-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VCAMkgPVBFcsBVZAkdnr0rTEkWdrold2Nx/UeMujesbj8rr9+bHd3r4MLLbfCXmz ezUz5hzjyD/jkLJZiAPdGQ== 0001005150-03-001630.txt : 20031020 0001005150-03-001630.hdr.sgml : 20031020 20031020162619 ACCESSION NUMBER: 0001005150-03-001630 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20031020 GROUP MEMBERS: ASHMORE GLOBAL SPECIAL SITUATIONS FUND LTD. GROUP MEMBERS: ASHMORE GROUP LTD. GROUP MEMBERS: ASHMORE INVESTMENT MANAGEMENT LTD. GROUP MEMBERS: ASHMORE INVESTMENTS (UK) LTD. GROUP MEMBERS: ASHMORE MANAGEMENT COMPANY LTD. GROUP MEMBERS: ASSET HOLDER PCC 2 LIMITED RE: ASHMORE EMERGING ECONOMY PORT FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ASHMORE INVESTMENT MANAGEMENT LTD CENTRAL INDEX KEY: 0001267311 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D MAIL ADDRESS: STREET 1: 20 BEDFORDBURY CITY: LONDON, STATE: X0 ZIP: WC2N 4BL SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HUNGARIAN TELEPHONE & CABLE CORP CENTRAL INDEX KEY: 0000889949 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 133652685 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-48118 FILM NUMBER: 03948015 BUSINESS ADDRESS: STREET 1: 1201 THIRD AVENUE, SUITE 3400 CITY: SEATTLE STATE: WA ZIP: 98101 BUSINESS PHONE: 206-654-0204 MAIL ADDRESS: STREET 1: 1201 THIRD AVENUE, SUITE 3400 CITY: SEATTLE STATE: WA ZIP: 98101 SC 13D 1 form13d.txt ----------------------------- OMB APPROVAL OMB Number: 3235-0145 Expires: December 31, 2005 Estimated average burden hours per response......11 ---------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------------------- SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __) HUNGARIAN TELEPHONE AND CABLE CORP. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, $0.001 PAR VALUE - -------------------------------------------------------------------------------- (Title of Class of Securities) 4455421030 - -------------------------------------------------------------------------------- (CUSIP Number) ASHMORE INVESTMENT MANAGEMENT LIMITED WITH A COPY TO: 20 BEDFORDBURY DEWEY BALLANTINE LONDON WC2N 4BL ST. HELEN'S, 1 UNDERSHAFT UNITED KINGDOM LONDON EC3A 8LP ATTN: MARK GRIMWOOD UNITED KINGDOM ATTN: DOUGLAS L. GETTER, ESQ. - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) OCTOBER 10, 2003 (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), 13d-1(f) or 13d-1(g), check the following box [ ]. CUSIP No. 4455421030 - ---------- --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: Ashmore Investment Management Limited I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS - (ENTITIES ONLY) - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 3. SEC USE ONLY - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 4. SOURCE OF FUNDS: AF - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: England and Wales - ---------- --------------------------------------------------------------------- - ------------------------- -------- --------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES -------- --------------------------------------------- BENEFICIALLY -------- --------------------------------------------- OWNED 8. SHARED VOTING POWER: 1,828,572 BY -------- --------------------------------------------- EACH -------- --------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -------- --------------------------------------------- WITH: -------- --------------------------------------------- 10. SHARED DISPOSITIVE POWER: 1,828,572 - ------------------------- -------- --------------------------------------------- - ---------- --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,828,572 - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 15.0 percent - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: IA - ---------- --------------------------------------------------------------------- 2 CUSIP No. 4455421030 - ---------- --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: Ashmore Group Limited I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS - (ENTITIES ONLY) - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 3. SEC USE ONLY - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 4. SOURCE OF FUNDS: AF - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: England and Wales - ---------- --------------------------------------------------------------------- - ------------------------- -------- --------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES -------- --------------------------------------------- BENEFICIALLY -------- --------------------------------------------- OWNED 8. SHARED VOTING POWER: 1,828,572 BY -------- --------------------------------------------- EACH -------- --------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -------- --------------------------------------------- WITH: -------- --------------------------------------------- 10. SHARED DISPOSITIVE POWER: 1,828,572 - ------------------------- -------- --------------------------------------------- - ---------- --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,828,572 - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 15.0 percent - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: CO - ---------- --------------------------------------------------------------------- 3 CUSIP No. 4455421030 - ---------- --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: Ashmore Investments (UK) Limited I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS - (ENTITIES ONLY) - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 3. SEC USE ONLY - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 4. SOURCE OF FUNDS: AF - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: England and Wales - ---------- --------------------------------------------------------------------- - ------------------------- -------- --------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES -------- --------------------------------------------- BENEFICIALLY -------- --------------------------------------------- OWNED 8. SHARED VOTING POWER: 1,828,572 BY -------- --------------------------------------------- EACH -------- --------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -------- --------------------------------------------- WITH: -------- --------------------------------------------- 10. SHARED DISPOSITIVE POWER: 1,828,572 - ------------------------- -------- --------------------------------------------- - ---------- --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,828,572 - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 15.0 percent - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: CO - ---------- --------------------------------------------------------------------- 4 CUSIP No. 4455421030 - ---------- --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: Ashmore Management Company Limited I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS - (ENTITIES ONLY) - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 3. SEC USE ONLY - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 4. SOURCE OF FUNDS: AF - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Guernsey, Channel Islands - ---------- --------------------------------------------------------------------- - ------------------------- -------- --------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES -------- --------------------------------------------- BENEFICIALLY -------- --------------------------------------------- OWNED 8. SHARED VOTING POWER: 1,828,572 BY -------- --------------------------------------------- EACH -------- --------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -------- --------------------------------------------- WITH: -------- --------------------------------------------- 10. SHARED DISPOSITIVE POWER: 1,828,572 - ------------------------- -------- --------------------------------------------- - ---------- --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,828,572 - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 15.0 percent - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: IA - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 5 CUSIP No. 4455421030 - ---------- --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: Ashmore Global Special Situations Fund Limited I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS - (ENTITIES ONLY) - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 3. SEC USE ONLY - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 4. SOURCE OF FUNDS: WC - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Guernsey, Channel Islands - ---------- --------------------------------------------------------------------- - ------------------------- -------- --------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES -------- --------------------------------------------- BENEFICIALLY -------- --------------------------------------------- OWNED 8. SHARED VOTING POWER: 1,548,572 BY -------- --------------------------------------------- EACH -------- --------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -------- --------------------------------------------- WITH: -------- --------------------------------------------- 10. SHARED DISPOSITIVE POWER: 1,548,572 - ------------------------- -------- --------------------------------------------- - ---------- --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 1,548,572 - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 12.7 percent - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: CO - ---------- --------------------------------------------------------------------- 6 CUSIP No. 4455421030 - ---------- --------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS: Asset Holder No. 2 Limited re: Ashmore Emerging Economy Portfolio I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS - (ENTITIES ONLY) - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 3. SEC USE ONLY - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 4. SOURCE OF FUNDS: WC - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Guernsey, Channel Islands - ---------- --------------------------------------------------------------------- - ------------------------- -------- --------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES -------- --------------------------------------------- BENEFICIALLY -------- --------------------------------------------- OWNED 8. SHARED VOTING POWER: 280,000 BY -------- --------------------------------------------- EACH -------- --------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON -------- --------------------------------------------- WITH: -------- --------------------------------------------- 10. SHARED DISPOSITIVE POWER: 280,000 - ------------------------- -------- --------------------------------------------- - ---------- --------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 280,000 - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11: 2.3 percent - ---------- --------------------------------------------------------------------- - ---------- --------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON: CO - ---------- --------------------------------------------------------------------- 7 ITEM 1. SECURITY AND ISSUER. This statement relates to the common stock, par value $0.001 per share (the "Common Stock"), of Hungarian Telephone and Cable Corp., a company organized under the laws of the State of Delaware (the "Company"). The principal executive offices of the Company are located at 1201 Third Avenue, Suite 3400, Seattle, Washington 98101-3034, United States of America. ITEM 2. IDENTITY AND BACKGROUND. (a), (b) and (c): Ashmore Investment Management Limited ("AIML") is organized as a company in England and Wales and has its principal office address at 20 Bedfordbury, London WC2N 4BL, United Kingdom. AIML is a wholly-owned subsidiary of AI(UK)L (as defined below). AIML is authorized and regulated by the UK Financial Services Authority pursuant to the Financial Services and Markets Act 2000. AIML is a professional investment manager and pursuant to (i) delegated authority from AMCL (as defined below) provides investment management services with respect to the Ashmore Funds (as defined below) and (ii) delegated authority from AEMDF (as defined below) provides investment management services with respect to AEMDF. Ashmore Group Limited ("AGL") is organized as a company in England and Wales and has its principal office address at 20 Bedfordbury, London WC2N 4BL, United Kingdom. Other than its directors, executive officers and shareholders, there are no persons controlling or ultimately in control of AGL. AGL is a holding company whose subsidiaries manage the Ashmore family of companies which provide investment management, advisory or administrative services to open and closed-ended investment funds, segregated accounts and other investment vehicles. Ashmore Investments (UK) Limited ("AI(UK)L") is organized as a company in England and Wales and has its principal office address at 20 Bedfordbury, London WC2N 4BL, United Kingdom. AI(UK)L is a wholly-owned subsidiary of AGL. AI(UK)L is an intermediate holding company. Ashmore Management Company Limited ("AMCL") is organized as a company in Guernsey, Channel Islands and has its principal office address at Arnold House, St. Julian's Avenue, St. Peter Port, Guernsey GY1 3NF, Channel Islands ("Arnold House"). AMCL is authorized and regulated by the Guernsey Financial Services Commission ("GFSC") as a Principal Manager pursuant to the Protection of Investors (Bailiwick of Guernsey) Law 1987 and is a wholly-owned subsidiary of AI(UK)L. AMCL is responsible for the overall management of eight open-ended funds (the "Ashmore Funds") which are domiciled and regulated in Guernsey. AMCL has delegated investment management responsibility with respect to the Ashmore Funds to AIML. Ashmore Global Special Situations Fund Limited ("GSSF") is an open-ended investment company registered with limited liability in Guernsey, Channel Islands, and has its principal office address at PO Box 282, Borough House, Rue du Pre, St. Peter Port, Guernsey GY1 3RH, Channel Islands. GSSF has been authorized by the GFSC as a Class B Collective Investment Scheme under the Protection of Investors (Bailiwick of Guernsey) Law 1987. GSSF was established to enable investors to invest in debt instruments of distressed emerging market companies or emerging market companies undergoing restructuring. Asset Holder PCC No. 2 Limited re Ashmore Emerging Economy Portfolio ("AEEP") is a protected cell (segregated class of shares) of Asset Holder PCC No. 2 Limited (a protected cell company) registered in Guernsey, Channel Islands and has its principal office address at Arnold House. AEEP has been authorized by the GFSC as a Class B Collective Investment Scheme under the Protection of Investors (Bailiwick of Guernsey) Law 1987. AEEP was established to enable investors to invest in emerging market equities and equity-linked instruments. AIML, AGL, AI(UK)L, AMCL, GSSF and AEEP are together referred to herein as the "Ashmore Parties" and, individually, as an "Ashmore Party." 8 The name, present principal occupation or employment and business address of each director and executive officer of the relevant Ashmore Parties is set forth in Exhibit 7.1 hereto and incorporated by reference herein. (d) and (e): The Ashmore Parties have not, within the last 5 years, nor to the knowledge of the Ashmore Parties, have any of their directors and executive officers, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding been or are 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): AGL, AI(UK)L, AIML are organized as companies in England and Wales. AMCL is organized as a company in Guernsey, Channel Islands. GSSF is an open-ended investment company registered with limited liability in Guernsey, Channel Islands. AEEP is a protected cell (segregated class of assets) of Asset Holder PCC No. 2 Limited (a protected cell company) registered in Guernsey, Channel Islands. Each director and executive officer of the relevant Ashmore Parties is a citizen of the United Kingdom. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. GSSF paid US$7,156,094 for 1,548,572 shares of Common Stock pursuant to the Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated September 26, 2003, by and between Postabank es Takarekpenztar Rt ("Postabank") and GSSF (the "GSSF Purchase Agreement"). The funds for the purchase of Common Stock by GSSF were provided out of the general investment funds of GSSF. AEEP paid US$1,293,906 for 280,000 shares of Common Stock pursuant to the Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated September 26, 2003, by and between Postabank and AEEP (the "AEEP Purchase Agreement"). The funds for the purchase of the Common Stock by AEEP were provided out of the general investment funds of the AEEP. Simultaneously with the foregoing purchases of Common Stock, certain affiliates of the Ashmore Parties acquired unsecured subordinated notes ("Unsecured Notes) and warrants ("Warrants") of the Company from Postabank pursuant to the (i) Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated September 26, 2003, by and between Postabank and Asset Holder PCC Limited re: Emerging Markets Liquid Investment Portfolio ("EMLIP")(the "EMLIP Purchase Agreement") and (ii) Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated September 26, 2003, by and between Postabank and Ashmore Emerging Markets Debt Fund ("AEMDF")(the "AEMDF Purchase Agreement"). No separate consideration was paid by either EMLIP or AEMDF in respect of the Warrants. The GSSF Purchase Agreement, the AEEP Purchase Agreement, the EMLIP Purchase Agreement and the AEMDF Purchase Agreement are collectively referred to herein as the "Ashmore Purchase Agreements." The description of the Ashmore Purchase Agreements and the transactions contemplated thereby are qualified in their entirety by reference to the complete copies of the agreements which are filed with this Schedule 13D and incorporated by reference into this Item 3 in all respects. The information set forth in Item 6 with respect to the Warrants is incorporated by reference into this Item 3 in all respects. ITEM 4. PURPOSE OF TRANSACTION. The Common Stock, Unsecured Notes and the Warrants were acquired pursuant to the Ashmore Purchase Agreements in a series of related transactions from Postabank. Each of GSSF and AEEP purchased the Common Stock for investment purposes. 9 Except as set forth in Item 6 which is incorporated by reference into this Item 4 in all respects, none of the Ashmore Parties at the present time has any plans or proposals that relate to or would result in any of the transactions described in paragraphs (a) - (j) of Item 4 of Schedule 13D. The Ashmore Parties intend to review on a continuing basis their investment in the Common Stock of the Company and the Company's business, prospects and financial condition. Based on such continuing reviews, alternate investments opportunities available to the parties and all other factors deemed relevant (including, without limitation, the market for and the price of the Common Stock, offers for shares of the Common Stock, applicable transfer restrictions, general economic conditions and other future developments), the Ashmore Parties may decide to sell or seek the sale of all or part of the Common Stock or increase their holding of Common Stock. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) and (b): Based on information disclosed by the Company, the Company has 12,195,680 shares of Common Stock issued and outstanding. GSSF directly beneficially owns 1,548,572 shares of Common Stock representing 12.7 percent of the Common stock. GSSF has shared voting and investment power with respect to such shares of Common Stock. AEEP directly beneficially owns 280,000 shares of Common Stock representing 2.3 percent of the Common Stock. AEEP has shared voting and investment power with respect to such shares of Common Stock. AGL indirectly beneficially owns 1,828,572 the Common Stock representing 15 percent of the Common Stock by virtue of its indirect beneficial ownership of GSSF and AEEP. AGL has shared voting and investment power with respect to such shares of Common Stock. AI(UK)L indirectly beneficially owns 1,828,572 the Common Stock representing 15 percent of the Common Stock by virtue of its indirect beneficial ownership of GSSF and AEEP. AI(UK)L has shared voting and investment power with respect to such shares of Common Stock. AMCL indirectly beneficially owns 1,828,572 shares of Common Stock representing 15 percent of the Common Stock by virtue of its indirect beneficial ownership of GSSF and AEEP. AMCL has shared voting and investment power with respect to such shares of Common Stock. AIML indirectly beneficially owns 1,828,572 shares of Common Stock representing 15 percent of the Common Stock by virtue of its indirect beneficial ownership of GSSF and AEEP. AIML has shared voting and investment power with respect to such shares of Common Stock. (c) Other than the transactions described herein, no transactions by the Ashmore Parties required to be reported by this Item have taken place in the last sixty (60) days. (d) Except as described in Item 5(a) and 5(b) above, no other person is known to have the right to receive or power to direct the receipt of dividends from or proceeds from the sale of the Common Stock. (e) Not applicable. 10 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. GSSF, AEEP, EMLIP and AEMDF entered into the Ashmore Purchase Agreements relating to the Company's Common Stock, Unsecured Notes and Warrants as set forth in Item 3. The information set forth in Item 3 is incorporated by the reference in this Item 6 in all respects. Pursuant to the (i) EMLIP Purchase Agreement, EMLIP acquired Unsecured Notes and 21 Warrants to purchase 100,000 shares of Common Stock per Warrant and (ii) AEMDF Purchase Agreement, AEMDF acquired Unsecured Notes and 4 Warrants to purchase 100,000 shares of Common Stock per Warrant from Postabank. Postabank has agreed to hold the Warrants for the benefit of EMLIP and AEMDF and only take such actions with respect to the Warrants as requested by EMLIP or AEMDF including, if so instructed, remitting the proceeds resulting from an exercise of the Warrants and a sale of the underlying Common Stock. However, the Warrants are by their terms not exercisable nor transferable prior to January 1, 2004 and accordingly Postabank may not transfer or exercise such Warrants prior to such time. In addition, the transfer by Postabank of the Warrants after January 1, 2004 is subject to the consent of the Company which consent may not be unreasonably withheld or delayed. The Warrants are subject to cancellation by the Company in whole or in part prior to January 1, 2004 upon (i) repayment of a proportionate amount of the US$25 million of the Unsecured Notes and (ii) the payment to the holders of such cancelled Warrants an amount equal to 7.5 percent of the principal amount of the Unsecured Notes repaid. The Warrants expire on March 31, 2007. The exercise price of the Warrants is US$10 per share of Common Stock. 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 current exercise price of the Warrants, subject to certain exemptions. Pursuant to the Ashmore Purchase Agreements, Postabank assigned to the relevant Ashmore Parties all of its rights, duties and obligations (assignable by it) under the Securities Purchase Agreement, dated May 10, 1999, by and between the Company and Postabank, as amended by Amendment No. 1 to the Securities Purchase Agreement, dated April 11, 2000. The description of the Securities Purchase Agreement, Unsecured Notes and Warrants and the transactions contemplated thereby are qualified in their entirety by reference to the complete copies of the Securities Purchase Agreement and the forms of the Unsecured Notes and Warrants which are filed with this Schedule 13D and incorporated by reference into this Item 6 in all respects. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 7.1: Directors and Executive Officers of the relevant Ashmore Parties. Exhibit 7.2 Joint Filing Agreement. Exhibit 7.3: Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Ashmore Global Special Situations Fund Limited, as amended pursuant to Amendment No. 1, dated October 10, 2003. Exhibit 7.4: Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Asset Holder PCC No. 2 Limited re: Ashmore Emerging Economy Portfolio, as amended pursuant to Amendment No. 1, dated October 10, 2003. Exhibit 7.5 Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Ashmore Emerging Markets Debt Fund, as amended pursuant to Amendment No. 1, dated October 10, 2003. 11 Exhibit 7.6 Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Asset Holder PCC Limited re: Ashmore Emerging Markets Liquid Investment Portfolio, as amended pursuant to Amendment No. 1, dated October 10, 2003. Exhibit 7.7 Securities Purchase Agreement, dated as of May 10, 1999, by and between Hungarian Telephone and Cable Corp. and Postabank es Takarekpenztar Rt. Exhibit 7.8 Amendment No. 1 to the Securities Purchase Agreement, dated as of April 11, 2000, by and between Hungarian Telephone and Cable Corp. and Postabank es Takarekpenztar Rt. Exhibit 7.9 Form of Unsecured Note Exhibit 7.10 Form of Warrant 12 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. Date: October 20, 2003 /s/ Tim Davis ---------------------- Name: Tim Davis Title: General Counsel On behalf of: Ashmore Investment Management Limited /s/ Mark Coombs -------------------------- Name: Mark Coombs Title: Director On behalf of: Ashmore Group Limited Ashmore Investments (UK) Limited /s/ Nigel Carey --------------------------- Name: Nigel Carey Title: Director On behalf of: Ashmore Management Company Limited Ashmore Global Special Situations Fund Asset Holder PCC No. 2 Limited re: Ashmore Emerging Economy Portfolio 13 EXHIBIT INDEX Exhibit No. Description 7.1 Directors and Executive Officers of the relevant Ashmore Parties. 7.2 Joint Filing Agreement. 7.3 Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Ashmore Global Special Situations Fund Limited, as amended pursuant to Amendment No. 1, dated October 10, 2003. 7.4 Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Asset Holder PCC No. 2 Limited re: Ashmore Emerging Economy Portfolio, as amended pursuant to Amendment No. 1, dated October 10, 2003. 7.5 Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Ashmore Emerging Markets Debt Fund, as amended pursuant to Amendment No. 1, dated October 10, 2003. 7.6 Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants, dated as of September 26, 2003, by and between Postabank es Takarekpenztar Rt. and Asset Holder PCC Limited re: Ashmore Emerging Markets Liquid Investment Portfolio, as amended pursuant to Amendment No. 1, dated October 10, 2003. 7.7 Securities Purchase Agreement, dated as of May 10, 1999, by and between Hungarian Telephone and Cable Corp. and Postabank es Takarekpenztar Rt. 7.8 Amendment No. 1 to the Securities Purchase Agreement, dated as of April 11, 2000, by and between Hungarian Telephone and Cable Corp. and Postabank es Takarekpenztar Rt. 7.9 Form of Unsecured Note 7.10 Form of Warrant 14 EX-7.1 3 ex7-1.txt EXHIBIT 7.1 Directors and Executive Officers of the Relevant Ashmore Parties as of October 20, 2003 The name, present principal occupation or employment, and the name of any corporation or other organization in which such employment is conducted, of each director and executive officer of the relevant Ashmore Parties is set forth below. Unless otherwise indicated, each occupation set forth opposite a director or executive officer's name refers to employment with AIML. 1. ASHMORE INVESTMENT MANAGEMENT LIMITED Name Present Principal Occupation or Employment - ---- ------------------------------------------ Directors - --------- Mark Coombs Managing Director and Chairman of the Investment Committee Jon Moulton Managing Partner, Alchemy Partners LLP, 20 Bedfordbury, London WC2N 4BL, United Kingdom Executive Officers - ------------------ Mark Coombs Managing Director and Chairman of the Investment Committee 2. ASHMORE GROUP LIMITED Name Present Principal Occupation or Employment - ---- ------------------------------------------ Directors - --------- Mark Coombs Managing Director and Chairman of the Investment Committee Jules Green Senior Portfolio Manager (Global & Easter Europe) Jon Moulton Managing Partner, Alchemy Partners LLP, 20 Bedfordbury, London WC2N 4BL, United Kingdom 3. ASHMORE MANAGEMENT COMPANY LIMITED Name Present Principal Occupation or Employment - ---- ------------------------------------------ Directors - --------- Mark Coombs Managing Director and Chairman of the Investment Committee Nigel Carey Partner, Carey Olsen, PO Box 98, 7 New Street, St. Peter Port, Guernsey G1Y 4B2, Channel Islands John Roper Retired Director General, Guernsey Financial Services Commission, La Plaiderie Chambers, La Plaiderie, St. Peter Port, Guernsey GY1 1WG Channel Islands 4. ASHMORE GLOBAL SPECIAL SITUATIONS FUND LIMITED Name Present Principal Occupation or Employment - ---- ------------------------------------------ Directors - --------- Mark Coombs Managing Director and Chairman of the Investment Committee, Ashmore Investment Management Limited Nigel Carey Partner, Carey & Olsen, PO Box 98, 7 New Street, St. Peter Port, Guernsey G1Y 4B2, Channel Islands Ashmore Management Corporate Director, Arnold House, St. Julian's Avenue, Company Limited St. Peter Port, Guernsey GY1 3NF, Channel Islands 5. ASSET HOLDER PCC NO. 2 LIMITED RE: ASHMORE EMERGING ECONOMY PORTFOLIO Name Present Principal Occupation or Employment - ---- ------------------------------------------ Directors - --------- Nigel Carey Partner, Carey & Olsen, PO Box 98, 7 New Street, St. Peter Port, Guernsey G1Y 4B2, Channel Islands John Roper Retired Director General, Guernsey Financial Services Commission, La Plaiderie Chambers, La Plaiderie, St. Peter Port, Guernsey GY1 1WG Channel Islands Ashmore Management Corporate Director, Arnold House, St. Julian's Avenue, Company Limited St. Peter Port, Guernsey GY1 3NF, Channel Islands EX-7.2 4 ex7-2.txt EXHIBIT 7.2 Joint Filing Agreement In accordance with Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to a joint filing with all the Ashmore Parties (as such term is defined in the Schedule 13D referred to below) on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the shares of common stock of Hungarian Telephone and Cable Corp., par value $0.001 per share, and that this Agreement be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument. In witness whereof, the undersigned hereby execute this Agreement this 20th day of October, 2003. /s/ Tim Davis ------------------------- Name: Tim Davis Title: General Counsel On behalf of: Ashmore Investment Management Limited /s/ Mark Coombs ------------------------- Name: Mark Coombs Title: Director On behalf of: Ashmore Group Limited Ashmore Investments (UK) Limited /s/ Nigel Carey ------------------------- Name: Nigel Carey Title: Director On behalf of: Ashmore Management Company Limited Ashmore Global Special Situations Fund Asset Holder PCC No. 2 Limited re: Ashmore Emerging Economy Portfolio EX-7.3 5 ex7-3.txt EXHIBIT 7.3 EXHIBIT 7.3 Execution Copy AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Dated as of September 26, 2003 by and between POSTABANK ES TAKAREKPENZTAR RT. and ASHMORE GLOBAL SPECIAL SITUATIONS FUND LIMITED Squire, Sanders & Dempsey L.L.P. Zochova 5 811 03 Bratislava Slovak Republic TABLE OF CONTENTS 1. Definitions...........................................................1 2. Purchase and Sale of Shares, Unsecured Notes and Warrants.............3 (a) Purchase and Sale 3 (b) Purchase Price 3 (c) The Closing 3 (d) Delivery of the Shares, Unsecured Notes and Warrants 3 (e) Delivery of Certificates, etc. at the Closing 3 (f) Delivery of Purchase Price at the Closing 3 (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes 3 3. Representations and Warranties Concerning the Transaction.............3 (a) Representations and Warranties of the Seller 3 (b) Representations and Warranties of the Buyer 6 4. Assignment and Assumption of Securities Purchase Agreement............7 5. Assignment and Assumption of Unsecured Notes..........................7 6. Assignment and Assumption of Warrants.................................7 7. Pre-Closing Covenants.................................................7 (a) Cooperation Prior to Closing 7 (b) Seller to Refrain from Taking or to Undertake Certain Actions 7 (c) Closing Arrangements for Shares, Unsecured Notes and Warrants 7 (d) Seller to Use Reasonable Best Efforts on Warrants 8 8. Post-Closing Covenants................................................8 (a) General 8 (b) Litigation Support 8 (c) Warrants 8 9. Conditions to Obligation to Close.....................................8 (a) Conditions to Obligation of the Buyer 8 (b) Conditions to Obligation of the Seller 9 10. Remedies for Breaches of this Agreement..............................10 (a) Survival of Representations and Warranties 10 (b) Indemnification Provisions for Benefit of the Buyer 10 (c) Indemnification Provisions for Benefit of the Seller 10 (d) Matters Involving Third Parties 10 (e) Indemnification with Respect to M&A Capital Ltd. Dispute 10 (f) Exclusive Remedy 11 11. Termination..........................................................11 (a) Termination of Agreement 11 (b) Effect of Termination 11 12. Miscellaneous........................................................11 (a) Press Releases and Public Announcements 11 (b) No Third-Party Beneficiaries 11 (c) Entire Agreement 11 (d) Succession and Assignment 11 (e) Counterparts 11 (f) Headings 12 (g) Notice 12 (h) Governing Law 12 (i) Dispute Resolution 12 (j) Amendments and Waivers 13 (k) Severability 13 (l) Expenses 13 (m) Construction 13 (n) Stamp Taxes, etc. 13 (o) Incorporation of Exhibits and Schedules 13 (p) Execution on Behalf of Buyer by Custodian 13 (q) References to Shares, Unsecured Notes and Warrants 13 - ii - EXHIBITS - -------- Exhibit A Securities Purchase Agreement Exhibit B Sample Unsecured Note Schedule B-1 Descriptive List of Unsecured Notes Exhibit C Sample Warrant Schedule C-1 Descriptive List of Warrants Exhibit D Form of Transfer of Unsecured Note Exhibit E Form of Transfer of Warrant Exhibit F Statement that the Buyer is an Accredited Investor Exhibit G Form of Agreement Amending the Warrants Exhibit H Form of Assumption Agreement regarding the Warrants Exhibit I Form of Agreement Amending Securities Purchase Agreement. Exhibit J Closing Arrangements Exhibit K Form of Opinion Letter of Seller's US Counsel Addressed to Buyer and Transfer Agent Exhibit L Form of Opinion Letter of Seller's Hungarian Counsel Addressed to Buyer SCHEDULES - --------- Schedule 3(a)(viii) Litigation - iii - AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS THIS AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS (this "Agreement") is made as of September 26, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Ashmore Global Special Situations Fund Limited ("Buyer"). The Buyer and the Seller are referred to collectively herein as the "Parties." RECITALS WHEREAS, Seller is the owner of the Shares, Unsecured Notes and Warrants (each as defined in Section 1); WHEREAS, Seller wishes to sell and Buyer wishes to buy the Shares, Unsecured Notes and Warrants on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Securities Purchase Agreement (as defined in Section 1) on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Unsecured Notes on the terms and conditions set forth in this Agreement; and WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Warrants on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Definitions. "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act. "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Buyer" has the meaning set forth in the preface above. "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP. "Closing" has the meaning set forth in Section 2(c) below. "Closing Date" has the meaning set forth in Section 2(c) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "HTCC" means Hungarian Telephone and Cable Corp., a Delaware corporation, together with all of its Subsidiaries and Affiliates. -1- "Income Tax" means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not. "Indemnified Party" has the meaning set forth in Section 10(d) below. "Indemnifying Party" has the meaning set forth in Section 10(d) below. "Knowledge" shall mean the actual knowledge, without independent investigation, of the Board of Directors of Seller and of Mr. Tamas Ugroczky, the officer at the Seller responsible for the Senior Secured Debt Facility. "Material Adverse Effect" means any event which will or could reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the properties, business, operations, earnings, assets, liabilities, condition (financial or otherwise) or prospects of HTCC and its Subsidiaries whether or not in the ordinary course of business. "Party" has the meaning set forth in the preface above. