Exhibit 10.87
HTCC CONSULTING RT.
HUNGARIAN TELEPHONE AND CABLE CORP.
POSTABANK ES TAKAREKPENZTAR RT.
[RELEVANT SUBSIDIARY OF HUNGARIAN TELEPHONE AND CABLE CORP.]
ABN AMRO (MAGYARORSZAG) RT.
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SECURITY AGREEMENT
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THIS SECURITY AGREEMENT ("Security Agreement") is made on October
15, 1996
between
(1) HUNGARIAN TELEPHONE AND CABLE CORP. ("HTCC USA") having its
registered office at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇. 2;
(2) HTCC CONSULTING RT. ("HTCC Consulting") having its registered
office at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇. 2;
((1) and (2) together the "DEPOSITORS" and any one of them a
"DEPOSITOR")
(3) POSTABANK ES TAKAREKPENZTAR RT. having its registered office
at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ut 48 (the "BANK" or "LENDER"),
(4) [Relevant subsidiary of Hungarian Telephone and Cable Corp.]
(the "BORROWER")
(5) ABN AMRO (MAGYARORSZAG) RT. having its registered office at H-
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇ ▇▇ (the "ESCROW AGENT")
(the Depositors, the Borrower, the Escrow Agent and the Bank are
hereinafter together referred to as the "PARTIES").
WHEREAS:
(i) The Bank has issued a commitment letter dated
September 30, 1996 which was amended the same day
(the "COMMITMENT LETTER") in which the Bank
irrevocably stated and confirmed that it would
finance the telecommunication development of the
Borrower, directly on one hand, and according to
the terms and conditions of the Commitment Letter,
with the cooperation of enterprises jointly
appointed by Fazis Rt. and the Bank on the other,
and the Bank shall accept full responsibility for
the provision of the facility;
(ii) Based on the Commitment Letter, the Multi Currency
Credit Facility Agreement was executed by the parties
and the Borrower has entered into the Borrower's
Individual Loan Agreement with the Bank;
(iii) As security for the Borrower's Individual Loan
Agreement, the Parties have agreed to enter into
various security arrangements, i.e a Pledge Agreement
with the Borrower securing the Loan and this Security
Agreement;
NOW IT IS HEREBY AGREED AS FOLLOWS:
1 INTERPRETATION
Terms defined in the Borrower's Individual Loan Agreement shall have
the same meanings in this Security Agreement save as otherwise provided
herein.
In this Security Agreement:
"BORROWER'S INDIVIDUAL LOAN AGREEMENT" means the individual loan
agreement the Borrower has entered into between the Bank as lender, the
Borrower as borrower and HTCC USA as guarantor;
"CIVIL CODE" means the Act No. IV of 1959 as amended;
"MULTI CURRENCY CREDIT FACILITY AGREEMENT" means the credit
facility agreement made between Hungarotel Rt., Papatel Rt.,
KNC Rt., Raba-Com Rt., and HTCC Consulting Rt. as borrowers,
Postabank es Takarekpenztar Rt. as Lender and Hungarian
Telephone and Cable Corp. as guarantor, effective as of
October 15, 1996;
"OUTSTANDING OBLIGATIONS" means collectively, all moneys and
liabilities in the currency in which such moneys and liabilities are
expressed to be payable which are now or may at any time hereafter be
due, owing or incurred and which remain outstanding from any of the
obligations incurred under the Borrower's Individual Loan Agreement to
the Bank;
"SECURITY" means the security created by this Agreement;
"DEPOSITED SECURITIES" means the shares set out in column headed "Total
No. of Shares deposited with Escrow Agent" opposite the name of the
Borrower in Schedule 1 to this Security Agreement ("deposited security"
has the meaning set out in Section 270 and 271 of the Civil Code).
"PLEDGED GOODS" means all movable and immovable assets owned by the
Depositors (i) which were acquired and/or furnished by the Depositors
under the previous credit facilities borrowed by the Depositor which
are to be repaid by the proceeds of the Borrower's Individual Loan
Agreement and (ii) which are or will be acquired and/or furnished by
using the Loan borrowed under the Borrower's Individual Loan Agreement.
2 EXISTING PLEDGE AGREEMENTS
2.1 All ordinary registered shares in the Borrower owned by HTCC
USA are currently pledged in favor of Matav Rt [Relevant only
to three of Hungarian Telephone and Cable
Corp.'s subsidiaries] for securing its claim under a security
agreement dated ________ between Matav Rt, HTCC USA and
various third parties. The loan to Matav Rt will be repaid by
the Borrower with the funds it receives from the Bank, at
which time the shares pledged to Matav Rt will be released.
