tanacsado Reszvenytarsasag as Countersignor;
"Business Day" shall be construed as a reference to a day (other than
a Saturday or Sunday) on which banks are generally open for business
in New York City and Budapest;
"Clause" shall, subject to any contrary indication, be construed as a
reference to a Clause hereof;
"Concession Contract" has the meaning ascribed to such term in the
Bridge Loan Agreement;
"Condition" and "Conditions" shall have the meanings ascribed thereto
herein;
"Expiration Date" means 31 March 2007, or if such day is not a
Business Day, the next succeeding day which is a Business Day;
"Finance Documents" has the meaning ascribed to such term in the
Bridge Loan Agreement;
"Fixed Margin" means in relation to each Interest Period or other
relevant period six per cent. (6%) per annum. Provided that if the
interest on the Notes is duly paid on the Interest Payment Date for
each Interest Period when due, then the Fixed Margin for such
Interest Period shall be four per cent (4%) per annum;
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<PAGE>
"HUF" denote the lawful currency for the time being of Hungary;
"holder" has the meaning ascribed to such term in Clause 5.2;
"Hungary" means the Republic of Hungary;
"Interbank Rate" means in relation to any Interest Period or other
period, the arithmetic mean (rounded upward to the nearest four
decimal places) of the offered quotations for U.S. dollar deposits
for such period which appear on the relevant Telerate Page of the
Telerate Service which displays a British Bankers Association
Interest Settlement Rate for U.S. dollars (or such other page or such
other service as may replace such page and/or service, as
appropriate, for the purpose of displaying London Interbank Offered
Rates of leading banks) at or about 11.00 a.m. (London time) on the
applicable Quotation Day provided that if there is one only or no
such offered quotations on the relevant Telerate Page of the Telerate
Service or there is no relevant Telerate Page, the applicable
interest rate shall be the arithmetic mean (rounded upwards, if not
already such a multiple of one-sixteenth of one per cent. (0.0625%))
of the rates at which each of the Reference Banks was offering to
prime banks in the Budapest Interbank market deposits in U.S. dollars
at or about 11.00 a.m. (Budapest time) on the applicable Quotation
Day for a period equal to such period and in an amount comparable
with the amount to be outstanding during such period;
"Interest Payment Date" has the meaning ascribed to it in Clause
14.2;
"Interest Period" means, subject as provided below, in relation to
any Note, a period of six (6) calendar months Provided that:
(a) if any Interest Period would otherwise end on a day which is
not a Business Day, that Interest Period shall be extended to
the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period over into
another calendar month in which event such Interest Period
shall end on the last preceding Business Day; and
(b) any Interest Period which commences on the last day of a
calendar month and any Interest Period which commences on a
day for which there is no numerically corresponding day in the
calendar month which is the relevant number of months after
the commencement of such Interest Period shall end on the last
Business Day of the calendar month which is the relevant
number of calendar months after the commencement of such
Interest Period;
"Issue Date" means in relation to the Notes, the date(s) specified as
such in the Note Certificates;
"Issuer" means the Issuer of the Notes, being Hungarian Telephone and
Cable Corp.;
"Mandatory Prepayment Events " means any one of the events specified
as such in Clause 16 (Mandatory Prepayment Events) or any event which
the passing of time, the giving of notice, the making of any
determination and/or, as appropriate, the formation of any opinion as
specified in Clause 16 (Mandatory Prepayment Events) would or might
constitute such an event;
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<PAGE>
"Master Closing Agreement" means the master closing agreement dated
May 1999 made between: (1) Hungarian Telephone and Cable Corp.; (2)
HTCC Tanacsado Reszvenytarsasag; (3) Hungarotel Tavkozlesi
Koncesszios Reszvenytarsasag; (4) RABA-COM Tavkozlesi Koncesszios
Reszvenytarsasag; (5) Papa es Tersege Tavkozlesi Koncesszios
Reszvenytarsasag; (6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
Reszvenytarsasag; (7) Postabank es Takarekpenztar Reszvenytarsasag as
Arranger; (8) Postabank es Takarekpenztar Reszvenytarsasag as
Facility Agent; (9) Postabank es Takarekpenztar Reszvenytarsasag as
Security Agent; (10) Postabank es Takarekpenztar Reszvenytarsasag as
Bank; and (11) Postabank es Takarekpenztar Reszvenytarsasag as
Closing Agent;
"month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
succeeding calendar month save that, where any such period would
otherwise end on a day which is not a Business Day, it shall end on
the next succeeding Business Day, unless that day falls in the
calendar month succeeding that in which it would otherwise have
ended, in which case it shall end on the immediately preceding
Business Day if a period starts on the last Business Day in a
calendar month or if there is no numerically corresponding day in the
month in which that period ends, that period shall end on the last
business day in that later month;
"Notes" means the notes issued or to be issued in accordance with the
Securities Purchase Agreement the terms and conditions of which notes
are the Conditions contained herein;
"Note Certificate" means a certificate evidencing a Note issued by
the Issuer as more particularly described in the Conditions and
substantially in the form set out herein;
"Noteholder" has the meaning ascribed to such term in Clause 5.2;
"Note Issue Period" means the period from May 1999 until the
Expiration Date;
"person" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing;
"Securities Purchase Agreement" means the securities purchase
agreement dated May 1999 made between: (1) Hungarian Telephone and
Cable Corp.; and (2) Postabank es Takarekpenztar Reszvenytarsasag;
"Quotation Day" means in relation to any Interest Period or other
period, the day on which interest rate quotations are ordinarily
given by prime banks in the London Interbank Market for deposits in
U.S. dollars for delivery on the first day of the Interest Period or
other such period Provided that, if, for any such period, quotations
would ordinarily be given on more than one day, the Quotation Day for
such period will be the last of those days;
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<PAGE>
"Reference Banks" has the same meaning as is applied to it in the
Bridge Loan Agreement;
"Register" means the register to be kept by the Issuer in which the
Noteholders from time to time of the Notes are registered;
"Schedule" shall, subject to any contrary indication, be
construed as a reference to a schedule hereto;
"tax" shall be construed so as to include any tax, levy, impost, duty
or other charge of a similar nature (including, without limitation,
any penalty or interest payable in connection with any failure to pay
or any delay in paying any of the same);
"Warrants" means the warrants to purchase common stock of Hungarian
Telephone and Cable Corp. set out as Exhibit B to the Securities
Purchase Agreement.
"winding up", "dissolution", "administration or "re-organisation" of
a company or corporation shall be construed so as to include any
equivalent or analogous proceedings under the law of the jurisdiction
in which such company or corporation is incorporated or any
jurisdiction in which such company or corporation carries on
business, including the seeking of liquidation, winding up,
re-organisation, dissolution, administration, arrangement,
adjustment, protection or relief of debtors (except in each case for
the purpose of a reconstruction approved in advance in writing by
each Noteholder);
"U.S. dollar", "dollars", "USD", "$" and "U.S.$" denote the lawful
currency for the time being of the United States of America.
1.2 Save where the contrary is indicated, any reference herein to:
1.2.1 the Securities Purchase Agreement or any other agreement or
document shall be construed as a reference to the
Securities Purchase Agreement or, as the case may be, such
other agreement or document as the same may have been, or
may from time to time be, amended, varied, notated or
supplemented;
1.2.2 a reference to any person includes its successors and
permitted transferees and permitted assigns; and
1.2.3 a statute shall be construed as a reference to such statute
as the same may have been, or may from time to time be,
amended or re-enacted.
1.3 Clause and Schedule headings are for ease of reference only. Unless
the context otherwise requires, words denoting the singular shall
include the plural and vice versa.
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<PAGE>
2. The Notes
Subject to satisfaction or express waiver by the Noteholders of the
conditions precedent set out in Clause 8 (Conditions Precedent to the
Issuance of the Notes), the Noteholders grant to the Issuer upon the
terms and subject to the Conditions hereof U.S. dollar notes
issuance, pursuant to which Notes having an aggregate face value of
up to twenty-five million U.S. dollars (U.S.$ 25,000,000) will, in
twenty-five (25) Notes of equal value, be issued during the Note
Issue Period.
3. Purpose
3.1 The proceeds of the Notes shall be used by the Issuer, inter alia,
for refinancing drawings under certain existing indebtedness of the
Group with Postabank es Takarekpenztar Reszvenytarsasag and for fees,
costs and expenses associated with the Securities Purchase Agreement
and the transactions contemplated therein.
3.2 Without prejudice to the obligations of the Issuer under Clause 3.1,
no Noteholder shall be obliged to concern itself with the application
of amounts raised by the Issuer hereunder.
4. Constitution of the Notes
4.1 The Issuer hereby covenants in favour of the Noteholders and each
Noteholder that it will duly perform and comply with the obligations
expressed to be undertaken by it in the Conditions (and for this
purpose any reference in the Conditions to any obligation or payment
under or in respect of any Note shall be construed to include a
reference to any obligation or payment under or pursuant to this
provision). The Issuer hereby unconditionally and irrevocably
acknowledges the right of every Noteholder to the prompt production
of a copy of the Securities Purchase Agreement.
4.2 The covenant set out in Clause 4.1 shall take effect as a deed poll
for the benefit of the Noteholders and each Noteholders and shall
enure to the benefit of the Noteholders and each Noteholder and
its/their (and any subsequent) successors and assigns, each of which
shall be entitled severally to enforce the covenant set out in Clause
4.1.
4.3 Each Noteholder shall be entitled to transfer or assign all or any of
its rights, benefits and obligations in respect of this Clause 4
solely in accordance with Clause 6 (Transfers of Notes).
