SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. ____________)*
Hungarian Telephone and Cable Corp.
(Name of Issuer)
Common Stock, $0.001 Par Value
(Title of Class of Securities)
4455421030
(CUSIP Number)
Postabank es Takarekpenztar Rt. with a copy to:
H-1920 George R. Shockey Jr.
Jozsef nador ter 1. Stroock & Stroock & Lavan LLP
Budapest, Hungary 180 Maiden Lane
Attention: Chief Executive Officer New York, New York 10038-4982
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 12, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g),
check the following box [ ]
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 6 Pages)
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, SEE
the Notes).
<PAGE>
- ------------------------------ ------------------------------
CUSIP No. 4455421030 13D Page 2 of 6 Pages
- ------------------------------ ------------------------------
- -------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Postabank es Takarekpenztar Rt.
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) / /
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
BK
- -------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e)
/ /
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Hungary
- -------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,428,572 shares of Common Stock.
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON WITH ------------------------------------------------------
8 SHARED VOTING POWER
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
2,428,572 shares of Common Stock.
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,428,572 shares of Common Stock.
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/ /
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.3%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
BK
- -------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
ITEM 1. SECURITY AND ISSUER
The securities to which this statement relates are shares of common
stock, par value US$ 0.001 per share (the "Common Stock") of Hungarian Telephone
and Cable Corp. (the "Company"). The principal executive office of the Company
is located at 100 First Stamford Place, Stamford, Connecticut 06902.
The reporting person is filing this Schedule 13D because of its
agreement to acquire, and subsequent acquisition of, shares of Common Stock.
ITEM 2. IDENTITY AND BACKGROUND
(a) Postabank es Takarekpenztar Rt., a company limited by shares
organized under the laws of the Republic of Hungary (the "Bank").
(b) H-1920, Jozsef nador ter 3., Budapest, Hungary (address of
principal business and principal office).
(c) Commercial banking.
(d) and (e) The Bank has not, within the last five years, been
convicted in a criminal proceeding, or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding been or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violations with respect to
such laws.
(f) Not applicable.
ITEM 3. SOURCE AND AMOUNT OF FUNDS.
The funds for the purchase of the Common Stock was provided out of the
general funds of the Bank. The Bank paid to the Company US$ 34,000,000 for the
Common Stock.
ITEM 4. PURPOSE OF TRANSACTIONS.
The Common Stock was acquired for investment purposes in connection
with a restructuring of outstanding obligations of the Company and its
subsidiaries to the Bank. The Bank intends to review on a continuing basis its
investment in the Company and the Company's business, prospects and financial
condition. Based on such continuing reviews, alternative investment
opportunities available to the Bank and all other factors deemed relevant
(including, without limitation the market for and price of Common Stock, offers
for shares of the Common Stock, applicable transfer restrictions, general
economic conditions and other future developments), the Bank may decide to sell
or seek the sale of all or part of the Common Stock or increase its holdings of
the Common Stock.
As part of the restructuring of the outstanding obligations of the
Company and its subsidiaries to the Bank, the Bank, Tele Danmark AS ("Tele
Danmark"), Citizens Utilities Company ("Citizens") and Danish Investment Fund
(the "Fund") invested US$ 74 million in Common Stock. In addition the Bank
purchased US$ 25 million aggregate proposed amount of the Company's Floating
Rate Unsecured Notes due 2007 (the "Unsecured Notes") with Warrants to purchase
2,500,000 shares of Common Stock (the "Warrants"). The Company used such funds
(i) to make capital contributions to its subsidiaries which in turn used such
contributions to repay in part the outstanding obligations of such subsidiaries
to the Bank and (ii) to settle the Company's cash payment obligations to
Citizens. The remaining balance of such obligations of the Company's
subsidiaries to the Bank were repaid with the proceeds of a new bridge loan from
the Bank in the aggregate principal amount of US$ 138 million. It is expected
that the bridge loan will be refinanced within one year.
Pursuant to the Agreement (as defined in Item 6), the Bank has the
right to have one (1) nominee included on the Board of Director's slate of
nominees to stand for election to the Board of Directors of the Company. The
Bank has determined not to exercise such right at present, but may do so in the
future.