Upon their release, these shares shall be deposted at the
Escrow Agent and be included in the Security created by this
Security Agreement.
3 DEPOSITING THE SECURITIES
3.1 Upon repayment of the loan to Matav Rt referred to above in
Clause 2.1, the Deposited Securities will be deposited at the
Escrow Agent and for the benefit of the Lender subject to the
terms of this Agreement. The Deposited Securities guarantee
the Outstanding Obligations of the Borrower under the
Borrower's Individual Loan Agreement.
3.2 The certificate of deposit is contained in Schedule 2 to this
Agreement. The declaration on delivery and handling of the
Deposited Securities is contained in Schedule 3 to this
Agreement.
3.3 The Depositors shall deposit the Deposited Securities
with a blank endorsement.
4 ENFORCING THE SECURITY
4.1 Upon the occurrence of an Event of Default and the expiry of
the notice period defined in Clause 8.2 of the Borrower's
Individual Loan Agreement, and in the absence of waiver or any
new agreement, the Bank may, during a period of 90 days,
solicit offers for the Deposited Securities.
4.2 If, at the end of the 90 day period, the Bank has received a
bona fide offer in writing which includes a conditional
agreement in respect of the Pledged Goods and which
(i) is backed with a bank guarantee from a bank
independent of the Lender; or
(ii) is backed with an unconditional irrevocable
guarantee from a company rated A by both
Standard & Poors and Moodys; or
(iii) is from a third party which itself is a
company rated A by both Standard & Poors and
Moodys;
(the "Offer"), it will notify the Depositors of all details of
the Offer and the Depositors have 15 business days in which to
match the Offer in order to retain its
ownership of the Deposited Securities. For the avoidance of
doubt, matching the Offer means matching the total
consideration included in the Offer, including any repayment
of debt or increase in capital offered by the offeror. If the
Depositors cannot match the Offer within the 15 business day
period, the Bank is free to accept the Offer.
4.3 If, at the end of the 90 day period, the Bank has received no
Offers, the Depositors will have a further 90 day period to
solicit offers for the Deposited Securities. If the Depositors
receive a bona fide offer in writing which includes a
conditional agreement in respect of the Pledged Goods and
which
(i) is backed with a bank guarantee from a bank
independent of the Lender; or
(ii) is backed with an unconditional irrevocable
guarantee from a company rated A by both
Standard & Poors and Moodys; or
(iii) is from a third party which itself is a
company rated A by both Standard & Poors and
Moodys;
(the "Depositors' Offer"), they will notify the Bank thereof.
The Bank will have 15 business days to accept the Depositors'
Offer.
4.4 If the Depositors receive no offers by the end of this further
90 day period, or the Bank does not accept the offer, the Bank
may purchase 50% of the Deposited Securities for a price of 1
HUF per Share.
4.5 The Parties agrees that:
4.5.1 if the net proceeds from the sale of the Deposited
Securities are greater than the Outstanding
Obligations, the balance will be returned to the
Borrower or HTCC USA, as the case may be;
4.5.2 if the net proceeds from the sale of the Deposited
Securities are less than the Outstanding Obligations,
the amount of the shortfall will remain Outstanding
Obligations of the Borrower.
5 DIVIDENDS AND VOTING RIGHTS OF THE DEPOSITED SECURITIES
5.1 The Parties agree that all dividends from and voting rights
attaching to the Deposited Securities shall belong to the
Depositors. The Escrow Agent shall not be responsible in any
way for the handling of the dividends.
6 WARRANTIES
6.1 The Depositors each warrant that it is the owner of the
Deposited Securities and that no third person has any rights
to them subject to the full repayment of the loan granted by
Citicorp North America Inc.
6.2 Each Depositor assumes the obligation:
(a) not to sell the Deposited Securities or any
interest relating to the same, in particular,
without limitation, it shall not sell, or otherwise
transfer or encumber under any title the Deposited
Securities; however this does not affect the right
of the Depositor to cede such secondary security
rights to a third person which do not affect the
Bank's primary security right in any manner and
which do not limit any right due to the Bank under
this Agreement;
(b) to refrain from any action or omission, whose
purpose or result may bring about the cancellation
of the Deposited Securities or permanently reduce
their value;
(c) to ensure that the Company enters in the register
of shares that the Depositor has granted security
over the Deposited Securities;
(d) to use its best endeavours, to carry out, or to cause
to be carried out, all actions which are necessary or
advised for the effective establishment of the
Security and which make it possible for the Bank to
exercise all of its rights relating to the Deposited
Securities under this Agreement.