5. Form and Title
5.1 The Notes are issued in registered form. The Issuer will maintain a
register (the "Register") in respect of the Notes.
5.2 Title to each Note is passed by and upon registration in the
Register. In these Conditions, the "holder" of a Note means the
person in whose name such Note is for the time being registered in
the Register (or, in the case of a joint holding, the first named
thereof) and "Noteholder" shall be construed accordingly. A
certificate (each a "Note Certificate") will be issued to each
Noteholder in respect of its registered holding. The holder of a Note
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<PAGE>
shall (except as otherwise required by law) be treated as the
absolute owner of such Note for all purposes (whether or not it is
overdue and regardless of any notice of ownership, trust or any other
interest therein, any writing on any Note Certificate relating
thereto (other than the endorsed form of transfer) or any notice of
any previous loss or theft of such Note Certificate) and no person
shall be liable for so treating such holder.
6. Transfers of Notes
6.1 Subject to Article XI of the Securities Purchase Agreement and Clause
6.3 below, a Note may be transferred in whole (but not in part) upon
surrender of the relevant Note Certificate, with the endorsed form of
transfer duly completed, at the specified office of the Issuer,
together with such evidence as the Issuer may reasonably require to
prove:
(a) the title of the transferor; and
(b) the authority of the individuals who have executed the form of
transfer;
Provided that no Note may be transferred without a corresponding
transfer of the relevant Noteholder's rights and obligations under
the Note Issue. The transfer of a Note will be effected without
charge.
6.2 Within five (5) Business Days of the surrender of a Note Certificate
in accordance with Clause 6.1 above, the Issuer will register the
transfer in question provided it is duly stamped and deliver a new
Note Certificate to the relevant holder at its specified office or
(at the request and risk of such relevant holder) by uninsured first
class mail (airmail if overseas) to the address specified for the
purpose by such relevant holder.
6.3 No Noteholder may require transfers to be registered during the
period of five (5) Business Days ending on the due date for any
payment of principal in respect of any Note.
7. Status
The Notes constitute direct, general and unconditional obligations of
the Issuer which will at all times rank pari passu with all other
present and future unsecured obligations of the Issuer.
8. Conditions Precedent to Issuance of the Notes
Prior to issuing the Notes the Closing Agent must have first issued a
written confirmation to the Issuer confirming that the conditions
precedent for the issue of the Notes, as set out in the Master
Closing Agreement, have been duly satisfied.
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<PAGE>
9. Representations and Warranties of the Issuer
The Issuer hereby repeats and on the Issue Date of any Note is deemed
to repeat, in favour of the Noteholders and each Noteholder, each of
the representations and warranties set out in Article III
(Representations and Warranties of the Company) of the Securities
Purchase Agreement, as if each such representation and warranty were
set out herein, by reference to the then existing facts and
circumstances.
10. Covenants of the Issuer
10.1 The Issuer covenants with the Noteholders and each Noteholder that it
shall provide them with such financial and other information
regarding the Issuer, its business and assets as any Noteholder may
from time to time reasonably require.
10.2 The Issuer covenants with and undertakes to the Noteholders and
to each Noteholder:
(a) to inform each Noteholder promptly upon any of the
representations and warranties given or to be given by the
Issuer in Article III of the Securities Purchase Agreement
becoming materially untrue or inaccurate, by reference to
the then existing facts and circumstances;
(b) that it shall not issue any bond, note, debenture or
debenture stock, except pursuant to the Securities Purchase
Agreement or for the purpose of redeeming any Note issued
hereunder;
(c) to supply the Noteholders and each Noteholder with the
financial information as set out in Article VI (Affirmative
Covenants of the Company) of the Securities Purchase
Agreement; and
(d) to promptly notify the Noteholders and each Noteholder of
the occurrence of any Mandatory Prepayment Events or
potential Mandatory Prepayment Events.
11. Redemption
11.1 The Notes will be redeemed at its face amount on the Expiration Date,
together with all accrued interest and any other amount payable under
the Notes. The Notes on redemption will be cancelled and may not be
reissued or resold.
11.2 The Issuer may redeem the Notes, in whole or in part, prior to the
Expiration Date
Provided that:
(a) the Issuer shall give to the Noteholders not less than ten
(10) Business Days prior written notice of its intention to
make any such prepayment;
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(b) on the redemption of the whole of the Notes, the Issuer
shall pay to the Noteholders the face amount of the Notes,
together with all accrued interest and any other amount
payable under the Notes;
(c) the Issuer shall pay to the Noteholder on demand a sum
equal to the reasonable breakage costs incurred by the
Noteholder as a result of redemption of the Note prior to
the Expiration Date (as determined by the Noteholder); and
(d) any redemption of part of the Notes will be subject to the
minimum prepayment of five million U.S. dollars (U.S.$
5,000,000) and integral multiples of one million U.S.
dollars (U.S.$ 1,000,000), and any such prepayment shall be
applied by the Issuer pro rata towards the prepayment of
the amounts of principal of each of the Notes then
outstanding.
12. Payments
12.1 On each date on which these Conditions require an amount to be paid
by the Issuer, the Issuer shall make the same available to
Noteholders at the opening of business on the due date for such
payment by payment in U.S. dollars and in immediately available
cleared funds to a bank account of each Noteholder in New York City
or Budapest specified from time to time to the Issuer by such
Noteholder for this purpose.
12.2 If the date on which any payment is to be made under the Conditions
is not a Business Day then the Noteholders shall not be entitled to
payment of such amount until the next following Business Day and
shall not be entitled to any further interest or other payment in
respect of any such delay.
12.3 All payments required to be made by the Issuer hereunder shall be
made in U.S. dollars and shall be calculated without reference to any
set-off or counterclaim and shall be made free and clear of any
without any deduction for or on account of any set-off or counterdown
save as required by mandatory provisions of law.
13. Taxes and Tax Credits
13.1 All sums payable in respect of the Notes shall be made free and clear
of and without withholding or deduction for or on account of any tax
unless the Issuer is required by law to make such a payment subject
to the withholding or deduction of tax, in which case to the extent
that the Noteholder is the Noteholder the sum payable by the Issuer
in respect of which such withholding or deduction is required to be
made shall be increased to the extent necessary to ensure that, after
the making of such withholding or deduction, each Noteholder receives
and retains (free from any liability in respect of any such
withholding or deduction) a net sum equal to the sum which it would
have received and so retained had no such withholding or deduction
been made or required to be made.
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<PAGE>
13.2 If, at any time, the Issuer is required by law to make any
withholding or deduction from any sum payable by it hereunder (or if
thereafter there is any change in the rates at which or the manner in
which such withholdings or deductions are calculated), the Issuer
shall promptly notify the Noteholder.
13.3 If, following the making of any increased payment by the Issuer
pursuant to Clause 13.1, a Noteholder receives or is granted a credit
against, remission for or repayment of any tax payable or suffered by
it which is referable to such deduction or withholding or such
increased payment and which confers a genuine benefit on such
Noteholder, such Noteholder shall, to the extent that the auditors of
such Noteholder (acting as experts and not as arbitrators) are
reasonably satisfied that it can do so without prejudice to the
retention of such credit, remission or repayment, promptly reimburse
the Issuer with such amount as the auditors of such Noteholder
(acting as experts and not as arbitrators) shall reasonably determine
and certify (substantiating in reasonably sufficient detail the
amount concerned but not including any matters which such Noteholder
fairly regards as confidential) to the Issuer to be such proportion
of such credit, remission or repayment as will leave such Noteholder
(after such reimbursement) in no better position (after tax) than
would have been the case had no such deduction or withholding been
required to be made.
13.4 Reimbursement shall be made under Clause 13.3 above within seven (7)
days after a Noteholder has actually received the benefit of such
exemption, credit, emission or repayment, but any reimbursement shall
include an amount in respect of interest or repayment supplement on
or in respect of tax actually received or credited to such Noteholder
in respect of such exemption, credit, remission or repayment and such
Noteholder shall not unreasonably delay the obtaining of such
benefit.
13.5 If a Noteholder is obliged to pay to the Issuer any sum under a Note
and:
(a) any such exemption, credit, remission or repayment as is
referred to in Clause 13.3 is subsequently withdrawn in
whole or in part; or
(b) such sum is paid on the basis that it would be allowed to
such Noteholder as a deduction or offset for taxation
purposes in the accounting period of such Noteholder and
such assumption subsequently proves to be incorrect,
then the Issuer shall repay to such Noteholder promptly on demand
such amount as the auditors of such Noteholder (acting as experts and
not as arbitrators) shall reasonably determine and certify
(substantiating in reasonably sufficient detail the amount concerned
and not including any matters which such Noteholder fairly regards as
confidential) to the Issuer to be such amount as will leave such
Noteholder (after such repayment) in no better position (after tax)
than would have been the case had no such circumstances mentioned in
paragraphs (a) and (b) above existed.
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14. Interest
14.1 The rate of interest on the Notes for each Interest Period shall be
the aggregate of the applicable:
(a) Fixed Margin; and
(b) Interbank Rate.
14.2 Except as otherwise provided herein, interest shall be payable by the
Issuer in U.S. dollars on (except as specified in Clause 14.3) the
last day of each Interest Period (each such day, subject as provided
in Clause 14.3, an "Interest Payment Date").
14.3 The first Interest Period in respect of the Notes will commence on
the day that is twelve (12) months after the Issue Date, with the
first Interest Payment Date being six (6) months thereafter.
14.4 Interest shall accrue from day to day from and including the first
day of the relevant Interest Period to but excluding the last day
thereof and shall be calculated at the rate specified in Clause 14.1.