The issuance of the Common Stock to the Bank, together the investments
by Tele Danmark, Citizens and the Fund, constitute a material change in the
capitalization of the Company. If the Warrants are exercised, in whole or in
part, there could be a material change in the capitalization of the Company.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUES.
(a) Based on information provided by the Company, the Company has
11,981,579 shares of Common Stock outstanding.
The Bank owns 2,428,572 shares of Common Stock constituting 20.3 % of
the Common Stock.
The Bank has sole voting and investment power with respect to the
Common Stock and Warrants.
(b) See the answer to Item 5 (a).
(c) Other than the transactions described herein, no transactions by
the Bank required to be reported by this Item have taken place in the last sixty
(60) days.
(d) The stockholders of the Bank may receive dividends when and if
declared by the General Meeting (i.e. shareholders meeting) of the Bank. The
stockholders of the Bank do not have a right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, the Common
Stock or Warrants.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS AND RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Pursuant to a Securities Purchase Agreement dated May 11, 1999 (the
"Agreement") between the Company and the Bank, the Bank agreed to purchase and
purchased, subject to the conditions set forth therein, (i) 2,428,572 shares of
Common Stock and (ii) US$ 25,000,000 aggregate principal amount of Unsecured
Notes with Warrants to purchase 2,500,000 shares of Common Stock.
The Bank may not dispose of any shares of Common Stock until the
earlier of (i) the repayment of the bridge loan referred to in Item 4 from the
Bank to subsidiaries of the Company and (ii) March 31, 2000. Following April 1,
2000, the Bank may dispose of up to 25 % of its shares of Common Stock in any
twelve month period. The Company has a right of first refusal with respect to
the disposition of the Bank's Common Stock until January 1, 2003. All
restrictions on the Bank's ability to dispose of Common Stock will expire on
January 1, 2003.
The Warrants are not exercisable until January 1, 2004. The Warrants
are not transferable without the consent of the Company until January 1, 2004.
The Warrants are subject to cancellation in whole or in part upon repayment of a
proportionate amount of the Unsecured Notes and the payment to the holders of
canceled Warrants of an amount equal to 7.5 % of the principal amount of the
Unsecured Notes repaid or 5.0 % of the principal amount of the Unsecured Notes
repaid if cancellation occurs before September 30, 1999.
The Warrants expire on March 31, 2007. The exercise price is US$ 10.00
per share.
The Warrants contain anti-dilution provisions and a prohibition
against issuing warrants, options, rights or other obligations or securities
convertible into or exchangeable for Common Stock with an exercise price,
conversion price or exchange price per share less than the then current exercise
price of the Warrants, subject to certain exceptions.
ITEM 7. MATERIAL FILED AS EXHIBITS
1. Securities Purchase Agreement dated May 11, 1999.
2. Warrant
3. Unsecured Note due 2007
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 21, 1999.
POSTABANK ES TAKAREKPENZTAR RT.
By: /s/ Henrik Auth
---------------------------
Name: Henrik Auth
Title: Chief Executive Officer
By: /s/ Laslo Urban
----------------------------
Name: Laslo Urban
Title: Deputy Chief Executive Officer
Exhibit 1
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
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
<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.
(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.
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.
(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 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
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.
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.
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;
(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 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
(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
(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.
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
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 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 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. 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.
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
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.
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
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.
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]
<PAGE>
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: /s/ Henrik Auth
------------------------------
Name: Henrik Auth
Title:
By: /s/ Laslo Urban
-------------------------------
Name: Laslo Urban
Title:
HUNGARIAN TELEPHONE AND CABLE CORP.
By: /s/Ole Bertram
--------------------------------
Name: Ole Bertram
Title: President and Chief
Executive Officer
Exhibit 2
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
<PAGE>
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.
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.
(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.
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.
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 (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:
(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
(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
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
distributions) 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
reorganization 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;
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;
(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.
(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.
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]
<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
Exhibit 3
- --------------------------------------------------------------------------------
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.
<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
<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;
"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;
"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;
"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.
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 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.
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;
(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.
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.
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.
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.
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.
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.
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.
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 )
