STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 12th day of May, 1999 among Hungarian Telephone and Cable Corp.,
a Delaware, United States corporation, as the seller ("HTCC" or the "Seller"),
Citizens International Management Services Company, a Delaware corporation, as
the buyer ("CIMS" or the "Buyer"), and CU CapitalCorp., a Delaware corporation
and an affiliate of CIMS ("CUCC").
R E C I T A L S:
WHEREAS, Buyer presently owns 100,000 shares of HTCC Common Shares (as
defined herein);
WHEREAS, CUCC presently owns 905,908 shares of HTCC Common Shares (as
defined herein);
WHEREAS, Seller, Buyer and CUCC are parties to a certain Replacement
and Termination Agreement dated as of September 30, 1998 (the "Replacement
Agreement");
WHEREAS, pursuant to the Replacement Agreement, Seller issued a
promissory note to Buyer in the principal amount of $8,374,498 (the "Note");
WHEREAS, pursuant to the Replacement Agreement, Seller agreed to pay to
CIMS $21,000,000 in quarterly installments from 2004 through and including 2010
(the "Payment Obligations") as payment for certain consulting services and the
cancellation of a certain management services agreement;
WHEREAS, Seller is entering into certain agreements (the "Revised
Agreements") as of the date hereof to revise its capital structure with
Postabank es Takarekpenztar Rt. ("Postabank");
WHEREAS, an additional equity investment in Seller by Buyer is a
condition precedent for Postabank entering into the Revised Agreements; and
WHEREAS, Seller desires to sell, transfer and deliver to Buyer, and
Buyer desires to purchase and accept from Seller, additional HTCC Common Shares
(as defined herein) and HTCC Preferred Shares (as defined herein) upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement and any
amendment hereto, the following terms are defined as set out below:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.
"Lien" means, with respect to any asset, any mortgage, lien, claim,
pledge, option, charge, right of first refusal, security interest or encumbrance
of any kind in respect of such asset.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
1.2 List of Additional Definitions. The following is a list of some
additional terms used in this Agreement and a reference to the Section thereto
in which such term is defined:
Term Section
Agreement Preamble
Buyer Preamble
CIMS Preamble
CUCC Preamble
Closing Date Sec. 2.1
HTCC Preamble
HTCC Common Shares Sec. 2.1
HTCC Shares Sec. 2.1
HTCC Preferred Shares Sec. 2.1
Indemnitee Sec. 6.3
Indemnitor Sec. 6.3
Note Recitals
Payment Obligations Recitals
Postabank Recitals
Replacement Agreement Recitals
Revised Agreements Recitals
Seller Preamble
Securities Act Sec. 2.2(b)
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of HTCC Shares. Upon the terms and subject to the
conditions of this Agreement and in exchange for the consideration set forth in
Section 2.2 below, on the date hereof (the "Closing Date"), Buyer shall purchase
and accept from Seller, and Seller shall sell, transfer, assign, convey and
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deliver to Buyer, 1,300,000 newly issued shares of the Seller's Common Stock,
par value $0.001 per share (the "HTCC Common Shares"), and (following compliance
with the Delaware General Corporation Law) 30,000 newly issued shares of the
Seller's Series A Preferred Stock, par value $0.001 per share (the "HTCC
Preferred Shares") (the HTCC Common Shares and the HTCC Preferred Shares
together are referred to herein as the "HTCC Shares").
2.2 Consideration.
(a) In consideration for the purchase of the HTCC Shares as
provided for in Section 2.1 above, Buyer agrees to (i) transfer the
Note to Seller for cancellation and (ii) renounce and forego any rights
whatsoever forever to any of the Payment Obligations and releases
Seller from any and all liability with respect to the Payment
Obligations such that the Seller shall not be liable whatsoever for any
portion of the Payment Obligations. Subject to the terms herein, the
parties agree that without any further action being required by either
party, HTCC's right to receive the consulting services contained in
Section 1.2(c) of the Replacement Agreement shall be extinguished and
be of no further force or effect.
(b) The HTCC Shares shall be duly authorized, validly issued,
fully paid and non-assessable. Buyer agrees to hold its HTCC Shares and
not to convey such shares until May 15, 2000 without the prior written
consent of Seller and Postabank, in any event, not to offer to sell or
otherwise transfer the HTCC Shares without either registration or
exemption from the Securities Act of 1933, as amended (the "Securities
Act"). Buyer and CUCC agree to hold any and all other shares of HTCC
Common Stock and not to convey such shares until May 15, 2000 without
the prior written consent of Seller and Postabank. Each certificate for
the HTCC Shares issued to Buyer pursuant to this Agreement shall bear
the following legend:
" The shares of stock represented by this certificate have
been issued pursuant to a certain Stock Purchase Agreement
dated as of May 12, 1999 among Hungarian Telephone and Cable
Corp., Citizens International Management Services Company and
CU CapitalCorp. and are subject to certain provisions thereof.
