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EXHIBIT 10.34
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JOINT VENTURE AND SHAREHOLDERS' AGREEMENT
among
▇▇▇▇▇▇ AIRCRAFT SALES AND LEASING COMPANY,
SFMT-HUNGARO INC.
and
MICROSYSTEM TELECOM RT.
August 5, 1994
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TABLE OF CONTENTS
Page No.
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Recitals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Organization of the Company; Management;
Operational Responsibilities, etc. . . . . . . . . . 6
2.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Board of Directors . . . . . . . . . . . . . . . . . . . . . 6
2.3 Supervisory Board . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Operational Responsibilities, etc. . . . . . . . . . . . . . 8
2.4.1 System Development . . . . . . . . . . . . . . . . . . . . . . 8
2.4.2 System Operation and Performances . . . . . . . . . . . . . . 8
2.4.3 SFMT Services and Products . . . . . . . . . . . . . . . . . . 9
2.4.4 Other Third Party Contracts . . . . . . . . . . . . . . . . . 9
2.4.5 SFMT Assistance . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 System Financing . . . . . . . . . . . . . . . . . . . . . . 9
2.5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5.2 Capital Contributions . . . . . . . . . . . . . . . . . . . . 9
2.5.3 Debt Financing . . . . . . . . . . . . . . . . . . . . . . . 10
2.5.4 Equipment Financing . . . . . . . . . . . . . . . . . . . . . 10
2.5.6 Microsystem Interest . . . . . . . . . . . . . . . . . . . . 10
2.6 Business Plan . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Dividend Policy . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Disposition of Shares by ▇▇▇▇▇▇ . . . . . . . . . . . . 11
3.1 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . 11
3.2 Right of First Refusal . . . . . . . . . . . . . . . . . . . 12
Section 4. Disposition of Shares by SFMT . . . . . . . . . . . . . 12
4.1 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . 12
4.2 Tag-Along Rights of ▇▇▇▇▇▇ . . . . . . . . . . . . . . . . . 13
Section 5. Disposition of Shares by a Hungarian
Shareholder . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Transfer Restriction . . . . . . . . . . . . . . . . . . . . 14
5.2 Eligible Hungarian Buyer . . . . . . . . . . . . . . . . . . 14
5.3 Transfer of Interest to H Corporation . . . . . . . . . . . . 15
Section 6. Piggyback Registration Rights of
Shareholders . . . . . . . . . . . . . . . . . . . . . 15
6.1 Public Offering . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Piggyback Registration . . . . . . . . . . . . . . . . . . . 16
6.3 Registration Expenses . . . . . . . . . . . . . . . . . . . 16
6.4 Maximum Number of Shares . . . . . . . . . . . . . . . . . . 16
6.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 17
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Section 7. Certain Rights of ▇▇▇▇▇▇ . . . . . . . . . . . . . . . 18
7.1 ▇▇▇▇▇▇ Premium . . . . . . . . . . . . . . . . . . . . . . . 18
7.1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1.2 Preferential Dividend Distributions . . . . . . . . . . . . . 18
7.1.3 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.1.4 Confirmation of Entitlement . . . . . . . . . . . . . . . . . 19
7.2 Repayment of Concession Fee and Expenses . . . . . . . . . . 20
7.3 Bid Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Certain Voting Rights Afforded to ▇▇▇▇▇▇ . . . . . . . . . . 20
7.4.1 C Share . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4.2 Capital Calls . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4.3 Additional Voting Rights . . . . . . . . . . . . . . . . . . 21
7.4.4 Confirmation of Entitlement . . . . . . . . . . . . . . . . . 22
Section 8. Concession Contract . . . . . . . . . . . . . . . . . 22
Section 9. Assumption of Obligations, etc. . . . . . . . . . . . 23
Section 10. Representations, Warranties and Covenants
of Shareholders . . . . . . . . . . . . . . . . . . . 24
10.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 SFMT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.3 ▇▇▇▇▇▇ . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.4 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11. Term; Termination . . . . . . . . . . . . . . . . . 24
Section 12. Assignment . . . . . . . . . . . . . . . . . . . . . 25
Section 13. Confidentiality . . . . . . . . . . . . . . . . . . . 25
Section 14. Public Announcements . . . . . . . . . . . . . . . . 27
Section 15. Expenses, etc. . . . . . . . . . . . . . . . . . . . 27
Section 16. Governing Law and Dispute Resolution . . . . . . . . 27
Section 17. Waiver . . . . . . . . . . . . . . . . . . . . . . . 27
Section 18. Notices . . . . . . . . . . . . . . . . . . . . . . . 27
Section 19. Entire Agreement . . . . . . . . . . . . . . . . . . 29
Section 20. Amendments and Modifications . . . . . . . . . . . . 29
Section 21. Further Assurances . . . . . . . . . . . . . . . . . 29
Section 22. Severability . . . . . . . . . . . . . . . . . . . . 29
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EXHIBITS
Exhibit 1.6 Approved Business Plan
Exhibit 1.15 Deed of Foundation (Hungarian and English)
Exhibit 5.3.2 Voting Trust Agreement
Exhibit 7.1.2 Example of Calculation of Preferential Dividend Distributions
Exhibit 8.1 Concession Contract
Exhibit 10.1 Representations and Warranties
Exhibit 10.3 Certain Liabilities/Obligations
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JOINT VENTURE AND SHAREHOLDERS' AGREEMENT
This Joint Venture and Shareholders' Agreement is entered into on this 5th day
of August, 1994 among:
▇▇▇▇▇▇ AIRCRAFT SALES AND LEASING COMPANY ("▇▇▇▇▇▇"), a company incorporated
under the laws of the State of Delaware, having its address at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ___________ USA, represented by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
SFMT-Hungaro INC. ("SFMT"), a company incorporated under the the State of
Delaware, having its address at ▇ ▇▇▇▇ __________ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇, represented by ____________ ▇▇▇▇; and
MICROSYSTEM TELECOM ("Microsystem"), a company limited by shares incorporated
under the laws of Hungary, having its address at 1122 Budapest, Varosmajor u.
78, Hungary, represented by ▇▇. ▇▇▇▇▇ ▇▇▇▇▇;
▇▇▇▇▇▇ SFMT and Microsystem are hereinafter collectively referred to as the
"Shareholders".
RECITALS
A. The Magyar Paging Consortium (the "Consortium") originally consisting
of ▇▇▇▇▇▇ and Microsystem, has been selected by the Ministry (as
defined in Section 1.27) as the winner of a concession (the
"Concession") to provide nationwide public paging services in Hungary,
by establishing, implementing, maintaining and operating one ERMES
system pursuant to the standard No. ETS 300 133...1-7 (the "System").
B. On May 6, 1994, the Consortium entered into a concession agreement
(the "Concession Agreement") with the Minister (as defined in Section
1.27), pursuant to which the Consortium was granted the Concession.
The Concession Agreement provides, inter alia, that the Consortium is
responsible for establishing a concession company to carry out the
Concession within 90 days from the date of the Concession Agreement
(i.e. by August 6, 1994).
C. SFMT has, with the consent of the Minister, agreed to join as a member
of the Consortium, effective May 6, 1994.
D. In connection with the execution of this Agreement, the members of the
Consortium are signing the Deed of Foundation of the Company ("Deed of
Foundation") providing for the establishment of the concession
company, which shall be known as EURO Szemelyhivo Magyarorszag
Koncesszios Rt. (EURO Paging Hungary Concession Company Limited by
Shares) (the "Company"), a
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company limited by shares incorporated under the laws of Hungary,
having its address at 1134 ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇, ▇/▇▇▇, ▇▇▇▇▇▇▇.
E. The Deed of Foundation of the Company provides that the Company has a
share capital of HUF 200,000,000 (two hundred million Hungarian
Forints), consisting of A Shares (as defined in Section 1.1), B Shares
(as defined in Section 1.5), one C Share (as defined in Section 1.8)
and D Shares (as defined in Section 1.14).
F. The members of the Consortium desire that the initial share capital of
the Company will be owned as follows:
▇▇▇▇▇▇: Shares, the aggregate nominal value of which equals
HUF 51,000,000 (fifty-one million Hungarian Forints),
consisting of 44 A Shares, 6 B Shares and one C
Share;
SFMT: Shares, the aggregate nominal value of which equals
HUF 98,000,000 (ninety-eight million Hungarian
Forints), consisting of 98 A Shares; and
Microsystem: Shares, the aggregate nominal value of which equals
HUF 10,000,000 (ten million Hungarian Forints),
consisting of 10 A Shares.
In addition, the members of the Consortium desire that a Hungarian
company which is majority-owned by Hungarian interests ("H
Corporation") shall own share capital of the Company, as follows:
H Corporation: Shares, the aggregate nominal value of which equals HUF
41,000,000 (forty-one million Hungarian Forints), consisting
of 41 A Shares; provided that such shares will be held in
trust by ▇▇▇▇▇▇ ▇▇▇▇▇, as contemplated by Section 5.3.2;
provided, further, that upon the transfer of such shares to H
Corporation (as contemplated by Section 5.3.3), the term
"Shareholders" shall, for the purposes hereof, be deemed to
mean and include H Corporation from and after the date of
transfer.
G. The members of the Consortium further desire that the initial voting
interests in respect of the share capital of the Company will be as
follows:
▇▇▇▇▇▇ 45 voting shares (consisting of the 44 A Shares and
one C Share);
SFMT 98 voting shares (all A Shares);
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Microsystems 10 voting shares (all A Shares); and
H Corporation 41 Voting shares (all A Shares, which will initially
be held by ▇▇▇▇▇▇ ▇▇▇▇▇)
H. The Shareholders desire to regulate certain matters relating to the
management of the Company and their shareholdings in the Company, and
further desire to outline the manner in which they contemplate the
Company's establishment, implementation, maintenance and operation of
the System shall take place.
AGREEMENTS
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the
following definitions:
1.1 "A Shares" shall mean registered ordinary Series A Common Voting
Shares, having a face value of HUF 1,000,000 (one million Hungarian
Forints) each, as described in the Deed of Foundation;
1.2 "affiliate" means any person or entity which directly or indirectly,
through one or more intermediaries, controls, is controlled by or is
under common control with, a party to this Agreement (and "control" of
an entity means (i) direct or indirect ownership of at least 50% of
the equity of such entity or (ii) the power to elect a majority of the
Board of Directors (or similar management committee or body) of the
entity controlled);
1.3 "Agreement" shall mean this entire joint venture agreement, including
the Exhibits attached hereto, which shall be deemed a part hereof;
1.4 [intentionally deleted]
1.5 "B Shares" shall mean registered Series B Non-Voting Preference
Shares, having a face value of HUF 1,000,000 (one million Hungarian
Forints) each, as described in the Deed of Foundation;
1.6 "Business Plan" shall mean the business plan developed by the Board of
Directors reflecting their joint expectations of the investment
required and of the operation of the Company, as the same may be
changed or modified from time to time with the approval of the
Shareholders (as provided in Section 2.6); a copy of the initial
approved Business Plan prepared by the Consortium is attached as
Exhibit 1.6;
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1.7 "Buyer" shall mean any person or entity (including a Shareholder) to
whom ▇▇▇▇▇▇ proposes to make a particular Disposition under Section 3,
SFMT proposes to make a particular Disposition under Section 4, or a
Hungarian Shareholder proposes to make a particular Disposition under
Section 5, as the case may be;
1.8 "C Share" shall mean the one registered Series C Voting Preference
Share, having a face value of HUF 1,000,000 (one million Hungarian
Forints), as described in the Deed of Foundation;
1.9 "Company" is defined in Recital C;
1.10 "Concession" is defined in Recital A; and "Concession Agreement" is
defined in Recital B;
1.11 "Concession Contract" means the concession contract to be entered into
between the Minister and the Concession Company;
1.12 "Confidential Information" is defined in Section 13;
1.13 "Consortium" is defined in Recital A;
1.14 "D Shares" shall mean Series D Non-Voting Common Shares, having a face
value of HUF 1,000,000 (one million Hungarian Forints) each, as
described in the Deed of Foundation;
1.15 "Deed of Foundation" is defined in Recital D; a copy of the Deed of
Foundation (in Hungarian and in English) is attached as Exhibit 1.15;
1.16 "Disposition" shall mean any sale, transfer, pledge or other
disposition, whether voluntary or involuntary, of shares of the
Company, except a disposition (i) which occurs by reason of a Public
Offering; (ii) in the case of ▇▇▇▇▇▇, to an affiliate of ▇▇▇▇▇▇
(subject to the restrictions contemplated by Section 8.2 (ii)); or
(iii) in the case of SFMT, to an affiliate of SFMT (subject to the
restrictions contemplated by Section 8.2 (ii)); provided that
transfers referred to in items (ii) and (iii) above shall be permitted
only upon compliance with the provisions of Section 9;
1.17 "Distributable Amount" is defined in Section 7.1.1 (ii);
1.18 "Eligible Hungarian Buyer" shall mean any person or entity who
qualifies under the Concession Contract and applicable law (as
contemplated by Section 8.2 (ii)) to whom a Hungarian Shareholder
proposes to make a Disposition;
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1.19 "▇▇▇▇▇▇" is defined in the introductory paragraph of this
Agreement;
1.20 "▇▇▇▇▇▇ Premium Amount" is defined in Section 7.1.1;
1.21 "H Corporation" is defined in Recital F;
1.22 "Hungarian Shareholder" shall mean H Corporation and
Microsystem, collectively, or either H Corporation or
Microsystem, individually, as appropriate in the context;
1.23 "HUF" shall mean Hungarian Forints;
1.24 "Installation Contractor" shall mean the installation
contractor for the installation of the System to be retained
by the Company;
1.25 "Maximum Number" is defined in Section 6.4.1;
1.26 "Microsystem" is defined in the introductory paragraph of this
Agreement;
1.27 "Ministry" shall mean the Ministry for Transport,
Communications and Water Management, or any successor thereto
responsible for public telecommunications in Hungary; and the
term "Minister" shall mean the Minister in charge of the
Ministry;
1.28 "party" shall mean a party to this Agreement (i.e. the
Shareholders and, for purposes of certain Sections, the
Company);
1.29 "Preferential Dividend Distribution" is defined in Section
7.1.1(i);
1.30 "Price" shall mean the terms and conditions (including price)
specified for or allocable to each of the shares that are the
subject of the proposed Disposition under a good faith written
offer received from the Buyer by the Shareholder that intends
to make the particular Disposition (i.e. by ▇▇▇▇▇▇ in the case
of a Disposition under Section 3, by SFMT in the case of a
Disposition under Section 4, or by a Hungarian Shareholder in
the case of a Disposition under Section 5);
1.31 "Public Offering" shall mean any offering of shares of the
Company on the Budapest Stock Exchange or on any other bona
fide exchange in Europe;
1.32 "SFMT" is defined in the introductory paragraph;
1.33 "Shareholders" is defined in the last sentence of the
introductory paragraph;
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1.34 "shares" shall mean A Shares, B Shares and D Shares, and the
one C Share, collectively, or either A Shares or B Shares or D
Shares, or the one C Share, individually, as appropriate in
the context (such term shall also include such other classes
as may be issued by the Company);
1.35 "System" is defined in Recital A;
1.36 "Third Party" shall mean a person or entity who, at the
particular point of time, is not a Shareholder;
1.37 "Trust Agreement" is defined in Section 5.3.2;
1.38 "US $" shall mean United States Dollars; and
1.39 "Year" shall mean the calendar year.
2. ORGANIZATION OF THE COMPANY; MANAGEMENT; OPERATIONAL
RESPONSIBILITIES, ETC.
2.1 Organization. In connection with the execution of this
Agreement, the parties will execute the Deed of Foundation.
The Board of Directors of the Company shall take such steps as
are appropriate or necessary in order for the Company to be
organized under the laws of Hungary.
2.2 Board of Directors.
2.2.1 The Shareholders agree that, for so long as each of ▇▇▇▇▇▇,
SFMT, H Corporation and Microsystem owns at least 5% of the
shares having voting rights, the Board of Directors of the
Company shall consist of six directors, of whom (i) three
shall be nominees of SFMT, including the Chairman of the Board
of Directors; (ii) one shall be the nominee of ▇▇▇▇▇▇; (iii)
one shall be the nominee of H Corporation; and (iv) one shall
be the nominee of Microsystem. In the event of any tie vote,
the Chairman of the Board of Directors shall have the casting
(deciding) vote. The Board of Directors shall be responsible
for selecting the General Manager and the management of the
Company.
2.2.2 In the case of any Disposition of all of the shares held by a
Shareholder to another Shareholder or to a third party (who
will then become a Shareholder for purposes of this
Agreement), such transferee shall be entitled to the number of
nominees to the Board of Directors as the transferor was
previously entitled to. In the case of any Disposition of less
than all of the shares held by a Shareholder to another
Shareholder or to a third party, the transferor shall be
entitled to the same number of nominees to the Board of
Directors as provided in Section 2.2.1, unless the transferor
and the transferee shall agree otherwise.
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2.2.3 In the event of the removal, resignation or death of
any member of the Board of Directors, the vacancy thereby
created shall be filled by a nominee of the Shareholder whose
nominee was the director so removed, resigned or deceased.
2.2.4 The Shareholders hereby agree to vote their shares in
accordance with the provisions of this Section 2.2. In the
event a Shareholder desires to remove one of its nominees from
the Board of Directors, such Shareholder shall so notify the
other Shareholders in writing of such desire, and the
Shareholders agree that they shall vote their shares in
accordance with the direction of the Shareholder providing
such notice.
2.3 Supervisory Board.
2.3.1 The Shareholders agree that, for so long as each of ▇▇▇▇▇▇,
SFMT, H Corporation and Microsystem owns at least 5% of the
shares having voting rights, the Supervisory Board of the
Company shall consist of six members, of whom (i) three shall
be nominees of SFMT, including the Chairman of the Supervisory
Board; (ii) one shall be the nominee of ▇▇▇▇▇▇; (iii) one
shall be the nominee of H Corporation; and (iv) one shall be
the nominee of Microsystem. In the event of any tie vote, the
Chairman of the Supervisory Board shall have the casting
(deciding) vote.
2.3.2. In the case of any Disposition of all of the shares held by a
Shareholder to another Shareholder or to a third party (who
will then become a Shareholder for purposes of this
Agreement), such transferee shall be entitled to the number of
nominees to the Supervisory Board as the transferor was
entitled to. In the case of any Disposition of less than all
of the shares held by a Shareholder to another Shareholder or
to a third party, the transferor shall be entitled to the same
number of nominees to the Supervisory Board as provided in
Section 2.3.1, unless the transferor and the transferee shall
agree otherwise.
2.3.3 In the event of the removal, resignation or death of any
member of the Supervisory Board, the vacancy thereby created
shall be filled by a nominee of the Shareholder whose nominee
was the director so removed, resigned or deceased.
2.3.4 The Shareholders hereby agree to vote their shares in
accordance with the provisions of this Section 2.3. In the
event a Shareholder desires to remove one of its nominees from
the Supervisory Board, such Shareholder shall notify the other
Shareholders in writing of such desire, and the Shareholders
agree that they shall vote their shares in accordance with the
direction of the Shareholder providing such notice.
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2.4 Operational Responsibilities Etc.
2.4.1 System Development. SFMT, working together with the
Installation Contractor, shall be responsible for
accomplishing the development and implementation of the
System, in accordance with the Business Plan. Promptly after
the date of this Agreement, the Company shall enter into a
contract with the preferred Installation Contractor. SFMT
shall use its best efforts to obtain a performance
guaranty/bond from the Installation Contractor securing the
performance of its obligations to install the System, for an
amount equal to the price of the contract with the
Installation Contractor. The parties expressly agree that no
Shareholder, or individual acting on behalf of a Shareholder,
shall have any responsibility or liability for the terms of
the contract with the Installation Contractor.
2.4.2 System Operation and Performance. Subject to the requirements
of Hungarian law (and without limiting the responsibilities
delegated to the management of the Company under Hungarian
law), throughout the life of the Concession, as among the
Shareholders, SFMT shall be responsible for the overall
operations and management of the Company. To this end, SFMT
shall be responsible for ensuring that the Company operates on
a purely commercial, profit-oriented basis, in accordance with
the Business Plan approved by the Shareholders, in a manner
that maximizes the return on the investments by the
Shareholders. In addition, and without limiting the generality
of the foregoing, SFMT shall use its best efforts throughout
the life of the Concession to ensure that the System will
comply in all material respects with, to the maximum extent
possible, the then prevailing Concession Contract, applicable
laws, including governmental and ministerial decrees, and
applicable standards and related requirements (including
without limitation any general or specific development and
service quality assurance conditions).
In the event SFMT were to transfer operational control of the
Company pursuant to a Disposition in accordance with the
provisions of this Agreement (as contemplated by Section 4.2),
the transferee who shall then become responsible for
operational control shall expressly assume SFMT's obligations
under this Section 2.4.2.
Subject to the provisions of applicable law, in the event SFMT
undergoes a bankruptcy proceeding, ▇▇▇▇▇▇ (or its designee)
shall, upon the occurrence of such event (and only upon the
occurrence of such event), select an experienced
telecommunications operator to take over responsibility for
operational control of the Company. For the purposes of the
foregoing sentence,
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SFMT shall be deemed to "undergo a bankruptcy proceeding" in
the event (i) it files a petition in bankruptcy or for an
arrangement pursuant to any present or future bankruptcy,
winding-up or insolvency Act; (ii) is adjudicated to be
insolvent or bankrupt; (iii) makes any general assignment for
the benefit of its creditors; (iv) admits in writing its
inability to pay its debts generally as they become due; (v)
consents to the appointment of a receiver, trustee or
liquidator of itself or of the whole or a substantial part of
its property; or (vi) is involuntarily dissolved.
2.4.3 SFMT Services and Products. SFMT hereby agrees that all
services and products offered by it to the Company shall be
offered on terms and conditions (including price) that are at
least equal to the most favorable terms and conditions on
which similar services and/or products are made available to
its customers, based upon volume of node sites.
2.4.4 Other Third Party Contracts. Subject to the requirements of
Hungarian law, SFMT shall ensure that all contracts that the
Company enters into with third parties shall be on an
arms-length basis.
2.4.5 SFMT Assistance. The parties acknowledge that, from time to
time, the Company may desire to utilize the expertise and
assistance of employees of affiliates of SFMT. In the event
such assistance requires travel to Hungary, the Company shall
pay for the reasonable expenses relating to air travel and
hotel accommodation which are incurred by such personnel in
the performance of work on behalf of the Company.
2.5 System Financing.
2.5.1 General. The Business Plan attached to this Agreement sets
forth the anticipated total amount and the scheduling of the
financing needs of the Company as it exists today. Subject to
the provisions of this Agreement, the Business Plan may be
modified in accordance with the dictates of the Company's
business.
2.5.2 Capital Contributions. Subject to Sections 2.5.5 and 7.2, each
Shareholder shall be responsible for making the contribution
to the Company's capital in proportion to such Shareholder's
ownership of the share capital of the Company. Subject to the
foregoing, the amount and form of the initial capital
contributions of the Shareholders shall be set out in the Deed
of Foundation.
In the event of any increase of the share capital of the
Company (including an increase by way of a capital call), each
Shareholder shall be responsible for making
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such capital contributions as are necessary in order to
achieve the following ownership structure:
▇▇▇▇▇▇: Shares representing 25% of the registered
share capital of the Company plus an amount
equal to the face value of one A Share;
SFMT: Shares representing 50% of the registered
share capital of the Company minus an amount
equal to (i) the face value of one A Share
multiplied by (ii) two;
Microsystem: Shares representing 5% of the share capital
of the Company (subject to Section 2.5.5);
and
H Corporation: Shares representing 20% of the registered
share capital of the Company plus an amount
equal to the face value of one A Share.
The Shareholders expressly acknowledge that they intend for
the share capital of the Company to be held as set out above,
and that, in the event of an increase in the share capital of
the Company, they will take such actions as are appropriate in
order to achieve this ownership structure.
2.5.3 Debt Financing. Subject to Section 2.5.4 and to Section 7.4.3,
SFMT shall be primarily responsible, with the input and
assistance of ▇▇▇▇▇▇, for arranging all debt financing
necessary, subject to the achievement of reasonable terms and
conditions, for the investments required by the Company, in
excess of its share capital, during the course of development
of the System, in accordance with the Business Plan.
2.5.4 Equipment Financing. ▇▇▇▇▇▇ agrees that it will use its best
efforts, working with the Installation Contractor, to obtain
equipment financing for the products sold by the Installation
Contractor to the Company (it being expressly understood that
the foregoing does not in any way constitute a guaranty by
▇▇▇▇▇▇ that any such financing may be available). SFMT shall
provide such assistance as may be reasonably required in
connection with the foregoing.
2.5.5 Microsystem Interest. In connection with the execution of this
Agreement, SFMT (or one of its affiliates) and Microsystem
shall enter into a loan agreement, pursuant to which SFMT
shall be responsible for advancing the funds required for
Microsystem's 5% ownership interest in the Company, as
contemplated by the initial Business Plan. Such loan agreement
shall provide that repayment
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15
of such advances from SFMT to Microsystem, with interest,
shall come from Microsystem's proportionate share of dividends
in respect of its A Shares. In the event the equity of the
Company shall be increased to an amount which exceeds the
amount contemplated by the initial Business Plan (i.e. an
amount in excess of US $4,009,309), Microsystem shall have the
right to acquire its pro rata portion of the increased amount
of equity out of its own funds, it being understood that SFMT
shall have no obligation to advance funds required for such
acquisition under the foregoing loan agreement.
2.6 Business Plan.
The Shareholders confirm their approval of the initial
Business Plan attached to this Agreement. In the event the
Board of Directors proposes to make any material changes in or
modifications to the Business Plan with respect to any year
(beginning with the year ending December 31, 1995), the Board
shall supply each Shareholder, for its consideration, with a
draft of the proposed changes or modifications at least 30
days prior to the relevant meeting of Shareholders. Such
changes or modifications shall be considered by the
Shareholders and the Business Plan, as modified, shall be
approved by the Shareholders after such changes or
modifications have been made that are reasonably acceptable to
the Shareholders.
2.7 Dividend Policy.
The General Meeting of Shareholders shall have responsibility
for declaring dividends in respect of any year. It shall be
the policy of the Company to distribute the profits of the
Company to the Shareholders by way of dividends (or by other
means acceptable to the Shareholders) as soon as practicable,
subject always to the relevant provisions of Hungarian law,
and subject to the general proposition that dividends shall be
distributed after the reserve of sufficient funds to pay for
the operations of the Company.
3. DISPOSITION OF SHARES BY ▇▇▇▇▇▇.
3.1 Transfer Restrictions.
No Disposition shall be made by ▇▇▇▇▇▇ prior to July 1, 1997.
Thereafter, ▇▇▇▇▇▇ may not make a Disposition without
complying with the procedures set forth in Section 3.2, and
unless ▇▇▇▇▇▇ has complied with the provisions in the
Concession Contract relating to share transfers (as discussed
in Section 8.2 (ii)).
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16
3.2 Right of First Refusal.
3.2.1 In the event ▇▇▇▇▇▇ desires to sell any of its shares, it
shall give written notice of its intention to make a
Disposition to SFMT (with a copy to each of the other
Shareholders and to the Board of Directors of the Company).
Such notice shall state the nature of the Disposition proposed
to be made, the number of shares that are the subject of the
proposed Disposition, the identity of the Buyer and the Price.
Such notice shall include a copy of the substantiated and firm
offer received from the Buyer.
3.2.2 SFMT shall have the right to purchase the shares that are the
subject of the proposed Disposition, at the Price. Such right
to purchase may be exercised by SFMT within 30 days following
the giving of the notice referred to in Section 3.2.1 by SFMT
giving written notice to ▇▇▇▇▇▇ (with a copy of such notice
being given to each of the other Shareholders and to the Board
of Directors of the Company) of SFMT's election to exercise
such right to purchase. ▇▇▇▇▇▇ shall thereafter promptly (and
in any event within 45 days after the expiration of such
30-day period) transfer and deliver to SFMT the shares which
SFMT has elected to purchase, free and clear of all liens,
charges and encumbrances, against payment by SFMT, in
immediately available funds, of the purchase price for such
shares (at the Price).
3.2.3 If following the expiry of the 30-day period referred to in
Section 3.2.2 SFMT has not indicated its desire to purchase
the shares that are the subject of the proposed Disposition,
▇▇▇▇▇▇ may, within 30 days following the close of such 30-day
period, make the Disposition to the Buyer, for not less than
the Price, of such shares. If the Disposition to the Buyer is
not made within such 30-day period, no Disposition may be made
by ▇▇▇▇▇▇ without again complying with the terms of this
Section 3. In the event SFMT does not accept the offer to
purchase shares that are the subject of the proposed
Disposition, ▇▇▇▇▇▇ will not make a Disposition to the Buyer
on terms that are more favorable than the Price without first
offering such shares to SFMT.
4. DISPOSITION OF SHARES BY SFMT.
4.1 Transfer Restrictions.
No Disposition shall be made by SFMT prior to July 1, 1997.
Thereafter, SFMT may not make a Disposition without complying
with the procedures set forth in Section 4.2, and unless SFMT
has complied with the
- 12 -
17
provisions in the Concession Contract relating to share
transfers (as discussed in Section 8.2 (ii)).
4.2 Tag-Along Rights of ▇▇▇▇▇▇.
4.2.1 In the event SFMT desires to sell any of its shares, it shall
give written notice of its intention to make a Disposition to
▇▇▇▇▇▇ (with a copy to each of the Hungarian Shareholders and
to the Board of Directors of the Company). Such notice shall
state the nature of the Disposition proposed to be made, the
number of shares that are the subject of the proposed
Disposition, the identity of the Buyer and the Price. Such
notice shall include a copy of the substantiated and firm
offer received from the Buyer. In addition, such notice shall
indicate whether, in SFMT's reasonable determination, SFMT
shall remain in operational control of the Company in the
event the proposed Disposition is to be completed.
4.2.2 In the event of any proposed Disposition by SFMT under Section
4.2.1 which results in SFMT relinquishing operational control
of the Company, ▇▇▇▇▇▇ shall have the right to sell all of its
shares to the Buyer, at the Price. In the event of any
proposed Disposition by SFMT under Section 4.2.1 which does
not result in SFMT relinquishing operational control of the
Company, ▇▇▇▇▇▇ shall have the right to sell such number of
its shares to the Buyer as represents the proportion of SFMT's
interest in the Company being transferred to the Buyer (being
the aggregate number of shares owned by ▇▇▇▇▇▇ multiplied by
the quotient of (i) the number of shares being sold by SFMT
and (ii) the number of shares owned by SFMT immediately prior
to the effectiveness of the Disposition).
