Exhibit 10.32



                                 EUR 130,000,000
                     SENIOR SECURED DEBT FACILITY AGREEMENT
                              dated April 11, 2000

                                       for

               HUNGAROTEL TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
                RABA-COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
             PAPA ES TERSEGE TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
          KNC KELET-NOGRAD COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG
                                  as Borrowers

                                      with

                       HUNGARIAN TELEPHONE AND CABLE CORP.
                         HTCC TANACSADO RESZVENYTARSASAG
                                  as Guarantors

                                   arranged by

                                 CITIBANK, N.A.
                      WESTDEUTSCHE LANDESBANK GIROZENTRALE

                                      with

                           CITIBANK INTERNATIONAL PLC
                            acting as Facility Agent

                                       and

                                  CITIBANK RT.
                            acting as Security Agent




     Ormai es Tarsai
   CMS Cameron McKenna                                     CMS Cameron McKenna
Citibank Tower, 4th Floor                                      Mitre House
       Bank Center                                        160 Aldersgate Street
     Szabadsag ter 7                                              London
     H-1944 Budapest                                             EC1A 4DD
         Hungary                                                 England
   Tel: +36 1 302 9302                                    Tel: +44 171 367 3000
   Fax: +36 1 302 9300                                    Fax: +44 171 367 2000




                                       (i)


<PAGE>


THIS SENIOR SECURED DEBT FACILITY AGREEMENT (the "Agreement") is dated 11 April
2000 and is made between:

(1)   HUNGAROTEL TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG acting in its capacity
      as borrower;

(2)   RABA-COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG acting in its capacity as
      borrower;

(3)   PAPA ES TERSEGE TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG acting in its
      capacity as borrower;

(4)   KNC KELET-NOGRAD COM TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG acting in its
      capacity as borrower,

(the Parties detailed at (1) to (4) inclusive above each a "Borrower" and
together, the "Borrowers");

(5)   HUNGARIAN TELEPHONE AND CABLE CORP. acting in its capacity as guarantor;

(6)   HTCC TANACSADO RESZVENYTARSASAG acting in its capacity as guarantor,

(the Parties detailed at (5) and (6) above each a "Guarantor" and together, the
"Guarantors");

(7)   CITIBANK, N.A. and WESTDEUTSCHE LANDESBANK GIROZENTRALE acting in their
      capacity as arrangers (each an "Arranger" and together, the "Arrangers");

(8)   CITIBANK INTERNATIONAL PLC acting in its capacity as facility agent (the
      "Facility Agent");

(9)   CITIBANK RT. acting in its capacity as security agent (the "Security
      Agent"); and

(10)  THE FINANCIAL INSTITUTIONS listed in Schedule 1 (The Original Lenders)
      acting in their capacity as lenders (each, an "Original Lender" and
      together, the "Original Lenders").



IT IS AGREED as follows:



                                       1
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                   SECTION 1 - DEFINITIONS AND INTERPRETATION

1.       DEFINITIONS AND INTERPRETATION

1.1      Definitions

         In this Agreement the following terms have the meanings given to them
         in this Clause 1.1.

         "10K Document" means any 10K filing made by Hungarian Telephone and
         Cable Corp. to the Securities and Exchange Commission of the United
         States of America in respect of any financial year of Hungarian
         Telephone and Cable Corp. ending on 31 December each year.

         "10Q Document" means any 10Q filing made by Hungarian Telephone and
         Cable Corp. to the Securities and Exchange Commission of the United
         States of America in respect of any quarter financial year of Hungarian
         Telephone and Cable Corp.

         "Affiliate" means, in relation to any person, a Subsidiary of that
         person or a Holding Company of that person or any other Subsidiary of
         that Holding Company.

         "Agents" means each of the Facility Agent and the Security Agent and
         "Agent" means any and each of them.

         "Amendment No. 1 to Securities Purchase Agreement" means the first
         amendment to the Securities Purchase Agreement dated on or about the
         date of this Agreement made between: (1) Hungarian Telephone and Cable
         Corp.; and (2) Postabank es Takarekpenztar Reszvenytarsasag.

         "Annual Operating Budget" means, in respect of the Group at any time,
         the annual operating budget of the Group at such time, being as at the
         date of this Agreement as set out in the Information Memorandum and
         with each revised or amended annual operating budget (if any) to be,
         except as otherwise approved in advance in writing by the Facility
         Agent, acting on the instructions of the Majority Lenders, in
         substantially the same form as the annual operating budget set out in
         the Information Memorandum.

         "Applicable Law" means, in relation to any person, any law, regulation,
         rule, executive order, decree, judicial or official order, code of
         practice, circular, guidance note or injunction of, or made by, any
         Competent Authority, which is binding and enforceable on or against the
         relevant person and/or with which the relevant person is required to
         comply.

         "Applicable Margin" means the margin from time to time applicable to
         Interest Periods for Loans, determined in accordance with Clause 9.5
         (Applicable Margin).

         "Articles of Association" means the articles of incorporation, the
         articles of association or the deed of foundation, as applicable, of
         any person as at the date of this Agreement.

         "Assignment of Contractual Rights No. 1 Agreement" means the assignment
         of contractual rights agreement dated on or about the date of this
         Agreement made between: (1) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as assignor; (2) Citibank Rt. as assignee and Security
         Agent; (3) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (4) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.


                                       2
<PAGE>


         "Assignment of Contractual Rights No. 2 Agreement" means the assignment
         of contractual rights agreement dated on or about the date of this
         Agreement made between: (1) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as assignor; (2) Citibank Rt. as assignee and Security
         Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (4) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Assignment of Contractual Rights No. 3 Agreement" means the assignment
         of contractual rights agreement dated on or about the date of this
         Agreement made between: (1) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as assignor; (2) Citibank Rt. as assignee and Security
         Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor.

         "Assignment of Contractual Rights No. 4 Agreement" means the assignment
         of contractual rights agreement dated on or about the date of this
         Agreement made between: (1) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
         Reszvenytarsasag as assignor; (2) Citibank Rt. as assignee and Security
         Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; and (5) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor.

         "Assignment of Contractual Rights No. 5 Agreement" means the assignment
         of contractual rights agreement dated on or about the date of this
         Agreement made between: (1) HTCC Tanacsado Reszvenytarsasag as
         assignor; (2) Citibank Rt. as assignee and Security Agent; (3)
         Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
         (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
         (5) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; and (6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor.

         "Assignment of Contractual Rights No. 6 Agreement" means the assignment
         of contractual rights agreement dated on or about the date of this
         Agreement made between: (1) Hungarian Telephone and Cable Corp. as
         assignor; (2) Citibank Rt. as assignee and Security Agent; (3)
         Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
         (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor;
         (5) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (6) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (7) HTCC Tanacsado
         Reszvenytarsasag as countersignor.

         "Assignment of Contractual Rights Agreements" means, at any time, each
         of the Assignment of Contractual Rights No. 1 Agreement, the Assignment
         of Contractual Rights No. 2 Agreement, the Assignment of Contractual
         Rights No. 3 Agreement, the Assignment of Contractual Rights No. 4
         Agreement, the Assignment of Contractual Rights No. 5 Agreement, the
         Assignment of Contractual Rights No. 6 Agreement and any other
         assignment of contractual rights agreement at such time designated as
         such in writing jointly by the Facility Agent, the Security Agent and
         the Obligors.

         "Associated Costs" means, in relation to each Loan and/or Unpaid Sum,
         the percentage rate from time to time determined by the Facility Agent
         (at its sole discretion, in consultation with the other Finance
         Parties) as reflecting the costs, loss or difference in return which
         would be suffered or incurred by the Facility Agent and/or any Finance
         Party or Finance Parties if the Facility Agent or such Finance Party or
         Finance Parties funded such Loan or Unpaid Sum, as a result of any
         maintenance or reserve requirements of and/or any charge imposed by the
         Bank of


                                       3
<PAGE>


         England, the Financial Services Authority, the NBH, the European
         Central Bank or any central bank or similar authority, agency or body
         having authority with respect to that Finance Party or Finance Parties,
         as applicable, (or any other authority which replaces all of any of
         such authority's functions) in respect of eligible liabilities or
         analogous liabilities (assuming these to be in excess of any stated
         minimum) which relate to funding such Loan and/or Unpaid Sum.

         "Auditors" means, at any time, the auditors of each member of the Group
         at such time, being, as at the date of this Agreement, KPMG Hungaria
         Konyvvizsgalo, Ado- es Kozgazdasagi Tanacsado Kft., or any other
         internationally recognised firm of independent auditors licensed to
         practice in Hungary and/or the United States of America, as
         appropriate, duly appointed by each member of the Group to replace
         such firm and approved in advance in writing by the Facility Agent,
         acting on the instructions of the Majority Lenders.

         "Authorisation" means an authorisation, notification, permit,
         acknowledgement, consent, approval, resolution, licence, exemption,
         filing, notarisation, registration or similar proceedings.

         "Authorised Signatory" means, in respect of any person at any time, any
         individual duly authorised under Applicable Law and by such person's
         by-laws, board of directors and/or analogous body, as applicable, at
         such time to sign, execute and deliver at such time the applicable
         document(s), notice(s) or instrument(s) for and on behalf of such
         person.

         "Availability Period" means:

         (a)      in relation to Facility A, the period from and including the
                  date of this Agreement to and including the date thirty (30)
                  days following the date of this Agreement or, if earlier, the
                  date Facility A is first utilised or cancelled in full; and

         (b)      in relation to Facility B, the period from and including the
                  date of this Agreement to and including the date falling one
                  (1) Month prior to the Final Maturity Date or, if earlier, the
                  date Facility B is cancelled in full.

         "Available Commitment" means:

         (a)      in relation to Facility A, prior to the simultaneous making of
                  the Facility A Loans as contemplated and provided for in
                  Clause 5 (Utilisation), a Lender's Commitment under Facility
                  A, thereafter, zero (0); and

         (b)      in relation to Facility B, a Lender's Commitment under
                  Facility B minus:

                  (i)      the amount of such Lender's participation in any
                           outstanding Facility B Loans; and

                  (ii)     in relation to any proposed Utilisation, the amount
                           of its participation in any Facility B Loans that are
                           due to be made under Facility B on or before the
                           proposed Utilisation Date, other than that Lender's
                           participation in any Facility B Loans that are due to
                           be repaid or prepaid on or before the proposed
                           Utilisation Date.

         "Available Facility" means, in relation to a Facility, the aggregate
         for the time being of each Lender's Available Commitment in respect of
         that Facility.


                                       4
<PAGE>


         "Bankruptcy Act" means Act IL of 1991 on Bankruptcy, Liquidation and
         Final Accounting, as amended, of Hungary.

         "Base Currency" means the euro.

         "Base Currency Amount" means, in relation to a Loan, the amount
         specified in the Utilisation Request delivered by a Borrower for such
         Loan (or, if the amount requested is not denominated in the Base
         Currency, that amount converted into the Base Currency at the Security
         Agent's Spot Rate of Exchange on the date which is three (3) Business
         Days before the Utilisation Date or, if later, on the date the Facility
         Agent receives the Utilisation Request) adjusted to reflect any
         repayment or prepayment of such Loan.

         "Break Costs" means the amount (if any) by which:

         (a)      the interest which a Lender should have received for the
                  period from the date of receipt of all or any part of its
                  participation in a Loan or Unpaid Sum to the last day of the
                  current Interest Period in respect of that Loan or Unpaid Sum,
                  had the principal amount or Unpaid Sum received been paid on
                  the last day of that Interest Period;

         exceeds:

         (b)      the amount which that Lender would be able to obtain by
                  placing an amount equal to the principal amount or Unpaid Sum
                  received by it on deposit with a leading bank in the Relevant
                  Interbank Market for a period starting on the Business Day
                  following receipt or recovery and ending on the last day of
                  the current Interest Period.

         "Bridge Loan Agreement" means the thirty three billion seven hundred
         million forints (HUF 33,700,000,000) dual currency bridge loan
         agreement dated 10 May 1999 made between: (1) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as borrower; (2) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as borrower; (3) Papa es Tersege
         Tavkozlesi Koncesszios Reszvenytarsasag as borrower; (4) KNC
         Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as borrower;
         (5) Postabank es Takarekpenztar Reszvenytarsasag as arranger; (6)
         Postabank es Takarekpenztar Reszvenytarsasag as facility agent; (7)
         Postabank es Takarekpenztar Reszvenytarsasag as security agent; and (8)
         the banks defined therein as the Banks; and countersigned by (9)
         Hungarian Telephone and Cable Corp. as countersignor; and (10) HTCC
         Tanacsado Reszvenytarsasag as countersignor.

         "BUBOR" means, in relation to any Loan or Unpaid Sum denominated in
         forints:

         (a)      the applicable Screen Rate; and

         (b)      if no Screen Rate is available for the period of that Loan,
                  the arithmetic mean of the rates (rounded upwards to four
                  decimal places) as supplied to the Facility Agent at its
                  request quoted by the Relevant Reference Banks to leading
                  banks in the Budapest interbank market,

         as of the Specified Time on the Quotation Day for the offering of
         deposits in forint for a period comparable to the Interest Period of
         the relevant Loan or period on which interest is to accrue.

         "Budget Comparison Certificate" means a certificate substantially in
         the form set out in Schedule 6 (Form of Budget Comparison Certificate).


                                       5
<PAGE>


         "Business Day" means a day (other than a Saturday or Sunday) on which
         banks are open for general business in both London and Budapest and:

         (a)      in relation to any date for payment or purchase of a currency
                  other than euro, the principal financial centre of the country
                  of that currency; or

         (b)      in relation to any date for payment or purchase of euro, any
                  TARGET Day.

         "Business Plan" means, in respect of the Group at any time, the
         business plan of the Group at such time, being as at the date of this
         Agreement, as set out in the Information Memorandum and with each
         revised or amended business plan (if any) to be, except as otherwise
         approved in advance in writing by the Facility Agent, acting on the
         instructions of the Majority Lenders, in substantially the same form as
         the business plan set out in the Information Memorandum.

         "Citizens International Management Services Company" means Citizens
         International Management Services Company, a company duly incorporated
         under the laws of the State of Delaware, United States of America,
         whose principal place of business is at 3 High Ridge Park, Stamford,
         Connecticut, CT06902, United States of America.

         "Citizens Utilities Company" means Citizens Utilities Company, a
         corporation incorporated under the laws of the State of Delaware,
         United States of America, whose principal place of business is at 3
         High Ridge Park, Stamford, Connecticut, CT06902, United States of
         America.

         "Citizens" means Citizens Utilities Company, Citizens International
         Management Services Company or any of their respective Affiliates.

         "Civil Code" means Act IV of 1959 on the Civil Code, as amended, of
         Hungary.

         "Commitment" means a Facility A Commitment or Facility B Commitment.

         "Companies Act" means Act CXLIV of 1997 on Business Associations, as
         amended, of Hungary.

         "Competent Authority" means, in respect of any person, any local,
         national, supranational agency, authority, department, inspectorate,
         minister, official, court, tribunal or public or statutory person
         (whether autonomous or not) of any other country, which has
         jurisdiction over such person.

         "Compliance Certificate" means a certificate substantially in the form
         set out in Schedule 5 (Form of Compliance Certificate).

         "Concession Contract" means, in respect of:

         (a)      Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag:

                  (i)      the concession contract in respect of the Bekescsaba
                           primary area dated 6 May 1994 made between: (1)
                           Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag;
                           and (2) the Minister, as amended on 16 June 1996; and

                  (ii)     the concession contract in respect of the Oroshaza
                           primary area dated 6 May 1994 between: (1) Hungarotel
                           Tavkozlesi Koncesszios Reszvenytarsasag; and (2) the
                           Minister, as amended on 16 June 1996;


                                       6
<PAGE>


         (b)      RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, the
                  concession contract in respect of the primary area dated 6 May
                  1994 made between: (1) RABA-COM Tavkozlesi Koncesszios
                  Reszvenytarsasag; and (2) the Minister;

         (c)      Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, the
                  concession contract in respect of the primary area dated 6 May
                  1994 made between: (1) Papa es Tersege Tavkozlesi Koncesszios
                  Reszvenytarsasag; and (2) the Minister, as amended on 16 June
                  1996; and

         (d)      KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag,
                  the concession contract in respect of the primary area dated 6
                  May 1994 made between: (1) KNC Kelet-Nograd COM Tavkozlesi
                  Koncesszios Reszvenytarsasag; and (2) the Minister.

         "Confidentiality Undertaking" means a confidentiality undertaking
         substantially in the form set out in Schedule 8 (Form of
         Confidentiality Undertaking) or in any other form agreed between the
         Obligors and the Facility Agent.

         "Constitutional Documents" means, in respect of any person at any time,
         the then current and up-to-date constitutional documents of such person
         at such time (including, inter alia, such person's articles of
         incorporation, by-laws, articles of association or deed of foundation,
         as applicable, internal rules of organisation and operation, rules of
         procedure of board of directors meetings, if applicable, rules of
         procedure of supervisory board meetings, if applicable, register of
         quotaholder(s) or shareholder(s), as appropriate, and all similar
         and/or analogous documents whatsoever).

         "Default" means an Event of Default or any fact, event or circumstance
         specified in Clause 22 (Events of Default) which would (with the expiry
         of a grace period which has commenced, the giving of notice where such
         notice could be issued, the making of any determination under the
         Finance Documents or any combination of any of the foregoing) be an
         Event of Default.

         "Deed of Guarantee No. 1" means the deed of guarantee dated on or about
         the date of this Agreement made between: (1) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as guarantor; (2) Citibank International
         plc as beneficiary and Facility Agent; (3) Citibank Rt. as beneficiary
         and Security Agent; (4) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (5) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Deed of Guarantee No. 2" means the deed of guarantee dated on or about
         the date of this Agreement and made between: (1) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as guarantor; (2) Citibank International
         plc as beneficiary and Facility Agent; (3) Citibank Rt. as beneficiary
         and Security Agent; (4) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (5) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Deed of Guarantee No. 3" means the deed of guarantee dated on or about
         the date of this Agreement and made between: (1) Papa es Tersege
         Tavkozlesi Koncesszios Reszvenytarsasag as guarantor; (2) Citibank
         International plc as beneficiary and Facility Agent; (3) Citibank Rt.
         as beneficiary and Security Agent; (4) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (5) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.


                                       7
<PAGE>


         "Deed of Guarantee No. 4" means the deed of guarantee dated on or about
         the date of this Agreement and made between: (1) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as guarantor; (2) Citibank
         International plc as beneficiary and Facility Agent; (3) Citibank Rt.
         as beneficiary and Security Agent; (4) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (5) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (6) Papa es Tersege
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Deed of Guarantee No. 5" means the deed of guarantee dated on or about
         the date of this Agreement made between: (1) HTCC Tanacsado
         Reszvenytarsasag as guarantor; (2) Citibank International plc as
         beneficiary and Facility Agent; (3) Citibank Rt. as beneficiary and
         Security Agent; (4) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag
         as countersignor; (5) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag
         as countersignor; (6) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (7) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Deed of Guarantee No. 6" means the deed of guarantee dated on or about
         the date of this Agreement made between: (1) Hungarian Telephone and
         Cable Corp. as guarantor; (2) Citibank International plc as beneficiary
         and Facility Agent; (3) Citibank Rt. as beneficiary and Security Agent;
         (4) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (5) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (6) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (7) KNC Kelet-Nograd COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (8) HTCC Tanacsado
         Reszvenytarsasag as countersignor.