15. Default Interest and Indemnity
15.1 If interest in respect of any Note which is due and payable by the
Issuer hereunder is not paid on the due date therefor or if any sum
due and payable by the Issuer under any judgment of any court in
connection herewith is not paid on the date of such judgment, such
sum (the balance thereof for the time being unpaid being herein
referred to as an "unpaid sum") shall bear interest beginning on such
due date or, as the case may be, the date of such judgment and ending
on the date upon which the obligation of the Issuer to pay is
discharged over successive periods selected by the relevant
Noteholder(s). During each such period an unpaid sum shall bear
interest at the rate of two per cent. (2%) per annum above the rate
payable under Clause 14.1.
15.2 Any interest which shall have accrued under Clause 15.1 in respect of
an unpaid sum shall be due and payable and shall be paid by the
Issuer to the relevant Noteholder(s) at the end of the period by
reference to which it is calculated or on such other date or dates as
such Noteholder(s) may specify by written notice to the Issuer.
15.3 The Issuer undertakes to indemnify each Noteholder against any cost,
claim, loss, expense (including legal fees) or liability, which it
may sustain or incur as a consequence of the occurrence of any
default by the Issuer in the performance of any of the obligations
expressed to be assumed by it in respect of the Notes.
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<PAGE>
16. Mandatory Prepayment Events
16.1 If at any time the Issuer raises any indebtedness whatsoever which in
aggregate is U.S.$ 12,500,000 or more than the amount then necessary to
repay all the principal and interest then outstanding under the Bridge
Loan Agreement, the Issuer will immediately apply, pro tanto, the
amount of such additional financial indebtedness in excess of U.S.$
12,500,000 towards the prepayment of the principal then outstanding
under the Notes.
16.2 Upon the occurrence of any of the fact(s), event(s) or circumstance(s)
set out below, the Issuer will immediately prepay to the Noteholders
all the outstanding principal and all interest and all other amounts
payable under and/or relating to the Notes:
(a) the Issuer fails to pay any sum required to be paid,
including, but not limited to interest, under the terms
provided herein on the due date and in the event that such
failure arises for technical or administrative reasons it
continues for two (2) Business Days;
(b) a successful tender offer is made for the ordinary shares of
the Issuer;
(c) any of the Issuer, any of its subsidiaries or Tele Danmark is
in material breach or default under any Finance Documents to
which it is a party;
(d) the Issuer or any of its subsidiaries does any formal act
amounting to or evidencing any abandonment or sale (or any
intention thereof) by any such subsidiary of any Concession
Contract to which it is a party;
(e) it becomes unlawful for the Issuer to comply with any of its
obligations under the Securities Purchase Agreement and/or any
of the Notes; and/or
(f) the Issuer or any one or more of its subsidiaries declares an
ordinary share dividend prior to the exercising of or the
cancellation of the Warrants.
17. Replacement of Note Certificate
Subject to Article X of the Securities Purchase Agreement, if any
Note Certificate is lost, stolen, mutilated, defaced or destroyed, it
may be replaced at the specified office of the Issuer, subject to all
applicable laws, upon payment by the claimant of the expenses
incurred in connection with such replacement and on such terms as to
evidence, security, indemnity and otherwise as the Issuer may
reasonably require. Mutilated or defaced Note Certificates must be
surrendered before replacements will be issued.
18. Modification and Noteholders' Resolutions
18.1 Any modification to these Conditions shall be agreed in writing
between the Issuer and Noteholders holding at least eighty per cent.
(80%) of the face amount of the Notes and any such modifications so
agreed shall be binding on all further Noteholders.
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<PAGE>
18.2 Any resolution of Noteholders in relation to these Conditions may be
made in writing signed by or on behalf such Noteholders holding the
relevant face amount of Notes upon delivery to the Issuer by each
such Noteholder of such evidence as to its identity and its capacity
as Noteholder as the Issuer may reasonably require.
19. Miscellaneous
19.1 No failure by any Noteholder to exercise, nor any delay by such
Noteholder in exercising, any right or remedy in respect of any of
the Notes shall operate as a waiver thereof, nor shall any single or
partial exercise of any right or remedy prevent any further or other
exercise thereof or the exercise of any other right or remedy. The
rights and remedies herein provided are cumulative and not exclusive
of any other rights or remedies (whether provided by law or
otherwise).
19.2 Subject to Section 12.9 (Expenses) of the Securities Purchase
Agreement, the Issuer will pay all costs associated with the Notes
Issue.
20. Notices
20.1 Any notice required to be issued or delivered by any party hereto to
any other party hereto shall be issued or delivered, unless otherwise
provided herein, by letter, telephone or facsimile to, in the case of
the Issuer, the Issuer's other representative as set out below and,
in the case of any Noteholder, to its representative specified on the
Register (or to such other representative or to such other address as
such Noteholder may hereafter specify in writing to the other parties
hereto):
ISSUER
Address: Kiralyhago utca 2., H-1126 Budapest, Hungary
Tel: + 36 1 457 6300
Facsimile: + 36 1 202 2974
Attention of: Ole Bertram
Copied to: Legal Counsel
Dr. Peter Lakatos - Koves & Partners Clifford Chance
Madach Trade Center, Madach Imre ut 14, H-1075
Budapest, Hungary
Fax: +36 1 268 1610
Tel: +36 1 268 1600)
20.2 Any notice delivered by hand to the notice address of the addressee
shall be deemed to be served at the time of delivery, notices sent by
facsimile shall be deemed to be served upon completion of
transmission and notices sent by first class post or pre-paid
recorded delivery shall be deemed to be served forty-eight (48) hours
after time of posting.
21. Law
The Notes are governed by, and shall be construed in accordance with,
the laws of the State of New York.
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<PAGE>
22. Arbitration
22.1 If any dispute, as between the Issuer and any Noteholder arises in
respect of a Note, including, but not limited to, any question as to
its existence, validity or termination, such dispute shall be
referred to and finally resolved by arbitration in accordance with
the Arbitration Rules of the United Nations Commission on
International Trade Law ("UNCITRAL") which are applicable at the time
of reference to such arbitration and which are deemed to be
incorporated by reference into this Clause 22.1. Any arbitration
proceedings commenced pursuant to this Clause 22.1 shall be conducted
by a tribunal comprising three (3) arbitrators, the first arbitrator
selected by the relevant Noteholder(s), the second arbitrator
selected by the Issuer and the third arbitrator selected by agreement
by the first and second arbitrator, or failing such agreement such
third arbitrator shall be appointed by the Court of Arbitration
attached to the Hungarian Chamber of Commerce and Industry. The place
and seat of any arbitration proceedings commenced pursuant to this
Clause 22.1 shall be Budapest, Hungary. The language in which such
arbitration shall be conducted shall be Hungarian. Any judgement or
determination rendered shall be final and binding on the parties
thereto and may be entered in any court having jurisdiction or
application may be made to such court for an order of enforcement as
the case may require. No failure or delay in exercising any rights of
any Noteholder in respect of the Notes shall operate as a waiver, or
preclude the further exercise of such rights.
22.2 Service of Process for Arbitration Proceedings The Issuer agrees that
the process by which any arbitration proceedings are begun may be
served on it by being delivered to the address identified in Clause 20
(Notices) or other its registered office for the time being. If the
appointment of the person(s) mentioned in this Clause 22.2 ceases to be
effective the Issuer shall immediately appoint a further person in
Hungary to act on its behalf in Hungary as agent for the commencement
of arbitration proceedings and, failing such appointment within fifteen
(15) days, the Noteholder(s) shall be entitled to appoint such a person
by notice to the Issuer. Nothing contained in these Conditions shall
affect the right to serve process in any other manner permitted by law.
22.3 Consent to Enforcement The Issuer hereby consents generally in respect
of any proceedings to the giving of any relief or the issue of any
process in connection with such proceedings including the making,
enforcement or execution against any property whatsoever (irrespective
of its use or intended use) of any order or judgement which may be made
or given in such proceedings.
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<PAGE>
23. Language
The Notes shall be executed in the English language. The Notes may be
translated into the Hungarian language. In the event that any dispute
or question of interpretation arises, the English language version
shall prevail.
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<PAGE>
EXECUTION
The Issuer
Executed and delivered ) Director
as a deed by )
HUNGARIAN TELEPHONE AND ) Director/Secretary
CABLE CORP. )
The Noteholder
signed by ) Director/Secretary
for and on behalf of )
POSTABANK ES TAKAREKPENZTAR )
RESZVENYTARSASAG )
-17-
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 12th day of May, 1999 between Hungarian Telephone and Cable
Corp., a Delaware, United States corporation ("HTCC"), as the seller (HTCC or
the "Seller"), and Tele Danmark A/S, a corporation organized under the laws of
Denmark ("TD"), as the buyer (TD or the "Buyer").
R E C I T A L S:
WHEREAS, Buyer presently owns 994,158 shares of Seller's outstanding
common stock;
WHEREAS, Seller is entering into certain agreements (the "Revised
Agreements") as of the date hereof to revise its capital structure with
Postabank Rt. ("Postabank");
WHEREAS, an equity investment in Seller by Buyer is a condition
precedent for Postabank entering into the Revised Agreements;
WHEREAS, Seller desires to sell, transfer and deliver to Buyer, and
Buyer desires to purchase and accept from Seller additional shares of the
Seller's common stock upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement and any amendment
hereto, the following terms are defined as set out below:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.