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Purchase Price" has the meaning set forth in Section 2(b) below. "Securities Act" means the Securities Act of 1933, as amended. "Securities Purchase Agreement" means that certain agreement by and between HTCC and the Seller, dated as of May 10, 1999, as amended by Amendment No. 1 to the Securities Purchase Agreement, dated April 11, 2000, which agreement is attached hereto as Exhibit A. "Security Interest" means any charge, claim, community property interest, condition, equitable interest, lien, pledge, security interest, right of first refusal, or restriction or encumbrance of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute, other than (a) mechanic's, materialmen's and similar liens, (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings and (c) purchase money liens and liens securing rental payments under capital lease arrangements, provided, however, that restrictions on the transferability of the Warrants as set forth in the terms of the Warrants shall not be considered a Security Interest. "Seller" has the meaning set forth in the preface above. "Senior Secured Debt Facility" means the Senior Secured Debt Facility Agreement dated April 11, 2000 arranged by Citibank, N.A. and Westdeutsche Landesbank Girozentrale, pursuant to which the Seller is a senior creditor of HTCC. "Shares" means the one million five hundred and forty eight thousand five hundred and seventy two (1,548,572) shares of common stock, par value $0.001 per share, of HTCC owned by the Seller. "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "Third Party Claim" has the meaning set forth in Section 10(d) below. "Unsecured Notes" means zero (0) of the Amended & Restated US $1,000,000 Unsecured Subordinated Notes of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit B and a descriptive list of which is set forth in Schedule B-1. -2- "Warrants" means zero (0) Warrants to Purchase Common Stock of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit C and a descriptive list of which is set forth in Schedule C-1. 2. Purchase and Sale of Shares, Unsecured Notes and Warrants. (a) Purchase and Sale. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, the Shares, Unsecured Notes and Warrants for the consideration specified below in this Section 2. (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing seven million one hundred and fifty six thousand and ninety four U.S. dollars ($7,156,094) (the "Purchase Price") in cash, which Purchase Price is payable by wire transfer or delivery of other immediately available funds. The Purchase Price shall be allocated in the following manner: $7,156,094 for the Shares, $0 for the Unsecured Notes and $0 for the Warrants. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Dewey Ballantine LLP ("Dewey") in Budapest, Hungary, commencing at 9:00 a.m. local time on October 10, 2003 or on such other date and at such other place as the Buyer and the Seller may mutually determine (the "Closing Date"); provided, however, that the Closing Date shall be no later than November 28, 2003. (d) Delivery of the Shares, Unsecured Notes and Warrants. At the Closing, Dewey will release the Shares, Unsecured Notes and Warrants to the Buyer upon written confirmation by the Parties of the Closing of the transaction, as required by the terms of the closing arrangements set forth in Exhibit J attached hereto. (e) Delivery of Certificates, etc. at the Closing. At or prior to the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 9(a) below and (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 9(b) below. (f) Delivery of Purchase Price at the Closing. At the Closing, Buyer will deliver to the Seller the consideration specified in Section 2(b) above. (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes. (i) All interest, and all fees which are expressed to accrue by reference to time elapsed, are based on contractual rates, as set forth in the Unsecured Notes. For the avoidance of doubt (A) such interest is payable by HTCC in respect of each Interest Period on each Interest Payment Date (each such term as defined in the Unsecured Notes) in US dollars in advance and (B) the apportionment set forth in (ii) below shall relate to the Interest Period during which time the Closing shall occur. (ii) All prepaid interest in respect of the relevant Interest Period up to but excluding the Closing Date shall be for the account of the Seller. All prepaid interest in respect of the relevant Interest Period from and including the Closing Date (the "Buyer's Portion") shall be for the account of the Buyer. The Seller agrees to pay the Buyer at the Closing the Buyer's Portion by means of a dollar-for-dollar reduction in the Purchase Price. The Buyer's Portion shall be determined independently by the Facility Agent (as defined in the Unsecured Notes) prior to the Closing. 3. Representations and Warranties Concerning the Transaction. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of Seller. The Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. -3- (ii) Authorization of Transaction. The Seller has full power and authority, and all corporate actions necessary on the part of the Seller have been taken, to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable against it in accordance with its terms, except (A) to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity and (B) that the transfer of the Warrants will not be enforceable unless such Warrants shall be amended as set forth below in Section 9(a)(vi). The Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any third parties (including HTCC other than with respect to Warrants as provided above), any government or any governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice, filing, authorization, consent or approval is needed, it has been given or obtained. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any agreement or any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller or, to the Knowledge of the Seller, to which HTCC is subject or any provision of the Seller's charter or bylaws. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (v) Shares. The Seller holds of record and owns the Shares free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of the Shares (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of the Shares. Upon transfer of the Shares in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Shares, free and clear of any Security Interests. (vi) Unsecured Notes. The Seller holds of record and owns the Unsecured Notes free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Unsecured Notes in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Unsecured Notes, free and clear of any Security Interests. (vii) Warrants. The Seller holds of record and owns the Warrants free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws and restrictions imposed under the terms of the Warrants themselves), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Warrants in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Warrants, free and clear of any Security Interests. (viii) No Proceedings Against Seller. There is no civil, criminal or administrative suit or claim, proceeding or investigation before any court, arbitrator or similar panel at law or in equity now pending or, to the Knowledge of the Seller, threatened against the Seller, the Shares, the Unsecured Notes or the Warrants, which could reasonably be expected to have a Material Adverse Effect or adversely effect the ability to consummate the transaction or encumber the Shares, the Unsecured Notes and Warrants, except as set forth in Schedule 3(a)(viii) hereto. (ix) Accuracy of Principal Amounts. The principal amounts of the Unsecured Notes and Warrants as of the Closing Date are accurately stated in Schedules B-1 and C-1 hereto, respectively. (x) No Funding Obligation. There is no funding obligation of any kind (whether fixed, contingent, conditional, or otherwise) in respect of the Shares, Unsecured Notes or the Warrants (including any obligation to make advances or to purchase participations in letters of credit or any obligation relating to any currency or interest rate swap, hedge, or similar arrangement) that Seller or Buyer is or shall be required to pay or otherwise perform, that Seller has not paid or otherwise performed in full. -4- (xi) No Acts or Omissions Adversely Affecting Shares, Unsecured Notes or Warrants. Seller has not engaged in any acts or conduct or made any omissions (including, without limitation, (A) in connection with any membership on or participation in any official or unofficial creditors' committee or other similar committee relating to HTCC, or in connection with its status (if any) as an insider or Affiliate of HTCC or (B) by virtue of Seller's holding any funds or property of, or owing amounts or property to HTCC), that will result in Buyer receiving proportionately less in payments or distributions under, or less favorable treatment (including the timing of payments or distributions) for, the Shares, Unsecured Notes or Warrants than is received by other holders of shares, unsecured notes or warrants of the same tranche, class or type as the Shares, Unsecured Notes or Warrants (if any). (xii) Compliance with Securities Purchase Agreement, Unsecured Notes and Warrants. To the best knowledge of the Seller, the Seller has complied with, and has performed, all obligations required to be complied with or performed by it under the Securities Purchase Agreements, Unsecured Notes and Warrants and Seller has not breached any of its representations, warranties, obligations, agreements or covenants under the Securities Purchase Agreements, Unsecured Notes or Warrants. (xiii) Seller is a Sophisticated Seller. Seller (A) is a sophisticated seller with respect to the sale of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the sale of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Buyer, and based on such information as Seller has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that Seller has relied upon Buyer's express representations, warranties, covenants and indemnities in this Agreement. Seller acknowledges that Buyer has not given Seller any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (xiv) Excluded Information. Seller acknowledges that (A) Buyer currently may have, and later may come into possession of, information with respect to the Shares, Unsecured Notes or Warrants or HTCC or any of its Affiliates that is not known to Seller and that may be material to a decision to sell the Shares, Unsecured Notes or Warrants ("Seller Excluded Information"), (B) Seller has determined to sell the Shares, Unsecured Notes and Warrants notwithstanding its lack of knowledge of the Seller Excluded Information and (C) Buyer shall have no liability to Seller, and Seller waives and releases any claims that it might have against Buyer whether under applicable securities laws or otherwise, with respect to the nondisclosure of the Seller Excluded Information in connection with the transactions contemplated by this Agreement; provided, however, that the Seller Excluded Information shall not and does not affect the truth or accuracy of Buyer's representations or warranties in this Agreement. (xv) Provision of Documents. On or prior to the Closing Date, Seller (A) will have provided or made available to Buyer copies of the Securities Purchase Agreement, the Unsecured Notes and the Warrants, as well as only those intercreditor agreements, subordination agreements, waivers and amendments executed in connection therewith, in each case as currently in effect and (B) will have provided original copies of all documents directly related to the purchase and sale of the Unsecured Notes. (xvi) No Consent to Changes. Seller has not given its consent to change, nor has it waived, any term or provision of the Securities Purchase Agreement, the Unsecured Notes or the Warrants, including, without limitation, with respect to the amount or time of any payment of principal or the rate or time of any payment of interest, except as contemplated by this Agreement. (xvii) No Other Agreements. Seller is not a party to, or bound by, any document or agreement (other than (A) the Senior Secured Debt Facility, (B) any banking agreements with HTCC that may arise in the course of normal business and (C) Seller's agreement on a best efforts basis to increase its participation in the Senior Secured Debt Facility following the Closing) that could materially and adversely affect the Shares, Unsecured Notes or Warrants or Buyer's rights and remedies under this Agreement. -5- (xviii) Transactions with HTCC. Seller has not engaged with HTCC in any transactions other than on an arm's-length basis and on reasonable commercial terms. (xix) Disclaimer of other Representations and Warranties. The Seller makes no representation or warranty, express or implied, at law or in equity, in respect of HTCC or any of its assets, liabilities or operations, except that the Seller represents and warrants that to the Knowledge of the Seller there is no fact that specifically applies to the Seller or HTCC that could reasonably be expected to have a Material Adverse Effect and that has not been set forth in this Agreement or in HTCC's public filings. Except as expressly set forth herein, Buyer hereby acknowledges and agrees that the Buyer is purchasing the Shares having made, to its full and complete satisfaction, a due diligence investigation of HTCC. (b) Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that the statements contained in this Section 3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of the Buyer. The Buyer is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization. (ii) Authorization of Transaction. The Buyer has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions, except to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws. (iv) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. (v) Investment. The Buyer (A) understands that the Shares, Unsecured Notes and Warrants have not been, and will not be, registered under the Securities Act, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions from registration for transactions not involving any public offering, (B) understands that the Shares, Unsecured Notes and Warrants may not be sold, transferred, pledged, hypothecated or otherwise disposed of or offered for sale except pursuant to an effective registration statement under the Securities Act and applicable state securities laws or an applicable exemption therefrom, (C) is acquiring the Shares, Unsecured Notes and Warrants solely for its own account or for any fund or account managed by Ashmore Investment Management Limited for investment purposes, and not with a view to the distribution thereof in violation of any applicable securities laws, (D) is a sophisticated investor with knowledge and experience in business and financial matters, (E) has received adequate information concerning HTCC and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, Unsecured Notes and Warrants, (F) is able to bear the economic risk and lack of liquidity inherent in holding the Shares, Unsecured Notes and Warrants, and (G) is an accredited investor within the meaning of Regulation D promulgated under the Securities Act for the reasons set forth in Exhibit F attached hereto. (vi) Buyer is a Sophisticated Buyer. Buyer (A) is a sophisticated buyer with respect to the purchase of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the purchase of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Seller, and based on such -6- information as Buyer has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that Buyer has relied upon Seller's express representations, warranties, covenants and indemnities in this Agreement. Buyer acknowledges that Seller has not given Buyer any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (vii) Excluded Information. Buyer represents that any Seller Excluded Information which is currently known by Buyer would not, in Buyer's reasonable independent judgment, have a Material Adverse Effect, whether as a direct or indirect result of the transactions contemplated by this Agreement or otherwise, on the creditworthiness of HTCC. 4. Assignment and Assumption of Securities Purchase Agreement. Pursuant to the provisions of Section 13.3 of the Securities Purchase Agreement, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Securities Purchase Agreement, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Securities Purchase Agreement and agrees to perform in accordance with such agreement, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Securities Purchase Agreement. 5. Assignment and Assumption of Unsecured Notes. Pursuant to the provisions of Section 6 of the Terms and Conditions of the Unsecured Notes and as evidenced by a Form of Transfer for each Unsecured Note, a sample of which is attached hereto as Exhibit D, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Unsecured Notes, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Unsecured Notes and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Unsecured Notes. 6. Assignment and Assumption of Warrants. Pursuant to the provisions of Section 4.2 of the Warrants and as evidenced by a Form of Transfer for each Warrant, a sample of which is attached hereto as Exhibit E, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Warrants, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Warrants and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Warrants. 7. Pre-Closing Covenants. (a) Cooperation Prior to Closing Between the execution of this Agreement and the Closing, each of the Parties will use its reasonable best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 9 below). (b) Seller to Refrain from Taking or to Undertake Certain Actions. Between the execution of this Agreement and the Closing, Seller agrees: (i) Not to take any action with regard to the Shares, Unsecured Notes or Warrants without the consent of the Buyer, which consent shall not be unreasonably withheld; (ii) Not take any action which would have a Material Adverse Effect on the Shares, Unsecured Notes or Warrants or which would result in a breach of the Agreement; and (iii) To take such reasonable actions with respect to the Shares, as the Buyer may request. (c) Closing Arrangements for Shares, Unsecured Notes and Warrants. Between the execution of this Agreement and Closing, the Parties shall take all actions and do all things necessary in order to implement the Closing Arrangements set forth in Exhibit J attached hereto, including taking all actions within their respective power so that HTCC gives effect to the closing arrangements contemplated therein. -7- (d) Seller to Use Reasonable Best Efforts on Warrants. Between the execution of this Agreement and Closing, the Seller shall use its reasonable best efforts to ensure that the Agreement set forth in Exhibit G (Agreement Amending the Warrants) shall be executed by HTCC. 8. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing: (a) General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefore under Section 10 below). (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against third party any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving or relating to HTCC or otherwise related to this Agreement, the other Party shall be obligated to cooperate on a commercially reasonable basis with it and its counsel in the defense or contest, make available its personnel, and provide access to its books and records as shall be necessary in connection with the defense or contest, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefore under Section 10 below). (c) Warrants. If (i) Seller is unable to obtain the Agreement Amending the Warrants in the form set forth in Exhibit G attached hereto, (ii) Buyer has waived the condition set forth in Section 9(a)(vi)(A) and (iii) the Closing shall have occurred, then on and after the Closing Date up to and including the Expiration Date (as such term is defined in the Warrant), the Seller shall hold the Warrants for the benefit of the Buyer and shall only take such actions as the Buyer shall request with respect to the Warrants and, if applicable, shall remit all proceeds to Buyer in connection with any exercise of the Warrants and sale of the underlying shares of HTCC. 9. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(a) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) all necessary governmental, shareholder and third party consents and approvals in connection with the transactions contemplated by the Agreement shall have been obtained; (v) the Seller shall have delivered to the Buyer certificates executed by the responsible officer or the secretary of the Seller, as applicable, certifying (A) that each of the conditions specified in Section 9(a)(i)-(iv) are satisfied in all respects, (B) the resolution(s) of the Seller's board of directors authorizing the Seller's execution, delivery and performance of the Agreement and all matters in connection with the Agreement and transactions contemplated thereby, and (C) the incumbency of the officer of the Seller executing the Agreement and all other documents executed and delivered in connection therewith; (vi) the relevant parties shall have entered into the agreements in the forms set forth in (A) Exhibit G (Agreement Amending the Warrants), (B) Exhibit H (Assumption Agreement regarding the Warrants) and (C) Exhibit I (Agreement Amending Securities Purchase Agreement) and attached hereto and the same shall be in full force and effect; -8- (vii) the Buyer shall have received: (A) from Hungarian Counsel of the Seller, a legal opinion in the form set forth in Exhibit L attached hereto, and dated as of the Closing Date, to the effect that (u) the Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice filing, authorization, consent or approval is needed, it has been gained or obtained, (v) any arbitration award in favor of the Buyer obtained pursuant to this Agreement would be valid and enforceable before a court of competent jurisdiction in Hungary and (x) the matters set forth in Section 3(a)(i) and the first and third sentences of Section 3(a)(ii) of the Agreement; and (B) from US Counsel to the Seller, an opinion in the form as may be attached hereto as Exhibit K, and dated as of the Closing Date (y) covering the matters set forth in the second sentence of Section 3(a)(ii) of the Agreement and (z) stating that no registration is required under the Securities Act to transfer the Shares, Unsecured Notes or the Warrants to Buyer in accordance with the Agreement; (viii) the Closing Arrangements set forth in Exhibit J attached hereto shall have been implemented in full to the Buyer's satisfaction; for the avoidance of doubt Seller acknowledges and agrees that unless and until the Closing Arrangements set forth in Exhibit J have been implemented as contemplated by this Section 9(a)(viii), Buyer shall have no obligation whatsoever to pay the Purchase Price; (ix) Since the date of the this Agreement, no event or events shall have occurred which have had or reasonably may be expected to have a Material Adverse Effect; (x) All actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer; and (xi) The Buyer shall have had the opportunity to conduct a reasonable investigation of the matters set forth in Schedule 3(a)(viii) of this Agreement and satisfy itself that no material commercial risk will be transferred with respect to the Shares, Unsecured Notes and Warrants as a result of the dispute described therein in the event that the Closing shall occur. The Buyer may waive any condition specified in this Section 9(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Section 9(b)(i)-(iii) is satisfied in all respects; (vi) the relevant parties shall have entered into the agreement in the form set forth in Exhibit H (Assumption Agreement regarding the Warrants) and attached hereto and the same shall be in full force and effect; (vii) the Seller shall have entered into and be ready to close a purchase and sale agreement dated the date hereof with respect to the sale of the Seller's six hundred thousand (600,000) shares of HTCC to an unaffiliated third party; and -9- (viii) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller. The Seller may waive any condition specified in this Section 9(b) if it executes a writing so stating at or prior to the Closing. 10. Remedies for Breaches of this Agreement. (a) Survival of Representations and Warranties. All of the representations, warranties, covenants and obligations of the Parties contained in this Agreement and any certificate or document delivered with this Agreement shall survive the Closing (unless the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations) or the specific terms thereof. (b) Indemnification Provisions for Benefit of the Buyer. In the event any the Seller breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to Section 12(g) below within such survival period, then the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (c) Indemnification Provisions for Benefit of the Seller. In the event the Buyer breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to Section 12(g) below within such survival period, then the Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (d) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the other Party (the "Indemnifying Party") under this Section 10, then the Indemnified Party shall promptly (and in any event within thirty (30) days after receiving notice of the Third Party Claim) notify the Indemnifying Party thereof in writing. (ii) Notwithstanding the fact that the Indemnifying Party will have the right at any time to assume and thereafter conduct the defense of the Third Party Claim with counsel of his or its choice, the Indemnified Party will have the right to participate in such proceedings at its own cost. (iii) Unless and until an Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 10(d)(ii) above, however, the Indemnified Party may defend, at the cost of the Indemnifying Party, against the Third Party Claim in any manner it reasonably may deem appropriate. (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to monetary damages, with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld or delayed). (e) Indemnification with Respect to M&A Capital Ltd. Dispute. Seller agrees to indemnify and hold harmless the Buyer against any and all costs, expenses, liabilities, claims, losses and damages of whatever nature (including reasonable attorneys' fees) to the extent such costs, expenses, liabilities, claims, losses and damages arise out of or are based on the matters set forth in Schedule 3(a)(viii) of the Agreement. -10- (f) Exclusive Remedy. The Buyer and the Seller acknowledge and agree that the foregoing indemnification provisions in this Section 10 shall be the exclusive remedy of the Buyer and the Seller with respect to the transactions contemplated by this Agreement. 11. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003, by reason of the failure of any condition precedent under Section 9(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (iii) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003 by reason of the failure of any condition precedent under Section 9(b) hereof (unless the failure results primarily from the Seller itself breaching any representation, warranty, or covenant contained in this Agreement). (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 11(a) above, all rights and obligations of the Parties hereunder, with the express exception of the provisions of Sections 12(g), 12(h), 12(i) and 12(l) hereof, shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 12. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to making the disclosure). (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other Party, except that the Buyer may freely assign without restriction the benefit of this Agreement or otherwise sell or transfer all the Shares, Unsecured Notes or the Warrant to any fund or account managed by Ashmore Investment Management Limited. (e) Counterparts. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. -11- (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
If to the Seller: Copy to: Postabank es Takarekpenztar Rt. Squire, Sanders & Dempsey L.L.P. Rumbach Sebestyen u. 19-21. Zochova 5 1075 Budapest 811 03 Bratislava Hungary Republic of Slovakia Attention: Katalin Igaz Attention: Andrew Sandor Facsimile: +36-1-266-8077 Facsimile: +421-2-5930-3415 If to the Buyer: Ashmore Global Special SituationsFund Limited c/o Barings (Guernsey) Limited, as custodian PO Box 71, Trafalgar Court Les Banques, St Peter Port Guernsey GY1 3DA Attention: Tracy le Sauvage Facsimile: 01481 745 058 Copy to: Copy to: Ashmore Investment Management Limited Dewey Ballantine 20 Bedfordbury 1 Undershaft London WC2N 4BL London, EC3 8LP United Kingdom United Kingdom Attention: Tim Davis Attention: Douglas L. Getter, Esq. Facsimile: +44-20-7557-4141 Facsimile: +44-20-7456-6001
Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. (i) Dispute Resolution. (i) In the event of any dispute between the Parties, the Parties shall first attempt to settle such dispute amicably. Provided that, unless the Parties otherwise agree, arbitration may be commenced on or after the thirtieth (30) day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made. (ii) If amicable settlement has not been reached within the period stated in Section 12(i)(i) above, the dispute shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed under such Rules. Each arbitrator shall have experience in agreements -12- of this type generally. The language of the arbitration shall be English and all documents submitted to the arbitration shall be in English (or where applicable an English translation shall be provided). The place of such arbitration shall be London. The prevailing party in any such arbitration shall be fully reimbursed by the other party for all costs associated with the arbitration, including reasonable legal fees. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each Party. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Expenses. Each of the Buyer and the Seller will bear its own costs and expenses (including legal fees and expenses) incurred in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby. (m) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (n) Stamp Taxes, etc.. Seller agrees that it will pay, and will hold the Buyer harmless from any and all liability with respect to any stamp or similar taxes which may be determined to be payable in connection with the execution, delivery and performance of this Agreement. (o) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (p) Execution on Behalf of Buyer by Custodian. Barings (Guernsey) Limited is executing this Agreement and any other operative documents relating hereto to which Buyer is a party or shall be a party on behalf of Buyer and solely in his capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Agreement or such other operative documents. (q) References to Shares, Unsecured Notes and Warrants. References to "Shares", "Unsecured Notes" and "Warrants" shall applicable in this Agreement to extent that references to each of these terms is applicable with respect to the specific purchase and sale arrangement contemplated by Section 2 of this Agreement -13- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASHMORE GLOBAL SPECIAL SITUATIONS FUND LIMITED By: /s/ Bela Singlovics By: BARINGS (GUERNSEY) LIMITED, ----------------------- as custodian for Ashmore Name: Bela Singlovics Global Special Situations Title: Chief Executive Officer Fund Limited /s/ Tracy Le Sauvage -------------------- Authorized Signatory By: /s/ Katalin Igaz /s/ Jason Yendell ----------------------------- -------------------- Name: Katalin Igaz Authorized Signatory Title: Deputy Chief Executive Officer -14- AMENDMENT NO. 1 TO THE AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Amendment No. 1 to the Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants (this "Amendment") is made as of October 10, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Ashmore Global Special Situations Fund Limited ("Buyer"). RECITALS WHEREAS, the Seller and Buyer have entered into the Agreement for the Purchase and Sale of Shares, Unsecured Notes And Warrants dated September 26, 2003 (the "Agreement"); and WHEREAS, the Seller and Buyer wish to amend certain of the representations of the warranties given by the Buyer in the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller and the Buyer agree as follows: AGREEMENT 1. Amendment to Agreement. Section 3(b)(v)(A) of the Agreement shall be amended by deleting the words "for transactions not involving any public offering". 2. Effective Time. This Amendment shall be effective immediately upon execution. 3. Governing Law. This Amendment 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 conflict of laws provisions thereof. 4. Ratification. The Agreement, as amended by this Amendment, is and continues to be, in full force and effect and is hereby in all respects confirmed, approved and ratified. 5. Execution on Behalf of Buyer by Custodian. Barings (Guernsey) Limited is executing this Amendment on behalf of Buyer and solely in its capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Amendment. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASHMORE GLOBAL SPECIAL SITUATIONS FUND LIMITED By: /s/ Bela Singlovics By: BARINGS (GUERNSEY) LIMITED, ----------------------- as custodian for Ashmore Global Name: Bela Singlovics Special Situations Fund Limited Title: Chief Executive Officer /s/ Tracy Le Sauvage By: /s/ Katalin Igaz -------------------- ------------------------------ Authorized Signatory Name: Katalin Igaz Title: Deputy Chief Executive Officer /s/ Jason Yendell -------------------- Authorized Signatory 2 EX-7.4 6 ex7-4.txt EXHIBIT 7.4 EXHIBIT 7.4 Execution Copy AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Dated as of September 26, 2003 by and between POSTABANK ES TAKAREKPENZTAR RT. and ASSET HOLDER PCC NO. 2 LIMITED RE: ASHMORE EMERGING ECONOMY PORTFOLIO Squire, Sanders & Dempsey L.L.P. Zochova 5 811 03 Bratislava Slovak Republic TABLE OF CONTENTS 1. Definitions...........................................................1 2. Purchase and Sale of Shares, Unsecured Notes and Warrants.............3 (a) Purchase and Sale 3 (b) Purchase Price 3 (c) The Closing 3 (d) Delivery of the Shares, Unsecured Notes and Warrants 3 (e) Delivery of Certificates, etc. at the Closing 3 (f) Delivery of Purchase Price at the Closing 3 (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes 3 3. Representations and Warranties Concerning the Transaction.............3 (a) Representations and Warranties of the Seller 3 (b) Representations and Warranties of the Buyer 6 4. Assignment and Assumption of Securities Purchase Agreement............7 5. Assignment and Assumption of Unsecured Notes..........................7 6. Assignment and Assumption of Warrants.................................7 7. Pre-Closing Covenants.................................................7 (a) Cooperation Prior to Closing 7 (b) Seller to Refrain from Taking or to Undertake Certain Actions 7 (c) Closing Arrangements for Shares, Unsecured Notes and Warrants 7 (d) Seller to Use Reasonable Best Efforts on Warrants 8 8. Post-Closing Covenants................................................8 (a) General 8 (b) Litigation Support 8 (c) Warrants 8 9. Conditions to Obligation to Close.....................................8 (a) Conditions to Obligation of the Buyer 8 (b) Conditions to Obligation of the Seller 9 10. Remedies for Breaches of this Agreement..............................10 (a) Survival of Representations and Warranties 10 (b) Indemnification Provisions for Benefit of the Buyer 10 (c) Indemnification Provisions for Benefit of the Seller 10 (d) Matters Involving Third Parties 10 (e) Indemnification with Respect to M&A Capital Ltd. Dispute 10 (f) Exclusive Remedy 11 11. Termination..........................................................11 (a) Termination of Agreement 11 (b) Effect of Termination 11 12. Miscellaneous........................................................11 (a) Press Releases and Public Announcements 11 (b) No Third-Party Beneficiaries 11 (c) Entire Agreement 11 (d) Succession and Assignment 11 (e) Counterparts 11 (f) Headings 12 (g) Notice 12 (h) Governing Law 12 (i) Dispute Resolution 12 (j) Amendments and Waivers 13 (k) Severability 13 (l) Expenses 13 (m) Construction 13 (n) Stamp Taxes, etc. 13 (o) Incorporation of Exhibits and Schedules 13 (p) Execution on Behalf of Buyer by Custodian 13 (q) References to Shares, Unsecured Notes and Warrants 13 - ii - EXHIBITS - -------- Exhibit A Securities Purchase Agreement Exhibit B Sample Unsecured Note Schedule B-1 Descriptive List of Unsecured Notes Exhibit C Sample Warrant Schedule C-1 Descriptive List of Warrants Exhibit D Form of Transfer of Unsecured Note Exhibit E Form of Transfer of Warrant Exhibit F Statement that Buyer is an Accredited Investor Exhibit G Form of Agreement Amending the Warrants Exhibit H Form of Assumption Agreement regarding the Warrants Exhibit I Form of Agreement Amending Securities Purchase Agreement. Exhibit J Closing Arrangements Exhibit K Form of Opinion Letter of Seller's US Counsel Addressed to Buyer and Transfer Agent Exhibit L Form of Opinion Letter of Seller's Hungarian Counsel Addressed to Buyer SCHEDULES - --------- Schedule 3(a)(viii) Litigation - iii - AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS THIS AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS (this "Agreement") is made as of September 26, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Asset Holder PCC No. 2 Limited re: Ashmore Emerging Economy Portfolio ("Buyer"). The Buyer and the Seller are referred to collectively herein as the "Parties." RECITALS WHEREAS, Seller is the owner of the Shares, Unsecured Notes and Warrants (each as defined in Section 1); WHEREAS, Seller wishes to sell and Buyer wishes to buy the Shares, Unsecured Notes and Warrants on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Securities Purchase Agreement (as defined in Section 1) on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Unsecured Notes on the terms and conditions set forth in this Agreement; and WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Warrants on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Definitions. "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act. "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Buyer" has the meaning set forth in the preface above. "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP. "Closing" has the meaning set forth in Section 2(c) below. "Closing Date" has the meaning set forth in Section 2(c) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "HTCC" means Hungarian Telephone and Cable Corp., a Delaware corporation, together with all of its Subsidiaries and Affiliates. -1- "Income Tax" means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not. "Indemnified Party" has the meaning set forth in Section 10(d) below. "Indemnifying Party" has the meaning set forth in Section 10(d) below. "Knowledge" shall mean the actual knowledge, without independent investigation, of the Board of Directors of Seller and of Mr. Tamas Ugroczky, the officer at the Seller responsible for the Senior Secured Debt Facility. "Material Adverse Effect" means any event which will or could reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the properties, business, operations, earnings, assets, liabilities, condition (financial or otherwise) or prospects of HTCC and its Subsidiaries whether or not in the ordinary course of business. "Party" has the meaning set forth in the preface above. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Purchase Price" has the meaning set forth in Section 2(b) below. "Securities Act" means the Securities Act of 1933, as amended. "Securities Purchase Agreement" means that certain agreement by and between HTCC and the Seller, dated as of May 10, 1999, as amended by Amendment No. 1 to the Securities Purchase Agreement, dated April 11, 2000, which agreement is attached hereto as Exhibit A. "Security Interest" means any charge, claim, community property interest, condition, equitable interest, lien, pledge, security interest, right of first refusal, or restriction or encumbrance of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute, other than (a) mechanic's, materialmen's and similar liens, (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings and (c) purchase money liens and liens securing rental payments under capital lease arrangements, provided, however, that restrictions on the transferability of the Warrants as set forth in the terms of the Warrants shall not be considered a Security Interest. "Seller" has the meaning set forth in the preface above. "Senior Secured Debt Facility" means the Senior Secured Debt Facility Agreement dated April 11, 2000 arranged by Citibank, N.A. and Westdeutsche Landesbank Girozentrale, pursuant to which the Seller is a senior creditor of HTCC. "Shares" means the two hundred and eighty thousand (280,000) shares of common stock, par value $0.001 per share, of HTCC owned by the Seller. "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "Third Party Claim" has the meaning set forth in Section 10(d) below. "Unsecured Notes" means zero (0) of the Amended & Restated US $1,000,000 Unsecured Subordinated Notes of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit B and a descriptive list of which is set forth in Schedule B-1. -2- "Warrants" means zero (0) Warrants to Purchase Common Stock of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit C and a descriptive list of which is set forth in Schedule C-1. 2. Purchase and Sale of Shares, Unsecured Notes and Warrants. (a) Purchase and Sale. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, the Shares, Unsecured Notes and Warrants for the consideration specified below in this Section 2. (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing one million two hundred and ninety three thousand nine hundred and six U.S. dollars ($1,293,906) (the "Purchase Price") in cash, which Purchase Price is payable by wire transfer or delivery of other immediately available funds. The Purchase Price shall be allocated in the following manner: $1,293,906 for the Shares, $0 for the Unsecured Notes and $0 for the Warrants. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Dewey Ballantine LLP ("Dewey") in Budapest, Hungary, commencing at 9:00 a.m. local time on October 10, 2003 or on such other date and at such other place as the Buyer and the Seller may mutually determine (the "Closing Date"); provided, however, that the Closing Date shall be no later than November 28, 2003. (d) Delivery of the Shares, Unsecured Notes and Warrants. At the Closing, Dewey will release the Shares, Unsecured Notes and Warrants to the Buyer upon written confirmation by the Parties of the Closing of the transaction, as required by the terms of the closing arrangements set forth in Exhibit J attached hereto. (e) Delivery of Certificates, etc. at the Closing. At or prior to the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 9(a) below and (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 9(b) below. (f) Delivery of Purchase Price at the Closing. At the Closing, Buyer will deliver to the Seller the consideration specified in Section 2(b) above. (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes. (i) All interest, and all fees which are expressed to accrue by reference to time elapsed, are based on contractual rates, as set forth in the Unsecured Notes. For the avoidance of doubt (A) such interest is payable by HTCC in respect of each Interest Period on each Interest Payment Date (each such term as defined in the Unsecured Notes) in US dollars in advance and (B) the apportionment set forth in (ii) below shall relate to the Interest Period during which time the Closing shall occur. (ii) All prepaid interest in respect of the relevant Interest Period up to but excluding the Closing Date shall be for the account of the Seller. All prepaid interest in respect of the relevant Interest Period from and including the Closing Date (the "Buyer's Portion") shall be for the account of the Buyer. The Seller agrees to pay the Buyer at the Closing the Buyer's Portion by means of a dollar-for-dollar reduction in the Purchase Price. The Buyer's Portion shall be determined independently by the Facility Agent (as defined in the Unsecured Notes) prior to the Closing. 3. Representations and Warranties Concerning the Transaction. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of Seller. The Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. (ii) Authorization of Transaction. The Seller has full power and -3- authority, and all corporate actions necessary on the part of the Seller have been taken, to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable against it in accordance with its terms, except (A) to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity and (B) that the transfer of the Warrants will not be enforceable unless such Warrants shall be amended as set forth below in Section 9(a)(vi). The Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any third parties (including HTCC other than with respect to Warrants as provided above), any government or any governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice, filing, authorization, consent or approval is needed, it has been given or obtained. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any agreement or any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller or, to the Knowledge of the Seller, to which HTCC is subject or any provision of the Seller's charter or bylaws. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (v) Shares. The Seller holds of record and owns the Shares free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of the Shares (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of the Shares. Upon transfer of the Shares in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Shares, free and clear of any Security Interests. (vi) Unsecured Notes. The Seller holds of record and owns the Unsecured Notes free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Unsecured Notes in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Unsecured Notes, free and clear of any Security Interests. (vii) Warrants. The Seller holds of record and owns the Warrants free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws and restrictions imposed under the terms of the Warrants themselves), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Warrants in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Warrants, free and clear of any Security Interests. (viii) No Proceedings Against Seller. There is no civil, criminal or administrative suit or claim, proceeding or investigation before any court, arbitrator or similar panel at law or in equity now pending or, to the Knowledge of the Seller, threatened against the Seller, the Shares, the Unsecured Notes or the Warrants, which could reasonably be expected to have a Material Adverse Effect or adversely effect the ability to consummate the transaction or encumber the Shares, the Unsecured Notes and Warrants, except as set forth in Schedule 3(a)(viii) hereto. (ix) Accuracy of Principal Amounts. The principal amounts of the Unsecured Notes and Warrants as of the Closing Date are accurately stated in Schedules B-1 and C-1 hereto, respectively. (x) No Funding Obligation. There is no funding obligation of any kind (whether fixed, contingent, conditional, or otherwise) in respect of the Shares, Unsecured Notes or the Warrants (including any obligation to make advances or to purchase participations in letters of credit or any obligation relating to any currency or interest rate swap, hedge, or similar arrangement) that Seller or Buyer is or shall be required to pay or otherwise perform, that Seller has not paid or otherwise performed in full. -4- (xi) No Acts or Omissions Adversely Affecting Shares, Unsecured Notes or Warrants. Seller has not engaged in any acts or conduct or made any omissions (including, without limitation, (A) in connection with any membership on or participation in any official or unofficial creditors' committee or other similar committee relating to HTCC, or in connection with its status (if any) as an insider or Affiliate of HTCC or (B) by virtue of Seller's holding any funds or property of, or owing amounts or property to HTCC), that will result in Buyer receiving proportionately less in payments or distributions under, or less favorable treatment (including the timing of payments or distributions) for, the Shares, Unsecured Notes or Warrants than is received by other holders of shares, unsecured notes or warrants of the same tranche, class or type as the Shares, Unsecured Notes or Warrants (if any). (xii) Compliance with Securities Purchase Agreement, Unsecured Notes and Warrants. To the best knowledge of the Seller, the Seller has complied with, and has performed, all obligations required to be complied with or performed by it under the Securities Purchase Agreements, Unsecured Notes and Warrants and Seller has not breached any of its representations, warranties, obligations, agreements or covenants under the Securities Purchase Agreements, Unsecured Notes or Warrants. (xiii) Seller is a Sophisticated Seller. Seller (A) is a sophisticated seller with respect to the sale of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the sale of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Buyer, and based on such information as Seller has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that Seller has relied upon Buyer's express representations, warranties, covenants and indemnities in this Agreement. Seller acknowledges that Buyer has not given Seller any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (xiv) Excluded Information. Seller acknowledges that (A) Buyer currently may have, and later may come into possession of, information with respect to the Shares, Unsecured Notes or Warrants or HTCC or any of its Affiliates that is not known to Seller and that may be material to a decision to sell the Shares, Unsecured Notes or Warrants ("Seller Excluded Information"), (B) Seller has determined to sell the Shares, Unsecured Notes and Warrants notwithstanding its lack of knowledge of the Seller Excluded Information and (C) Buyer shall have no liability to Seller, and Seller waives and releases any claims that it might have against Buyer whether under applicable securities laws or otherwise, with respect to the nondisclosure of the Seller Excluded Information in connection with the transactions contemplated by this Agreement; provided, however, that the Seller Excluded Information shall not and does not affect the truth or accuracy of Buyer's representations or warranties in this Agreement. (xv) Provision of Documents. On or prior to the Closing Date, Seller (A) will have provided or made available to Buyer copies of the Securities Purchase Agreement, the Unsecured Notes and the Warrants, as well as only those intercreditor agreements, subordination agreements, waivers and amendments executed in connection therewith, in each case as currently in effect and (B) will have provided original copies of all documents directly related to the purchase and sale of the Unsecured Notes. (xvi) No Consent to Changes. Seller has not given its consent to change, nor has it waived, any term or provision of the Securities Purchase Agreement, the Unsecured Notes or the Warrants, including, without limitation, with respect to the amount or time of any payment of principal or the rate or time of any payment of interest, except as contemplated by this Agreement. (xvii) No Other Agreements. Seller is not a party to, or bound by, any document or agreement (other than (A) the Senior Secured Debt Facility, (B) any banking agreements with HTCC that may arise in the course of normal business and (C) Seller's agreement on a best efforts basis to increase its participation in the Senior Secured Debt Facility following the Closing) that could materially and adversely affect the Shares, Unsecured Notes or Warrants or Buyer's rights and remedies under this Agreement. -5- (xviii) Transactions with HTCC. Seller has not engaged with HTCC in any transactions other than on an arm's-length basis and on reasonable commercial terms. (xix) Disclaimer of other Representations and Warranties. The Seller makes no representation or warranty, express or implied, at law or in equity, in respect of HTCC or any of its assets, liabilities or operations, except that the Seller represents and warrants that to the Knowledge of the Seller there is no fact that specifically applies to the Seller or HTCC that could reasonably be expected to have a Material Adverse Effect and that has not been set forth in this Agreement or in HTCC's public filings. Except as expressly set forth herein, Buyer hereby acknowledges and agrees that the Buyer is purchasing the Shares having made, to its full and complete satisfaction, a due diligence investigation of HTCC. (b) Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that the statements contained in this Section 3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of the Buyer. The Buyer is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization. (ii) Authorization of Transaction. The Buyer has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions, except to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws. (iv) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. (v) Investment. The Buyer (A) understands that the Shares, Unsecured Notes and Warrants have not been, and will not be, registered under the Securities Act, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions from registration for transactions not involving any public offering, (B) understands that the Shares, Unsecured Notes and Warrants may not be sold, transferred, pledged, hypothecated or otherwise disposed of or offered for sale except pursuant to an effective registration statement under the Securities Act and applicable state securities laws or an applicable exemption therefrom, (C) is acquiring the Shares, Unsecured Notes and Warrants solely for its own account or for any fund or account managed by Ashmore Investment Management Limited for investment purposes, and not with a view to the distribution thereof in violation of any applicable securities laws, (D) is a sophisticated investor with knowledge and experience in business and financial matters, (E) has received adequate information concerning HTCC and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, Unsecured Notes and Warrants, (F) is able to bear the economic risk and lack of liquidity inherent in holding the Shares, Unsecured Notes and Warrants, and (G) is an accredited investor within the meaning of Regulation D promulgated under the Securities Act for the reasons set forth in Exhibit F attached hereto. (vi) Buyer is a Sophisticated Buyer. Buyer (A) is a sophisticated buyer with respect to the purchase of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the purchase of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Seller, and based on such information as Buyer has deemed appropriate, made its own analysis and -6- decision to enter into this Agreement, except that Buyer has relied upon Seller's express representations, warranties, covenants and indemnities in this Agreement. Buyer acknowledges that Seller has not given Buyer any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (vii) Excluded Information. Buyer represents that any Seller Excluded Information which is currently known by Buyer would not, in Buyer's reasonable independent judgment, have a Material Adverse Effect, whether as a direct or indirect result of the transactions contemplated by this Agreement or otherwise, on the creditworthiness of HTCC. 4. Assignment and Assumption of Securities Purchase Agreement. Pursuant to the provisions of Section 13.3 of the Securities Purchase Agreement, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Securities Purchase Agreement, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Securities Purchase Agreement and agrees to perform in accordance with such agreement, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Securities Purchase Agreement. 5. Assignment and Assumption of Unsecured Notes. Pursuant to the provisions of Section 6 of the Terms and Conditions of the Unsecured Notes and as evidenced by a Form of Transfer for each Unsecured Note, a sample of which is attached hereto as Exhibit D, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Unsecured Notes, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Unsecured Notes and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Unsecured Notes. 6. Assignment and Assumption of Warrants. Pursuant to the provisions of Section 4.2 of the Warrants and as evidenced by a Form of Transfer for each Warrant, a sample of which is attached hereto as Exhibit E, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Warrants, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Warrants and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Warrants. 7. Pre-Closing Covenants. (a) Cooperation Prior to Closing. Between the execution of this Agreement and the Closing, each of the Parties will use its reasonable best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 9 below). (b) Seller to Refrain from Taking or to Undertake Certain Actions. Between the execution of this Agreement and the Closing, Seller agrees: (i) Not to take any action with regard to the Shares, Unsecured Notes or Warrants without the consent of the Buyer, which consent shall not be unreasonably withheld; (ii) Not take any action which would have a Material Adverse Effect on the Shares, Unsecured Notes or Warrants or which would result in a breach of the Agreement; and (iii) To take such reasonable actions with respect to the Shares, as the Buyer may request. (c) Closing Arrangements for Shares, Unsecured Notes and Warrants. Between the execution of this Agreement and Closing, the Parties shall take all actions and do all things necessary in order to implement the Closing Arrangements set forth in Exhibit J attached hereto, including taking all actions within their respective power so that HTCC gives effect to the closing arrangements contemplated therein. -7- (d) Seller to Use Reasonable Best Efforts on Warrants. Between the execution of this Agreement and Closing, the Seller shall use its reasonable best efforts to ensure that the Agreement set forth in Exhibit G (Agreement Amending the Warrants) shall be executed by HTCC. 8. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing: (a) General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefore under Section 10 below). (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against third party any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving or relating to HTCC or otherwise related to this Agreement, the other Party shall be obligated to cooperate on a commercially reasonable basis with it and its counsel in the defense or contest, make available its personnel, and provide access to its books and records as shall be necessary in connection with the defense or contest, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefore under Section 10 below). (c) Warrants. If (i) Seller is unable to obtain the Agreement Amending the Warrants in the form set forth in Exhibit G attached hereto, (ii) Buyer has waived the condition set forth in Section 9(a)(vi)(A) and (iii) the Closing shall have occurred, then on and after the Closing Date up to and including the Expiration Date (as such term is defined in the Warrant), the Seller shall hold the Warrants for the benefit of the Buyer and shall only take such actions as the Buyer shall request with respect to the Warrants and, if applicable, shall remit all proceeds to Buyer in connection with any exercise of the Warrants and sale of the underlying shares of HTCC. 9. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(a) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) all necessary governmental, shareholder and third party consents and approvals in connection with the transactions contemplated by the Agreement shall have been obtained; (v) the Seller shall have delivered to the Buyer certificates executed by the responsible officer or the secretary of the Seller, as applicable, certifying (A) that each of the conditions specified in Section 9(a)(i)-(iv) are satisfied in all respects, (B) the resolution(s) of the Seller's board of directors authorizing the Seller's execution, delivery and performance of the Agreement and all matters in connection with the Agreement and transactions contemplated thereby, and (C) the incumbency of the officer of the Seller executing the Agreement and all other documents executed and delivered in connection therewith; (vi) the relevant parties shall have entered into the agreements in the forms set forth in (A) Exhibit G (Agreement Amending the Warrants), (B) Exhibit H (Assumption Agreement regarding the Warrants) and (C) Exhibit I (Agreement Amending Securities Purchase Agreement) and attached hereto and the same shall be in full force and effect; -8- (vii) the Buyer shall have received: (A) from Hungarian Counsel of the Seller, a legal opinion in the form set forth in Exhibit L attached hereto, and dated as of the Closing Date, to the effect that (u) the Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice filing, authorization, consent or approval is needed, it has been gained or obtained, (v) any arbitration award in favor of the Buyer obtained pursuant to this Agreement would be valid and enforceable before a court of competent jurisdiction in Hungary and (x) the matters set forth in Section 3(a)(i) and the first and third sentences of Section 3(a)(ii) of the Agreement; and (B) from US Counsel to the Seller, an opinion in the form as may be attached hereto as Exhibit K, and dated as of the Closing Date (y) covering the matters set forth in the second sentence of Section 3(a)(ii) of the Agreement and (z) stating that no registration is required under the Securities Act to transfer the Shares, Unsecured Notes or the Warrants to Buyer in accordance with the Agreement; (viii) the Closing Arrangements set forth in Exhibit J attached hereto shall have been implemented in full to the Buyer's satisfaction; for the avoidance of doubt Seller acknowledges and agrees that unless and until the Closing Arrangements set forth in Exhibit J have been implemented as contemplated by this Section 9(a)(viii), Buyer shall have no obligation whatsoever to pay the Purchase Price; (ix) Since the date of the this Agreement, no event or events shall have occurred which have had or reasonably may be expected to have a Material Adverse Effect; (x) All actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer; and (xi) The Buyer shall have had the opportunity to conduct a reasonable investigation of the matters set forth in Schedule 3(a)(viii) of this Agreement and satisfy itself that no material commercial risk will be transferred with respect to the Shares, Unsecured Notes and Warrants as a result of the dispute described therein in the event that the Closing shall occur. The Buyer may waive any condition specified in this Section 9(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Section 9(b)(i)-(iii) is satisfied in all respects; (vi) the relevant parties shall have entered into the agreement in the form set forth in Exhibit H (Assumption Agreement regarding the Warrants) and attached hereto and the same shall be in full force and effect; (vii) the Seller shall have entered into and be ready to close a purchase and sale agreement dated the date hereof with respect to the sale of the Seller's six hundred thousand (600,000) shares of HTCC to an unaffiliated third party; and -9- (viii) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller. The Seller may waive any condition specified in this Section 9(b) if it executes a writing so stating at or prior to the Closing. 10. Remedies for Breaches of this Agreement. (a) Survival of Representations and Warranties. All of the representations, warranties, covenants and obligations of the Parties contained in this Agreement and any certificate or document delivered with this Agreement shall survive the Closing (unless the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations) or the specific terms thereof. (b) Indemnification Provisions for Benefit of the Buyer. In the event any the Seller breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to Section 12(g) below within such survival period, then the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (c) Indemnification Provisions for Benefit of the Seller. In the event the Buyer breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to Section 12(g) below within such survival period, then the Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (d) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the other Party (the "Indemnifying Party") under this Section 10, then the Indemnified Party shall promptly (and in any event within thirty (30) days after receiving notice of the Third Party Claim) notify the Indemnifying Party thereof in writing. (ii) Notwithstanding the fact that the Indemnifying Party will have the right at any time to assume and thereafter conduct the defense of the Third Party Claim with counsel of his or its choice, the Indemnified Party will have the right to participate in such proceedings at its own cost. (iii) Unless and until an Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 10(d)(ii) above, however, the Indemnified Party may defend, at the cost of the Indemnifying Party, against the Third Party Claim in any manner it reasonably may deem appropriate. (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to monetary damages, with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld or delayed). (e) Indemnification with Respect to M&A Capital Ltd. Dispute. Seller agrees to indemnify and hold harmless the Buyer against any and all costs, expenses, liabilities, claims, losses and damages of whatever nature (including reasonable attorneys' fees) to the extent such costs, expenses, liabilities, claims, losses and damages arise out of or are based on the matters set forth in Schedule 3(a)(viii) of the Agreement. -10- (f) Exclusive Remedy. The Buyer and the Seller acknowledge and agree that the foregoing indemnification provisions in this Section 10 shall be the exclusive remedy of the Buyer and the Seller with respect to the transactions contemplated by this Agreement. 11. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003, by reason of the failure of any condition precedent under Section 9(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (iii) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003 by reason of the failure of any condition precedent under Section 9(b) hereof (unless the failure results primarily from the Seller itself breaching any representation, warranty, or covenant contained in this Agreement). (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 11(a) above, all rights and obligations of the Parties hereunder, with the express exception of the provisions of Sections 12(g), 12(h), 12(i) and 12(l) hereof, shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 12. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to making the disclosure). (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other Party, except that the Buyer may freely assign without restriction the benefit of this Agreement or otherwise sell or transfer all the Shares, Unsecured Notes or the Warrant to any fund or account managed by Ashmore Investment Management Limited. (e) Counterparts. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. -11- (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
If to the Seller: Copy to: Postabank es Takarekpenztar Rt. Squire, Sanders & Dempsey L.L.P. Rumbach Sebestyen u. 19-21. Zochova 5 1075 Budapest 811 03 Bratislava Hungary Republic of Slovakia Attention: Katalin Igaz Attention: Andrew Sandor Facsimile: +36-1-266-8077 Facsimile: +421-2-5930-3415 If to the Buyer: Asset Holder PCC No. 2 Limited re: Ashmore Emerging Economy Portfolio c/o Barings (Guernsey) Limited, as custodian PO Box 71, Trafalgar Court Les Banques, St Peter Port Guernsey GY1 3DA Attention: Tracy le Sauvage Facsimile: 01481 745 058 Copy to: Copy to: Ashmore Investment Management Limited Dewey Ballantine 20 Bedfordbury 1 Undershaft London WC2N 4BL London, EC3 8LP United Kingdom United Kingdom Attention: Tim Davis Attention: Douglas L. Getter, Esq. Facsimile: +44-20-7557-4141 Facsimile: +44-20-7456-6001
Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. (i) Dispute Resolution. (i) In the event of any dispute between the Parties, the Parties shall first attempt to settle such dispute amicably. Provided that, unless the Parties otherwise agree, arbitration may be commenced on or after the thirtieth (30) day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made. (ii) If amicable settlement has not been reached within the period stated in Section 12(i)(i) above, the dispute shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed -12- under such Rules. Each arbitrator shall have experience in agreements of this type generally. The language of the arbitration shall be English and all documents submitted to the arbitration shall be in English (or where applicable an English translation shall be provided). The place of such arbitration shall be London. The prevailing party in any such arbitration shall be fully reimbursed by the other party for all costs associated with the arbitration, including reasonable legal fees. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each Party. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Expenses. Each of the Buyer and the Seller will bear its own costs and expenses (including legal fees and expenses) incurred in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby. (m) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (n) Stamp Taxes, etc.. Seller agrees that it will pay, and will hold the Buyer harmless from any and all liability with respect to any stamp or similar taxes which may be determined to be payable in connection with the execution, delivery and performance of this Agreement. (o) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (p) Execution on Behalf of Buyer by Custodian. Barings (Guernsey) Limited is executing this Agreement and any other operative documents relating hereto to which Buyer is a party or shall be a party on behalf of Buyer and solely in his capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Agreement or such other operative documents. (q) References to Shares, Unsecured Notes and Warrants. References to "Shares", "Unsecured Notes" and "Warrants" shall applicable in this Agreement to extent that references to each of these terms is applicable with respect to the specific purchase and sale arrangement contemplated by Section 2 of this Agreement -13- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASSET HOLDER PCC NO. 2 LIMITED RE: ASHMORE EMERGING ECONOMY PORTFOLIO By: /s/ Bela Singlovics By: BARINGS (GUERNSEY) LIMITED, ----------------------- as custodian for Asset Name: Bela Singlovics Holder PCC No. 2 Title: Chief Executive Officer Limited Re: Ashmore Emerging Economy Portfolio /s/ Tracy Le Sauvage -------------------- Authorized Signatory By: /s/ Katalin Igaz ------------------------------ Name: Katalin Igaz /s/ Jason Yendell Title: Deputy Chief Executive Officer -------------------- Authorized Signatory -14- AMENDMENT NO. 1 TO THE AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Amendment No. 1 to the Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants (this "Amendment") is made as of October 10, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Asset Holder PCC No. 2 Limited re: Ashmore Emerging Economy Portfolio ("Buyer"). RECITALS WHEREAS, the Seller and Buyer have entered into the Agreement for the Purchase and Sale of Shares, Unsecured Notes And Warrants dated September 26, 2003 (the "Agreement"); and WHEREAS, the Seller and Buyer wish to amend certain of the representations of the warranties given by the Buyer in the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller and the Buyer agree as follows: AGREEMENT 1. Amendment to Agreement. Section 3(b)(v)(A) of the Agreement shall be amended by deleting the words "for transactions not involving any public offering". 2. Effective Time. This Amendment shall be effective immediately upon execution. 3. Governing Law. This Amendment 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 conflict of laws provisions thereof. 4. Ratification. The Agreement, as amended by this Amendment, is and continues to be, in full force and effect and is hereby in all respects confirmed, approved and ratified. 5. Execution on Behalf of Buyer by Custodian. Barings (Guernsey) Limited is executing this Amendment on behalf of Buyer and solely in its capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Amendment. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASSET HOLDER PCC NO. 2 LIMITED RE: ASHMORE EMERGING ECONOMY PORTFOLIO By: /s/ Bela Singlovics By: BARINGS (GUERNSEY) LIMITED, ----------------------- as custodian for Asset Name: Bela Singlovics Holder PCC No. 2 Title: Chief Executive Officer Limited Re: Ashmore Emerging Economy Portfolio /s/ Tracy Le Sauvage By: /s/ Katalin Igaz -------------------- ----------------------------- Authorized Signatory Name: Katalin Igaz Title: Deputy Chief Executive Officer /s/ Jason Yendell -------------------- Authorized Signatory 2 EX-7.5 7 ex7-5.txt EXHIBIT 7.5 EXHIBIT 7.5 Execution Copy AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Dated as of September 26, 2003 by and between POSTABANK ES TAKAREKPENZTAR RT. and ASHMORE EMERGING MARKET DEBT FUND Squire, Sanders & Dempsey L.L.P. Zochova 5 811 03 Bratislava Slovak Republic TABLE OF CONTENTS 1. Definitions...........................................................1 2. Purchase and Sale of Shares, Unsecured Notes and Warrants.............3 (a) Purchase and Sale 3 (b) Purchase Price 3 (c) The Closing 3 (d) Delivery of the Shares, Unsecured Notes and Warrants 3 (e) Delivery of Certificates, etc. at the Closing 3 (f) Delivery of Purchase Price at the Closing 3 (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes 3 3. Representations and Warranties Concerning the Transaction.............3 (a) Representations and Warranties of the Seller 3 (b) Representations and Warranties of the Buyer 6 4. Assignment and Assumption of Securities Purchase Agreement............7 5. Assignment and Assumption of Unsecured Notes..........................7 6. Assignment and Assumption of Warrants.................................7 7. Pre-Closing Covenants.................................................7 (a) Cooperation Prior to Closing 7 (b) Seller to Refrain from Taking or to Undertake Certain Actions 7 (c) Closing Arrangements for Shares, Unsecured Notes and Warrants 8 (d) Seller to Use Reasonable Best Efforts on Warrants 8 8. Post-Closing Covenants................................................8 (a) General 8 (b) Litigation Support 8 (c) Warrants 8 9. Conditions to Obligation to Close.....................................8 (a) Conditions to Obligation of the Buyer 8 (b) Conditions to Obligation of the Seller 9 10. Remedies for Breaches of this Agreement..............................10 (a) Survival of Representations and Warranties 10 (b) Indemnification Provisions for Benefit of the Buyer 10 (c) Indemnification Provisions for Benefit of the Seller 10 (d) Matters Involving Third Parties 10 (e) Indemnification with Respect to M&A Capital Ltd. Dispute 11 (f) Exclusive Remedy 11 11. Termination..........................................................11 (a) Termination of Agreement 11 (b) Effect of Termination 11 12. Miscellaneous........................................................11 (a) Press Releases and Public Announcements 11 (b) No Third-Party Beneficiaries 11 (c) Entire Agreement 11 (d) Succession and Assignment 12 (e) Counterparts 12 (f) Headings 12 (g) Notice 12 (h) Governing Law 13 (i) Dispute Resolution 13 (j) Amendments and Waivers 13 (k) Severability 13 (l) Expenses 13 (m) Construction 13 (n) Stamp Taxes, etc. 13 (o) Incorporation of Exhibits and Schedules 13 (p) Execution on Behalf of Buyer by Custodian 13 (q) References to Shares, Unsecured Notes and Warrants 13 -ii- EXHIBITS - -------- Exhibit A Securities Purchase Agreement Exhibit B Sample Unsecured Note Schedule B-1 Descriptive List of Unsecured Notes Exhibit C Sample Warrant Schedule C-1 Descriptive List of Warrants Exhibit D Form of Transfer of Unsecured Note Exhibit E Form of Transfer of Warrant Exhibit F Statement that the Buyer is an Accredited Investor Exhibit G Form of Agreement Amending the Warrants Exhibit H Form of Assumption Agreement regarding the Warrants Exhibit I Form of Agreement Amending Securities Purchase Agreement. Exhibit J Closing Arrangements Exhibit K Form of Opinion Letter of Seller's US Counsel Addressed to Buyer and Transfer Agent Exhibit L Form of Opinion Letter of Seller's Hungarian Counsel Addressed to Buyer SCHEDULES - --------- Schedule 3(a)(viii) Litigation -iii- AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS THIS AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS (this "Agreement") is made as of September 26, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Ashmore Emerging Market Debt Fund ("Buyer"). The Buyer and the Seller are referred to collectively herein as the "Parties." RECITALS WHEREAS, Seller is the owner of the Shares, Unsecured Notes and Warrants (each as defined in Section 1); WHEREAS, Seller wishes to sell and Buyer wishes to buy the Shares, Unsecured Notes and Warrants on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Securities Purchase Agreement (as defined in Section 1) on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Unsecured Notes on the terms and conditions set forth in this Agreement; and WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Warrants on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1. Definitions. "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act. "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Buyer" has the meaning set forth in the preface above. "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP. "Closing" has the meaning set forth in Section 2(c) below. "Closing Date" has the meaning set forth in Section 2(c) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "HTCC" means Hungarian Telephone and Cable Corp., a Delaware corporation, together with all of its Subsidiaries and Affiliates. -1- "Income Tax" means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not. "Indemnified Party" has the meaning set forth in Section 10(d) below. "Indemnifying Party" has the meaning set forth in Section 10(d) below. "Knowledge" shall mean the actual knowledge, without independent investigation, of the Board of Directors of Seller and of Mr. Tamas Ugroczky, the officer at the Seller responsible for the Senior Secured Debt Facility. "Material Adverse Effect" means any event which will or could reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the properties, business, operations, earnings, assets, liabilities, condition (financial or otherwise) or prospects of HTCC and its Subsidiaries whether or not in the ordinary course of business. "Party" has the meaning set forth in the preface above. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Purchase Price" has the meaning set forth in Section 2(b) below. "Securities Act" means the Securities Act of 1933, as amended. "Securities Purchase Agreement" means that certain agreement by and between HTCC and the Seller, dated as of May 10, 1999, as amended by Amendment No. 1 to the Securities Purchase Agreement, dated April 11, 2000, which agreement is attached hereto as Exhibit A. "Security Interest" means any charge, claim, community property interest, condition, equitable interest, lien, pledge, security interest, right of first refusal, or restriction or encumbrance of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute, other than (a) mechanic's, materialmen's and similar liens, (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings and (c) purchase money liens and liens securing rental payments under capital lease arrangements, provided, however, that restrictions on the transferability of the Warrants as set forth in the terms of the Warrants shall not be considered a Security Interest. "Seller" has the meaning set forth in the preface above. "Senior Secured Debt Facility" means the Senior Secured Debt Facility Agreement dated April 11, 2000 arranged by Citibank, N.A. and Westdeutsche Landesbank Girozentrale, pursuant to which the Seller is a senior creditor of HTCC. "Shares" means the zero (0) shares of common stock, par value $0.001 per share, of HTCC owned by the Seller. "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "Third Party Claim" has the meaning set forth in Section 10(d) below. "Unsecured Notes" means four (4) Amended & Restated US $1,000,000 Unsecured Subordinated Notes of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit B and a descriptive list of which is set forth in Schedule B-1. -2- "Warrants" means four (4) Warrants to Purchase Common Stock of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit C and a descriptive list of which is set forth in Schedule C-1. 2. Purchase and Sale of Shares, Unsecured Notes and Warrants. (a) Purchase and Sale. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, the Shares, Unsecured Notes and Warrants for the consideration specified below in this Section 2. (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing three million two hundred thousand U.S. dollars ($3,200,000) (the "Purchase Price") in cash, which Purchase Price is payable by wire transfer or delivery of other immediately available funds. The Purchase Price shall be allocated in the following manner: $0 for the Shares, $3,200,000 for the Unsecured Notes and $0 for the Warrants. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Dewey Ballantine LLP ("Dewey") in Budapest, Hungary, commencing at 9:00 a.m. local time on October 10, 2003 or on such other date and at such other place as the Buyer and the Seller may mutually determine (the "Closing Date"); provided, however, that the Closing Date shall be no later than November 28, 2003. (d) Delivery of the Shares, Unsecured Notes and Warrants. At the Closing, Dewey will release the Shares, Unsecured Notes and Warrants to the Buyer upon written confirmation by the Parties of the Closing of the transaction, as required by the terms of the closing arrangements set forth in Exhibit J attached hereto. (e) Delivery of Certificates, etc. at the Closing. At or prior to the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 9(a) below and (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 9(b) below. (f) Delivery of Purchase Price at the Closing. At the Closing, Buyer will deliver to the Seller the consideration specified in Section 2(b) above. (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes. (i) All interest, and all fees which are expressed to accrue by reference to time elapsed, are based on contractual rates, as set forth in the Unsecured Notes. For the avoidance of doubt (A) such interest is payable by HTCC in respect of each Interest Period on each Interest Payment Date (each such term as defined in the Unsecured Notes) in US dollars in advance and (B) the apportionment set forth in (ii) below shall relate to the Interest Period during which time the Closing shall occur. (ii) All prepaid interest in respect of the relevant Interest Period up to but excluding the Closing Date shall be for the account of the Seller. All prepaid interest in respect of the relevant Interest Period from and including the Closing Date (the "Buyer's Portion") shall be for the account of the Buyer. The Seller agrees to pay the Buyer at the Closing the Buyer's Portion by means of a dollar-for-dollar reduction in the Purchase Price. The Buyer's Portion shall be determined independently by the Facility Agent (as defined in the Unsecured Notes) prior to the Closing. 3. Representations and Warranties Concerning the Transaction. (a) Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of Seller. The Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. -3- (ii) Authorization of Transaction. The Seller has full power and authority, and all corporate actions necessary on the part of the Seller have been taken, to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable against it in accordance with its terms, except (A) to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity and (B) that the transfer of the Warrants will not be enforceable unless such Warrants shall be amended as set forth below in Section 9(a)(vi). The Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any third parties (including HTCC other than with respect to Warrants as provided above), any government or any governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice, filing, authorization, consent or approval is needed, it has been given or obtained. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any agreement or any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller or, to the Knowledge of the Seller, to which HTCC is subject or any provision of the Seller's charter or bylaws. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (v) Shares. The Seller holds of record and owns the Shares free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of the Shares (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of the Shares. Upon transfer of the Shares in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Shares, free and clear of any Security Interests. (vi) Unsecured Notes. The Seller holds of record and owns the Unsecured Notes free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Unsecured Notes in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Unsecured Notes, free and clear of any Security Interests. (vii) Warrants. The Seller holds of record and owns the Warrants free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws and restrictions imposed under the terms of the Warrants themselves), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Warrants in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Warrants, free and clear of any Security Interests. (viii) No Proceedings Against Seller. There is no civil, criminal or administrative suit or claim, proceeding or investigation before any court, arbitrator or similar panel at law or in equity now pending or, to the Knowledge of the Seller, threatened against the Seller, the Shares, the Unsecured Notes or the Warrants, which could reasonably be expected to have a Material Adverse Effect or adversely effect the ability to consummate the transaction or encumber the Shares, the Unsecured Notes and Warrants, except as set forth in Schedule 3(a)(viii) hereto. (ix) Accuracy of Principal Amounts. The principal amounts of the Unsecured Notes and Warrants as of the Closing Date are accurately stated in Schedules B-1 and C-1 hereto, respectively. -4- (x) No Funding Obligation. There is no funding obligation of any kind (whether fixed, contingent, conditional, or otherwise) in respect of the Shares, Unsecured Notes or the Warrants (including any obligation to make advances or to purchase participations in letters of credit or any obligation relating to any currency or interest rate swap, hedge, or similar arrangement) that Seller or Buyer is or shall be required to pay or otherwise perform, that Seller has not paid or otherwise performed in full. (xi) No Acts or Omissions Adversely Affecting Shares, Unsecured Notes or Warrants. Seller has not engaged in any acts or conduct or made any omissions (including, without limitation, (A) in connection with any membership on or participation in any official or unofficial creditors' committee or other similar committee relating to HTCC, or in connection with its status (if any) as an insider or Affiliate of HTCC or (B) by virtue of Seller's holding any funds or property of, or owing amounts or property to HTCC), that will result in Buyer receiving proportionately less in payments or distributions under, or less favorable treatment (including the timing of payments or distributions) for, the Shares, Unsecured Notes or Warrants than is received by other holders of shares, unsecured notes or warrants of the same tranche, class or type as the Shares, Unsecured Notes or Warrants (if any). (xii) Compliance with Securities Purchase Agreement, Unsecured Notes and Warrants. To the best knowledge of the Seller, the Seller has complied with, and has performed, all obligations required to be complied with or performed by it under the Securities Purchase Agreements, Unsecured Notes and Warrants and Seller has not breached any of its representations, warranties, obligations, agreements or covenants under the Securities Purchase Agreements, Unsecured Notes or Warrants. (xiii) Seller is a Sophisticated Seller. Seller (A) is a sophisticated seller with respect to the sale of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the sale of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Buyer, and based on such information as Seller has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that Seller has relied upon Buyer's express representations, warranties, covenants and indemnities in this Agreement. Seller acknowledges that Buyer has not given Seller any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (xiv) Excluded Information. Seller acknowledges that (A) Buyer currently may have, and later may come into possession of, information with respect to the Shares, Unsecured Notes or Warrants or HTCC or any of its Affiliates that is not known to Seller and that may be material to a decision to sell the Shares, Unsecured Notes or Warrants ("Seller Excluded Information"), (B) Seller has determined to sell the Shares, Unsecured Notes and Warrants notwithstanding its lack of knowledge of the Seller Excluded Information and (C) Buyer shall have no liability to Seller, and Seller waives and releases any claims that it might have against Buyer whether under applicable securities laws or otherwise, with respect to the nondisclosure of the Seller Excluded Information in connection with the transactions contemplated by this Agreement; provided, however, that the Seller Excluded Information shall not and does not affect the truth or accuracy of Buyer's representations or warranties in this Agreement. (xv) Provision of Documents. On or prior to the Closing Date, Seller (A) will have provided or made available to Buyer copies of the Securities Purchase Agreement, the Unsecured Notes and the Warrants, as well as only those intercreditor agreements, subordination agreements, waivers and amendments executed in connection therewith, in each case as currently in effect and (B) will have provided original copies of all documents directly related to the purchase and sale of the Unsecured Notes. (xvi) No Consent to Changes. Seller has not given its consent to change, nor has it waived, any term or provision of the Securities Purchase Agreement, the Unsecured Notes or the Warrants, including, without limitation, with respect to the amount or time of any payment of principal or the rate or time of any payment of interest, except as contemplated by this Agreement. (xvii) No Other Agreements. Seller is not a party to, or bound by, any document or agreement (other than (A) the Senior Secured Debt -5- Facility, (B) any banking agreements with HTCC that may arise in the course of normal business and (C) Seller's agreement on a best efforts basis to increase its participation in the Senior Secured Debt Facility following the Closing) that could materially and adversely affect the Shares, Unsecured Notes or Warrants or Buyer's rights and remedies under this Agreement. (xviii) Transactions with HTCC. Seller has not engaged with HTCC in any transactions other than on an arm's-length basis and on reasonable commercial terms. (xix) Disclaimer of other Representations and Warranties. The Seller makes no representation or warranty, express or implied, at law or in equity, in respect of HTCC or any of its assets, liabilities or operations, except that the Seller represents and warrants that to the Knowledge of the Seller there is no fact that specifically applies to the Seller or HTCC that could reasonably be expected to have a Material Adverse Effect and that has not been set forth in this Agreement or in HTCC's public filings. Except as expressly set forth herein, Buyer hereby acknowledges and agrees that the Buyer is purchasing the Shares having made, to its full and complete satisfaction, a due diligence investigation of HTCC. (b) Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that the statements contained in this Section 3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of the Buyer. The Buyer is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization. (ii) Authorization of Transaction. The Buyer has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions, except to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws. (iv) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. (v) Investment. The Buyer (A) understands that the Shares, Unsecured Notes and Warrants have not been, and will not be, registered under the Securities Act, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions from registration for transactions not involving any public offering, (B) understands that the Shares, Unsecured Notes and Warrants may not be sold, transferred, pledged, hypothecated or otherwise disposed of or offered for sale except pursuant to an effective registration statement under the Securities Act and applicable state securities laws or an applicable exemption therefrom, (C) is acquiring the Shares, Unsecured Notes and Warrants solely for its own account or for any fund or account managed by Ashmore Investment Management Limited for investment purposes, and not with a view to the distribution thereof in violation of any applicable securities laws, (D) is a sophisticated investor with knowledge and experience in business and financial matters, (E) has received adequate information concerning HTCC and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, Unsecured Notes and Warrants, (F) is able to bear the economic risk and lack of liquidity inherent in holding the Shares, Unsecured Notes and Warrants, and (G) is an accredited investor within the meaning of Regulation D promulgated under the Securities Act for the reasons set forth in Exhibit F attached hereto. -6- (vi) Buyer is a Sophisticated Buyer. Buyer (A) is a sophisticated buyer with respect to the purchase of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the purchase of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Seller, and based on such information as Buyer has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that Buyer has relied upon Seller's express representations, warranties, covenants and indemnities in this Agreement. Buyer acknowledges that Seller has not given Buyer any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (vii) Excluded Information. Buyer represents that any Seller Excluded Information which is currently known by Buyer would not, in Buyer's reasonable independent judgment, have a Material Adverse Effect, whether as a direct or indirect result of the transactions contemplated by this Agreement or otherwise, on the creditworthiness of HTCC. 4. Assignment and Assumption of Securities Purchase Agreement. Pursuant to the provisions of Section 13.3 of the Securities Purchase Agreement, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Securities Purchase Agreement, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Securities Purchase Agreement and agrees to perform in accordance with such agreement, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Securities Purchase Agreement. 