         "Deeds of Guarantee" means, at any time, each of the Deed of Guarantee
         No. 1, the Deed of Guarantee No. 2, the Deed of Guarantee No. 3, the
         Deed of Guarantee No. 4, the Deed of Guarantee No. 5, the Deed of
         Guarantee No. 6 and any other deed of guarantee at such time designated
         as such in writing jointly by the Facility Agent, the Security Agent
         and the Obligors.

         "Dispute" has the meaning attributed to it in Clause 37.7 (Facility
         Agent's option to refer disputes to arbitration).

         "Distribution" means, at any time, any dividend or distribution or
         other payment whatsoever made, paid or otherwise provided by, or on
         behalf of, any Obligor to or for the benefit of any of its
         shareholders.

         "EBITDA" means, in respect of any period, the consolidated net
         operating income of the Group for such period plus any net hedging
         costs, net interest, Tax, and any amount(s) of depreciation and
         amortisation charged to the consolidated profit and loss account of the
         Group, adjusted to reflect the amounts of any extraordinary items and
         any foreign exchange gains and losses (such that foreign exchange gains
         are deducted and foreign exchange losses added back) and non-cash items
         in respect of ongoing operations, in each case, during such period.

         "Encumbrance" means: (a) a mortgage, charge, pledge, lien or other
         encumbrance or security interest whatsoever securing any obligation of
         any person; (b) any arrangement under which money or claims to, or the
         benefit of, a bank or other account may be applied, set-off or made
         subject to a combination of accounts so as to effect payment of sums
         owed or payable to any person; or (c) any other type of agreement or
         arrangement (including, but not limited to, title transfer and
         retention arrangements) having a similar effect.


                                       8
<PAGE>


         "Enforcement of Judicial Decisions Act" means Act LIII of 1994 on the
         Enforcement of Judicial Decisions, as amended, of Hungary.

         "Escrow Account" means the closed ("zarolt") bank account denominated
         in dollars of Hungarian Telephone and Cable Corp. opened (or to be
         opened) and maintained with the Escrow Bank for the purposes of the
         Escrow Agreement.

         "Escrow Agreement" means the escrow agreement dated on or about the
         date of this Agreement made between: (1) Hungarian Telephone and Cable
         Corp.; (2) Citibank Rt. as Escrow Bank; and (3) Citibank International
         plc in its capacity as Facility Agent.

         "Escrow Bank" means Citibank Rt. acting in its capacity as Escrow Bank
         under the Escrow Agreement.

         "EURIBOR" means, in relation to any Loan or Unpaid Sum denominated in
         euro:

         (a)      the applicable Screen Rate; or

         (b)      (if no Screen Rate is available for the period of that Loan or
                  Unpaid Sum) the arithmetic mean of the rates (rounded upwards
                  to four (4) decimal places) as supplied to the Facility Agent
                  at its request quoted by the Relevant Reference Banks to
                  leading banks in the European interbank market,

         as of the Specified Time on the Quotation Day for the offering of
         deposits in euro for a period comparable to the Interest Period of the
         relevant Loan or period on which interest is to accrue.

         "Event of Default" means any fact, event or circumstance specified or
         described as such in Clause 22 (Events of Default).

         "Excess Cashflow" means, in respect of any period, EBITDA for such
         period adjusted downwards to reflect any changes in working capital,
         capital expenditure, acquisitions (less disposals), amount(s) paid in
         respect of Tax, net interest costs (including in respect of the Notes),
         any costs incurred as a result of implementing the Hedging Strategy,
         any Related Party Payments, any payments of dividends made in respect
         of the Preference Shares and scheduled repayments of the Loans (or
         part(s) thereof).

         "Facility" means Facility A or Facility B.

         "Facility A" means the term loan facility made available under this
         Agreement as described in Clause 2 (The Facilities).

         "Facility A Commitment" means:

         (a)      in relation to an Original Lender, the amount in the Base
                  Currency set opposite its name under the heading "Facility A
                  Commitment" in Schedule 1 (The Original Lenders) and the
                  amount of any other Facility A Commitment transferred to it
                  under this Agreement; and

         (b)      in relation to any other Lender, the amount in the Base
                  Currency of any Facility A Commitment transferred to it under
                  this Agreement,

         to the extent not cancelled, reduced or transferred by it under this
         Agreement.


                                       9
<PAGE>


         "Facility A EURO Commitment" means, in respect of any Lender, such Base
         Currency Amount of its Facility A Commitment which is not to be funded
         in forint pursuant to the Utilisation Request in respect of Facility A.

         "Facility A HUF Commitment" means, in respect of any Lender, such Base
         Currency Amount, if any, of its Facility A Commitment as such Lender
         has previously, by written notice to the Facility Agent, agreed to
         provide denominated in forint.

         "Facility A Loan" means a loan made or to be made under Facility A or
         the principal amount outstanding for the time being of that loan.

         "Facility B" means the revolving loan facility made available under
         this Agreement as described in Clause 2 (The Facilities).

         "Facility B Commitment" means:

         (a)      in relation to an Original Lender, the amount in the Base
                  Currency set opposite its name under the heading "Facility B
                  Commitment" in Schedule 1 (The Original Lenders) and the
                  amount of any other Facility B Commitment transferred to it
                  under this Agreement; and

         (b)      in relation to any other Lender, the amount in the Base
                  Currency of any Facility B Commitment transferred to it under
                  this Agreement,

         to the extent not cancelled, reduced or transferred by it under this
         Agreement.

         "Facility B Loan" means a loan made or to be made under Facility B or
         the principal amount outstanding for the time being of that loan.

         "Facility Office" means the office or offices notified by a Lender to
         the Facility Agent in writing on or before the date such Lender becomes
         a Lender (or, following that date, by not less than five (5) Business
         Days' written notice) as the office or offices through which such
         Lender will perform its obligations under this Agreement.

         "Fee Letter" means any letter or letters dated on or before the date of
         this Agreement from the Arrangers to any of the Obligors (or from any
         Agent to any of the Obligors) setting out any of the fees referred to
         in Clause 12 (Fees).

         "Final Maturity Date" means 31 December 2007.

         "Finance Documents" means, at any time, each of this Agreement, each
         Fee Letter, each Hedging Document, the Letter of Borrowings and
         Encumbrances, each Note, each Security Agreement, the Subordination and
         Trust Deed and any other document, notice, instrument or agreement
         entered into or delivered pursuant to any of the foregoing and any
         other document, notice, instrument or agreement at such time designated
         as such in writing jointly by the Facility Agent, the Security Agent
         and the Obligors, and "Finance Document" means any and each such
         document, notice, instrument or agreement.

         "Finance Parties" means, at any time, each of the Arrangers, the
         Facility Agent, the Security Agent, the Lenders and the Hedging Banks
         at such time and "Finance Party" shall mean any or each of them.

         "Financial Indebtedness" means any indebtedness for or in respect of:


                                       10
<PAGE>


         (a)      moneys borrowed;

         (b)      any amount raised by acceptance under any acceptance credit
                  facility or any other documentary credit facility;

         (c)      any amount raised pursuant to any note purchase facility or
                  the issue of bonds, notes, debentures, loan stock or any
                  similar instrument;

         (d)      any guarantee, indemnity, bond, standby letter of credit or
                  any other instrument issued in connection with the performance
                  of any contract or other obligation;

         (e)      the amount of any liability in respect of any lease or hire
                  purchase contract which would, in accordance with US GAAP, IAS
                  and/or HAS, as appropriate and as consistently applied in such
                  jurisdiction, be treated as a finance or capital lease;

         (f)      any amount raised pursuant to any issue of shares which are
                  expressed to be redeemable;

         (g)      receivables sold or discounted (other than any receivables to
                  the extent they are sold on a non-recourse basis);

         (h)      the amount of any liability in respect of any advance or
                  deferred purchase agreement if one of the primary reasons for
                  entering into such agreement is to raise finance;

         (i)      any amount raised under any other transaction (including, but
                  not limited to, any forward sale or purchase agreement) having
                  the commercial effect of a borrowing;

         (j)      any agreement or option to re-acquire an asset if one of the
                  primary reasons for entering into such agreement or option is
                  to raise finance;

         (k)      any derivative transaction, including, but not limited to, any
                  interest rate swap, currency swap, forward foreign exchange
                  transaction, cap, floor, or option transaction or any other
                  transaction entered into in connection with protection against
                  or benefit from fluctuation in any rate or price (and the
                  amount of the Financial Indebtedness in relation to any such
                  transaction shall be calculated by reference to the
                  marked-to-market valuation of such transaction at the relevant
                  time);

         (l)      any counter-indemnity obligation in respect of a guarantee,
                  indemnity, bond, standby or documentary letter of credit or
                  any other instrument issued by a bank or financial
                  institution; and

         (m)      the amount of any liability in respect of any guarantee or
                  indemnity for any of the items referred to in paragraphs (a)
                  to (l) above.

         "Financial Services Authority" means the Financial Services Authority
         of the United Kingdom of Great Britain and Northern Ireland.

         "Fixed Charge No. 1 Agreement" means the fixed charge agreement dated
         on or about the date of this Agreement made between: (1) Hungarotel
         Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2) Citibank Rt. as
         pledgee and Security Agent; (3) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag


                                       11
<PAGE>


         as countersignor; and (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor.

         "Fixed Charge No. 2 Agreement" means the fixed charge agreement dated
         on or about the date of this Agreement made between: (1) RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2) Citibank Rt. as
         pledgee and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

        "Fixed Charge No. 3 Agreement" means the fixed charge agreement dated
         on or about the date of this Agreement made between: (1) Papa es
         Tersege Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2)
         Citibank Rt. as pledgee and Security Agent; (3) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Fixed Charge No. 4 Agreement" means the fixed charge agreement dated
         on or about the date of this Agreement made between: (1) KNC
         Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as pledgor;
         (2) Citibank Rt. as pledgee and Security Agent; (3) Hungarotel
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) Papa
         es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Fixed Charge No. 5 Agreement" means the fixed charge agreement dated
         on or about the date of this Agreement made between: (1) HTCC Tanacsado
         Reszvenytarsasag as pledgor; (2) Citibank Rt. as pledgee and Security
         Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (5) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Fixed Charge Agreements" means, at any time, each of the Fixed Charge
         No. 1 Agreement, the Fixed Charge No. 2 Agreement, the Fixed Charge No.
         3 Agreement, the Fixed Charge No. 4 Agreement, the Fixed Charge No. 5
         Agreement and any other fixed charge agreement at such time designated
         as such in writing jointly by the Facility Agent, the Security Agent
         and the Obligors.

         "Floating Charge No. 1 Agreement" means the floating charge agreement
         dated on or about the date of this Agreement made between: (1)
         Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2)
         Citibank Rt. as pledgee and Security Agent; (3) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (4) Papa es Tersege
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) KNC
         Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor.

         "Floating Charge No. 2 Agreement" means the floating charge agreement
         dated on or about the date of this Agreement made between: (1) RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2) Citibank Rt. as
         pledgee and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.


                                       12
<PAGE>


         "Floating Charge No. 3 Agreement" means the floating charge agreement
         dated on or about the date of this Agreement made between: (1) Papa es
         Tersege Tavkozlesi Koncesszios Reszvenytarsasag as pledgor; (2)
         Citibank Rt. as pledgee and Security Agent; (3) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Floating Charge No. 4 Agreement" means the floating charge agreement
         dated on or about the date of this Agreement made between: (1) KNC
         Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as pledgor;
         (2) Citibank Rt. as pledgee and Security Agent; (3) Hungarotel
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) Papa
         es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Floating Charge No. 5 Agreement" means the floating charge agreement
         dated on or about the date of this Agreement made between: (1) HTCC
         Tanacsado Reszvenytarsasag as pledgor; (2) Citibank Rt. as pledgee and
         Security Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag
         as countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag
         as countersignor; (5) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Floating Charge Agreements" means, at any time, each of the Floating
         Charge No. 1 Agreement, the Floating Charge No. 2 Agreement, the
         Floating Charge No. 3 Agreement, the Floating Charge No. 4 Agreement,
         the Floating Charge No. 5 Agreement and any other floating charge
         agreement designated at such time as such in writing jointly by the
         Facility Agent, the Security Agent and the Obligors.

         "Foreign Exchange Act" means Act XCV of 1995 on Foreign Exchange, as
         amended, of Hungary.

         "Good Industry Practice" means the exercise of that degree of skill,
         diligence, prudence, foresight and operating practice which would
         reasonably and ordinarily be expected from a skilled and experienced
         telecommunications operator engaged in the same type of undertaking as
         the Group.

         "Government Decree" means government decree number 7 of 1997 (I.22.)
         issued by the Hungarian Government pursuant to the Civil Code.

         "Group" means, at any time, Hungarian Telephone and Cable Corp. and its
         Subsidiaries at such time.

         "HAS" means, at any time, accounting principles, standards and
         practices generally accepted and implemented in Hungary at such time.

         "Hedging Bank" means, at any time, any financial institution or bank
         which is at such time a counterparty to a Hedging Document entered into
         by any Borrower.

         "Hedging Document" means each agreement in respect of any derivative
         transaction, including, but not limited to, any interest rate swap,
         currency swap, forward foreign exchange transaction, cap, floor, or
         option transaction, or any other transaction entered into in connection
         with protection against any fluctuation in any rate or price, in each
         case, entered into by a Borrower in compliance with and in order to
         implement the Hedging Strategy, each such agreement to be based on the
         1992


                                       13
<PAGE>


         ISDA Master Agreement (multicurrency-cross border) and each in a form
         approved in advance by the Facility Agent, acting on the instructions
         of the Majority Lenders.

         "Hedging Strategy" means, at any time, in respect of the Borrowers, the
         strategy of the Borrowers at such time, devised by the Borrowers in
         accordance with sound and prudent business practices, for the
         management and mitigation of the risks arising to the financial
         condition of the Borrowers from interest rate and/or foreign exchange
         rates and implemented by the Borrowers during the term of this
         Agreement pursuant to Clause 21.20 (Hedging Strategy).

         "Holding Company" means, in relation to a company or corporation, any
         other company or corporation in respect of which it is a Subsidiary.

         "HTCC Tanacsado Reszvenytarsasag" means HTCC Tanacsado
         Reszvenytarsasag, a company duly incorporated under the laws of
         Hungary, with its registered office at Terez krt. 46, H-1066 Budapest,
         Hungary and registered at the Metropolitan Court of Registration with
         registration number 01-10-042606.

         "Hungarian Telephone and Cable Corp." means Hungarian Telephone and
         Cable Corp., a company registered under the laws of the State of
         Delaware, United States of America and whose principal place of
         business as at the date of this Agreement is at 100 First Stamford
         Place Suite, 204 Stamford, CT06902, Connecticut, United States of
         America.

         "Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag" means Hungarotel
         Tavkozlesi Koncesszios Reszvenytarsasag, a company duly incorporated
         under the laws of Hungary, with its registered office at Terez krt. 46,
         H-1066 Budapest, Hungary and registered at the Metropolitan Court of
         Registration with registration number 01-10-043040.

         "Hungary" means the Republic of Hungary.

         "IAS" means, at any time, international accounting standards issued by
         the International Accounting Standards Committee from time to time as
         such international accounting standards are accepted and implemented in
         Hungary at such time.

         "Income" means, in respect of any person at any time, the entire income
         of and all cash and/or money and/or money equivalent receivables
         whatsoever and howsoever arising of such person at such time.

         "Income Accounts" means the bank accounts of the Obligors, being, as at
         the date of this Agreement, in respect of:

         (a)      Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, those set
                  out and detailed in Schedule 11 (List of Bank Accounts) and
                  any sub-accounts of such account;

         (b)      RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, those set
                  out and detailed in Schedule 11 (List of Bank Accounts) and
                  any sub-accounts of such account;

         (c)      Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, those
                  set out and detailed in Schedule 11 (List of Bank Accounts)
                  and any sub-accounts of such account;

         (d)      KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag,
                  those set out and detailed in Schedule 11 (List of Bank
                  Accounts) and any sub-accounts of such account; and


                                       14
<PAGE>


         (e)      HTCC Tanacsado Reszvenytarsasag, those set out and detailed in
                  Schedule 11 (List of Bank Accounts) and any sub-accounts of
                  such account,

         and/or any other account(s) and/or branch(es) with any Lender or which
         the Facility Agent and the Security Agent, acting on the instructions
         of the Majority Lenders, may approve.

         "Information Memorandum" means the document in the form approved by
         each member of the Group concerning the Obligors which, at the
         Hungarian Telephone and Cable Corp.'s request and on its behalf, was
         prepared in relation to this transaction and distributed by the
         Arrangers to selected financial institutions prior to the date of this
         Agreement.

         "Interest Period" means, in relation to a Loan, each period determined
         in accordance with Clause 10 (Interest periods) and, in relation to an
         Unpaid Sum, each period determined in accordance with Clause 9.3
         (Default interest).

         "IO Fund" means the Danish Investment Fund for Central and Eastern
         Europe, an entity organised under the laws of Denmark.

         "Key Performance Indicators Certificate" means a certificate
         substantially in the form set out in Schedule 7 (Form of Key
         Performance Indicators Certificate).

         "KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag" means
         KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag, a company
         duly incorporated under the laws of Hungary, with its registered office
         at Dozsa Gy. utca 15., H-3162 Sagujfalu, Hungary and registered at the
         Nograd County Court of Registration with registration number
         12-10-001503.

         "Lender" means:

         (a)      any Original Lender; and

         (b)      any bank or financial institution which has become a Party in
                  accordance with Clause 23 (Changes to the Lenders),

         which in each case has not ceased to be a Party in accordance with the
         terms of this Agreement.

         "Letter of Borrowings and Encumbrances" means the letter dated on or
         about the date of this Agreement, addressed to the Facility Agent and
         signed by each member of the Group setting out, in reasonable detail,
         particulars of: (i) all of their respective indebtedness, (whether
         incurred as principal or surety), whether present or future, actual or
         contingent; (ii) all Encumbrances (if any), whether present or future,
         actual or contingent, over any of their respective assets (other than
         Permitted Encumbrances); and (iii) an explanation as to how such
         indebtedness and encumbrances will be repaid, eliminated, discharged,
         released, replaced and/or consolidated, as applicable, on the basis
         agreed in advance in writing prior to the date of this Agreement by
         each member of the Group and the Facility Agent.

         "LIBOR" means, in relation to any Loan or Unpaid Sum denominated in a
         currency other than forint or euro:

         (a)      the applicable Screen Rate; or

         (b)      (if no Screen Rate is available for the currency or period of
                  that Loan or Unpaid Sum) the arithmetic mean of the rates
                  (rounded upwards to four decimal places) as supplied to the


                                       15
<PAGE>


                  Facility Agent at its request quoted by the Relevant Reference
                  Banks to leading banks in the London interbank market,

         as of the Specified Time on the Quotation Day for the offering of
         deposits in the currency of that Loan or Unpaid Sum and for a period
         comparable to the Interest Period of the relevant Loan or period on
         which interest is to accrue.

         "Loan" means a Facility A Loan or a Facility B Loan.

         "Majority Lenders" means:

         (a)      if there are no Loans then outstanding, a Lender or Lenders
                  whose Commitments aggregate more than sixty six and two-thirds
                  per cent. (66 2/3%) of the Total Commitments (or, if the Total
                  Commitments have been reduced to zero (0), aggregated more
                  than sixty six and two-thirds per cent. (66 2/3%) of the Total
                  Commitments immediately prior to the reduction); or

         (b)      at any other time, a Lender or Lenders whose participations in
                  the Loans then outstanding aggregate more than sixty six and
                  two-thirds per cent. (66 2/3%) of all the Loans then
                  outstanding,

         Provided that, in respect of any Lender which, at the time of any
         determination to be made by the Majority Lenders pursuant to this
         Agreement, owns, legally and/or beneficially, directly and/or
         indirectly, five per cent. (5%) or more of the issued and paid-up share
         capital of Hungarian Telephone and Cable Corp. and/or any Note(s)
         and/or any Warrant(s), such Lender's Commitment and participation in
         the Total Commitments or participations in all the Loans then
         outstanding, as applicable, shall be deemed to be zero (0) for the
         purposes of determining the composition of the Majority Lenders and
         such Lender shall not be entitled to take part in any such
         determination by the remaining Lenders.