For purposes of this Section 4.2, SFMT shall be deemed to
relinquish operational control of the Company in the event
that, as a result of any Disposition by it, SFMT no longer has
(i) the right to cast the deciding vote in the event of the
deadlock vote of the Board of Directors (as provided in
Section 2.2.1) or (ii) the ability to designate the general
manager of the Company. SFMT shall have the burden of
demonstrating to ▇▇▇▇▇▇ that any sale of its interest in the
Company does not result in SFMT relinquishing operational
control of the Company.
4.2.3 The right to sell referred to in Section 4.2.2 may be
exercised by ▇▇▇▇▇▇ within 30 days following the giving of the
notice referred to in Section 4.2.1 by ▇▇▇▇▇▇ giving written
notice to SFMT (with a copy of such notice being given to each
of the other Shareholders and to the Board of Directors of the
Company) of Gerard's election to exercise such right to sell.
▇▇▇▇▇▇ shall thereafter promptly (and in any event
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18
within 45 days after the expiration of such 30-day period)
transfer and deliver to the Buyer the shares which ▇▇▇▇▇▇ has
elected to sell under this Section 4.2.2, free and clear of
all liens, charges and encumbrances, against payment by the
Buyer, in immediately available funds, of the purchase price
for such shares (at the Price). Such sale shall take place
simultaneously with the sale by SFMT of the shares designated
by it under Section 4.2.1 to the Buyer. SFMT covenants that,
in no event, shall it make any Disposition under this Section
4.2, with respect to which ▇▇▇▇▇▇ has elected to exercise its
right to sell, unless ▇▇▇▇▇▇ also successfully completes its
transfer of the shares which ▇▇▇▇▇▇ has elected to sell under
this Section 4.2.2.
4.2.4 If following the expiry of the 30-day period referred to in
Section 4.2.3 ▇▇▇▇▇▇ has not indicated its desire to sell all
or part of its shares (as appropriate), SFMT may, within 30
days following the close of such 30-day period, make the
Disposition to the Buyer, for not less than the Price, of such
shares. If the Disposition to the Buyer is not made within
such 30-day period, no Disposition may be made by SFMT without
again complying with the terms of this Section 4.
5. DISPOSITION OF SHARES BY A HUNGARIAN SHAREHOLDER.
5.1 Transfer Restriction
No Disposition shall be made by a Hungarian Shareholder prior
to July 1, 1997. Thereafter, no Hungarian Shareholder may make
a Disposition unless (i) such Disposition is made to an
Eligible Hungarian Buyer and (ii) the selling Hungarian
Shareholder has complied with the restrictions on transfer set
forth in the Concession Contract (as described in Section
8.2(ii)).
5.2 Eligible Hungarian Buyer
In the event a Hungarian shareholder desires to make a
Disposition of any of its shares, it shall give written notice
of its intention to make a Disposition to the other
Shareholders and to the Board of Directors of the Company at
least 30 days prior to the effectiveness of the transaction.
Such notice shall state the nature of the Disposition proposed
to be made, the number of shares that are the subject of the
proposed Disposition, the identity of the Eligible Hungarian
Buyer and the Price at which the Selling Hungarian Shareholder
is willing to sell the shares. Such notice shall include a
copy of the substantiated and firm offer received from the
Eligible Hungarian Buyer.
If requested by the Board of Directors of the Company, the
Hungarian Shareholder shall procure, prior to the
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19
completion of the Disposition, an unqualified written opinion
by a lawyer qualified to practice law in Hungary who is
acceptable to the Board of Directors to the effect that the
proposed Buyer will qualify as an Eligible Hungarian Buyer
under the terms of the Concession Contract and applicable law,
and that the proposed Disposition will not adversely affect
the existence of the Concession. The reasonable legal fees
relating to the preparation associated with such opinion shall
be borne by the Company.
5.3 Transfer of Interest to H Corporation.
5.3.1 SFMT shall be responsible for the selection of H Corporation,
which entity shall be subject to the prior written approval of
▇▇▇▇▇▇ and Microsystem (such approval not to be unreasonably
withheld). In the event that a binding commitment has not been
received by a Hungarian entity acceptable to SFMT, ▇▇▇▇▇▇ and
Microsystem by August 1, 1995, these three Shareholders shall,
promptly after such date, consult with a view to reach a
mutually satisfactory resolution of the Hungarian ownership
position.
5.3.2 SFMT, ▇▇▇▇▇▇ and Microsystem expressly agree that, in
connection with the execution of this Agreement, these
Shareholders will enter into a voting trust agreement in the
form of Exhibit 5.3.2 (the "Trust Agreement") with ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇, pursuant to which ▇▇. ▇▇▇▇▇ will hold 41 A Shares in
trust for the benefit of the Company, until such time as H
Corporation shall acquire such shares. The Trust Agreement
shall provide, inter alia, that, at the written direction of
SFMT, ▇▇▇▇▇▇ and Microsystem, ▇▇. ▇▇▇▇▇ shall transfer such
shares to H Corporation.
5.3.3 The transfer referred to in Section 5.3.2 shall be conditioned
upon H Corporation entering into such documents and assurances
as may be reasonably required by SFMT, ▇▇▇▇▇▇ and Microsystem,
including (without limitation) (i) a share subscription
agreement, (ii) an agreement whereby H Corporation agrees to
be bound by the provisions of this Agreement (as a Hungarian
Shareholder hereunder) and (iii) a confirmation to the effect
that H Corporation has read the Concession Contract, and is
aware of the provisions of the Concession Contract.
6. PIGGYBACK REGISTRATION RIGHTS OF SHAREHOLDERS.
6.1 Public Offering
The Shareholders agree that the Company may, upon the
recommendation by the Board of Directors and with the approval
of the Shareholders, make a Public offering of any or all of
the A Shares (or any other class(es) of
- 15 -
20
shares created after the date hereof, other than B shares or
the one C Share) at any time after July 1, 1997 (subject to
the receipt of any required approval from the Minister).
6.2 Piggyback Registration
Subject to the terms and conditions of this Section 6,
whenever the Company proposes to register any shares for sale
by the Company in connection with a Public Offering (or make
any similar registration under applicable law), the Company
will give prompt notice to the Shareholders of its intention
to make such a Public offering, and will use reasonable
efforts, subject to the provisions of this Section 6, to
include in such public offering the shares then held by such
Shareholders with respect to which the Company has received
written requests for inclusion therein within fifteen (15)
days after the giving of the Company's notice referred to
above. Notwithstanding the foregoing, the Shareholders
expressly acknowledge and agree that the rights of the
Hungarian Shareholders under this Section 6 shall be limited
to the sale of shares, pursuant to such a Public Offering, of
their shares to Eligible Hungarian Buyers.
6.3 Registration Expenses
The Company shall bear all expenses of each Shareholder
participating in a Public Offering covered by Section 6.2
(including without limitation the Company's registration and
filing fees, fees and expenses of compliance with securities
laws and fees of outside advisors for the Company (but
excluding fees of any outside advisor retained by a
Shareholder)).
6.4 Maximum Number of Shares
6.4.1 If a Public Offering is an underwritten registration on behalf
of the Company, the managing underwriters shall be selected by
the Company in its sole discretion. If the managing
underwriters advise the Company in writing that in their
opinion the number of shares requested to be included in such
registration (including without limitation shares requested to
be registered by Shareholders pursuant to Section 6.2) (i)
exceeds the maximum number of shares which can be marketed at
a price reasonably related to the then current market value of
such shares or (ii) materially and adversely affects such
underwriters' ability to effect an orderly distribution of the
shares intended to be offered by the Company, the number of
shares to be registered in such Public Offering shall be
reduced to such number (the "Maximum Number") which the
managing underwriters advise the Company in writing is the
maximum number of shares of Stock which can be registered
without being
- 16 -
21
covered by clauses (i) and (ii) of this sentence. In such event, the
Company will include in such registration (1) first, such number
of shares which the Company proposes, in its absolute discretion,
to sell, and (2) second, such number, if any, of shares requested
pursuant to Section 6.2 to be included by any Shareholder's pro
rata share (being a percentage equal to the percentage then held by
such Shareholder requesting registration of the total number of shares
which are held by all Shareholders so requesting such registration) of
the excess, if any, of the Maximum Number over the number of shares
referred to in item (1) of this sentence.
6.4.2 In the event the number of shares requested to be included by
Hungarian Shareholders in such registration might result in a breach
of the provision in the Concession Contract relating to Hungarian
ownership (as discussed in Section 8.2(i)), the Company will use its
best efforts to structure such registration to include the maximum
number, if any, of shares requested pursuant to Section 6.2 to be
included by any Hungarian Shareholder, on a pro rata basis (being a
percentage equal to the percentage then held by each Hungarian
Shareholder requesting registration of the total number of shares which
are held by all Hungarian Shareholders so requesting such
registration); provided that the Shareholders agree that the Company
(working with the managing underwriters and its other advisors) shall
have sole discretion in determining the terms and conditions of any
registration that are necessary or appropriate to ensure compliance
with the Concession Contract's provision relating to Hungarian
ownership (as discussed in Section 8.2.2(i)).
6.5 Indemnification
6.5.1 The Company agrees to indemnify, to the extent permitted by Hungarian
law, each Shareholder, its officers and directors against all losses,
claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such Shareholder
expressly for use therein.
6.5.2. In connection with any registration statement in which a Shareholder is
participating, each such Shareholder will furnish to the Company in
writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement
- 17 -
22
or prospectus and agrees to indemnify, to the extent permitted by law,
the Company, its directors and officers against any losses, claims,
damages, liabilities and expenses resulting from any untrue or
alleged omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in
writing by such Shareholder.
7. CERTAIN RIGHTS OF ▇▇▇▇▇▇.
7.1 ▇▇▇▇▇▇ Premium.
7.1.1 General. The Shareholders agree that ▇▇▇▇▇▇ shall be rewarded for the
value of the Concession through payment of Preferential Dividend
Distributions in respect of the B Shares up to the cumulative aggregate
amount of US $3,000,000 (the "▇▇▇▇▇▇ Premium Amount").
For the purposes of this Section 7.1:
(i) all amounts payable as preference dividends in respect of the B
Shares under this Section 7.1 shall be deemed to be "Preferential
Dividend Distributions"; and
(ii) the amount which the Board of Directors determines is properly
distributable as dividends in respect of any year (prior to
deduction to reflect the premium that ▇▇▇▇▇▇ is entitled to under
this Section 7) shall be referred to as the "Distributable
Amount".
7.1.2 Preferential Dividend Distributions. Until such time as ▇▇▇▇▇▇
has received Preferential Dividend Distributions in an aggregate amount
equal to the entire ▇▇▇▇▇▇ Premium Amount, dividends shall be
distributed to the Shareholders for each year in respect of which the
Board of Directors declares that any dividends shall be payable, in the
following manner:
(i) the amount equal to the first 40% of the Distributable Amount
for any year shall be payable to ▇▇▇▇▇▇ as Preferential
Dividend Distributions; and
(ii) the amount equal to the remaining 60% of the Distributable
Amount shall be payable to the shareholders (including ▇▇▇▇▇▇)
in proportion to their respective ownership interests of the A
- 18 -
23
Shares, together with the C Share (in the case of ▇▇▇▇▇▇);
provided, that if in a particular year the outstanding balance of the
▇▇▇▇▇▇ Premium equals an amount which is less than 40% of the
Distributable Amount for that year (on account of payments in respect
of the ▇▇▇▇▇▇ Premium Amount over the course of prior years), then:
(x) ▇▇▇▇▇▇ shall be entitled to receive such amount under item
(i) above as would equal the outstanding balance of the ▇▇▇▇▇▇
Premium Amount, thereby resulting in Gerard's receipt of
Preferential Dividend Distributions in an aggregate amount
equal to the ▇▇▇▇▇▇ Premium Amount (when added to all prior
preferential distributions); and
(y) the balance of the Distributable Amount for that year shall be
payable to the Shareholders in proportion to their respective
ownership interests of the A Shares, together with the C Share
(in the case of ▇▇▇▇▇▇).
Upon any payment of Preferential Dividends Distributions under this
Section 7.1.2, the ▇▇▇▇▇▇ Premium Amount shall be deemed reduced by an
amount equal to the amount of the Preferential Dividend Distributions
that ▇▇▇▇▇▇ has received. For purposes of this Section 7.1, all
calculations as to the amount of Preferential Dividend Distributions
shall be made in US Dollars, as of the date of payment of each such
Preferential Dividend Distribution.
Exhibit 7.1.2 sets forth an example of how the premium contemplated by
this Section 7.1 is to be paid to ▇▇▇▇▇▇.
7.1.3 Limitation. The Shareholders agree that, once ▇▇▇▇▇▇ has received
Preferential Dividend Distributions under this Section 7.1 in a
cumulative aggregate amount equal to the ▇▇▇▇▇▇ Premium Amount, the B
Shares shall no longer carry preferential dividend rights (and shall
automatically be converted to D Shares) and thereafter all amounts
payable to the Shareholders as dividends shall be payable in proportion
to their respective ownership interests in the Company, with ▇▇▇▇▇▇
being entitled to receive dividends in respect of A Shares, the one C
Share and D Shares.
7.1.4 Confirmation of Entitlement. The Shareholders acknowledge that Section
4.3 of the Deed of Foundation reflects the foregoing. The Deed of
Foundation has been submitted to the Budapest Court of Registration.
The Shareholders specifically agree that if the Court were to withhold
registration on account of the
-19 -
24
language of Section 4.3, and were to thus require modification of
Section 4.3 of the Deed of Foundation as a condition to registration of
the Company (e.g. if the Court were to require that the ▇▇▇▇▇▇ Premium
Amount be expressed in HUF rather than in US $), then the Shareholders
will, as soon as possible after the receipt of notice of the foregoing,
work together to develop a mechanism that enables ▇▇▇▇▇▇ to receive the
full economic benefit of the premium contemplated by this Section 7.1,
it being understood that the parties shall agree on such a mechanism
prior to the submission of any modification to the Deed of Foundation
with respect to Section 4.3.
7.2 Repayment of Concession Fee and Expenses.
The Shareholders acknowledge that ▇▇▇▇▇▇ has, to date, paid US
$1,200,000 for the one-time upfront fee for the Concession and has
incurred US $300,000 in out-of-pocket expenses to obtain the Concession.
By August 15, 1994 SFMT shall arrange for payment, by wire transfer, to
an account designated in writing by ▇▇▇▇▇▇, the amount of US $750,000,
representing reimbursement for 50% of the foregoing US $1,500,000
amount.
The Shareholders agree that, for accounting/bookkeeping purposes, the
above US $1,500,000 Concession acquisition cost shall be deemed as a
contribution to the Company's capital, and the Company's internal
capital accounts shall reflect same. Accordingly, the Shareholders
acknowledge and agree that ▇▇▇▇▇▇ shall not be required to pay any
amounts in respect of the Company's capitalization until such time as
the Company's internal capital accounts have been so equalized, on
a pro rata basis.
7.3 Bid Guaranty.
The Shareholders acknowledge that ▇▇▇▇▇▇ has posted a bid guaranty in
the amount of US $100,000. Such amount shall be returned to ▇▇▇▇▇▇ when
the bid guaranty is replaced by the performance guaranty required by the
Concession Contract, it being understood that the performance guaranty
will be provided by the Company.
7.4 Certain Voting Rights Afforded to ▇▇▇▇▇▇.
7.4.1 C Share. The Shareholders agree that, although Gerard's voting
rights in the Company shall not equal its ownership interest in the
Company, ▇▇▇▇▇▇ shall be entitled to the same voting rights as a
shareholder owning at least 25% plus one share in a company limited by
shares would generally be entitled to under Hungarian law. Without
limiting the generality of the foregoing, Section 4.4 and Article 11
of the Deed of
- 20 -
25
Foundation specify certain corporate actions that may not be taken
without the approval of ▇▇▇▇▇▇, throughout its ownership of one Class C
Share; provided that in the event ▇▇▇▇▇▇ makes a Disposition of any
portion of its shares, the result of which would be that its ownership
of share capital of the Company would fall below an amount representing
25% of the registered share capital plus an amount equal to the face
value of one A Share, ▇▇▇▇▇▇ shall no longer be entitled to the
foregoing voting rights, and the one Class C Share shall be transferred
to one Class A Share.
7.4.2. Capital Calls. The parties agree that ▇▇▇▇▇▇ shall have an absolute
veto right in respect of (i) any request by SFMT for an increase, by
way of a capital call, of the amount of equity contemplated by the
initial Business Plan (i.e. US $4,009,309) by more than 50% over
the amount of the then current share capital of the Company and (ii) any
request by any other Shareholder for an increase in the share capital
of the Company.
In the event SFMT proposes any increase of the Company's equity by way
of a capital call, which would result either in (i) an increase of the
amount of the Company's share capital to an amount which does not
exceed US $4,009,309, or (ii) in the event the Company's share capital
equals or exceeds $4,009,309, to an amount which does not exceed 50% of
the amount of the then current share capital of the Company, ▇▇▇▇▇▇ will
not unreasonably withhold its vote in favor of the capital call
requested by SFMT; provided that SFMT can demonstrate that the capital
call is (i) a good faith request reasonably related to the profitable
operation of the Company, taking into account the Business Plan (as the
same may be modified from time to time in accordance with the provisions
of this Agreement); and (ii) will result in maximizing the return on the
investment to the Shareholders generally. In the event the foregoing
criteria are met, ▇▇▇▇▇▇ shall approve the proposed amendment to the
deed of foundation effectuating such capital call, in the requested
amount.
7.4.3. Additional Voting Rights. In addition, the Shareholders agree that the
following actions may not be taken unless approved in advance in
writing by ▇▇▇▇▇▇:
(i) the incurrence of any indebtedness (or other obligation) with
recourse to ▇▇▇▇▇▇ (or any of its affiliates);
(ii) any material change or modification to the Business Plan (as
provided in Section 2.6);
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26
(iii) any Public Offering (as provided in Section 6.1); or
(iv) except as expressly contemplated by the Business Plan and/or by
Section 2.4.3, any agreement or material transaction between the
Company and a Shareholder or a member of the Board of Directors
or the Supervisory Board, or any person or entity that is an
affiliate of such Shareholder or such member, that is either (i)
outside the ordinary course of business or (ii) on terms less
favorable than could be obtained from a nonaffiliated third party.
7.4.4 Confirmation of Entitlement. The Shareholders acknowledge that Section
4.4 of the Deed of Foundation grants the Class C Share veto rights with
respect to the matters referred to in Section 7.4.1. The Deed of
Foundation has been submitted to the Budapest Court of Registration. The
Shareholders specifically agree that if the Court were to withhold
registration on account of the language of Section 4.4, and were to thus
require modification of Section 4.4 of the Deed of Foundation as a
condition to registration of the Company (e.g. if the Court were to find
the veto right unacceptable), then the Shareholders will amend the Deed
of Foundation to provide that the Class C Share will carry the minimum
number of additional votes so that ▇▇▇▇▇▇ will shall be entitled to the
same voting rights referred to in the first sentence of Section 7.4.1.
In the event such a change is made to the Deed of Foundation, the
Shareholders agree that, in the event of any increase of the capital of
the Company, they will vote their shares in favor of any change in the
minimum number of additional voting rights necessary in order to enable
▇▇▇▇▇▇ to receive the full benefit of the voting rights contemplated
by this Section 7.4.
8. CONCESSION CONTRACT.
8.1 The Shareholders acknowledge that, on or before August 5, 1994, the
Consortium and the Company will endeavour to execute the Concession
Contract. The final version of the Concession Contract will be
attached to this Agreement as Exhibit 8.1, upon its signature.
8.2. Each of the Shareholders specifically acknowledges that Section 2 of
the Concession Contract shall contain the restrictions on share
transfers along the lines of the following:
(i) throughout the life of the Concession not less than 25% plus one
voting share of the share capital of the Company shall remain in
the ownership of Hungarian economic associations with
- 22 -
27
a Hungarian majority or of Hungarian natural and legal entitles;
(ii) any transfer of more than 5% of a Shareholder's interest in the
Concession Company shall require the prior approval of the
Minister, which approval shall be conditional upon the Minister
being satisfied with the capability of the Company both legally
and financially as well as professionally to perform the
liabilities under the Concession; and
(iii) without the prior approval of the Minister, the participation of
▇▇▇▇▇▇, SFMT and Microsystem in the Concession Company shall not
be decreased under 50% plus one voting share.
8.3 Each of the Shareholders hereby covenants and agrees that, throughout
the life of the Concession, such Shareholder will not take any action,
or omit to take any action, the result of which would be a material
breach of the Concession Contract. Without limiting the generality of
the foregoing, no Disposition shall be made by a Shareholder which, if
completed, may result in a breach of the terms of the Concession
Contract relating to restrictions of the transfer of shares in
the Concession Company (as discussed in Section 8.2(ii)).
8.4 Each of the Shareholders acknowledges that it shall be jointly and
severally liable for the obligations of the Company under the
Concession Contract.
9. ASSUMPTION OF OBLIGATIONS, ETC.
The Shareholders expressly agree that no transfer of shares to a third
party pursuant to Section 3, 4 or 5, or in accordance with Section 1.16
(ii) and (iii), may be completed unless the Buyer or the affiliate, as
the case may be, shall have executed such documents as reasonably
required by the other Shareholders to assure that such third party shall
undertake the same responsibilities to the Shareholders as did the
Shareholder making the Disposition and to be bound by the provisions of
this Agreement, including any applicable restrictions on transfer of
shares. Upon the execution of such documents, such third party shall be
deemed to be a "Shareholder" for all purposes of this Agreement in place
of the Selling Shareholder, or SFMT or ▇▇▇▇▇▇, as the case may be.
- 23 -
28
10. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SHAREHOLDERS.
10.1 General.
Each of the Shareholders hereby makes the representations and
warranties to each of the other Shareholders that are set forth on
Exhibit 10.1.
10.2. SFMT.
SFMT specifically warrants to the other Shareholders that it possesses
the skills and experience in telecommunications (but not in paging),
technology in the area of telecommunications and, in particular, in
satellite communications, knowledge of the Hungarian market and capacity
necessary for the due and proper performance of its obligations
under this Agreement.
10.3. ▇▇▇▇▇▇.
▇▇▇▇▇▇ warrants to the other Shareholders that, except as set out on
Exhibit 10.3, to the best of its knowledge, the Consortium has not
incurred any material liabilities or obligations that would be binding
upon the Company.
10.4 Covenants.
The Shareholders expressly acknowledge that (i) they have entered into
the transactions contemplated by this Agreement taking into account
certain special characteristics of the ownership structure of the
Company, and (ii) in view of the foregoing, the restrictions on transfer
set forth in this Agreement and the special rights granted to ▇▇▇▇▇▇
under this Agreement reflect the parties' intentions, considerations and
mutual expectations. Accordingly, each of the Shareholders hereby waives
with final and irrevocable effect its right to challenge any of the
provisions in this Agreement relating to the transfer of shares
(including without limitation Sections 3, 4, 5 and 9). In addition, each
of the Shareholders hereby waives with final and irrevocable effect any
right to challenge the provisions in this Agreement or in the Deed of
Foundation relating to the rights specifically granted to ▇▇▇▇▇▇
under Section 7.
11. TERM; TERMINATION.
11.1. Unless sooner terminated as provided in Section 12.2, this Agreement
shall continue in full force and effect until 29 April 2009; provided
that, in the event the Concession is extended under Section 1.3.2 of the
Concession Contract, this Agreement shall continue in full force and
effect throughout such extended period.
- 24 -
29
11.2 This Agreement shall terminate, without notice to any party hereto,
forthwith upon the occurrence of any one of the following events
or conditions: (i) notwithstanding the good faith efforts on the part of
the Shareholders, the Company has not entered into the Concession
Contract by October 1, 1994; provided that such date may be extended by
the mutual agreement of the parties in the event that negotiations
regarding the Concession Contract are ongoing; (ii) the termination of
the concession in accordance with the provisions of Sections 13.4 and
13.5 of the Concession Contract; (iii) SFMT shall purchase at least 70%
of the shares of the Company; or (iv) any Public Offering (in which case
the Shareholders shall enter into a stock-bloc agreement reflecting the
provisions of this Agreement, as appropriate).
11.3 The termination of this Agreement shall not affect the respective
rights and obligations of the Shareholders in respect of any
right or obligation that arose prior to such termination, it being
understood and agreed that any such right may be exercised (and any such
obligation shall be fulfilled), as if this Agreement had not terminated.
Without limiting the generality of the foregoing, the termination of
this Agreement shall not affect Gerard's right to receive Preferential
Dividend Distributions under Article 7 (except in the case of a
termination under item (i) of Section 11.2 or item (ii) of Section
11.2; provided that this exception shall not be applicable with respect
to such item (ii) to the extent that ▇▇▇▇▇▇ is entitled to receive
Preferential Dividend Distributions as a result of dividends declared by
the Board of Dividends prior to a termination under such item (ii), and
such dividends have not been received by ▇▇▇▇▇▇ prior to the date of
termination).
12. ASSIGNMENT.
No right or obligation under this Agreement may be assigned by a
Shareholder unless such assignment occurs in connection with the
transfer of shares of the Company to the proposed transferee in
accordance with the provisions of this Agreement. Subject to the
foregoing sentence, all the terms of this Agreement shall be binding
upon and be enforceable by the successors and permitted assigns of
each of the Shareholders.
13. CONFIDENTIALITY.
The parties shall not disclose to any other person or entity or use or
exploit for any other purpose whatsoever any of the information
contained in the Business Plan, and related materials, any information
contributed by a Shareholder and/or any other
- 25 -
30
information which they obtain or had heretofore obtained in relation to
the transactions contemplated by this Agreement or the proposed business
activities of the Company ("Confidential Information") , except (i) with
the prior written consent of the other parties, (ii) as may be required
by law (and then only to the extent such announcement is required in
order to comply with applicable law), and (iii) to the extent expressly
permitted by this Agreement. For the purposes of this Section 13,
Confidential Information shall not include any information which:
(i) is available to the general public at the time of use or
disclosure through no action of the disclosing party;
(ii) becomes available to the general public, other than by manner of
unauthorized disclosure or use; or
(iii) is provided by a third party who is lawfully in possession of
such information and has the lawful right to disclose or use it.
All Confidential Information belonging to any Shareholder and made
available to the Company shall continue to be the property of the
Shareholder making such available to the Company, and shall be used by
the other Shareholders exclusively for the purposes of the business of
the Company, unless the Shareholder making Confidential Information
available to the Company provides its express written permission for use
by any other Shareholder for any purpose other than the business
of the Company.
Each Shareholder who has received Confidential Information shall, and
shall require that its affiliates, counsel, accountants, consultants,
employees, agents and representatives shall, (1) keep confidential and
not disclose to any person or exploit for any purpose whatsoever the
Confidential Information (except as expressly permitted in this
Section 13), (2) use all Confidential Information for the benefit of
the Company and (3) preserve all Confidential Information for the
benefit of the Shareholder which provided the Confidential
Information.
Subject to the foregoing, each of the Shareholders shall have
complete access to the Company's documents, books and records upon
reasonable notice during normal business hours. Each Shareholder shall
be entitled, upon written request to the Company, to receive promptly
one copy of all such documents, books and records at the expense of
the Company.
- 26 -
31
14. PUBLIC ANNOUNCEMENTS.
No party shall make any public announcement or disclosure relating in
any way to the transactions contemplated by this Agreement or any
agreement executed in connection with this Agreement, except (i) with
the prior written consent of the other Shareholders or (ii) as may be
required by law (and then only to the extent such announcement is
required to comply with applicable law).
15. EXPENSES, ETC.
Whether or not the transactions contemplated by this Agreement are
consummated, each of the parties shall pay its own costs and expenses
and the fees and expenses of its counsel and accountants and other
representatives incurred in connection with the transactions
contemplated by this Agreement.
16. GOVERNING LAW AND DISPUTE RESOLUTION.
16.1 This Agreement and the rights of the parties hereunder shall be
construed and interpreted in accordance with the laws of the State of
New York, without giving effect to its conflicts of laws principles.
16.2 In the event that disagreements or disputes arise with respect to the
interpretation or performance of this Agreement or any of its
provisions, the parties will use their best efforts to resolve them
through consultation. Disagreements or disputes that have not been
settled by such consultation and conciliation within ninety (90) days
after first notification thereof by one party to the other will, at the
request of either party, be submitted to and finally settled by binding
arbitration in accordance with the Rules of the Stockholm Chamber of
Commerce. The arbitration shall be conducted in Stockholm, Sweden in
the English language.
17. WAIVER.
None of the terms of this Agreement shall be deemed to have been waived
by any party, unless such waiver is in writing and signed by that party.
The waiver by any party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other provision of
this Agreement.
18. NOTICES.
All notices and other communications required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered personally, or by registered mail (return
- 27 -
32
receipt requested), or sent by international courier delivery or by
facsimile transmission, to the other party or parties at the
respective address sat forth below (or to such other address as a
party shall designate for itself by notice given in accordance
herewith):
18.1 if to ▇▇▇▇▇▇:
▇▇▇▇▇▇ Aircraft Sales and Leasing Company
c/o Monaghan Company
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
U.S.A.
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
President
Fax: (▇ ▇▇▇) ▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
H-1054 Budapest
Vadasz u. 31
Fax: (▇▇ ▇) ▇▇▇ ▇▇▇▇
18.2 if to SFMT:
c/o SFMT, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
U.S.A.
Attention: ▇. ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Vice President and General Counsel
Fax: (▇ ▇▇▇) ▇▇▇ ▇▇▇▇
18.3 if to Microsystem:
Microsystem Telecom Rt.
H-1122 Budapest
Varosmajor u. 78
Hungary
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
President
Fax: (▇▇ ▇) ▇▇▇ ▇▇▇▇
- 28 -
33
18.4 if to the Company:
EURO Szemelyhivo Magyarorszag Koncesszios Rt.
▇/▇ ▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
▇-▇▇▇▇ ▇▇▇▇▇▇▇▇
Vaci ut 37. A/502
Hungary
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Managing Director
Fax: (▇▇ ▇) ▇▇▇ ▇▇▇▇
Any notice or other communication shall be deemed to have been given
on the date of receipt, as indicated by the receipt of confirmation.