"Lien" means, with respect to any asset, any mortgage, lien, claim,
pledge, option, charge, right of first refusal, security interest or encumbrance
of any kind in respect of such asset.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
1.2 List of Additional Definitions. The following is a list of some
additional terms used in this Agreement and a reference to the Section thereto
in which such term is defined:
<PAGE>
Term Section
---- -------
Agreement Preamble
Buyer Preamble
Closing Date Sec. 2.1
Consideration Sec. 2.2(a)
HTCC Preamble
HTCC Shares Sec. 2.1
Indemnitee Sec. 6.3
Indemnitor Sec. 6.3
Postabank Recitals
Revised Agreements Recitals
Seller Preamble
Securities Act Sec. 2.2(b)
TD Preamble
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares . Upon the terms and subject to the
conditions of this Agreement and in exchange for the consideration set forth in
Section 2.2 below, on the date hereof (the "Closing Date"), Buyer shall purchase
and accept from Seller, and Seller shall sell, transfer, assign, convey and
deliver to Buyer 1,571,429 newly issued shares of the Seller's common stock, par
value .001 per share (the "HTCC Shares"). Buyer waives any and all preemptive
rights that it has with respect to the transactions contemplated by the Revised
Agreement including the issuance of any securities to Buyer, Postabank, Citizens
Utilities or the Danish Investment Fund for Central and Eastern Europe or any of
such parties' affiliates
2.2 Consideration.
(a) In consideration for the purchase of the HTCC Shares as
provided for in Section 2.1 above, Buyer shall pay Seller the sum of
Eleven Million Dollars ($11,000.000) (the "Consideration") in cash by
wire transfer to such bank account as Seller may designate in writing
to Buyer.
(b) The HTCC Shares shall be duly authorized, validly issued,
fully paid and non-assessable. Buyer agrees to hold its HTCC Shares and
not to convey such shares for a period of one year from the date hereof
without the prior written consent of Seller and, in any event, not to
offer to sell or otherwise transfer the HTCC Shares without either
registration or exemption from the Securities Act of 1933, as amended
(the "Securities Act"). Each certificate for the HTCC Shares issued to
Buyer pursuant to this Agreement shall bear the following legend:
" The shares of stock represented by this certificate have
been issued pursuant to a certain Stock Purchase Agreement
dated as of May 12, 1999 between Hungarian Telephone and Cable
Corp. and Tele Danmark A/S and have not been registered under
the Securities Act of 1933, as amended, and may not be sold or
otherwise transferred without registration thereunder or an
applicable exemption therefrom."
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<PAGE>
ARTICLE III
REQUIRED DELIVERABLES
3.1 Delivery by Seller. On the Closing Date and as a condition to
Buyer's obligation to pay the Consideration as set forth in Section 2.2 above,
Seller shall deliver or cause to be delivered to Buyer a certificate(s)
representing the HTCC Shares.
3.2 Delivery by Buyer. On the Closing Date and as a condition to
Seller's obligations to deliver the deliverables as set forth in Section 3.1
above, Buyer shall pay the Consideration to Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization and Existence. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
4.2 Corporate Authorization. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within the corporate powers of Seller and have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement constitutes a valid and binding agreement of Seller.
4.3 Governmental Authorization. The execution, delivery and performance
by Seller of this Agreement requires no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than such
actions or filings that have been taken or made on or prior to the date hereof.
4.4 Non-Contravention. The execution, delivery and performance by
Seller of this Agreement does not contravene or conflict with the Certificate of
Incorporation or By-Laws of Seller or any provision of any law, regulation,
judgment, injunction, order or decree binding upon Seller.
4.5 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Seller who might be entitled to any fee or commission from Buyer or any
Affiliate of Buyer upon consummation of the transactions effected by this
Agreement.
4.6 Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Seller, threatened against or affecting
Seller before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions effected hereby.
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<PAGE>
4.7 HTCC Shares. All of the HTCC Shares issued to Buyer in connection
with the transactions effected hereby are duly authorized, validly issued, fully
paid and nonassessable shares of HTCC Common Stock.
4.8 Due Diligence. Seller has provided Buyer, through Buyer's
representative employee working out of Seller's offices in Budapest, Hungary,
with all the material financial and budgeting information regarding Seller and
its Hungarian subsidiaries. Seller has also provided Buyer with all other
material information that Buyer has requested and all such information that
investors in the United States public markets currently have access to in making
an investment decision regarding a purchase or sale of HTCC Common Stock. None
of the documents or other information provided to Buyer contain any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein not misleading.
4.9 No Undisclosed Material Liabilities; No Material Adverse Change.
Other than as disclosed in Seller's filings with the United States Securities
and Exchange Commission pursuant to the Securities Act or the Securities
Exchange Act of 1934, as amended, or disclosed to Buyer's representatives
working at Seller's Hungarian offices or Buyer's representatives on Seller's
Board of Directors (i) there have been no material liabilities incurred by
Seller other than those incurred in the ordinary course of business consistent
with past practice and (ii) there has not been any material adverse change in
the business, assets or financial condition of Seller and its Hungarian
subsidiaries taken as a whole.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Corporate Existence and Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Denmark,
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
5.2 Corporate Authorization. The execution, delivery and performance of
this Agreement and the consummation of the transactions effected hereby by Buyer
are within its corporate powers and have been duly authorized by all necessary
corporate action, including the approval by its board of directors. This
Agreement constitutes a valid and binding agreement of Buyer.
5.3 Governmental Authorization; Consents. The execution, delivery and
performance of this Agreement by Buyer require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than
actions or filings which have been taken or made on or prior to the date hereof.
No consent, approval, waiver or other action by any Person under any contract,
agreement, indenture, lease, instrument or other document to which it is a party
or by which it is bound is required or necessary for the execution, delivery and
performance of this Agreement or the consummation of the transactions effected
hereby.
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<PAGE>
5.4 Non-Contravention. The execution, delivery and performance of this
Agreement by Buyer does not (i) contravene or conflict with the certificate of
incorporation, bylaws or other charter documents of Buyer or (ii) contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Buyer or
(iii) contravene or conflict with any contract to which Buyer is a party.
5.5 Accredited Investor. Buyer understands that the HTCC Shares that it
will acquire pursuant to this Agreement have not been registered under the
Securities Act. The HTCC Shares are being acquired under this Agreement in good
faith solely for its own account, for investment and not with a view toward
resale or other distribution within the meaning of the Securities Act. Buyer is
a sophisticated or accredited investor for purposes of (i) the securities laws
of the United States of America and (ii) the ability of Seller to issue the HTCC
Shares without registration under the securities laws of the United States of
America.
5.6 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Seller or any of
its Affiliates upon consummation of the transactions contemplated by this
Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller. Seller does hereby indemnify and hold
Buyer harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Buyer or its
Affiliates resulting from any untrue representation, breach of warranty
or non-fulfillment of any covenant or agreement by Seller contained in
this Agreement, any document delivered by Seller pursuant to this
Agreement, or in any statement, exhibit, schedule or certificate
furnished or to be furnished to Buyer pursuant hereto or in connection
with the transactions provided for herein; and
(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Buyer or its Affiliates, including reasonable
attorneys' fees and disbursements, incident to any of the foregoing.
6.2 Indemnification by Buyer. Buyer does hereby indemnify and hold
Seller harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Seller
resulting from any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement by Buyer contained in this
Agreement, any document delivered by Buyer pursuant to this Agreement,
or in any statement, exhibit, schedule or certificate furnished or to
be furnished by Buyer to Seller pursuant hereto or in connection with
the transactions provided for herein; and
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<PAGE>
(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Seller, including reasonable attorneys' fees
and disbursements, incident to any of the foregoing.
6.3 Notice of Third-Party Claims. If any action, suit or proceeding
shall be commenced against, or any claim or demand shall be asserted against
Buyer or Seller, in respect of which a party (Buyer or Seller) proposes to seek
indemnification under this Article VI, the party seeking indemnification (the
"Indemnitee") shall give prompt notice thereof to the other party (the
"Indemnitor"), and shall permit the Indemnitor, at its sole cost and expense, to
assume the defense of any such claim or any litigation resulting therefrom;
provided, however, that the Indemnitee shall have the option, at its own
expense, to participate in the defense thereof; and provided further, that the
failure of any Indemnitee to give notice as provided herein shall not relieve
the Indemnitor of its obligations under this Article VI except to the extent
that the Indemnitor is actually prejudiced by such failure to give notice.
Failure by the Indemnitor to notify the Indemnitee of its election to defend any
such action within fifteen (15) days after notice thereof shall be deemed a
waiver by the Indemnitor of its right to defend such action. In the defense of
such claim or any litigation resulting therefrom, the Indemnitor shall not,
without the written consent of the Indemnitee: (a) consent to the entry of any
judgment, or (b) enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnitee of a release from all liability in respect to such claim or
litigation. If such defense is unsuccessful or abandoned by the Indemnitor,
then, upon the Indemnitor's failure to pay an amount sufficient to discharge any
such claim or judgment, the Indemnitee may pay and settle the same and the
Indemnitor's liability shall be conclusively established by any such payment. If
the Indemnitor fails to assume the defense of any such claim or litigation
resulting therefrom, the Indemnitee may defend against and settle such claim or
litigation in such manner as it may seem appropriate and the Indemnitor shall
promptly reimburse the Indemnitee for the amount of all expenses, legal or
otherwise, incurred by the Indemnitee in connection with the defense against or
settlement of such claim or litigation. If no settlement is made, the Indemnitor
shall promptly reimburse the Indemnitee for the amount of any judgment rendered
with respect to such claim or such litigation and of all expenses, legal or
otherwise, incurred by the Indemnitee in the defense thereof.
