Hungarian Joint Venture & Shareholders Agreemen

EXHIBIT 10.34


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JOINT VENTURE AND SHAREHOLDERS' AGREEMENT


among


GERARD AIRCRAFT SALES AND LEASING COMPANY,


SFMT-HUNGARO INC.


and


MICROSYSTEM TELECOM RT.


August 5, 1994


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TABLE OF CONTENTS


Page No.
-------- 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 Gerard . . . . . . . . . . . . 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 Gerard . . . . . . . . . . . . . . . . . 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


3


Section 7. Certain Rights of Gerard . . . . . . . . . . . . . . . 18


7.1 Gerard 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 Gerard . . . . . . . . . . 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 Gerard . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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


-2- 4 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


-3- 5
JOINT VENTURE AND SHAREHOLDERS' AGREEMENT


This Joint Venture and Shareholders' Agreement is entered into on this 5th day of August, 1994 among:


GERARD AIRCRAFT SALES AND LEASING COMPANY ("Gerard"), a company incorporated under the laws of the State of Delaware, having its address at 1013 Centre Road, Wilmington, Delaware ___________ USA, represented by James Monaghan;


SFMT-Hungaro INC. ("SFMT"), a company incorporated under the the State of Delaware, having its address at 9 East __________ Street, Dover, Delaware 19901, USA, represented by ____________ Toth; 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 Mr. Peter Maros;


Gerard SFMT and Microsystem are hereinafter collectively referred to as the "Shareholders".


RECITALS


A. The Magyar Paging Consortium (the "Consortium") originally consisting
of Gerard 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


6
company limited by shares incorporated under the laws of Hungary,
having its address at 1134 Budapest, Vaci ut 37, A/502, Hungary.


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:


Gerard: 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 Istvan Pesti, 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:


Gerard 45 voting shares (consisting of the 44 A Shares and
one C Share);


SFMT 98 voting shares (all A Shares);


-2- 7 Microsystems 10 voting shares (all A Shares); and


H Corporation 41 Voting shares (all A Shares, which will initially
be held by Istvan Pesti)


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;


-3- 8 1.7 "Buyer" shall mean any person or entity (including a Shareholder) to
whom Gerard 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 Gerard, to an affiliate of Gerard
(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;


-4- 9


1.19 "Gerard" is defined in the introductory paragraph of this
Agreement;


1.20 "Gerard 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 Gerard 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;


-5- 10 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 Gerard,
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 Gerard; (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.


-6- 11 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 Gerard,
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 Gerard; (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.


- 7 - 12 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 l ...