19. ENTIRE AGREEMENT.
This Agreement, together with the Deed of Foundation (and the
agreement contemplated by Section 5.2.3(ii), once signed), contains
the entire agreement, and supersedes all prior agreements and
understandings and arrangements, oral or written, among the parties
hereto with respect to the subject matter hereof. The parties
expressly agree that, as between themselves, in the event of any
conflict between any term or provision of this Agreement and any term
or provision of the Deed of Foundation, (i) the relevant term and/or
provision of this Agreement shall prevail and (ii) subject to the
requirements of Hungarian law (and the other provisions of this
Agreement), the Shareholders will endeavour to amend the Deed of
Foundation to resolve such conflict.
20. AMENDMENTS AND MODIFICATIONS.
This Agreement may not be modified, amended or changed in any respect
except in writing duly signed by the parties.
21. FURTHER ASSURANCES.
The parties hereto undertake, generally, to execute all such
agreements and other instruments and to do all such other acts as are
necessary or appropriate to give full effect to the terms, conditions
and provisions of this Agreement and to make them binding on the
parties.
22. SEVERABILITY.
Should any provision of this Agreement be rendered invalid or no
longer applicable, the remaining provisions of this Agreement shall
remain in full force and effect. In such an event, the provision of
this Agreement that has been rendered invalid or
- 29 -
34
inapplicable shall be deemed amended in such a manner that facilitates
the achievement of the parties' intentions and the economic and legal
objectives that the parties desired to accomplish by the invalid or
inapplicable provision.
IN WITNESS WHEREOF, this Joint Venture and Shareholders' Agreement has been
signed by or on behalf of each of the parties in Budapest on the date first
above written.
▇▇▇▇▇▇ AIRCRAFT SALES AND LEASING COMPANY
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
SFMT-HUNGARO INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
MICROSYSTEM TELECOM RT.
/s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman
For purposes of Sections 2, 6, 7, 11 and 13-22:
EURO SZEMELYHIVO MAGYARORSZAG KONCESSZIOS RT.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman of the Board of Directors
-30-
35
[HEADING ILLEGIBLE]
1994 1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ---------- ----------
Tone only
Average annual rent 0 0 0 0 0 0
Necessary receivers 0 0 0 0 0 0
New pager from growth 0 0 0 0 0 0
New pagers (replacement) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total new pagers 0 0 0 0 0 0
Numeric
Average annual rent 0 0 0 0 0 0
Necessary receivers 0 0 0 0 0 0
New pager from growth 0 0 0 0 0 0
New pagers (replacement) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total new pagers 0 0 0 0 0 0
Alphanumeric
Average annual rent 0 0 0 0 0 0
Necessary receivers 0 0 0 0 0 0
New pager from growth 0 0 0 0 0 0
New pagers (replacement) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total new pagers 0 0 0 0 0 0
Total New Pagers 0 0 0 0 0 0
========== ========== ========== ========== ========== ==========
2000 2001 2002 2003 2004
---------- ---------- ---------- ---------- ----------
Tone only
Average annual rent 0 0 0 0 0
Necessary receivers 0 0 0 0 0
New pager from growth 0 0 0 0 0
New pagers (replacement) 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total new pagers 0 0 0 0 0
Numeric
Average annual rent 0 0 0 0 0
Necessary receivers 0 0 0 0 0
New pager from growth 0 0 0 0 0
New pagers (replacement) 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total new pagers 0 0 0 0 0
Alphanumeric
Average annual rent 0 0 0 0 0
Necessary receivers 0 0 0 0 0
New pager from growth 0 0 0 0 0
New pagers (replacement) 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total new pagers 0 0 0 0 0
Total New Pagers 0 0 0 0 0
========== ========== ========== ========== ==========
36
[HEADING ILLEGIBLE]
1994 1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ---------- ----------
Cost of pagers ($US/unit)
Tone only 130 130 120 110 100 90
Numeric 140 140 130 120 110 100
Alphanumeric 180 160 145 135 130 125
----------- --------- ---------- ---------- ---------- ----------
Total Cost of Pagers ($US/unit)
Entry costs
Custom duty 50.00%
Custom clearance 2.00%
Statistical 3.00%
Other 5.00%
60.00%
Cost of pagers (HUF/unit)
Tone only 21,216 21,216 19,584 17,952 16,320 14,688
Numeric 22,848 22,848 21,216 19,584 17,952 16,320
Alphanumeric 29,376 26,112 23,664 22,032 21,216 20,400
---------- ---------- ---------- ---------- ---------- ----------
Total cost of pagers (HUF/unit) 73,440 70,176 64,464 59,568 55,488 51,408
Sales price of pagers (HUF/unit)
0 Margin
Tone only 21,216 21,216 19,584 17,952 16,320 14,688
Numeric 22,848 22,848 21,216 19,584 17,952 16,320
Alphanumeric 29,376 26,112 23,664 22,032 21,216 20,400
---------- ---------- ---------- ---------- ---------- ----------
Total Sales Price of 73,440 70,176 64,464 59,568 55,488 51,408
Pagers (HUF/unit)
Gross Margin (HUF/unit)
Tone only 0 0 0 0 0 0
Numeric 0 0 0 0 0 0
Alphanumeric 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total Gross Margin (HUF/unit) 0 0 0 0 0 0
Total Sales Price of 720 688 632 584 544 504
Pagers ($US/unit)
Total Cost of Pagers ($US/Unit) (720) (688) (632) (584) (544) (504)
---------- ---------- ---------- ---------- ---------- ----------
Total Gross Margin ($US/unit) 0 0 0 0 0 0
2000 2001 2002 2003 2004
---------- ---------- ---------- ---------- ----------
Cost of pagers ($US/unit)
Tone only 85 80 80 80 80
Numeric 95 90 90 90 90
Alphanumeric 120 120 120 120 120
---------- ---------- ---------- ---------- ----------
Total Cost of Pagers ($US/unit)
Entry costs
Custom duty
Custom clearance
Statistical
Other
Cost of pagers (HUF/unit)
Tone only 13,872 13,056 13,056 13,056 13,056
Numeric 15,504 14,688 14,688 14,688 14,688
Alphanumeric 19,584 19,584 19,584 19,534 19,584
---------- ---------- ---------- ---------- ----------
Total cost of pagers (HUF/unit) 48,960 47,328 47,328 47,328 47,328
Sales price of pagers (HUF/unit)
0 Margin
Tone only 13,872 13,056 13,056 13,056 13,056
Numeric 15,504 14,688 14,688 14,688 14,688
Alphanumeric 19,584 19,584 19,584 19,584 19,584
---------- ---------- ---------- ---------- ----------
Total Sales Price of 48,960 47,328 47,328 47,328 47,328
Pagers (HUF/unit)
Gross Margin (HUF/unit)
Tone only 0 0 0 0 0
Numeric 0 0 0 0 0
Alphanumeric 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total Gross Margin (HUF/unit) 0 0 0 0 0
Total Sales Price of 480 464 464 464 464
Pagers ($US/unit)
Total Cost of Pagers ($US/Unit) (480) (464) (464) (464) (464)
---------- ---------- ---------- ---------- ----------
Total Gross Margin ($US/unit) 0 0 0 0 0
37
[HEADING ILLEGIBLE]
1994 1995 1996 1997 1998 1999
---------- ----------- --------- --------- --------- ----------
Income From Basic Services
Tone Only 0 0 0 0 0 0
Sales of Pagers 0 0 0 0 0 0
Subscription Rate 0 0 0 0 0 0
Registration Fee 0 0 0 0 0 0
Rent 0 0 0 0 0 0
---------- ----------- --------- --------- --------- ----------
Total Tone Only 0 0 0 0 0 0
Numeric
Sales of Pagers 0 268,800 280,800 352,512 439,824 445,536
Subscription Rate 0 70,588 217,059 393,618 628,937 908,290
Registration Fee 0 23,529 26,471 36,000 49,000 54,600
Rent 0 0 0 0 0 0
---------- ----------- --------- --------- --------- ----------
Total Numeric 0 362,918 524,329 782,130 1,117,761 1,408,426
Alpha Numeric
Sales of Pagers 0 2,764,800 1,774,800 1,586,304 1,559,376 1,670,760
Subscription Rate 0 889,412 2,364,353 3,480,935 4,529,089 5,607,994
Registration Fee 0 264,706 187,500 160,000 183,750 204,750
Rent 0 0 0 0 0 0
---------- ----------- --------- --------- --------- ----------
Total Alphanumeric 0 3,918,918 4,326,653 5,247,239 6,272,215 7,483,504
---------- ----------- --------- --------- --------- ----------
Total Income From Basic Service 0 4,281,835 4,850,982 6,029,369 7,389,975 8,891,930
---------- ----------- --------- --------- --------- ----------
Other Income
Income from extra services 0 249,647 559,076 818,111 1,078,155 1,355,127
Income from other services 0 24,965 55,908 81,811 107,816 135,513
---------- ----------- --------- --------- --------- ----------
Total Other Income 0 274,612 614,984 899,922 1,185,971 1,490,639
---------- ----------- --------- --------- --------- ----------
Total Income 0 4,556,447 5,465,966 6,929,291 8,575,946 10,382,570
========== ========== ========== ========== ========== ==========
2000 2001 2002 2003 2004
---------- ---------- ---------- ---------- ----------
Income From Basic Services
Tone Only 0 0 0 0 0
Sales of Pagers 0 0 0 0 0
Subscription Rate 0 0 0 0 0
Registration Fee 0 0 0 0 0
Rent 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total Tone Only 0 0 0 0 0
Numeric
Sales of Pagers 440,895 400,982 230,565 121,041 121,047
Subscription Rate 1,197,300 1,471,860 1,656,252 1,717,072 1,730,113
Registration Fee 56,875 54,600 31,395 16,482 16,482
Rent 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total Numeric 1,695,070 1,927,443 1,918,212 1,854,601 1,867,641
Alpha Numeric
Sales of Pagers 1,670,760 1,603,930 922,260 484,186 484,186
Subscription Rate 6,732,179 7,800,155 8,493,685 8,672,255 8,653,998
Registration Fee 213,281 204,750 117,731 61,809 61,809
Rent 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
Total Alphanumeric 8,616,221 9,608,835 9,533,675 9,218,251 9,199,994
---------- ---------- ---------- ---------- ----------
Total Income From Basic Service 10,311,291 11,536,278 11,451,888 11,072,851 11,067,635
---------- ---------- ---------- ---------- ----------
Other Income
Income from extra services 1,639,927 1,906,273 2,059,813 2,093,524 2,092,480
Income from other services 163,993 190,627 205,981 209,352 209,248
---------- ---------- ---------- ---------- ----------
Total Other Income 1,803,920 2,096,900 2,265,794 2,302,876 2,301,728
---------- ---------- ---------- ---------- ----------
Total Income 12,115,211 13,633,178 13,717,682 13,375,727 13,369,364
========== ========== ========== ========== ==========
38
HEADING ILLEGIBLE
1994 1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ---------- ----------
Central Equipment
ERMES software 1 0 0 0 0 0
TAU/VMS 1 0 0 0 0 0
Data access unit 1 0 0 0 0 0
PNC (50 thousands subsc.) 1 0 0 0 0 0
PAC 0 0 0 0 0 0
OMC 1 0 0 0 0 0
Spare parts 1 0 0 0 0 0
Training, installation 1 0 0 0 0 0
Documentation 1 0 0 0 0 0
Central equipment replacement 0 0 0 0 0 0
Base Stations
Antenna 4 76 20 0 0 0
Base station hardware 4 76 20 0 0 0
VSAT receiver 4 76 20 0 0 0
Data Transmission
Rented line inst. for BS 3 8 2 0 0 0
Rented line inst. for DAU 4 10 3 1 1 1
Pagers to rent 0 0 0 0 0 0
Vehicles 2 4 2 0 0 2
Computers, fax, telecom per new staff 22 32 13 6 4 4
Telephone main line per staff 11 16 6 3 2 2
2000 2001 2002 2003 2004 Total
----------- ---------- ---------- ---------- ---------- ---------
Central Equipment
ERMES software 0 0 0 0 0
TAU/VMS 0 0 0 0 0
Data access unit 0 0 0 0 0
PNC (50 thousands subsc.) 0 0 0 0 0
PAC 0 0 0 0 0
OMC 0 0 0 0 0
Spare parts 0 0 0 0 0
Training, installation 0 0 0 0 0
Documentation 0 0 0 0 0 [Master Illegible]
Central equipment replacement 0 0 0 0 0
Base Stations
Antenna 0 0 0 0 0 1
Base station hardware 0 0 0 0 0 1
VSAT receiver 0 0 0 0 0 1
Data Transmission
Rented line inst. for BS 0 0 0 0 0
Rented line inst. for DAU 0 1 0 0 0
Pagers to rent 0 0 0 0 0
Vehicles 4 2 0 0 2
Computers, fax, telecom per new staff 2 1 1 0 0 1
Telephone main line per staff 1 1 0 0 0
39
[HEADING ILLEGIBLE]
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- ---------
Central Equipment
ERMES software 289,540 0 0 0 0 0
Tau/VMS 265,050 0 0 0 0 0
Data access unit 85,560 0 0 0 0 0
PNC (50 thousands subsc.) 209,250 0 0 0 0 0
PAC 0 0 0 0 0 0
OMC 26,040 0 0 0 0 0
Spare parts 72,354 0 0 0 0 0
Training, installation 124,000 0 0 0 0 0
Documentation 24,800 0 0 0 0 0
Central equipment replacement 0 0 0 0 0 0
Base Stations
Antenna 7,440 141,360 37,200 0 0 0
Base station hardware 29,760 565,440 148,800 0 0 0
VSAT receiver 12,400 235,600 62,000 0 0 0
Data Transmission
Rented line inst. for BS 6,000 16,000 4,000 0 0 0
Rented line inst. for DAU 4,000 10,000 3,000 1,000 1,000 1,000
Pagers to rent 0 0 0 0 0 0
Vehicles 40,000 80,000 40,000 0 0 40,000
Computers, fax, telecom 66,000 96,000 39,000 18,000 12,000 12,000
Telephone main line 9,900 14,400 5,400 2,700 1,800 1,800
--------- --------- --------- --------- --------- ---------
TOTAL 1,272,094 1,158,800 339,400 21,700 14,800 54,800
========= ========= ========= ========= ========= =========
2000 2001 2002 2003 2004 Total
------- ------- ------- ------- ------- -------
Central Equipment
ERMES software 0 0 0 0 0 289,540
TAU VMS 0 0 0 0 0 265,050
Data access unit 0 0 0 0 0 85,560
PNC (50 thousands subsc.) 0 0 0 0 0 209,250
PAC 0 0 0 0 0 0
OMC 0 0 0 0 0 26,040
Spare parts 0 0 0 0 0 72,354
Training, installation 0 0 0 0 0 124,000
Documentation 0 0 0 0 0 24,800
Central equipment replacement 0 0 0 0 0 0
Base Stations
Antenna 0 0 0 0 0 186,000
Base station hardware 0 0 0 0 0 744,000
VSAT receiver 0 0 0 0 0 310,000
Data Transmission
Rented line inst. for BS 0 0 0 0 0 26,000
Rented line inst. for DAU 0 1,000 0 0 0 21,000
Pagers to rent 0 0 0 0 0 0
Vehicles 80,000 40,000 0 0 40,000 360,000
Computers, fax, telecom 6,000 3,000 3,000 0 0 255,000
Telephone main line 900 900 0 0 0 47,800
------- ------- ------- ------- ------- -------
TOTAL 86,900 44,900 3,000 0 40,000 3E[Illeg]
======= ======= ======= ======= ======= =======
40
[HEADING ILLEGIBLE]
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -------
Depreciation for Year Placed In Service
Central Equipment
ERMES software 41,363 0 0 0 0 0
TAU/ VMS 37,864 0 0 0 0 0
Data access unit 12,223 0 0 0 0 0
PNC (50 thousands subsc.) 29,893 0 0 0 0 0
PAC 0 0 0 0 0 0
OMC 3,720 0 0 0 0 0
Spare parts 10,336 0 0 0 0 0
Training, installation 17,714 0 0 0 0 0
Documentation 3,543 0 0 0 0 0
Central equipment replacement 0 0 0 0 0 0
Base Stations
Antenna 1,063 20,194 5,314 0 0 0
Base station hardware 4,251 80,777 21,257 0 0 0
VSAT receiver 1,771 33,657 8,857 0 0 0
Data Transmission
Rented line inst. for BS 857 2,286 571 0 0 0
Rented line inst. for DAU 571 1,429 429 143 143 143
Pagers to rent 0 0 0 0 0 0
Vehicles 8,000 16,000 8,000 0 0 8,000
Computers, fax, telecom 22,000 32,000 13,000 6,000 4,000 4,000
Telephone main line 1,414 2,057 771 386 257 257
Incremental Depreciation Expense 196,585 188,400 58,200 6,529 4,400 12,400
------- ------- ------- ------- ------- -------
Annual Depreciation Expense 196,585 384,985 443,185 427,713 400,113 391,513
======= ======= ======= ======= ======= =======
2000 2001 2002 2003 2004
------- ------- ------- ------- -------
Depreciation for Year Placed In Service
Central Equipment
ERMES software 0 0 0 0 0
TAU/ VMS 0 0 0 0 0
Data access unit 0 0 0 0 0
PNC (50 thousands subsc.) 0 0 0 0 0
PAC 0 0 0 0 0
OMC 0 0 0 0 0
Spare parts 0 0 0 0 0
Training, installation 0 0 0 0 0
Documentation 0 0 0 0 0
Central equipment replacement 0 0 0 0 0
Base Stations
Antenna 0 0 0 0 0
Base station hardware 0 0 0 0 0
VSAT receiver 0 0 0 0 0
Data Transmission
Rented line inst. for BS 0 0 0 0 0
Rented line inst. for DAU 0 143 0 0 0
Pagers to rent 0 0 0 0 0
Vehicles 16,000 8,000 0 0 8,000
Computers, fax, telecom 2,000 1,000 1,000 0 0
Telephone main line 129 129 0 0 0
Incremental Depreciation Expense 18,129 9,271 1,000 0 8,000
------- ------- ------- ------- -------
Annual Depreciation Expense 387,642 218,329 74,929 35,729 34,200
======= ======= ======= ======= =======
41
[HEADING ILLEGIBLE]
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
General Management
General Manager 1 1 1 1 1 1 1 1 1 1 1
Secretary 1 1 1 1 1 1 1 1 1 1 1
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total staff 2 2 2 2 2 2 2 2 2 2 2
Finance Division
Finance Director 1 1 1 1 1 1 1 1 1 1 1
Secretary 0 0 0 0 0 0 0 0 0 0 0
Accounting, invoicing 1 2 2 2 3 3 4 4 5 5 5
Other staff 0 0 0 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total staff 2 3 3 3 4 4 5 5 6 6 6
Technical Division
Technical Director 1 1 1 1 1 1 1 1 1 1 1
HW development engineer 0 0 0 0 0 0 0 0 0 0 0
SW development engineer 0 0 0 0 0 0 0 0 0 0 0
Production engineer 1 1 1 2 2 2 2 2 2 2 2
Head of operators 1 1 1 2 2 2 2 2 2 2 2
Operator 10 40 50 52 55 58 59 60 60 60 60
Secretary 1 1 1 1 1 2 2 2 2 2 2
Other staff 0 0 0 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
14 44 54 58 61 65 66 67 67 67 67
Total staff
Marketing Division
Marketing Director 1 1 1 1 1 1 1 1 1 1 1
Marketing 0 0 0 0 0 0 0 0 0 0 0
Head of Customer Service 1 1 1 1 1 1 1 1 1 1 1
Customer service 1 2 5 7 7 7 7 7 7 7 7
Secretary 1 1 1 1 1 1 1 1 1 1 1
Other staff 0 0 0 0 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total staff 4 5 8 10 10 10 10 10 10 10 10
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Staff 22 54 67 73 77 81 83 84 85 85 85
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
42
[HEADING ILLEGIBLE]
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -------
General Management
General Manager 37,500 75,000 75,000 75,000 75,000 75,000
Secretary 4,590 9,180 9,180 9,180 9,180 9,180
------- ------- ------- ------- ------- -------
Total Salaries 42,090 84,180 84,180 84,180 84,180 84,180
Finance Division
Finance Director 10,000 40,000 40,000 40,000 40,000 40,000
Secretary 0 0 0 0 0 0
Accounting, invoicing 3,825 30,600 30,600 30,600 45,900 45,900
Other staff 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total Salaries 13,825 70,600 70,600 70,600 85,900 85,900
Technical Division
Technical Director 0 40,000 40,000 40,000 40,000 40,000
HW development engineer 0 0 0 0 0 0
SW development engineer 0 0 0 0 0 0
Production engineer 5,100 15,300 15,300 30,600 30,600 30,600
Head of operators 2,833 8,500 8,500 17,000 17,000 17,000
Operator 20,000 240,000 300,000 312,000 330,000 348,000
Secretary 3,060 9,180 9,180 9,180 9,180 18,360
Other staff 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total Salaries 30,993 312,980 372,980 408,780 426,780 453,960
Marketing Division
Marketing Director 20,000 40,000 40,000 40,000 40,000 40,000
Marketing 0 0 0 0 0 0
Head of Customer Service 2,833 8,500 8,500 8,500 8,500 8,500
Customer service 1,000 12,000 30,000 42,000 42,000 42,000
Secretary 1,530 9,180 9,180 9,180 9,180 9,180
Other staff 0 0 0 0 0 0
------- ------- ------- ------- ------- -------
Total Salaries 25,363 69,680 87,680 99,680 99,680 99,680
------- ------- ------- ------- ------- -------
Total Salaries 112,272 537,440 615,440 663,240 696,540 723,720
======= ======= ======= ======= ======= =======
Averages:
Salary 9,953 9,186 9,085 9,046 8,935
Social Security 4,379 4,042 3,998 3,980 3,931
Unemployment/Vocational 896 827 818 814 804
2000 2001 2002 2003 2004
------- ------- ------- ------- -------
General Management
General Manager 75,000 75,000 75,000 75,000 75,000
Secretary 9,180 9,180 9,180 9,180 9,180
------- ------- ------- ------- -------
Total Salaries 84,180 84,180 84,180 84,180 84,180
Finance Division
Finance Director 40,000 40,000 40,000 40,000 40,000
Secretary 0 0 0 0 0
Accounting, invoicing 61,200 61,200 76,500 76,500 76,500
Other staff 0 0 0 0 0
------- ------- ------- ------- -------
Total Salaries 101,200 101,200 116,500 116,500 116,500
Technical Division
Technical Director 40,000 40,000 40,000 40,000 40,000
HW development engineer 0 0 0 0 0
SW development engineer 0 0 0 0 0
Production engineer 30,600 30,600 30,600 30,600 30,600
Head of operators 17,000 17,000 17,000 17,000 17,000
Operator 354,000 360,000 360,000 360,000 360,000
Secretary 18,360 18,360 18,360 18,360 18,360
Other staff 0 0 0 0 0
------- ------- ------- ------- -------
Total Salaries 459,960 465,960 465,960 465,960 465,960
Marketing Division
Marketing Director 40,000 40,000 40,000 40,000 40,000
Marketing 0 0 0 0 0
Head of Customer Service 8,500 8,500 8,500 8,500 8,500
Customer service 42,000 42,000 42,000 42,000 42,000
Secretary 9,180 9,180 9,180 9,180 9,180
Other staff 0 0 0 0 0
------- ------- ------- ------- -------
Total Salaries 99,680 99,680 99,680 99,680 99,680
------- ------- ------- ------- -------
Total Salaries 745,020 751,020 766,320 766,320 766,320
======= ======= ======= ======= =======
Averages:
Salary 8,976 8,941 9,016 9,016 9,016
Social Security 3,950 3,934 3,967 3,967 3,967
Unemployment/Vocational 808 805 811 811 811
43
EXHIBIT 1.6
[HEADING ILLEGIBLE]
INPUTS:
First Fiscal Year MIRR 0.08 0.16 0.3
Starts 1-Jan-94 NPV Rates 0.1
Ends 31-Dec-94 0.12
Population of Hungary [thousands] 0.14
Start 10,600 0.16
Growth Factor 0.00%
Input for Schedule A
Yearly:
Growth rate
Attrition rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Rental rate 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Subscriber base
Utilization of Rented Pagers 50.00% NA
Interest Rates
Working Capital Loan 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Inflation Rates
Inflation (HUF) 23.00% 20.00% 15.00% 15.00% 10.00% 10.00% 10.00% 10.00%
Inflation (USD) 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
Hungarian Inflation Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
US Inflation Factor 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Exchange Rate
HUF:USD 102 102 102 102 102 102 102 102
Hungarian Income Tax rate 40.00%
Acquisition Costs
Legal & Accounting $ 120,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Travel Costs $ 80,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Concession Acquisition $1,200,000 $ 0 $ 0 $800,000
Due $ 0 Premium
Award Date 4/29/94 $ 0 Bid Deposit
14 5/13/94 $1,200,000 First Payment
30 5/29/94 $ 500,000 Bond
30 5/29/94 $ 0 Return of Bid Deposit
1095.75 4/28/97 $ 800,000 Second Payment
Bond $ 500,000 $ 0 ($500,000) $ 0 $ 0 $ 0 $ 0 $ 0
Annual concession fee annual % 1.00% 1.00% 1.00% 1.00% 1.00% 2.00% 2.50% 3.00%
INPUTS:
First Fiscal Year
Starts
Ends
Population of Hungary [thousands]
Start
Growth Factor
Input for Schedule A
Yearly:
Growth rate
Attrition rate 5.00% 5.00% 5.00%
Rental rate 0.00% 0.00% 0.00%
Subscriber base
Utilization of Rented Pagers
Interest Rates
Working Capital Loan 0.00% 0.00% 0.00%
Inflation Rates
Inflation (HUF) 10.00% 10.00% 10.00%
Inflation (USD) 5.00% 5.00% 5.00%
Hungarian Inflation Factor 1.00 1.00 1.00
US Inflation Factor 1.00 1.00 1.00
Exchange Rate
HUF:USD 102 102 102
Hungarian Income Tax rate
Acquisition Costs
Legal & Accounting $ 0 $ 0 $ 0
Travel Costs $ 0 $ 0 $ 0
Concession Acquisition
Award Date
Bond $ 0 $ 0 $ 0
Annual concession fee annual % 3.50% 4.00% 5.00%
44
EXHIBIT 1.15
DEED OF FOUNDATION
OF
EURO PAGING HUNGARY CONCESSION
COMPANY LIMITED BY SHARES
RECITALS
WHEREAS the Minister of Transportation, Communications and Water
Management (the "Minister") of the Republic of Hungary ("Hungary") exercising
the power vested in him by Act No. XVI of 1991 on Concessions (the "Concession
Act"), and Act No. LXXII of 1992 on Telecommunications (the "Telecommunications
Act") as well as the other relevant laws on telecommunications, issued an
international concession tendering for the provision of Hungarian nationwide
public paging services on the territory of Hungary,
WHEREAS the Magyar Paging Consortium (the "Consortium"), consisting of
▇▇▇▇▇▇ Aircraft Sales and Leasing Company, SFMT-Hungaro, Inc. and Microsystem
Telecom Tavkozlesfejleszto es Kereskedelmi Rt. has won the tender and signed
the Concession Agreement with the Minister on May 6, 1994,
WHEREAS the Consortium has to establish a concession company within
ninety (90) days after the signing of the Concession Agreement,
THEREFORE the founders
o ▇▇▇▇▇▇ AIRCRAFT SALES AND LEASING COMPANY, a corporation organized and
existing under the laws of the State of Delaware, having its
registered office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
(hereinafter referred to as "▇▇▇▇▇▇"), and duly represented by ▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President;
o SFMT-HUNGARO, INC., a corporation organized and existing under the
laws of the State of Delaware (hereinafter referred to as "SFMT")
having its registered office at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇, and duly represented by ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇, President;
o MICROSYSTEM TELECOM TAVKOZLESFEJLESZTO ES KERSEKEDELMI RT, a company
limited by shares organized and existing under the laws of the
Republic of Hungary ("Hungary"), having its registered office at 1122
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇, ▇▇▇▇▇▇▇ (hereinafter referred to as
"Microsystem"), registration No.: ▇▇-▇▇-▇▇▇▇▇▇, and duly represented by
▇▇. ▇▇▇▇▇ ▇▇▇▇▇, Chairman; and
o ▇▇▇▇▇ ▇▇▇▇▇▇, a Hungarian citizen, resident of 2120 Dunakeszi, ▇▇▇▇▇▇
▇.7;
45
2
(together referred to as "Founders" or "Shareholders") have established
EURO-Paging Hungary Concession Company Limited by Shares (hereinafter referred
to as the "Company") in accordance with the provisions of the Concession Act,
the Telecommunications Act and Act No. VI of 1983 on Business Organizations
(the "Company Act").
The Founders have established the Company in the form of a closed company
limited by shares ("zartkoru alapitasu reszvenytarsasag4) in accordance with
Section 260 of the Company Act.
This Deed of Foundation serves as the founding document of EURO Paging Hungary
Concession Company Limited by Shares as well as the Articles of Associations
thereof, and provides as follows:
ARTICLE I
FORM, NAME AND SEAT
1.1 The Company's name is in Hungarian EURO Szemelyhivo Magyarorszag
Koncesszios Reszvenytarsasag, in English EURO Paging Hungary
Concession Company Limited by Shares; it can also participate in
business transactions under the abbreviated name of EURO-Hivo Rt. and
EURO-Call Ltd.
1.2 The Company's registered office shall be 1134 Budapest, Vaci ut 37.
A/502.
1.3 The Company is a company limited by shares and its operation shall be
governed by Hungarian law.
ARTICLE 2
DURATION
2.1 The Company shall be established for fifteen (15) years counted from
April 29, 1994.
2.2 Unless sooner terminated, the Company shall continue to operate until
29 April 2009, provided, that the Concession is not extended for an
additional seven and one half (7,5) years.
46
3
ARTICLE 3
OBJECT AND ACTIVITIES
3.1 The Company has been formed to create the conditions, set up a network
for, and provide nationwide public paging services within the
framework of the Telecommunication Act, Act No. LXII of 1993 on
Frequency Management (the "Frequency Act") as well as the relevant
rules of Hungarian law.