         "Material Adverse Effect" means, in relation to any fact(s), event(s)
         and/or circumstance(s) or series of the foregoing, such fact(s),
         event(s) and/or circumstance(s) which has or would be reasonably likely
         to have a material adverse effect on:

         (a)      the business, condition (financial or otherwise) or results of
                  operations of any Obligor;

         (b)      the business, condition (financial or otherwise) or results of
                  operations of the Group taken as a whole; and/or

         (c)      the ability of any Obligor to duly comply, perform and
                  discharge such Obligor's respective obligations and
                  liabilities under any of the Finance Documents.

         "Minister" means, at any time, the Minister appointed at such time to
         head the Ministry.

         "Minister's Letter" means the letter from the Minister to Koves
         Clifford Chance Punder (as legal counsel acting on behalf of the
         Borrowers) confirming, inter alia, the Minister's approval of the
         creation of the Encumbrances created by and constituted in the Security
         Agreements and approving, on terms and conditions set out in such
         letter(s), the transfer of ownership of the Borrowers and/or the assets
         of the Borrowers upon the enforcement of the Encumbrances created by
         and constituted in the Security Agreements.


                                       16
<PAGE>


         "Ministry" means, as at the date of this Agreement, the Ministry of
         Transport, Communication and Water Management of Hungary (or any
         successor Competent Authority with relevant responsibilities at such
         time in respect of the Concession Contracts).

         "Month" means a period starting on one day in a calendar month and
         ending on the numerically corresponding day in the next calendar month,
         except that:

         (a)      (subject to paragraph (c) below) if the numerically
                  corresponding day is not a Business Day, that period shall end
                  on the next Business Day in that calendar month in which that
                  period is to end if there is one, or if there is not, on the
                  immediately preceding Business Day;

         (b)      if there is no numerically corresponding day in the calendar
                  month in which that period is to end, that period shall end on
                  the last Business Day in that calendar month; and

         (c)      if an Interest Period begins on the last Business Day of a
                  calendar month, that Interest Period shall end on the last
                  Business Day in the calendar month in which that Interest
                  Period is to end.

         The above rules will only apply to the last Month of any period.

         "Mortgage No. 1 Agreement" means the mortgage agreement dated on or
         about the date of this Agreement made between: (1) Hungarotel
         Tavkozlesi Koncesszios Reszvenytarsasag as mortgagor; (2) Citibank Rt.
         as mortgagee and Security Agent; (3) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Mortgage No. 2 Agreement" means the mortgage agreement dated on or
         about the date of this Agreement made between: (1) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as mortgagor; (2) Citibank Rt. as
         mortgagee and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Mortgage No. 3 Agreement" means the mortgage agreement dated on or
         about the date of this Agreement made between: (1) Papa es Tersege
         Tavkozlesi Koncesszios Reszvenytarsasag as mortgagor; (2) Citibank Rt.
         as mortgagee and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (5) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Mortgage No. 4 Agreement" means the mortgage agreement dated on or
         about the date of this Agreement made between: (1) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as mortgagor; (2) Citibank Rt.
         as mortgagee and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (5) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor.

         "Mortgage No. 5 Agreement" means the mortgage agreement dated on or
         about the date of this Agreement made between: (1) HTCC Tanacsado
         Reszvenytarsasag as mortgagor; (2) Citibank Rt. as mortgagee and
         Security Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag
         as


                                       17
<PAGE>


         countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (5) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Mortgage Agreements" means, at any time, each of the Mortgage No. 1
         Agreement, the Mortgage No. 2 Agreement, the Mortgage No. 3 Agreement,
         the Mortgage No. 4 Agreement, the Mortgage No. 5 Agreement and any
         other mortgage agreement at such time designated as such in writing
         jointly by the Facility Agent, the Security Agent and the Obligors.

         "NBH" means the National Bank of Hungary.

         "NBH Acknowledgement" means the acknowledgement of the NBH issued in
         respect of Facility A pursuant to the Foreign Exchange Act.

         "NBH Permission" means the licence of the NBH issued in respect of
         Facility B pursuant to the Foreign Exchange Act.

         "Net Cumulative Excess Cashflow" means, at any time, the aggregate of
         all positive Excess Cashflow amounts, calculated from 1 January 2000
         onwards, up to such time less the aggregate of all prepayments made to
         the Lenders, calculated from 1 January 2000 onwards, up to such time by
         any Borrower(s) pursuant to Clause 8.2 (Mandatory prepayment).

         "Notaries Public Act" means Act XLI of 1991 on Notaries Public, as
         amended, of Hungary.

         "Notary Public" means a notary public of Hungary, duly operating under
         the Notaries Public Act who, amongst other matters, is entitled to
         notarise and enter details of applicable collateral securities into the
         Register of Pledges.

         "Notes" means each of the twenty five (25) unsecured loan notes, each
         of one million dollar (USD 1,000,000) nominal value, dated 10 May 1999
         issued by Hungarian Telephone and Cable Corp. to Postabank es
         Takarekpenztar Reszvenytarsasag as noteholder, as amended and restated
         pursuant to the Amendment No. 1 to Securities Purchase Agreement, as
         such notes may have been prepaid in accordance with this Agreement and
         "Note" means any or each of them.

         "Obligors" means each of the Borrowers and each Guarantor and "Obligor"
         shall mean any or each of them.

         "Optional Currency" means, in respect of Facility A, forint.

         "Original Financial Statements" means, in respect of:

         (i)      Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag, its
                  financial statements for its financial year ended 31 December
                  1998 audited by the Auditors;

         (ii)     RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag, its
                  financial statements for its financial year ended 31 December
                  1998 audited by the Auditors;

         (iii)    Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag, its
                  financial statements for its financial year ended 31 December
                  1998 audited by the Auditors;

         (iv)     KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag,
                  its financial statements for its financial year ended 31
                  December 1998 audited by the Auditors;


                                       18
<PAGE>


         (v)      HTCC Tanacsado Reszvenytarsasag, its financial statements for
                  its financial year ended 31 December 1998 audited by the
                  Auditors;

         (vi)     PILISTAV Tavkozlesi, Epito es Szolgaltato Korlatolt
                  Felelossegu Tarsasag, its financial statements for its
                  financial year ended 31 December 1998 audited by the Auditors;
                  and

         (vii)    Hungarian Telephone and Cable Corp., the 10K Document for its
                  financial year ended 31 December 1998 audited by KPMG L.L.P.
                  and the 10Q Document in respect of the first nine (9) Months
                  of its 1999 financial year, such nine (9) Month period ending
                  30 September 1999.

         "Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag" means Papa es
         Tersege Tavkozlesi Koncesszios Reszvenytarsasag, a company duly
         incorporated under the laws of Hungary, with its registered office at
         Major utca 2., H-8500 Papa, Hungary and registered at the Veszprem
         County Court of Registration with registration number 19-10-500090.

         "Participating Member State" means any member state of the European
         Communities that adopts or has adopted the euro as its lawful currency
         in accordance with legislation of the European Communities relating to
         European Monetary Union.

         "Party" means a party to this Agreement and includes its successors in
         title, permitted assigns and permitted transferees and "Parties" means
         any two (2) or more such persons.

         "Permitted Fee Distribution" means any Distribution to be made by any
         Obligor (other than Hungarian Telephone and Cable Corp.) to Hungarian
         Telephone and Cable Corp. and/or HTCC Tanacsado Reszvenytarsasag, as
         appropriate, as guarantee or similar fees in respect of the guarantees
         created by and constituted in the Deed of Guarantee No. 5 or the Deed
         of Guarantee No. 6, as applicable, and/or as loan fees, interest or
         similar fees in respect of the Financial Indebtedness of such Obligor
         to Hungarian Telephone and Cable Corp. or HTCC Tanacsado
         Reszvenytarsasag, as applicable, made in accordance with Clause 21.13
         (Loans and guarantees), in each case the amounts of which have been
         expressly approved in advance in writing by the Facility Agent, acting
         on the instructions of the Majority Lenders.

         "Permitted Inter-company Loan" means any loan made between any of the
         Borrowers or any loan made between any of the Borrowers and HTCC
         Tanacsado Reszvenytarsasag, expressly contemplated by and permitted
         pursuant to paragraph (a) of Clause 21.13 (Loans and guarantees).

         "Permitted Management Contracts" means any management or similar
         agreement, contract or other arrangement whatsoever to which any member
         of the Group is or will be a party which:

         (a)      has been fully disclosed to and approved by the Facility Agent
                  prior to the date of this Agreement;

         (b)      which has been approved in advance in writing by the Facility
                  Agent, acting on the instructions of the Majority Lenders; or

         (c)      does not give rise to a Material Adverse Effect and which (if
                  not already falling into the scope of paragraphs (a) or (b)
                  above) when aggregated with all other such agreements,
                  contracts or other arrangements does not in any financial year
                  give rise to a liability (present or future, actual or
                  contingent) of an amount more than the equivalent to five
                  hundred thousand dollars (USD 500,000).


                                       19
<PAGE>


         "PILISTAV Tavkozlesi, Epito es Szolgaltato Korlatolt Felelossegu
         Tarsasag" means PILISTAV Tavkozlesi, Epito es Szolgaltato Korlatolt
         Felelossegu Tarsasag a company duly incorporated under the laws of
         Hungary, with its registered office at Jozsef Attila u. 1., H-2083
         Solymar, Hungary and registered at the Pest County Court of
         Registration with registration number 13-09-065295.

         "Pledge and Security Agreement" means the pledge and security agreement
         dated on or about the date of this agreement made between: (1)
         Hungarian Telephone and Cable Corp. as grantor; and (2) Citibank Rt. as
         Security Agent.

         "Pledge Over Bank Accounts No. 1 Agreement" means the pledge over bank
         accounts agreement dated on or about the date of this Agreement made
         between: (1) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
         pledgor; (2) Citibank Rt. as pledgee and Security Agent; (3) RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) Papa es
         Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and
         (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor.

         "Pledge Over Bank Accounts No. 2 Agreement" means the pledge over bank
         accounts agreement dated on or about the date of this Agreement made
         between: (1) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         pledgor; (2) Citibank Rt. as pledgee and Security Agent; (3) Hungarotel
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) Papa es
         Tersege Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and
         (5) KNC Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor.

         "Pledge Over Bank Accounts No. 3 Agreement" means the pledge over bank
         accounts agreement dated on or about the date of this Agreement made
         between: (1) Papa es Tersege Tavkozlesi Koncesszios Reszvenytarsasag as
         pledgor; (2) Citibank Rt. as pledgee and Security Agent; (3) Hungarotel
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (5) KNC
         Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor.

         "Pledge Over Bank Accounts No. 4 Agreement" means the pledge over bank
         accounts agreement dated on or about the date of this Agreement made
         between: (1) KNC Kelet-Nograd COM Tavkozlesi Koncesszios
         Reszvenytarsasag as pledgor; (2) Citibank Rt. as pledgee and Security
         Agent; (3) Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; (4) RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor; and (5) Papa es Tersege Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor.

         "Pledge Over Bank Accounts No. 5 Agreement" means the pledge over bank
         accounts agreement dated on or about the date of this Agreement made
         between: (1) HTCC Tanacsado Reszvenytarsasag as pledgor; (2) Citibank
         Rt. as pledgee and Security Agent; (3) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (5) Papa es Tersege
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (6) KNC
         Kelet-Nograd COM Tavkozlesi Koncesszios Reszvenytarsasag as
         countersignor.

         "Pledge Over Bank Accounts No. 6 Agreement" means the pledge over bank
         accounts agreement dated on or about the date of this Agreement made
         between: (1) Hungarian Telephone and Cable Corp. as pledgor; (2)
         Citibank Rt. as pledgee and Security Agent; (3) Hungarotel Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; (5) Papa es Tersege
         Tavkozlesi


                                       20
<PAGE>


         Koncesszios Reszvenytarsasag as countersignor; and (6) KNC Kelet-Nograd
         COM Tavkozlesi Koncesszios Reszvenytarsasag as countersignor; and (7)
         HTCC Tanacsado Reszvenytarsasag as countersignor.

         "Pledge Over Bank Accounts Agreements" means, at any time, each of the
         Pledge Over Bank Accounts No. 1 Agreement, the Pledge Over Bank
         Accounts No. 2 Agreement, the Pledge Over Bank Accounts No. 3
         Agreement, the Pledge Over Bank Accounts No. 4 Agreement, the Pledge
         Over Bank Accounts No. 5 Agreement, the Pledge Over Bank Accounts No. 6
         Agreement and any other pledge over bank accounts agreement at such
         time designated as such in writing jointly by the Facility Agent, the
         Security Agent and the Obligors.

         "Preference Shares" means the thirty thousand (30,000) preference
         shares ("Preferred Stock Series A"), each with a par value of zero
         point zero zero one dollars (USD 0.001) and each with a liquidation
         value of seventy dollars (USD 70), in Hungarian Telephone and Cable
         Corp. issued to Citizens International Management Services Company on
         12 May 1999 which are convertible at any time after 10 May 2000, at the
         option of the holder, into common shares of Hungarian Telephone and
         Cable Corp. on a one for ten (1:10) basis and which until such
         conversion entitle the holder to receive cumulative dividends payable
         in arrears at an annual rate of five per cent. (5%) compounded annually
         on the liquidation value.

         "Qualifying Lender" has the meaning provided for in Clause 13.1
         (Definitions).

         "Quotation Day" means, in relation to any period for which an interest
         rate is to be determined:

         (a)      if the currency is euro, two (2) TARGET Days before the first
                  day of that period; or

         (b)      for any currency other than euro, two (2) Business Days before
                  the first day of that period,

         unless market practice differs in the Relevant Interbank Market for a
         currency, in which case the Quotation Day for that currency will be
         determined by the Facility Agent in accordance with market practice in
         the Relevant Interbank Market (and if quotations would normally be
         given by leading banks in the Relevant Interbank Market on more than
         one day, the Quotation Day will be the last of those days).

         "RABA-COM Tavkozlesi Koncesszios Reszvenytarsasag" means RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag, a company duly incorporated
         under the laws of Hungary, with its registered office at Ady Endre utca
         1., H-9600 Sarvar, Hungary and registered at the Vas County Court of
         Registration with registration number 18-10-100512.

         "Reduction Date" means 31 December 2005.

         "Reduction Instalment" means two million five hundred thousand euro
         (EUR 2,500,000).

         "Register of Pledges" means the register of pledges maintained by the
         Hungarian National Chamber of Notaries Public, as provided for by the
         Government Decree.

         "Related Party" means, at any time, with respect to any person: (a) an
         Affiliate of such person; (b) a director, managing director,
         supervisory board member, employee or similar officer of such person;
         or (c) any spouse, relative in a direct line, adopted child, stepchild,
         foster-child, adoptive, step- or foster-parent, brother or sister of
         any person referred to in paragraph (a) above at such time.


                                       21
<PAGE>


         "Related Party Payments" means the payments to be made to former
         members of the management of the Group as detailed in the Information
         Memorandum, being for 2000 the amount not to exceed one million two
         hundred and eight thousand three hundred and forty dollars (USD
         1,208,340), for 2001 the amount not to exceed one million two hundred
         and eight thousand three hundred and forty dollars (USD 1,208,340) and
         for 2002 an amount not to exceed seven hundred and seventeen thousand
         dollars (USD 717,000).

         "Relevant Interbank Market" means:

         (a)      in respect of any Facility A Loan or Unpaid Sum denominated in
                  forint, the Budapest interbank market for BUBOR;

         (b)      in respect of any Facility A Loan, Facility B Loan or Unpaid
                  Sum denominated in euro, the Brussels interbank market for
                  EURIBOR; and

         (c)      in respect of any Unpaid Sum denominated in any currency other
                  than euro or forint, the London interbank market for LIBOR.

         "Relevant Interbank Market Rate" means

         (a)      in respect of a Facility A Loan or Unpaid Sum denominated in
                  forints, BUBOR;

         (b)      in respect of a Facility A Loan, Facility B Loan or Unpaid Sum
                  denominated in euro, EURIBOR; and

         (c)      in respect of an Unpaid Sum denominated in a currency other
                  than euro or forint, LIBOR.

         "Relevant Reference Banks" means:

         (a)      in respect of BUBOR, the principal Budapest offices of
                  Citibank Rt., Westdeutsche Landesbank (Hungaria) Rt. and
                  Magyar Kulkereskedelmi Bank Rt. and/or such other bank or
                  banks as may be appointed as such by the Facility Agent after
                  consultation with the Borrowers;

         (b)      in respect of EURIBOR, the principal Brussels offices of
                  Citibank, N.A., principal Dusseldorf offices of Westdeutsche
                  Landesbank Girozentrale and principal Paris offices of Credit
                  Lyonnais S.A. and/or such other bank or banks as may be
                  appointed as such by the Facility Agent after consultation
                  with the Borrowers; and

         (c)      in respect of LIBOR, the principal London offices of Citibank,
                  N.A., Westdeutsche Landesbank Girozentrale and Credit Lyonnais
                  S.A. and/or such other bank or banks as may be appointed as
                  such by the Facility Agent after consultation with the
                  Borrowers.

         "Repayment Dates" means each of the dates provided for under Clause 7.1
         (Repayment of Facility A Loans) and "Repayment Date" means any such
         date Provided that where any such Repayment Date is not a Business Day,
         the relevant date shall be deemed to be the Business Date immediately
         preceding such Repayment Date and "Repayment Date" and "Repayment
         Dates" shall, in such circumstances, be construed accordingly.


                                       22
<PAGE>


         "Repeating Representations" means each of those representations set out
         in Clause 18 (Representations) which are stated as being deemed to be
         repeated as provided for pursuant to Clause 18.29 (Repetition).

         "Rollover Loan" means one or more Facility B Loans:

         (a)      made or to be made on the same day that a maturing Facility B
                  Loan is due to be repaid;

         (b)      the aggregate amount of which is equal to or less than the
                  maturing Facility B Loan; and

         (c)      made or to be made to the same Borrower for the purpose of
                  refinancing a maturing Facility B Loan.

         "Screen Rate" means:

         (a)      in relation to LIBOR, the British Bankers Association Interest
                  Settlement Rate for the relevant currency and period displayed
                  on the appropriate page of the Telerate Screen, being, as at
                  the date of this Agreement, page 3750;

         (b)      in relation to EURIBOR, the percentage rate per annum
                  determined by the Banking Federation of the European Union for
                  the relevant period displayed on the appropriate page of the
                  Telerate Screen, being, as at the date of this Agreement, page
                  248; and

         (c)      in relation to BUBOR, the percentage rate per annum determined
                  according to the rules established by the Hungarian Forex
                  Association and published by the NBH for the relevant period
                  displayed on the appropriate page of the Reuters Screen,
                  being, as at the date of this Agreement, page BUBOR,

         or, if the agreed page is replaced or service ceases to be available,
         such other page or service displaying the appropriate rate as the
         Facility Agent, after consultation with the Borrowers and the Lenders,
         may select.