ARTICLE VII
MISCELLANEOUS
7.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties shall survive for a period of twelve (12)
months after the date hereof. Any claim for indemnification with respect to an
alleged breach of a representation or warranty not asserted by notice to the
indemnifying party, which notice specified a particular breach and the facts and
circumstances relating thereto in reasonable detail, prior to the expiration of
such survival period may not be pursued and is irrevocably waived after such
time.
7.2 Execution of Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document. Execution counterparts may
be delivered by facsimile provided that original execution copies shall be
delivered to each of the parties for signature.
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<PAGE>
7.3 Assignment, Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither this Agreement nor any rights or responsibilities hereunder shall be
assigned by any party without the prior written consent of the other party.
7.4 Applicable Law; Consent to Jurisdiction; Forum. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware without giving effect to the provisions, policies or
principles of any state relating to choice or conflict of laws except to the
extent Hungarian corporate law may apply to any matter covered by this
Agreement. In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, each party hereby submits to the jurisdiction of the courts of
Delaware and agrees to be served with legal process from any of such courts.
Each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection that it may have, whether now or in the future, to the laying of
the venue in, or to the jurisdiction of, any and each of such courts for the
purpose of any such suit, action, proceeding or judgment and further waives any
claim that any such suit, action, proceeding or judgment has been brought in an
inconvenient forum.
7.5 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall bear its own expenses incurred in connection with the execution
and performance of this Agreement and the consummation of the transactions
effected hereby, including the fees, expenses and disbursements of its counsel
and advisors.
7.6 Entire Agreement; Severability. This Agreement constitutes the
entire understanding among the parties and supersedes and cancels any other
agreement, representation, or communication, whether oral or written, between
the parties hereto relating to the transactions contemplated hereby or the
subject matter hereof unless such other agreement, representation, or
communication is in writing and bears a date contemporaneous with or subsequent
to the date hereof. In the event that any provision or any part of any provision
of this Agreement shall be void or unenforceable for any reason, whatsoever,
then such provision shall be stricken and of no force and effect. However,
unless such stricken provision goes to the essence of the consideration
bargained for by a party, the remaining provisions of this Agreement shall
continue in full force and effect, and to the extent required, shall be modified
to preserve their validity.
7.7 Notices. Any notice, certification, request, demand and other
communication hereunder shall be in writing and shall be deemed to have been
duly given and delivered if mailed, by certified mail, first class postage
prepaid, or delivered personally or by recognized overnight air courier, or if
sent by telecopier transmission, with transmission confirmed in writing:
If to HTCC: and:
Kiralyhago u.2. 100 First Stamford Place, Suite 204
H-1126 Budapest, Hungary Stamford, CT 06902
Telephone: 011-36-1-457-6300 Telephone: 203-348-9069
Facsimile: 011-36-1-202-4778 Facsimile: 203-348-9128
Attn: Ole Bertram Attn: Peter T. Noone, Esq.
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<PAGE>
If to Tele Danmark A/S:
IOTVH, L-142 Larslejsstraede 6,
0900 Copenhagen C, Denmark
Telephone: 011-45-33-99-80-50
Facsimile: 011-45-33-99-80-55
Attn: Torben V. Holm
or to such other address as each party may designate for itself by like notice
to the other party.
7.8 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party entitled to the
benefit thereof. Any such waiver shall be validly and sufficiently authorized
for the purposes of this Agreement if, as to any party, it is authorized in
writing by an authorized representative of such party. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
7.9 Further Assurances. If, at any time after the date hereof, Buyer or
Seller shall consider or be advised that any further assignments, documents,
instruments, agreements, or releases are necessary, desirable or proper to carry
out any of the provisions or purposes of this Agreement, the parties hereto
agree to execute and deliver all such assignments, documents, instruments,
agreements or releases as reasonably may be necessary, desirable or proper to
carry out any of the provisions or purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HUNGARIAN TELEPHONE AND CABLE CORP.
ATTEST:
By: /s/Ole Bertram
Ole Bertram, President and Chief
Executive Officer
TELE DANMARK A/S
ATTEST:
By:
Name:
Title:
Signature Page of May 12, 1999 Stock Purchase Agreement
-8-
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 12th day of May, 1999 between Hungarian Telephone and Cable
Corp., a Delaware, United States corporation ("HTCC"), as the seller (HTCC or
the "Seller"), and the Danish Investment Fund for Central and Eastern Europe, an
entity organized under the laws of Denmark (the "Fund"), as the buyer (the Fund
or the "Buyer").
R E C I T A L S:
WHEREAS, Seller is entering into certain agreements (the "Revised
Agreements") as of the date hereof to revise its capital structure with
Postabank Rt. ("Postabank");
WHEREAS, an equity investment in Seller by Buyer is a condition
precedent for Postabank entering into the Revised Agreements;
WHEREAS, Seller desires to sell, transfer and deliver to Buyer, and
Buyer desires to purchase and accept from Seller shares of the Seller's common
stock upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement and any amendment
hereto, the following terms are defined as set out below:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.
"Lien" means, with respect to any asset, any mortgage, lien, claim,
pledge, option, charge, right of first refusal, security interest or encumbrance
of any kind in respect of such asset.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
1.2 List of Additional Definitions. The following is a list of some
additional terms used in this Agreement and a reference to the Section thereto
in which such term is defined:
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Term Section
---- -------
Agreement Preamble
Buyer Preamble
Closing Date Sec. 2.1
Consideration Sec. 2.2(a)
Fund Preamble
HTCC Preamble
HTCC Shares Sec. 2.1
Indemnitee Sec. 6.3
Indemnitor Sec. 6.3
Postabank Recitals
Revised Agreements Recitals
Seller Preamble
Securities Act Sec. 2.2(b)
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of Shares. Upon the terms and subject to the
conditions of this Agreement and in exchange for the consideration set forth in
Section 2.2 below, on the date hereof (the "Closing Date"), Buyer shall purchase
and accept from Seller, and Seller shall sell, transfer, assign, convey and
deliver to Buyer 1,285,714 newly issued shares of the Seller's common stock, par
value .001 per share (the "HTCC Shares").
2.2 Consideration.
(a) In consideration for the purchase of the HTCC Shares as
provided for in Section 2.1 above, Buyer shall pay Seller the sum of
Nine Million Dollars ($9,000.000) (the "Consideration") in cash by wire
transfer on May 12, 1999 to Seller's Bank Account at Postabank
#11991102-02177539-01310010.
(b) The HTCC Shares shall be duly authorized, validly issued,
fully paid and non-assessable. Buyer agrees to hold its HTCC Shares and
not to convey such shares, except to Tele Danmark A/S, from May 12,
1999 to May 11, 2000 without the prior written consent of Seller and,
may not offer to sell or otherwise transfer the HTCC Shares without
either registration or exemption from the Securities Act of 1933, as
amended (the "Securities Act"). Each certificate for the HTCC Shares
issued to Buyer pursuant to this Agreement shall bear the following
legend:
" The shares of stock represented by this certificate have
been issued pursuant to a certain Stock Purchase Agreement
dated as of May 12, 1999 between Hungarian Telephone and Cable
Corp. and The Danish Investment Fund for Central and Eastern
Europe and have not been registered under the Securities Act
of 1933, as amended, and may not be sold or otherwise
transferred without registration thereunder or an applicable
exemption therefrom."
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ARTICLE III
REQUIRED DELIVERABLES
3.1 Delivery by Seller. On the Closing Date and as a condition to
Buyer's obligation to pay the Consideration as set forth in Section 2.2 above,
Seller shall deliver or cause to be delivered to Buyer a certificate(s)
representing the HTCC Shares.
3.2 Delivery by Buyer. On the Closing Date and as a condition to
Seller's obligations to deliver the deliverables as set forth in Section 3.1
above, Buyer shall pay the Consideration to Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization and Existence. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
4.2 Corporate Authorization. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within the corporate powers of Seller and have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement constitutes a valid and binding agreement of Seller.
4.3 Governmental Authorization. The execution, delivery and performance
by Seller of this Agreement requires no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than such
actions or filings that have been taken or made on or prior to the date hereof.
4.4 Non-Contravention. The execution, delivery and performance by
Seller of this Agreement does not contravene or conflict with the Certificate of
Incorporation or By-Laws of Seller or any provision of any law, regulation,
judgment, injunction, order or decree binding upon Seller.
4.5 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Seller who might be entitled to any fee or commission from Buyer or any
Affiliate of Buyer upon consummation of the transactions effected by this
Agreement.
4.6 Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Seller, threatened against or affecting
Seller before any court or arbitrator or any governmental body, agency or
official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions effected hereby.
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4.7 HTCC Shares. All of the HTCC Shares issued to Buyer in connection
with the transactions effected hereby are duly authorized, validly issued, fully
paid and nonassessable shares of HTCC Common Stock.
4.8 No Undisclosed Material Liabilities; No Material Adverse Change.
Other than as disclosed in Seller's filings with the United States Securities
and Exchange Commission pursuant to the Securities Act or the Securities
Exchange Act of 1934, as amended, (i) there have been no material liabilities
incurred by Seller other than those incurred in the ordinary course of business
consistent with past practice and (ii) there has not been any material adverse
change in the business, assets or financial condition of Seller and its
Hungarian subsidiaries taken as a whole.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Existence and Power. Buyer is an entity duly organized, validly
existing and in good standing under the laws of Denmark, and has all powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
5.2 Authorization. The execution, delivery and performance of this
Agreement and the consummation of the transactions effected hereby by Buyer are
within its powers and have been duly authorized by all necessary action,
including the approval by its board of directors. This Agreement constitutes a
valid and binding agreement of Buyer.