5. Assignment and Assumption of Unsecured Notes. Pursuant to the provisions of Section 6 of the Terms and Conditions of the Unsecured Notes and as evidenced by a Form of Transfer for each Unsecured Note, a sample of which is attached hereto as Exhibit D, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Unsecured Notes, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Unsecured Notes and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Unsecured Notes. 6. Assignment and Assumption of Warrants. Pursuant to the provisions of Section 4.2 of the Warrants and as evidenced by a Form of Transfer for each Warrant, a sample of which is attached hereto as Exhibit E, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Warrants, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Warrants and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Warrants. 7. Pre-Closing Covenants. (a) Cooperation Prior to Closing Between the execution of this Agreement and the Closing, each of the Parties will use its reasonable best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 9 below). (b) Seller to Refrain from Taking or to Undertake Certain Actions. Between the execution of this Agreement and the Closing, Seller agrees: (i) Not to take any action with regard to the Shares, Unsecured Notes or Warrants without the consent of the Buyer, which consent shall not be unreasonably withheld; (ii) Not take any action which would have a Material Adverse Effect on the Shares, Unsecured Notes or Warrants or which would result in a breach of the Agreement; and (iii) To take such reasonable actions with respect to the Shares, as the Buyer may request. -7- (c) Closing Arrangements for Shares, Unsecured Notes and Warrants. Between the execution of this Agreement and Closing, the Parties shall take all actions and do all things necessary in order to implement the Closing Arrangements set forth in Exhibit J attached hereto, including taking all actions within their respective power so that HTCC gives effect to the closing arrangements contemplated therein. (d) Seller to Use Reasonable Best Efforts on Warrants. Between the execution of this Agreement and Closing, the Seller shall use its reasonable best efforts to ensure that the Agreement set forth in Exhibit G (Agreement Amending the Warrants) shall be executed by HTCC. 8. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing: (a) General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefore under Section 10 below). (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against third party any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving or relating to HTCC or otherwise related to this Agreement, the other Party shall be obligated to cooperate on a commercially reasonable basis with it and its counsel in the defense or contest, make available its personnel, and provide access to its books and records as shall be necessary in connection with the defense or contest, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefore under Section 10 below). (c) Warrants. If (i) Seller is unable to obtain the Agreement Amending the Warrants in the form set forth in Exhibit G attached hereto, (ii) Buyer has waived the condition set forth in Section 9(a)(vi)(A) and (iii) the Closing shall have occurred, then on and after the Closing Date up to and including the Expiration Date (as such term is defined in the Warrant), the Seller shall hold the Warrants for the benefit of the Buyer and shall only take such actions as the Buyer shall request with respect to the Warrants and, if applicable, shall remit all proceeds to Buyer in connection with any exercise of the Warrants and sale of the underlying shares of HTCC. 9. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(a) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) all necessary governmental, shareholder and third party consents and approvals in connection with the transactions contemplated by the Agreement shall have been obtained; (v) the Seller shall have delivered to the Buyer certificates executed by the responsible officer or the secretary of the Seller, as applicable, certifying (A) that each of the conditions specified in Section 9(a)(i)-(iv) are satisfied in all respects, (B) the resolution(s) of the Seller's board of directors authorizing the Seller's execution, delivery and performance of the Agreement and all matters in connection with the Agreement and transactions contemplated thereby, and (C) the incumbency of the officer of the Seller executing the Agreement and all other documents executed and delivered in connection therewith; -8- (vi) the relevant parties shall have entered into the agreements in the forms set forth in (A) Exhibit G (Agreement Amending the Warrants), (B) Exhibit H (Assumption Agreement regarding the Warrants) and (C) Exhibit I (Agreement Amending Securities Purchase Agreement) and attached hereto and the same shall be in full force and effect; (vii) the Buyer shall have received: (A) from Hungarian Counsel of the Seller, a legal opinion in the form set forth in Exhibit L attached hereto, and dated as of the Closing Date, to the effect that (u) the Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice filing, authorization, consent or approval is needed, it has been gained or obtained, (v) any arbitration award in favor of the Buyer obtained pursuant to this Agreement would be valid and enforceable before a court of competent jurisdiction in Hungary and (x) the matters set forth in Section 3(a)(i) and the first and third sentences of Section 3(a)(ii) of the Agreement; and (B) from US Counsel to the Seller, an opinion in the form as may be attached hereto as Exhibit K, and dated as of the Closing Date (y) covering the matters set forth in the second sentence of Section 3(a)(ii) of the Agreement and (z) stating that no registration is required under the Securities Act to transfer the Shares, Unsecured Notes or the Warrants to Buyer in accordance with the Agreement; (viii) the Closing Arrangements set forth in Exhibit J attached hereto shall have been implemented in full to the Buyer's satisfaction; for the avoidance of doubt Seller acknowledges and agrees that unless and until the Closing Arrangements set forth in Exhibit J have been implemented as contemplated by this Section 9(a)(viii), Buyer shall have no obligation whatsoever to pay the Purchase Price; (ix) Since the date of the this Agreement, no event or events shall have occurred which have had or reasonably may be expected to have a Material Adverse Effect; (x) All actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer; and (xi) The Buyer shall have had the opportunity to conduct a reasonable investigation of the matters set forth in Schedule 3(a)(viii) of this Agreement and satisfy itself that no material commercial risk will be transferred with respect to the Shares, Unsecured Notes and Warrants as a result of the dispute described therein in the event that the Closing shall occur. The Buyer may waive any condition specified in this Section 9(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Section 9(b)(i)-(iii) is satisfied in all respects; -9- (vi) the relevant parties shall have entered into the agreement in the form set forth in Exhibit H (Assumption Agreement regarding the Warrants) and attached hereto and the same shall be in full force and effect; (vii) the Seller shall have entered into and be ready to close a purchase and sale agreement dated the date hereof with respect to the sale of the Seller's six hundred thousand (600,000) shares of HTCC to an unaffiliated third party; and (viii) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller. The Seller may waive any condition specified in this Section 9(b) if it executes a writing so stating at or prior to the Closing. 10. Remedies for Breaches of this Agreement. (a) Survival of Representations and Warranties. All of the representations, warranties, covenants and obligations of the Parties contained in this Agreement and any certificate or document delivered with this Agreement shall survive the Closing (unless the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations) or the specific terms thereof. (b) Indemnification Provisions for Benefit of the Buyer. In the event any the Seller breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to Section 12(g) below within such survival period, then the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (c) Indemnification Provisions for Benefit of the Seller. In the event the Buyer breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to Section 12(g) below within such survival period, then the Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (d) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the other Party (the "Indemnifying Party") under this Section 10, then the Indemnified Party shall promptly (and in any event within thirty (30) days after receiving notice of the Third Party Claim) notify the Indemnifying Party thereof in writing. (ii) Notwithstanding the fact that the Indemnifying Party will have the right at any time to assume and thereafter conduct the defense of the Third Party Claim with counsel of his or its choice, the Indemnified Party will have the right to participate in such proceedings at its own cost. (iii) Unless and until an Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 10(d)(ii) above, however, the Indemnified Party may defend, at the cost of the Indemnifying Party, against the Third Party Claim in any manner it reasonably may deem appropriate. -10- (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to monetary damages, with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld or delayed). (e) Indemnification with Respect to M&A Capital Ltd. Dispute. Seller agrees to indemnify and hold harmless the Buyer against any and all costs, expenses, liabilities, claims, losses and damages of whatever nature (including reasonable attorneys' fees) to the extent such costs, expenses, liabilities, claims, losses and damages arise out of or are based on the matters set forth in Schedule 3(a)(viii) of the Agreement. (f) Exclusive Remedy. The Buyer and the Seller acknowledge and agree that the foregoing indemnification provisions in this Section 10 shall be the exclusive remedy of the Buyer and the Seller with respect to the transactions contemplated by this Agreement. 11. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003, by reason of the failure of any condition precedent under Section 9(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (iii) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003 by reason of the failure of any condition precedent under Section 9(b) hereof (unless the failure results primarily from the Seller itself breaching any representation, warranty, or covenant contained in this Agreement). (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 11(a) above, all rights and obligations of the Parties hereunder, with the express exception of the provisions of Sections 12(g), 12(h), 12(i) and 12(l) hereof, shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 12. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to making the disclosure). (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. -11- (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other Party, except that the Buyer may freely assign without restriction the benefit of this Agreement or otherwise sell or transfer all the Shares, Unsecured Notes or the Warrant to any fund or account managed by Ashmore Investment Management Limited. (e) Counterparts. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
If to the Seller: Copy to: Postabank es Takarekpenztar Rt. Squire, Sanders & Dempsey L.L.P. Rumbach Sebestyen u. 19-21. Zochova 5 1075 Budapest 811 03 Bratislava Hungary Republic of Slovakia Attention: Katalin Igaz Attention: Andrew Sandor Facsimile: +36-1-266-8077 Facsimile: +421-2-5930-3415 If to the Buyer: Ashmore Emerging Market Debt Fund The Northern Trust Co., as custodian 50 Bank Street Canary Wharf London E14 5NT United Kingdom Attention: Kim Marlin Facsimile: +44-20 7982 3606 Copy to: Copy to: Ashmore Investment Management Limited Dewey Ballantine 20 Bedfordbury 1 Undershaft London WC2N 4BL London, EC3 8LP United Kingdom United Kingdom Attention: Tim Davis Attention: Douglas L. Getter, Esq. Facsimile: +44-20-7557-4141 Facsimile: +44-20-7456-6001
Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. -12- (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. (i) Dispute Resolution. (i) In the event of any dispute between the Parties, the Parties shall first attempt to settle such dispute amicably. Provided that, unless the Parties otherwise agree, arbitration may be commenced on or after the thirtieth (30) day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made. (ii) If amicable settlement has not been reached within the period stated in Section 12(i)(i) above, the dispute shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed under such Rules. Each arbitrator shall have experience in agreements of this type generally. The language of the arbitration shall be English and all documents submitted to the arbitration shall be in English (or where applicable an English translation shall be provided). The place of such arbitration shall be London. The prevailing party in any such arbitration shall be fully reimbursed by the other party for all costs associated with the arbitration, including reasonable legal fees. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each Party. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Expenses. Each of the Buyer and the Seller will bear its own costs and expenses (including legal fees and expenses) incurred in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby. (m) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (n) Stamp Taxes, etc.. Seller agrees that it will pay, and will hold the Buyer harmless from any and all liability with respect to any stamp or similar taxes which may be determined to be payable in connection with the execution, delivery and performance of this Agreement. (o) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (p) Execution on Behalf of Buyer by Custodian. The Northern Trust Co. is executing this Agreement and any other operative documents relating hereto to which Buyer is a party or shall be a party on behalf of Buyer and solely in his capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Agreement or such other operative documents. (q) References to Shares, Unsecured Notes and Warrants. References to "Shares", "Unsecured Notes" and "Warrants" shall applicable in this Agreement to extent that references to each of these terms is applicable with respect to the specific purchase and sale arrangement contemplated by Section 2 of this Agreement -13- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASHMORE EMERGING MARKET DEBT FUND By: /s/ Bela Singlovics By: THE NORTHERN TRUST CO., ----------------------- as custodian for Ashmore Name: Bela Singlovics Emerging Market Debt Fund Title: Chief Executive Officer By: /s/ Kim Martin -------------- Name: Kim Martin Title: Vice President By: /s/ Katalin Igaz ------------------------------ Name: Katalin Igaz Title: Deputy Chief Executive Officer -14- AMENDMENT NO. 1 TO THE AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Amendment No. 1 to the Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants (this "Amendment") is made as of October 10, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Ashmore Emerging Market Debt Fund ("Buyer"). RECITALS WHEREAS, the Seller and Buyer have entered into the Agreement for the Purchase and Sale of Shares, Unsecured Notes And Warrants dated September 26, 2003 (the "Agreement"); and WHEREAS, the Seller and Buyer wish to amend certain of the representations of the warranties given by the Buyer in the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller and the Buyer agree as follows: AGREEMENT 1. Amendment to Agreement. Section 3(b)(v)(A) of the Agreement shall be amended by deleting the words "for transactions not involving any public offering". 2. Effective Time. This Amendment shall be effective immediately upon execution. 3. Governing Law. This Amendment 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 conflict of laws provisions thereof. 4. Ratification. The Agreement, as amended by this Amendment, is and continues to be, in full force and effect and is hereby in all respects confirmed, approved and ratified. 5. Execution on Behalf of Buyer by Custodian. The Northern Trust Co. is executing this Amendment on behalf of Buyer and solely in its capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Amendment. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASHMORE EMERGING MARKET DEBT FUND By: /s/ Bela Singlovics By: THE NORTHERN TRUST CO., ----------------------- as custodian for Ashmore Name: Bela Singlovics Emerging Market Debt Fund Title: Chief Executive Officer By: /s/ Katalin Igaz By: /s/ Kim Martin ----------------------------- ------------------- Name: Katalin Igaz Name: Kim Martin Title: Deputy Chief Executive Officer Title: Vice President 2 EX-7.6 8 ex7-6.txt EXHIBIT 7.6 EXHIBIT 7.6 Execution Copy AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Dated as of September 26, 2003 by and between POSTABANK ES TAKAREKPENZTAR RT. and ASSET HOLDER PCC LIMITED RE: ASHMORE EMERGING MARKET LIQUID INVESTMENT PORTFOLIO Squire, Sanders & Dempsey L.L.P. Zochova 5 811 03 Bratislava Slovak Republic TABLE OF CONTENTS 1. Definitions...........................................................1 2. Purchase and Sale of Shares, Unsecured Notes and Warrants.............3 (a) Purchase and Sale 3 (b) Purchase Price 3 (c) The Closing 3 (d) Delivery of the Shares, Unsecured Notes and Warrants 3 (e) Delivery of Certificates, etc. at the Closing 3 (f) Delivery of Purchase Price at the Closing 3 (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes 3 3. Representations and Warranties Concerning the Transaction.............3 (a) Representations and Warranties of the Seller 3 (b) Representations and Warranties of the Buyer 6 4. Assignment and Assumption of Securities Purchase Agreement............7 5. Assignment and Assumption of Unsecured Notes..........................7 6. Assignment and Assumption of Warrants.................................7 7. Pre-Closing Covenants.................................................7 (a) Cooperation Prior to Closing 7 (b) Seller to Refrain from Taking or to Undertake Certain Actions 7 (c) Closing Arrangements for Shares, Unsecured Notes and Warrants 8 (d) Seller to Use Reasonable Best Efforts on Warrants 8 8. Post-Closing Covenants................................................8 (a) General 8 (b) Litigation Support 8 (c) Warrants 8 9. Conditions to Obligation to Close.....................................8 (a) Conditions to Obligation of the Buyer 8 (b) Conditions to Obligation of the Seller 9 10. Remedies for Breaches of this Agreement..............................10 (a) Survival of Representations and Warranties 10 (b) Indemnification Provisions for Benefit of the Buyer 10 (c) Indemnification Provisions for Benefit of the Seller 10 (d) Matters Involving Third Parties 10 (e) Indemnification with Respect to M&A Capital Ltd. Dispute 11 (f) Exclusive Remedy 11 11. Termination..........................................................11 (a) Termination of Agreement 11 (b) Effect of Termination 11 12. Miscellaneous........................................................11 (a) Press Releases and Public Announcements 11 (b) No Third-Party Beneficiaries 11 (c) Entire Agreement 11 (d) Succession and Assignment 12 (e) Counterparts 12 (f) Headings 12 (g) Notice 12 (h) Governing Law 13 (i) Dispute Resolution 13 (j) Amendments and Waivers 13 (k) Severability 13 (l) Expenses 13 (m) Construction 13 (n) Stamp Taxes, etc. 13 (o) Incorporation of Exhibits and Schedules 13 (p) Execution on Behalf of Buyer by Custodian 13 (q) References to Shares, Unsecured Notes and Warrants 13 -ii- EXHIBITS - -------- Exhibit A Securities Purchase Agreement Exhibit B Sample Unsecured Note Schedule B-1 Descriptive List of Unsecured Notes Exhibit C Sample Warrant Schedule C-1 Descriptive List of Warrants Exhibit D Form of Transfer of Unsecured Note Exhibit E Form of Transfer of Warrant Exhibit F Statement that the Buyer is an Accredited Investor Exhibit G Form of Agreement Amending the Warrants Exhibit H Form of Assumption Agreement regarding the Warrants Exhibit I Form of Agreement Amending Securities Purchase Agreement. Exhibit J Closing Arrangements Exhibit K Form of Opinion Letter of Seller's US Counsel Addressed to Buyer and Transfer Agent Exhibit L Form of Opinion Letter of Seller's Hungarian Counsel Addressed to Buyer SCHEDULES - --------- Schedule 3(a)(viii) Litigation -iii- AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS THIS AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS (this "Agreement") is made as of September 26, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Asset Holder PCC Limited re: Ashmore Emerging Market Liquid Investment Portfolio ("Buyer"). The Buyer and the Seller are referred to collectively herein as the "Parties." RECITALS WHEREAS, Seller is the owner of the Shares, Unsecured Notes and Warrants (each as defined in Section 1); WHEREAS, Seller wishes to sell and Buyer wishes to buy the Shares, Unsecured Notes and Warrants on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Securities Purchase Agreement (as defined in Section 1) on the terms and conditions set forth in this Agreement; WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Unsecured Notes on the terms and conditions set forth in this Agreement; and WHEREAS, Seller wishes to assign to Buyer and Buyer wishes to assume from Seller all of Seller's rights, duties and obligations under the Warrants on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 1.Definitions. "Accredited Investor" has the meaning set forth in Regulation D promulgated under the Securities Act. "Adverse Consequences" means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys' fees and expenses. "Affiliate" means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. "Buyer" has the meaning set forth in the preface above. "Cash" means cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP. "Closing" has the meaning set forth in Section 2(c) below. "Closing Date" has the meaning set forth in Section 2(c) below. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "HTCC" means Hungarian Telephone and Cable Corp., a Delaware corporation, together with all of its Subsidiaries and Affiliates. -1- "Income Tax" means any federal, state, local, or foreign income tax, including any interest, penalty, or addition thereto, whether disputed or not. "Indemnified Party" has the meaning set forth in Section 10(d) below. "Indemnifying Party" has the meaning set forth in Section 10(d) below. "Knowledge" shall mean the actual knowledge, without independent investigation, of the Board of Directors of Seller and of Mr. Tamas Ugroczky, the officer at the Seller responsible for the Senior Secured Debt Facility. "Material Adverse Effect" means any event which will or could reasonably be expected to have, either individually or in the aggregate, a material adverse effect on the properties, business, operations, earnings, assets, liabilities, condition (financial or otherwise) or prospects of HTCC and its Subsidiaries whether or not in the ordinary course of business. "Party" has the meaning set forth in the preface above. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Purchase Price" has the meaning set forth in Section 2(b) below. "Securities Act" means the Securities Act of 1933, as amended. "Securities Purchase Agreement" means that certain agreement by and between HTCC and the Seller, dated as of May 10, 1999, as amended by Amendment No. 1 to the Securities Purchase Agreement, dated April 11, 2000, which agreement is attached hereto as Exhibit A. "Security Interest" means any charge, claim, community property interest, condition, equitable interest, lien, pledge, security interest, right of first refusal, or restriction or encumbrance of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute, other than (a) mechanic's, materialmen's and similar liens, (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings and (c) purchase money liens and liens securing rental payments under capital lease arrangements, provided, however, that restrictions on the transferability of the Warrants as set forth in the terms of the Warrants shall not be considered a Security Interest. "Seller" has the meaning set forth in the preface above. "Senior Secured Debt Facility" means the Senior Secured Debt Facility Agreement dated April 11, 2000 arranged by Citibank, N.A. and Westdeutsche Landesbank Girozentrale, pursuant to which the Seller is a senior creditor of HTCC. "Shares" means the zero (0) shares of common stock, par value $0.001 per share, of HTCC owned by the Seller. "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "Third Party Claim" has the meaning set forth in Section 10(d) below. "Unsecured Notes" means twenty one (21) Amended & Restated US $1,000,000 Unsecured Subordinated Notes of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit B and a descriptive list of which is set forth in Schedule B-1. -2- "Warrants" means twenty one (21) Warrants to Purchase Common Stock of Hungarian Telephone and Cable Corp., a sample of which is attached hereto as Exhibit C and a descriptive list of which is set forth in Schedule C-1. 2. Purchase and Sale of Shares, Unsecured Notes and Warrants. (a) Purchase and Sale. On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees to sell to the Buyer, the Shares, Unsecured Notes and Warrants for the consideration specified below in this Section 2. (b) Purchase Price. The Buyer agrees to pay to the Seller at the Closing sixteen million eight hundred thousand U.S. dollars ($16,800,000) (the "Purchase Price") in cash, which Purchase Price is payable by wire transfer or delivery of other immediately available funds. The Purchase Price shall be allocated in the following manner: $0 for the Shares, $16,800,000 for the Unsecured Notes and $0 for the Warrants. (c) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Dewey Ballantine LLP ("Dewey") in Budapest, Hungary, commencing at 9:00 a.m. local time on October 10, 2003 or on such other date and at such other place as the Buyer and the Seller may mutually determine (the "Closing Date"); provided, however, that the Closing Date shall be no later than November 28, 2003. (d) Delivery of the Shares, Unsecured Notes and Warrants. At the Closing, Dewey will release the Shares, Unsecured Notes and Warrants to the Buyer upon written confirmation by the Parties of the Closing of the transaction, as required by the terms of the closing arrangements set forth in Exhibit J attached hereto. (e) Delivery of Certificates, etc. at the Closing. At or prior to the Closing, (i) the Seller will deliver to the Buyer the various certificates, instruments, and documents referred to in Section 9(a) below and (ii) the Buyer will deliver to the Seller the various certificates, instruments, and documents referred to in Section 9(b) below. (f) Delivery of Purchase Price at the Closing. At the Closing, Buyer will deliver to the Seller the consideration specified in Section 2(b) above. (g) Apportionment of Semi-Annual Interest Payment on Unsecured Notes. (i) All interest, and all fees which are expressed to accrue by reference to time elapsed, are based on contractual rates, as set forth in the Unsecured Notes. For the avoidance of doubt (A) such interest is payable by HTCC in respect of each Interest Period on each Interest Payment Date (each such term as defined in the Unsecured Notes) in US dollars in advance and (B) the apportionment set forth in (ii) below shall relate to the Interest Period during which time the Closing shall occur. (ii) All prepaid interest in respect of the relevant Interest Period up to but excluding the Closing Date shall be for the account of the Seller. All prepaid interest in respect of the relevant Interest Period from and including the Closing Date (the "Buyer's Portion") shall be for the account of the Buyer. The Seller agrees to pay the Buyer at the Closing the Buyer's Portion by means of a dollar-for-dollar reduction in the Purchase Price. The Buyer's Portion shall be determined independently by the Facility Agent (as defined in the Unsecured Notes) prior to the Closing. 3. Representations and Warranties Concerning the Transaction. (a)Representations and Warranties of the Seller. The Seller represents and warrants to the Buyer that the statements contained in this Section 3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of Seller. The Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. -3- (ii) Authorization of Transaction. The Seller has full power and authority, and all corporate actions necessary on the part of the Seller have been taken, to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable against it in accordance with its terms, except (A) to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity and (B) that the transfer of the Warrants will not be enforceable unless such Warrants shall be amended as set forth below in Section 9(a)(vi). The Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any third parties (including HTCC other than with respect to Warrants as provided above), any government or any governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice, filing, authorization, consent or approval is needed, it has been given or obtained. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any agreement or any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Seller or, to the Knowledge of the Seller, to which HTCC is subject or any provision of the Seller's charter or bylaws. (iv) Brokers' Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated. (v) Shares. The Seller holds of record and owns the Shares free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Seller is not a party to any option, warrant, purchase right, or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of the Shares (other than this Agreement). The Seller is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of the Shares. Upon transfer of the Shares in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Shares, free and clear of any Security Interests. (vi) Unsecured Notes. The Seller holds of record and owns the Unsecured Notes free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Unsecured Notes in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Unsecured Notes, free and clear of any Security Interests. (vii) Warrants. The Seller holds of record and owns the Warrants free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws and restrictions imposed under the terms of the Warrants themselves), taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Upon transfer of the Warrants in accordance with the terms of this Agreement, Buyer shall acquire good, valid and marketable title to the Warrants, free and clear of any Security Interests. (viii) No Proceedings Against Seller. There is no civil, criminal or administrative suit or claim, proceeding or investigation before any court, arbitrator or similar panel at law or in equity now pending or, to the Knowledge of the Seller, threatened against the Seller, the Shares, the Unsecured Notes or the Warrants, which could reasonably be expected to have a Material Adverse Effect or adversely effect the ability to consummate the transaction or encumber the Shares, the Unsecured Notes and Warrants, except as set forth in Schedule 3(a)(viii) hereto. (ix) Accuracy of Principal Amounts. The principal amounts of the Unsecured Notes and Warrants as of the Closing Date are accurately stated in Schedules B-1 and C-1 hereto, respectively. -4- (x) No Funding Obligation. There is no funding obligation of any kind (whether fixed, contingent, conditional, or otherwise) in respect of the Shares, Unsecured Notes or the Warrants (including any obligation to make advances or to purchase participations in letters of credit or any obligation relating to any currency or interest rate swap, hedge, or similar arrangement) that Seller or Buyer is or shall be required to pay or otherwise perform, that Seller has not paid or otherwise performed in full. (xi) No Acts or Omissions Adversely Affecting Shares, Unsecured Notes or Warrants. Seller has not engaged in any acts or conduct or made any omissions (including, without limitation, (A) in connection with any membership on or participation in any official or unofficial creditors' committee or other similar committee relating to HTCC, or in connection with its status (if any) as an insider or Affiliate of HTCC or (B) by virtue of Seller's holding any funds or property of, or owing amounts or property to HTCC), that will result in Buyer receiving proportionately less in payments or distributions under, or less favorable treatment (including the timing of payments or distributions) for, the Shares, Unsecured Notes or Warrants than is received by other holders of shares, unsecured notes or warrants of the same tranche, class or type as the Shares, Unsecured Notes or Warrants (if any). (xii) Compliance with Securities Purchase Agreement, Unsecured Notes and Warrants. To the best knowledge of the Seller, the Seller has complied with, and has performed, all obligations required to be complied with or performed by it under the Securities Purchase Agreements, Unsecured Notes and Warrants and Seller has not breached any of its representations, warranties, obligations, agreements or covenants under the Securities Purchase Agreements, Unsecured Notes or Warrants. (xiii) Seller is a Sophisticated Seller. Seller (A) is a sophisticated seller with respect to the sale of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the sale of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Buyer, and based on such information as Seller has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that Seller has relied upon Buyer's express representations, warranties, covenants and indemnities in this Agreement. Seller acknowledges that Buyer has not given Seller any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (xiv) Excluded Information. Seller acknowledges that (A) Buyer currently may have, and later may come into possession of, information with respect to the Shares, Unsecured Notes or Warrants or HTCC or any of its Affiliates that is not known to Seller and that may be material to a decision to sell the Shares, Unsecured Notes or Warrants ("Seller Excluded Information"), (B) Seller has determined to sell the Shares, Unsecured Notes and Warrants notwithstanding its lack of knowledge of the Seller Excluded Information and (C) Buyer shall have no liability to Seller, and Seller waives and releases any claims that it might have against Buyer whether under applicable securities laws or otherwise, with respect to the nondisclosure of the Seller Excluded Information in connection with the transactions contemplated by this Agreement; provided, however, that the Seller Excluded Information shall not and does not affect the truth or accuracy of Buyer's representations or warranties in this Agreement. (xv) Provision of Documents. On or prior to the Closing Date, Seller (A) will have provided or made available to Buyer copies of the Securities Purchase Agreement, the Unsecured Notes and the Warrants, as well as only those intercreditor agreements, subordination agreements, waivers and amendments executed in connection therewith, in each case as currently in effect and (B) will have provided original copies of all documents directly related to the purchase and sale of the Unsecured Notes. (xvi) No Consent to Changes. Seller has not given its consent to change, nor has it waived, any term or provision of the Securities Purchase Agreement, the Unsecured Notes or the Warrants, including, without limitation, with respect to the amount or time of any payment of principal or the rate or time of any payment of interest, except as contemplated by this Agreement. (xvii) No Other Agreements. Seller is not a party to, or bound by, any document or agreement (other than (A) the Senior Secured Debt Facility, (B) any banking agreements with HTCC that may arise in the -5- course of normal business and (C) Seller's agreement on a best efforts basis to increase its participation in the Senior Secured Debt Facility following the Closing) that could materially and adversely affect the Shares, Unsecured Notes or Warrants or Buyer's rights and remedies under this Agreement. (xviii)Transactions with HTCC. Seller has not engaged with HTCC in any transactions other than on an arm's-length basis and on reasonable commercial terms. (xix) Disclaimer of other Representations and Warranties. The Seller makes no representation or warranty, express or implied, at law or in equity, in respect of HTCC or any of its assets, liabilities or operations, except that the Seller represents and warrants that to the Knowledge of the Seller there is no fact that specifically applies to the Seller or HTCC that could reasonably be expected to have a Material Adverse Effect and that has not been set forth in this Agreement or in HTCC's public filings. Except as expressly set forth herein, Buyer hereby acknowledges and agrees that the Buyer is purchasing the Shares having made, to its full and complete satisfaction, a due diligence investigation of HTCC. (b) Representations and Warranties of the Buyer. The Buyer represents and warrants to the Seller that the statements contained in this Section 3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then). (i) Organization of the Buyer. The Buyer is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization. (ii) Authorization of Transaction. The Buyer has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions, except to the extent that the enforcement of the rights and remedies created therein is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights and general principles of equity. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement. (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws. (iv) Brokers' Fees. The Buyer has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated. (v) Investment. The Buyer (A) understands that the Shares, Unsecured Notes and Warrants have not been, and will not be, registered under the Securities Act, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions from registration for transactions not involving any public offering, (B) understands that the Shares, Unsecured Notes and Warrants may not be sold, transferred, pledged, hypothecated or otherwise disposed of or offered for sale except pursuant to an effective registration statement under the Securities Act and applicable state securities laws or an applicable exemption therefrom, (C) is acquiring the Shares, Unsecured Notes and Warrants solely for its own account or for any fund or account managed by Ashmore Investment Management Limited for investment purposes, and not with a view to the distribution thereof in violation of any applicable securities laws, (D) is a sophisticated investor with knowledge and experience in business and financial matters, (E) has received adequate information concerning HTCC and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Shares, Unsecured Notes and Warrants, (F) is able to bear the economic risk and lack of liquidity inherent in holding the Shares, Unsecured Notes and Warrants, and (G) is an accredited investor within the meaning of Regulation D promulgated under the Securities Act for the reasons set forth in Exhibit F attached hereto. -6- (vi) Buyer is a Sophisticated Buyer. Buyer (A) is a sophisticated buyer with respect to the purchase of the Shares, Unsecured Notes and Warrants, (B) has adequate information concerning the business and financial condition of HTCC to make an informed decision regarding the purchase of the Shares, Unsecured Notes and Warrants and (C) has independently and without reliance upon Seller, and based on such information as Buyer has deemed appropriate, made its own analysis and decision to enter into this Agreement, except that Buyer has relied upon Seller's express representations, warranties, covenants and indemnities in this Agreement. Buyer acknowledges that Seller has not given Buyer any investment advice, credit information, or opinion on whether the sale of the Shares, Unsecured Notes or Warrants is prudent. (vii) Excluded Information. Buyer represents that any Seller Excluded Information which is currently known by Buyer would not, in Buyer's reasonable independent judgment, have a Material Adverse Effect, whether as a direct or indirect result of the transactions contemplated by this Agreement or otherwise, on the creditworthiness of HTCC. 4. Assignment and Assumption of Securities Purchase Agreement. Pursuant to the provisions of Section 13.3 of the Securities Purchase Agreement, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Securities Purchase Agreement, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Securities Purchase Agreement and agrees to perform in accordance with such agreement, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Securities Purchase Agreement. 5. Assignment and Assumption of Unsecured Notes. Pursuant to the provisions of Section 6 of the Terms and Conditions of the Unsecured Notes and as evidenced by a Form of Transfer for each Unsecured Note, a sample of which is attached hereto as Exhibit D, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Unsecured Notes, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Unsecured Notes and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Unsecured Notes. 6. Assignment and Assumption of Warrants. Pursuant to the provisions of Section 4.2 of the Warrants and as evidenced by a Form of Transfer for each Warrant, a sample of which is attached hereto as Exhibit E, the Seller hereby assigns, transfers and delegates to the Buyer all of its rights, duties and obligations under the Warrants, and the Buyer hereby accepts such assignment and assumes the Seller's rights, duties and obligations under the Warrants and agrees to perform, from and after the Closing Date, each of the terms, conditions, covenants and agreements to be performed by the Seller under the Warrants. 7. Pre-Closing Covenants. (a) Cooperation Prior to Closing Between the execution of this Agreement and the Closing, each of the Parties will use its reasonable best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in Section 9 below). (b) Seller to Refrain from Taking or to Undertake Certain Actions. Between the execution of this Agreement and the Closing, Seller agrees: (i) Not to take any action with regard to the Shares, Unsecured Notes or Warrants without the consent of the Buyer, which consent shall not be unreasonably withheld; (ii) Not take any action which would have a Material Adverse Effect on the Shares, Unsecured Notes or Warrants or which would result in a breach of the Agreement; and (iii) To take such reasonable actions with respect to the Shares, as the Buyer may request. -7- (c) Closing Arrangements for Shares, Unsecured Notes and Warrants. Between the execution of this Agreement and Closing, the Parties shall take all actions and do all things necessary in order to implement the Closing Arrangements set forth in Exhibit J attached hereto, including taking all actions within their respective power so that HTCC gives effect to the closing arrangements contemplated therein. (d) Seller to Use Reasonable Best Efforts on Warrants. Between the execution of this Agreement and Closing, the Seller shall use its reasonable best efforts to ensure that the Agreement set forth in Exhibit G (Agreement Amending the Warrants) shall be executed by HTCC. 8. Post-Closing Covenants. The Parties agree as follows with respect to the period following the Closing: (a) General. In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefore under Section 10 below). (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against third party any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving or relating to HTCC or otherwise related to this Agreement, the other Party shall be obligated to cooperate on a commercially reasonable basis with it and its counsel in the defense or contest, make available its personnel, and provide access to its books and records as shall be necessary in connection with the defense or contest, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefore under Section 10 below). (c) Warrants. If (i) Seller is unable to obtain the Agreement Amending the Warrants in the form set forth in Exhibit G attached hereto, (ii) Buyer has waived the condition set forth in Section 9(a)(vi)(A) and (iii) the Closing shall have occurred, then on and after the Closing Date up to and including the Expiration Date (as such term is defined in the Warrant), the Seller shall hold the Warrants for the benefit of the Buyer and shall only take such actions as the Buyer shall request with respect to the Warrants and, if applicable, shall remit all proceeds to Buyer in connection with any exercise of the Warrants and sale of the underlying shares of HTCC. 9. Conditions to Obligation to Close. (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(a) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Seller shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) all necessary governmental, shareholder and third party consents and approvals in connection with the transactions contemplated by the Agreement shall have been obtained; (v) the Seller shall have delivered to the Buyer certificates executed by the responsible officer or the secretary of the Seller, as applicable, certifying (A) that each of the conditions specified in Section 9(a)(i)-(iv) are satisfied in all respects, (B) the resolution(s) of the Seller's board of directors authorizing the Seller's execution, delivery and performance of the Agreement and all matters in connection with the Agreement and transactions contemplated thereby, and (C) the incumbency of the officer of the Seller executing the Agreement and all other documents executed and delivered in connection therewith; -8- (vi) the relevant parties shall have entered into the agreements in the forms set forth in (A) Exhibit G (Agreement Amending the Warrants), (B) Exhibit H (Assumption Agreement regarding the Warrants) and (C) Exhibit I (Agreement Amending Securities Purchase Agreement) and attached hereto and the same shall be in full force and effect; (vii) the Buyer shall have received: (A) from Hungarian Counsel of the Seller, a legal opinion in the form set forth in Exhibit L attached hereto, and dated as of the Closing Date, to the effect that (u) the Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement, or if such notice filing, authorization, consent or approval is needed, it has been gained or obtained, (v) any arbitration award in favor of the Buyer obtained pursuant to this Agreement would be valid and enforceable before a court of competent jurisdiction in Hungary and (x) the matters set forth in Section 3(a)(i) and the first and third sentences of Section 3(a)(ii) of the Agreement; and (B) from US Counsel to the Seller, an opinion in the form as may be attached hereto as Exhibit K, and dated as of the Closing Date (y) covering the matters set forth in the second sentence of Section 3(a)(ii) of the Agreement and (z) stating that no registration is required under the Securities Act to transfer the Shares, Unsecured Notes or the Warrants to Buyer in accordance with the Agreement; (viii) the Closing Arrangements set forth in Exhibit J attached hereto shall have been implemented in full to the Buyer's satisfaction; for the avoidance of doubt Seller acknowledges and agrees that unless and until the Closing Arrangements set forth in Exhibit J have been implemented as contemplated by this Section 9(a)(viii), Buyer shall have no obligation whatsoever to pay the Purchase Price; (ix) Since the date of the this Agreement, no event or events shall have occurred which have had or reasonably may be expected to have a Material Adverse Effect; (x) All actions to be taken by the Seller in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer; and (xi) The Buyer shall have had the opportunity to conduct a reasonable investigation of the matters set forth in Schedule 3(a)(viii) of this Agreement and satisfy itself that no material commercial risk will be transferred with respect to the Shares, Unsecured Notes and Warrants as a result of the dispute described therein in the event that the Closing shall occur. The Buyer may waive any condition specified in this Section 9(a) if it executes a writing so stating at or prior to the Closing. (b) Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (i) the representations and warranties set forth in Section 3(b) above shall be true and correct in all material respects at and as of the Closing Date; (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; (iii) there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement; (iv) the Buyer shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Section 9(b)(i)-(iii) is satisfied in all respects; -9- (vi) the relevant parties shall have entered into the agreement in the form set forth in Exhibit H (Assumption Agreement regarding the Warrants) and attached hereto and the same shall be in full force and effect; (vii) the Seller shall have entered into and be ready to close a purchase and sale agreement dated the date hereof with respect to the sale of the Seller's six hundred thousand (600,000) shares of HTCC to an unaffiliated third party; and (viii) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Seller. The Seller may waive any condition specified in this Section 9(b) if it executes a writing so stating at or prior to the Closing. 10. Remedies for Breaches of this Agreement. (a) Survival of Representations and Warranties. All of the representations, warranties, covenants and obligations of the Parties contained in this Agreement and any certificate or document delivered with this Agreement shall survive the Closing (unless the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations) or the specific terms thereof. (b) Indemnification Provisions for Benefit of the Buyer. In the event any the Seller breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Buyer makes a written claim for indemnification against the Seller pursuant to Section 12(g) below within such survival period, then the Seller agrees to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (c) Indemnification Provisions for Benefit of the Seller. In the event the Buyer breaches any of its representations, warranties, and covenants contained herein, and, if there is an applicable survival period pursuant to Section 10(a) above, provided that the Seller makes a written claim for indemnification against the Buyer pursuant to Section 12(g) below within such survival period, then the Buyer agrees to indemnify the Seller from and against the entirety of any Adverse Consequences the Seller shall suffer through and after the date of the claim for indemnification caused proximately by the breach. (d) Matters Involving Third Parties. (i) If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against the other Party (the "Indemnifying Party") under this Section 10, then the Indemnified Party shall promptly (and in any event within thirty (30) days after receiving notice of the Third Party Claim) notify the Indemnifying Party thereof in writing. (ii) Notwithstanding the fact that the Indemnifying Party will have the right at any time to assume and thereafter conduct the defense of the Third Party Claim with counsel of his or its choice, the Indemnified Party will have the right to participate in such proceedings at its own cost. (iii) Unless and until an Indemnifying Party assumes the defense of the Third Party Claim as provided in Section 10(d)(ii) above, however, the Indemnified Party may defend, at the cost of the Indemnifying Party, against the Third Party Claim in any manner it reasonably may deem appropriate. -10- (iv) In no event will the Indemnified Party consent to the entry of any judgment or enter into any settlement with respect to monetary damages, with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld or delayed). (e) Indemnification with Respect to M&A Capital Ltd. Dispute. Seller agrees to indemnify and hold harmless the Buyer against any and all costs, expenses, liabilities, claims, losses and damages of whatever nature (including reasonable attorneys' fees) to the extent such costs, expenses, liabilities, claims, losses and damages arise out of or are based on the matters set forth in Schedule 3(a)(viii) of the Agreement. (f) Exclusive Remedy. The Buyer and the Seller acknowledge and agree that the foregoing indemnification provisions in this Section 10 shall be the exclusive remedy of the Buyer and the Seller with respect to the transactions contemplated by this Agreement. 11. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement as provided below: (i) the Buyer and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing; (ii) the Buyer may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event the Seller has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Seller of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003, by reason of the failure of any condition precedent under Section 9(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and (iii) the Seller may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Seller has notified the Buyer of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach but not later than November 28, 2003 or (B) if the Closing shall not have occurred on or before November 28, 2003 by reason of the failure of any condition precedent under Section 9(b) hereof (unless the failure results primarily from the Seller itself breaching any representation, warranty, or covenant contained in this Agreement). (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 11(a) above, all rights and obligations of the Parties hereunder, with the express exception of the provisions of Sections 12(g), 12(h), 12(i) and 12(l) hereof, shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). 12. Miscellaneous. (a) Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts to advise the other Parties prior to making the disclosure). (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns. (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof. -11- (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of his or its rights, interests, or obligations hereunder without the prior written approval of the other Party, except that the Buyer may freely assign without restriction the benefit of this Agreement or otherwise sell or transfer all the Shares, Unsecured Notes or the Warrant to any fund or account managed by Ashmore Investment Management Limited. (e) Counterparts. This Agreement may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) Notice. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:
If to the Seller: Copy to: Postabank es Takarekpenztar Rt. Squire, Sanders & Dempsey L.L.P. Rumbach Sebestyen u. 19-21. Zochova 5 1075 Budapest 811 03 Bratislava Hungary Republic of Slovakia Attention: Katalin Igaz Attention: Andrew Sandor Facsimile: +36-1-266-8077 Facsimile: +421-2-5930-3415 If to the Buyer: Asset Holder PCC Limited re: Ashmore Emerging Market Liquid Investment Portfolio c/o Barings (Guernsey) Limited, as custodian PO Box 71, Trafalgar Court Les Banques, St Peter Port Guernsey GY1 3DA Attention: Tracy le Sauvage Facsimile: 01481 745 058 Copy to: Copy to: Ashmore Investment Management Limited Dewey Ballantine 20 Bedfordbury 1 Undershaft London WC2N 4BL London, EC3 8LP United Kingdom United Kingdom Attention: Tim Davis Attention: Douglas L. Getter, Esq. Facsimile: +44-20-7557-4141 Facsimile: +44-20-7456-6001
Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth. -12- (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. (i) Dispute Resolution. (i) In the event of any dispute between the Parties, the Parties shall first attempt to settle such dispute amicably. Provided that, unless the Parties otherwise agree, arbitration may be commenced on or after the thirtieth (30) day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made. (ii) If amicable settlement has not been reached within the period stated in Section 12(i)(i) above, the dispute shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed under such Rules. Each arbitrator shall have experience in agreements of this type generally. The language of the arbitration shall be English and all documents submitted to the arbitration shall be in English (or where applicable an English translation shall be provided). The place of such arbitration shall be London. The prevailing party in any such arbitration shall be fully reimbursed by the other party for all costs associated with the arbitration, including reasonable legal fees. (j) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each Party. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. (k) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. (l) Expenses. Each of the Buyer and the Seller will bear its own costs and expenses (including legal fees and expenses) incurred in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby. (m) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" shall mean including without limitation. (n) Stamp Taxes, etc.. Seller agrees that it will pay, and will hold the Buyer harmless from any and all liability with respect to any stamp or similar taxes which may be determined to be payable in connection with the execution, delivery and performance of this Agreement. (o) Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. (p) Execution on Behalf of Buyer by Custodian. Barings (Guernsey) Limited is executing this Agreement and any other operative documents relating hereto to which Buyer is a party or shall be a party on behalf of Buyer and solely in his capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Agreement or such other operative documents. (q) References to Shares, Unsecured Notes and Warrants. References to "Shares", "Unsecured Notes" and "Warrants" shall applicable in this Agreement to extent that references to each of these terms is applicable with respect to the specific purchase and sale arrangement contemplated by Section 2 of this Agreement -13- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASSET HOLDER PCC LIMITED RE: ASHMORE EMERGING MARKET LIQUID INVESTMENT PORTFOLIO By: /s/ Bela Singlovics By: BARINGS (GUERNSEY) LIMITED, ----------------------- as custodian for Asset Name: Bela Singlovics Holder PCC Limited Title: Chief Executive Officer Re: Ashmore Emerging Market Liquid Investment Portfolio /s/ Tracy Le Sauvage -------------------- Authorized Signatory By: /s/ Katalin Igaz ------------------------------ Name: Katalin Igaz /s/ Jason Yendell Title: Deputy Chief Executive Officer -------------------- Authorized Signatory -14- AMENDMENT NO. 1 TO THE AGREEMENT FOR THE PURCHASE AND SALE OF SHARES, UNSECURED NOTES AND WARRANTS Amendment No. 1 to the Agreement for the Purchase and Sale of Shares, Unsecured Notes and Warrants (this "Amendment") is made as of October 10, 2003 by and among Postabank es Takarekpenztar Rt., a Hungarian commercial bank ("Seller"), and Asset Holder PCC Limited re: Ashmore Emerging Market Liquid Investment Portfolio ("Buyer"). RECITALS WHEREAS, the Seller and Buyer have entered into the Agreement for the Purchase and Sale of Shares, Unsecured Notes And Warrants dated September 26, 2003 (the "Agreement"); and WHEREAS, the Seller and Buyer wish to amend certain of the representations of the warranties given by the Buyer in the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants set forth in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller and the Buyer agree as follows: AGREEMENT 1. Amendment to Agreement. Section 3(b)(v)(A) of the Agreement shall be amended by deleting the words "for transactions not involving any public offering". 2. Effective Time. This Amendment shall be effective immediately upon execution. 3. Governing Law. This Amendment 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 conflict of laws provisions thereof. 4. Ratification. The Agreement, as amended by this Amendment, is and continues to be, in full force and effect and is hereby in all respects confirmed, approved and ratified. 5. Execution on Behalf of Buyer by Custodian. Barings (Guernsey) Limited is executing this Amendment on behalf of Buyer and solely in its capacity as custodian for the Buyer, and is making no independent representations or warranties and shall have no independent liability under the Amendment. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above. SELLER: BUYER: POSTABANK ES TAKAREKPENZTAR RT. ASSET HOLDER PCC LIMITED RE: ASHMORE EMERGING MARKET LIQUID INVESTMENT PORTFOLIO By: /s/ Bela Singlovics By: BARINGS (GUERNSEY) LIMITED, ----------------------- as custodian for Asset Holder Name: Bela Singlovics PCC Limited Re: Ashmore Title: Chief Executive Officer Emerging Market Liquid Investment Portfolio By: /s/ Katalin Igaz /s/ Tracy Le Sauvage ------------------------------ -------------------- Name: Katalin Igaz Authorized Signatory Title: Deputy Chief Executive Officer /s/ Jason Yendell -------------------- Authorized Signatory 2 EX-7.7 9 ex7-7.txt EXHIBIT 7.7 EXHIBIT 7.7 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 10, 1999 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...................................................................2 SECTION 3.1. ORGANIZATION AND EXISTENCE...................................2 SECTION 3.2. SUBSIDIARIES.................................................2 SECTION 3.3. CAPITALIZATION...............................................2 SECTION 3.4. AUTHORIZATION; BINDING OBLIGATIONS...........................3 SECTION 3.5. COMPLIANCE WITH INSTRUMENTS, ETC.............................3 SECTION 3.6. LITIGATION...................................................3 SECTION 3.7. FINANCIAL STATEMENTS; TAXES..................................3 SECTION 3.8. TAXES........................................................4 SECTION 3.9. OFFERING.....................................................4 SECTION 3.10. PERMITS; GOVERNMENTAL AND OTHER APPROVALS...................4 SECTION 3.11. FORM 10-K...................................................4 SECTION 3.12. REGISTRATION RIGHTS.........................................4 SECTION 3.13. ORDINARY COURSE; NO MATERIAL ADVERSE CHANGE.................4 SECTION 3.14. DISCLOSURE..................................................4 SECTION 3.15. REPRESENTATIONS AND WARRANTIES IN THE BRIDGE LOAN AGREEMENT.4 ARTICLE IV....................................................................4 SECTION 4.1. REPRESENTATIONS AND WARRANTIES CORRECT.......................4 SECTION 4.2. PERFORMANCE..................................................4 SECTION 4.3. COMPLIANCE CERTIFICATE.......................................5 SECTION 4.4. NO IMPEDIMENTS...............................................5 SECTION 4.5. NO MATERIAL ADVERSE CHANGE...................................5 SECTION 4.6. LEGAL INVESTMENT.............................................5 SECTION 4.7. QUALIFICATIONS...............................................5 SECTION 4.8. ISSUANCE TAXES...............................................5 SECTION 4.9. PROCEEDINGS AND OTHER DOCUMENTS..............................5 SECTION 4.10. OPINION OF COUNSEL..........................................5 SECTION 4.11. CONSENTS, WAIVERS, ETC......................................5 SECTION 4.12. OTHER MATTERS...............................................5 ARTICLE V.....................................................................5 SECTION 5.1. PAYMENT OF PURCHASE PRICE....................................6 SECTION 5.2. PERFORMANCE..................................................6 ARTICLE VI....................................................................6 SECTION 6.1. REPORTS......................................................6 SECTION 6.2. ACCOUNTS AND RECORDS.........................................7 SECTION 6.3. INSPECTION...................................................7 SECTION 6.4. INDEPENDENT ACCOUNTANTS......................................7 SECTION 6.5. RULE 144A INFORMATION........................................7 SECTION 6.6. USE OF PROCEEDS..............................................7 SECTION 6.7. SEAT ON BOARD OF DIRECTORS...................................7 SECTION 6.8. FURTHER ASSURANCES...........................................8 ii ARTICLE VII...................................................................8 SECTION 7.1 SURVIVAL.......................................................8 SECTION 7.2 INDEMNIFICATION................................................8 SECTION 7.3 CERTAIN DEFINITIONS AND LIMITATIONS............................8 SECTION 7.4 PROCEDURES.....................................................8 ARTICLE VIII..................................................................9 SECTION 8.1 RESTRICTIONS OF TRANSFER OF SHARES............................9 SECTION 8.2. RIGHT OF FIRST REFUSAL.......................................9 ARTICLE IX...................................................................10 SECTION 9.1 AMENDMENT AND WAIVER.........................................10 SECTION 9.2. BINDING EFFECT..............................................10 ARTICLE X....................................................................10 ARTICLE XI...................................................................10 ARTICLE XII..................................................................10 ARTICLE XIII.................................................................11 SECTION 13.1 GOVERNING LAW...............................................11 SECTION 13.2 CONSENT OF JURISDICTION.....................................11 SECTION 13.3 SUCCESSORS AND ASSIGNS......................................11 SECTION 13.4 ENTIRE AGREEMENT............................................11 SECTION 13.5 NOTICES, ETC................................................11 SECTION 13.6 DELAYS OR OMISSIONS.........................................12 SECTION 13.7 SEVERABILITY................................................12 SECTION 13.8 AGENT'S FEES................................................12 SECTION 13.9 EXPENSES....................................................12 SECTION 13.10 TITLES AND SUBTITLES........................................12 SECTION 13.11 COUNTERPARTS................................................12 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 iii SECURITIES PURCHASE AGREEMENT dated as of May 10, 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. 