         "Securities Purchase Agreement" means the securities purchase agreement
         dated 10 May 1999 made between: (1) Hungarian Telephone and Cable
         Corp.; and (2) Postabank es Takarekpenztar Reszvenytarsasag.

         "Security Agent's Spot Rate of Exchange" means the Security Agent's
         spot rate of exchange for the purchase of the relevant currency with
         the Base Currency in the Budapest foreign exchange market at or about
         10.00 a.m. (Budapest time) on a particular day.

         "Security Agreements" means, at any time, each of the Assignment of
         Contractual Rights Agreements, the Deeds of Guarantee, the Fixed Charge
         Agreements, the Floating Charge Agreements, the Mortgage Agreements,
         the Pledge and Security Agreement, the Pledge Over Bank Accounts
         Agreements, the Security Deposit Agreements and any other document at
         such time designated as such in writing jointly by the Facility Agent,
         the Security Agent and the Obligors.

         "Security Deposit No. 1 Agreement" means the security deposit agreement
         dated on or about the date of this Agreement made between: (1)
         Hungarian Telephone and Cable Corp. as depositor; (2) Citibank Rt. as
         depositee and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (5) KNC Kelet-Nograd COM Tavkozlesi
         Koncesszios


                                       23
<PAGE>

         Reszvenytarsasag as countersignor; (6) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (7) HTCC Tanacsado
         Reszvenytarsasag as countersignor.

         "Security Deposit No. 2 Agreement" means the security deposit agreement
         dated on or about the date of this Agreement made between: (1) HTCC
         Tanacsado Reszvenytarsasag as depositor; (2) Citibank Rt. as depositee
         and Security Agent; (3) Hungarotel Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (4) RABA-COM Tavkozlesi Koncesszios
         Reszvenytarsasag as countersignor; (5) KNC Kelet-Nograd COM Tavkozlesi
         Koncesszios Reszvenytarsasag as countersignor; and (6) Papa es Tersege
         Tavkozlesi Koncesszios Reszvenytarsasag as countersignor.

         "Security Deposit Agreements" means each of the Security Deposit No. 1
         Agreement, the Security Deposit No. 2 Agreement and any other security
         deposit agreement designated as such in writing jointly by the Facility
         Agent, the Security Agent and the Obligors.

         "Selection Notice" means a notice substantially in the form set out in
         Part II of Schedule 3 (Form of Requests) given in accordance with
         Clause 10 (Interest Periods) in relation to Facility A.

         "Senior Finance Documents" means, at any time, each of this Agreement,
         each Fee Letter, each Hedging Document, each Security Agreement, the
         Subordination and Trust Deed and any other document, notice, instrument
         or agreement entered into or delivered pursuant to any of the foregoing
         and any other document, notice, instrument or agreement at such time
         designated as such in writing jointly by the Facility Agent, the
         Security Agent and the Obligors, and "Senior Finance Document" means
         any and each such document, notice, instrument or agreement.

         "Specified Time" means a time determined in accordance with Schedule 9
         (Timetables).

         "Subordination and Trust Deed" means the subordination and trust deed
         dated on or about the date of this Agreement made between: (1)
         Hungarotel Tavkozlesi Koncesszios Reszvenytarsasag; (2) RABA-COM
         Tavkozlesi Koncesszios Reszvenytarsasag; (3) Papa es Tersege Tavkozlesi
         Koncesszios Reszvenytarsasag; (4) KNC Kelet-Nograd COM Tavkozlesi
         Koncesszios Reszvenytarsasag; (5) Hungarian Telephone and Cable Corp.;
         (6) HTCC Tanacsado Reszvenytarsasag; (7) Citibank International plc
         acting in its capacity as Facility Agent on behalf of each and every
         Finance Party; and (8) Citibank Rt. acting in its capacity as Security
         Agent on behalf of each and every Finance Party.

         "Subsidiary" means, in respect of a company or corporation, any other
         company or corporation:

         (a)      which is controlled, directly or indirectly, by the
                  first-mentioned company or corporation;

         (b)      more than half the issued share or quota capital of which is
                  beneficially owned, directly or indirectly, by the
                  first-mentioned company or corporation; or

         (c)      which is a subsidiary of another subsidiary of the
                  first-mentioned company or corporation;

         and, for these purposes, a company or corporation shall be treated as
         being controlled by another if that other company or corporation is
         able to direct its affairs and/or to direct and/or control the
         composition of its board of directors or equivalent body.


                                       24
<PAGE>

         "TARGET" means Trans-European Automated Real-time Gross Settlement
         Express Transfer payment system.

         "TARGET Day" means any day on which TARGET is open for the settlement
         of payments in euro.

         "Tax" means any tax, stamp tax, registration tax, documentary tax,
         levy, impost, duty or other charge or withholding of a similar nature
         (including any penalty or interest payable in connection with any
         failure to pay or any delay in paying any of the same).

         "Taxes Act" means the Income and Corporation Taxes Act 1988, as
         amended, of England and Wales.

         "Telecommunications Act" means Act LXXVII of 1992 on Telecommunication,
         as amended, of Hungary.

         "Telecommunications Authority" means Hirkozlesi Fofelugyelet, being an
         organ of the Ministry, with, inter alia, certain responsibilities,
         duties and rights in respect of the Telecommunications Act.

         "Tele Danmark A/S" means Tele Danmark A/S, a corporation duly
         incorporated under the laws of Denmark, whose principal place of
         business is at Kannikegade 16, DK 8000, Aarhus-C, Denmark.

         "Total Commitments" means the aggregate of the Total Facility A
         Commitments and the Total Facility B Commitments, being one hundred and
         thirty million euro (EUR 130,000,000) at the date of this Agreement.

         "Total Facility A Commitments" means the aggregate of the Facility A
         Commitments, being one hundred and twenty five million euro (EUR
         125,000,000) at the date of this Agreement.

         "Total Facility A EURO Commitments" means the aggregate Base Currency
         Amount of the Facility A EURO Commitments of the Lenders.

         "Total Facility A HUF Commitments" means the aggregate Base Currency
         Amount of the Facility A HUF Commitments of the Lenders.

         "Total Facility A Loan" means, at any time, the Base Currency Amount of
         all Facility A Loans drawn down and outstanding at such time.

         "Total Facility B Commitments" means the aggregate of the Facility B
         Commitments, being five million euro (EUR 5,000,000) at the date of
         this Agreement.

         "Transfer Certificate" means a certificate substantially in the form
         set out in Part I of Schedule 4 (Form of Transfer Certificate) or any
         other form agreed between the Facility Agent and the Obligors.

         "Transfer Date" means, in relation to a transfer, the later of:

         (a)      the proposed Transfer Date specified in the Transfer
                  Certificate; and

         (b)      the date on which the Facility Agent executes the Transfer
                  Certificate.


                                       25
<PAGE>


         "Trigger Date" means the first date on which, for the then two (2)
         preceding financial quarter years of the Group, the ratio, calculated
         on the basis of the financial statements set out in the relevant 10K
         Document and/or 10Q Documents in respect of such financial quarter
         years, of the aggregate amount of all indebtedness (including, for the
         purpose of these calculations, the amount of twenty five million
         dollars (USD 25,000,000) being the amount of principal outstanding
         under the Notes) of each member of the Group (excluding any
         indebtedness arising between members of the Group) to EBITDA
         (calculated, in each case, on the basis of the four (4) previous
         financial quarter years) was less than three point five to one (3.5:1).

         "Unpaid Sum" means any sum due and payable but unpaid by an Obligor
         under the Finance Documents.

         "US GAAP" means, from time to time, the general accounting principles
         generally accepted in the United Sates of America at such time;

         "Utilisation" means a utilisation of a Facility.

         "Utilisation Date" means the date of a Utilisation, being the date on
         which the relevant Loan is to be made.

         "Utilisation Request" means a notice substantially in the form set out
         in Part I of Schedule 3 (Form of Requests).

         "VAT" means value added tax and any other Tax of a similar nature.

         "Warrant Confirmation Letter" means the letter dated on or about the
         date of this Agreement from Hungarian Telephone and Cable Corp. to
         Postabank es Takarekpenztar Reszvenytarsasag, in its capacities as
         holder of the Notes and as holder of the Warrants, confirming and
         affirming that each of the Warrants remains in full force and effect
         notwithstanding the amendment and restatement of the Notes pursuant to
         the Amendment No. 1 to Securities Purchase Agreement.

         "Warrants" means each warrant dated 12 May 1999 made between: (1)
         Hungarian Telephone and Cable Corp.; and (2) Postabank es
         Takarekpenztar Reszvenytarsasag, issued pursuant to the Securities
         Purchase Agreement and "Warrant" means any and each of them.

1.2      Construction

(a)      Any reference in this Agreement to:
         (i)      the "Arrangers", any "Arranger", the "Facility Agent", the
                  "Security Agent", the "Agents", any "Agent", the "Lenders",
                  any "Lender", any "Finance Party", the "Finance Parties",
                  "Citizens", "Tele Danmark A/S", "IO Fund" or "Beneficiary"
                  shall be construed so as to include its (and any
                  participant's) and any subsequent successors, transferees
                  assigns and/or replacements in accordance with their
                  respective interests;

         (ii)     "assets" includes present and future properties, revenues and
                  rights of every description;

         (iii)    the "equivalent" on any given date in one currency (the "first
                  currency") of an amount denominated in another currency (the
                  "second currency") is, where neither the first currency nor
                  the second currency is forint, a reference to the amount of
                  the first currency which could be purchased with the amount of
                  the second currency at the spot rate of exchange quoted by the
                  Facility Agent at or about 9.15 a.m. (London time) on


                                       26
<PAGE>


                  such date for the purchase of the first currency with the
                  second currency or, if either the first currency or the second
                  currency is forint, the amount of the first currency which
                  could be purchased with the amount of the second currency at
                  the spot rate of exchange quoted by the Security Agent at or
                  about 10.00 a.m. (Budapest time) on such date for the purchase
                  of the first currency with the second currency;

         (iv)     the "European interbank market" means the interbank market for
                  euro operating in Participating Member States;

         (v)      a "Finance Document" or any other agreement or instrument is a
                  reference to that Finance Document or other agreement or
                  instrument as amended or novated;

         (vi)     "indebtedness" includes any obligation (whether incurred as
                  principal or as surety) for the payment or repayment of money,
                  whether present or future, actual or contingent;

         (vii)    "laws and regulations of Hungary" shall be construed so as to
                  include any and all laws and regulations adopted in accordance
                  with Act XI of 1987 on Law Making, as amended, of Hungary;

         (viii)   a "person" includes any person, firm, company, corporation,
                  government, state or agency of a state or any association,
                  trust or partnership (whether or not having separate legal
                  personality) or two or more of the foregoing;

         (ix)     a "regulation" includes any regulation, rule, official
                  directive, request or guideline (whether or not having the
                  force of law) of any governmental, intergovernmental or
                  supranational body, agency, department or regulatory,
                  self-regulatory or other authority or organisation and, in
                  respect of any such, request or guideline, self-imposed
                  regulation, being those with which it is customary to comply;

         (x)      "repay" (or any derivative form thereof) shall, subject to any
                  contrary indication, be construed to include "prepay" (or, as
                  the case may be, the corresponding derivative form thereof);

         (xi)     a "successor" shall be construed so as to include an assignee
                  or successor in title of such party and any person who under
                  the laws of its jurisdiction of incorporation or domicile has
                  assumed the rights and obligations of such party under this
                  Agreement or to which, under such laws, such rights and
                  obligations have been transferred;

         (xii)    the "winding-up", "dissolution" or "administration" of a
                  company or corporation shall be construed so as to include any
                  equivalent or analogous proceedings under the law of the
                  jurisdiction in which such company or corporation is
                  incorporated or any jurisdiction in which such company or
                  corporation carries on business including the seeking of
                  bankruptcy, liquidation, final accounting, winding-up,
                  reorganisation, dissolution, administration, arrangement,
                  adjustment, protection or relief of debtors;

         (xiii)   a statute, law regulation, treaty or provision of any of the
                  foregoing is, in the absence of express wording to the
                  contrary, a reference to that statute, law, regulation, treaty
                  or such provision as amended or re-enacted;

         (xiv)    unless a contrary indication appears, a time of day is a
                  reference to Budapest time;

         (xv)     words imparting the singular shall be deemed to include the
                  plural and vice versa.


                                       27
<PAGE>


(b)      Section, Clause and Schedule headings are for ease of reference only.

(c)      Unless a contrary indication appears, a term used in any other Finance
         Document or in any notice given under or in connection with any Finance
         Document has the same meaning in that Finance Document or notice as in
         this Agreement.

(d)      A Default (other than an Event of Default) is "continuing" if it has
         not been remedied or waived and an Event of Default is "continuing" if
         it has not been waived.

(e)      "US$", "$", "USD", "dollars" and "Dollars" denote lawful currency of
         the United States of America; "HUF", "Forint" and "forint" denote
         lawful currency of Hungary; and "EUR", "euro" and "Euro" denote lawful
         currency of the Participating Member States.


                                       28
<PAGE>


                           SECTION 2 - THE FACILITIES

2.       THE FACILITIES

2.1      The Facilities
         Subject to the terms of this Agreement, the Lenders make available to
         the Borrowers:

         (a)      a dual currency term loan facility in an aggregate amount
                  equal to the Total Facility A Commitments; and

         (b)      a revolving loan facility in an aggregate amount equal to the
                  Total Facility B Commitments.

2.2      Lenders' rights and obligations
(a)      The obligations of each Lender under the Finance Documents are several.
         Failure by a Lender to perform its obligations under the Finance
         Documents does not affect the obligations of any other Party under the
         Finance Documents. No Finance Party is responsible for the obligations
         of any other Finance Party under the Finance Documents.

(b)      The rights of each Lender under or in connection with the Finance
         Documents are separate and independent rights and any debt arising
         under the Finance Documents to a Lender from an Obligor shall be a
         separate and independent debt.

(c)      A Finance Party may, except as otherwise stated in the Finance
         Documents, separately enforce its rights under the Finance Documents
         without the prior consent or approval of any other person.

3.       PURPOSE

3.1      Purpose
(a)      Each Borrower shall apply all amounts borrowed by it under Facility A
         towards the refinancing of such Borrower's existing indebtedness
         arising under the Bridge Loan Agreement.

(b)      Each Borrower shall apply all amounts borrowed by it under Facility B
         towards the payment of amounts arising under any Fee Letter, interest
         arising under this Agreement and/or for general corporate working
         capital purposes.

3.2      Monitoring
         No Finance Party is (other than, in respect of a Lender which is a
         Hungarian credit institution, as required by mandatory laws and
         regulations of Hungary), obliged to monitor, verify or otherwise
         concern itself with the application of any amount(s) borrowed pursuant
         to this Agreement.

4.       CONDITIONS OF UTILISATION

4.1      Initial conditions precedent
         No Borrower may deliver a Utilisation Request unless the Facility Agent
         has received all of the documents and other evidence listed in Schedule
         2 (Conditions precedent) in form and substance satisfactory to the
         Facility Agent. The Facility Agent shall notify the Obligors and the
         Lenders in writing promptly upon being so satisfied.

4.2      Further conditions precedent
         The Lenders will only be obliged to comply with Clause 5.4 (Lenders'
         participation) if on the date of the Utilisation Request and on the
         proposed Utilisation Date:


                                       29


<PAGE>


         (a)      no Event of Default is continuing or would result from the
                  proposed Loan and, in the case of any other Loan (subject to
                  Clause 7.2 (Repayment of Facility B Loans), other than a
                  Rollover Loan), no Default is continuing or would result from
                  the proposed Loan; and

         (b)      the Repeating Representations made or deemed to be made by
                  each Obligor on such date are true in all material respects.

4.3      Conditions relating to Optional Currency
         The Borrowers have expressed a desire for all or part of the Facility A
         to be utilised and drawn down in Facility A Loans which are denominated
         in forints. The forint will constitute the Optional Currency in
         relation to the making of a Facility A Loan if it has been approved in
         writing by the Facility Agent (acting on the instructions of all the
         Lenders who have previously agreed to fund a Facility A Loan in forint)
         on or prior to the date four (4) Business Days before the receipt by
         the Facility Agent of the relevant Utilisation Request for that
         Facility A Loan.

4.4      Maximum number of Loans
         A Borrower may not deliver a Utilisation Request if, as a result of the
         proposed Utilisation:

         (a)      more than eight (8) Facility A Loans would then be
                  outstanding; or

         (b)      more than five (5) Facility B Loans would then be outstanding.




                                       30
<PAGE>


                             SECTION 3 - UTILISATION

5.       UTILISATION

5.1      Delivery of a Utilisation Request

(a)      The Borrowers may only utilise Facility A by delivery to the Facility
         Agent of a single duly completed Utilisation Request not later than the
         Specified Time.

(b)      A Borrower may utilise Facility B by delivery to the Facility Agent of
         a duly completed Utilisation Request not later than the Specified Time.

5.2      Completion of a Utilisation Request
         Each Utilisation Request is irrevocable and will not be regarded as
         having been duly completed unless:

         (a)      it identifies the Facility to be utilised;

         (b)      the proposed Utilisation Date is a Business Day within the
                  Availability Period applicable to that Facility;

         (c)      the currency and amount of each Utilisation comply with Clause
                  5.3 (Currency and amount); and

         (d)      the proposed Interest Period complies with Clause 10 (Interest
                  Periods).

5.3      Currency and amount
(a)      The currency specified in a Utilisation Request in respect of any
         Facility A Loan must be the Base Currency or the Optional Currency and,
         in respect of any Facility B Loan must be the Base Currency.

(b)      In respect of Facility A:

         (i)      the Base Currency Amount of any proposed Facility A Loan which
                  is to be utilised and drawn down by a Borrower denominated in
                  forint shall, when aggregated with all other Facility A Loans
                  to be utilised and drawn down by the Borrowers denominated in
                  forint, not exceed the Base Currency Amount, if any, of
                  Facility A which the Lenders have previously, by written
                  notice to the Facility Agent, agreed to provide to the
                  Borrowers in forint;

         (ii)     the Base Currency Amount of any proposed Facility A Loan which
                  is to be utilised and drawn down by a Borrower shall, when
                  aggregated with any other Facility A Loans to be utilised and
                  drawn down by such Borrower, not exceed the following Base
                  Currency Amounts:

                  (1)      in respect of Hungarotel Tavkozlesi Koncesszios
                           Reszvenytarsasag, seventy nine million euro (EUR
                           79,000,000);

                  (2)      in respect of RABA-COM Tavkozlesi Koncesszios
                           Reszvenytarsasag, fourteen million euro (EUR
                           14,000,000);


                                       31
<PAGE>


                  (3)      in respect of Papa es Tersege Tavkozlesi Koncesszios
                           Reszvenytarsasag, thirteen million euro (EUR
                           13,000,000); and

                  (4)      in respect of KNC Kelet-Nograd COM Tavkozlesi
                           Koncesszios Reszvenytarsasag, twenty six million euro
                           (EUR 26,000,000); and

         (iii)    the aggregate Base Currency Amount of each Facility A Loan to
                  be utilised and drawn down by all of the Borrowers shall not
                  exceed the Total Facility A Commitments.

(c)      The amount of any proposed Facility B Loan must be a minimum of one
         million euro (EUR 1,000,000) or, if less, the Available Facility (in
         respect of Facility B) and, if for a greater amount, an integral
         multiple thereof of one million euro (EUR 1,000,000) or the balance of
         the Available Facility (in respect of Facility B), up to the Total
         Facility B Commitments.

5.4      Lenders' participation
(a)      If the conditions set out in this Agreement have been met, each Lender
         shall make its participation in each applicable Loan available through
         its Facility Office.