5.3 Governmental Authorization; Consents. The execution, delivery and
performance of this Agreement by Buyer require no action by or in respect of, or
filing with, any governmental body, agency, official or authority other than
actions or filings which have been taken or made on or prior to the date hereof.
No consent, approval, waiver or other action by any Person under any contract,
agreement, indenture, lease, instrument or other document to which it is a party
or by which it is bound is required or necessary for the execution, delivery and
performance of this Agreement or the consummation of the transactions effected
hereby.
5.4 Non-Contravention. The execution, delivery and performance of this
Agreement by Buyer does not (i) contravene or conflict with the organizational
documents, bylaws or other charter documents of Buyer or (ii) contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Buyer or
(iii) contravene or conflict with any contract to which Buyer is a party.
5.5 Accredited Investor. Buyer understands that the HTCC Shares that it
will acquire pursuant to this Agreement have not been registered under the
Securities Act. The HTCC Shares are being acquired under this Agreement in good
faith solely for its own account, for investment and not with a view toward
resale or other distribution within the meaning of the Securities Act. Buyer is
a sophisticated or accredited investor for purposes of (i) the securities laws
of the United States of America and (ii) the ability of Seller to issue the HTCC
Shares without registration under the securities laws of the United States of
America.
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5.6 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Seller or any of
its Affiliates upon consummation of the transactions contemplated by this
Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller. Seller does hereby indemnify and hold
Buyer harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Buyer or its
Affiliates resulting from any untrue representation, breach of warranty
or non-fulfillment of any covenant or agreement by Seller contained in
this Agreement, any document delivered by Seller pursuant to this
Agreement, or in any statement, exhibit, schedule or certificate
furnished or to be furnished to Buyer pursuant hereto or in connection
with the transactions provided for herein; and
(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Buyer or its Affiliates, including reasonable
attorneys' fees and disbursements, incident to any of the foregoing.
6.2 Indemnification by Buyer. Buyer does hereby indemnify and hold
Seller harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Seller
resulting from any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement by Buyer contained in this
Agreement, any document delivered by Buyer pursuant to this Agreement,
or in any statement, exhibit, schedule or certificate furnished or to
be furnished by Buyer to Seller pursuant hereto or in connection with
the transactions provided for herein; and
(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Seller, including reasonable attorneys' fees
and disbursements, incident to any of the foregoing.
6.3 Notice of Third-Party Claims. If any action, suit or proceeding
shall be commenced against, or any claim or demand shall be asserted against
Buyer or Seller, in respect of which a party (Buyer or Seller) proposes to seek
indemnification under this Article VI, the party seeking indemnification (the
"Indemnitee") shall give prompt notice thereof to the other party (the
"Indemnitor"), and shall permit the Indemnitor, at its sole cost and expense, to
assume the defense of any such claim or any litigation resulting therefrom;
provided, however, that the Indemnitee shall have the option, at its own
expense, to participate in the defense thereof; and provided further, that the
failure of any Indemnitee to give notice as provided herein shall not relieve
the Indemnitor of its obligations under this Article VI except to the extent
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that the Indemnitor is actually prejudiced by such failure to give notice.
Failure by the Indemnitor to notify the Indemnitee of its election to defend any
such action within fifteen (15) days after notice thereof shall be deemed a
waiver by the Indemnitor of its right to defend such action. In the defense of
such claim or any litigation resulting therefrom, the Indemnitor shall not,
without the written consent of the Indemnitee: (a) consent to the entry of any
judgment, or (b) enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnitee of a release from all liability in respect to such claim or
litigation. If such defense is unsuccessful or abandoned by the Indemnitor,
then, upon the Indemnitor's failure to pay an amount sufficient to discharge any
such claim or judgment, the Indemnitee may pay and settle the same and the
Indemnitor's liability shall be conclusively established by any such payment. If
the Indemnitor fails to assume the defense of any such claim or litigation
resulting therefrom, the Indemnitee may defend against and settle such claim or
litigation in such manner as it may seem appropriate and the Indemnitor shall
promptly reimburse the Indemnitee for the amount of all expenses, legal or
otherwise, incurred by the Indemnitee in connection with the defense against or
settlement of such claim or litigation. If no settlement is made, the Indemnitor
shall promptly reimburse the Indemnitee for the amount of any judgment rendered
with respect to such claim or such litigation and of all expenses, legal or
otherwise, incurred by the Indemnitee in the defense thereof.
ARTICLE VII
MISCELLANEOUS
7.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties shall survive for a period of twelve (12)
months after the date hereof. Any claim for indemnification with respect to an
alleged breach of a representation or warranty not asserted by notice to the
indemnifying party, which notice specified a particular breach and the facts and
circumstances relating thereto in reasonable detail, prior to the expiration of
such survival period may not be pursued and is irrevocably waived after such
time.
7.2 Execution of Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document. Execution counterparts may
be delivered by facsimile provided that original execution copies shall be
delivered to each of the parties for signature.
7.3 Assignment, Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither this Agreement nor any rights or responsibilities hereunder shall be
assigned by any party without the prior written consent of the other party.
7.4 Applicable Law; Consent to Jurisdiction; Forum. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware. All disputes which cannot be settled amicably shall be
finally settled by arbitration under the Rules of Conciliation and Arbitration
of the International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said Rules. Judgment upon the award rendered by the
arbitrator(s) may be rendered in any court of competent jurisdiction. The site
of arbitration shall be in the Hague, the Netherlands. Each party hereby
irrevocably waives, to the fullest extent permitted by law, any objection that
it may have, whether now or in the future, to the laying of the venue in, or to
the jurisdiction of, any and each of such court for the purpose of any such
suit, action, proceeding or judgment and further waives any claim that any such
suit, action, proceeding or judgment has been brought in an inconvenient forum.
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7.5 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall bear its own expenses incurred in connection with the execution
and performance of this Agreement and the consummation of the transactions
effected hereby, including the fees, expenses and disbursements of its counsel
and advisors.
7.6 Entire Agreement; Severability. This Agreement constitutes the
entire understanding among the parties and supersedes and cancels any other
agreement, representation, or communication, whether oral or written, between
the parties hereto relating to the transactions contemplated hereby or the
subject matter hereof unless such other agreement, representation, or
communication is in writing and bears a date contemporaneous with or subsequent
to the date hereof. In the event that any provision or any part of any provision
of this Agreement shall be void or unenforceable for any reason, whatsoever,
then such provision shall be stricken and of no force and effect. However,
unless such stricken provision goes to the essence of the consideration
bargained for by a party, the remaining provisions of this Agreement shall
continue in full force and effect, and to the extent required, shall be modified
to preserve their validity.
7.7 Notices. Any notice, certification, request, demand and other
communication hereunder shall be in writing and shall be deemed to have been
duly given and delivered if mailed, by certified mail, first class postage
prepaid, or delivered personally or by recognized overnight air courier, or if
sent by telecopier transmission, with transmission confirmed in writing:
If to HTCC: and:
Kiralyhago u.2. 100 First Stamford Place, Suite 204
H-1126 Budapest, Hungary Stamford, CT 06902
Telephone: 011-36-1-457-6300 Telephone: 203-348-9069
Facsimile: 011-36-1-202-4778 Facsimile: 203-348-9128
Attn: Ole Bertram Attn: Peter T. Noone, Esq.
If to the Fund:
The Investment Fund for Central and Eastern Europe
Bremerholm 4
DK 1069 Copenhagen, Denmark
Telephone: 011-45-33-63-7500
Facsimile: 011-45-33-32-2524
Attn: Frank Norman Larsen
or to such other address as each party may designate for itself by like notice
to the other party.
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7.8 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party entitled to the
benefit thereof. Any such waiver shall be validly and sufficiently authorized
for the purposes of this Agreement if, as to any party, it is authorized in
writing by an authorized representative of such party. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
7.9 Further Assurances. If, at any time after the date hereof, Buyer or
Seller shall consider or be advised that any further assignments, documents,
instruments, agreements, or releases are necessary, desirable or proper to carry
out any of the provisions or purposes of this Agreement, the parties hereto
agree to execute and deliver all such assignments, documents, instruments,
agreements or releases as reasonably may be necessary, desirable or proper to
carry out any of the provisions or purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HUNGARIAN TELEPHONE AND CABLE CORP.
ATTEST:
By: /s/Ole Bertram
Ole Bertram, President and Chief
Executive Officer
THE DANISH INVESTMENT FUND FOR CENTRAL
AND EASTERN EUROPE
ATTEST:
By: /s/Frank Norman Larsen/Niels Even DT
Names: Frank Norman Larsen/Niels Even DT
Titles: Dep Man. Director/IT-Dept. Director
Signature Page of May 12, 1999 Stock Purchase Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 12th day of May, 1999 among Hungarian Telephone and Cable Corp.,
a Delaware, United States corporation, as the seller ("HTCC" or the "Seller"),
Citizens International Management Services Company, a Delaware corporation, as
the buyer ("CIMS" or the "Buyer"), and CU CapitalCorp., a Delaware corporation
and an affiliate of CIMS ("CUCC").