The shares have not been registered under the Securities Act
of 1933, as amended, and may not be sold or otherwise
transferred without registration thereunder or an applicable
exemption therefrom."
2.3 Additional HTCC Common Shares. If the average closing price of HTCC
common stock on the American Stock Exchange or such other similar trading
exchange for the twenty trading days ending March 31, 2000 is less than $7.00
per HTCC Common Share, then HTCC shall promptly thereafter issue to Buyer such
number of HTCC Preferred Shares equal in value to (i) 1,600,000 times (ii) $7.00
less the average closing price of HTCC common stock on the American Stock
Exchange or such other similar trading exchange for the twenty trading days
ending March 31, 2000. For purposes of this calculation, each HTCC Preferred
Share shall have a value of $70.
2.4 Waiver of Rights. Buyer and CUCC waive any and all preemptive or
anti-dilution rights that they may have solely with respect to the transactions
contemplated by the Revised Agreements including with respect to the issuance of
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any securities (including but not limited to any common stock, warrants, shares
issuable pursuant to any warrants, and notes) to Buyer, Tele Danmark A/S,
Postabank, or the Danish Investment Fund for Central and Eastern Europe or any
of such parties' affiliates. Buyer hereby acknowledges that no anti-dilution or
pre-emptive rights of any existing HTCC stockholder are applicable to the
issuance of the HTCC Shares under this Article II of this Agreement.
ARTICLE III
REQUIRED DELIVERABLES
3.1 Delivery by Seller. On the Closing Date (or as soon as practicable
thereafter) and as a condition to Buyer's obligation to convey the consideration
as set forth in Section 2.2 above, (i) Seller shall deliver or cause to be
delivered to Buyer certificates representing the HTCC Shares and (ii) Seller
shall adopt and file with the Secretary of State of Delaware the Certificate of
Designation for the Series A Preferred Stock in the form attached hereto as
Exhibit A.
3.2 Delivery by Buyer. On the Closing Date (or as soon as practicable
thereafter) and as a condition to Seller's obligations to deliver the
deliverables as set forth in Section 3.1 above, Buyer shall deliver to the
Seller the Note for cancellation by Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization and Existence. Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
4.2 Corporate Authorization. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within the corporate powers of Seller and have been duly
authorized by all necessary corporate action on the part of Seller. This
Agreement constitutes a valid and binding agreement of Seller enforceable in
accordance with its terms.
4.3 Governmental Authorization; Consents. The execution, delivery and
performance by Seller of this Agreement requires no action by or in respect of,
or filing with, any governmental body, agency, official or authority other than
such actions or filings that have been taken or made on or prior to the date
hereof. No consent, approval, waiver or other action by any Person under any
contract, agreement, indenture, lease, instrument or other document to which it
is a party or by which it is bound is required or necessary for the execution,
delivery and performance of this Agreement or the consummation of the
transactions effected hereby.
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4.4 Non-Contravention. The execution, delivery and performance by
Seller of this Agreement does not (i) contravene or conflict with the
certificate of incorporation, by-laws or other charter documents of Seller, (ii)
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or decree binding upon or
applicable to Seller, or (iii) contravene or conflict with any contract to which
Seller is a party.
4.5 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Seller who might be entitled to any fee or commission from Buyer or any
Affiliate of Buyer upon consummation of the transactions effected by this
Agreement.
4.6 Litigation. There is no action, suit, investigation or proceeding
pending, or to the knowledge of Seller, threatened, against or affecting Seller
before any court or arbitrator or any governmental body, agency or official
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions effected hereby.
4.7 HTCC Shares. All of the shares issued to Buyer in connection with
the transactions effected hereby are duly authorized, validly issued, fully paid
and nonassessable HTCC Common Shares or HTCC Preferred Shares.
4.8 No Undisclosed Material Liabilities; No Material Adverse Change.
Other than as disclosed in Seller's filings with the United States Securities
and Exchange Commission pursuant to the Securities Act or the Securities
Exchange Act of 1934, as amended, or disclosed to Buyer's representatives on
Seller's Board of Directors (i) there have been no material liabilities incurred
by Seller other than those incurred in the ordinary course of business
consistent with past practice and (ii) there has not been any material adverse
change in the business, assets or financial condition of Seller and its
Hungarian subsidiaries taken as a whole.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Buyer and CUCC each hereby represents and warrants to Seller as
follows:
5.1 Corporate Existence and Power. Each of Buyer and CUCC is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
5.2 Corporate Authorization. The execution, delivery and performance of
this Agreement and the consummation of the transactions effected hereby by Buyer
and CUCC are within their corporate powers and have been duly authorized by all
necessary corporate action, including the approval by its board of directors if
necessary. This Agreement constitutes a valid and binding agreement of Buyer and
CUCC enforceable in accordance with its terms.