The Minister has entitled the Company to provide ERMES nationwide
public terrestrial telecommunications paging services on the whole
territory of Hungary through the ERMES channel 11 (169,675 Mhz)
according to the standard No. ETS 300 133-1...7 and to set up and
operate its own telecommunication network necessary therefor.
3.2 The objectives of the Company primarily are to:
(i) set up its own telecommunication network necessary for the
provision of nationwide public paging services and the
provision of public paging services with the timing,
technical, quality, quantity as well as pricing requirements
included in the Concession Contract;
(ii) enter into contracts with subscribers of the nationwide public
paging services and collect fees for services rendered as
provided in the Concession Contract;
(iii) enter into interconnection agreements with other
telecommunication networks, which interconnections are
necessary for the provision of the paging services as required
by the Concession Contract;
(iv) to join the ERMES MoU by signing the MoU Agreements and become
the member of ERMES MoU; and
(v) establish the technical conditions for supplying international
roaming services and enter into agreements with other ERMES
service providers for the provision of domestic and
international roaming.
3.3 The Company's scope of activity, expressed in accordance with uniform
statistical nomenclature ("TEAOR") and Section 5(4) of the
Telecommunications Act will be as follows:
4540 Maintenance and modernization of buildings
- including the organization, implementation and general
construction activities relating to investment projects and
building maintenance
5190 Foreign trade activity
5243 Retail trade of electronic and telecommunication equipments
47
4
6420 Telecommunication
- including setting up the paging network for, and provision of
nationwide paging services;
- the provision of other telecommunication services, including
(a) local, regional and nationwide paging services;
(b) data transmission;
(c) voice mail services;
(d) other value added services;
- computer application;
- measurement and safety engineering services;
- telecommunications research and development;
- general technical development services;
8040 Adult education
- including telecommunication courses and other forms of
telecommunication training.
3.4 If the pursuance of a specific activity is bound to official license,
the activity shall be pursued by the Company only after the receipt of
such official license.
ARTICLE 4
SHARE CAPITAL, SHARES
4.1 The Company's registered share capital, all by way of cash
contributions, amounts to two hundred million Hungarian Forints (HUF
200,000,000) as of the date of signing of this Deed of Foundation and
is divided into one hundred and ninety three (193) registered common
shares with a face value of one million Hungarian forints (HUF
1,000,000) each and six (6) dividend preferred, non voting registered
shares with a face value of one million Hungarian forints (HUF
1,000,000) each and one (1) voting preferred share with a face value
of one million Hungarian forints (HUF 1,000,000).
The Company has, as assets above the share capital, a concession
rights to provide nationwide public paging services for fifteen
(15) years having a value of the HUF equivalent of 2 million USD.
48
5
4.2 The shares of the Company are divided into three classes of shares:
(i) common, registered, voting shares, with a face value of one
million Hungarian forints (HUF 1,000,000) (Class "A" Shares);
and
(ii) registered, dividend preferred, non-voting shares with a face
value of one million Hungarian forints (HUF 1,000,000) (Class
"B" Shares); and
(iii) registered, voting preferred shares with a face value of one
million Hungarian forints (HUF 1,000,000) (Class "C" Shares).
4.3 The proportion of the Class "B" Shares shall not exceed three percent
(3%) of the share capital of the Company. Until such time as the
holder of the Class "B" Shares has received Preferential Dividend
Distributions in an aggregate amount equal to 3 million US dollars,
dividends shall be distributed to the Shareholders for each year in
respect of which the Board of Directors declares that any dividends
are properly payable, in the following manner:
(i) the amount equal to the first forty per cent (40%) of the
Distributable Amount for any year shall be payable, to the
holder of the Class "B" Share as Preferential Dividend
Distributions; and
(ii) the amount equal to the remaining sixty per cent (60%) of the
Distributable Amount shall be payable to the Shareholders in
proportion to their respective ownership interests of the
share capital of the Company;
Upon any payment of Preferential Dividends Distributions the USD 3
million shall be deemed reduced by an amount equal to the amount of
the Preferential Dividend Distributions that the holders of Class "B"
Shares has received. All calculations as to the amount of Preferential
Dividend Distribution shall be made in US Dollars, as of the date of
payment of each such Preferential Dividend Distribution. After the
holder of the Class "B" shares has received three million US dollars
in preferred dividends, such shares shall be converted into Class "D",
non-voting common registered shares.
4.4 The following rights are attributable to the Class "C" Share:
No valid resolution can be passed without the approval of the owner of
the Class "C" Shares in the following cases:
(i) establishment of modification of the Deed of Foundation;
(ii) increase and decrease in share capital;
(iii) modification or establishment of rights assigned to any given
class of shares;
49
6
(iv) decision on merger with any other legal entity, on the
dissolution or termination of the Company or transformation
to any other form of association;
(v) decision about the transformation of the types of shares by
means of change of shares and overprint of them;
4.5 The Company shall not issue any other kind of shares apart from those
mentioned in Section 4.2, 4.3 and 4.4 above, without the unanimous
approval of the Shareholders Meeting.
4.6 The cash contributions to the initial share capital shall be paid in
accordance with the following schedule:
(i) before filing the registration documents with the Court of
Registration, the Shareholders shall pay in at least 30% of
their capital contributions; and
(ii) within one (1) year after the registration of the Company at
the Court of Registration, the Shareholders shall pay in the
balance of their cash contributions at the written request of
the Board of Directors.
4.7 The Shareholders shall pay in the following cash contributions:
4.7.1 ▇▇▇▇▇▇
The cash contribution of ▇▇▇▇▇▇ is fifty one million Hungarian forints
(HUF 51,000,000). ▇▇▇▇▇▇ shall pay its capital contribution in US
dollars, (USD) and shall be kept by the Company in US dollars in the
Company's foreign currency capital account.
The amount of Gerard's capital contribution shall be calculated on the
middle exchange rate of US dollars quoted by the National Bank of
Hungary on the value date of transfer.
▇▇▇▇▇▇ shall receive fourty four (44) Class "A" Shares, six (6) Class
"B" Shares and one (1) Class "C" Share in return for its cash
contribution.
4.7.2 SFMT
The cash contribution of SFMT is ninety eight million Hungarian
forints (HUF 98,000,000). SFMT shall pay its capital contribution in
US dollars, (USD) and shall be kept by the Company in US dollars in
the Company's foreign currency capital account.
SFMT shall receive ninety eight (98) Class "A" Shares in return for
its cash contribution.
50
7
4.7.3 Microsystem
The cash contribution of Microsystem is ten million Hungarian forints
(HUF 10,000,000).
Microsystem shall receive ten (10) Class "A" Shares in return for its
cash contribution.
4.7.4 ▇▇▇▇▇ ▇▇▇▇▇▇
The cash contribution of ▇▇▇▇▇ ▇▇▇▇▇▇ is fourty one million Hungarian
forints (HUF 41,000,000).
▇▇▇▇▇ ▇▇▇▇▇▇ shall receive fourty one (41) Class "A" Shares in return
for its cash contribution.
4.8 The initial ownership structure of the Company shall be as follows:
▇▇▇▇▇▇: 25% plus 1 share, representing 23% of the voting rights;
SFMT: 50% less two shares, representing 51% of the voting
rights;
Microsystem: 5%, representing 5% of the voting rights; and
▇▇▇▇▇ ▇▇▇▇▇▇: 25% plus 1 share, representing 21% of the voting rights.
4.9 The Board of Directors may issue shares with aggregate denominations
or may divide them at the request and sole cost of the shareholders.
4.10 The Company, may acquire, up to one-third (1/3) of its own, fully
paid-up shares from the assets above its share capital in accordance
with Section 247 of the Company Act.
4.11 The Board of Directors may issue share certificates
("reszvenyutalvany") on the already paid in amount of the capital
already paid in before the registration of the Company at the Court
of Registration. The share certificates are not transferable.
4.12 Shares can be issued only after the full payment of the capital
contributions. The Board of Directors may issue temporary shares
("ideiglenes reszveny") after the registration of the Company on the
Trade Register upon the already paid in amount of the shares. The
temporary shares are transferable.
51
8
ARTICLE 5
REGISTER OF SHAREHOLDERS
5.1 The Board of Directors shall keep a Register of Shareholders including
(i) the name and address (corporate seat) of each shareholder,
(ii) the serial numbers of their shares;
(iii) the amount paid up on every share; and
(iv) any transfer of shares.
5.2 All entries and notes in the Register of Shareholders shall be signed
by the Chairman of the Board of Directors individually or by any other
two members of the Board of Directors acting jointly.
5.3 Any transfer of shares is effective with regard to the Company if the
name of the new shareholder is recorded in the Register of
Shareholders.
ARTICLE 6
OWNERSHIP RESTRICTIONS
6.1 In accordance with Section 2.2 of the Concession Contract, by the end
of the period defined in Section 2.1 and 2.2 of this Deed above, the
following ownership restrictions shall be obeyed by the Shareholders:
(i) no Shareholder of the Company can be a shareholder of Easy
Call Hungary Concession Company Limited by Shares at the same
time. If such a case occurs, the Shareholder holding the
shares of both companies obligated to sell the shares of one
of such companies within thirty (30) days following the
occurrence of such event;
(ii) during the period defined in Section 2.1 above, at least
twenty five per cent (25%) plus one (1) share of the Company
shall remain in the ownership of Hungarian majority owned
business organization, registered in Hungary or Hungarian
natural persons;
(iii) the initial and Substantial Shareholding Position defined in
Section 4.8 above may not be changed without the prior
approval of the Minister. The Minister shall only approve a
change in ownership, i.e., transfer or assignment, only if he
is satisfied with the capability of the Company, both legally
and financially as well as professionally to perform the
obligations of the Company under the Concession Agreement.
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6.2 "Substantial Shareholding Position" is considered to be any change in
the ownership structure involving more than five percent (5%) of the
voting shares of the Company. This definition covers all cases as well
when the amount of the subsequent transfers exceeds the five percent
(5%) level as defined above. This stipulation covers all the cases as
well when the amount of transfers following one another exceeds the
five percent (5%) level as permitted.
6.3 Non-voting shares of the Company may be transferred or otherwise
assigned without the prior approval of the Minister; however, the
Minister must be notified of any such transfer or assignment including
more than five percent (5%) of the share capital.
6.4 Without the prior approval of the Minister the participation of
▇▇▇▇▇▇, SFMT and Microsystem in the Company shall not be decreased
under 50% plus 1 voting share.
6.5 The Company shall continuously control whether its ownership structure
corresponds to the conditions contained in this Deed of Foundation.
Based on the authorization of the Minister, the Telecommunications
Chief Inspectorate is entitled to examine the composition of ownership
at any time. If either of Company or the Telecommunications Chief
Inspectorate observes any change in the composition of ownership
according to which the Company fails to meet the Hungarian ownership
ratio of at least twenty five per cent (25%) plus one (+1) share, the
Minister shall oblige the Company - setting a deadline of two (2) years
to provide for the appropriate change in the proportions of the
structure of ownership.
ARTICLE 7
INCREASE IN THE SHARE CAPITAL
7.1 The share capital can be increased by virtue of a resolution of the
Shareholders' Meeting in accordance with Section 7.3 on the terms and
conditions and with such rights and privileges to be decided upon by
such resolution.
7.2 The share capital can only be increased after the existing shares of
the Company have been fully paid-in, and the increase as well as the
new shareholders, if any, has been approved by the Minister.
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10
7.3 The Shareholders' Meeting shall decide on an increase in capital on
the basis of the recommendation of the Board of Directors. The
following information shall be included in the notice calling a
Shareholders' Meeting at which any increase in the share capital is
to be voted upon;
(i) the reason for, the manner and the minimum value of the
increase in share capital;
(ii) the draft of the Deed amended to reflect the increase in
capital;
(iii) the number and issued value of the new shares;
(v) if new classes of shares are to be issued, the rights to be
attached to such shares, the rights of previously issued
shares which are affected and the manner in which such rights
are affected;
(v) in the case of an increase in capital by subscription, the
opening and closing date for such subscription; and
(vi) in the case of an increase in capital by an in-kind
contribution, the proposal relating to such contribution.
7.4 Pursuant to Section 301(3) of the Company Act, no capital increase can
be made by way of issue of new shares within one calendar year of the
establishment of the Company.
7.5 When new shares are issued, only the persons designated by the
Shareholders and approved by the Ministry, have a right to subscribe
to the new shares in the proportion as defined in the resolution
passed on the increase in the share capital.
7.6 The Board of Directors of the Company is entitled to increase the
share capital of the Company by transforming the assets exceeding the
share capital of the Company into a share capital up to ten percent
(10%) of the share capital of the Company at the time of the proposed
increase. In the latter case the Board of Directors shall offer the
newly issued shares free-of-charge on a pro-rata basis to the
shareholders of the Company existing at the time of the capital
increase.
7.7 The resolution of the Shareholders' Meeting pursuant to Article 7.3
relating to any increase in capital shall be reported to the Court of
Registration within thirty (30) days of passing such resolution.
7.8 The completion of an increase in capital shall be reported to the
Court of Registration by the Board of Directors for the purpose of
registration and publication.
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ARTICLE 8
ORGANIZATION AND MANAGEMENT OF THE COMPANY
8.1 The governing bodies of the Company are:
(i) the Shareholders' Meeting;
(ii) the Board of Directors; and
(iii) the Supervisory Board.
ARTICLE 9
SHAREHOLDERS' MEETING
9.1 The Shareholders Meeting, made up of the entirety of the shareholders,
is the highest decision-making body of the Company.
9.2 The Shareholders' Meeting may either be annual or extraordinary and
shall be called by the Board of Directors, unless the Company Act
provides otherwise.
9.3 The annual Shareholders' Meeting shall be held each year, no later
than 4 (four) months after the end of the business year of the
Company.
9.4 The Shareholders' Meeting shall be held at the place where the
Company has its corporate seat or any other place as may be determined
by the Supervisory Board, the Board of Directors or the Shareholders.
9.5 The Board of Directors shall publish notification of the Shareholders'
Meeting at least thirty (30) days before the date of the meeting.
The announcement of the calling of the Shareholders' Meeting shall
contain the following:
(i) the name and seat of the Company;
(ii) the date and place of the Shareholders' Meeting;
(iii) the agenda of the Shareholders' Meeting; and
(iv) the conditions of voting prescribed by the Deed of
Foundation.
Holders of registered shares shall be notified personally regarding
the calling of the Shareholders' Meeting.
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12
Furthermore, each shareholder may request the Board of Directors,
within eight (8) days from the date of publication of the notice of a
Shareholders' Meeting, to introduce additional matters on the agenda.
If such proposal is not added to the agenda of the forthcoming
Shareholders' Meeting, and published as aforesaid within eight (8)
days, upon the request of such shareholders, the Court of Registration
shall do so.
9.6 A shareholder holding at least five percent (5%) of the voting shares
may request to call an extraordinary Shareholders' Meeting. Such a
request should be submitted in advance to the Board of Directors,
which shall immediately call the Shareholders' Meeting.
If such an extraordinary Shareholders' Meeting is not called within
thirty (30) days from the date of submitting the request to the Board
of Directors, the Court of Registration shall call such an
extraordinary Shareholders' Meeting.
ARTICLE 10
POWERS OF THE SHAREHOLDERS' MEETING
The exclusive powers of the General Meeting are the following:
(i) establishment of the annual balance sheet;
(ii) approval of the reports of the Supervisory Board and of the
Board of Directors regarding the previous business year's
activities of the Company, as well as approval of proposals
made by these boards regarding the annual balance sheet and
the distribution of profits;
(iii) discussion and acceptance of the reports of the Auditor;
(iv) decide on the distribution of profits and creation of
reserves therefrom as well as on the settlement of losses
including possible equity losses;
(v) election or removal of the members of the Board of Directors,
the Supervisory Board, except for any member of the
Supervisory Board chosen by the employees pursuant to section
13 of the Act, and the Auditor and determination of their
remuneration;
(vi) increase or decrease of the share capital other than as
described in Articles 7.6 and 17.2(o);
(vii) approval of the by-laws of the Supervisory Board;
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(viii) decision on merger with any other legal entity, on the
dissolution or termination of the Company or transformation
to any other form of association;
(ix) establishment and modification of the Deed of Foundation;
(x) decision about the transformation of the types of shares by
means of exchange of shares or overprint of them;
(xi) the modification of rights assigned to any given class of
shares;
(xii) issuance of convertible bonds or bonds ensuring preferential
or preemptive rights;
(xiii) any public offering of securities of the Company;
(xiv) decisions in any other issues which the Company Act or this
Deed of Foundation reserves for the sphere of authority of the
Shareholders' Meeting.
ARTICLE 11
QUORUM AND VOTES AT THE SHAREHOLDERS MEETING
11.1 A Shareholders' Meeting is considered to be duly held if it is called
in accordance with Article 9 and is attended by shareholders holding
not less than fifty-one percent (51%) of the share capital entitled
to vote.
If the quorum is not present at the Shareholders' Meeting, a second
Shareholders' Meeting called within Fifteen (15) days may decide on
all items included in the agenda of the previous meeting, irrespective
of the number of those present.
11.2 Each voting share is entitled to one vote at a Shareholders' Meeting.
11.3 Every shareholder may attend the Shareholders' Meeting or send a
representative holding a written power of attorney authorizing the
representative to attend the meeting and, insofar as this power gives
the representative a voting right, to exercise such voting right. Such
a power of attorney must be deposited at the latest by the time and at
the place indicated in the notice of the Shareholders' Meeting
specified in Article 9.5.
11.4 Any shareholder affected by a decision to be made - namely a
shareholder who pursuant to such decision would be entitled or held
liable to the Company in a manner that the entitlement or liability
thus deriving would not at the same time and to the same degree be
applicable to all shareholders -- shall be excluded from taking part in
the voting on such decision; his vote thereupon shall be disregarded
for the purposes of verifying the quorum and for the effectiveness of
the decisions.
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14
11.5 In case of a tie vote, the largest shareholder present shall cast the
deciding vote.
ARTICLE 12
THE CHAIRMAN OF THE SHAREHOLDERS' MEETING
12.1 The Chairman of the Shareholders' Meeting shall be elected by the
Shareholders' Meeting.
12.2 All matters concerning the admission of anyone to the Shareholders'
Meeting, the exercise of voting rights and all other matters connected
with the conduct of the meeting shall be decided by the Chairman of
the Shareholders' Meeting, who shall also accept the admission to the
Shareholders' Meeting of representatives or other persons duly
authorized according to Article 11.3 or otherwise entitled to attend
pursuant to the law. The Chairman has no right to remove, on his own,
matters from the agenda or change the agenda.
ARTICLE 13
MINUTES OF THE SHAREHOLDERS' MEETING
13.1 The Chairman shall appoint a secretary who shall keep the minutes of
the Shareholders' Meeting. The minutes shall be signed by the
Chairman, the secretary and by two shareholders elected by the
Shareholders' Meeting. The Board of Directors shall enter the minutes
in a minute book. The minutes shall be kept in English and Hungarian
languages and shall be made available at the offices of the Company
for shareholders and officials of the Company.
In addition, the Board of Directors shall submit within thirty (30)
days from the date of the Shareholders' Meeting, to the Court of
Registration in Budapest, a certified copy of the minutes of the
Shareholders' Meeting, the copies of the gazettes containing the
announcement on the convening of the Shareholders' Meeting and of the
attendance list of the participants pursuant to Article 13.2 below.
13.2 An attendance list shall be made for each Shareholders' Meeting,
containing the names of shareholders and their representatives, their
addresses, the number of shares they represent and the voting
rights they are entitled to, and shall be signed by the Chairman and
secretary of the Shareholders' Meeting.
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15
ARTICLE 14
VOTES AT THE SHAREHOLDERS' MEETING
14.1 Except as required in Articles 14.2 and 14.3 below and subject to
Articles 4.4 and 4.5 above resolutions of the Shareholders' Meeting
shall require the favorable vote of shareholders holding at least
fifty one per cent (51%) of the shares of the Company entitled to
vote.
14.2 Resolutions of the Shareholders' Meeting concerning the matters
referred to in Article 10 (vii), (ix), (x),(xi) and (xii) shall
require the favourable vote of shareholders holding at least
seventy-five per cent (75%) of the registered shares of the Company
entitled to vote.
14.3 Any resolution which adversely affects any rights attached to certain
classes of shares shall be valid only with the approval of
shareholders holding these shares.
ARTICLE 15
METHOD OF VOTING AT THE SHAREHOLDERS' MEETING
15.1 Voting concerning business matters shall take place viva voce. Voting
concerning persons shall take place by secret ballot. Secret ballot
shall also be held at the request of at least one of the shareholders
present. Abstentions and votes recorded on signed slips shall not be
counted as votes.
15.2 In the event of an election of persons where an absolute majority of
votes has not been obtained by any one person, a second ballot shall
be held between the two persons who obtained the largest number of
votes. If at the second ballot there is a tie of votes, the decision
shall be arrived at by the drawing of lots.
ARTICLE 16
AUDITOR
16.1 The Shareholders' Meeting shall elect one auditor employed by an
independent internationally recognized auditing firm and qualified
under the Hungarian regulations to supervise regularly the accounting
and other operations of the Company, audit the annual financial
statements and the report on the Company's activities drawn up by the
Board of Directors and present a written report expressing an opinion
thereon. The Shareholders' Meeting can remove the auditor at any time.
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16
16.2 The Auditor shall examine all reports to be submitted for approval to
the Shareholders' Meeting. No decision can be passed relating to these
reports without the written opinion of the Auditor.
16.3 With the exception of the first Auditor, all Auditors shall be
elected for a duration of three (3) business years; The Auditor for
the first business year of the Company is listed in Annex 1.
ARTICLE 17
BOARD OF DIRECTORS
17.1 The Board of Directors shall consist of at least three (3) and at most
eleven (11) members who shall be elected by the Shareholders' Meeting.
17.2 The Board of Directors shall be vested with the management of the
Company and shall have the right to exercise those powers of the
Company that are not required to be exercised by the Shareholders'
Meeting.
Within this authority, the Board of Directors primarily
(a) continuously performs management tasks;
(b) ensures the formal safekeeping of the Company's records;
(c) convenes the Shareholders' Meeting according to these Articles
of Association,
(d) prepares a written report on the management and business
plan of the Company once a year for the Shareholders' Meeting;
(e) determines the mid-term business plan, and provides for the
supervision of its implementation;
(f) has the balance-sheet, the statement of assets and the
division of profits proposal prepared, presents them to the
Supervisory Board, and brings them forward to the regular
annual Shareholders' Meeting along with the report of the
Supervisory Board and the Auditor's report;
(g) publishes important information from the balance-sheet, the
division of profits proposal;
(h) formulates opinions and proposals for the items placed on the
agenda of the Shareholders' Meeting and brings them forward
to the Shareholders' Meeting;
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17
(i) upon request on the part of the shareholders presented in
writing not later than eight (8) days prior to the
Shareholders' Meeting gives the shareholders appropriate
information regarding items placed on the agenda of the
Shareholders' Meeting;
(j) upon request provides the shareholders with an excerpt or with
a copy of the minutes of the Shareholders' Meeting;
(k) executes resolutions approved at the Shareholders' Meeting;
(1) fulfils its regular and special obligation of providing
information regarding publicly issued shares of the Company;
(m) in special cases changes the type of shares according to the
provisions of Article 240 para 3 of the Company Act,
(n) safekeeps the Share Register of registered shares according to
the legal regulations and the Deed of Foundation;
(o) decides upon the increase of capital by 10% a year at the most
through issuing new Class "A" shares or by transforming the
Company's assets above its registered capital into registered
capital;
(p) decides upon the consolidation or division of shares, and if
the alteration is requested by a shareholder, carries it out
at his or her expense;
(q) executes the increase of capital determined by the
Shareholders' Meeting;
(r) defines the Company's policy concerning the re-purchase and
sale of Company's shares;
(s) prepares the By-laws of the Board of Directors;
(t) prepares and supervises the implementation of the annual
business plan;
(u) prepares the Company's regulation business conduct;
(v) approves the organizational and operational rules of the
Company;
(w) approves the Company's management directives;
(x) delegates the Company's employees authorized to sign in the
name of the Company;
(y) collectively exercises employer rights over the Chief
Executive, the Deputy Chief Executive and the Managing
Directors of the Company.
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17.3 The Board of Directors is composed of a Chairman and members of the
Board; the Chairman shall be elected by the Board of Directors from
its members.
17.4 With the exception of the first Board of Directors, all Directors
shall be elected for a duration of three (3) business years; the
duration of the first Board of Directors shall be the first business
year of the Company. Members of the Board of Directors may be
re-elected.
17.5 The Board of Directors shall meet at such times as it may determine,
and shall also meet whenever called by the Chairman.
17.6 The Chairman shall call the meetings and shall inform all members of
the Board of Directors of the meeting date, place, hour and agenda at
least twenty-four (24) days before the date of the meeting, not
counting the day of the notice and that of the meeting, all this
without prejudice to what has been or will be provided thereon by
law.
17.7 The Board of Directors may pass its resolutions by correspondence,
provided, that the votes on each items of the agenda are confirmed by
tested telex, cable or by registered mail.
17.8 The detailed regulations of the organization and activity of the Board
of Directors shall be established by the Board of Directors in the
By-laws of the Board of Directors.
17.9 The members of the Board of Directors for the first business year of
the Company are listed in Annex 2.
ARTICLE 18
SUPERVISORY BOARD
18.1 The Supervisory Board shall consist of at least five (5) members and
at most eleven (11) members, elected by the Shareholders' Meeting for
three (3) business years, except the first Supervisory Board
designated by the founders. The duration of the first Supervisory
Board shall be the first business year of the Company. Members of the
Supervisory Board may be re-elected.
No member of the Board of Directors nor persons employed by the
Company, except for the case provided for in section 12 (l) of the
Company Act, can be elected to the Supervisory Board.
18.2 The members of the Supervisory Board shall elect a Chairman among
themselves. The Chairman shall be elected for a period of one (1)
business year and may be re-elected. The Supervisory Board shall also
elect one Deputy-Chairman from their midst.
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18.3 The Supervisory Board may be called by the Chairman, either on his
own initiative, at the request of the Board of Directors or at the
request of two members of the Supervisory Board. The Supervisory
Board shall meet at least once a year.
18.4 The Supervisory Board may pass resolutions by correspondence provided
that all members confirm their vote on such resolutions by tested
telex, cable or registered mail.
18.5 The Supervisory Board shall deliver a report on its observations and
proposals at least once a business year to the Shareholders' Meeting.
The Supervisory Board shall assume the obligation of reviewing the
annual balance sheet and provide its opinion thereon to the
Shareholders' Meeting.
18.6 The Supervisory Board shall establish its own by-laws subject to the
approval of the Shareholders' Meeting.
18.7 The members of the Supervisory Board for the first business year of
the Company are listed in Annex 3.
ARTICLE 19
POWERS OF THE SUPERVISORY BOARD
19.1 The Supervisory Board shall supervise whether the activities of the
Company are in compliance with the laws in force, the Deed of
Incorporation and the resolutions of the Shareholders' Meeting.
ARTICLE 20
CONFLICT OF INTEREST
20.1 Should the interests of the Company be or become in conflict with the
personal interest of a member of the Supervisory Board or of the Board
of Directors, his/her spouse, relative or any shareholder with which
he/she has an employment relationship, such member shall not
participate in deliberating on such matters and, further, shall
request the board meeting to take note of such conflict of interest in
the minute.
20.2 A member of the Board of Directors may not, without the Supervisory
Board's consent, engage in a competitive business or participate in a
competitive company as a partner or member of the governing body.
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20
ARTICLE 21
REPRESENTATION OF THE COMPANY
21.1 The representation of the Company shall be made in such a manner that
the person entitled to represent the Company shall undersign his or
her name to the written, pre-typed or pre-printed name of the Company,
according to his or her authenticated specimen signature as filed with
the Court of Registration.
21.2 The following persons may represent the Company:
(i) the Chairman of the Board of Directors and the Chief Executive
Officer of the Company acting individually;
(ii) any other two members of the Board of Directors acting
jointly;
(iii) any member of the Board of Directors acting together with an
employee so authorized by the Chairman of the Board of
Directors; or
(iv) any two employees acting jointly authorized by the Chairman of
Board of the Directors to represent the Company in certain
matters.
ARTICLE 22
BUSINESS YEAR, BALANCE SHEET AND STATEMENT OF INCOME
22.1 The business year of the Company shall coincide with the calendar
year. The first business year shall commence on the date of approval
of this Deed of Foundation by the founders and shall end at December
31 of that same year.
22.2 The Board of Directors shall draw up a balance sheet for approval of
the Shareholders' Meeting, a statement of income and explanatory notes
for the preceding business year, which documents shall form the annual
financial statements, as well as a detailed written report on the
Company's activities for that period and a proposal for the allocation
of the profit and distribution of dividends. These documents shall be
drawn up in Hungarian and English languages and shall be in accordance
with Article 23 and the generally accepted international accounting
principles and practices. Furthermore the Board of Directors shall
submit the annual financial statements as well as the report on the
Company's activities to the Auditor of the Company for examination.
22.3 The annual financial statements shall be signed by all members of the
Board of Directors.
22.4 The Board of Directors shall submit the annual financial statements,
the written report on the Company's activities for that period, the
proposal for the allocation of
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the profits and distribution of dividends, as well the report thereon
by the Auditor for examination to the Supervisory Board, no later than
March 15 following the completion of each business year.
22.5 Copies of the above-mentioned documents under Article 22.4 together
with a copy of the report of the Supervisory Board and the Auditor
shall be provided to the Shareholders no later than thirty (30) days
before the annual Shareholders' Meeting.
22.6 The Board of Directors shall publish the annual financial statement
within fourteen (14) days from tile date on which the Shareholders'
Meeting has approved the annual financial statements.
ARTICLE 23
THE ACCOUNTING OF THE COMPANY
23.1 The accounting of the Company shall be made in Hungarian language in
accordance with the Hungarian Act XVIII of 1991 on Accounting. In
addition, the Board of Directors shall also issue financial statements
in accordance with the generally accepted international accounting
principles and practices in English and Hungarian languages as
provided for in Article 24.2 above.
23.2 The books of the Company shall be kept in Hungarian Forints.
ARTICLE 24
DIVIDENDS - RESERVE FUNDS
24.1 The Shareholders' Meeting held within one hundred and twenty (120)
days after the end of each business year shall approve the annual
financial statements of the Company, allocate profits and declare
dividends.