R E C I T A L S:
WHEREAS, Buyer presently owns 100,000 shares of HTCC Common Shares (as
defined herein);
WHEREAS, CUCC presently owns 905,908 shares of HTCC Common Shares (as
defined herein);
WHEREAS, Seller, Buyer and CUCC are parties to a certain Replacement
and Termination Agreement dated as of September 30, 1998 (the "Replacement
Agreement");
WHEREAS, pursuant to the Replacement Agreement, Seller issued a
promissory note to Buyer in the principal amount of $8,374,498 (the "Note");
WHEREAS, pursuant to the Replacement Agreement, Seller agreed to pay to
CIMS $21,000,000 in quarterly installments from 2004 through and including 2010
(the "Payment Obligations") as payment for certain consulting services and the
cancellation of a certain management services agreement;
WHEREAS, Seller is entering into certain agreements (the "Revised
Agreements") as of the date hereof to revise its capital structure with
Postabank es Takarekpenztar Rt. ("Postabank");
WHEREAS, an additional equity investment in Seller by Buyer is a
condition precedent for Postabank entering into the Revised Agreements; and
WHEREAS, Seller desires to sell, transfer and deliver to Buyer, and
Buyer desires to purchase and accept from Seller, additional HTCC Common Shares
(as defined herein) and HTCC Preferred Shares (as defined herein) upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings herein contained, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement and any
amendment hereto, the following terms are defined as set out below:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.
"Lien" means, with respect to any asset, any mortgage, lien, claim,
pledge, option, charge, right of first refusal, security interest or encumbrance
of any kind in respect of such asset.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
1.2 List of Additional Definitions. The following is a list of some
additional terms used in this Agreement and a reference to the Section thereto
in which such term is defined:
Term Section
Agreement Preamble
Buyer Preamble
CIMS Preamble
CUCC Preamble
Closing Date Sec. 2.1
HTCC Preamble
HTCC Common Shares Sec. 2.1
HTCC Shares Sec. 2.1
HTCC Preferred Shares Sec. 2.1
Indemnitee Sec. 6.3
Indemnitor Sec. 6.3
Note Recitals
Payment Obligations Recitals
Postabank Recitals
Replacement Agreement Recitals
Revised Agreements Recitals
Seller Preamble
Securities Act Sec. 2.2(b)
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of HTCC Shares. Upon the terms and subject to the
conditions of this Agreement and in exchange for the consideration set forth in
Section 2.2 below, on the date hereof (the "Closing Date"), Buyer shall purchase
and accept from Seller, and Seller shall sell, transfer, assign, convey and
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deliver to Buyer, 1,300,000 newly issued shares of the Seller's Common Stock,
par value $0.001 per share (the "HTCC Common Shares"), and (following compliance
with the Delaware General Corporation Law) 30,000 newly issued shares of the
Seller's Series A Preferred Stock, par value $0.001 per share (the "HTCC
Preferred Shares") (the HTCC Common Shares and the HTCC Preferred Shares
together are referred to herein as the "HTCC Shares").
2.2 Consideration.
(a) In consideration for the purchase of the HTCC Shares as
provided for in Section 2.1 above, Buyer agrees to (i) transfer the
Note to Seller for cancellation and (ii) renounce and forego any rights
whatsoever forever to any of the Payment Obligations and releases
Seller from any and all liability with respect to the Payment
Obligations such that the Seller shall not be liable whatsoever for any
portion of the Payment Obligations. Subject to the terms herein, the
parties agree that without any further action being required by either
party, HTCC's right to receive the consulting services contained in
Section 1.2(c) of the Replacement Agreement shall be extinguished and
be of no further force or effect.
(b) The HTCC Shares shall be duly authorized, validly issued,
fully paid and non-assessable. Buyer agrees to hold its HTCC Shares and
not to convey such shares until May 15, 2000 without the prior written
consent of Seller and Postabank, in any event, not to offer to sell or
otherwise transfer the HTCC Shares without either registration or
exemption from the Securities Act of 1933, as amended (the "Securities
Act"). Buyer and CUCC agree to hold any and all other shares of HTCC
Common Stock and not to convey such shares until May 15, 2000 without
the prior written consent of Seller and Postabank. Each certificate for
the HTCC Shares issued to Buyer pursuant to this Agreement shall bear
the following legend:
" The shares of stock represented by this certificate have
been issued pursuant to a certain Stock Purchase Agreement
dated as of May 12, 1999 among Hungarian Telephone and Cable
Corp., Citizens International Management Services Company and
CU CapitalCorp. and are subject to certain provisions thereof.
The shares have not been registered under the Securities Act
of 1933, as amended, and may not be sold or otherwise
transferred without registration thereunder or an applicable
exemption therefrom."
2.3 Additional HTCC Common Shares. If the average closing price of HTCC
common stock on the American Stock Exchange or such other similar trading
exchange for the twenty trading days ending March 31, 2000 is less than $7.00
per HTCC Common Share, then HTCC shall promptly thereafter issue to Buyer such
number of HTCC Preferred Shares equal in value to (i) 1,600,000 times (ii) $7.00
less the average closing price of HTCC common stock on the American Stock
Exchange or such other similar trading exchange for the twenty trading days
ending March 31, 2000. For purposes of this calculation, each HTCC Preferred
Share shall have a value of $70.
2.4 Waiver of Rights. Buyer and CUCC waive any and all preemptive or
anti-dilution rights that they may have solely with respect to the transactions
contemplated by the Revised Agreements including with respect to the issuance of
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any securities (including but not limited to any common stock, warrants, shares
issuable pursuant to any warrants, and notes) to Buyer, Tele Danmark A/S,
Postabank, or the Danish Investment Fund for Central and Eastern Europe or any
of such parties' affiliates. Buyer hereby acknowledges that no anti-dilution or
pre-emptive rights of any existing HTCC stockholder are applicable to the
issuance of the HTCC Shares under this Article II of this Agreement.
ARTICLE III
REQUIRED DELIVERABLES
3.1 Delivery by Seller. On the Closing Date (or as soon as practicable
thereafter) and as a condition to Buyer's obligation to convey the consideration
as set forth in Section 2.2 above, (i) Seller shall deliver or cause to be
delivered to Buyer certificates representing the HTCC Shares and (ii) Seller
shall adopt and file with the Secretary of State of Delaware the Certificate of
Designation for the Series A Preferred Stock in the form attached hereto as
Exhibit A.
3.2 Delivery by Buyer. On the Closing Date (or as soon as practicable
thereafter) and as a condition to Seller's obligations to deliver the
deliverables as set forth in Section 3.1 above, Buyer shall deliver to the
Seller the Note for cancellation by Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization and Existence. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
4.2 Corporate Authorization. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within the corporate powers of Seller and have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement constitutes a valid and binding agreement of Seller enforceable in
accordance with its terms.
4.3 Governmental Authorization; Consents. The execution, delivery and
performance by Seller of this Agreement requires no action by or in respect of,
or filing with, any governmental body, agency, official or authority other than
such actions or filings that have been taken or made on or prior to the date
hereof. No consent, approval, waiver or other action by any Person under any
contract, agreement, indenture, lease, instrument or other document to which it
is a party or by which it is bound is required or necessary for the execution,
delivery and performance of this Agreement or the consummation of the
transactions effected hereby.
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4.4 Non-Contravention. The execution, delivery and performance by
Seller of this Agreement does not (i) contravene or conflict with the
certificate of incorporation, by-laws or other charter documents of Seller, (ii)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to Seller, or (iii) contravene or conflict with any contract to which
Seller is a party.
4.5 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Seller who might be entitled to any fee or commission from Buyer or any
Affiliate of Buyer upon consummation of the transactions effected by this
Agreement.
4.6 Litigation. There is no action, suit, investigation or proceeding
pending, or to the knowledge of Seller, threatened, against or affecting Seller
before any court or arbitrator or any governmental body, agency or official
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions effected hereby.
4.7 HTCC Shares. All of the shares issued to Buyer in connection with
the transactions effected hereby are duly authorized, validly issued, fully paid
and nonassessable HTCC Common Shares or HTCC Preferred Shares.
4.8 No Undisclosed Material Liabilities; No Material Adverse Change.
Other than as disclosed in Seller's filings with the United States Securities
and Exchange Commission pursuant to the Securities Act or the Securities
Exchange Act of 1934, as amended, or disclosed to Buyer's representatives on
Seller's Board of Directors (i) there have been no material liabilities incurred
by Seller other than those incurred in the ordinary course of business
consistent with past practice and (ii) there has not been any material adverse
change in the business, assets or financial condition of Seller and its
Hungarian subsidiaries taken as a whole.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Buyer and CUCC each hereby represents and warrants to Seller as
follows:
5.1 Corporate Existence and Power. Each of Buyer and CUCC is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
5.2 Corporate Authorization. The execution, delivery and performance of
this Agreement and the consummation of the transactions effected hereby by Buyer
and CUCC are within their corporate powers and have been duly authorized by all
necessary corporate action, including the approval by its board of directors if
necessary. This Agreement constitutes a valid and binding agreement of Buyer and
CUCC enforceable in accordance with its terms.
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<PAGE>
5.3 Governmental Authorization; Consents. The execution, delivery and
performance of this Agreement by Buyer and CUCC requires no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than actions or filings which have been taken or made on or prior to the
date hereof. Except for the consent of Postabank, which consent has already been
received, no consent, approval, waiver or other action by any Person under any
contract, agreement, indenture, lease, instrument or other document to which it
is a party or by which it is bound is required or necessary for the execution,
delivery and performance of this Agreement or the consummation of the
transactions effected hereby.
5.4 Non-Contravention. The execution, delivery and performance of this
Agreement by Buyer and CUCC does not (i) contravene or conflict with the
certificate of incorporation, bylaws or other charter documents of Buyer or
CUCC, or (ii) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Buyer or CUCC, or (iii) contravene or conflict with any
contract to which Buyer or CUCC is a party.