1 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 2 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 3 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 4 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: 5 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 6 (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". 7 (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 8 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. 9 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 10 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 11 (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] 12 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 13 EX-7.8 10 ex7-8.txt EXHIBIT 7.8 EXHIBIT 7.8 AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT ------------------------------------------------ AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT, dated as of April 11, 2000 (this "Amendment No 1"), among Hungarian Telephone and Cable Corp., A Delaware corporation (the "Company"), Postabank es Takarekpenziar Rt., a Hungarian commercial bank (the "Bank") and Citibank International plc (the "Facility Agent"). BACKGROUND ---------- The Company and the Bank entered into the Securities Purchase Agreement dated as of May 10, 1999 (the "Securities Purchase Agreement"), as part of a certain restructuring arrangement, pursuant to which, among other things, (i) the Bank purchased from the Company 2,428,572 shares of Common Stock, par value $.001 per share (the "Common Stock"), of the Company, and (ii) $25,000,000 aggregate principal amount of Floating Rate Unsecured Notes dated May 12, 1999 and due March 31, 2007, of the Company (the "Notes") with detachable warrants to purchase an aggregate of 2,500,000 shares of Common Stock were issued to the Bank. Terms are used in this Amendment No. 1 as defined in the Securities Purchase Agreement unless otherwise specified. In connection with certain new financing arrangements to be made available to the Company and its subsidiaries, the Company and the Bank are required to (i) provide for the return to the Company of the Notes, marked returned and (ii) issue and deliver to the Bank new amended and restated notes dated the date hereof (the "Amended and Restated Notes") to provide that, among other things, the Company's obligations under such Notes shall be subordinated to the prior payment in full of all Senior Obligations. The Company and the Bank have agreed to amend the Securities Purchase Agreement to replace the form of Note with the new form for Amended and Restated Note and to set forth the terms of subordination. The Company and the Bank are willing to modify the Securities Purchase Agreement to provide for such new form on the terms and subject to the conditions set forth below. NOW THEREFORE, the Company and the Bank, intending to be legally bound, hereby agree as follows: AGREEMENT --------- 1. Amendments to Securities Purchase Agreement. The Securities Purchase Agreement, as of the date hereof, is amended as follows: 1.1 The form of Note referred to in Section 1.1(a) of the Securities Purchase Agreement and attached thereto as Exhibit A shall be deleted and replaced in its entirety with the form of Amended and Restated Note attached hereto as Exhibit A. Each reference to the "Notes" or any "Note" in the Securities Purchase Agreement or any related documentation shall mean and be a reference to such Amended and Restated Notes or Amended and Restated Note. 1.2 The Securities Purchase Agreement is amended by (a) the modification of the title of Article VIII to read as follows: "RESTRICTION ON TRANSFER OF SHARES; RIGHT OF FIRST REFUSAL; SUBORDINATION" AND (b) the addition of a new Section 8.3 immediately following Section 8.2 to read as follows: Section 8.3. Subordination ------------- (a) The Company covenants and agrees, and the Bank by its acceptance hereof likewise covenants and agrees, that all payments of the principal of and interest and premium, if any, on the Notes and all other obligations of the Company now or hereafter existing under or in respect of the Notes (including, without limitation, amounts payable on account of the redemption provisions set forth in the Notes) (collectively, the "Subordinated Debt") shall be subordinated in accordance with the provisions of this Section 8.3 to the prior payment in full of all Senior Obligations. For purposes hereof, the Senior Obligations shall not be deemed to have been paid in full until the Finance Parties shall have received payment of the Senior Obligations in full in cash. In furtherance of the foregoing, the Company and the Bank agree as follows: (b) Upon payment or distribution of assets or securities of the Company of any kind or character, whether in cash, property or securities, upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Company, all Senior Obligations shall first be paid in full in cash, or payment provided for in cash or cash equivalents in a manner satisfactory to the Finance Parties, before any direct or indirect payment or distribution, including, without limitation, by exercise of set-off, of any cash, property or securities on account of principal of (or premium, if any) or interest or any other amounts on or in respect of the Notes and to that end the Finance Parties shall be entitled to receive directly, for application to the payment of the Senior Obligations (to the extent necessary to pay all Senior Obligations in full after giving effect to any substantially concurrent payment or distribution to or provision for payment to the Finance Parties), any payment or distribution of any kind or character, whether in cash, property or securities, in respect of the Subordinated Debt. The Facility Agent is hereby irrevocably authorized and empowered (in its own name or in the name of the Bank or otherwise); but shall have no obligation, to demand, sue for, collect and receive payment or distribution referred to herein and to file a claim and proofs of claim and take such other such action (including without limitation, 2 voting the Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Bank hereunder. (c) No direct or indirect payment by or on behalf of the Company of principal of (premium, if any), or interest on, or any other amount with respect to, the Subordinated Debt, and no repurchase, redemption or other retirement of any Note, whether pursuant to the terms of the Note, upon acceleration or otherwise, shall be made if at the time of such payment, repurchase, redemption or retirement, a Subordination Event has occurred and for so long as such Subordination Event shall not have been cured or waived in writing by all applicable parties; provided that the payment of accrued interest specified in the proviso in the definition of "Interest Payment Default" may be paid in accordance with such proviso; and provided, further, that on and after the Standstill Termination Date, the Company may resume payments on account of the principal of (premium, if any), and interest (including interest pursuant to Clause 15.1 of the Note) and any other amounts on the Note, subject to the provisions of Section 8.3(a) and Section 8.3(b) hereof. (d) (i) In the event that, notwithstanding the foregoing provisions prohibiting such payment or distribution, the Bank shall have received any payment on account of the Subordinated Debt at a time when such payment is prohibited by such provisions before the Senior Obligations are paid in full, then and in such event, such payment or distribution shall be received and held in trust by the Bank apart from its other assets and forthwith paid over or delivered to the Facility Agent in the same form as so received (with any necessary endorsement) to be applied (in the case of cash) to, or held as collateral (in the case of non-cash property or securities) for, the payment or prepayment of the Senior Obligations in accordance with the terms of the Senior Loan Agreements. (ii) Nothing contained in this Section 8.3 will limit the right of the Bank to take any action provided herein with respect to the Subordinated Debt; provided, that all Senior Obligations then due or thereafter declared to be due shall first be paid in full before the Bank is entitled to receive any payment from the Company of principal of, or interest on, or any other amounts under any Note. (iii) Upon any payment or distribution of assets or securities referred to in this Section 8.3, the Bank shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution winding up, liquidation or reorganization proceedings are pending, and upon a certificate of the receiver; trustee in bankruptcy, liquidating trustee, agent or other person making any such payment or distribution, delivered to the Bank for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the 3 Senior Obligations and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 8.3. (iv) No right of any present or future holder of any Senior Obligations to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act by any such holder, or by any noncompliance by the Company or any holder of a Note with the terms and provisions and covenants herein regardless of any knowledge thereof such holder may have or otherwise be charged with. (v) The provisions of this Section 8.3 are intended to be for the benefit of, and shall be enforceable directly by, the holders of the Senior Obligations. The Company and the Bank, by its acceptance hereof, each acknowledge that the Finance Parties are relying upon the provisions of this Section 8.3 in extending such Senior Obligations. (e) Any payment or distribution to the Facility Agent, on behalf of the holders of the Senior Obligations, pursuant to the provisions of this Section 8.3 shall entitle the Bank to exercise a right of subrogation in respect thereof; provided, however that all such subrogation rights are not exercisable until the Senior Obligations have been paid in full. (f) Nothing contained in this Section 8.3 or elsewhere in this Agreement or in the Note is intended to or shall impair, as between the Company and the Bank, the obligations of the Company, which are absolute and unconditional, to pay to the Bank the principal of (premium, if any), and interest on, the Note as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Bank and creditors of the Company other than the holders of the Senior Obligations nor shall anything herein or therein prevent the Bank from exercising all remedies otherwise permitted by applicable law upon the occurrence of a Mandatory Prepayment Event under the Notes, subject to the rights, if any, under this Section 8.3 of the holders of the Senior Obligations in respect of cash, property or securities of the Company received upon the exercise of any such remedy. (g) As long as the Senior Obligations shall nor have been paid in full, the Bank shall not commence, or join with any creditor other than the holders of the Senior Obligations in commencing, or directly or indirectly cause the Company to commence or assist the Company in commencing, any proceeding referred to in Section 8.3(b). (h) All rights and interests hereunder of the holders of the Senior Obligation, and all agreements and obligations of the Bank and the Company under this Section 8.3, shall remain in full force and effect irrespective of: 4 (i) the lack of validity or enforceability of any provision under any Senior Loan Agreement or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Obligations, or any other amendment or waiver of or any consent to any departure from the Senior Loan Agreements, including, without limitation, any increase in the Senior Obligations resulting from the extension of additional credit to the Company or any of its subsidiaries or otherwise; (iii) any taking, exchange, release or non-perfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Senior Obligations; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Senior Obligations, or any manner of sale or other disposition of any collateral for all or any of the Senior Obligations or any other assets of the Company or any of its subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of the Company or any of its subsidiaries; or (vi) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Company or a subordinated creditor. The Bank and the Company hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Senior Obligations and this Section 8.3 and any requirement that the Facility Agent or any holder of the Senior Obligations protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Company or any other person or entity or any collateral. (i) the provisions of this Section 8.3 shall continue to be effective or be reinstated, and the Senior Obligations shall not be deemed to be paid in full, as the case may be, if at any time any payment of any of the Senior Obligations is rescinded or must otherwise be returned by the Facility Agent or any holder of the Senior Obligations upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made. (ii) The provisions of this Section 8.3 shall (a) remain in full force and effect until the payment in full of the Senior Obligations, (b) be binding upon the Company and the Bank and their respective successors, assigns and transferees and (c) insure to the benefit of, and be enforceable by each Finance Party and its successors, assigns and transferees. 5 1.3 Section 9.1 of the Securities Purchase Agreement is amended by adding the following proviso to the end of the sentence thereof: "provided that no amendment, supplement or modification to, or waiver of, any provision set forth in Section 8.3 may be effected without the prior written consent of the Facility Agent (with the consent of the "Majority Lenders", as defined in the Senior Secured Credit Agreement), and any such amendment, supplement, modification or waiver entered into without the prior written consent of the Facility Agent shall be null and void and without any force and effect whatsoever." 1.4 Section 7.2 of the Securities Purchase Agreement is amended by the addition of a new paragraph (c) immediately following paragraph (b) to read as follows: (c) If, as of the date hereof, the Bank produces evidence satisfactory to the Company of the loss, theft or destruction of any Note required to be returned and exchanged for an Amended and Restated Note (a "Lost Note"), the Bank hereby (a) agrees with the Company that the Company shall refuse to recognize any person as the owner of the Lost Note and shall refuse to make any payment, transfer, registration, delivery or exchange called for by the Lost Note to any other person; (b) agrees that if it should find or receive any such Lost Note, the Bank will immediately surrender the same to the Company for cancellation without requiring any consideration therefor, and (c) agrees, in consideration of compliance of the foregoing request, to indemnify and hold harmless the Company, any creditor of the Company, including without limitation the holders of the Senior Obligations, any person, firm or corporation now or hereafter acting as its transfer agent or registrar, or in any other capacity, from and against any and all liability, loss, damage, claim and expense of any nature whatsoever, including without limitation legal fees and expenses, in connection with or arising out of, or in connection, resulting from or otherwise relating to, the loss of any Lost Note or the failure of the Bank to cancel and return each Lost Note to the Company. Nothing herein shall limit in any way any other rights or remedies that the Company may have with respect to any Lost Note. 1.5 The Securities Purchase Agreement shall be amended to add "Citibank International plc, as Facility Agent" as a party to the Securities Purchase Agreement for the purposes of Sections 8.3, 9.1, 13.2 and 13.12 only. 6 1.6 Section 13.2(a) of the Securities Purchase Agreement is amended by replacing the first sentence thereof beginning with the words "The Company" with the following sentence: Each of the parties hereunder irrevocably submits to the jurisdiction of any New York state or Federal court sitting in New York City in any Dispute 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 courts. 1.7 The Securities Purchase Agreement is amended by the addition of a new Section 13.12 immediately following Section 13.11 to read as follows: Section 13.12 Governing Law/Arbitration. ------------------------- (a) Option to Refer Disputes to Arbitration. Notwithstanding the provisions of Section 13.2(a) herein, (a) in the event that the Facility Agent deems it appropriate to assert its rights relating to this Agreement, or (b) at the option of either party in the event the Facility Agent has not asserted its rights related hereto or at any time after the Senior Obligations have been paid in full, such Person may, in its sole discretion assert any rights in an arbitration, if any dispute or difference anses out of or in connection with this Agreement, including any question as to its existence, validity or termination (a "Dispute"), and on condition that the Facility Agent, acting on instructions of the Majority Lenders, shall have elected by giving notice in writing to each of the other parties, such Dispute shall be referred to and finally settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force (the "UNCITRAL Rules"), which are deemed incorporated by reference into this Section 13.12(a). (b) Non-Exclusive Jurisdiction. This Section 13.12(b) is for the benefit of the Finance Parties and nothing in Section 13.2(a) shall prevent the Facility agent from taking proceedings relating to a Dispute involving a holder of any Note in any other courts with jurisdiction in the jurisdiction in which such holder of such Note has its place of incorporation, principal place of business and/or substantial assets. To the extent allowed by law, the Facility Agent may take concurrent proceeding in any number of jurisdictions. 7 (c) Waiver of Immunity. To the extent that each party hereunder may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in respect of execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to such party or its assets such immunity (whether or not claimed), such party hereby unconditionally and irrevocably agrees not to claim and hereby irrevocably waives such immunity to the full extent permitted by the Applicable Law of such jurisdiction. (d) Appointment of the Arbitral Tribunal. (i) Any arbitral tribunal appointed pursuant to Section 13.12(a) (Option to Refer Disputes to Arbitration) shall be composed of three (3) arbitrators one of whom shall be the presiding arbitrator. The appointing authority shall be the London Court of International Arbitration (the "LCIA"). The LCIA shall appoint all three (3) members of the arbitral and shall nominate which of them shall act as the presiding arbitrator. (ii) In all matters relating to the appointment of arbitrators under this Agreement, the parties hereunder agree that the LCIA shall be free to appoint whomsoever the LCIA considers appropriate in the LCIA's sole discretion, save that the LCIA shall take account of the views of the parties and shall give effect to any agreement of the parties in relation to the appointment of the arbitrators unless the LCIA determines in the LCIA's absolute discretion that it is not appropriate to do so. (iii) In all matters relating to the appointment of arbitrators under this Agreement, the parties hereunder agree that the LCIA shall be free to appoint whomsoever the LCIA considers appropriate in the LCIA's sole discretion, save that the LCIA shall take account of the views of the parties and shall give effect to any agreement of the parties in relation to the appointment of the arbitrators unless the LCIA determines in the LCIA's absolute discretion that it is not appropriate to do so. (e) Initiation of Arbitration Proceedings. Subject to Section 13.12(a) (Option to Refer Disputes to Arbitration), any of the parties hereunder which wishes to initiate an arbitration shall simultaneously: 8 (i) give a notice of arbitration to the other parties in accordance with Article 3 of the UNICITRAL Rules; and (ii) request in writing the LCIA to appoint the three (3) arbitrators and to nominate the presiding arbitrator and give a copy of such request to all the other parties to this agreement. Each party may make its own representations to the LCIA concerning the appointment of arbitrators within twenty-one (21) days of receipt of such notice of arbitration. For the avoidance of doubt, the parties agree that the LCIA may take note of any such representations, but shall otherwise be free in the LCIA's discretion to appoint whomsoever the LCIA consider appropriate as the three (3) arbitrators. (f) Place and Language of the Proceedings. The place and seat of the arbitration shall be London and language of the arbitral proceedings shall be English. (g) The Award and Exclusion of the Right of Appeal. All any awards of the arbitral shall be made in accordance with the UNCITRAL Rules in writing and shall be final and binding on the relevant parties. All and any awards shall be made by majority decision. If there be no majority, the award shall be made by the presiding arbitrator alone. The final award shall be made within six (6) months from the appointment of the third arbitrator, but insofar as this is impractical it shall be made as soon as possible thereafter. (h) Notice of Arbitration. In relation to any arbitration proceedings, the provision of Section 13.5 of this Agreement shall apply in respect of this Section 13.12(h) in addition to the notification provisions of the UNCITRAL. (i) Expedition of Arbitration. The appointed arbitrators shall conduct the arbitration in accordance with the UNCITRAL Rules and at all times in such a manner as to ensure a speedy resolution of the Dispute. 1.8 For the purpose of defining capitalized terms used herein, the Securities Purchase Agreement shall be amended by adding a new section 13.13 immediately following Section 13.12 to read as follows: 9 Section 13.13. Definitions. ------------ The following terms shall have the specified meanings: "Applicable Law" means, in relation to any person, any law, regulation, rule, executive order, decree, judicial or official order, code of practice, circular, guidance note or injunction of, or made by, any Competent Authority, which is binding and enforceable on or against the relevant person and/or with which the relevant person is required to comply: "Arrangers" means Citibank, N.A. and Westdeutsche Landesbank Girozentrale, each in its capacity as Arranger under the Senior Secure Credit Agreement; "Competent Authority" means, in respect of any person, any local national, supranational agency, authority; department inspectorate, minister, official, court, tribunal or public or statutory person (whether autonomous or not) of any other country, which has jurisdiction over such person; "Dispute" shall have the meaning ascribed to such term in Section 13.12(a) hereof; "Facility Agent" means, at any time, the facility agent for the Senior Banks under the Senior Secured Credit Agreement at such time, being as at the date of the amendment and restatement of the Notes, Citibank International plc; "Finance Parties" has the meaning ascribed to such term in the Senior Secured Credit Agreement; "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government; "HTCC Group" means the Company and each of its subsidiaries; "Interest Payment Date" has the meaning ascribed to such term in Clause 14.2 of the Notes; "Interest Payment Default" means any interest payment when due on the Interest Payment Date therefor shall fail to be made and such failure shall continue for at least 365 consecutive days after such Interest Payment Date; 10 provided, however that not Interest Payment Default shall be deemed to have occurred hereunder if, within 10 days after the end of such 365-day period, the Bank shall have received all interest accrued (including, without limitation, interest accruing pursuant to Clause 15.1 of the Notes) from such Interest Payment Date to the date the interest payment is made; "Majority Lenders" has the meaning ascribed to such term in the Bridge Loan Agreement. "Mandatory Prepayment Event" means any of the following: (a) while any Senior Obligations shall remain unpaid or any commitment under the Senior Secured Credit Agreement shall be in force, the occurrence of (i) any Senior Default or (ii) an Interest Payment Default; or (b) at any time after the Senior Obligations shall have been paid in full and the commitments under the Senior Secured Credit Agreement shall have been terminated, (i) the occurrence of any "Event of Default" (as defined in the Senior Secured Credit Agreement as in effect immediately prior to such payment and termination) or (ii) the Company shall fail to make any payment (whether of principal, interest or otherwise) when due under the Notes; "Person" means an individual, partnership, corporation (including a business trust), joint stock issuer, estate, trust, limited liability issuer, unincorporated association, joint venture or other entity, or a Governmental Authority; "Post-Petition Interest" means interest at the contract rate accruing subsequent to the filing of a petition initiating any proceeding in bankruptcy, insolvency or like proceeding whether or not such interest is allowed claim enforceable against the debtor in any proceeding under any applicable bankruptcy law; "Senior Banks" means the Arrangers and the other financial institutions from time to time party to the Senior Secured Credit Agreement; "Senior Default" means while any Senior Obligations shall remain unpaid or any commitment under the Senior Secured Credit Agreement shall be in force, the occurrence of any "Event of Default" (as defined in the Senior Secured 11 Credit Agreement) and the acceleration of the maturity of the Senior Obligations in accordance with the terms thereof, if such acceleration shall continue for at least 365 consecutive days after the Facility Agent has so elected such acceleration; "Senior Guaranty" means the Deed of Guarantee No. 6 dated as of April 11, 2000 among the Company, as guarantor, Citibank International plc, as Facility Agent and beneficial, Citibank Rt., as Security Agent and beneficiary and Hungarotel Tavkozlesi Koncesszios Reszvenyrarsasag, RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, and KNC Kelei-Nograd COM Tavkozlesi Koncesszios Reszvenytarasasag, as countersignors; "Senior Indebtedness" means all indebtedness and other obligations of any member of the HTCC group under or in connection with the Senior Loan Agreements; "Senior Loan Agreements" means the Senior Secured Credit Agreement, the Senior Guaranty, the Senior Security Deposit Agreement, the Senior Security Agreement and each "Senior Finance Document" (as defined in the Senior Secured Credit Agreement) and, in each case, any other agreement relating to the obligations thereunder, as any such agreements may be amended, restated, supplemented or otherwise modified from time to time, and any agreement extending the maturity of, refinancing or otherwise restructuring all or any portion of the obligations under such agreements or any successor thereto; "Senior Obligations" means the principal, premium, if any, interest (including Post-Petition Interest), penalties, fees, expenses, claims, charges, indemnity obligations, attorneys' fees and expenses, and other liabilities with respect to the Senior Indebtedness; "Senior Secured Credit Agreement" means the EUR 130,000,000 Secured Senior Debt Facility Agreement dated as of April 11, 2000 among Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, and KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag, as Borrowers; the Company and HTCC Tanacsado Reszvenytarsasag, as Guarantors, Citibank, N.A. and 12 Westdeutsche Landesbank Girozentrale, as Arrangers; the Facility Agent; Citibank Rt., as Security Agent; and the financial institutions from time to time party to the Senior Secured Credit Agreement in their capacity as lenders; "Senior Security Agreement" means the Pledge and Security Agreement dated April 11, 2000 by the Company in favor of Citibank Rt., as Security Agent; "Senior Security Deposit Agreement" means the Security Deposit No. 1 Agreement dated as of April 11, 2000 among the Company, as depositor, Citibank Rt., as Security Agent and depositee, and Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, RABA-COM TRavkozlesi Koncesszios Reszvenytarsasag, Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, and KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag, as countersignors. "Standstill Termination Date" means the earlier of (a) the repayment in full in cash of the Senior Obligations and (b) March 31, 2007; and "Subordination Event" means the occurrence of any "Event of Default" as defined in the Senior Secured Credit Agreement. 1.9 The Securities Purchase Agreement shall be amended by the addition of a new Section 13.14 immediately following Section 13.13 to reach as follows: Section 13.14. Waiver of Jury Trial. --------------------- Each of the parties hereunder irrevocably waives trial by jury in any action, proceeding or Dispute with respect to this Agreement. 2. Governing Law. This Amendment No. 1 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. 3. Ratification. The Securities Purchase Agreement, as amended by this Amendment No. 1, is and continues to be, in full force and effect and is hereby in all respects confirmed, approved and ratified. [Remainder of Page Intentionally Left Blank] 13 In WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed as of the date first above written. HUNGARIAN TELEPHONE AND CABLE CORP., a Delaware corporation By: ----------------------------------- Name: ---------------- Title: ---------------- POSTABANK ES TAKAREKPENZTAR RT., a Hungarian commercial bank By: ----------------------------------- Name: ---------------- Title: CEO ---------------- CITIBANK INTERNATIONAL PLC., as Facility Agent (for the purposes of Section 8.3, 9.1, 13.2 and 13.12 only) By: ----------------------------------- Name: ------------------------ Title: ---------------- Address for Notice: ------------------- Citibank International plc P.O. Box 242 336 Strand London W24 IHB England 14 EX-7.9 11 ex7-9.txt EXHIBIT 7.9 EXHIBIT 7.9 NO.__ OF TWENTY-FIVE NOTES 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 STATE'S SECURITIES LAWS. NEITHER THIS NOTE NOR ANY PORTION THEREOF MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR 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 ISSUER COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THE INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATE TO THE SENIOR OBLIGATIONS, AS DEFINED HEREIN AMENDED & RESTATED U.S.