(b)      In respect of any Facility A Loans to be utilised and drawn down
         denominated in forint, each Lender shall participate in such Facility A
         Loans in an amount equal to the proportion borne by such Lender's
         Facility A HUF Commitment to the Total Facility A HUF Commitments.

(c)      In respect of any Facility A Loans to be utilised and drawn down
         denominated in euro, each Lender shall participate in each such
         Facility A Loan in an amount equal to the proportion borne by such
         Lender's Facility A EURO Commitment to the Total Facility A EURO
         Commitments.

(d)      The amount of each Lender's participation in each Facility B Loan will
         be equal to the proportion borne by its Available Commitment to the
         Available Facility immediately prior to making such Facility B Loan.

(e)      The Facility Agent shall notify each Lender in writing of the amount,
         currency and the Base Currency Amount of each Loan at the Specified
         Time.

5.5      Rounding by Facility Agent
         Each Obligor and each Finance Party hereby authorises and directs the
         Facility Agent to make such minor adjustments in respect of the amounts
         of the Facility A Loans, with the intent of avoiding problems,
         including but not limited to, the rounding of figures and to simplify
         the ongoing management of such Facility A Loans.

6.       OPTIONAL CURRENCY

6.1      Selection of currency
(a)      A Borrower shall select the currency of a Facility A Loan in a
         Utilisation Request.

(b)      If a Borrower fails to select a currency in relation to a Facility A
         Loan, such Facility A Loan will be denominated in euro.

6.2      Unavailability of the Optional Currency
         If before the Specified Time on any Quotation Day:

         (a)      the Facility Agent has received notice from a Lender that the
                  Optional Currency requested is not readily available to it in
                  the amount required; or


                                       32
<PAGE>

         (b)      a Lender notifies the Facility Agent that compliance with its
                  obligation to participate in a Facility A Loan in the proposed
                  Optional Currency would contravene an Applicable Law,

         the Facility Agent will give notice to the relevant Borrower to that
         effect by the Specified Time on that day. In this event, any Lender
         that gives notice pursuant to this Clause 6.2 will be required to
         participate in the Facility A Loan in the Base Currency (in an amount
         equal to that Lender's proportion of the Base Currency Amount of that
         Facility A Loan) and its participation will be treated as a separate
         Loan denominated in the Base Currency during that Interest Period.



                                       33
<PAGE>


               SECTION 4 - REPAYMENT, PREPAYMENT AND CANCELLATION

7.       REPAYMENT

7.1      Repayment of Facility A Loans

(a) The Borrowers will repay the Facility A Loans in accordance with the
schedule set out below:

<TABLE>
<CAPTION>
<S>                 <C>                                           <C>
                    --------------------------------------------------------------------------------
                    Repayment Date (subject to the proviso        Amount of the Total Facility A
                    contained in the definition of Repayment      Loan to be repaid on the
                    Dates in Clause 1.1 (Definitions))            relevant Repayment Date,
                                                                  expressed as a percentage of the
                                                                  Total Facility A Loan
                                                                  outstanding immediately
                                                                  following the making of the
                                                                  Facility A Loans (subject to any
                                                                  adjustment(s) made in respect of
                                                                  any prepayments made pursuant to
                                                                  Clause 8.4 (Voluntary Prepayment
                                                                  of Facility A Loans))
         -------------------------------------------------------------------------------------------
         1.         30 June 2001                                                three per cent. (3%)
         -------------------------------------------------------------------------------------------
         2.         31 December 2001                                             four per cent. (4%)
         -------------------------------------------------------------------------------------------
         3.         30 June 2002                                                 five per cent. (5%)
         -------------------------------------------------------------------------------------------
         4.         31 December 2002                                              six per cent. (6%)
         -------------------------------------------------------------------------------------------
         5.         30 June 2003                                                seven per cent. (7%)
         -------------------------------------------------------------------------------------------
         6.         31 December 2003                                            seven per cent. (7%)
         -------------------------------------------------------------------------------------------
         7.         30 June 2004                                                seven per cent. (7%)
         -------------------------------------------------------------------------------------------
         8.         31 December 2004                                            seven per cent. (7%)
         -------------------------------------------------------------------------------------------
         9.         30 June 2005                                                eight per cent. (8%)
         -------------------------------------------------------------------------------------------
         10.        31 December 2005                                            eight per cent. (8%)
         -------------------------------------------------------------------------------------------
         11.        30 June 2006                                                eight per cent. (8%)
         -------------------------------------------------------------------------------------------
         12.        31 December 2006                                             ten per cent. (10%)
         -------------------------------------------------------------------------------------------
         13.        30 June 2007                                                 ten per cent. (10%)
         -------------------------------------------------------------------------------------------
         14.        31 December 2007                                             ten per cent. (10%)
         -------------------------------------------------------------------------------------------
                    TOTAL:                                              one hundred per cent. (100%)
                    --------------------------------------------------------------------------------
</TABLE>


(b)      Each Borrower will, on each Repayment Date, repay such percentage of
         the Facility A Loan(s) then drawn down by and outstanding from such
         Borrower, as is provided for in the schedule set out under paragraph
         (a) above Provided that for the avoidance of doubt, the percentages
         specified in the schedule set out under paragraph (a) above are such
         percentages as adjusted and revised to reflect any prepayments made
         pursuant to Clause 8.4 (Voluntary prepayment of Facility A Loans) and
         such percentages or adjusted and revised percentages, as applicable,
         are, in respect of any Facility A Loans denominated in forint,
         expressed as percentages of the forint amount of each Facility A Loan
         funded in forint and, in respect of Facility A Loans funded in euro,
         expressed as percentages of the euro amount of each Facility A Loan
         funded in euro.

(c)      No Borrower may reborrow any part of Facility A which is repaid.

7.2      Repayment of Facility B Loans
         Each Borrower which has drawn a Facility B Loan shall repay that Loan
         on the last day of its Interest Period or, if earlier, on the Final
         Maturity Date. If, in respect of any Facility B Loan which is
         outstanding and which the relevant Borrower wishes to continue to
         utilise as a Rollover Loan, on the day of issue of a Utilisation
         Request by the relevant Borrower (for such Facility B


                                       34
<PAGE>

         Loan to be a Rollover Loan) and/or on the last day of the Interest
         Period for that Facility B Loan, a Default is continuing, then, subject
         to paragraph (h) of Clause 8.7 (Restrictions), that Facility B Loan
         shall not be repaid on the last day of the Interest Period for that
         Facility B Loan, but shall continue to be utilised as a Rollover Loan
         for one (1) further Interest Period of (irrespective of any request by
         that Borrower for a longer Interest Period in the relevant Utilisation
         Request and in any event subject to the other provisions of this
         Agreement) one (1) Month and if on the last day of such subsequent one
         (1) Month Interest Period a Default is still continuing, that Facility
         B Loan shall be repaid on the last day of such subsequent one (1) Month
         Interest Period.

7.3      Reduction of Facility B
         The amount of Facility B shall reduce on the Reduction Date by the
         Reduction Instalment to two million five hundred thousand euro (EUR
         2,500,000).

8.       PREPAYMENT AND CANCELLATION

8.1      Illegality
         If it becomes unlawful in any jurisdiction for a Lender to perform any
         of its obligations as contemplated by this Agreement or to fund its
         participation in any Loan:

         (a)      that Lender shall promptly notify the Facility Agent upon
                  becoming aware of that event;

         (b)      upon the Facility Agent notifying the relevant Obligor, the
                  Commitment of that Lender will be immediately cancelled; and

         (c)      each Borrower shall repay that Lender's participation in the
                  Loans made to that Borrower on the last day of the Interest
                  Period for each Loan occurring after the Facility Agent has
                  notified the relevant Obligor or, if earlier, the date
                  specified by the Lender in the notice delivered to the
                  Facility Agent (being no earlier than the last day of any
                  applicable grace period permitted by Applicable Law).

8.2      Mandatory prepayment
         During the period commencing on the date of this Agreement and ending
         at such time as at which an aggregate amount (aggregating amounts or
         their equivalents which are, in relation to each respective prepayment
         made pursuant to this Clause 8.2, determined by reference to the date
         on which such prepayment is actually received by the Lenders)
         equivalent to twenty five million dollars (USD 25,000,000) of the
         aggregate amount of the Facility A Loans (outstanding following the
         making of the Facility A Loans pursuant to this Agreement) has been
         pre-paid, the Obligors shall procure and ensure that, within fifteen
         (15) days of the publication of each 10K Document (commencing with the
         10K Document in respect of the financial year ending 31 December 2000),
         at least fifty per cent. (50%) of the Group's Excess Cashflow in each
         such financial year to which each such 10K Document relates, is applied
         towards prepayment of the Facility A Loans. Provided that for the
         avoidance of doubt, such amount(s) so repaid will be applied
         proportionately between the Facility A Loans denominated in euro and
         any Facility A Loans denominated in HUF, in each case by reference to
         the amounts of such Facility A Loans, converted into the Base Currency
         at the Security Agent's Spot Rate of Exchange on the date of such
         mandatory prepayment. Repayments made pursuant to this Clause 8.2 shall
         be made in inverse order of maturity.


                                       35
<PAGE>

8.3      Voluntary cancellation

(a)      The Borrowers may, if they give the Facility Agent not less than
         fifteen (15) Business Days' (or such shorter period as the Facility
         Agent, acting on the instructions of the Majority Lenders, may agree)
         prior notice, cancel the whole or any part (being, during the period
         commencing on the date of satisfaction of the conditions precedent
         pursuant to Clause 4.1 (Initial conditions precedent) and ending
         fifteen (15) days thereafter, a minimum amount of two million euro (EUR
         2,000,000) and thereafter being a minimum amount of five million euro
         (EUR 5,000,000) and if, in either case, being for a larger amount, an
         integral multiple of one million euro (EUR 1,000,000)) of Facility A.
         Any cancellation under this Clause 8.3 shall reduce the Commitments of
         the Lenders rateably under Facility A.

(b)      The Borrowers may, if they give the Facility Agent not less than
         fifteen (15) Business Days' (or such shorter period as the Facility
         Agent acting on the instructions of the Majority Lenders, may agree)
         prior notice, cancel the whole or any part (being a minimum amount of
         two million five hundred thousand euro (EUR 2,500,000)) of Facility B.
         Any cancellation under this Clause 8.3 shall reduce the Commitments of
         the Lenders rateably under Facility B.

8.4      Voluntary prepayment of Facility A Loans
(a)      A Borrower to which a Facility A Loan has been made may, if such
         Borrower gives the Facility Agent not less than twenty (20) Business
         Days' (or such shorter period as the Facility Agent, acting on the
         instructions of the Majority Lenders, may agree) prior notice, prepay
         the whole or any part of any Facility A Loan (but, in each case, the
         amount being so prepaid shall, when aggregated with all other amounts
         being prepaid on such date pursuant to this Clause 8.4, be not less
         than an amount equivalent to five million euro (EUR 5,000,000) or, if a
         larger amount, an integral multiple of one million euro (EUR
         1,000,000)).

(b)      A Facility A Loan may only be prepaid after the last day of the
         Availability Period (or, if earlier, the day on which the applicable
         Available Facility is zero (0)).

(c)      Any prepayment under this Clause 8.4 shall be applied so as to satisfy
         pro rata the obligations under Clause 7.1 (Repayment of Facility A
         Loans). The Facility Agent shall, as quickly as practicable following
         any prepayment made pursuant to this Clause 8.4, confirm to the
         Obligors and to each Lender in writing the percentages provided for in
         paragraph (a) of Clause 7.1 (Repayment of Facility A Loans) adjusted
         and revised to reflect such prepayment.

8.5      Voluntary prepayment of Facility B Loans
         The Borrower to which a Facility B Loan has been made may, if it gives
         the Facility Agent not less than twenty (20) Business Days' (or such
         shorter period as the Facility Agent, acting on the instructions of the
         Majority Lenders, may agree) prior notice, prepay the whole or any part
         of a Facility B Loan (but, if in part, being an amount that reduces the
         Base Currency Amount of the Facility B Loan by a minimum amount of one
         million euro (EUR 1,000,000) and integral multiples of one million euro
         (EUR 1,000,000) thereafter).

8.6      Right of repayment and cancellation in relation to a single Lender
(a)      If:

         (i)      any sum payable to any Lender by an Obligor is required to be
                  increased under paragraph (c) of Clause 13.2 (Tax gross-up);
                  or

         (ii)     any Lender claims indemnification from any Borrower under
                  Clause 13.3 (Tax indemnity) or Clause 14.1 (Increased costs),


                                       36
<PAGE>


         such Borrower may, whilst the circumstance giving rise to the
         requirement or indemnification continues, give the Facility Agent
         notice of cancellation of the Commitment of that Lender and such
         Borrower's intention to procure the repayment of that Lender's
         participation in the Loans.

(b)      On receipt of a notice referred to in paragraph (a) above, the
         Commitment of that Lender shall immediately be reduced to zero (0).

(c)      On the last day of each Interest Period which ends after a Borrower has
         given notice under paragraph (a) above (or, if earlier, the date
         specified by such Borrower in that notice), such Borrower to which a
         Loan is outstanding shall repay that Lender's participation in that
         Loan.

8.7      Restrictions
(a)      Any notice of cancellation or prepayment given by any Party under this
         Clause 8 shall be irrevocable and, unless a contrary indication appears
         in this Agreement, shall specify the date or dates upon which the
         relevant cancellation or prepayment is to be made and the amount of
         that cancellation or prepayment.

(b)      Any prepayment under this Agreement shall be made together with accrued
         interest on the amount prepaid and, subject to any Break Costs, without
         premium or penalty.

(c)      No Borrower may reborrow any part of Facility A which is prepaid.

(d)      Unless a contrary indication appears in this Agreement, any part of
         Facility B which is prepaid may be reborrowed in accordance with the
         terms of this Agreement.

(e)      The Borrowers shall not repay or prepay all or any part of the Loans or
         cancel all or any part of the Commitments except at the times and in
         the manner expressly provided for in this Agreement.

(f)      No amount of the Total Commitments cancelled under this Agreement may
         be subsequently reinstated.

(g)      If the Facility Agent receives a notice under this Clause 8 it shall
         promptly forward a copy of that notice to either the relevant
         Borrower(s) or the affected Lender, as appropriate.

(h)      No Interest Period in respect of a Facility B Loan may extend beyond
         the Final Maturity Date.





                                       37
<PAGE>


                        SECTION 5 - COSTS OF UTILISATION

9.       INTEREST

9.1      Calculation of interest
(a)      The rate of interest on each Loan for each Interest Period is the
         percentage rate per annum which is the aggregate of:

         (i)      the Applicable Margin;

         (ii)     in relation to any Loan denominated in forint, BUBOR or, in
                  relation to any Loan denominated in euro, EURIBOR; and

         (iii)    the Associated Costs, if any.

(b)      Subject to Clause 9.3 (Default interest), the rate of interest on each
         Unpaid Sum for each Interest Period is the percentage rate per annum
         which is the aggregate of:

         (i)      the Applicable Margin;

         (ii)     in relation to any Unpaid Sum denominated in forint, BUBOR, in
                  relation to any Unpaid Sum denominated in euro, EURIBOR or, in
                  relation to any Unpaid Sum denominated in any other currency,
                  LIBOR; and

         (iii)    the Associated Costs, if any.

9.2      Payment of interest
         The Borrower to which a Loan has been made shall pay accrued interest
         on that Loan on the last day of each Interest Period.

9.3      Default interest
(a)      If an Obligor fails to pay any amount payable by it under a Finance
         Document on its due date, interest shall accrue on the overdue amount
         from the due date up to the date of actual payment (both before and
         after judgment) at a rate two per cent. (2%) higher than the rate which
         would have been payable if the overdue amount had, during the period of
         non-payment, constituted a Loan in the currency of the overdue amount
         for successive Interest Periods, each of a duration selected by the
         Facility Agent (acting reasonably). Any interest accruing under this
         Clause 9.3 shall be immediately payable by the Obligor on demand by the
         Facility Agent.

(b)      Default interest (if unpaid) arising on an overdue amount will be
         compounded with the overdue amount at the end of each Interest Period
         applicable to that overdue amount but will remain immediately due and
         payable.

9.4      Notification of rates of interest
         The Facility Agent shall promptly notify the Lenders and the relevant
         Borrower(s) in writing of the determination of a rate of interest under
         this Agreement. Without prejudice to Clause 30.1 (Communications in
         writing), such notification may be made by the Facility Agent by e-mail
         to a Lender or Borrower where such Lender or Borrower, as appropriate,
         has expressly agreed, by written notice to the Facility Agent, to
         receive such notification by e-mail and has informed the Facility Agent
         of an e-mail address pursuant to Clause 30.2 (Addresses) or, to the
         extent that it becomes common practice in the syndicated euroloan
         markets to do so and such Lender or Borrower, as appropriate, has
         expressly agreed, by written notice to the Facility Agent (in each


                                       38
<PAGE>


         case, such agreement not to be unreasonably withheld or delayed), by
         reference to rates quoted on a web site, the address of which (and the
         location of the relevant rates at such web site) has been confirmed to
         such Lender or Borrower, as appropriate, in accordance with Clause 30
         (Notices).

9.5      Applicable Margin
         The margin from time to time applicable to Interest Periods (the
         "Applicable Margin") shall be:

         (a)      for any Interest Period which begins on the first Utilisation
                  or during the twelve (12) Month period following such first
                  Utilisation, one point seven five per cent. per annum (1.75%
                  p.a.); and

         (b)      for any Interest Period which begins on or after the date
                  which falls twelve (12) Months after the date of first
                  Utilisation, one point seven five per cent. per annum (1.75%
                  p.a.) subject to adjustment in accordance with Clause 9.6
                  (Adjustments to Margin).

9.6      Adjustments to Margin
(a)      If, in respect of any Interest Period which commences on or after the
         date falling twelve (12) Months after the date of first Utilisation,
         the Group's Senior Debt to EBITDA Ratio calculated in accordance with
         Clause 20.1 (Financial Condition of the Group) and following the
         delivery of Hungarian Telephone and Cable Corp.'s then most recent 10K
         Document or 10Q Document, as applicable, together with the supporting
         calculations and workings of such calculations:

         (i)      is equal to or less than four point zero to one (4.0:1) and on
                  such date no Default or Event of Default is continuing then
                  the Applicable Margin on the Loan to which such Interest
                  Period relates will be set at one point six zero per cent. per
                  annum (1.60% p.a.) for the period up to the earlier of:

                  (A)      the commencement of a subsequent Interest Period
                           following a change in the Group's Senior Debt to
                           EBITDA Ratio; and

                  (B)      the occurrence of a Default or Event of Default;

         (ii)     is equal to or less than three point zero to one (3.0:1) and
                  on such date no Default or Event of Default is continuing then
                  the Applicable Margin on the Loan to which such Interest
                  Period relates will be set at one point three five per cent.
                  per annum (1.35% p.a.) for the period up to the earlier of:

                  (A)      the commencement of a subsequent Interest Period
                           following a change in the Group's Senior Debt to
                           EBITDA Ratio; and

                  (B)      the occurrence of a Default or Event of Default;  or

         (iii)    is equal to or less than two point zero to one (2.0:1) and on
                  such date no Default or Event of Default is continuing then
                  the Applicable Margin on the Loan to which such Interest
                  Period relates will be set at one point five per cent. per
                  annum (1.15% p.a.) for the period up to the earlier of:

                  (A)      the commencement of a subsequent Interest Period
                           following a change in the Group's Senior Debt to
                           EBITDA Ratio, and

                  (B)      the occurrence of a Default or Event of Default,


                                       39
<PAGE>

         Provided that, and notwithstanding this Clause 9.6 no more than one
         downward adjustment of Applicable Margin may take place in any three
         (3) Month period.