5.5 Accredited Investor. Buyer understands that the HTCC Shares that it
will acquire pursuant to this Agreement have not been registered under the
Securities Act. The HTCC Shares are being acquired under this Agreement in good
faith solely for its own account, for investment and not with a view toward
resale or other distribution within the meaning of the Securities Act. Buyer is
a sophisticated or accredited investor for purposes of (i) the securities laws
of the United States of America and (ii) the ability of Seller to issue the HTCC
Shares without registration under the securities laws of the United States of
America.
5.6 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Seller or any of
its Affiliates upon consummation of the transactions contemplated by this
Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller. Seller does hereby indemnify and hold
Buyer and CUCC harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Buyer, CUCC or
their Affiliates resulting from any untrue representation, breach of
warranty or non-fulfillment of any covenant or agreement by Seller
contained in this Agreement, any document delivered by Seller pursuant
to this Agreement, or in any statement, exhibit, schedule or
certificate furnished or to be furnished to Buyer and CUCC pursuant
hereto or in connection with the transactions provided for herein; and
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<PAGE>
(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Buyer, CUCC or their Affiliates, including
reasonable attorneys' fees and disbursements, incident to any of the
foregoing.
6.2 Indemnification by Buyer and CUCC. Buyer and CUCC do hereby
indemnify and hold Seller harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Seller
resulting from any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement by Buyer or CUCC contained
in this Agreement, any document delivered by Buyer or CUCC pursuant to
this Agreement, or in any statement, exhibit, schedule or certificate
furnished or to be furnished by Buyer or CUCC to Seller pursuant hereto
or in connection with the transactions provided for herein; and
(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Seller, including reasonable attorneys' fees
and disbursements, incident to any of the foregoing.
6.3 Notice of Third-Party Claims. If any action, suit or proceeding
shall be commenced against, or any claim or demand shall be asserted against
Buyer, Seller, or CUCC, in respect of which a party (Buyer, Seller, or CUCC)
proposes to seek indemnification under this Article VI, the party seeking
indemnification (the "Indemnitee") shall give prompt notice thereof to the other
party (the "Indemnitor"), and shall permit the Indemnitor, at its sole cost and
expense, to assume the defense of any such claim or any litigation resulting
therefrom; provided, however, that the Indemnitee shall have the option, at its
own expense, to participate in the defense thereof; and provided further, that
the failure of any Indemnitee to give notice as provided herein shall not
relieve the Indemnitor of its obligations under this Article VI except to the
extent that the Indemnitor is actually prejudiced by such failure to give
notice. Failure by the Indemnitor to notify the Indemnitee of its election to
defend any such action within fifteen (15) days after notice thereof shall be
deemed a waiver by the Indemnitor of its right to defend such action. In the
defense of such claim or any litigation resulting therefrom, the Indemnitor
shall not, without the written consent of the Indemnitee: (a) consent to the
entry of any judgment, or (b) enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or the plaintiff to
the Indemnitee of a release from all liability in respect to such claim or
litigation. If such defense is unsuccessful or abandoned by the Indemnitor,
then, upon the Indemnitor's failure to pay an amount sufficient to discharge any
such claim or judgment, the Indemnitee may pay and settle the same and the
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<PAGE>
Indemnitor's liability shall be conclusively established by any such payment. If
the Indemnitor fails to assume the defense of any such claim or litigation
resulting therefrom, the Indemnitee may defend against and settle such claim or
litigation in such manner as it may seem appropriate and the Indemnitor shall
promptly reimburse the Indemnitee for the amount of all expenses, legal or
otherwise, incurred by the Indemnitee in connection with the defense against or
settlement of such claim or litigation. If no settlement is made, the Indemnitor
shall promptly reimburse the Indemnitee for the amount of any judgment rendered
with respect to such claim or such litigation and of all expenses, legal or
otherwise, incurred by the Indemnitee in the defense thereof.
ARTICLE VII
MISCELLANEOUS
7.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties shall survive for a period of twelve (12)
months after the date hereof. Any claim for indemnification with respect to an
alleged breach of a representation or warranty not asserted by notice to the
indemnifying party, which notice specified a particular breach and the facts and
circumstances relating thereto in reasonable detail, prior to the expiration of
such survival period may not be pursued and is irrevocably waived after such
time.
7.2 Execution of Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document. Execution counterparts may
be delivered by facsimile provided that original execution copies shall be
delivered to each of the parties for signature.
7.3 Assignment, Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither this Agreement nor any rights or responsibilities hereunder shall be
assigned by any party without the prior written consent of the other party.
7.4 Applicable Law; Consent to Jurisdiction; Forum. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware without giving effect to the provisions, policies or
principles of any state relating to choice or conflict of laws except to the
extent Hungarian corporate law may apply to any matter covered by this
Agreement. In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, each party hereby submits to the jurisdiction of the courts of
Delaware and agrees to be served with legal process from any of such courts.
Each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection that it may have, whether now or in the future, to the laying of
the venue in, or to the jurisdiction of, any and each of such courts for the
purpose of any such suit, action, proceeding or judgment and further waives any
claim that any such suit, action, proceeding or judgment has been brought in an
inconvenient forum.
7.5 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall bear its own expenses incurred in connection with the execution
and performance of this Agreement and the consummation of the transactions
effected hereby, including the fees, expenses and disbursements of its counsel
and advisors.
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<PAGE>
7.6 Entire Agreement; Severability. This Agreement constitutes the
entire understanding among the parties and supersedes and cancels any other
agreement, representation, or communication, whether oral or written, between
the parties hereto relating to the transactions contemplated hereby or the
subject matter hereof (except to the extent this Agreement does not alter the
Replacement Agreement) unless such other agreement, representation, or
communication is in writing and bears a date contemporaneous with or subsequent
to the date hereof. In the event that any provision or any part of any provision
of this Agreement shall be void or unenforceable for any reason, whatsoever,
then such provision shall be stricken and of no force and effect. However,
unless such stricken provision goes to the essence of the consideration
bargained for by a party, the remaining provisions of this Agreement shall
continue in full force and effect, and to the extent required, shall be modified
to preserve their validity.
7.7 Notices. Any notice, certification, request, demand and other
communication hereunder shall be in writing and shall be deemed to have been
duly given and delivered if mailed, by certified mail, first class postage
prepaid, or delivered personally or by recognized overnight air courier, or if
sent by telecopier transmission, with transmission confirmed in writing:
If to HTCC: and:
Kiralyhago u.2. 100 First Stamford Place, Suite 204
H-1126 Budapest, Hungary Stamford, CT 06902
Telephone: 011-36-1-457-6300 Telephone: 203-348-9069
Facsimile: 011-36-1-202-4778 Facsimile: 203-348-9128
Attn: Ole Bertram Attn: Peter T. Noone, Esq.
If to CIMS or CUCC: With a copy to:
c/o Citizens Utilities Company Fleischman and Walsh,.L.P.
3 High Ridge Park 1400 Sixteenth Street, N.W.
Stamford, CT 06902 Washington, DC 20036
Telephone: (203) 614-5047 Telephone: (202) 939-7900
Facsimile: (203) 614-4651 Facsimile: (203) 265-5706
Attn: L. Russell Mitten, II, Esq. Attn: Jeffry L. Hardin, Esq.
or to such other address as each party may designate for itself by like notice
to the other party.
7.8 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party entitled to the
benefit thereof. Any such waiver shall be validly and sufficiently authorized
for the purposes of this Agreement if, as to any party, it is authorized in
writing by an authorized representative of such party. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
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<PAGE>
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
7.9 Further Assurances. If, at any time after the date hereof, Buyer or
Seller shall consider or be advised that any further assignments, documents,
instruments, agreements, or releases are necessary, desirable or proper to carry
out any of the provisions or purposes of this Agreement, the parties hereto
agree to execute and deliver all such assignments, documents, instruments,
agreements or releases as reasonably may be necessary, desirable or proper to
carry out any of the provisions or purposes of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HUNGARIAN TELEPHONE AND CABLE CORP.
ATTEST:
By: /s/Ole Bertram
Ole Bertram, President and Chief
Executive Officer
CITIZENS INTERNATIONAL MANAGEMENT
SERVICES COMPANY
ATTEST:
By: /s/Daryl A. Ferguson
Name: Daryl A. Ferguson
Title: President and Chief
Operating Officer of Citizens
Utilities Company
CU CAPITALCORP.
ATTEST:
By: /s/Daryl A. Ferguson
Name: Daryl A. Ferguson
Title: President and Chief
Operating Officer of Citizens
Utilities Company
Signature Page of May 12, 1999 Stock Purchase Agreement
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Hungarian Telephone and Cable Corp.'s Consolidated Financial Statements
for the quarter March 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000889949
<NAME> HUNGARIAN TELEPHONE AND CABLE CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,869
<SECURITIES> 0
<RECEIVABLES> 7,647
<ALLOWANCES> (969)
<INVENTORY> 0
<CURRENT-ASSETS> 19,738
<PP&E> 142,595
<DEPRECIATION> (20,149)
<TOTAL-ASSETS> 163,899
<CURRENT-LIABILITIES> 50,886
<BONDS> 164,777
0
0
<COMMON> 0
<OTHER-SE> (90,196)
<TOTAL-LIABILITY-AND-EQUITY> 163,899
<SALES> 11,205
<TOTAL-REVENUES> 11,205
<CGS> 0
<TOTAL-COSTS> 7,249
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,860
<INCOME-PRETAX> (8,014)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 5
<NET-INCOME> (8,014)
<EPS-PRIMARY> (1.49)
<EPS-DILUTED> 0
</TABLE>