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5.3 Governmental Authorization; Consents. The execution, delivery and
performance of this Agreement by Buyer and CUCC requires no action by or in
respect of, or filing with, any governmental body, agency, official or authority
other than actions or filings which have been taken or made on or prior to the
date hereof. Except for the consent of Postabank, which consent has already been
received, no consent, approval, waiver or other action by any Person under any
contract, agreement, indenture, lease, instrument or other document to which it
is a party or by which it is bound is required or necessary for the execution,
delivery and performance of this Agreement or the consummation of the
transactions effected hereby.
5.4 Non-Contravention. The execution, delivery and performance of this
Agreement by Buyer and CUCC does not (i) contravene or conflict with the
certificate of incorporation, bylaws or other charter documents of Buyer or
CUCC, or (ii) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Buyer or CUCC, or (iii) contravene or conflict with any
contract to which Buyer or CUCC is a party.
5.5 Accredited Investor. Buyer understands that the HTCC Shares that it
will acquire pursuant to this Agreement have not been registered under the
Securities Act. The HTCC Shares are being acquired under this Agreement in good
faith solely for its own account, for investment and not with a view toward
resale or other distribution within the meaning of the Securities Act. Buyer is
a sophisticated or accredited investor for purposes of (i) the securities laws
of the United States of America and (ii) the ability of Seller to issue the HTCC
Shares without registration under the securities laws of the United States of
America.
5.6 Finder's Fees. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Buyer who might be entitled to any fee or commission from Seller or any of
its Affiliates upon consummation of the transactions contemplated by this
Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller. Seller does hereby indemnify and hold
Buyer and CUCC harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Buyer, CUCC or
their Affiliates resulting from any untrue representation, breach of
warranty or non-fulfillment of any covenant or agreement by Seller
contained in this Agreement, any document delivered by Seller pursuant
to this Agreement, or in any statement, exhibit, schedule or
certificate furnished or to be furnished to Buyer and CUCC pursuant
hereto or in connection with the transactions provided for herein; and
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(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Buyer, CUCC or their Affiliates, including
reasonable attorneys' fees and disbursements, incident to any of the
foregoing.
6.2 Indemnification by Buyer and CUCC. Buyer and CUCC do hereby
indemnify and hold Seller harmless from and against the following:
(a) any and all losses, claims, liabilities, damages,
deficiencies, costs or expenses suffered or incurred by Seller
resulting from any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement by Buyer or CUCC contained
in this Agreement, any document delivered by Buyer or CUCC pursuant to
this Agreement, or in any statement, exhibit, schedule or certificate
furnished or to be furnished by Buyer or CUCC to Seller pursuant hereto
or in connection with the transactions provided for herein; and
(b) any and all actions, suits, proceedings, claims,
complaints, demands, assessments, judgments, costs and expenses
suffered or incurred by Seller, including reasonable attorneys' fees
and disbursements, incident to any of the foregoing.
6.3 Notice of Third-Party Claims. If any action, suit or proceeding
shall be commenced against, or any claim or demand shall be asserted against
Buyer, Seller, or CUCC, in respect of which a party (Buyer, Seller, or CUCC)
proposes to seek indemnification under this Article VI, the party seeking
indemnification (the "Indemnitee") shall give prompt notice thereof to the other
party (the "Indemnitor"), and shall permit the Indemnitor, at its sole cost and
expense, to assume the defense of any such claim or any litigation resulting
therefrom; provided, however, that the Indemnitee shall have the option, at its
own expense, to participate in the defense thereof; and provided further, that
the failure of any Indemnitee to give notice as provided herein shall not
relieve the Indemnitor of its obligations under this Article VI except to the
extent that the Indemnitor is actually prejudiced by such failure to give
notice. Failure by the Indemnitor to notify the Indemnitee of its election to
defend any such action within fifteen (15) days after notice thereof shall be
deemed a waiver by the Indemnitor of its right to defend such action. In the
defense of such claim or any litigation resulting therefrom, the Indemnitor
shall not, without the written consent of the Indemnitee: (a) consent to the
entry of any judgment, or (b) enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or the plaintiff to
the Indemnitee of a release from all liability in respect to such claim or
litigation. If such defense is unsuccessful or abandoned by the Indemnitor,
then, upon the Indemnitor's failure to pay an amount sufficient to discharge any
such claim or judgment, the Indemnitee may pay and settle the same and the
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Indemnitor's liability shall be conclusively established by any such payment. If
the Indemnitor fails to assume the defense of any such claim or litigation
resulting therefrom, the Indemnitee may defend against and settle such claim or
litigation in such manner as it may seem appropriate and the Indemnitor shall
promptly reimburse the Indemnitee for the amount of all expenses, legal or
otherwise, incurred by the Indemnitee in connection with the defense against or
settlement of such claim or litigation. If no settlement is made, the Indemnitor
shall promptly reimburse the Indemnitee for the amount of any judgment rendered
with respect to such claim or such litigation and of all expenses, legal or
otherwise, incurred by the Indemnitee in the defense thereof.