(b)      if the Applicable Margin applicable to a Loan is reduced by operation
         of the provisions of paragraph (a) above and:

         (i)      it is subsequently established that the relevant 10K
                  Document(s) and/or 10Q Document(s) used for the purposes of
                  calculating the Group's Senior Debt to EBITDA Ratio before the
                  relevant Interest Period(s) did not in all material respects
                  reflect the actual financial position of Hungarian Telephone
                  and Cable Corp. and/or the Group during the relevant
                  period(s); and/or

         (ii)     the relevant 10K Document(s) and/or 10Q Document(s) used for
                  the purposes of calculating the Group's Senior Debt to EBITDA
                  Ratio are (with the involvement of the Auditors or otherwise)
                  re-calculated and/or re-stated and as a result the Applicable
                  Margin should not have been fixed at the reduced rate, then:

                  (A)      if the reduced Applicable Margin applies to a Loan,
                           in respect of which the Interest Period has not yet
                           ended, the Facility Agent may revoke the reduced
                           Applicable Margin in respect of the entire Interest
                           Period by notice in writing to the relevant Borrower
                           and the appropriate rate set out in the definition of
                           Applicable Margin in Clause 9.5 (Applicable Margin)
                           or paragraph (a) of this Clause 9.6 (Adjustments to
                           Margin), as appropriate, shall apply; and/or

                  (B)      if the reduced Applicable Margin applies to a Loan,
                           in respect of which one or more Interest Period(s)
                           have already ended, the relevant Borrower shall
                           promptly on demand by the Facility Agent pay to the
                           Facility Agent, by way of additional interest, the
                           amount determined by the Facility Agent to be equal
                           to that by which the amount of interest that would
                           have been payable in respect of the relevant Interest
                           Period(s) calculated in accordance with the
                           appropriate rate set out in the definition of
                           Applicable Margin in Clause 9.5 (Applicable Margin)
                           or paragraph (a) of this Clause 9.6, as appropriate,
                           exceeds the amount(s) actually paid in respect of the
                           relevant Interest Period(s).

10.      INTEREST PERIODS

10.1     Selection of Interest Periods
(a)      The Borrowers may select an Interest Period for their respective
         Facility A Loan(s) in the Utilisation Request for Facility A Loan(s) or
         (if such Facility A Loan(s) has/have already been borrowed) in a
         Selection Notice Provided that (and subject to the provisions of this
         Agreement), unless agreed otherwise in advance in writing by the
         Facility Agent, acting on the instructions of the Majority Lenders,
         each of the Facility A Loans denominated in forint shall have Interest
         Periods commencing on the same date and of the same duration and each
         of the Facility A Loans denominated in euro shall have Interest Periods
         commencing on the same date and of the same duration.

(b)      Each Selection Notice in respect of the Facility A Loan(s) then
         outstanding is irrevocable and must be delivered to the Facility Agent
         by the Borrower(s) to which such Facility A Loan(s) was/were made not
         later than the Specified Time Provided that in respect of any such
         Facility A Loan denominated in forint, the Borrowers may select from
         one (1) and three (3) Months and in respect of any such Facility A Loan
         denominated in euro, the Borrowers may select from one (1),


                                       40
<PAGE>


         three (3) and six (6) Months and in respect of any Facility B Loan, the
         Borrower(s) may select from one (1), three (3) and six (6) Months.

(c)      If the Borrowers fail to deliver a Selection Notice to the Facility
         Agent in accordance with paragraph (b) above, the relevant Interest
         Period will, subject to Clause 10.2 (Changes to Interest Periods), be
         three (3) Months.

(d)      Subject to this Clause 10, the Borrowers may select an Interest Period
         of any other period agreed between the Borrowers and the Facility
         Agent, acting on the instructions of all the Lenders.

(e)      An Interest Period for a Facility A Loan shall not extend beyond a
         Repayment Date applicable to Facility A.

(f)      Each Interest Period for a Facility A Loan shall start on the
         Utilisation Date or (if already made) on the last day of its preceding
         Interest Period.

(g)      A Facility B Loan has one (1) Interest Period only.

10.2     Changes to Interest Periods
(a)      Prior to determining the interest rate for any Facility A Loan(s), the
         Facility Agent may shorten an Interest Period for any Facility A Loan
         to ensure the Interest Periods for such Facility A Loan does not extend
         beyond a Repayment Date.

(b)      Prior to determining the interest rate for a Facility B Loan, the
         Facility Agent may shorten an Interest Period for any Facility B Loan
         to ensure that, when aggregated with the Available Facility for
         Facility B, there are sufficient Facility B Loans with an Interest
         Period ending on the Reduction Date for the Reduction Instalment to be
         made on the Reduction Date.

(c)      If the Facility Agent makes any of the changes to an Interest Period
         referred to in this Clause 10.2, it shall promptly notify the Obligors
         and the Lenders in writing.

10.3     Non-Business Days
         Subject to paragraph (e) of Clause 10.1 (Selection of Interest
         Periods), if an Interest Period would otherwise end on a day which is
         not a Business Day, that Interest Period will instead end on the
         preceding Business Day.

11.      CHANGES TO THE CALCULATION OF INTEREST

11.1     Absence of quotations
         Subject to Clause 11.2 (Market disruption), if a Relevant Interbank
         Market Rate is to be determined by reference to the Relevant Reference
         Banks but a Relevant Reference Bank does not supply a quotation by the
         Specified Time on the Quotation Day, the Relevant Interbank Market Rate
         shall be determined on the basis of the quotations of the remaining
         Relevant Reference Banks.

11.2     Market disruption
(a)      If a Market Disruption Event occurs in relation to a Loan for any
         Interest Period, then the rate of interest on each Lender's share of
         that Loan for that Interest Period shall be the rate per annum which is
         the sum of:

         (i)      the Applicable Margin;


                                       41
<PAGE>

         (ii)     the rate notified to the Facility Agent by that Lender as soon
                  as practicable and in any event before interest is due to be
                  paid in respect of that Interest Period, to be that which
                  expresses as a percentage rate per annum the cost to that
                  Lender of funding its participation in that Loan from whatever
                  source it may reasonably select; and

         (iii)    the Associated Costs, if any, applicable to that Lender's
                  participation in the Loan.

(b)      In this Agreement "Market Disruption Event" means:

         (i)      at or about noon on the Quotation Day for the relevant
                  Interest Period the Screen Rate is not available and none or
                  only one of the Relevant Reference Banks supplies a rate to
                  the Facility Agent to determine the Relevant Interbank Market
                  Rate for the relevant currency and period; or

         (ii)     before close of business in London on the Quotation Day for
                  the relevant Interest Period, the Facility Agent receives
                  notifications from a Lender or Lenders (whose participations
                  in a Loan exceed in aggregate thirty five per cent. (35%) of
                  that Loan) that the cost to it of obtaining matching deposits
                  in the Relevant Interbank Market would be in excess of the
                  Relevant Interbank Market Rate.

11.3     Alternative basis of interest or funding
(a)      If a Market Disruption Event occurs in respect of an Interest Period
         and the Facility Agent or the Obligors so require(s), the Facility
         Agent and the Obligors shall enter into negotiations (for a period of
         not more than thirty (30) days) with a view to agreeing a substitute
         basis for determining the rate of interest for that Interest Period.

(b)      Any alternative basis agreed pursuant to paragraph (a) above shall,
         with the prior consent of all the Lenders and the Obligors, be binding
         on all Parties.

11.4     Break Costs
(a)      Each Borrower shall, within three (3) Business Days of demand by a
         Finance Party, pay to that Finance Party such Finance Party's Break
         Costs attributable to all or any part of a Loan or Unpaid Sum being
         paid by that Borrower on a day other than the last day of an Interest
         Period for that Loan or Unpaid Sum.

(b)      Each Lender shall, as soon as reasonably practicable after a demand by
         the Facility Agent, provide a certificate confirming the amount of its
         Break Costs for any Interest Period in which they accrue.

12.      FEES

12.1     Commitment fee
(a)      The Borrowers shall, on the basis of joint and several liability, pay
         to the Facility Agent (for the account of each Lender) a fee in the
         Base Currency computed at the rate of:

         (i)      the lower of zero point seven five per cent. per annum (0.75%
                  p.a.) or fifty per cent. (50%) of the Applicable Margin at
                  such time on that Lender's Available Commitment under Facility
                  A for the Availability Period applicable to Facility A; and

         (ii)     the lower of zero point seven five per cent. per annum (0.75%
                  p.a.) or fifty per cent. (50%) of the Applicable Margin at
                  such time on that Lender's Available Commitment under Facility
                  B for the Availability Period applicable to Facility B.


                                       42
<PAGE>

(b)      The accrued commitment fee is payable on the last day of each
         successive period of three (3) Months which ends during the relevant
         Availability Period, on the last day of the Availability Period and on
         the cancelled amount of the relevant Lender's Commitment at the time
         the cancellation is effective.

12.2     Arrangement fee
         The Borrowers shall pay to the Arrangers an arrangement fee in the
         amount and at the times agreed in a Fee Letter.

12.3     Agency fee
         The Obligors shall pay to the Facility Agent (for its own account) an
         agency fee in the amount and at the times agreed in a Fee Letter.


                                       43
<PAGE>


                   SECTION 6 - ADDITIONAL PAYMENT OBLIGATIONS

13.      TAX GROSS-UP AND INDEMNITIES

13.1     Definitions
(a)      In this Clause 13:

         "Protected Party" means a Finance Party which is or will be, for or on
         account of Tax, subject to any liability or required to make any
         payment in relation to a sum received or receivable (or any sum deemed
         for the purposes of Tax to be received or receivable) under a Finance
         Document.

         "Qualifying Lender" means a Lender which is (on the date of this
         Agreement):

         (i)      resident in Hungary for tax purposes under Applicable Law;

         (ii)     entitled to that payment under a double taxation agreement in
                  force on the date (subject to the completion of any necessary
                  procedural formalities) without a Tax Deduction (a "Treaty
                  Lender").

         "Tax Credit" means a credit against, relief or remission for, or
         repayment of any Tax.

         "Tax Deduction" means a deduction or withholding for or on account of
         Tax from a payment under a Finance Document.

         "Tax Payment" means an increased payment made by an Obligor to a
         Finance Party under Clause 13.2 (Tax gross-up) or a payment under
         Clause 13.3 (Tax indemnity).

(b)      In this Clause 13 a reference to "determines" or "determined" means a
         determination made in the absolute discretion of the person making the
         determination.

13.2     Tax gross-up
(a)      Each Obligor shall make all payments to be made by it without any Tax
         Deduction, unless a Tax Deduction is required by Applicable Law.

(b)      An Obligor shall promptly upon becoming aware that an Obligor must make
         a Tax Deduction (or that there is any change in the rate or the basis
         of a Tax Deduction) notify the Facility Agent in writing accordingly.

(c)      If a Tax Deduction is required by Applicable Law to be made by an
         Obligor in one of the circumstances set out in paragraph (d) below, the
         amount of the payment due from that Obligor shall be increased to an
         amount which (after making any Tax Deduction) leaves an amount equal to
         the payment which would have been due if no Tax Deduction had been
         required.

(d)      The circumstances referred to in paragraph (c) above are where a person
         entitled to the payment:

         (i)      is the Facility Agent or the Arranger (on its own behalf);  or

         (ii)     is a Qualifying Lender, unless that Qualifying Lender is a
                  Treaty Lender and the Obligor making the payment is able to
                  demonstrate the Tax Deduction is required to be made as a
                  result of the failure of that Qualifying Lender to comply with
                  paragraph (g) below; or


                                       44
<PAGE>


         (iii)    has ceased to be a Qualifying Lender to the extent that this
                  altered status results from any change after the date of this
                  Agreement in (or in the interpretation, administration, or
                  application of) any Applicable Law or double taxation
                  agreement or any published practice or published concession of
                  any relevant taxing authority.

(e)      If an Obligor is required to make a Tax Deduction, that Obligor shall
         make that Tax Deduction and any payment required in connection with
         that Tax Deduction within the time allowed and in the minimum amount
         required by Applicable Law.

(f)      Within thirty (30) days of making either a Tax Deduction or any payment
         required in connection with that Tax Deduction, the Obligor making that
         Tax Deduction shall deliver to the Facility Agent for the Finance Party
         entitled to the payment evidence reasonably satisfactory to that
         Finance Party that the Tax Deduction has been made or (as applicable)
         any appropriate payment paid to the relevant taxing authority.

(g)      A Treaty Lender and each Obligor which makes a payment to which that
         Treaty Lender is entitled shall co-operate in completing as quickly as
         is practicable in the context of the circumstances at such time any
         procedural formalities necessary for that Obligor to obtain
         authorisation to make that payment without a Tax Deduction.

13.3     Tax indemnity
(a)      The Obligors shall (within three (3) Business Days of demand by the
         Facility Agent) pay to a Protected Party an amount equal to the loss,
         liability or cost which that Protected Party determines will be or has
         been (directly or indirectly) suffered for or on account of Tax by that
         Protected Party.

(b)      Paragraph (a) above shall not apply with respect to any Tax assessed
         on:

         (i)      a Finance Party:

                  (A)      under the Applicable Law of the jurisdiction in which
                           that Finance Party is incorporated or, if different,
                           the jurisdiction (or jurisdictions) in which that
                           Finance Party is treated as resident for tax
                           purposes; or

                  (B)      under the Applicable Law of the jurisdiction in which
                           that Finance Party's Facility Office is located in
                           respect of amounts received or receivable in that
                           jurisdiction,

                           if that Tax is imposed on or calculated by reference
                           to the net income received or receivable (but not any
                           sum deemed to be received or receivable) by that
                           Finance Party; or

         (ii)     the Facility Agent, as a result of the relevant Lender not
                  correctly representing that Lender's position pursuant to
                  Clause 25.15 (Lenders' tax status confirmation).

(c)      A Protected Party making, or intending to make a claim pursuant to
         paragraph (a) above shall promptly notify the Facility Agent in writing
         of the event which will give, or has given, rise to the claim,
         following which the Facility Agent shall notify the Obligors in
         writing.

(d)      A Protected Party shall, on receiving a payment from an Obligor under
         this Clause 13.3, notify the Facility Agent in writing.


                                       45
<PAGE>

13.4     Tax Credit
         If an Obligor makes a Tax Payment and the relevant Finance Party
         determines that:

         (a)      a Tax Credit is attributable to that Tax Payment; and

         (b)      that Finance Party has obtained, utilised and retained that
                  Tax Credit,

         the Finance Party shall pay an amount to the Obligor which the Finance
         Party, in (for the avoidance of doubt and without otherwise affecting,
         qualifying or limiting the determination rights of any Finance Party
         provided for in the Finance Documents) that Finance Party's sole and
         absolute discretion, determines will leave it (after that payment) in
         the same after-Tax position (the after-Tax position of the Finance
         Party as consolidated with its Affiliates, Holding Company (or Holding
         Companies, as appropriate) and with any Related Party of such Finance
         Party) as would have been the case had the Tax Payment not been made by
         the Obligor. Each Finance Party and each of its Affiliates, Holding
         Company (or Holding Companies, as appropriate) and each Related Party
         of such Finance Party, have sole and absolute discretion as to how they
         organise their respective tax affairs and none of them are under any
         obligation to utilise any amount of the Tax Payment as a Tax Credit.
         The Finance Party and each of its Affiliates, Holding Company (or
         Holding Companies, as appropriate) and each Related Party of such
         Finance Party, will have no obligation to disclose any information
         whatsoever regarding their tax affairs to the Obligor or to any other
         Party or to any other person.

13.5     Stamp taxes
         The Obligors shall, on the basis of joint and several liability, pay
         and, within three (3) Business Days of demand, indemnify each Finance
         Party against any cost, loss or liability that Finance Party incurs in
         relation to all stamp duty, registration and other similar Taxes
         payable in respect of any Finance Document.

13.6     Value added tax
(a)      All consideration payable under a Finance Document by an Obligor to a
         Finance Party shall be deemed to be exclusive of any VAT. If VAT is
         chargeable, the Obligor shall pay to the Finance Party (in addition to
         and at the same time as paying the consideration) an amount equal to
         the amount of the VAT.

(b)      Where a Finance Document requires an Obligor to reimburse a Finance
         Party for any costs or expenses, that Obligor shall also at the same
         time pay and indemnify that Finance Party against all VAT incurred by
         that Finance Party in respect of the costs or expenses save to the
         extent that that Finance Party is entitled to repayment or credit in
         respect of the VAT.

14.      INCREASED COSTS

14.1     Increased costs
(a)      Subject to Clause 14.3 (Exceptions) the Obligors shall, on the basis of
         joint and several liability, within three (3) Business Days of a demand
         by the Facility Agent, pay for the account of a Finance Party the
         amount of any Increased Costs incurred by that Finance Party or any of
         its Affiliates as a result of: (i) the introduction of or any change in
         (or in the interpretation or application of) any Applicable Law; or
         (ii) compliance with any Applicable Law made after the date of this
         Agreement.


                                       46
<PAGE>

(b)      In this Agreement "Increased Costs" means:

         (i)      a reduction in the rate of return from the Facility or on a
                  Finance Party's (or its Affiliate's) overall capital;

         (ii)     an additional or increased cost; or

         (iii)    a reduction of any amount due and payable under any Finance
                  Document,

         which is incurred or suffered by a Finance Party or any of its
         Affiliates to the extent that it is attributable to that Finance Party
         having entered into its Commitment or funding or performing its
         obligations under any Finance Document.

14.2     Increased cost claims
(a)      A Finance Party intending to make a claim pursuant to Clause 14.1
         (Increased costs) shall notify the Facility Agent in writing of the
         event giving rise to the claim, following which the Facility Agent
         shall promptly notify the Obligors in writing.

(b)      Each Finance Party shall, as soon as practicable after a demand by the
         Facility Agent, provide a certificate confirming the amount of its
         Increased Costs.

14.3     Exceptions
(a)      Clause 14.1 (Increased costs) does not apply to the extent any
         Increased Cost is:

         (i)      attributable to a Tax Deduction required by law to be made by
                  an Obligor;

         (ii)     compensated for by Clause 13.3 (Tax indemnity) (or would have
                  been compensated for under Clause 13.3 (Tax indemnity) but was
                  not so compensated solely because one of the exclusions in
                  paragraph (b) of Clause 13.3 (Tax indemnity) applied);

         (iii)    compensated for by the payment of the Associated Costs; or

         (iv)     attributable to the wilful breach by the relevant Finance
                  Party or its Affiliates of any law or regulation.

(b)      In this Clause 14.3, a reference to a "Tax Deduction" has the same
         meaning given to the term in Clause 13.1 (Definitions).

15.      OTHER INDEMNITIES

15.1     Currency indemnity
(a)      If any sum due from an Obligor under the Finance Documents (a "Sum"),
         or any order, judgment or award given or made in relation to a Sum, has
         to be converted from the currency (the "First Currency") in which that
         Sum is payable into another currency (the "Second Currency") for the
         purpose of:

         (i)      making or filing a claim or proof against that Obligor;

         (ii)     obtaining or enforcing an order, judgment or award in relation
                  to any litigation or arbitration proceedings,

         that Obligor shall as an independent obligation, within three (3)
         Business Days of demand, indemnify each Finance Party to whom that Sum
         is due against any cost, loss or liability arising out of or as a
         result of the conversion including any discrepancy between: (A) the
         rate of


                                       47
<PAGE>


         exchange used to convert that Sum from the First Currency into the
         Second Currency; and (B) the rate or rates of exchange available to
         that person at the time of its receipt of that Sum.