7 PROVISIONS RELATING TO THE RELEASE OF THE DEPOSITED SECURITIES
7.1 If the Borrower or HTCC USA, as the case may be, complies with
all of its payment obligations due to the Bank under the
Borrower's Individual Loan Agreement, the Bank shall release
all the Deposited Securities to the Depositors and this
Security Agreement shall cease to exist.
7.2 The Bank and the Escrow Agent acknowledge that ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ shall be the authorised person to take delivery of
the Deposited Securities on behalf of the Depositors, until
the Bank and the Escrow Agent are notified otherwise by the
Depositors.
8 COSTS AND EXPENSES
8.1 The Parties agree that any costs incurred in connection with
this Agreement shall be born by the Depositors.
9 LEGAL DISPUTE AND GOVERNING LAW
9.1 LEGAL DISPUTES
The Parties shall attempt to resolve all disputes pertaining
to this Agreement through mutual consent, and in case of the
failure of such attempts the Permanent Arbitration Court
attached to the Hungarian Chamber of Commerce and Industry
will be assigned exclusively to deal with the issue.
9.2 GOVERNING LAW AND LANGUAGE
This agreement will be governed by the laws of the Republic of
Hungary. This agreement is executed in Hungarian and English
and the Hungarian version will prevail in the event of any
discrepancies.
10 LIABILITY OF ESCROW AGENT
10.1 The parties agree that the Escrow Agent will hold the
Deposited Securities on deposit on the terms set out in
this Security Agreement. The Escrow Agent will return
the Deposited Securities to the person named in clause
7.2 upon delivery to it of a request for the Deposited
Securities from the Depositors, accompanied by a letter
from the Bank confirming that (i) all existing payment
obligations due to the Bank from the Borrower have been
met or (ii) that the Bank does not object to the
Deposited Securities being returned to the Depositors.
10.2 The Bank, the Depositors and the Borrower agree to indemnify
the Escrow Agent from and against any losses which may arise
in connection with this Security Agreement, except where such
loss or damage results from the negligence or wilful default
of the Escrow Agent.
11 MISCELLANEOUS
11.1 EFFECTIVENESS
This Agreement shall come into effect upon the authorized
signing by the Parties and receipt of the approval of the
Minister of Transport, Telecommunications and Water to the
pledge of the Deposited Securities and also subject to the
approval of Tele Denmark and the Danish Investment
Fund for Central and Eastern Europe [with respect to two of
Hungarian Telephone and Cable Corp.'s subsidiaries], and the
full payment of Matav.
11.2 COMMUNICATIONS AND NOTICES
Each communication and notice to be made hereunder shall be
made in writing and, unless otherwise stated, shall be made by
fax, and confirmed by letter to the following addresses and
fax numbers:
(1) [Relevant subsidiary of Hungarian Telephone and
Cable Corp.]
(2) Kelet-Nograd Com. Tavkozlesi es Telekommunikacios
Magyar-Amerikai Koncesszios ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ter 1.
To the attention of: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Fax number:
202 4778
(3) HTCC Consulting Rt., ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇.
2. To the attention of: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Fax
number: 202 4778
(4) Hungarian Telephone and Cable Corp., ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇. 2. To the attention of: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Fax number: ▇▇▇ ▇▇▇▇
(5) ABN AMRO (Magyarorszag) Rt. H-▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ ▇ ▇▇. To the attention of: [ ]
Fax number: [ ]
All communication shall be copied to ▇▇▇▇▇ ▇▇▇▇▇▇▇,
fax: ▇▇▇-▇▇▇▇
11.3 LANGUAGE
Each communication and document made or delivered by one party
to another pursuant to this Agreement shall be in the English
language or accompanied by a translation thereof into English
certified (by an officer of the person making or delivering
the same) as being a true and accurate translation thereof.
11.4 COPIES
This Agreement is signed in 8 original copies.
AS WITNESS the hands of the duly authorized representatives of the parties
hereto the day and year first before written.
[Duly Executed by all of
the Parties]