24.2 The dividend, subject to the provisions in Article 4.3 above, shall be
distributed in proportion to the nominal value of shares; if shares
are not fully paid up, the dividends shall be distributed
proportionally to payments made on shares.
24.3 The Shareholders' Meeting may decide to make payable one or more
interim dividends during each year.
24.4 The Shareholders' Meeting shall decide upon the disposition of the
reserve fund according to the applicable Hungarian legislation.
24.5 The raising and use of other reserve funds in general shall be
determined by the Shareholders' Meeting.
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ARTICLE 25
ANNOUNCEMENTS OF THE COMPANY
25.1 The announcements of the Company shall be published in the daily
newspaper Nepszabadsag and in cases established by law in the Official
Gazette.
ARTICLE 26
TERMINATION
26.1 Unless the term specified in Section 2.1 above shall be extended in
accordance with Section 2.2 above, the Company will be terminated on
the fifteenth anniversary of the signing date of the Concession
Agreement.
26.2 Regardless of the term specified in Section 26.1 above the Company
terminates in case of:
(i) early termination of the Concession Contract; or
(ii) the Company goes bankrupt or is liquidated.
26.3 The assets of the Company remaining after the satisfaction of
creditors shall be paid back to the Shareholders in proportion to
their contribution to the share capital of the Company.
ARTICLE 27
INITIAL COSTS
27.1 Any fees and expenditures incurred in connection with the
establishment of the Company and with its registration shall be
reimbursed by the Company.
ARTICLE 28
LAW AND JURISDICTION
28.1 In the event of a dispute arising in connection with this Deed of
Foundation shall be finally settled by three arbitrators appointed and
proceeding according to the rules of the permanent Arbitration Court
of the Hungarian Chamber of Commerce.
28.2 The governing law shall be the Hungarian Law.
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28.3 The language of the procedure shall be English.
ARTICLE 29
OTHER PROVISIONS
29.1 The present Deed of Foundation and its Annexes were prepared both in
English and Hungarian languages. In case of dispute, the Hungarian
version shall prevail.
29.2 All documents, convening notices and other communications regarding
the matters as set out in the present Deed of Foundation shall be in
English and Hungarian languages and shall be delivered personally or
by registered mail, tested telex or cable to all parties concerned. In
case of dispute, the English version shall prevail.
Budapest, August 4, 1994
------------------------------------ -----------------------------
On behalf of ▇▇▇▇▇▇ Aircraft Sales On behalf of SFMT-Hungaro, Inc.
and Leasing Company ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ President
President
------------------------------------ -----------------------------
On behalf of Microsystem Telecom Ltd. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
President
Countersigned by:
67
ANNEX I
AUDITOR
Ernst & Young Kft.
1146 Budapest
▇▇▇▇▇▇▇ ut. 17.
Licence No.: KE-0016/92/XI
68
ANNEX 2
MEMBERS OF THE BOARD OF DIRECTORS
The first members of the Board of Directors
1.) ▇▇▇▇▇ ▇▇▇▇▇▇
2120 Dunakeszi
Mihaly utca 7.
Hungary
2.) ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 171.
Belgium
3.) ▇▇▇▇▇ Self
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
4.) ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ utca 44.
Hungary
5.) ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
6.) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
69
1
CONCESSION CONTRACT
FOR
THE PROVISION
OF
ERMES NATIONWIDE PUBLIC PAGING SERVICES
IN TEE REPUBLIC OF HUNGARY
EURO PAGING HUNGARY
CONCESSION COMPANY
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August 5th, 1994.
CONCESSION CONTRACT
FOR THE PROVISION OF ERMES NATIONWIDE PUBLIC PAGING
SERVICES
IN ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
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CONCESSION CONTRACT
FOR THE PROVISION OF ERMES NATIONWIDE PUBLIC PAGING
SERVICES
IN ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
This Concession Contract dated 15 August 1994 is entered into between
the Minister of Transport, Communications and Water Management acting
on behalf of the State of Hungary (hereinafter referred to as
"Minister") and the Euro Paging Hungary Concessions Company Limited by
Shares (hereinafter referred to as "Concession Company") founded by
the majority of members of Magyar Paging Consortium as the winner of
the ERMES Concession Tender, according to the terms and conditions set
forth below:
INTRODUCTORY COMMENTS
WHEREAS creation of conditions to implement and provide nationwide
public paging by way of subscriber's contracts is desirable within the
framework of the Act LXXII of 1992 on Telecommunications and the Act
LXXIII of 1993 on Frequency Management as well as the additional rules
of law,
WHEREAS the country needs, besides employing the domestic technics and
working sources, the involvement of foreign capital and the high
technical and management levels connected thereto in order to assure a
high technical level of nationwide public paging service to provide a
wide range service in order to join the ERMES International network,
WHEREAS the Minister of Transport, Communications and Water
Management of the Republic of Hungary exercising the power vested in
him by the Act XVI of 1991 on Concessions as well as the valid laws on
telecommunications, issued an international concession tender on
February 4, 1994 for two service providers according to which the
winners of the tender shall be liable by way of a Concession Company
established by them to provide two independent nationwide public
paging services of ERMES type for a period of fifteen (15) years, and
to create the technical, economic and financial conditions needed
thereto.
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WHEREAS the Minister evaluated the tenders submitted according to the
tender invitation and announced the result thereof on April 29, 1994 in
the presence of a notary public where Magyar Paging Consortium has
been declared as one of the winners of the tender and was requested to
conclude the relevant Concession Agreement latest by May 6, 1994.
WHEREAS the Concession Agreement was duly concluded on May 6, 1994,
between the Minister and Magyar Paging Consortium which took legal
effect from April 29, 1994, on the basis of which Magyar Paging
Consortium has duly transferred the sole concession fee payable under
the Concession Agreement for the Concession rights,
WHEREAS the Magyar Paging Consortium, pursuant to its obligations
under the Concession Agreement, created the Concession Company with
its own majority participation which has duly accepted the Declaration
of Assignment of the Magyar Paging Consortium countersigned by the
Minister at the time of conclusion of the Concession Agreement, and
consequently the Concession Company became the legally entitled holder
of the concession rights and obligations,
WHEREAS the Concession Company is entitled and liable to conclude
Concession Contract with the Minister under the laws on concession and
telecommunication as well as on the basis of the Concession Agreement,
tender invitation and documentation, and approved offer of the Magyar
Paging Consortium by observing the fulfillment of the above listed
conditions.
NOW THEREFORE, in consideration of the foregoing contained herein,
the Minister on the one hand and the Concession Company on the other,
conclude the following:
CONCESSION CONTRACT
SECTION I
CONCESSION RIGHTS AND OBLIGATIONS
1.1 IMPLEMENTATION OF THE PROJECT AND PROVISION OF NATIONWIDE
PUBLIC PAGING SERVICES.
1.1.1 The Minister entitles the Concession Company by the present
Concession Contract to provide ERMES (European Radio Message
System) nationwide public terrestrial telecommunications
paging services on the territory of the Republic of Hungary
through the ERMES channel 11 (169,675 MHz) according to the
standard No. ETS 300 133-1....7, to implement and establish in
its own financing, the
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telecommunications network most suitable to operate it and provide the
services on the basis of contracts with subscribers (hereinafter
called "Project").
1.1.2 The concession period is fifteen (15) years as specified in Section
1.3.1.
1.1.3 The Concession Company, as a company duly authorized by the Minister,
is entitled and obliged to:
(i) enter into subscribers' contracts with the customers of
nationwide public paging services and collect the fees for the
services contracted in this way,
(ii) enter into network contracts concerning the necessary
interconnections with other telecommunication networks,
(iii) announce its intent to join the ERMES MoU within thirty (30)
days from the signing of the present Concession Contract, and
then to duly undersign the MoU Agreement as soon as possible,
as well as to comply with the rights and obligations under
such membership,
(iv) establish the technical conditions for supplying international
roaming services and enter into agreements with other ERMES
service providers to offer domestic and international roaming
under the conditions set forth by the ERMES MoU.
1.2 FREQUENCY USAGE DURING THE CONCESSION PERIOD
The Concession Company shall be exclusively entitled to use the ERMES
11 channel on the 169,675 MHz transmission frequency during the period
stipulated in Section 1.3.1
1.2.2 For the effective use of this frequency specified in Section 1.2.1,
the Concession Company shall apply for all the necessary licenses on
the basis of the Act on Frequency Management, and shall comply with
the conditions on use and control of frequencies as detailed in
Section 3.3 of the Concession Contract as well as to pay the fees
therefor.
1.2.3 The Concession Company may claim other frequencies (channels) for
ERMES use depending on the requirement of ERMES traffic and/or in case
of eventual collisions between the frequency coordination in the
border area, or in case of difficulties. In such cases, the Concession
Contract shall also be extended appropriately following the proposal
of the Concession Company.
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1.3 THE CONCESSION PERIOD
1.3.1 The Concession Company is granted the concession rights for fifteen
(15) years for providing the services specified in Section 1.1.1. The
concession period commenced on April 29, 1994, and will expire on April
29, 2009.
1.3.2 In case of satisfactory services, the Minister shall not issue a new
concession tender and may extend the validity of the Concession
Contract by the half of the period specified in Section 1.3.1 without
any tender invitation. The procedure, prior to the extension is
regulated in Section 14.2 of the Concession Contract.
For the purposes of the present Section 1.3.2, "Satisfactory Services"
shall be deemed to have been provided if (i) the service provided has
met the requirements of the standard No. ERMES 300 ETS 133-1...7, (ii)
the Concession Company has met the coverage requirements specified in
Section 4.1 and (iii) the Concession Company's subscriber contracts
are in accordance with the TT Telecommunications Act and the PT
Hungarian Civil Code.
1.4 THE CONCESSION FEE
1.4.1 With regard to the liability specified in Section 4.1 of the
Concession Agreement, the Concession Company and/or the Magyar Paging
Consortium undertakes to pay the concession fee in a lump sum of the
amount of 2,000,000 USD latest by May 6, 1997, to the account of the
Communications Fund in the following installments:
(i) 1,200,000 USD has been paid by the Consortium in May 1994; and
(ii) 800,000 USD shall be paid by the above deadline.
Account Number:
Orszagos Takarekpenztar es Kereskedelmi Bank Rt.
Pest-Buda
Kereskedelmi Banki Fiok, Vallalkozasi Iroda
1051 Budapest,
Bajcsy-Zsilinszky ut 24.
MNB 217-98089/▇▇▇-▇▇▇-▇▇▇
1.4.2 Over and above the lump sum concession fee, the Concession Company
shall pay a yearly concession fee for the use of the concession rights
to the relevant account number of the Communications Fund as follows:
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(i) From the start of the first year to the end of the fifth year
of the Concession, an amount equal to one per cent (1%) of the
Concession Company's yearly Gross Revenue (VAT not included)
earned by the provision of nationwide public paging services.
(ii) From the beginning of the sixth year to the end of the
Concession period, an amount equal to three per cent (3%) of
the Concession Company's yearly Gross Revenue (VAT not
included) earned by the provision of nationwide public paging
services, including the possible execution thereof.
The Concession Company will pay the above concession fees yearly to
the account number of the Telecommunications Fund mentioned above.
For the purposes hereof, the term "Gross Revenues" shall mean the
aggregate amount of subscribers' fees and revenues earned by the
provision of nationwide public paging services less the costs
associated with the provision of such services as computed according
to the Hungarian accounting rules.
SECTION 2
THE CONCESSION COMPANY
2.1 PRINCIPAL DATA OF THE CONCESSION COMPANY
2.1.1 The Concession Company has been created by way of a closed
foundation process. The responsible manager of the Concession Company
submitted the Deed of Foundation thereof for registration at the Court
of Registration on August 4, 1994 under No.▇▇-▇▇-▇▇-▇▇-▇▇.
2.1.2 The initial registered capital of the Concession Company is
200,000,000 HUF, by way of a cash contribution.
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2.1.3 Share of the members of the Magyar Paging Consortium in the Concession
Company are as follows:
▇▇▇▇▇▇ Aircraft Sales and Leasing Company Ltd.: 25% 51 shares
Microsystem Telecom Rt.: 5% 10 shares
SFMT-Hungaro Inc.: 50% 98 shares
Total: 80% 159 shares
2.1.4 Over and above the activity for providing nationwide public paging
services subject to concession, the Concession Company may include in
its sphere of activity the following activities:
* other telecommunications services including local and regional
paging, data transmission and voice mail services,
* sale, maintenance and repair of telecommunications and
computer equipment,
* computer and application services,
* measurement and safety engineering services,
* general technical development services,
* telecommunications research and development,
* organization, implementation and general construction
activities relating to investment projects and building
maintenance,
* telecommunications courses and other related forms of
telecommunications training.
2.2 RESTRICTIONS REGARDING PARTICIPATION IN THE CONCESSION COMPANY,
CHANGES IN THE OWNERSHIP SHARE IN THE CONCESSION COMPANY.
2.2.1 The Concession Company covenants to meet the following restrictions
and stipulations up to the end of the concession period.
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(i) Neither any natural person nor legal entities and economic
associations being shareholder in the Concession Company can
be a shareholder at the same time in the
"EasyCall Hungary Concession Company"
(ii) At least 25 percent (25%) + 1 (one) share of the stock capital
of the Concession Company shall remain in the ownership of
legal entities or economic organizations owned by a
Hungarian majority or natural persons registered in Hungary
till the end of the concession period.
(iii) The initial and substantial shareholding position should not
be transferred or otherwise assigned without the prior
approval of the Minister. The Minister shall only approve such
transfer or assignment if he is convinced of the capability of
the Concession Company both legally and financially as well as
professionally to perform the liabilities under the Concession
Agreement.
It is considered to be a substantial change incurred in the
ownership share and structure which affects more than five
percent of the voting shares in the Concession Company. This
stipulation is also valid in case if the total amount of the
consecutive transfers of shares reaches the permitted 5
percent level.
2.2.2 Non-voting shares of the Concession Company may be transferred or
otherwise assigned without the prior approval of the Minister.
However, the Minister must be notified of any such transfer or
assignment involving more than five percent (5%) of the share capital.
2.2.3 The Concession Company shall continue to control whether its ownership
structure corresponds to the conditions contained in this Concession
Contract. Based on the authorization of the Minister, the Communication
Chief Directorate is at any time entitled to examine the structure of
ownership. If either the Concession Company or the Communication Chief
Directorate observe any change in the structure of ownership in which
the Concession Company fails to meet the conditions contained in the
tender relating to Hungarian ownership ratio of at least 25% plus one
share, the Minister shall oblige the Concession Company - setting a
deadline of two (2) years - to effect appropriate change in the
structure of ownership. If the Concession Company fails to meet its
obligation to report on time, the Minister may include the period of
delay in the non-extendable deadline of two (2) years. If the
Concession Company fails to comply to the notice of the Minister
issued in this respect, the Minister may terminate this Concession
Contract.
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2.3 LIABILITIES OF THE CONCESSION COMPANY IN CONNECTION WITH PROVIDING
INFORMATION AND DATA.
2.3.1 The Concession Company shall be liable to inform the Minister prior to
any essential change in the company's ownership structure and/or any
change in the position of General Manager or Financial Manager as well
as in the position of any responsible managers.
2.3.2 Within at least 180 days from the end of the fiscal year the
Concession Company will be liable to submit to the Minister all
financial statements and audit reports stipulated by the Hungarian
accounting laws, containing details of:
(i) financial results of the Concession Company
(ii) issues on debt services
(iii) changes in the Company's assets
for the relevant fiscal year.
2.3.3 The Concession Company will be liable to inform the Minister by
quarterly periodical reports within 60 (sixty) days after the relevant
quarter on the quantity of services to be rendered upon the concession
rights, the degree of territorial coverage (with services), and any
factors materially and adversely affecting or which could so affect
the Concession Company's business and operations, or its financial
status.
2.3.4 For the purpose of the Minister's supervision regarding the
fulfillment of network contracts, the Concession Company will be
liable to perform the following:
(i) keeping continuous records on the performance data of the
ERMES network and providing data for the relevant
communications authorities.
(ii) assuring access to the quantitative and qualitative data base
of the nationwide public paging service to the communications
authorities and be of assistance to them by providing
technical and other means in the course of their controlling
activities.
2.3.5 The Minister is entitled to publish his statements relating to the
quality of the nationwide public paging services.
(i) Before publishing these statements, the Concession Company
has to be informed thereof. The Concession Company is
entitled to make its own comments on the proposed statements.
The statements will not be published without prior approval
of the Concession Company.
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(ii) Other statements in connection with the operation of the
Concession Company shall only be published with prior
approval of the Concession Company unless, publication is
necessary according to the Minister's opinion because of
public interest on the provision of public paging services.
2.3.6 The Concession Company shall inform the public about the development
of implementation of the project at least in two national daily papers
and in one daily paper published in the region where the actual
implementation is taking place.
2.4 LIABILITIES IN CONNECTION WITH THE OPERATION OF THE CONCESSION COMPANY
2.4.1 The Concession Company shall be operated according to the Hungarian
Laws and Regulations.
2.4.2 The Minister (his Representative) confirmed that the Deed of
Foundation as a document of incorporation of the Concession Company
includes the following requirements as stipulated in Section 5.
subparagraph 2 of Act No. LXXII on Telecommunications:
(i) restrictions and requirements relating to the ownership
structure of the Concession Company,
(ii) the timing of the quality, quantity, technical performance and
requirements as well as any other changes thereof
(iii) the terms of cooperation with other telecommunications service
providers
(iv) methods for fixing tariffs and terms and conditions of any
changes which are not regulated by law,
(v) nationwide and permanent character of performing activity
(providing services),
(vi) majority share ownership of the members of Magyar Paging
Consortium existing till the end of the concession period.
2.4.3 Financial resources required for the construction and operation of the
Project shall be raised by the financing of the Concession Company by
way of registered capital and shareholder's loans and/or bank loans
without obtaining any governmental assistance.
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2.4.4 Concession rights are prohibited;
(i) to be transferred to any third person
(ii) to be allowed for anybody's temporary use in advance
(iii) to be debited or given as collateral or mortgaged
Incomes and future revenues of the Concession Company may cover the
creditors' claims and/or collaterals. Except for the concession right,
all assets, revenues, and/or shares of the Concession Company may be
mortgaged, pledged, charged or assigned to third parties.
The above prohibitions do not exclude the employment of
subcontractors. Economic activities associated with the exercising of
any of the concession rights may be subcontracted (e.g. marketing,
commercial distribution, sales, technical services, repair and
maintenance).
2.4.5 Not later than four (4) months after the effective date of this
Concession Contract, the Concession Company shall submit a proposal
for the system of accounts to the Minister in accordance with Act No.
XVIII of 1991 on Accounting.
2.4.6 The Concession Company shall provide access to the Minister to control
the earnings and expenditures in connection with performing the
activity, subject of the concession, serving for the basis of the
payment of the yearly concession fee.
2.4.7 If the Concession Contract for the Provision of Nationwide Public
Paging Services terminates for any reason as specified in Sections 13.4
and 13.5 of the Concession Contract, the then current shareholders of
the Concession Company shall liquidate the Concession Company
according to the rules set forth in Act VI of 1988 on Economic
Associations and Act No. IL of 1992 on Bankruptcy, Liquidation and
Final Settlement. The Concession Company, however, shall not be
liquidated and the Nationwide Public Paging Services shall
continuously be rendered on the same standard until the new Service
Provider nominated by the Minister commences to provide the services.
This obligatory period (for carrying on the service provision), should
not exceed six (6) months starting from the termination of the
Concession, and in no event shall the Concession Company be
responsible for payment of a concession fee with respect to the
obligatory period, unless the Parties agree otherwise.
In case of expiry or termination of the Concession Contract for any
reason as specified in Sections 13.4 and 13.5 of this Concession
Contract, the equipment provided for the Concession Company and placed
at the network's disposal by the members of the Concession Company
shall remain in the ownership of the Concession Company.
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SECTION 3
ESTABLISHEMENT OF THE NATIONWIDE PUBLIC PAGING NETWORK,
INFRASTRUCTURE OF THE ERMES NETWORK AND
ITS INTERCONNECTION WITH OTHER NETWORKS, PERMITS OF
AUTHORITIES,
RIGHTS TO USE REAL ESTATE PROPERTY.
3.1 ESTABLISHMENT OF PUBLIC PAGING NETWORK
3.1.1 The Concession Company shall, at its own cost and risk, implement
(design, construct) the network composed of the elements PNC (Paging
Network Controller), PAC (Paging Area Controller), BS (Base Station)
and other necessary equipment as specified in the standard No. ETS 300
133-1...7 and necessary for the provision of the Nationwide Public
Paging Services.
3.1.2 The Concession Company shall, at its own cost, establish the technical
infrastructure providing fix placed interconnections between the
single elements of the ERMES network either by use of the existing
telecommunications network on a contractual basis (network contracts),
and/or by implementation of its own network providing a fix placed
interconnection. The Concession Company as an ERMES Service Provider
may share its fixed placed telecommunications network equipment with
other service providers, and the transfer ways of connecting them,
under the condition that this sharing may not result in a significant
restriction in the competition.
3.2 INTERCONNECTION OF THE ERMES NETWORK WITH OTHER NETWORKS
3.2.1 In order to establish the ERMES network, the Concession Company shall,
in time, initiate with the service provider of the backbone
telecommunications network operating in the given area the
interconnections between the access points of the Paging Network
Controller(s) (PNC) and the secondary exchange(s) of the
telecommunications backbone network located nearest to the PNC. The
interconnection shall be effected through a line established between
the secondary exchange and the ERMES Paging Network Controller and
leased by the ERMES Concession Company from the service provider of
the backbone telecommunications network under network contracts to be
entered into under legal liability on the part of such a service
provider.
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Interconnection and commissioning costs of the rental lines shall be
borne by the Concession Company. Access to the ERMES networks cannot
entail the change of the associated other public telecommunications
networks except for the establishment of the interconnection
conditions of the fix placed ERMES network (connection circuit and
switching field capacity).
The 158/1993 Governmental Decree shall apply to the interconnections.
3.2.2 The Minister shall do his best efforts to assist the Concession
Company in obtaining such a number of high quality digital lines as
the Concession Company believes is reasonably appropriate for the
provision of services. In addition, the Minister shall assist the
backbone telecommunications service provider to issue such offers
which shall be identical in service and tariff conditions for both
ERMES Concession Companies when entering into the network contracts
for the interconnection on a rented line basis between the ERMES
networks and the backbone networks.
3.3 PERMIT OF AUTHORITIES
3.3.1 The Concession Company agrees that the Concession Contract does not
replace either the frequency assignment decision, radio license as
well as the conceptual and final construction permits needed for the
provision of the services as stipulated or the type approval needed
for the subscribers' equipments.
3.3.2 At the time of the establishment of the ERMES network, the Concession
Company shall obtain the following permits from the Chief
Communications Directorate:
(i) Frequency assignment decision specified in the present
Concession Contract for the ERMES channel 11 through the
169,675 MHz frequency. The Concession Company shall
simultaneously present, with the application for a frequency
assignment, a frequency plan containing the following data in
accordance with the CEPT T/R 25-07 recommendations to the
Chief Communication Directorate for approval:
* radio frequency
* place
* effective radiated power (ERP)
* reception region
* height of the antenna
* radiation direction
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(ii) Radio license for use and operation of the implemented Base
Station.
(iii) Type approval for the subscribers' equipment used in the ERMES
network. Under this obligation, the Concession Company shall
apply for issuing Hungarian type approval (in the form of a
certificate), for the subscriber's equipment to be used in the
ERMES network, marketed and distributed by the same.
3.3.3 For the fixed placed, wired and wireless ERMES network, the Concession
Company shall obtain the following:
(i) the conceptual construction permit
(ii) final construction permit
(iii) permit for use
3.4 RIGHTS OF USE OF REAL ESTATE PROPERTY AND BUILDING
To enable the Concession Company to fulfil its obligations with
respect to the introduction and provision of the ERMES nationwide
public paging services, the Concession Company shall be granted the
following special rights in accordance with paragraphs 26-28 of Act
LXXII of 1992 on Telecommunications.
(i) Upon prior notice the owner (trustee or occupant) of the real
estate property shall endure that:
(a) the authorized representative of the ERMES
telecommunications service provider enters the
territory of the real estate to carry out maintenance
and eliminating failures, defects.
(b) the ERMES public telecommunications service provider
may, if no other technical solution is possible,
(as certified by an authorized declaration), install
communication equipment, wires and antennas on,
above or under the real estate building or
establishment concerned;
(c) in connection with the above subparagraph (a), the
owner of the real estate is entitled to an
indemnification corresponding to the extent of the
restriction, and as stipulated in subparagraph (b),
the owner may enforce the rights fixed in Section
108, subsection (2) of the Hungarian Civil Code. The
applicant for expropriation shall also procure the
opinion of the communication authority concerned;
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ANNEX 3
MEMBERS OF THE SUPERVISORY BOARD
The first members of the Supervisory Board
1.) ▇▇▇▇▇▇ ▇▇▇
1134 Budapest
Vaci ut 37.
Hungary
2.) ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
Balaton utca 22-24.
Hungary
3.) ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
1138 Budapest
▇▇▇▇▇ utca 12.
Hungary
4.) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇
Arnyas utca 38-40.
Hungary
5.) ▇▇. ▇▇▇▇▇▇ Miklos
1136 Budapest
▇▇▇▇▇▇ utca 46.
Hungary
6.) ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
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Exhibit 5.3.2
VOTING TRUST AGREEMENT
THIS AGREEMENT is entered into is of August 5, 1994, among
SFMT-Hungaro Inc. a Delaware, U.S.A. corporation having its principal offices
at ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ("SFMT"), ▇▇▇▇▇▇ Aircraft
Sales and Leasing Company, a Delaware, U.S.A. corporation having its principal
offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ("▇▇▇▇▇▇"),
Microsystem Tavkozlesfejleszt es Szolgaltato Telecom Rt., a Hungarian company
limited by shares with its principal offices at 1122 ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇, ▇▇▇▇▇▇▇ ("Microsystem"), and ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, a Hungarian citizen
residing at 21-20 Dunakeszi, Mihaly utca 7 ("▇▇. ▇▇▇▇▇").
WHEREAS: SFMT, ▇▇▇▇▇▇ and Microsystem (together the "Founders")
have entered into a Joint Venture and Shareholders Agreement as of August
5, 1994, (the "Shareholders Agreement") to establish a Hungarian company limited
by shares to be called EURO Szemelyvhivo Magyarorszag Koncesszios Rt. (the
"Concession Company"), for the purpose of signing a Concession Contract with
the Minister of Transport, Communications and Water Management for the
provision of a nationwide public paging service in Hungary, and the Deed of
Foundation of said Concession Company must be filed with the Budapest Court of
Company Registration on this same date;
WHEREAS: pursuant to the applicable Hungarian law and the tender
invitation, 25% plus one share of the Concession Company must be held by
Hungarian majority owned legal entities and/or natural persons of Hungarian
nationality ("Hungarian Shareholder(s)");
WHEREAS: a Hungarian Shareholder whose shares in the Concession
Company together with those of Microsystem would make up the required 25% plus
one share has not been able to subscribe to the Deed of Foundation by the filing
deadline:
AND
WHEREAS: the Founders have requested ▇▇. ▇▇▇▇▇, and ▇▇. ▇▇▇▇▇ has
agreed, to subscribe to the required shares as a trustee for the eventual final
Hungarian Shareholder(s):
IN CONSIDERATION of the foregoing premises and the mutual undertakings
hereinbelow set forth, the parties hereto hereby agree as follows:
1. ▇▇. ▇▇▇▇▇ will sign the Deed of Foundation of the Concession Company
as a cofounder, subscribing to forty one (41) ordinary Class A voting
shares (the "Shares"), and pay in 30% of the nominal value of the
Shares amounting to HUF 12,300,000 (twelve million, three hundred
thousand Hungarian forints).
2. SFMT will cause its Hungarian subsidiary, SFMT-Montana Telecom Kft
("SFMT-Montana") having its principal offices at 1134 Budapest, Vaci
utca 37, to advance the 30% of the nominal value of the Shares which
must be paid in at the time of the foundation on behalf of ▇▇. ▇▇▇▇▇
(i.e., HUF 12,300,000). Similarly, SFMT-Montana will advance the
remaining 70% of the value of the Shares (i.e., 28,700,000) in the
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event it becomes payable before the Shares are transferred to the
Final Purchaser in accordance with clause (b) of Section 4. Such
advances will constitute an interest free loan to ▇▇. ▇▇▇▇▇ which
shall be repaid as further set forth below.
3. ▇▇. ▇▇▇▇▇ will hold the Shares in trust for the benefit of the
eventual Hungarian Shareholder(s) who shall be designated to ▇▇. ▇▇▇▇▇
in writing by all three Founders (the "Final Investor"). ▇▇. ▇▇▇▇▇
expressly declares that he has no interest whatsoever in the Shares
held by him in trust for the Final Investor other than that of a bare
trustee, and that any right or income in respect of such Shares, do
not in any manner belong to ▇▇. ▇▇▇▇▇ but are the property of the
Final Investor.
4. ▇▇. ▇▇▇▇▇ agrees irrevocably and unconditionally to assign and
transfer the Shares to the Final Investor within three working days
from the date of the designation referred to in Section 3, provided
that the Shares are then in transferable form (e.g. interim shares of
Final shares). If at that time the Shares are still in a form not
transferable under Hungarian law (e.g. share subscription vouchers),
▇▇. ▇▇▇▇▇ will within the same deadline of three (3) working days from
the date of the written designation under Section 3, (a) issue to the
Final Investor in valid and binding form a use right (or usufruct,
i.e., "haszonelvezeti jog" in Hungarian) to the Shares effectively
allowing the Final Investor to receive all dividends and vote the
Shares at all corporate meetings of the Concession Company, and (b)
within three working days of the date the Shares become freely
transferable, assign and transfer full legal ownership with all
rights, title and interest in the Shares to the Final Investor,
in valid and binding form.
As an alternative to the provisions of clause (a) above, at the
request of the Founders ▇▇. ▇▇▇▇▇ shall (i) within the three day
deadline referred to in Section 4, assign to the Final Investor the
right to receive all dividends that may be declared and distributed
with respect to the Shares since the establishment of the Concession
Company, and (ii) promptly upon request, issue to the Final Investor
a proxy in due time for each corporate meeting, authorizing the Final
Investor to vote the Shares as it deems fit at each such meeting.