(b)      Each Obligor waives any right it may have in any jurisdiction to pay
         any amount under the Finance Documents in a currency or currency unit
         other than that in which it is expressed to be payable.

15.2     Other indemnities
         The Obligors shall each (or shall procure that another Obligor will),
         within three (3) Business Days of demand, indemnify each Lender against
         any cost, loss or liability incurred by that Lender as a result of:

         (a)      the occurrence of any Event of Default;

         (b)      a failure by an Obligor to pay any amount due under a Finance
                  Document on its due date, including without limitation, any
                  cost, loss or liability arising as a result of Clause 27
                  (Sharing Among the Lenders) Provided that if, at any time
                  where no Event of Default is continuing, such cost, loss or
                  liability is incurred in respect any failure to pay which is
                  caused by administrative or technical error and payment is
                  made within three (3) Business Days of its due date, the
                  indemnity provided for pursuant to this sub-clause (ii) shall
                  only be in respect of any reasonable such cost, loss or
                  liability incurred during such cure period;

         (c)      funding, or making arrangements to fund, its participation in
                  a Loan requested by a Borrower in a Utilisation Request but
                  not made by reason of the operation of any one or more of the
                  provisions of this Agreement (other than by reason of default
                  or negligence by that Lender alone); or

         (d)      a Loan (or part of a Loan) not being prepaid in accordance
                  with a notice of prepayment given by an Obligor.

15.3     Indemnity to each Agent
         The Obligors shall promptly indemnify the Facility Agent against any
         cost, loss or liability incurred by the Facility Agent (acting
         reasonably) as a result of:

         (a)      investigating any event which it reasonably believes is a
                  Default; or

         (b)      acting or relying on any notice, request or instruction which
                  it reasonably believes to be genuine, correct and
                  appropriately authorised.

16.      MITIGATION BY THE LENDERS

16.1     Mitigation
(a)      Each Finance Party shall, in consultation with the Obligors, take all
         reasonable steps to mitigate any circumstances which arise and which
         would result in any amount becoming payable under, or cancelled
         pursuant to, any of Clause 8.1 (Illegality), Clause 13 (Tax gross-up
         and indemnities), Clause 14 (Increased costs) or paragraph (c) of
         Clause 15.2 (Other Indemnities) (where the reason for such Loan not
         being made is not attributable to the Obligors) including (but not
         limited to) transferring its rights and obligations under the Finance
         Documents to another Affiliate or Facility Office.


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<PAGE>

(b)      Paragraph (a) above does not in any way limit the obligations or
         liabilities of any Obligor under the Finance Documents.

16.2     Limitation of liability
(a)      The Obligors shall, on the basis of joint and several liability
         indemnify each Finance Party for all costs and expenses reasonably
         incurred by that Finance Party as a result of steps taken by it under
         Clause 16.1 (Mitigation).

(b)      A Finance Party is not obliged to take any steps under Clause 16.1
         (Mitigation) if, in the opinion of that Finance Party (acting
         reasonably), to do so might be prejudicial to it.

17.      COSTS AND EXPENSES

17.1     Transaction expenses
         The Obligors shall, on the basis of joint and several liability,
         promptly on demand pay each Agent and each Arranger the amount of all
         costs and expenses (including legal fees) reasonably incurred by any of
         them in connection with the negotiation, preparation, printing,
         execution and syndication of:

         (a)      this Agreement and any other documents referred to in this
                  Agreement; and

         (b)      any other Finance Documents executed after the date of this
                  Agreement.

17.2     Amendment costs
         If: (a) an Obligor requests an amendment, waiver or consent; or (b) an
         amendment is required pursuant to Clause 28.9 (Change of currency), the
         Obligors shall, on the basis of joint and several liability, within
         three (3) Business Days of demand, reimburse each Agent for the amount
         of all costs and expenses (including legal fees) reasonably incurred by
         such Agent in responding to, evaluating, negotiating or complying with
         that request or requirement.

17.3     Enforcement costs
         The Obligors shall, on the basis of joint and several liability, within
         three (3) Business Days of demand, pay to each Finance Party the amount
         of all costs and expenses (including legal fees) incurred by that
         Finance Party in connection with the enforcement of, or the
         preservation of any rights under, any Finance Document.


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<PAGE>


         SECTION 7 - REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT

18.      REPRESENTATIONS
         Each Obligor makes the representations and warranties set out in this
         Clause 18 to each Finance Party on the date of this Agreement and
         acknowledges that the Finance Parties have entered into this Agreement
         in reliance of those representations and warranties.

18.1     Status
(a)      Each Obligor is a corporation, duly incorporated and validly existing
         under the Applicable Law of its respective jurisdiction of
         incorporation and each Obligor is a separate legal entity with
         perpetual corporate existence, capable of suing and being sued.

(b)      Each Obligor and each of its Subsidiaries has the power to own its
         respective assets and carry on its respective business as it is being
         conducted.

18.2     Binding obligations
         As at the date of this Agreement, the obligations and liabilities
         expressed to be assumed by each Obligor in each Finance Document to
         which such Obligor is a party are, subject to any general principles of
         Applicable Law limiting such Obligor's obligations and/or liabilities
         which are specifically referred to in any legal opinion delivered
         pursuant to Clause 4 (Conditions of Utilisation) legal, valid, binding
         and enforceable obligations.

18.3     Non-conflict with other obligations
         The entry into and performance by each Obligor of, and the transactions
         contemplated by, the Finance Documents do not and will not conflict
         with:

         (a)      any Applicable Law applicable to such Obligor as at the date
                  of this Agreement;

         (b)      the constitutional documents of any member of the Group; or

         (c)      any agreement or instrument binding upon such Obligor or any
                  other member of the Group or any of such Obligor's or any
                  member of the Group's assets.

18.4     Power and authority
         Each Obligor has the power to own assets and to enter into, perform and
         deliver, and has taken all necessary action to authorise such Obligor's
         entry into, performance and delivery of, the Finance Documents to which
         such Obligor is a party and the transactions contemplated by those
         Finance Documents.

18.5     Validity and admissibility in evidence
         All Authorisations required or desirable:

         (a)      to enable each Obligor lawfully to enter into, exercise such
                  Obligor's rights and perform, comply with such Obligor's
                  obligations in the Finance Documents and the Concession
                  Contract(s) to which such Obligor is a party; and

         (b)      to ensure that the obligations expressed to be assumed by such
                  Obligor in such Finance Documents and Concession Contract(s),
                  are legal, valid, binding and enforceable against such
                  Obligor,

         have been obtained or effected and are in full force and effect.


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<PAGE>


         18.6 Governing law and enforcement (a) Subject to any general
         principles of Applicable Law which are specifically referred to in any
         legal opinion delivered pursuant to Clause 4 (Conditions of
         Utilisation), as at the date of this Agreement the choice of English
         law as the governing law of the Finance Documents will be recognised
         and enforced in its jurisdiction of incorporation.

(b)      Subject to any general principles of Applicable Law which are
         specifically referred to in any legal opinion delivered pursuant to
         Clause 4 (Conditions of Utilisation), as at the date of this Agreement
         any court judgment obtained in England in relation to a Finance
         Document will following its official translation into the Hungarian
         language and any other necessary notarisation or similar process, be
         admissible in evidence in court proceedings in Hungary.

(c)      Subject to any general principles of Applicable Law which are
         specifically referred to in any legal opinion delivered pursuant to
         Clause 4 (Conditions of Utilisation), as at the date of this Agreement
         any arbitral award obtained in any of England, Hungary or the United
         States of America will, in respect of any proceeding(s) before the
         Hungarian courts, subject to the official translation of such award
         into the Hungarian language (if such award is in another language) and
         any other necessary notarisation or similar process, compliance with
         applicable public policy considerations and compliance with procedural
         requirements, be recognised and enforced in its jurisdiction of
         incorporation.

18.7     Deduction of Tax
         Subject to, in respect of payments of interest, the relevant recipient
         being a Treaty Lender at the time of such payments, each Obligor is not
         required under the law of such Obligor's jurisdiction of incorporation
         to make any deduction for or on account of Tax from any payment such
         Obligor may make under any Finance Document.

18.8     No filing or stamp taxes
         As at the date of this Agreement, under the Applicable Law of each
         Obligor's jurisdiction of incorporation, other than the due
         registration of the Fixed Charge Agreements and the Floating Charge
         Agreements in the Register of Pledges with a Notary Public and the
         registration of the Mortgage Agreements against the relevant land at
         the relevant Land Registry (and the payment of all appropriate charges,
         duties, fees, costs and expenses in respect of such registration), it
         is not necessary that the Finance Documents be filed, recorded or
         enrolled with any court or other authority in such jurisdictions or
         that any Tax be paid on or in relation to the Finance Documents, the
         transactions contemplated by the Finance Documents or (other than the
         court duties ("illetek") expressly provided for under Applicable Laws
         of Hungary) their enforcement in the courts of Hungary.

18.9     No default
(a)      No Event of Default is continuing or would reasonably be expected to
         result from the making of any Utilisation.

(b)      No other fact(s), event(s) and/or circumstance(s) exist(s) or is/are
         outstanding which constitute(s) a default under any other agreement or
         instrument which is binding on any Obligor or any of such Obligor's
         Subsidiaries or to which such Obligor's (or such Obligor's
         Subsidiaries') assets are subject in a manner or to an extent which
         gives rise to a Material Adverse Effect.

18.10    No misleading information
(a)      As at the date of this Agreement, any factual information provided by
         an Obligor or any adviser (including, without limitation, legal
         counsel) of an Obligor to any Finance Party or any advisor (including,
         without limitation, legal counsel) of a Finance Party for the purposes
         of the


                                       51
<PAGE>


         Information Memorandum, in connection with this Agreement and/or
         otherwise in respect of the Group or any member, Affiliate or
         shareholder of the Group was true and accurate in all material respects
         as at the date it was provided or as at the date (if any) at which such
         information and/or such Information Memorandum, as appropriate, is
         stated to be correct and any projections, estimates and other
         non-factual information has been prepared on a reasonable basis by
         reference to the facts, events and circumstances existing and
         outstanding at the time when such projections, estimates and other
         non-factual information were prepared Provided that in respect of any
         such factual information provided orally and subsequently (and most
         recently) provided in writing, to the extent that any difference(s)
         between the oral and the most recently provided written factual
         information exist, that latest written information shall, in the
         absence of gross negligence or wilful deceit on the part of the
         person(s) providing such oral information, be deemed to restate and
         correct such oral factual information and shall, for the purposes of
         this paragraph (a), prevail.

(b)      As at the date of this Agreement, the financial projections contained
         in the Information Memorandum have been prepared on the basis of recent
         historical information and on the basis of reasonable assumptions.

(c)      As at the date of this Agreement, nothing has occurred or been omitted
         from the Information Memorandum and no information has been given or
         withheld that results in the information contained in the Information
         Memorandum being untrue or misleading in any material respect.

(d)      No fact(s), event(s) and/or circumstance(s) has/have arisen and/or
         occurred which would reasonably be expected to have a material impact
         on any of the written information supplied by an Obligor to any Finance
         Party (other than any which have been disclosed in any 10K Document or
         10Q Document or otherwise expressly disclosed to the Facility Agent,
         together with a reasonably detailed written explanation of the
         significance of such fact(s), event(s) and/or circumstance(s) within
         the context of this proposed Facility).

(e)      No Obligor is aware of any material fact(s), event(s) or
         circumstance(s) that has/have not been disclosed to the Finance Parties
         in writing which would reasonably be expected to, if disclosed,
         adversely affect the decision of a prudent commercial bank considering
         whether or not to provide finance to an Obligor.

18.11    Financial statements
(a)      In respect of Hungarian Telephone and Cable Corp., its Original
         Financial Statements were prepared in accordance with US GAAP
         consistently applied.

(b)      In respect of each member of the Group incorporated in Hungary, such
         Obligor's Original Financial Statements were prepared in accordance
         with HAS consistently applied.

(c)      Each member of the Group's Original Financial Statements and, in the
         case of Hungarian Telephone and Cable Corp., each 10K Document and 10Q
         Document, fairly represent such Obligor's financial condition and
         operations (consolidated in the case of Hungarian Telephone and Cable
         Corp.) during the relevant financial year and properly reflect in all
         material respects the tax position of such Obligor as at the respective
         date of such Original Financial Statement.

(d)      In the case of Hungarian Telephone and Cable Corp., each 10K Document,
         10Q Document, Budget Comparison Certificate, Compliance Certificate,
         Key Performance Indicators Certificate fairly and in all material
         respects represents its consolidated financial condition and operations
         during the relevant quarter.


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<PAGE>


(e)      Save as expressly disclosed to the Facility Agent in writing, no
         fact(s), event(s) and/or circumstance(s) has/have occurred and/or
         arisen, including without limitation in respect of an Obligor's
         business or financial condition (or the business or consolidated
         financial condition of Hungarian Telephone and Cable Corp.) since the
         most recent 10K Document, 10Q Document, Budget Comparison Certificate,
         Compliance Certificate, Key Performance Indicators Certificate was
         delivered to the Facility Agent which gives rise to a Material Adverse
         Effect.

18.12    Pari passu ranking
         Each Obligor's payment obligations under the Finance Documents to which
         such Obligor is a party rank at least pari passu with the claims of all
         such Obligor's other unsecured and unsubordinated creditors, except for
         obligations mandatorily preferred by operation of Applicable Law
         applying to companies generally in its jurisdiction of incorporation,
         in any jurisdiction in which it has significant assets and/or in any
         jurisdiction in which it carries out any business activities.

18.13    No proceedings pending or threatened
         Save as expressly disclosed to the Facility Agent in writing prior to
         the date of this Agreement, including, inter alia, those matters set
         out in the most recent 10K Document or 10Q Document as at the date of
         this Agreement, no litigation, arbitration or administrative
         proceedings of or before any court, arbitral body or agency which, if
         adversely determined, would give rise to a Material Adverse Effect,
         have (to the best of its knowledge and belief) been started or
         threatened against an Obligor or any of such Obligor's Subsidiaries.

18.14    No material defaults
         Save as expressly disclosed to the Facility Agent in writing,
         including, inter alia, those matters set out in the most recent 10K
         Document or 10Q Document, no Obligor is in breach of or in default
         under any agreement to which it is a party or which is binding on it or
         any of its respective assets to an extent or in a manner which gives
         rise to a Material Adverse Effect.

18.15    Tax
         Save as otherwise disclosed in the most recent 10K Document or 10Q
         Document or otherwise expressly disclosed to the Facility Agent in
         writing:

         (a)      the Original Financial Statements in respect of each of the
                  Obligors properly reflect in all material respects the tax
                  position of each Obligor as at the respective dates dated
                  thereof; and

         (b)      each Obligor has, to the best of its knowledge and belief,
                  complied in all material respects with all taxation laws in
                  all jurisdictions in which it is subject to taxation and has
                  paid all Taxes due and payable by it and no material claims
                  are being asserted against it with respect to Taxes.

18.16    Insolvency
         Save as expressly disclosed to the Facility Agent in writing, no
         Obligor has taken any formal corporate action nor to any Obligor's best
         knowledge and belief, having made reasonable enquires thereto as at the
         date of this Agreement, have any other formal steps been taken or legal
         proceedings been started or threatened in accordance with the
         procedures detailed in the Bankruptcy Act or in the Companies Act (or
         in accordance with similar or analogous provisions or proceedings)
         against it or against any other member of the Group (other than
         PILISTAV Tavkozlesi, Epit es Szolgaltato Korlatolt Felel sseg
         Tarsasag) for its or for any such other member of the Group's (other
         than PILISTAV Tavkozlesi, Epit es Szolgaltato Korlatolt Felel sseg


                                       53
<PAGE>


         Tarsasag) bankruptcy, liquidation, winding-up, dissolution,
         administration or reorganisation or final accounting (in each case
         pursuant to the Bankruptcy Act, the Companies Act or otherwise).

18.17    No undisclosed liabilities
         Save as expressly disclosed to the Facility Agent in writing, as at the
         date as of which the Original Financial Statements were prepared, no
         Obligor or, to each Obligor's best knowledge and belief, no other
         member of the Group had any material liabilities (contingent or
         otherwise) which were not disclosed thereby (or by the notes thereto)
         or reserved against therein or to each Obligor's best knowledge and
         belief, having made all reasonable enquiries thereto, any material
         unrealised or anticipated losses arising from commitments entered into
         by such Obligor which were not so disclosed or reserved against in such
         Original Financial Statements.

18.18    Encumbrances
         Subject to any general principles of Applicable Law which are
         specifically referred to in any legal opinion delivered pursuant to
         Clause 4 (Conditions of Utilisation), other than an Encumbrance falling
         into the scope of paragraph (c) of Clause 21.3 (Negative pledge) no
         Encumbrance exists over all or any of the present or future assets of
         an Obligor, nor to each Obligor's best knowledge and belief, those of
         any other Obligor.

18.19    No obligation to create security
         Each Obligor's execution of any of the Finance Documents to which such
         Obligor is a party and the exercise of its respective rights and
         performance of such Obligor's respective obligations under such Finance
         Documents will not, as at the date of the Agreement, result in the
         existence of nor oblige such Obligor to create any Encumbrance over all
         or any of any Obligor's respective present or future assets, other than
         as expressly provided for in and contemplated by the Finance Documents.

18.20    Compliance with laws and regulations
         Each Obligor and, to the best of each Obligor's respective knowledge
         and belief, having made all reasonable enquiries thereto, as at the
         date of the Agreement, each member of the Group, in carrying out its
         respective activities, business and operations is in all material and
         substantial respects doing so in compliance with Applicable Law
         governing the same.

18.21    Entire Agreement
         No Obligor is and, in respect of any Obligor which, directly or
         indirectly, legally or beneficially, owns any equity capital in any
         member of the Group, to the best of such Obligor's knowledge and
         belief, having made all reasonable enquiries thereto, no such member of
         the Group is, as at the date of this Agreement, a party to any material
         agreement or contract whatsoever (oral, written or otherwise) which is
         or which would reasonably be expected to become material to the
         Facility and/or the Encumbrances created and/or constituted by the
         applicable Security Agreements, which is not expressly provided for in
         any of the Finance Documents and/or which has not been disclosed in the
         most recent 10K Document or 10Q Document or otherwise fully and
         properly disclosed in writing prior to the date of this Agreement to
         the Facility Agent.

18.22    Environment
         Each Obligor and, in respect of any Obligor which, directly or
         indirectly, legally or beneficially, owns any equity capital in any
         member of the Group, to the best of such Obligor's knowledge and
         belief, each such member of the Group is, as at the date of this
         Agreement, in compliance with:

         (a)      all Applicable Law concerning the protection of the
                  environment and to the best of each Obligor's knowledge and
                  belief, having made reasonable enquires thereto, there are no


                                       54
<PAGE>


                  fact(s), event(s) and/or circumstance(s) which may prevent
                  that compliance in the future; and

         (b)      the terms of all permits and authorisation required by any
                  Applicable Law in respect of the environment for the ownership
                  and operation of each Obligor's businesses,

         in each case, in a manner and to an extent required to procure and
         ensure the avoidance of the occurrence of a Material Adverse Effect.

18.23    Management of business
         Save for any Permitted Management Contracts, no Obligor has, nor has
         any other member of the Group, entered into any management contract or
         similar arrangement whereby a material part of its or the Group's
         assets, business or operations are managed or are to be managed by any
         other person. Save as expressly disclosed to the Facility Agent in
         writing, each Obligor is managing its assets, business and operations
         in accordance with Good Industry Practice.