ARTICLE VII
MISCELLANEOUS
7.1 Survival of Representations and Warranties. The representations and
warranties made herein by the parties shall survive for a period of twelve (12)
months after the date hereof. Any claim for indemnification with respect to an
alleged breach of a representation or warranty not asserted by notice to the
indemnifying party, which notice specified a particular breach and the facts and
circumstances relating thereto in reasonable detail, prior to the expiration of
such survival period may not be pursued and is irrevocably waived after such
time.
7.2 Execution of Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document. Execution counterparts may
be delivered by facsimile provided that original execution copies shall be
delivered to each of the parties for signature.
7.3 Assignment, Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither this Agreement nor any rights or responsibilities hereunder shall be
assigned by any party without the prior written consent of the other party.
7.4 Applicable Law; Consent to Jurisdiction; Forum. This Agreement
shall be governed by and construed and enforced in accordance with the laws of
the State of Delaware without giving effect to the provisions, policies or
principles of any state relating to choice or conflict of laws except to the
extent Hungarian corporate law may apply to any matter covered by this
Agreement. In accordance with Title 6, Section 2708 of the Delaware Code
Annotated, each party hereby submits to the jurisdiction of the courts of
Delaware and agrees to be served with legal process from any of such courts.
Each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection that it may have, whether now or in the future, to the laying of
the venue in, or to the jurisdiction of, any and each of such courts for the
purpose of any such suit, action, proceeding or judgment and further waives any
claim that any such suit, action, proceeding or judgment has been brought in an
inconvenient forum.
7.5 Expenses. Except as otherwise expressly provided in this Agreement,
each party shall bear its own expenses incurred in connection with the execution
and performance of this Agreement and the consummation of the transactions
effected hereby, including the fees, expenses and disbursements of its counsel
and advisors.
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7.6 Entire Agreement; Severability. This Agreement constitutes the
entire understanding among the parties and supersedes and cancels any other
agreement, representation, or communication, whether oral or written, between
the parties hereto relating to the transactions contemplated hereby or the
subject matter hereof (except to the extent this Agreement does not alter the
Replacement Agreement) unless such other agreement, representation, or
communication is in writing and bears a date contemporaneous with or subsequent
to the date hereof. In the event that any provision or any part of any provision
of this Agreement shall be void or unenforceable for any reason, whatsoever,
then such provision shall be stricken and of no force and effect. However,
unless such stricken provision goes to the essence of the consideration
bargained for by a party, the remaining provisions of this Agreement shall
continue in full force and effect, and to the extent required, shall be modified
to preserve their validity.
7.7 Notices. Any notice, certification, request, demand and other
communication hereunder shall be in writing and shall be deemed to have been
duly given and delivered if mailed, by certified mail, first class postage
prepaid, or delivered personally or by recognized overnight air courier, or if
sent by telecopier transmission, with transmission confirmed in writing:
If to HTCC: and:
Kiralyhago u.2. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇-▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇-▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 011-36-1-202-4778 Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to CIMS or CUCC: With a copy to:
c/o Citizens Utilities Company ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇,.L.P.
▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ 1400 Sixteenth Street, N.W.
Stamford, CT 06902 ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, Esq. Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other address as each party may designate for itself by like notice
to the other party.
7.8 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party entitled to the
benefit thereof. Any such waiver shall be validly and sufficiently authorized
for the purposes of this Agreement if, as to any party, it is authorized in
writing by an authorized representative of such party. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
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thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
7.9 Further Assurances. If, at any time after the date hereof, Buyer or
Seller shall consider or be advised that any further assignments, documents,
instruments, agreements, or releases are necessary, desirable or proper to carry
out any of the provisions or purposes of this Agreement, the parties hereto
agree to execute and deliver all such assignments, documents, instruments,
agreements or releases as reasonably may be necessary, desirable or proper to
carry out any of the provisions or purposes of this Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
HUNGARIAN TELEPHONE AND CABLE CORP.
ATTEST:
By: /s/▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, President and Chief
Executive Officer
CITIZENS INTERNATIONAL MANAGEMENT
SERVICES COMPANY
ATTEST:
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief
Operating Officer of Citizens
Utilities Company
CU CAPITALCORP.
ATTEST:
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief
Operating Officer of Citizens
Utilities Company
Signature Page of May 12, 1999 Stock Purchase Agreement
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