5. ▇▇. ▇▇▇▇▇ hereby covenants and agrees that except as contemplated by
this Agreement (or as directed by all of the Founders), ▇▇. ▇▇▇▇▇
shall not, and shall not offer or agree to, sell, transfer, tender,
assign, hypothecate or otherwise dispose of, grant a proxy or power
of attorney with respect to, create or permit to exist any security
interest, lien, claim, pledge, option, right of first refusal,
agreement, limitation on voting rights, charge or other encumbrance of
any nature whatsoever with respect to, the Shares, or, directly or
indirectly, initiate, solicit or encourage, any person to take any
action that could reasonably be expected to lead to the occurrence of
any of the foregoing.
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6. ▇▇. ▇▇▇▇▇ hereby further covenants and agrees that until such time as
the Final Investor is designated and assigned the rights as foreseen
under clause (a) of Section 4, ▇▇. ▇▇▇▇▇ will vote the Shares at any
corporate meeting of the Concession Company in accordance with the
instructions of SFMT, and whenever requested he will promptly execute
and deliver to SFMT or its appointee an individual proxy in valid and
binding form allowing SFMT or its appointee to vote the Shares as SFMT
may deem fit at any single corporate meeting.
7. The SFMT will require the Final Investor on the date of the transfer
to it of the Shares or of the assignment of use rights (whichever is
earlier) pursuant to Section 4, to pay the purchase price of the
Shares, which shall be equal to the amount of the subscription price
already paid in up to that date on behalf of ▇▇. ▇▇▇▇▇, directly to
SFMT/Montana, whereupon the corresponding loan to ▇▇. ▇▇▇▇▇ pursuant
to Section 3 shall be fully satisfied and cancelled.
8. SFMT hereby undertakes to reimburse ▇▇. ▇▇▇▇▇ for all costs and
expenses, and to hold him harmless and indemnify him for any and all
damages, losses, claims and liabilities of any kind whatsoever, with
the sole exception of penal liability for wilful personal misconduct,
that he may incur as a result of or in connection with his performance
of any provision of this Agreement.
Such reimbursement or indemnification shall include, without
limitation, full compensation for any and all excess tax liability (on
a "grossed up basis") that ▇▇. ▇▇▇▇▇ may incur as a consequence of
this Agreement.
The parties expressly confirm that neither ▇▇▇▇▇▇ nor Microsystem
shall have any liability under this agreement.
9. This Agreement, upon its signature by all parties, shall enter into
effect as of the date first above written, and it shall continue in
full force and affect until all of the Shares are effectively
transferred to the Final Investor(s) as contemplated under Section 4.
10. This Agreement may not be terminated by any party as long as the
Shares are held by ▇▇. ▇▇▇▇▇, provided however, that the Founders
acting jointly may order ▇▇. ▇▇▇▇▇ at any time to transfer the Shares
to one of them or to another person, with which order ▇▇. ▇▇▇▇▇ shall
promptly comply, and the Founders may then terminate this Agreement
effective as of the date of such transfer. The payment of the purchase
price and settlement of ▇▇. ▇▇▇▇▇'▇ loan hereunder will in such case
be handled in accordance with the principle laid down in Section 7,
and the provisions of Section 8 shall in any case survive the
termination or expiration of this Agreement for a period of three
years.
11. All notices and other communications required to be given under this
Agreement shall be in writing and deemed to have been duly given if
delivered personally, or by registered mail (return receipt
requested), or sent by intrenational courier delivery or facsimile
transmission, to the other parties at the respective address set forth
above (or
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to such other address as a party shall designate for itself by notice
of given in accordance herewith).
Any notice or other communication shall be deemed to have been given
on the date of receipt, as indicated by the receipt of confirmation.
12. Any dispute or disagreement between any of the parties arising out of
or in connection with this Agreement that cannot be amicably resolved,
shall be exclusively decided and finally settled by the Court of
Arbitration attached to the Hungarian Chamber of Commerce in
accordance with its Rules of Procedure. The place of the arbitration
shall be Budapest and the language English.
13. This Agreement shall be generally governed by Hungarian law, provided,
however, that to the extent the applicable Hungarian rule fails to
give full effect to any specific provision hereof, such provision
shall be interpreted, decided and enforced in accordance with the law
of New York State, without giving effect to its conflict of law
principles.
IN WITNESS WHEREOF the parties have executed this Agreement by their
duly authorized representatives, in Budapest, as of the date first
above written.
[ILLEGIBLE] [ILLEGIBLE]
SFMT-Hungaro, Inc ▇▇▇▇▇▇ Aircraft Sales
and Leasing Company
[ILLEGIBLE]
Microsystem Telecom Rt ▇▇▇▇▇ ▇▇▇▇▇▇
89
Exhibit 7.1.2
Preferential Dividend Distributions
Following is a sample calculation of the payment of the ▇▇▇▇▇▇ Premium Amount.
1. Assume (for purposes of illustration only) that the Company does not
declare a dividend in the first three years of operations. In year four the
Company is in a position to declare dividends, and the Distributable Amount
equals the HUF equivalent of $1,000,000. (US $ will be utilized for the
purposes of this illustration.)
2. $400,000, representing the first 40% of the distributable amount,
would be paid to ▇▇▇▇▇▇. The remaining $600,000 would be distributed according
to the following ratios:
▇▇▇▇▇▇ 45/194
SFMT 98/194
Microsystem 10/194
H Corporation 41/194
Accordingly, the $600,000 would be paid as follows:
▇▇▇▇▇▇ $139,175
SFMT $303,093
Microsystem $ 30,928
H Corporation $126,804
--------
TOTAL $600,000
3. After payment of the foregoing dividend, the ▇▇▇▇▇▇ Premium Amount
would be deemed reduced by $400,000 to $2,600,000.
4. The above procedure would be followed each year thereafter until such
time as ▇▇▇▇▇▇ has received the aggregate amount of $3,000,000. Thereafter,
dividends shall be distributed according to the following ratios:
▇▇▇▇▇▇ 51/200
SFMT 98/200
Microsystem 10/200
H Corporation 41/200
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(d) in the case of subsection (b), upon request of the ERMES
public paging service provider the authority - in public
interest - may establish easement or other rights of use;
(e) the representative of the ERMES public paging service
provider, being in charge of tasks connected with the entrance
to real estate properties, shall be supplied with the
documents needed for identifying themselves and verifying
their task;
(f) the ERMES public paging service provider is entitled to
provide ground mobile telecommunication service in the
territory of the country (Hungary), namely, on the surface, on
the rivers, on natural lakes and in their beds, as well as in
the tunnels of the railway, roads and underground.
(ii) If the construction, renewal, renovation or destruction of a building
requires the removal of telecommunication equipment - taking into
consideration the stipulations of separate legal rules - installed by
the ERMES public service provider, from the building or affixed land,
the ERMES service provider shall execute these works at its own cost
(iii) The permit of the municipalities, in Budapest the permit of City
Council shall be required for the construction of high rise facilities
for telecommunications purposes and during the process aspects of
landscape protection and historical-environmental preservation shall be
considered.
3.5 CERTAIN CONSEQUENCES DUE TO LACK OF LICENSES.
The parties agree that the unsuccessful procedure of obtaining the
above licenses can temporarily hinder the execution of the agreement
as described in Section 1.5. In such case the deadline schedule will
be extended accordingly by a time period corresponding to the
hindrance described above and the Minister will then act appropriately
at the time of the modification of the schedule.
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SECTION 4.
REQUIREMENT ON PROVIDING ERMES SERVICES
4.1 COVERAGE OF THE TERRITORY OF THE REPUBLIC OF HUNGARY BY THE PAGING
SERVICES
4.1.1 The Concession Company shall cover not less than 80% of the territory
of the Republic of Hungary by ERMES public paging services within 3
years from the conclusion of the present Concession Contract according
to the following schedule:
Coverage Deadline
-------- --------
Budapest 31.01.1995
Balaton and its environs 31.05.1995
County seats 30.09.1995
Highways, motor roads,
one-numbered main roads 31.01.1996
86% of the territory of the country
all cities 30.04.1996
4.1.2 The professional services, however, have to include the provision of
the international roaming criteria from the very beginning both for
domestic subscribers and for foreign subscribers residing in the
territory of the Republic in Hungary from countries where the ERMES
system is in operation, subject to the technical compatibility as
interpreted by the ERMES MoU.
4.1.3 The Minister may agree to provisional postponement of the performance
of the international service provision obligations if, in the course
of the international coordination, restrictions in the frequency
applications become necessary by reason of any provisional
difficulties.
4.2 LIABILITIES IN CONNECTION WITH PROVIDING OF SERVICES
4.2.1 The services shall be provided for the subscribers for 24 hours on
each day of the week.
4.2.2 The Concession Company shall be liable to provide and make its
functioning and already licensed services available without any
distinction for those applicants who are either in the possession of
receivers, type-approved by the competent Hungarian authorities, or
intend to purchase or rent such receivers and conclude the
subscriber's contract. The roamer subscribers can use any ERMES
receivers in the territory of the Republic of Hungary, provided that
the type thereof has been approved in the country where the ERMES
subscription is situated.
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4.2.3 The Concession Company undertakes that in the periods of implementation
of the ERMES network as specified in Section 4.1.1 rate of the calls
interpreted on the basis of the standard ETS 300 133-1...7 shall be
above the minimum criteria declared in the standard No. ETS 300
133-1...7.
4.2.4 The ERMES Concession Company shall be liable to enter into
subscriber's contracts with proper contents concerning the subscribers
utilizing the ERMES Nationwide Public Paging Services satisfying the
provisions of paragraphs 8 to 13 of Act LXXII. of 1992 on
Telecommunications and the relevant legal rules.
The ERMES Concession Company as service provider shall publish its
general contractual terms and conditions and regulations concerning
the services following their approval by the Chief Communications
Directorate together with the fees to be charged for the subscribers
and not specified by the price-law.
4.2.5 If not stipulated otherwise by the law, the ERMES Concession Company
shall provide equal treatment to subscribers being in equal position,
requesting the provision of the services in the same time, in
connection with conditions and fees of the nationwide public paging
services.
4.2.6 The ERMES Concession Company may interrupt the provision of ERMES
nationwide public paging services only with prior written consent of
the Minister and giving notice to the subscribers except those cases
when such interruption occurs due to reasons beyond the reasonable
control of the ERMES Concession Company.
4.2.7 The ERMES Concession Company covenants to carry on maintenance works
on the ERMES network without causing any disturbance for the
customers.
4.2.8 In order to overcome martial law, emergency or natural disasters and
the consequences thereof jeopardizing the personal and material safety
of the citizens, the Minister may, upon specific authorization by the
Parliament temporarily restrict or suspend the radio
telecommunications services. The ERMES Concession Company shall
cooperate with state organs, other telecommunications service
providers and telecommunications network operators, in accordance with
the provision of the law under guidance of the Minister and other
ministers concerned in the setting up and execution of an active plan
to be applied under such circumstances.
In case of emergency, war or provisional emergency, as well as in the
interest of public security, the Concession Company shall act
according to the instructions of the Minister within the framework
defined by law.
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4.2.9 The ERMES Concession Company shall provide technical facilities for
the control of voice and non-voice communication of certain groups of
subscribers in compliance with the prevailing laws and Section 8.2.5
of the present Contract. This control shall possibly cover the whole
service area covered by this Contract for the service provider with
all categories of subscribers and all communication services which are
included in the facilities given to the subscribers.
4.3 PERMANENT PROVISION OF TECHNICAL AND PERSONNEL CONDITIONS, QUALITY OF
THE SERVICES
4.3.1 In the interest of smooth operation of the services, the Concession
Company shall provide the necessary personnel and material conditions
thereof, and make possible the continuous and reliable use of the
services for both domestic and foreign subscribers.
4.3.2 The Concession Company shall implement and operate the network of the
ERMES services in a way, regarding both the methodical and operational
point of view that it could meet the requirements of standard ETS 300
133-1...7, as well as the norms and recommendations of ERMES MoU.
4.3.3 The Nationwide Public Paging system to be implemented by the
Concession Company shall be suitable to provide the basic services
("voice" only, "numeric", "alphanumeric" and "transparent" data),
messages and the supplementary services as specified in the standard
ETS 300 133-1...7. The mandatory and optional scope of the basic and
supplementary services as well as the phases of their implementation
are defined by the ERMES MoU (Memorandum of Understanding), on the
basis of the ETS 300 133-1...7 norm.
4.3.4 The Concession Company shall include the scope of available ERMES
services in the subscribers' contract to be concluded with the
customers. The quality of the services shall be determined by the
ratio of message delivery time and the call success rate interpreted
on the basis of the ETS 300 133-1...7 Norm.
4.3.5 The Concession Company shall, in accordance with the service
availability individually defined in the subscriber's contracts in
accordance with the actual geographical coverage of the ERMES services
and within the framework of its nationwide public paging services
actually provide paging services within the following territories.
* local accessibility
* regional accessibility
* nationwide accessibility
* international accessibility
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The subscriber utilizing paging services on the basis of the
subscriber's contracts shall also be able to utilize roaming services
in the areas of other ERMES providers, where the ERMES Service
Providers concerned have already concluded the network contracts with
each other on basis of provisions and instructions of the ERMES MoU
and EC ONP (European Communities Open Network Provision).
4.4 BASIC REQUIREMENTS CONCERNING THE ERMES RECEIVERS.
4.4.1 The ERMES Concession Company being the Hungarian distributor of the
subscribers' receivers, shall have to have the appropriate permits and
licenses required and issued by the Hungarian Authorities for a
distributor, as well as a technical services network to supply the
maintenance and repair services established in proportion to the
number of the purchased receivers within the area covered by the ERMES
paging telecommunications services.
4.4.2 The Concession Company shall not be entitled to sell or otherwise
commercialize for the use in its own ERMES network any paging
receivers manufactured by any economic association which has any
direct or indirect shareholding in the ERMES Concession Company.
Except those paging receivers in the price of which the added value of
Hungarian origin is or above 50% of the net price of the final
product.
4.4.3 The Concession Company shall not be entitled to introduce or propose
restricting measures either directly or indirectly in order to prevent
the utilization in its ERMES network, of any such paging receiver
equipment type-approved for the utilization in the territory of the
Republic of Hungary.
4.4.4 The Concession Company may distribute subscriber's receivers without
any restrictions, and taking into account the issues specified in
Section 4.4.2, but the following shall be kept:
(i) Supply of any ERMES service should not be dependent upon the
purchase or rental of a specific type of receiver or,
(ii) Costs and fees of receivers provided by the Concession Company
shall not be part or portion of the costs and fees of any
ERMES paging service.
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4.5 THE MANDATORY CHARACTER OF TECHNICAL SPECIFICATIONS
4.5.1 The document on "Service, technical and network interconnection
requirements for the establishment and provision of nationwide public
paging services" shall be an integral part to the present Concession
Contract during the entire concession period.
4.5.2 The Concession Company covenants that it shall, for the entire period
of the validity of the Concession Contract comply with and enforce the
requirements put forward in the norms of standard ETS 300 133-1...7
and in the documents of ERMES MoU in the course of implementation,
provision and development of the ERMES paging telecommunications
services.
4.5.3 Any change or modification of the service, technical and network
interconnection requirements attached as Annex 1. to the present
Concession Contract, as well as the requirements of documents as
specified in Section 4.5.2, shall only be effective with the written
consent of the parties hereto, and without any harm in the interests
of the other ERMES Paging Telecommunications Service Providers.
Only international recommendations, standards and specifications, as
well as significant changes occurred in the structure and/or system of
the telecommunications networks interconnected with the ERMES service
provider can served for basis for this change.
SECTION 5
FEES PAYABLE TO THE AUTHORITIES IN CONNECTION WITH
THE ERMES SERVICES
5.1 FEES CONNECTED TO THE FREQUENCIES
Over and above the concession fees, the Concession Company shall be
liable to pay a yearly frequency reservation and frequency usage fee
for the Telecommunication Chief Directorate as specified in the ERMES
concession tender documentation (see Annex 2.) which shall be later
regulated by law, by a governmental decree or by the order of the
Minister of Transport, Communication and Water Management and
eventually by the order of the Minister of Finance.
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5.2 OTHER LICENSE, INSPECTION AND PARTICIPATION FEES PAYABLE TO
AUTHORITIES
5.2.1 The ERMES Concession Company shall pay the following fees during the
implementation and operation of the Network:
(i) the fees and duties in connection with the conceptual
construction permits, the final construction permits as well
as the permits for use needed for the implementation of the
network,
(ii) the control fees in connection with the quality supervision of
the ERMES public paging telecommunications network.
5.2.2 The yearly fees shall be payable to the Telecommunication Chief
Directorate for its relevant bank account latest by 31st March of
the year following the relevant one. The Concession Company shall be
liable to quarterly provide all background data used for calculating
the relevant fees, for the Minister and the Telecommunication Chief
Directorate.
5.2.3 Taking into account that both ERMES Concession Companies shall join
the ERMES MoU within six (6) months after their registration and
participate in its activity until the end of the concession period,
the Concession Company shall duly pay the proportionate participation
fees.
SECTION 6
REGULATION ON OFFICIAL TARIFFS AND FEES,
NETWORK AND SUBSCRIBER FEES
OF ERMES PAGING SERVICES
6.1 LEGAL BACKGROUND FOR REGULATION ON OFFICIAL FEES AND TARIFFS, CHANGE
IN FEES AND TARIFFS.
6.1.1 According to the Act No. LXXXVII of 1990 on Price Management, the
tariffs concerning the telecommunications services are officially
maximalized within the frame of which the Concession Company is
entitled to calculate fees and packages on fees and following the
approval of the Minister to put them forward in the subscribers'
contracts.
According to subparagraph (1) of Section 40 of Act No. LXXII of 1992
on Telecommunications, the tariffs of public paging telecommunication
services subject to concession and the methods of their modification
shall be stipulated in a common order issued by the Minister and the
Minister of Finance.
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The Minister takes the obligation that during preparing the order he
will take into consideration the fees and tariffs proposed in the
approved offer regarding the fact that at the time of signing the
Agreement, there was no legal rules stipulating the fee of such a
service.
6.1.2 The modification of official tariffs valid at the commencement of the
ERMES paging services may be effected on the basis of cost analysis as
well as of economic profitability study prepared by the service
provider in compliance with legal rules relating to the official
pricing.
The intention for such modification in tariffs shall be submitted to
the Minister sixty (60) days prior to the date of the planned entry
into force - along with the detailed supporting calculations -. The
Minister may refuse to approve the proposed tariffs if:
(i) the calculations are numerically incorrect
(ii) the proposed tariffs are in conflict with the relevant legal
rules on pricing.
The approved tariffs shall be announced in a decree by the Minister,
in agreement with the Minister of Finance, which shall be published by
October 31, 1994.
6.2 NETWORK AND SUBSCRIBER'S FEES OF ERMES SERVICES.
6.2.1 On the basis of the network contract, the ERMES Public Paging Services
Concession Company shall pay a one-time and a monthly interconnection
fee for the leased (rented) line service to the service provider of
the telecommunications backbone network, in the value corresponding to
the method of calculation specified by the Minister, considering the
30/1991 (XI.21.) KHVM order as a base.
6.2.2 Depending on the circulation and on the basis of a network contract, a
connection fee may be charged for the Concession Company for the
transfer - i.e. transfer fee of the telecommunication-way through
which the caller using the ERMES services matches the automatic and/or
dispatch center of the ERMES paging network - shall be paid to the
economic organizations in the portion specified in order no. 30/1993
(XI. 21) KHVM. The concession fee shall be paid by the caller.
Remarks: In the legal rules to be issued on the tariffs of public
paging services the Minister shall observe the proposals of the
Concession Company issued on the basis of its preliminary negotiations
held with the Service Provider of PSTN/ISDN (MATAV Ltd) relating to
the network contracts.
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6.2.3 On the basis of the subscriber's contract, the ERMES public paging
service provider shall be entitled to collect fees consisting of the
following elements:
(i) one-time subscriber's fee
(ii) monthly subscription fee
(iii) actual (calling) utilization fee
6.2.4 Due to the fact that the official regulation concerning the tariffs
for the public nationwide services has not been issued, the present
Concession Contract has been entered into by the partners being aware
of the fact that the new legal rule will be based on the following
view-points:
(i) Those who use ERMES receivers shall pay a monthly fee to the
Concession Company on the basis of subscriber's contract
dependent on the type of ERMES services but independent upon
the number of calls.
(ii) The method of inflation adjusting shall be similar to the
present price regulations as promulgated. The inflation
adjusting criteria shall be computed on the basis of the
Production Price Index (PPI).
(iii) The regulation shall be of "price maximazing" ("price cap")
type i.e. the highest level of the price elements shall be
restricted by the order. The Concession Company may have a
choice (option) either to offer direct price packages or price
packages being calculated on the basis of fixed priced
elements.
(iv) If the Concession Company chooses the second alternative
(tariff packages calculated on the basis of fixed priced
elements) the restriction shall be similar to the price
regulation on public mobile radio telephone services specified
in the KHVM Decree No. 13/1994.
(v) If the Concession Company offers a complex fee-structure
(subscriber's monthly fee, subscriber's monthly fee combined
with the calls), the whole fee package should not exceed the
limitation (restriction) to be stipulated in the new order as
a reasonable comparison basis.
(vi) The tariffs and fees shall be made public.
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6.2.5 In accordance with the offer of the Concession Company, the amount and
structure of the initial subscriber's fee, which shall be taken into
consideration by the Minister when creating the final regulations is
as follows:
Estimated ERMES service fees
Type of service Monthly fee Subscriber's fee
--------------- ----------- ----------------
Tone 1,500 HUF 2,000 HUF
Numeric 3,000 HUF 3,500 HUF
Alphanumeric 4,500 HUF 5,000 HUF
Remark: The monthly fee includes no more than 20 messages. As the
Concession Company does not have a full market knowledge of the new
ERMES paging services, the prices mentioned and estimated above are
only indicative and not binding.
The initial subscriber's fee which will be replaced by the new price
order, is valid till May 31, 1995.
6.2.6 In case of domestic as well as international roaming, the invoicing
between the Concession Company and the foreign ERMES service providers
shall be settled according to the recommendations of the EC NP
(European Communities Open Network Provisions) and the ERMES MoU.
SECTION 7
LIABILITIES AND COMPETENCY OF THE MINISTER
7.1 ENTITLEMENT FOR PROVISION OF NATIONWIDE PUBLIC PAGING SERVICES
The Minister hereby informs the Concession Company according to point
g.) in subsection (2) of Section 8 of Act No. XVI of 1991 on
Concessions, that in case of satisfactory level and quality of ERMES
nationwide public paging services according to point 1.3.2 hereabove,
he shall not authorize any other economic entity or natural person to
commence carrying on public paging services connected with frequency
use, subject to concession on a commercial basis.
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7.2 PUBLIC, CLEAR AND CONTROLLABLE PROCEDURE
7.2.1 The Minister warrants that all regulatory and administrative
proceedings relating to the rights, obligations or activities of the
Concession Company under this Concession Contract shall be public,
clear and controllable. The Minister shall do his best efforts in
order that the regulations of laws and orders being applied to the
nationwide public paging services shall not be modified to adversely
affect the Concession Company.
7.2.2 In his scope of activity, the Minister shall do his best efforts in
order to ensure that the ERMES Concession Company should be granted
all permits, approvals and authorization required for the due
performance of its obligations under this Contract, in the frame of
the valid legal rules within the shortest possible time, including the
processes specified in Section 3.3.
7.3 SETTLEMENT OF THE LEGAL DISPUTES
7.3.1 The Minister warrants within the framework and competency vested in
him under the law that the Concession Company shall be treated both in
the administrative procedures and as a participant of the
telecommunications market in a way that the Concession Company:
(i) shall be able to duly perform its liabilities under the
present Contract, and,
(ii) shall not be discriminated as compared to any other lawful
participant on the telecommunications market.
7.3.2 The Minister acknowledges the contents of the present Contract as
binding for the Hungarian State represented by himself and hereby
declares that in case of legal dispute, the Hungarian State shall not
refer to its sovereign immunity by supreme power with regard to the
authority of the court, but shall accept the court named in this
Concession Contract voluntarily carrying out its judgements. The
Concession Company shall also voluntarily carry out the judgement of
the Court.
7.4 AUTHORITY OF THE MINISTER IN INTERNATIONAL ISSUES
The Minister shall, as specified in the Governmental Decree declaring
his tasks and competency as well as in the Act No. LXXII of 1992 and
No. LXII of 1993 on Frequency Management, provide the setting of
directives for the relations between the Hungarian telecommunication
branch and the international frequency management. Furthermore he
shall provide the representation of the Republic of Hungary, the
participation of the Ministry in the activity of the International
telecommunication's
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forms and bodies, being essential in respect of the performance of its
official and international cooperation tasks. In performing all the
above the Minister shall act in a way which ensures the smooth
operation of the telecommunication providers working on the basis of
the concession agreements concluded by him.
The Minister undertakes to make the international announcement as
stipulated in the CEPT T/R25-07 recommendation pursuant to the
international frequency coordination.
SECTION 8
RULES CONCERNING THE BUSINESS AND MARKET ACTIVITY
AND LIABILITIES TO THE SUBSCRIBERS
OF THE CONCESSION COMPANY
8.1 REQUIREMENT OF FAIR BUSINESS ACTIVITY
8.1.1 The ERMES Concession Company, carrying on its business activity and
providing the nationwide public paging services, shall not exercise
the concession rights vested on it by the Minister in such a way that
would offend the concession rights of other telecommunications service
providers.
8.1.2 Within the scope of fair market activities the Concession Company:
(i) shall abstain from discriminating or making any preferences
between any telecommunications service providers.
(ii) in calculating and introducing the fees and tariffs of its
services and conditions thereof, it shall not make any
distinction between the subscribers using similar types of
services and being in a similar consumer position.
(iii) shall not make a sales combination between the
commercialization (lease) of ERMES receivers and the
utilization of any ERMES service.
(iv) shall not make the price and/or rental fee of the subscriber's
receivers as a component of the tariffs or fees of the ERMES
services.
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8.2 RIGHTS AND LIABILITIES IN CONNECTION WITH THE ERMES SUBSCRIBERS.
8.2.1 The Concession Company, parallel with the establishment of the ERMES
network shall be liable to conclude subscriber's contracts for the
already implemented sections and to occasionally modify and extend
these simultaneously with the enlargement of the network and/or
services and furthermore, to duly fulfil the subscriber's agreements.
8.2.2 The Concession Company shall be entitled to provide professional
information to the population and to carry out the marketing of the
communication activity aiming at the introduction and promotion of the
ERMES services.
8.2.3 The Concession Company shall be liable to organize and maintain a
service network of ERMES receivers used in its ERMES network and
distributed by the Concession Company and for its continuous and high
level operation according to the ERMES technical norms concerned, and
to provide the warranties as specified in the Civil Code.
The Concession Company shall warrant that all type-approved ERMES
receivers should be connected into its ERMES network and the radio
connection should be established and continuously operated according
to the approved business conditions and the included price list.
8.2.4 In accordance with the nationwide public paging services provided by
itself, the Concession Company shall be liable to establish and
operate the information and repair services and furthermore a client
service dealing with the questions of subscribers relating to the
orders, operation, services, accounting and advisory activities.
8.2.5 The Concession Company shall publish a register containing the data
and call numbers of subscribers switched into the ERMES services. In
this context, the Concession Company shall proceed pursuant to the
rules of Act on Data Protection as well as those of telecommunications
law. The Concession Company shall provide for the protection of the
confidentiality of business secrets and personal data that comes to
its knowledge in connection with the business activity, and use
effective procedures of data protection therefor.
8.2.6 Legal relations between the Concession Company and the subscribers
shall be governed by Act No. LXXII of 1992 on Telecommunications along
with the relevant governmental and ministerial regulations, the
subscriber contracts and the approved business conditions of the
Concession Company.
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8.2.7 The business terms and conditions of the Concession Company shall be
submitted to the Minister for approval and after approval these shall
be published.
If the Minister or the organization acting under appointment of the
Minister, verifies the business conditions issued by the Concession
Company concerning the provision of ERMES services as well as the
implementation and operation of the network, are not in compliance
with the relevant rules of law and/or the present Concession Contract,
he shall immediately notify the Concession Company to supplement
and/or modify its business conditions accordingly. The Concession
Company shall publish its valid business conditions as well as any
modification thereof and continuously inform its subscribers thereon.
SECTION 9
CO-OPERATION WITH OTHER TELECOMMUNICATIONS NETWORKS
AND SERVICE PROVIDERS
9.1 CO-OPERATION WITH OTHER TELECOMMUNICATIONS NETWORKS
9.1.1 The ERMES Concession Company shall equally treat all public
telecommunications service providers connected with them, including
its own economic entities, as to the conditions and requirements of
interconnection as well as the repair, maintenance and securing of
interconnection equipment.
9.1.2 The ERMES Concession Company shall be entitled to initiate the
interconnection with networks of other public telecommunications
networks and establishment thereof under the conditions set forth in
the valid legal rules according to the principle of equality as well
as the published technical specifications.
9.2 CO-OPERATION WITH OTHER TELECOMMUNICATION SERVICE PROVIDERS
The Concession Company providing the ERMES nationwide public paging
services and implementing the network thereof shall co-operate with
other telecommunications service providers in the following areas:
(i) supply of technical information and data necessary for the
smooth operation and interconnection of the network,
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(ii) harmonization of maintenance systems,
(iii) measurements connected to the operation of the networks,
(iv) elimination of failures occurred during providing services.
The Minister shall make all reasonable efforts in the frame of his
scope of activity in order to ensure the co-operation of other
concession companies as well as telecommunication service providers.
9.3 PREVENTION AND ELIMINATION OF TECHNICAL FAILURES.
9.3.1 The partners to this Concession Contract are aware of the fact that,
in the countries where the ERMES paging system has already been
implemented, the radio base stations (BS) of the paging service
network may produce incidental interferences on some television and
land mobile service channels and cable television networks. The
research team formed upon demand of CEPT issued a report in October
1993 on the compatibilities between ERMES and PMR System and TV E-5 in
Montreaux.