$ 1,000,000 UNSECURED SUBORDINATED NOTE OF HUNGARIAN TELEPHONE AND CABLE CORP. (Amending and Restating a Promissory Note dated May 12, 1999) Principal Amount: U.S. $1,000,000 Issue Date: May 12, 1999 and Expiration Date: March 31, 2007 amended and restated April 11, 2000 For value received, Hungarian Telephone and Cable Corp., a company formed under the laws of the State of Delaware, U.S.A. (the "Issuer"), hereby promises to pay to Postabank es Takarekpenztar Reszvenytarsasag the principal amount of this Note on the dates and in the amounts specified in the Conditions (as defined below). The Issuer promises to pay interest on the unpaid principal amount of this Note until the principal amount is paid in full, at such interest rates and payable at such times, as specified in the Conditions. This Note is one of a series of twenty-five Notes (collectively, the "Notes") dated the Issue Date and amended and restated on April __, 2000 which have been issued by the Issuer in favor of Postabank es Takarekpenztar Reszvenytarsasag ("Postabank") to amend and restate certain notes issued by the Issuer in favor of Postabank pursuant to a securities purchase agreement (as amended, the "Securities Purchase Agreement") dated May 10, 1999 between the Issuer and Postabank. Each of the Notes is subject to the additional terms and conditions which are set forth in the annex attached hereto (the "Conditions") and are incorporated herein by reference in their entirety. Upon any redemption of less than the entire principal amount outstanding of this Note in accordance with the Conditions, the amount so redeemed shall be recorded by the Issuer in the register maintained by the Issuer (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 is not transferable in part. 2 AS WITNESS the signature of a duly authorized officer on behalf of the Issuer: HUNGARIAN TELEPHONE AND CABLE CORP., AS ISSUER By: _______________________________ Name: Kaj Ole Bertram Title: President and Chief Executive Officer duly authorized signatory EXECUTED as of April __, 2000 3 FORM OF TRANSFER BETWEEN: (1) [Transferor] (the "Transferor"); and (2) [Transferee] (the "Transferee"). DATE: [____________] For value received the Transferor hereby transfers [*] Note[s] issued by Hungarian Telephone and Cable Corp. (the "Note[s]") in the original principal amount of U.S.$ [*] to the Transferee in accordance with the Conditions (as defined in the Note) and instructs the Issuer to register the Transferee as owner of the Note[s]. SIGNED: ....................................... ............................... duly authorized signatory duly authorized signatory for and on behalf of for and on behalf of [Transferor] as Transferor [Transferee] as Transferee 4 TERMS AND CONDITIONS OF THE AMENDED AND RESTATED UNSECURED SUBORDINATED NOTES The issue (the "Note Issue") of the Notes (the "Notes") of Hungarian Telephone and Cable Corp. (the "Issuer") are subject to 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 As used in the Securities Purchase Agreement (including the attached Exhibits) and in respect of the certificates for and terms and conditions of the Notes, the following terms shall have the specified meanings (unless otherwise defined therein): "Arrangers" means Citibank, N.A. and Westdeutsche Landesbank Girozentrale, each in its capacity as Arranger under the Senior Secured Credit Agreement; "Banks" means the Arrangers and the other financial institutions from time to time party to the Senior Secured Credit Agreement; "Business Day" means any day (other than a Saturday or Sunday) on which banks are not required or authorized to close in New York City and Budapest; "Clause" means, subject to any contrary indication, a reference to a Clause hereof; "Condition" and "Conditions" shall have the meanings ascribed thereto herein; "Dispute" shall mean any dispute or difference arising out of or in connection with this Note, including any question as to its existence, validity or termination; "Expiration Date" means March 31, 2007, or if such day is not a Business Day, the next succeeding day which is a Business Day; "Facility Agent" means, at any time, the facility agent for the Banks under the Senior Secured Credit Agreement at such time, being as at the date of the amendment and restatement of the Notes, Citibank International plc; "Finance Documents" means, at any time, each of the Securities Purchase Agreement, the Warrant Agreement and any other document, notice, instrument or agreement entered into or delivered pursuant to any of the foregoing, and "Finance Document" shall mean any or each such document, notice, instrument or agreement; "Finance Parties" has the meaning ascribed to such term in the Senior Secured Credit Agreement; 5 "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 an Interest Period when due, then the Fixed Margin for such Interest Period shall be three and one-half per cent (31/2%) per annum; "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government; "HTCC Consulting" means HTCC Tanacsado Reszvenytarsasag; "HTCC Group" means the Issuer and each of its subsidiaries; "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 Payment Default" means any interest payment when due on the Interest Payment Date therefor shall fail to be made and such failure shall continue for at least 365 consecutive days after such Interest Payment Date; provided, however that no Interest Payment Default shall be deemed to have occurred hereunder if, within 10 days after the end of such 365-day period, the Noteholder shall have received all interest accrued (including, without limitation, interest accruing pursuant to Clause 15.1) from such Interest Payment Date to the date the interest payment is made; 6 "Interest Period" means, subject as provided below, in relation to any Note, a period of six (6) 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, as to any Note, the date(s) specified as such in such Note; "Issuer" means Hungarian Telephone and Cable Corp., a corporation formed under the laws of the State of Delaware; "Majority Lenders" has the meaning ascribed to such term in the Senior Secured Credit Agreement; "Mandatory Prepayment Event" means any of the following: (a) while any Senior Obligations shall remain unpaid or any commitment under the Senior Secured Credit Agreement shall be in force, the occurrence of (i) any Senior Default or (ii) an Interest Payment Default; or (b) at any time after the Senior Obligations shall have been paid in full and the commitments under the Senior Secured Credit Agreement shall have been terminated, (i) the occurrence of any "Event of Default" (as defined in the Senior Secured Credit Agreement as in effect immediately prior to such payment and termination) or (ii) the Issuer shall fail to make any payment (whether of principal, interest or otherwise) when due under this Note; "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 7 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; "Noteholder" has the meaning ascribed to such term in Clause 5.2; "Notes" means the notes issued in accordance with the Securities Purchase Agreement, as such notes have been amended and restated on April __, 2000, and to which the Conditions contained herein are applicable; "Person" means an individual, partnership, corporation (including a business trust), joint stock issuer, estate, trust, limited liability issuer, unincorporated association, joint venture or other entity, or a Governmental Authority; "Post-Petition Interest" means interest at the contract rate accruing subsequent to the filing of a petition initiating any proceeding in bankruptcy, insolvency or like proceeding whether or not such interest is an allowed claim enforceable against the debtor in any proceeding under any applicable bankruptcy law; "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" means the principal London offices of ABN AMRO Bank N.V., Citibank N.A. and ING Bank N.V., or such other bank or banks as may from time to time be agreed between the Issuer and the Noteholders, such agreement not to be unreasonably withheld or delayed; "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; "Senior Default" means, while any Senior Obligations shall remain unpaid or any commitment under the Senior Secured Credit Agreement shall be in force, the occurrence of "Event of Default" (as defined in the Senior Secured Credit Agreement) and the acceleration of the maturity of the Senior Obligations in accordance with the terms thereof, if such acceleration shall continue for at least 365 consecutive days after the Facility Agent has so elected such acceleration; 8 "Senior Guaranty" means the Deed of Guarantee No. 6 dated as of April __, 2000 among the Issuer, as guarantor, Citibank International plc, as Facility Agent and beneficiary, Citibank Rt., as Security Agent and beneficiary and Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, and KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag, as countersignors; "Senior Indebtedness" means all indebtedness and other obligations of any member of the HTCC Group to the Finance Parties under or in connection with the Senior Loan Agreements; "Senior Loan Agreements" means the Senior Secured Credit Agreement, the Senior Guaranty, the Senior Security Deposit Agreement, the Senior Security Agreement, and each "Senior Finance Document" (as defined in the Senior Secured Credit Agreement) and, in each case, any other agreement relating to the obligations thereunder; "Senior Obligations" means the principal, premium, if any, interest (including Post-Petition Interest), penalties, fees, expenses, claims, charges, indemnity obligations, attorneys' fees and expenses, and other liabilities with respect to the Senior Indebtedness; "Senior Secured Credit Agreement" means the EUR 130,000,000 Secured Senior Debt Facility Agreement dated as of April __, 2000 among Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, and KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag, as Borrowers; the Issuer and HTCC Consulting, as Guarantors; Citibank, N.A. and Westdeutsche Landesbank Girozentrale, as Arrangers; the Facility Agent; Citibank Rt., as Security Agent; and the financial institutions party to the Senior Secured Credit Agreement in their capacity as lenders; "Senior Security Agreement" means the Pledge and Security Agreement dated as of April __, 2000 by the Issuer in favor of Citibank Rt., as Security Agent; "Senior Security Deposit Agreement" means the Security Deposit No. 1 Agreement dated as of April __, 2000 among the Issuer, as depositor, Citibank Rt., as Security Agent and depositee, and Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, and KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag, as countersignors; "Standstill Termination Date" means the earlier of (a) the repayment in full in cash of the Senior Obligations and (b) March 31, 2007; 9 "Subordinated Debt" has the meaning ascribed to such term in Clause 19; "Subordination Event" means the occurrence of any "Event of Default" as defined in the Senior Secured Credit Agreement; "Tax" means 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); "U.S. dollar", "dollars", "USD", "$" and "U.S.$" means the lawful currency of the United States of America; "Warrants" means the warrants to purchase common stock of the Issuer, set out as Exhibit B to the Securities Purchase Agreement; and "winding up", "dissolution", "administration or "re-organization" of the Issuer or corporation shall be construed so as to include any equivalent or analogous proceedings under the law of the jurisdiction in which the Issuer or corporation is incorporated or any jurisdiction in which the Issuer or corporation carries on business, including the seeking of liquidation, winding up, re-organization, dissolution, administration, arrangement, adjustment, protection or relief of debtors. 1.2 Save where the contrary is indicated, any reference herein to: (a) 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, novated or supplemented to the extent expressly permitted by the terms of the Senior Loan Agreements; (b) a reference to any Person includes its successors and permitted transferees and permitted assigns; (c) 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; and (d) a reference to the Senior Secured Credit Agreement, the Senior Guaranty, the Senior Security Deposit Agreement and any other Senior Loan Agreement, shall be construed as a reference to any such agreement as any such agreement may be amended, restated, renewed, replaced, refinanced, supplemented or otherwise modified from time to time, and to any agreement extending the maturity of, refinancing or otherwise restructuring all or any portion of the obligations under such agreements or any successor thereto; 10 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 The Notes having an aggregate principal amount of twenty-five million U.S. dollars (U.S.$ 25,000,000) have been issued in twenty-five (25) Notes of equal value. 3. Purpose 3.1 The proceeds of the Notes have been used by the Issuer for the making of various loans to members of the HTCC Group. 4. Constitution of the Notes 4.1 The Issuer hereby covenants in favor 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 inure to the benefit of the Noteholders and each Noteholder and its/their (and any subsequent) successors and permitted transferees, 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 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. 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 (other than the endorsed form of transfer) or any 11 notice of any previous loss or theft of such Note) 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, Clause 6.3 and Clause 19, a Note may be transferred in whole (but not in part) upon surrender of such Note, with the endorsed form of transfer duly completed, at the office of the Issuer specified in Clause 21.1, 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. The transfer of a Note will be effected without charge. 6.2 Within five (5) Business Days of the surrender of a Note in accordance with Clause 6.1 above, the Issuer will register the transfer in question and deliver a new Note 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 prior to 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 subordinated to the Senior Obligations and pari passu with all other present and future unsecured obligations of the Issuer. 8. Conditions Precedent to Issuance of the Notes The conditions precedent for the issuance of the Notes 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 favor 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. 12 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 or incur any bond, note, indebtedness, debenture or debenture stock, except (i) pursuant to, or permitted under the terms of, the Securities Purchase Agreement or the Senior Loan Agreements, and (ii) 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 Issuer) of the Securities Purchase Agreement; and (d) to promptly notify the Noteholders and each Noteholder of the occurrence of a Mandatory Prepayment Event or a potential Mandatory Prepayment Event. 11. Redemption 11.1 Subject to the subordination provisions set forth in Clause 19, each Note will be redeemed at its face amount on the Expiration Date, together with all accrued interest and any other amount payable under the Notes. Redeemed Notes 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 13 redemption of the Note prior to the end of the applicable Interest Period (as determined by the Noteholder); (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; and (e) such redemption is expressly permitted by the terms of the Senior Secured Credit Agreement and Clause 19 hereof. 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. 14 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. 15 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 in Clause 19 or otherwise, interest shall be payable by the Issuer in U.S. dollars in advance on the first day of each Interest Period (each such day, an "Interest Payment Date"). 14.3 The first Interest Period in respect of the Notes will commence on May 12, 2000 with the next Interest Payment Date being six (6) months thereafter. 14.4 Interest shall accrue from day to day from and including the last day of the immediately preceding Interest Period to but excluding the last day of the current Interest Period 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 at the rate specified in Clause 14.1 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. 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, provided, however that any such interest which shall have accrued as a result of an event which, but for the payment of such accrued interest as provided in the proviso set forth in the definition of "Interest Payment Default", would become an Interest Payment Default, shall be payable on the date upon which the obligation of the Issuer to pay such accrued interest is discharged, whether in accordance with the definition of "Interest Payment Default" or as otherwise provided herein. 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 16 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 Event Upon the occurrence of any Mandatory Payment Event, the Issuer will, subject to the provisions of Clause 19, immediately prepay to the Noteholders all the outstanding principal and all interest and all other amounts payable under the Notes. 17. Replacement of Note Subject to Article X of the Securities Purchase Agreement, if any Note 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 Notes 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, provided that no amendment, supplement or modification to, or waiver of, any provision set forth in this Clause 18, Clause 16, Clause 19, Clause 22 or Clause 23 may be effected without the prior written consent of the Facility Agent (with the consent of the "Majority Lenders", as defined in the Senior Secured Credit Agreement), and any such amendment, supplement, modification or waiver entered into without the prior written consent of the Facility Agent shall be null and void and without any force and effect whatsoever. 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. Subordination 19.1 The Issuer covenants and agrees, and the Noteholder by its acceptance hereof likewise covenants and agrees, that all payments of the principal of and interest and premium, if any, on the Notes and all other obligations of the Issuer now or hereafter existing under or in respect of the Notes (including, without limitation, amounts payable on account of the redemption provisions set forth herein) (collectively, the "Subordinated Debt") shall be subordinated in accordance with 17 the provisions of this Clause 19 to the prior payment in full of all Senior Obligations. For purposes hereof, the Senior Obligations shall not be deemed to have been paid in full until the Finance Parties shall have received payment of the Senior Obligations in full in cash. In furtherance of the foregoing, the Issuer and the Noteholder, by its acceptance hereof, agrees as follows: 19.2 Upon payment or distribution of assets or securities of the Issuer of any kind or character, whether in cash, property or securities, upon any dissolution or winding up or total or partial liquidation or reorganization of the Issuer, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Issuer, all Senior Obligations shall first be paid in full in cash, or payment provided for in cash or cash equivalents in a manner satisfactory to the Finance Parties, before any direct or indirect payment or distribution, including, without limitation, by exercise of set-off, of any cash, property or securities on account of principal of (or premium, if any) or interest or any other amounts on or in respect of the Notes and to that end the Finance Parties shall be entitled to receive directly, for application to the payment of the Senior Obligations (to the extent necessary to pay all Senior Obligations in full after giving effect to any substantially concurrent payment or distribution to or provision for payment to the Finance Parties), any payment or distribution of any kind or character, whether in cash, property or securities, in respect of the Subordinated Debt. The Facility Agent is hereby irrevocably authorized and empowered (in its own name or in the name of the Noteholders or otherwise), but shall have no obligation, to demand, sue for, collect and receive payment or distribution referred to herein and to file a claim and proofs of claim and take such other action (including without limitation, voting the Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Noteholders hereunder. 19.3 No direct or indirect payment by or on behalf of the Issuer of principal of (premium, if any), or interest on, or any other amount with respect to, the Subordinated Debt, and no repurchase, redemption or other retirement of any Note, whether pursuant to the terms of the Note, upon acceleration or otherwise, shall be made if at the time of such payment, repurchase, redemption or retirement, a Subordination Event has occurred for so long as such Subordination Event shall not have been cured or waived in writing by all applicable parties; provided, that the payment of accrued interest specified in the proviso in the definition of "Interest Payment Default" may be paid in accordance with such proviso; and provided, further, that on and after the Standstill Termination Date, the Issuer may resume payments on account of the principal of (premium, if any), and interest (including interest pursuant to Clause 15.1) and any other amounts on the Note, subject to the provisions of Clause 19.1 and Clause 19.2 hereof; 19.4 (a) In the event that, notwithstanding the foregoing provisions prohibiting such payment or distribution, the Noteholders shall have received any payment on 18 account of the Subordinated Debt at a time when such payment is prohibited by such provisions before the Senior Obligations are paid in full, then and in such event, such payment or distribution shall be received and held in trust by the Noteholders apart from their other assets and forthwith paid over or delivered to the Facility Agent in the same form as so received (with any necessary indorsement) to be applied (in the case of cash) to, or held as collateral (in the case of non-cash property or securities) for, the payment or prepayment of the Senior Obligations in accordance with the terms of the Senior Loan Agreements. (b) Nothing contained in this Clause 19 will limit the right of the Noteholders to take any action provided herein with respect to the Subordinated Debt; provided that all Senior Obligations then due or thereafter declared to be due shall first be paid in full before the Noteholders are entitled to receive any payment from the Issuer of principal of, or interest on, or any other amounts under any Note. (c) Upon any payment or distribution of assets or securities referred to in this Clause 19, the Noteholders shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, and upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making any such payment or distribution, delivered to the Noteholders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Obligations and other indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Clause 19. (d) No right of any present or future holder of any Senior Obligations to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act by any such holder, or by any noncompliance by the Issuer or any Noteholder with the terms and provisions and covenants herein regardless of any knowledge thereof such holder may have or otherwise be charged with. (e) The provisions of this Clause 19 are intended to be for the benefit of, and shall be enforceable directly by, the holders of the Senior Obligations. The Issuer and each Noteholder, by its acceptance hereof, each acknowledge that the Finance Parties are relying upon the provisions of this Clause 19 in extending such Senior Obligations. 19.5 Any payment or distribution to the Facility Agent, on behalf of the holders of the Senior Obligations, pursuant to the provisions of this Clause 19 shall entitle the Noteholder to a right of subrogation in respect thereof; provided, however that all such subrogation rights are not exercisable until the Senior Obligations shall have been paid in full. 19 19.6 Nothing contained in this Clause 19 or elsewhere in this Note is intended to or shall impair, as between the Issuer and the Noteholder, the obligations of the Issuer, which are absolute and unconditional, to pay to the Noteholder the principal of (premium, if any), and interest on, the Note as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Noteholder and creditors of the Issuer other than the holders of the Senior Obligations nor shall anything herein or therein prevent any Noteholder from exercising all remedies otherwise permitted by applicable law upon the occurrence of a Mandatory Prepayment Event under this Note, subject to the rights, if any, under this Clause 19 of the holders of the Senior Obligations in respect of cash, property or securities of the Issuer received upon the exercise of any such remedy. 19.7 As long as the Senior Obligations shall not have been paid in full, no Noteholder will commence, or join with any creditor other than the holders of the Senior Obligations in commencing, or directly or indirectly cause the Issuer to commence or assist the Issuer in commencing, any proceeding referred to in Clause 19.2. 19.8 All rights and interests hereunder of the holders of the Senior Obligations, and all agreements and obligations of the Noteholders and the Issuer under this Clause 19, shall remain in full force and effect irrespective of: (a) the lack of validity or enforceability of any provision under any Senior Loan Agreement or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Obligations, or any other amendment or waiver of or any consent to any departure from the Senior Loan Agreements, including, without limitation, any increase in the Senior Obligations resulting from the extension of additional credit to the Issuer or any of its subsidiaries or otherwise; (c) any taking, exchange, release or non-perfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Senior Obligations; (d) any manner of application of collateral, or proceeds thereof, to all or any of the Senior Obligations, or any manner of sale or other disposition of any collateral for all or any of the Senior Obligations or any other assets of the Issuer or any of its subsidiaries; (e) any change, restructuring or termination of the corporate structure or existence of the Issuer or any of its subsidiaries; or (f) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Issuer or a subordinated creditor. 20 Each Noteholder and the Issuer hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Senior Obligations and this Clause 19 and any requirement that the Facility Agent or any holder of the Senior Obligations protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Issuer or any other person or entity or any collateral. 19.9 (a) The provisions of this Clause 19 shall continue to be effective or be reinstated, and the Senior Obligations shall not be deemed to be paid in full, as the case may be, if at any time any payment of any of the Senior Obligations is rescinded or must otherwise be returned by the Facility Agent or any holder of the Senior Obligations upon the insolvency, bankruptcy or reorganization of the Issuer or otherwise, all as though such payment had not been made. (b) The provisions of this Clause 19 shall (i) remain in full force and effect until the payment in full of the Senior Obligations, (ii) be binding upon the Issuer and each Noteholder and their respective successors, assigns and transferees and (iii) inure to the benefit of, and be enforceable by, each Finance Party and its successors, assigns and transferees. 20. Miscellaneous 20.1 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). 20.2 Subject to Section 12.9 (Expenses) of the Securities Purchase Agreement, the Issuer will pay all costs associated with the issuance of the Notes. 21. Notices 21.1 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: Terez Krt, Budapest, Hungary Tel: + 36 1 474-7732 21 Facsimile: + 36 1 474-0350 Attention of: Kaj Ole Bertram Copies 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) and LEGAL COUNSEL Hungarian Telephone and Cable Corp. 100 First Stamford Place Stamford, CT 06902 Fax: 203-348-9128 Tel: 203-348-9069 21.2 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. 21.3 The Noteholder, by its acceptance hereof, understands and agrees that it may receive a request pursuant to Section 34.2 (Exceptions) of the Senior Secured Credit Agreement and that the response to such request shall be required to be provided to the Person indicated therein within fourteen (14) after delivery thereof or the Noteholder shall be deemed to have consented to such request. 22. Law The Notes are governed by, and shall be construed in accordance with, the laws of the State of New York. 23. Arbitration 23.1 New York Courts. Subject to Clause 23.2 below (Option to Refer Disputes to Arbitration), each of the Issuer and the Noteholder irrevocably agrees for the benefit of each of the Finance Parties that the courts of New York shall have exclusive jurisdiction to hear and determine any suit, action or proceeding, and to 22 settle any disputes, which may arise out of or in connection with this Note and, for such purposes, irrevocably submits to the jurisdiction of such courts. 23.2 Option to Refer Disputes to Arbitration. Notwithstanding the provisions of Clause 23.1 above (New York Courts), (a) in the event that the Facility Agent deems it appropriate to assert its rights relating to this Note, or (b) at the option of either the Issuer or the Noteholder in the event the Facility Agent has not asserted its rights related hereto or at any time after the Senior Obligations shall have been paid in full, such Person may, in its sole discretion assert such rights in an arbitration proceeding under the UNCITRAL Arbitration Rules as more particularly outlined in the Securities Purchase Agreement which is incorporated herein by reference in its entirety. 23.3 Non-Exclusive Jurisdiction. This Clause 23.3 is for the benefit of the Finance Parties and nothing in Clause 23.1 shall prevent the Facility Agent from taking proceedings relating to a Dispute involving a holder of any Note in any other courts with jurisdiction in the jurisdiction in which such holder of such Note has its place of incorporation, principal place of business and/or substantial assets. To the extent allowed by law, the Facility Agent may take concurrent proceedings in any number of jurisdictions. 23.4 Service of Process for Arbitration Proceedings. Each party hereunder 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 21 (Notices) or other its registered office for the time being. If the appointment of the person(s) mentioned in this Clause 23.4 ceases to be effective, such party shall immediately appoint a further person to act on its behalf as agent for the commencement of arbitration proceedings and, failing such appointment within fifteen (15) days, any other party or the Facility Agent shall be entitled to appoint such a person by notice to the other parties. Nothing contained in these Conditions shall affect the right to serve process in any other manner permitted by law. 23.5 Consent to Enforcement. Each party 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. 24. 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. 23 25. Waiver of Jury Trial Each of the parties hereto irrevocably waives trial by jury in any action, proceeding or Dispute with respect to this Note. 26. Amendment and Restatement This Note amends and restates and is a substitute for, but is not in payment or satisfaction of, the Unsecured Note no. __ dated May 12, 1999 in the principal amount of U.S. $1,000,000 from the Issuer to the Noteholder. 24 EXECUTION The Issuer Executed and delivered ) Director by Kaj Ole Bertram, President and ) Chief Executive Officer ) HUNGARIAN TELEPHONE AND ) Director/Secretary CABLE CORP. ) The Noteholder signed by ) Director/Secretary for and on behalf of ) POSTABANK ES TAKAREKPENZTAR ) RESZVENYTARSASAG ) 25 EX-7.10 12 ex7-10.txt EXHIBIT 7.10 EXHIBIT 7.10 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 One Hundred Thousand (100,000) Shares of Common Stock WARRANT TO PURCHASE COMMON STOCK OF HUNGARIAN TELEPHONE AND CABLE CORP. This certifies that, for value received, Postabank es Takarekpenztar Reszvenytarsasag 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] 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 -----END PRIVACY-ENHANCED MESSAGE-----