9.3.2 The Minister and the Concession Company agreed that they shall take
all reasonable measures to secure ERMES nationwide public services
through the frequency channel specified in Section 1.1.1 of this
Contract free of any interference on other networks and shall supply
among others, the following measures:
(i) the careful selection of the site of ERMES transmitters, as
well as of the radiation capacity and characteristics thereof,
undertaking appropriate regional trials, using the data basis
of the Chief Communications Directorate,
(ii) supplementary application of technological means and
equipments, discussions between the Concession Company and the
service providers concerned,
(iii) agreeing in filtering options,
(iv) appropriate shifting of the applied transmission frequencies,
(v) other options appropriately proven by the theory or practice
of radio-telecommunication.
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SECTION 10
USE OF HUNGARIAN GOODS AND SERVICES
10.1 USE OF HUNGARIAN GOODS AND SERVICES
10.1.1 The Concession Company agrees to use as much Hungarian goods,
equipment and services as financially feasible, taking into account the
qualitative and quantitative terms and conditions available on the
Hungarian market.
The Concession Company will do its best efforts to increase the ratio
of Hungarian participation during the concession period, including
participation in the management of the Concession Company.
10.1.2 The Minister is entitled to supervise the execution of the above and
may request any reasonable information needed for the evaluation.
10.2 NOTIONS OF "GOODS OF HUNGARIAN ORIGIN" AND "HUNGARIAN PARTICIPATION"
10.2.1 Goods shall be treated as of Hungarian origin if at least 25 percent
of the aggregate value of their components have been manufactured in
Hungary and/or their value has been raised by at least 25 percent
derived from any manufacturing activity that can be proved to be
executed in Hungary.
10.2.2 It shall be treated as "Hungarian participation" when the Concession
Company and/or any member thereof transfers technologies for
manufacturing in Hungary and realization of domestic manufacturing and
supply of certain elements, equipment of the ERMES network.
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SECTION 11
RESPONSIBILITIES OF THE CONCESSION COMPANY,
FINANCIAL SECURITIES TO BE PROVIDED BY THE CONCESSION COMPANY
11.1 RESPONSIBILITIES OF THE CONCESSION COMPANY IN CONNECTION WITH THE
IMPLEMENTATION OF THE PROJECT
11.1.1 In the course of implementation and operation of the Project as well
as of the provision of nationwide public paging services, the
Concession Company shall act with care and due diligence as is
expected from a telecommunications service provider.
11.1.2 The Concession Company shall be solely and exclusively responsible for
damages, death and personal injury suffered by and caused to anybody
in connection with the construction, operation and maintenance of the
Project caused by the Concession Company's gross negligence or willful
misconduct. The Concession Company shall be liable to effect insurance
at its own costs and benefits against such risk in the broadest
possible way:
(i) for the entire Project
(ii) for the construction of the Project
(iii) for the employees of the Project
(iv) for responsibilities in connection with the Project
(v) for the operation and maintenance of the Project
11.2 RESPONSIBILITIES OF THE CONCESSION COMPANY IN CONNECTION WITH THE
EXECUTION OF THE CONCESSION CONTRACT
11.2.1 The Concession Company shall be responsible for the due performance of
the liabilities under the present Concession Contract in accordance
with the laws and regulations on concession, telecommunications and
frequency management and the Civil Code of the Republic of Hungary.
11.2.2 The Concession Company shall be relieved from the responsibilities
either in whole or in part if the competent Hungarian Court acting in
accordance with the applicable laws, declares that such
responsibilities either do not exist in whole or in part.
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11.3 SECURITIES
11.3.1 To secure the performance of liabilities under the Concession
Contract, The Concession Company shall be liable to submit to the
Minister, or a duly authorized person or organization, a bank
guarantee in the amount of 500,000 USD issued by the Hungarian Foreign
Trade Bank for the Ministry of Transport, Communications and Water
Management of the Republic of Hungary as beneficiary, within 30
(thirty) days after the signing of the Concession Contract in
accordance with the wording of the letter of guarantee attached in
Annex 3. hereto.
11.3.2 The bank guarantee shall be valid for 4 (four) years plus 30 (thirty)
days after the date of issue.
11.3.3 The performance guarantee shall secure the implementation of the
Project in good quality and in due time, as well as the provision of
reliable services. The security shall be obtained either completely or
in part as the case may be. The lawfulness of the utilization of the
performance guarantee or any part thereof, may be examined by the
court proceeding as stated in section 17.1.
Upon request of the Concession Company, the Minister may return the
performance guarantee submitted to him earliest by April 30, 1996 or
90 (ninety) days thereafter, if he is convinced that the
implementation of the Project has met the coverage as well as the
quality requirements specified in Section 4.1.1. and 4.3. However, the
Concession Company agrees either to issue a new bank guarantee in the
original amount or to submit a security of the same value acceptable
to the Minister, within 90 (ninety) days after that the coverage
provided by the Concession Company has ceased either to meet the
quality requirements as specified in Section 4.3. or the standard of
the services do not correspond permanently to the quality requirements
as specified in Section 4.3.
11.3.4 The members of Magyar Paging Consortium as the founders of the
Concession Company shall jointly and separately provide guarantee for
the Concession Company's performances concerning the following:
(i) the majority participation in the Concession Company as well
as the voting rights thereon shall be exercised primarily in
the interest of due performance of the Concession Contract.
(ii) the Concession Company shall not transfer the concession
rights without the prior approval of the Minister.
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(iii) in case of termination of the Concession Contract by notice or
due to other reason, the Concession Company shall continue the
provision of services for at least six months.
11.3.5 The Minister may demand the performance from the guarantors if,
according to the decision of the court, it shall be proved that the
Concession Company breached any of the obligations wholly or partially
specified in Section 11.3.4 and the bank guarantee specified in
Section 11.3.1, and the assets of the Concession Company shall not
provide enough coverage for damages resulting from such a breach.
Legal disputes in connection with the guarantorship shall be settled
exclusively by the court as specified in Section 17.1.
SECTION 12
FORCE MAJEURE
The ERMES Concession Company shall only be excused from performing its
liabilities wholly or partially under this contract to the extent and for such
a time period as its performance is substantially hindered or is considered
impossible by Force Majeure, such as war, civil uprising, strikes, natural
disasters or any other such unavoidable emergencies.
If such events cause damages to the ERMES Public Paging Network operated by the
ERMES Concession Company, the Concession Company shall be liable to elaborate
proposals for the repair and reconstruction of the network and take the
necessary steps on the basis of the plan co-ordinated with the Minister.
Regarding the obligations of the Minister in case of Force Majeure, the
regulations of valid laws shall apply.
Regarding the occurrence, expected duration and effects on the performance of
the Concession Contract of the events qualified as Force Majeure, the Party
noticing it and referring hereto, must inform the other Party in writing
without delay.
The subject of the Force Majeure is to be evidenced without delay by the Party
referring hereto by the declaration of the competent authority pursuant to the
place and character of the Force Majeure event.
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SECTION 13
MODIFICATION, EXPIRY AND TERMINATION OF THE CONTRACT
13.1 MODIFICATION OF THE CONTRACT
13.1.1 The Contracting Parties may modify the present Contract at any time in
writing in any way as permitted by the relevant rules of law.
13.1.2 According to Section 5, subsection (1), para e.), of Act No. LXXII of
1992 on Telecommunications, the Minister shall be entitled to
supervise the Concession Contract periodically from the point of view
of the consumer's interests and/or of the due development criteria
and/or of the international liabilities meanwhile agreed and to modify
it accordingly.
(i) In the process of application and interpretation of the
present Contract under the term "modification under consumer's
interest" there shall be deemed such modification which shall
be initiated by the Minister following and based upon the
motivated proposals of the Telecommunications Reconciliation
Forum.
(ii) In the process of application and interpretation of the
present Contract under the term "modification under due
development criteria" there shall be deemed such modification
which shall be initiated by the Minister in the competency
specified as state functions under the laws on
telecommunications and/or frequency management.
(iii) In the process of application and interpretation of the
present Contract under the term "modifications under the
international liabilities meanwhile agreed" there shall be
deemed such modifications initiated by the Minister on the
basis of international liabilities undertaken by the Hungarian
State. Eventual modifications in recommendations and decisions
of ERMES MoU or in the norms of ETS 300 133-1...7 standard.
shall be deemed as necessary reasons for the modification of
the present Contract accordingly.
13.1.3 Any modification initiated by the Minister:
(i) may not change the basic rights and liabilities as to the
subject matter of the concession, duration and the fees
thereof to the disadvantage of the Company,
(ii) may not infringe the material and lawful interests of the
Concession Company in connection with the concession, the use
of frequency or the reasonable operation of the Concession
Company by complying with the obligations under the Contract
and the rules and regulations of the Hungarian law.
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13.2 EXPIRY OF THE CONTRACT
The present Concession Contract shall cease to exist by the expiration
of the period specified in Section 1.3.1, or it shall be terminated
by the written agreement of the Parties specifying the conditions and
consequences of such termination by agreement.
13.3 TERMINATION OF THE CONTRACT
The present Contract has been concluded for a fifteen (15) year period
according to Section 1.3.1, and with respect to the public interest on
the due performance thereof, it can only be terminated under reasons
specified in Sections 13.4 and 13.5 following an abortive grace period
provided by a preliminary written notice.
A termination with immediate effect shall take place only under
reasons specified in Section 13.4.2.
13.4 TERMINATION BY THE MINISTER
The Minister shall have the right to terminate the Concession Contract
upon the occurrence of any of the following events and circumstances
within the control of the Concession Company.
13.4.1 The ERMES Concession Company does not perform its main liabilities set
forth below and specified in the Concession Contract and its Annexes,
in particular
(i) schedule of implementation and development of the ERMES
nationwide public paging services.
(ii) observing price law regulations issued by authorities
concerning tariffs and prices.
(iii) performing the quality criteria of the services.
(iv) due payment of fees as specified in the Contract.
13.4.2 The Concession Company will not be entitled to carry on the concession
activity within six (6) months after the signing of the Concession
Contract or from the withdrawal of any of its permits by the
authorities as the case may be.
13.4.3 The Magyar Paging Consortium does not enforce the requirements
specified in Section 2.4.2 in the Deed of Foundation of the Concession
Company.
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13.4.4 The Concession Company intentionally and repeatedly violates its major
liabilities included in the Concession Contract, e.g. stipulations
concerning the subscribers or other telecommunications service
providers, or the rules of market behavior, and these violations shall
remain unremedied following the Minister's notice.
13.4.5 The Concession Company does not satisfy the demand for interconnection
of the authorized telecommunication service providers requesting the
same.
13.4.6 A liquidation process shall be opened against the Concession Company
due to bankruptcy or, during a bankruptcy process the Concession
Company makes such declarations to meet the demands of the creditors
which significantly and adversely affects the performance of its
liabilities under the Concession Contract concerning the provision of
the services.
13.5 NOTICE BY THE CONCESSION COMPANY
The Concession Company shall have the right to terminate the
Concession Contract by observing the following cases and conditions:
13.5.1 The Minister intentionally and repeatedly breaches the basic
liabilities under the present Concession Contract hereby offending and
causing serious prejudice to the lawful interests of the Concession
Company.
13.5.2 The Ministry being dissolved without legal successor or ceasing to
have the authorization needed for performing its obligations under the
present Concession Contract and the Government or any governmental
authority competent to do so under the valid laws and regulations
fails to assume the rights and obligations of the Ministry hereunder
in accordance with the applicable law.
13.6 PROCEDURE IN CASE OF NOTICE
13.6.1 Prior to exercising his right to terminate the Concession Contract by
notice under Sections 13.4.1, 13.4.3, 13.4.4, 13.4.5, 13.4.6, the
Minister shall send written notice to the Concession Company
requesting to remedy the event and/or the reason for such right of
termination, and/or to give proper clarification thereon. If the
Concession Company does not comply the notice within ninety (90) days
after the receipt thereof, neither gives satisfactory clarification
nor eliminate the situation and/or reason giving rise to such
termination, the Minister shall terminate the Contract by way of a
registered letter addressed to the Concession Company.
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The notice shall include:
(i) antecedents of the notice
(ii) reasons of the notice and indication relating to the proof
thereof
(iii) notice and deadline relating to the termination of operating
the network and of providing the ERMES services by the
Concession Company
(iv) other issues, notices and demands containing the consequences
of such notice. The dispute concerning the lawfulness of the
notice and its financial consequences shall be settled in the
procedures specified in Section 17.1.
(v) independently from any legal dispute, the Minister shall be
entitled to utilize wholly or partially the bank guarantee
(security) of 500.000 USD as specified in Sections 11.3.1,
11.3.2, 11.3.3.
13.6.2 The Concession Company shall, before exercising its right to terminate
the Concession Contract by notice according to Section 13.5, give
written notice to the Minister requesting the Minister to eliminate
the situation or reason and/or to give clarifications thereon. If the
Minister does not comply with the notice within ninety (90) days from
the receipt thereof, or give satisfactory explanation or eliminate the
situation and/or reason, the Concession Company shall terminate the
Contract by notice by a registered letter addressed to the Minister.
The letter or termination by notice shall include:
(i) the antecedents of the notice
(ii) reasons of the notice and indication relating to the proof
thereof
(iii) the notice in respect of security to be given by the Minister
to the Concession Company, and the declaration on date when the
Concession Company shall terminate the provision of ERMES
nationwide public paging services.
In case of notice given by the Concession Company as forthwith
instructed by the Minister, the Concession Company shall continue and
- under the same conditions - perform the operation of the network and
the provision of the public telecommunications services for six
months after the date of the notice.
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13.7 LEGAL EFFECTS OF THE NOTICE, THE NOTICE PERIOD
13.7.1 The dispute in connection with the lawfulness and financial
consequences of the notice shall be settled in the procedures
specified in Section 17.1.
13.7.2 If the Parties do not agree otherwise, the notice shall enter into
force on the day following the decision of the competent Hungarian
court relating to the lawfulness of such termination.
13.7.3 In case of lawful notice approved by the Minister, the concession fees
paid by the Concession Company shall not be reclaimed.
In case of lawful notice given by the Concession Company regarding the
issue of repayment of the lump sum of the concession fee, i.e. the
legal basis and/or the measure of the amount thereof, shall be agreed
by the Parties during the notice process. If the Parties do not agree
on the repayment of the lump sum of the concession fee the court
proceeding in the issue of lawfulness of the notice shall decide on
the legal basis and amount of the concession fee to be repaid for the
Concession Company.
13.7.4 The Concession Contract shall be ended by the notice on the date of
expiry of the 180 day lawful termination period.
13.7.5 During the termination period the Concession Company shall be liable
to secure the operation of the ERMES system and the provision of the
nationwide public paging services according to the order of the
Minister.
13.7.6 On the day of termination of the Contract:
(i) the concession rights shall cease,
(ii) the validity of the issued radio licenses as well as the
licenses for frequency usage granted in connection with the
concession, shall come to an end,
(iii) liabilities concerning the liquidation of the Concession shall
commence and shall be perfected within 30 days as specified in
Section 26 subparagraph (1) of the Act No. XVI. on Concessions
and in IL Law of 1991 on bankruptcy, liquidation and final
winding up and in Act No. VI of 1988 on Economic
Associations.
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(iv) the construction and using rights on land and property shall
cease as well as the rights concerning the interconnection
with other networks. In case of expiry or cessation of the
Concession Contract due to any reason, equipment provided for
use in the network by the members of the Concession Company
shall remain in the ownership of the Concession Company.
13.7.7 If the Concession Contract shall be terminated by a winding-up process
ordered due to bankruptcy of the Concession Company, the Minister and
the founders of the Concession Company may agree within the framework
of the valid legal rules and regulations, that they shall found a new
Concession Company to carry on the performance of concession rights
and liabilities during the rest of the concession period.
13.8 SURVIVAL CLAUSE
In case of termination of the present Concession Contract due to any
reason the following provisions of this Contract shall survive:
Section 17.6 on confidential information; Section 17.3 on legal
disputes including Section 7.3; Section 17.1.1 on applicable law;
Section 15 on conciliation and amicable settlement for disputes
including 7.3; Section 2.4.7 on ownership of equipment.
SECTION 14
LEGAL SUCCESSION, EXTENSION OF THE CONCESSION PERIOD
THE CONCESSION PERIOD
14.1 ASSIGNMENT
Without the prior written consent of the Minister the Concession
Company may not transfer and/or assign:
(i) the present Concession Contract or any associated contracts or
agreements relating to the ERMES nationwide public paging
services,
(ii) any of its rights arising from exercising the concession and
frequency use.
(iii) any of its assets directly promoting the ERMES nationwide
public paging services without substituting the same in its
own network.
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14.2 PROLONGATION OF THE CONCESSION PERIOD
14.2.1 The concession period shall expire on the day as specified in Section
1.3.1, however, it may be prolonged once by the parties' agreement by
at least half of the concession period (7.5 years).
14.2.2 The Ministry and the Concession Company shall negotiate the
prolongation of the concession period and validity of the Concession
Contract under mutually acceptable terms and conditions 12 months
prior to the expiry of the concession period.
If the Minister and the Concession Company shall not reach an
agreement regarding the prolongation of the concession period between
the 12th and the 6th month prior to the expiry of the concession
period, the Concession Contract shall cease on the day as specified by
the Section 1.3.1.
14.2.3 After the expiry of the Concession Contract and in case of repeated
Concession Tender procedures, the original concession holder shall be
preferred to other Bidders provided they offer the same conditions
regarding the major issues.
SECTION 15
HARDSHIP, CONCILIATION AND AMICABLE SETTLEMENT OF DISPUTES
15.1 HARDSHIP
In case of the occurrence of any event beyond the reasonable control
of either the Minister or the Concession Company (other than an event
qualified as Force Majeure) including any material change of
regulation directly impacting the Concession Company which could not
have been reasonably foreseen on the date of concluding the Concession
Contract and substantially and adversely affect the economic position
of the Concession Company and due performance of the present contract
timely for the Concession Company impossible, the Concession Company
shall give notice to the Minister within thirty (30) days of the
occurrence of such event, containing a description of the event and
its likely economic consequences to the concession Company. The
Minister and the Concession Company shall consult with a view to
reaching a mutually satisfactory resolution to the change in
circumstances of the project provided however, there shall be no
binding obligation on either party to reach a solution.
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15.2 CONCILIATION AND AMICABLE SETTLEMENT
The Partners, shall do their utmost to negotiate in good faith and to
conciliate and settle all disputes arising in connection with the
present Contract.
The Minister undertakes the obligation that he shall carry on
conciliation with the Concession Company and/or the economic
association (telecommunication service providers) concerned in all
issue or dispute referring to the present Concession Contract.
SECTION 16
RELEVANT LAWS
The following Acts of Hungarian law are of extreme importance for the present
Contract:
(a) Act No. IV of 1959 on the Civil Code of Republic of Hungary as
amended;
(b) Act No. VI of 1988 on Economic Associations as amended;
(c) Act No. IV of 1957 on the Procedures of State Administration as
amended;
(d) Act No. XVI of 1991 on Concessions as amended;
(e) Act No. LXXII of 1992 on Telecommunications as amended;
(f) Act No. LXII of 1993 on Frequency Management;
(g) Act No. LXXXVI of 1990 on Fixing Prices
(h) Act No. LXXXVI of 1990 on Prohibition of Unfair Market Practice
(i) Act No. LXIII of 1992 on Personal Data Protection and Publicity of
Data of Public Interest
(j) Act No. LXVI of 1992 on Registering of Personal Data and Home
Addresses of Citizens;
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(k) Act No. XCIII of 1990 as amended concerning duties
and the valid regulations (orders, decrees) of lower level specified in Annex
No...... of the present Contract.
SECTION 17
MISCELLANEOUS
17.1 APPLICABLE LAW, COMPETENT COURT
17.1.1 The Acts, governmental decrees and orders of Ministers of the Republic
of Hungary shall be applicable for the present Concession Contract,
its application and interpretation, as well as for the Concession
Company and operation thereof.
17.1.2 List of regulations to be applied is specified in Section 16 and in
Annex No....hereto.
17.1.3 In all disputes between the Minister and the Concession Company
arising from and connected with the present Contract, its
interpretation, application, performance, termination and extension,
shall be decided by the competent court of the Republic of Hungary
according to the rules of the Hungarian Civil Procedural Law.
The legally binding decisions of the proceeding court as well as the
higher court of second distance shall be final.
The contracting partners covenant to execute the decision of the court
in accordance with Section 7.3.
17.2 COMPLETE AGREEMENT
This Contract and Annexes hereto represent the complete agreement
between the Parties.
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17.3 SEPARABILITY
If any of the provisions of the present Concession Contract become
null and void the relevant provisions can only be treated as null and
void concerning the reason involved and the other provisions of the
contract shall remain valid.
17.4 THE LANGUAGE OF THE CONTRACT
The present Contract has been negotiated both in Hungarian and English
and the partners signed it in Hungarian in two original copies and the
English version has been supplemented to the present Contract. In case
of any dispute the Hungarian version shall prevail.
17.5 NOTICES
Any notice or correspondence under the present Contract shall be made
by letter, telefax or telex to the addresses of the partners
herebelow. Language of the notices, etc. shall be Hungarian.
To the Minister or the Ministry:
Ministry for Transport, Communications and Water Management
1077 ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇-▇▇.
Telephone: ▇(▇▇-▇) ▇▇▇-▇▇▇▇
Telefax ▇(▇▇-▇) ▇▇▇-▇▇▇▇
To the Euro Paging Hungary Concession Company Limited by Shares:
Vaci ut 37. A/502.
▇-▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
Telephone: ▇(▇▇-▇) ▇▇▇-▇▇▇▇
Telefax: ▇(▇▇-▇) ▇▇▇-▇▇▇▇
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17.6 CONFIDENTIAL INFORMATION
All information obtained and to be obtained in connection with the
present Contract shall be treated as confidential by the partners to
this Contract, their members, agents, advisers as well as their
financing institutes or employees, and shall not be disclosed without
the prior written approval of the other contracting partner.
This stipulation shall not be applied to data provision required by
the authorities and other empowered persons being specified by law.
The contracting partners shall secure that their members, employees,
advisers, present and future financial institutions, contractors, etc.
shall adhere to this Section.
17.7 ANNEXES
The following Annexes shall create an integral part of the present
Contract:
ANNEX No. 1: Technical requirements for providing the nationwide
public paging services and for implementation of the connected
network.
ANNEX No. 2: Frequency reservation and usage fees
ANNEX No. 3: Performance warranty
ANNEX No. 4: Applicable laws
ANNEX No. 5: English version of the present Concession Contract.
17.8 DEFINITIONS
The definitions used in wording of the present Contract concerning the
telecommunications and frequency management are contained in the
relevant annexes of Act on Telecommunications as well as of Act on
Frequency Management and the ETC 300 133-1...7 standard.
17.9 VALIDITY
The Contract shall be valid following the agreement on all conditions
and due undersigning thereof by the Minister and the ERMES Concession
Company, but with effect from 29th April, 1994 as the commencement of
the concession.
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17.10 The present Contract is undersigned in Hungarian in 2 originals.
Budapest, 5th August, 1994
Euro Paging Hungary Concession Company Minister for Transport,
Limited by shares Communications and
Water Management
............................................
▇▇▇▇▇▇ Aircraft Sales and Leasing Company
............................................
SFMT-Hungaro, Inc.
............................................
Microsystem Telecom Rt.
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EXHIBIT 10.1
REPRESENTATIONS AND WARRANTIES
In accordance with Section 10.1 of the Agreement, each Shareholder makes the
following representations and warranties to the other Shareholders:
1. Organization and Standing. Such Shareholder (i) is a corporation
established and validly existing under the laws of the State of
Delaware, in the case of ▇▇▇▇▇▇, the laws of the State of New York, in
the case of SFMT, or the laws of the Republic of Hungary, in the case
of Microsystem; and (ii) has all requisite power and authority to
conduct its business in accordance with its foundation documents.
2. Authorization; Due Execution. Such Shareholder has all requisite power
and authority to execute and deliver this Agreement (and all other
agreements contemplated by this Agreement to which it is a party,
including the Deed of Foundation), and to perform its obligations
under this Agreement (and under all such other agreements). This
Agreement has been (and all such other agreements have been or will
be) duly authorized, executed and delivered by such Shareholder and
this Agreement constitutes (and all such other agreements constitute
or will constitute) the valid and legally binding obligation of such
Shareholder (excepting the last paragraph of Section 2.4.2 and the
last sentence of Section 19), enforceable (in each case) against such
Shareholder in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting the enforceability
of creditors' rights generally and to general principles of equity
(and excepting the provisions set forth in
3. No Violation. Neither the execution or delivery by such Shareholder of
this Agreement (or any other agreement contemplated by this Agreement
to which it is a party, including the Deed of Foundation), nor the
consummation of the transactions contemplated hereby (or thereby),
will (i) violate any material agreement, commitment, judgment or order
to which such Shareholder's property is bound, (ii) contravene any law
or regulation having applicability to such Shareholder or (iii) result
in or require the creation or imposition of any encumbrance of any
nature upon, or with respect to, any properties or assets now owned or
hereafter acquired by such Shareholder (other than as may arise
pursuant to this Agreement).
4. Approvals, Consents, Etc. Other than any approval required by the
Ministry, no consent, authorization or
122
approval of, or waiver or exemption by, or filing or registration
with, any governmental agency or any other person or entity is
required to be obtained or made in connection with the execution,
delivery or performance by such Shareholder of this Agreement (or any
agreement contemplated by this Agreement, to which such Shareholder is
or will be a party, including the Deed of Foundation).
5. Litigation. There is no claim, action, suit, proceeding, arbitration,
investigation or hearing, pending or, to the knowledge of such
Shareholder, threatened by or before any court or governmental or
administrative agency or authority or private arbitration tribunal,
against such Shareholder involving the transactions contemplated by
this Agreement.
6. Financial Capacity. With the exception of Microsystem, the group of
companies that are affiliated with such Shareholder have the financial
means and resources necessary for the due and proper performance of
its obligations under this Agreement and the Deed of Foundation.
7. Certain Provisions of the Agreement. After due and proper inspection
and consideration of the relevant legal regulations, such Shareholder
is not aware of any fact that would constitute a sufficient basis to
qualify or render null and void or voidable (in full or in part) any
provision of this Agreement or the provisions of the Deed of
Foundation, under any body of applicable law.
8. Accuracy. No representation or warranty made by such Shareholder in
this Agreement or in any other document furnished in connection with
this Agreement contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact necessary
to make the statement contained herein or therein not false or
misleading.
----------------
-2-
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EXHIBIT 10.3
CERTAIN LIABILITIES/OBLIGATIONS
1. The Consortium has entered into the Concession Agreement.
2. ▇▇▇▇▇▇ has executed a letter of intent with Glenayre Electronics Ltd.,
relating to its work as installation contractor.
3. Legal fees have been incurred relating to work performed by ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ on in connection with the Concession
Contract since July 6, 1994. It is expected that the aggregate amount
of these fees will be approximately US $15,000. The parties have
agreed that 50% of the amount of such fees will be borne by SFMT
(notwithstanding anything to the contrary contained in Section 15 of
the Agreement).
4. International Technology Consultants has indicated that it might seek
a finder's fee relative to the transaction between ▇▇▇▇▇▇ and SFMT.
▇▇▇▇▇▇ understands that SFMT is handling this fee. Should SFMT arrange
for ITC to agree to a finder's fee in the amount of $40,000, ▇▇▇▇▇▇
has indicated its willingness to pay $15,000 of such amount (or its
pro rata share of any lesser amount).
5. Discussions relating to possible employment arrangements were held
with two employees of Radio Contact Ltd. These discussions did not
result in the execution of any agreements.
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AGREEMENT ON ASSIGNMENT
THIS AGREEMENT is entered into as of August 5, 1994, among Magyar Paging
Consortium (the "Consortium") and Euro-Paging Hungary Concession Company
Limited by Shares (the "Company"), a Hungarian company limited by shares,
having its principal offices at 1134 Budapest, Vaci ut 37. A/502.
WHEREAS the Minister of Transport, Telecommunications and Water Management of
the Republic of Hungary (the "Minister") issued an international concession
tender for the provision of nationwide public paging services on the territory
of the Republic of Hungary;
WHEREAS the Consortium has won the tender and signed the Concession Contract
with the Minister on May 5, 1994 with a legal effect of April 29, 1994;
WHEREAS the Consortium, pursuant to its obligations under the Concession
Contract, has established the Company which shall be the legal holder of the
concession right and the related obligations;
THEREFORE, IN CONSIDERATION of the foregoing promises and mutual undertakings
hereinbelow set forth, the parties hereby agree as follows:
1. The Consortium hereby irrevocably assigns its concession right and the
related obligations to the Company in accordance with the Concession Agreement
concluded between the Consortium and the Minister on May 6, 1994.
2. As consideration for the assignment as well as the costs associated to
the acquisition of the concession right defined under Section 1. above, the
Company shall pay to the Consortium a single fee of USD 1,500,000 (one million
five hundred thousand US Dollars).
3. The fee defined under Section 2. above shall be payable within fifteen
(15) days following the execution of this Assignment Agreement through wire
transfer to the designated bank account of SFMT-Hungaro, Inc.
4. The members of the Consortium, Microsystem Telecom Rt. and ▇▇▇▇▇▇
Aircraft Sales and Leasing Company, hereby acknowledge that the third member of
the Consortium, SFMT-Hungaro, Inc., has already reimbursed their costs incurred
in connection with the acquisition of the concession right. Thus, Microsystem
Telecom Rt and ▇▇▇▇▇▇ Aircraft Sales and Leasing Company hereby irrevocably
waive all their rights to claim any portion of the USD 1,500,000 (one million
five hundred thousand US dollars) payable by the Company to the Consortium in
accordance with Sections 1 and 3 of this Agreement and assign all their rights
arising therefrom to SFMT-Hungaro, Inc.
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2
5. Any dispute or disagreement between the parties arising out of or in
connection with this Assignment Agreement that cannot be amicably resolved,
shall be subject to the exclusive Jurisdiction by the Court of Arbitration of
the Hungarian Chamber of Commerce in accordance with its Rules of Procedure;
the decision of the Arbitration Courts shall be final and the place of the
arbitration shall be Budapest and the language English.
6. This Assignment Agreement shall be generally governed by Hungarian law.
/s/ [ILLEGIBLE]
---------------------
Euro-Paging Hungary Concession Ltd.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
--------------------- ---------------------
▇▇▇▇▇▇ Aircraft Sales SFMT-Hungaro, Inc.
and Leasing Co.
/s/ [ILLEGIBLE]
---------------------
Microsystem Telecom Rt.
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1
December 5, 1994
We refer to the joint venture and shareholders' agreement (the "Agreement")
dated August 5, 1994 among ▇▇▇▇▇▇ Aircraft Sales and Leasing Company
("▇▇▇▇▇▇"), SFMT-Hungaro, Inc. ("SFMT") and Microsystem Telecom Inc. Relating
to EURO Paging Hungary Concession Company Limited by Shares (the "Company").
Today we are executing certain documents relating to the capitalization of the
Company, including a loan agreement (the "Loan Agreement") between the Company
and ▇▇▇▇▇▇. In connection with the execution of these documents, this is to
confirm our understanding relating to the capitalization arrangements:
1. The initial registered capital of the Company will equal HUF 200
million. Consistent with Section 7.2 of the Agreement, SFMT (or one of
its affiliates) will be responsible for paying to the Company, on
behalf of ▇▇▇▇▇▇, the amount of HUF 51 million, representing the
portion of the initial registered capital equal to Gerard's equity
interest (as set out in Recital F of the Agreement).
2. Although the Loan Agreement provides that ▇▇▇▇▇▇ shall advance to the
Company the amount of $250,000.00 this amount shall be advanced to the
Company by SFMT (or one of its affiliates).
3. The parties intend that the amount advanced under the Loan Agreement,
as well as the amount advanced under a similar loan agreement between
SFMT and the Company, shall be converted into additional equity of the
Company in January 1996. Any such conversion will result in ▇▇▇▇▇▇ and
SFMT receiving such number of shares as are appropriate in order to
achieve the ownership structure
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2
set out in Section 2.5.2 of the Agreement. No payment shall be
required from ▇▇▇▇▇▇ for such shares.
▇▇▇▇▇▇ AIRCRAFT SALES AND LEASING COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
THE FOREGOING IS ACCEPTED AND AGREED TO:
SFMT-HUNGARO, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------
▇▇▇▇▇ ▇. ▇▇▇▇
President
128
THIS AGREEMENT is made as of the 15th day of December 1994
between
1. EURO SZEMELYHIVO MAGYARORSZAG KONCESSZIOS RESZVENYTARSASAG
▇▇▇▇ ▇▇ ▇▇/▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
(hereinafter called the "Borrower")
2. SFMT-HUNGARO, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
(hereinafter called the "Lender")
WHEREAS
(1) Borrower intends to develop and operate a network for the provision of
nationwide public paging services for fifteen (15) years throughout
the territory of the Republic of Hungary;
(2) Lender is the shareholder of Borrower and intends to finance the
operation of Borrower;
(3) Borrower desires to borrow USD 750,000 (seven hundred and fifty
thousand US dollars) in order to finance its initial operating costs;
(4) At the request of Borrower, Lender has agreed to advance to Borrower
USD 750,000 (seven hundred fifty thousand US dollars) upon and subject
to the terms and conditions of this Agreement.
NOW IT IS AGREED AS FOLLOWS:
1. LOAN
(1) Lender shall provide the Loan for fifteen (15) years. Lender agrees to
lend to Borrower, upon written request of Borrower, the aggregate
total principal amount of USD 750,000 (seventy five thousand US
dollars).
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(2) The repayment of the Loan will be an obligation of Borrower and will
rank in priority to (subject to such exceptions as are from time to
time mandatorily applicable under any applicable laws) all other
present and future borrowing of the Borrower.
(3) Borrower, in order to secure payment when due, whether by acceleration
or otherwise, of any and all obligations of Borrower to Lender
including, without limitation, principal, fees and expenses, whether
now existing or hereinafter arising (collectively, the "Obligations"),
grants a first priority lien, security interest and floating charge on
and over the revenues of Borrower.
(4) The purpose of this Loan shall be to provide financing for the
provision of nationwide public paging services for fifteen (15) years
throughout the territory of the Republic of Hungary.
2. INTEREST
(1) Lender shall provide the Loan at zero percent (0%) interest to
Borrower.
3. REPAYMENT OF LOAN
(1) Subject to as provided in this Agreement, Borrower shall repay the
Loan in US dollars within fifteen (15) days from the date of receipt
of the written notification duly signed by Lender.
(2) Upon full payment of the entire amount of the Loan, Lender shall (i)
provide written notification to Borrower that the Loan has been
repaid; and (ii) be deemed to have released the lien on Borrower's
assets.
4. COVENANTS BY THE BORROWER
Borrower hereby covenants to Lender that during the continuance of
this Agreement, Borrower:
a) will carry on and conduct its business in a proper and
efficient manner and will not without the written consent of Lender
(such consent not be unreasonably withheld) make any material
alteration in the nature of such business; and
b) will give to Lender such information relating to the affairs,
business and assets of the Borrower as Lender may from time to time
reasonably require.
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5. ASSIGNMENT
Lender cannot assign, transfer, lien, encumber or otherwise dispose of
any of its rights or obligations arising from this Agreement without
the prior written notification of Borrower.
Borrower cannot assign, transfer, lien, encumber or otherwise dispose
of any of its rights or obligations arising from this Agreement
without the prior written consent of Lender.
6. NON-CONTRAVENTION OF ARTICLES
(1) Borrower hereby certifies that it has the power to enter into this
Agreement and that the execution of this Agreement does not or will
not contravene any of the provisions of its Articles of Association
nor of any charge, trust deed, contract or other instrument to which
Borrower is a party or which is binding upon its assets.
(2) The contracting parties hereby acknowledge that the validity of this
Agreement is conditioned upon the approval of the National Bank of
Hungary.
7. TAXATION
All payments in respect of this Agreement will be made without
withholding or deduction for, or on account of, any present or future
taxes or duties or whatever nature imposed or levied by or any behalf
of any Governmental or other authority having power to tax, unless
Borrower is required by law to withhold or deduct amounts for, or on
account of, such taxes or duties.
8. WAIVER
No failure or delay on the part of Lender in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder.
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9. NOTICES
(1) Any notice to be served in connection with this Agreement shall be in
writing (which shall include telex and facsimile) and any notice or
other correspondence under or in connection with this Agreement shall
be delivered to the registered office of the addressee or as otherwise
notified by the relevant addressee, or transmitted by telex or by
first class mail or by facsimile, in each case to such address.
(2) Any such notice or correspondence shall be deemed to have been served
as follows:
a) in the case of delivery, on the day of delivery;
b) in the case of service by first class mail, ten (10) days
after the day on which it was posted;
c) in the case of telex, on the day when the recipients' machine
acknowledges the receipt thereof; and
d) in the case of a facsimile transmission on the date of
transmission of the notice.
10. CHOICE OF LAW
This Agreement shall be governed by, and construed in accordance with
the laws of the Republic of Hungary and all disputes shall be settled
by arbitration at the Hungarian Chamber of Commerce in Budapest in
accordance with its rules from time to time in effect.
II. SEVERABILITY
Should any of the terms of this Agreement be or become fully or
partially invalid, the legal validity of this Agreement shall not be
affected thereby.
12. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties as
the subject matter of this Agreement and may not be varied except in
writing signed by all parties hereto.
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IN WITNESS whereof the parties hereto have executed this Agreement in three
original copies on the day and year first above written.
/s/ Illegible /s/ Illegible
----------------------- -----------------------
EURO Szemelyhivo Magyarorszag SFMT-Hungaro, Inc.
Koncesszios ▇▇.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ President
December 29, 1994, Budapest
▇▇▇.▇▇.: 9989/1994/HJ
Approval No.: 94/2782
Admin.: ▇▇▇▇▇ ▇▇▇▇▇
Euro-Paging Hungary Concession Ltd.
Budapest
Vaci ut 37/a
1134
Re: Foreign currency authority approval
With respect to the application for approval of foreign currency loan dated
December 14, 1994, the foreign currency authority (the "Authority"), in
accordance with section 5 of the Law Decree No 1. of 1974, passed the following
decision:
The Authority hereby approves the foreign currency loan agreement between the
following companies with the conditions described below:
BORROWER: Euro-Paging Hungary Concession Ltd.
LENDER: SFMT-Hungaro Inc. (shareholder)
TARGET: Working capital
CURRENCY: USD
AMOUNT OF THE LOAN: 750,000 (seven hundred fifty thousand)
THE LOAN CAN BE DRAWN DOWN WITHIN 6 (SIX) MONTHS FOLLOWING THE DATE FIXED IN
THIS APPROVAL.
INTEREST: No interest.
MATURITY: 15 (fifteen) years
REPAYMENT OF THE PRINCIPAL: At the time of the maturity
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2
SECURITY: Assignment of the receivables
BANK: CA Ltd.
THE AMOUNT OF THE LOAN SHALL BE TRANSFERRED TO THE HUF OPERATING ACCOUNT NO.
217-68015 OF THE BORROWER.
The loan may be provided by the Lender only via bank transfer.
The bank statement on the exchange of the currency shall be submitted to the
bank which transfers back the amount of the loan at the time of the maturity.
The Hungarian National Bank shall provide, against payment in HUF, the currency
necessary to fulfill the Borrower's currency payment obligations to the Lender
arising out of the Loan Agreement approved in this decision.
This approval for the foreign currency loan shall be valid for a 6 (six) months
period of time from the date fixed in this approval. The loan shall be drawn
down during this period. In case the loan will not be drawn down, this approval
shall be returned to the Currency Administration Department.
Appendix No. 1 shall be sent to the Hungarian National Bank's Currency
Administration Department within 2 (two) weeks from the drowing down of the
loan. Appendix No. 2 shall be sent to the Hungarian National Bank's Currency
Administration Department on a quarterly basis.
Any deviation from the above described conditions shall be permitted only in
case of the modification of this approval.
This approval shall not be deemed as guarantee of the Hungarian National Bank.
In case of the Borrower's failure to supply the required information or any
violation of the provisions of this approval, the approval shall be withdrawn
by the Hungarian National Bank.
The authority hereby approves the application and, in absence of adverse party,
the authority, in accordance with section 43 paragraph 2 of Act No. 4 of 1957
on State Administration Procedure, does not provide the reasoning of the
approval and the information about the appeal possibilities.
Frigyes Harshegyi
(Stamp)
(Signature)
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Appendix No.1.
Report on foreign currency loans of business organizations
The information shall be supplied by business organizations whose application
for foreign currency loan was approved. The information shall be sent to the
Hungarian National Bank's Currency Administration Department within 2 (two)
weeks from the drown down of the loan.
If a Hungarian bank provided bank guarantee for the loan, a copy of the
agreement on such guarantee is required.
If the loan is not drawn down within 6 (six) months from the date determined in
the approval, the approval shall be withdrawn.
Name:
Approval No.:
Currency:
Amount of the loan:
Date of the drowning down:
The name of the Hungarian bank providing the bank guarantee:
signature
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4
Appendix for the transfer order for repayment of foreign currency loan
Name of the transferor:
No. of the transfer order:
Title of the amortization: principal interest (To be underscored)
No. of the foreign currency authority's approval:
Date of receipt/drowning down of the loan:
The name of the bank receiving the loan:
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Annex 2.
Report on foreign currency loans of the business organizations
on 199
The information shall be supplied by business organizations whose application
for foreign currency loan was approved. The first information shall be
provided within 90 days after the issue of the approval. Further information
shall be forwarded to the Currency Administration Department of the National
Bank of Hungary not later than the 10th day of the month following the quarter.
No. of the approval:
----------------------------
Name of the business organization:
----------------------------
Participating Hungarian bank:
----------------------------
-----------------------------------------------------------------------------------------------------------------------
Date of receipt resp. Principal Interest Net amount of
date of repayment Currency Received loan repayment repayment loans
-----------------------------------------------------------------------------------------------------------------------
TOTAL
----------------------------
Official Signature
138
THIS AGREEMENT is made as of the 15th day of December 1994
between
1. EURO SZEMELYHIVO MAGYARORSZAG KONCESSZIOS RESZVENYTARSASAG
▇▇▇▇ ▇▇ ▇▇/▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
(hereinafter called the "Borrower")
2. ▇▇▇▇▇▇ AIRCRAFT SALES AND LEASING COMPANY
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
(hereinafter called the "Lender")
WHEREAS
(1) Borrower intends to develop and operate a network for the provision of
nationwide public paging services for fifteen (15) years throughout
the territory of the Republic of Hungary;
(2) Lender is the shareholder of Borrower and intends to finance the
operation of Borrower;
(3) Borrower desires to borrow USD 250,000 (two hundred fifty thousand US
dollars) in order to finance its initial operating costs;
(4) At the request of Borrower, Lender has agreed to advance to Borrower
USD 250,000 (two hundred fifty thousand US dollars) upon and subject
to the terms and conditions of this Agreement.
NOW IT IS AGREED AS FOLLOWS:
1. LOAN
(1) Lender shall provide the Loan for fifteen (15) years. Lender agrees to
lend to Borrower, upon written request of Borrower, the aggregate
total principal amount of USD 250,000 (two hundred fifty thousand US
dollars).
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2
(2) The repayment of the Loan will be an obligation of Borrower and will
rank in priority to (subject to such exceptions as are from time to
time mandatorily applicable under any applicable laws) all other
present and future borrowings of the Borrower.
(3) Borrower, in order to secure payment when due, whether by acceleration
or otherwise, of any and all obligations of Borrower to Lender
including, without limitation, principal, fees and expenses, whether
now existing or hereinafter arising (collectively, the "Obligations"),
grants a first priority lien, security interest and floating charge on
and over the revenues of Borrower.
(4) The purpose of this Loan shall be to provide financing for the
provision of nationwide public paging services for fifteen (15) years
throughout the territory of the Republic of Hungary.
2. INTEREST
(1) Lender shall provide the Loan at zero percent (O%) interest to
Borrower.
3. REPAYMENT OF LOAN
(1) Subject to as provided in this Agreement, Borrower shall repay the
Loan in US dollars within fifteen (15) days from the date of receipt
of the written notification duly signed by Lender.
(2) Upon full payment of the entire amount of the Loan, Lender shall (i)
provide written notification to Borrower that the Loan has been
repaid; and (ii) be deemed written notification to have released the
lien on Borrower's assets.
4. COVENANTS BY THE BORROWER
Borrower hereby covenants to Lender that during the continuance of
this Agreement, Borrower:
a) will carry on and conduct its business in a proper and
efficient manner and will not without the written
consent of Lender (such consent not be unreasonably withheld)
make any material alteration in the nature of such business;
and
b) will give to Lender such information relating to the affairs,
business and assets of the Borrower as Lender may from time to
time reasonably require.
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5. ASSIGNMENT
Lender cannot assign, transfer, lien, encumber or otherwise dispose of
any of its rights or obligations arising from this Agreement without
the prior written notification of Borrower.
Borrower cannot assign, transfer, lien, encumber or otherwise dispose
of any of its rights or obligations arising from this Agreement
without the prior written consent of Lender.
6. NON-CONTRAVENTION OF ARTICLES
(1) Borrower hereby certifies that it has the power to enter into this
Agreement and that the execution of this Agreement does not or will
not contravene any of the provisions of its Articles of Association
nor of any charge, trust deed, contract or other instrument to which
Borrower is a party or which is binding upon its assets.
(2) The contracting parties hereby acknowledge that the validity of this
Agreement is conditioned upon the approval of the National Bank of
Hungary.
7. TAXATION
All payments in respect of this Agreement will be made without
withholding or deduction for, or on account of, any present or future
taxes or duties of whatever nature imposed or levied by or any behalf
of any Governmental or other authority having power to tax, unless
Borrower is required by law to withhold or deduct amounts for, or on
account of, such taxes or duties.
8. WAIVER
No failure or delay on the part of Lender in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such night, power or remedy
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder.
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9. NOTICES
(1) Any notice to be served in connection with this Agreement shall be in
writing (which shall include telex and facsimile) and any notice or
other correspondence under or in connection with this Agreement shall
be delivered to the registered office of the addressee or as otherwise
notified by the relevant addressee, or transmitted by telex or by
first class mail or by facsimile, in each case to such address.
(2) Any such notice or correspondence shall be deemed to have been served
as follows:
a) in the case of delivery, on the day of delivery;
b) in the case of service by first class mail, ten (10) days
after the day on which it was posted;
c) in the case of telex, on the day when the recipients' machine
acknowledges the receipt thereof; and
d) in the case of a facsimile transmission on the date of
transmission of the notice.
10. CHOICE OF LAW
This Agreement shall be governed by, and construed in accordance with
the laws of the Republic of Hungary and all disputes shall be settled
by arbitration at the Hungarian Chamber of Commerce in Budapest in
accordance with its rules from time to time in effect.
11. SEVERABILITY
Should any of the terms of this Agreement be or become fully or
partially invalid, the legal validity of this Agreement shall not be
affected thereby.
12. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties as
the subject matter of this Agreement and may not be varied except in
writing signed by all parties hereto.
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5
IN WITNESS whereof the parties hereto have executed this Agreement in three
original copies on the day and year first above written.
[ILLEGIBLE] [ILLEGIBLE]
---------------------------- ---------------------------------
EURO Szemelyhivo Magyarorszag ▇▇▇▇▇▇ Aircraft Sales and Leasing
Koncesszios Rt. Company
143
[MAGYAR ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇]
▇▇▇▇▇▇▇▇, ▇▇▇▇. januar 03.
Ikt.szam: 9990/1995/HJ
Eng.szam: 95/2790
Ugyintezo: ▇▇▇▇▇ ▇▇▇▇▇
Euro-Szemelyhivo Magyarorszag Koncesszios Rt.
Budapest
Vaci ut 37/A.
1134
Targy: Devizahatosagi engedely
Devizahitel felvetelenek engedelyezesere iranyulo 1994. december 14-en kelt
kerelemben foglaltakat megvizsgalva az 1974. evi 1. tvr. 5.Section alapjan az
alabbi hatarozatot hoztam:
engedelyezem, hogy
Euro-Szemelyhivo Magyarorszag Rt.HITELFELVEVO
▇▇▇▇▇▇ Aircraft Sales and Leasing Company (tulajdonos) HITELNYUJTOVAL
forgoeszkoz hitel CELRA
USD DEVIZANEMBEN MEGHATAROZVA
250.000,- Kettoszazotvenezer OSSZEGBEN
JELEN ENGEDELYBEN MEGJELOLT IDOPONTOT KOVETO 6 HONAPON BELULI
FELVETELRE
kamatmentesen
15 ev LEJARATTAL
lejaratkori TOKETORLESZTES ▇▇▇▇▇▇▇
bevetel engedmenyezese BIZTOSITEKKAL
CA Rt. BANKNAL VEZETETT
217-68015 SZ. FORINTSZAMLAJARA TORTENO ATUTALASSAL DEVIZAHITEL
FELVETELERE VONATKOZO SZERZODEST KOSSON.
144
A hitelnyujto a hitelt kizarolag bankatutalas formajaban bocsathatja
rendelkezesukre.
A deviza atvaltasarol a bank altal kiallitott okmanyt a hitel visszafizetesekor
az atutalast vegzo banknak be ▇▇▇▇ mutatni.
Az MNB gondoskodik arrol, hogy jelen engedellyel jovahagyott hitelugyletbol
eredo, Onoket a hitelnyujtoval szemben terhelo devizafizetesekhez
szukseges deviza forintfizetes elleneben rendelkezesre alljon.
Engedelyunk a hitelfelvetelre megjelolt idoponttol szamitott 6 honapig ervenyes.
Ezen idoszak alatt a hitelt fel ▇▇▇▇ ▇▇▇▇▇. Amennyiben a hitel felvetelere
egyaltalan nem kerul sor, abban az esetben a devizahatosagi engedelyt a
Devizaszabalyozasi foosztalynak vissza ▇▇▇▇ kuldeni.
A hitel felvetelet koveto 2 heten belul az 1. szamu mellekletet, mig a 2. szamu
mellekletet naptari negyedevenkent kitoltve kerjuk az MNB Devizaszabalyozasi
foosztalyara megkuldeni.
A hitelfelvetel elobbiekben kozolt felteteleitol eltermi csak az engedely
modositasa alapjan lehetseges.
Jelen engedelyunk nem jelenti az MNB garanciavallalasat.
Az adatszolgaltatas elmulasztasa, valamint a jelen engedely barmely eloirasanak
megszegese eseten az MNB az engedelyt visszavonja.
A hitelkerelemnek helyt adva - ellenerdeku fel hianyaban az allamigazgatasi
eljarasrol szolo 1957. evi IV. tv. 43.Section-nak /2/ bekezdese alapjan
mellozzuk az indoklast es a jogorvoslatrol szolo tajekoztatast.
[SEAL]
/s/ [ILLEGIBLE]
Dr. Harshegyi Frigyes
145
1
MINUTES
OF THE BOARD OF DIRECTORS ("BOD")
OF EURO-PAGING HUNGARY CONCESSION COMPANY LIMITED BY SHARES
held on December 12, 1994 at ▇▇▇▇ ▇▇ ▇▇/▇, ▇▇▇▇ ▇▇▇.
The following persons are present:
- ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the BoD
- ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, member of the BoD
- Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, member of the BoD
- ▇▇. ▇▇▇▇▇ ▇▇▇▇▇, member of the BoD
- ▇▇. ▇▇▇▇▇▇▇ ▇▇▇, SFMT-Central Europe
- ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Marketing Director of EURO-Paging Hungary Ltd
("EUROHIVO")
- ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Sterling, keeper of the Minutes
▇▇. ▇▇▇▇ established that, since more than half of the BoD members are present,
the meeting has a quorum.
▇▇. ▇▇▇ recited the agenda:
1. Operation Status and Overview
* Network
* Pagers
* Marketing/Advertising
* Distribution/Sales
* Staffing
* Customer Service Operation
* Concession/Legal
* Open Issues
2. Competition
3. Business Plan Update
4. 900 Service as VAS
5. Execution of Capitalization Documents
6. SFMT Intercompany Transactions
7. Scheduling of the Next Board Meeting
8. Tour of Operation
146
2
Before starting the discussion of Agenda No.1, the members of the BoD,
representing each shareholder, signed the documents necessary for the
capitalization of EUROHIVO and, thus discussed and completed AGENDA NO. 5.
AGENDA NO. 1
(a) Network. ▇▇. ▇▇▇▇▇ informed the BoD members that the base stations
will be shipped by the end of the week following the BoD meeting.
Three base stations will be shipped to Hungary, two of which will be
placed at Harmashatarhegy and Szechenyi ▇▇▇▇ and will be capable of
covering 80% of Budapest and, the three together, after their
installation, will be able to cover the whole Budapest area. EUROHIVO
plans to complete customs clearance by the 20th of December and have
an operational network before Christmas. With respect to network
equipment, EUROHIVO is responsible for customs matters - which are
actually handled by SFMT-Montana - and Glenayre is responsible for the
installation works. EUROHIVO received two digital lines from MATAV,
each with 30 channels thus, 60 incoming calls can be handled at the
same time. The cabling of the operator stations and the installation
of the Sky Data VSATs will be started shortly. EUROHIVO has purchased
its billing system from INTOUCH, a New York based corporation working
for paging companies. The PBX is installed, and the LAN is ordered.
(b) Pagers. ▇▇. ▇▇▇▇▇ informed the BoD members on the status of the pager
importation, which is one of the most critical points of EUROHIVO'S
operation. Currently, NEC is the only supplier; however, in
France NEC had to recall their pagers because of technical problems.
With respect to the NEC pagers, there are problems with certain
Hungarian characters like [ILLEGIBLE], [ILLEGIBLE], [ILLEGIBLE],
because NEC pagers are not capable to present these characters
without a new chip. Pagers are also produced by Swissphone.
Although the Swissphone pager would be able to present these
characters, it is not capable of shipping pagers by May 1995.
Other pager producers, like Motorola, will not be able to ship before
1996. The character set, however, is only a public relations problem
and not an operational one; it is manageable. ▇▇▇▇▇▇ ▇▇▇▇▇ also
mentioned that each pager will bear the "eurohivo" logo and, according
to his estimation, the import of 1,000 pager per month should not cause
a problem.
(c) Marketing, Advertising. EUROHIVO selected ▇▇▇▇▇ Hungary to be its
advertising agency in Hungary. The strategy of the advertising is
focused on the education of the prospective customers as to how they
can used the pagers and the paging services. The logo of EUROHIVO has
been designed and presented to the BoD members. The preparation of the
TV advertising is in progress: the first ad launch is planned for
February 1995; this advertisement should be seen at 66% of Hungary.
The POS materials will be ready by January 19, 1995 and the prelaunch
teaser, to develop interest though newspaper advertising is planned
for January 1995. The launch of the services, however, depends on
pager availability and quantity.
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3
(d) Distribution/Sales. ▇▇. ▇▇▇▇▇ informed the BoD members that the
negotiation of the exclusive Distribution Agreement with FOTEX will be
finished shortly. WESTEL, another possible distributor, was also
considered, but WESTEL did not undertake to finance (buy) the pagers;
only wanted a commission on the services sold. FOTEX, in accordance
with the current status of the negotiations, undertakes the financing
of the first 1,000 pagers as well as the financing of pagers in
general. EUROHIVO will then buy the pagers from FOTEX. EUROHIVO has
sent the NEC pager contract to FOTEX. FOTEX will earn a margin of the
sale of pagers as well as 8% of the basic service revenue. The retail
price of the pagers will be agreed and based on criteria like margin,
advertising costs, supplies and production price. EUROHIVO will
organize training session for FOTEX's management and employees (sales
representatives). FOTEX dedicated 40 sales representatives and 75
stores - 25 in Budapest, 50 outside Budapest - for the sale of the
pagers and services.
▇▇. ▇▇▇▇▇ mentioned that the combination of FOTEX and WESTEL, as
distributors, would deprive competitors from entering into
distribution agreements with these companies, which are among the
largest distributing companies in Hungary; thus, EUROHIVO could decide
to finance the pagers for WESTEL.
(e) Staffing. All senior positions, except for operations and
distribution, are staffed. Operations are handled by ▇▇▇▇ ▇▇▇▇ until
the Operations Manager will be appointed. There are a lot of
candidates; however, one problem is that Hungarians do not have paging
experience. By the end of January, the CSRs and operators will be
selected; thus, staffing will not cause any problems for the expected
launch. These persons should be trained, and Glenayre undertook the
management of this training. There are interviews for prospective
distribution/sales forces as well.
(f) Customer Service/Operators. The interviews for these jobs are nearly
complete. It is planned to organize a trip for CSRs to Portugal where
a well-rounded, well-organized paging company operates with the similar
business. The operator stations will be installed soon; the CSR
furniture and equipment has been ordered. The internal policies, like
working hours, vacation, etc, are being developed. These persons will
be on full payroll and trained fully by the end of January, 1995.
(g) Concession/Legal. ▇▇. ▇▇▇▇▇, based on the chart attached to the
Invitation, explained compliance with the requirements of the
Concession Contract.
With respect to pricing, he explained that EUROHIVO has difficulty with
the pricing (including problems with the frequency fee, that seems
to be substantially higher than originally expected, possible length
of the messages, the MATAV interconnect fees and the problem with the
pagers). That is why EUROHIVO was not able to comply with the
deadline. As a consequence, the tariffs have not been yet approved.
The pricing of the services will be finalized soon; currently
EUROHIVO is waiting for the result of market study prepared on
paging pricing in
148
4
Europe and the pricing of Operator Hungaria. EUROHIVO plans to file
tariffs similar to those included in the Concession Contract and later
decrease the prices.
The members of the BoD, after the above explanation, requested ▇▇.
▇▇▇▇▇ to file the pricing as soon as possible at the highest rate;
thus, during the discussion with the Ministry, EUROHIVO can still
reduce the prices. ▇▇. ▇▇▇▇▇▇▇▇ requested a copy of the pricing and
asked ▇▇. ▇▇▇▇, ▇▇. ▇▇▇▇▇, and ▇▇. ▇▇▇▇ to hold a discussion on the
subject.
(f) Other Issues. ▇▇. ▇▇▇▇▇ explained the issues included in the chart
attached to the agenda. There are problems arising from the ERMES
technology as well as different interpretations of the ERMES
specifications by NEC and Glenayre. He also referred to the problems
with the pagers and the message length, which in the opinion of
Glenayre could be 400 character long. There are problems with MATAV
with respect to the lines as well as with the interconnect.
Concerning the interconnect, the major issues are: (i) how much MATAV
will charge for a call; (ii) revenue sharing between MATAV and
EUROHIVO; (iii) how much does it cost to have a message. The BoD
members suggested to hire a consultant for managing this item.
Concerning frequency fees, ▇▇. ▇▇▇▇▇ stated that the major issue is
the amount of the frequency fee. EUROHIVO should go back and check
with the Ministry this fee since there is an inconsistency between the
oral agreement with the Ministry and Annex 2 to the Concession
Agreement.
The BoD members accepted ▇▇. ▇▇▇▇▇'▇ report on EUROHIVO's operation.
AGENDA NO. 2
▇▇. ▇▇▇ informed the BoD members that according to his information, EasyCall is
at least 2 to 3 months behind EUROHIVO. Otherwise EUROHIVO has a good
relationship with EasyCall have met and talked to each other on major mutual
issues.
The BoD members acknowledged the information.
AGENDA NO. 3
EUROHIVO's management submitted the revised 1994 and 1995 budget for approval.
After review by the Board, the 1994 and 1995 budget was accepted.
AGENDA NO. 4.
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5
▇▇. ▇▇▇▇▇▇▇▇ presented his ideas concerning the provision of 900 Services as
VAS. He presented several newspaper articles related to this matter and
suggested to invent a similar type of service since he believes that it would
make good money. Of course, the revenue should be shared with MATAV but a good
revenue sharing could be worked out.
▇▇. ▇▇▇▇▇ agreed to try to get into touch with the phone companies and ask
their opinion about the idea.
AGENDA NO. 6
With respect to SFMT-Intercompany Transactions, ▇▇. ▇▇▇ presented a chart (copy
attached) including the costs of certain employees' salary paid by SFMT, Inc,
who spend most of their time working for EUROHIVO as well as office expenses
for the first two months of operation. The BoD members accepted the costs and
requested that these costs should be budgeted in advance and included in the
business plan.
AGENDA NO. 7
The BoD members agreed to hold the next board meeting in the third week of
February 1995.
After the discussion of the above agenda items the meeting was adjourned and
the BoD members took tour of EUROHIVO's office.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇. ▇▇▇▇▇ Istvan
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Mr. ▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