18.24    Corporate chart
         The chart prepared after consultation with the Obligors, detailed in
         paragraph (f) of Clause 1 of Schedule 2 (Conditions precedent), and
         delivered to the Facility Agent pursuant to Clause 4.1 (Initial
         conditions precedent) showing the percentage ownership of each member
         of the Group and the relationship of the Obligors is true and correct
         in all respects as at the date of this Agreement and that no member of
         the Group has any form of equity and/or ownership interest whatsoever
         in any other person except as so disclosed in such chart.

18.25    Compliance with Finance Documents
         Each Obligor is, as at the date of this Agreement, in compliance with
         each of the covenants and each of the terms and conditions of each
         Finance Document to which such Obligor is a party.

18.26    Subordinated Financial Indebtedness
(a)      All indebtedness and encumbrances of each member of the Group as at the
         date of this Agreement are set out and detailed in the Letter of
         Borrowings and Encumbrances.

(b)      Any payments with repayment obligations received by or loans provided
         to any member of the Group from/by any other member of the Group are
         and have been fully subordinated at all times and in all respects to
         the obligations of such first member of the Group to the Finance
         Parties under the Finance Documents, with such other member of the
         Group being a party to the Subordination and Trust Deed.

(c)      In respect of any Borrower which has entered into an Hedging Document
         on or prior to the date of this Agreement, such Borrower has procured
         and ensured that the other party to such Hedging Document has become a
         party (in the capacity of Hedging Creditor) to the Subordination and
         Trust Deed.

18.27    Bank accounts
         No Obligor has opened or maintains any bank or similar account(s) with
         any bank, financial institution or other person other than as provided
         for in the definition of Income Accounts in Clause 1.1 (Definitions) as
         amended from time to time in compliance with this Agreement and all
         material financial services of whatever nature utilised by each Obligor
         since the date of this Agreement have been or are being provided by one
         or more of the Finance Parties and/or any Affiliate(s) of any Finance
         Party.


                                       55
<PAGE>

18.28    Validity and extent of Encumbrances
         Save as expressly disclosed in the Letter of Borrowings and
         Encumbrances, or otherwise fully disclosed in writing to the Facility
         Agent, or otherwise arising in accordance with and pursuant to Clause
         21.3 (Negative pledge) and subject to any general principles of
         Applicable Law which are specifically referred to in any legal opinion
         delivered pursuant to Clause 4 (Conditions of Utilisation), as at the
         date of this Agreement, Security Agreements create legal and valid
         first ranking Encumbrances over all the assets of the members of the
         Group (other than PILISTAV Tavkozlesi, Epit es Szolgaltato Korlatolt
         Felel sseg Tarsasag), other than the Concession Contracts, and each
         such Encumbrance is binding on and enforceable against the member of
         the Group over whose assets such Encumbrance has been created.

18.29    Repetition
         The representations and warranties set out in:

         (a)      Clause 18.1 (Status);

         (b)      paragraphs (b) and (c) of Clause 18.3 (Non-conflict with other
                  obligations);

         (c)      Clause 18.4 (Power and authority);

         (d)      Clause 18.5 (Validity and admissibility in evidence);

         (e)      Clause 18.7 (Deduction of tax);

         (f)      Clause 18.9 (No default);

         (g)      paragraphs (d) and (e) of Clause 18.10 (No misleading
                  information);

         (h)      Clause 18.11 (Financial statements);

         (i)      Clause 18.12 (Pari passu ranking);

         (j)      Clause 18.14 (No material defaults);

         (k)      Clause 18.15 (Tax);

         (l)      Clause 18.16 (Insolvency);

         (m)      Clause 18.17 (No undisclosed liabilities);

         (n)      Clause 18.18 (Encumbrances);

         (o)      Clause 18.23 (Management of business);

         (p)      paragraph (b) of clause 18.26 (Subordinated Financial
                  Indebtedness); and

         (q)      Clause 18.27 (Bank accounts),

         collectively the "Repeating Representations", are deemed to be made by
         each Obligor by reference to the facts and circumstances then existing
         on the date of each Utilisation Request and the first day of each
         Interest Period and if by such date any Obligor has delivered financial
         statements to the Facility Agent in accordance with its obligations
         under Clause 19.1 (Financial statements), references to the "Original
         Financial Statements" in this Clause 18 shall be deemed to


                                       56
<PAGE>

         be references to the then most recent financial statements delivered by
         such Obligor(s) to the Facility Agent in accordance with its respective
         obligations under Clause 19.1 (Financial statements).

19.      INFORMATION UNDERTAKINGS
         The undertakings in this Clause 19 remain in force from the date of
         this Agreement for so long as any amount is outstanding under the
         Finance Documents or any Commitment is in force.

19.1     Financial statements
(a)      Hungarian Telephone and Cable Corp. shall supply to the Facility Agent
         in sufficient copies for all the Lenders as soon as the same become
         available, but in any event within:

         (i)      ninety (90) days of the end of each of its financial years,
                  its audited 10K Document for that financial year or if
                  Hungarian Telephone and Cable Corp. duly applies to the
                  Securities Exchange Commission of the Untied States of America
                  for an extension of the deadline for the filing of such a 10K
                  Document, up to a maximum of one hundred and five (105) days;
                  and

         (ii)     sixty (60) days of the end of each quarter of each of its
                  financial years, its (unaudited) 10Q Document for that quarter
                  financial year.

(b)      Each Obligor (other than Hungarian Telephone and Cable Corp.) shall
         supply to the Facility Agent in sufficient copies for all the Lenders
         as soon as the same become available, but in any event within one
         hundred and fifty (150) days of the end of each of its financial years,
         its audited financial statements for that financial year.

19.2     Certificates
(a)      Hungarian Telephone and Cable Corp. shall supply to the Facility Agent,
         at the same time as the earlier of: (i) Hungarian Telephone and Cable
         Corp.'s delivery of each 10K Document or 10Q Document, as appropriate
         to the Facility Agent pursuant to Clause 19.1 (Financial Statements);
         and (ii) Hungarian Telephone and Cable Corp.'s release of a 10K
         Document or 10Q Document to the Securities and Exchange Commission of
         the United States of America following the end of the relevant quarter
         of its financial year:

         (i)      a Budget Comparison Certificate;

         (ii)     a Compliance Certificate setting out (in reasonable detail)
                  computations as to compliance with Clause 20 (Financial
                  covenants) as at the date as at which those financial
                  statements were drawn up; and

         (iii)    a Key Performance Indicators Certificate.

(b)      Each Budget Comparison Certificate, Compliance Certificate and Key
         Performance Indicators Certificate shall be signed by two officers of
         Hungarian Telephone and Cable Corp. identified as such in the relevant
         10K Document or 10Q Document, with one such officer being the chief
         financial officer or similar officer of Hungarian Telephone and Cable
         Corp.

19.3     Business Plan
         The Obligors shall, as quickly as practicable, but in any event within
         fourteen (14) days after the making of any amendment to the Business
         Plan, deliver to the Facility Agent in sufficient copies for the
         Lenders, such amended Business Plan for the period of up to and
         including 31 December


                                       57
<PAGE>


         2010, together with a written explanation of the rationale and effect
         of such change(s) to the reasonable satisfaction of the Facility Agent.

19.4     Annual Operating Budget
         The Obligors shall, as quickly as practicable, but in any event within
         fourteen (14) days after the approval by Hungarian Telephone and Cable
         Corp.'s board of directors (or analogous body) of the Annual Operating
         Budget in respect of a financial year, or during the course of a
         financial year, fourteen (14) days after the making of any amendments
         or revisions to the Annual Operating Budget for such financial year,
         deliver to the Facility Agent in sufficient copies for the Lenders of
         such Annual Operating Budget, together with a written explanation of
         such Annual Operating Budget(s).

19.5     Requirements as to financial statements
(a)      Each set of financial statements delivered by the Obligors pursuant to
         Clause 19.1 (Financial statements) shall be certified by an officer or
         director, as applicable, of the relevant company as fairly representing
         its financial condition as at the date as at which those financial
         statements were drawn up.

(b)      Each Obligor shall procure and ensure that each set of financial
         statements of such Obligor delivered pursuant to Clause 19.1 (Financial
         statements) and in the case of Hungarian Telephone and Cable Corp.,
         pursuant to Clause 19.2 (Certificates), in the case of Hungarian
         Telephone and Cable Corp., is prepared using and in accordance with US
         GAAP and, in the case of each Obligor other than Hungarian Telephone
         and Cable Corp., is prepared using and in accordance with HAS, in each
         case using accounting practices and financial reference periods
         consistent with those applied in the preparation of such Obligor's
         Original Financial Statements unless, in relation to any set of
         financial statements, such Obligor notifies the Facility Agent in
         writing that there has been a change in HAS or US GAAP, as appropriate,
         the accounting practices or reference periods and in each such case
         such Obligor will procure and ensure that such Obligor's Auditors
         promptly deliver to the Facility Agent:

         (i)      a description of any change(s) necessary for those financial
                  statements to reflect the HAS or US GAAP, as appropriate,
                  accounting practices and reference periods upon which such
                  Obligor's Original Financial Statements were prepared; and

         (ii)     sufficient information, in form and substance as may be
                  reasonably required by the Facility Agent, to enable the
                  Lenders to determine whether Clause 20 (Financial covenants)
                  has been complied with and make an accurate comparison between
                  the financial position indicated in those financial statements
                  and such Obligor's Original Financial Statements.

         Any reference in this Agreement to those financial statements shall be
         construed as a reference to those financial statements as adjusted to
         reflect the basis upon which the Original Financial Statements were
         prepared.

(c)      In respect of the financial statements of the members of the Group
         (other than Hungarian Telephone and Cable Corp.) to be delivered
         pursuant to this Agreement, such financial statements may be delivered
         prepared in the Hungarian language together with a "working"
         translation into the English language, it being agreed by the Finance
         Parties that, in the event of any discrepancy between the English and
         Hungarian language versions, no Obligor will have any liability in
         respect of such discrepancy towards any Finance Party pursuant to this
         Agreement and the Hungarian language version shall prevail.


                                       58
<PAGE>


19.6     Transactions with Affiliates
         Each Obligor shall deliver statements in sufficient detail satisfactory
         to the Facility Agent of all financial transactions, if any, entered
         into with any other member of the Group during the previous quarter of
         each of such Obligor's financial years, at the same time as the
         financial statements are delivered to the Facility Agent pursuant to
         paragraph (a) of Clause 19.1 (Financial statements).

19.7     Information: miscellaneous
         Each Obligor shall supply to the Facility Agent (in sufficient copies
         for all the Lenders, if the Facility Agent so requests):

         (a)      all documents dispatched by such Obligor to its shareholders
                  (or any class of them) or its creditors generally at the same
                  time as they are dispatched;

         (b)      promptly upon becoming aware of them, the details of any
                  litigation, arbitration or administrative proceedings which
                  are current, threatened or pending against any member of the
                  Group, and which, if it were to be adversely determined, gives
                  rise to a Material Adverse Effect; and

         (c)      promptly, such further information (including but not limited
                  to its extract of general ledger ("fokonyvi kivonat"))
                  regarding the financial condition, business and operations of
                  any member of the Group as any Finance Party (through the
                  Facility Agent) may reasonably request,

         Provided that if such Obligor is able to immediately furnish such
         information albeit in a format and/or presentational format then used
         by the relevant internal functions of the relevant member of the Group,
         such Obligor will immediately furnish such information to the Facility
         Agent (or such Lender through the Facility Agent) in such format and/or
         presentational format Provided Further that if such format and/or
         presentational format is not acceptable to the Facility Agent or such
         Lender, acting reasonably, such Obligor will as quickly as practicable
         and in any event within twenty one (21) days, provide the Facility
         Agent or such Lender, as applicable, such information in a format
         and/or presentational format reasonably requested by the Facility Agent
         or such Lender, as applicable.

19.8     Notification of default
(a)      Each Obligor shall notify the Facility Agent in writing of any Default
         (and the steps, if any, being taken to remedy it) promptly upon
         becoming aware of its occurrence (unless that Obligor is aware that a
         notification has already been provided by another Obligor).

(b)      Promptly upon a request by the Facility Agent, each Obligor shall
         supply to the Facility Agent a certificate signed by two of its
         directors or officers (as identified in the then most recent 10K
         Document, 10Q Document or other filing made to the Securities Exchange
         Commission of the United States of America), as applicable, on its
         behalf certifying that no Default is continuing (or if a Default is
         continuing, specifying the Default and the steps, if any, being taken
         to remedy it).

19.9     Accounting Terms
         All accounting expressions which are not otherwise defined in this
         Agreement shall be construed in accordance with US GAAP and/or HAS, as
         appropriate, consistently applied in the United States of America
         and/or Hungary, as applicable.

19.10    Access to Records
         Each Obligor shall, upon the reasonable request of the Facility Agent:


                                       59
<PAGE>

         (a)      permit the Facility Agent, the Security Agent and/or any
                  representatives of the Majority Lenders to visit such
                  Obligor's premises and to inspect such Obligor's books,
                  accounts and records and each Obligor shall provide the
                  Facility Agent, the Security Agent or such representative with
                  all necessary assistance and co-operation for such purpose;

         (b)      promptly provide the Facility Agent, the Security Agent and/or
                  any representative of the Majority Lenders with copies and/or
                  extracts of such Obligor's books, accounts and records as the
                  Facility Agent, the Security Agent and/or any representative
                  of the Majority Lenders may request.

19.11    Corporate records
         Each Obligor undertakes to procure and ensure that it and each other of
         the Group maintains such books, accounts and records require under
         Applicable Law and in accordance with Good Industry Practice.

19.12    Ownership of Notes
(a)      At the same time as it delivers 10K Document pursuant to paragraph (a)
         of Clause 19.1 (Financial Statements), and promptly upon the written
         request of the Facility Agent, Hungarian Telephone and Cable Corp.,
         will provide the Facility Agent with a copy extract of the register of
         Notes maintained by Hungarian Telephone and Cable Corp., showing the
         holders (and numbers held) of the Notes, as at 31 December of the
         financial year to which such 10K Document relates.

(b)      As quickly as possible upon becoming aware of any change in ownership
         of any Note(s), but in any event within three (3) Business days of
         becoming so aware, Hungarian Telephone and Cable Corp. will confirm to
         the Facility Agent in writing details of such change(s), including,
         inter alia, details of the new holder of such Note(s).

19.13    Conversion of Preference Shares
         As quickly as possible upon any conversion of a Preference Share into
         common stock of Hungarian Telephone and Cable Corp., but in any event
         within three (3) Business Days of such conversion, Hungarian Telephone
         and Cable Corp. will confirm to the Facility Agent in writing details
         of such conversion, including, inter alia, details of the holder of the
         shares arising from such conversion.

19.14    Ownership of Shares
(a)      At the same time as it delivers a 10K Document pursuant to paragraph
         (a) of Clause 19.1 (Financial Statements), and promptly upon the
         written request of the Facility Agent, Hungarian Telephone and Cable
         Corp., will provide the Facility Agent with an analysis of the register
         of shares maintained by Hungarian Telephone and Cable Corp., showing
         the shareholdings (expressed as an absolute number of shares and as a
         percentage of all Hungarian Telephone and Cable Corp.'s issues share
         capital) of: (i) Citizens; (ii) IO Fund; (iii) Postabank es
         Takarekpenztar Reszvenytarsasag; (iv) Tele Danmark A/S; (v) to the best
         knowledge and belief of Hungarian Telephone and Cable Corp., any person
         who, together with any Related Person to such person, holds five per
         cent. (5%) of the issued share capital of Hungarian Telephone and Cable
         Corp.; and (vi) the amount held by all other shareholders.

(b)      Hungarian Telephone and Cable Corp. will promptly upon, and in any
         event within five (5) Business Days of, becoming aware that any Lender
         and/or any Affiliate(s) of any Lender has or have become(s) the owner
         of five per cent. (5) or more of the issued share capital of Hungarian
         Telephone and Cable Corp., notify the Facility Agent in writing
         thereof.


                                       60
<PAGE>


20.      FINANCIAL COVENANTS

20.1     Financial condition of the Group
         The financial condition of the Group, as evidenced by the consolidated
         financial statements of Hungarian Telephone and Cable Corp. set out in
         the Original Financial Statements or subsequently delivered to the
         Facility Agent in accordance with the provisions of Clause 19.1
         (Financial statements) shall be such that:

         (a)      the Group's Senior Debt to EBITDA Ratio shall not on any date
                  after this Agreement exceed the values applicable at such time
                  as set out in the table below:
<TABLE>
<CAPTION>

                  ------------------------------------------------------------------------------------------------------
                     Date of determining the Group's Senior Debt to         The Group's Senior Debt to EBITDA Ratio
                                      EBITDA Ratio
                  ------------------------------------------------------------------------------------------------------
<S>                                                                              <C>
                  from the date of this Agreement to 30 December  2000             five point zero zero to one (5.00:1)
                  ------------------------------------------------------------------------------------------------------
                  From 31 December 2000 to 29 June 2001                           four point seven five to one (4.75:1)
                  ------------------------------------------------------------------------------------------------------
                  From 30 June 2001 to 30 December 2001                             four point two five to one (4.25:1)
                  ------------------------------------------------------------------------------------------------------
                  From 31 December 2001 to 29 June 2002                          three point seven five to one (3.75:1)
                  ------------------------------------------------------------------------------------------------------
                  From 30 June 2002 to 30 December 2002                           three point five zero to one (3.50:1)
                  ------------------------------------------------------------------------------------------------------
                  From 31 December 2002 to 30 December 2003                       three point zero zero to one (3.00:1)
                  ------------------------------------------------------------------------------------------------------
                  From 31 December 2003 to 30 December 2004                         two point five zero to one (2.50:1)
                  ------------------------------------------------------------------------------------------------------
                  From 31 December 2004 to 31 December 2007                         two point zero zero to one (2.00:1)
                  ------------------------------------------------------------------------------------------------------
</TABLE>

                  The Group's Senior Debt to EBITDA Ratio shall be calculated on
                  a quarterly basis until the Trigger Date and, thereafter,
                  semi-annually as follows:

                  A = (B - C) / D

                  where:

                  A =  the Group's Senior Debt to EBITDA Ratio;

                  B =  the aggregate of all Financial Indebtedness of the
                       Group (as specified in the relevant 10K Document or 10Q
                       Document);

                  C =  the aggregate amount of all Financial Indebtedness in
                       respect of the Notes (as specified in the relevant 10K
                       Document or 10Q Document);

                  D =  EBITDA for the Group determined on the basis of the
                       preceding four (4) quarter financial years of Hungarian
                       Telephone and Cable Corp.;

         (b)      the Group's Senior Interest Cover Ratio in respect of any
                  quarter financial year, as determined as at the date up to
                  which such quarter financial year relates, shall not be less
                  than the value set out in the table below:

<TABLE>
<CAPTION>
                  ------------------------------------------------------------------------------------------------------
                  Date for determining the Group's Senior Interest Cover     The Group's Senior Interest Cover Ratio
                                           Ratio
                  ------------------------------------------------------------------------------------------------------
<S>                                                                                <C>
                  From 31 December 2000 to 29 June 2001                                   one point five to one (1.5:1)
                  ------------------------------------------------------------------------------------------------------
                  From 30 June 2001 to 30 September 2001                           one point seven five to one (1.75:1)
                  ------------------------------------------------------------------------------------------------------
</TABLE>


                                       61
<PAGE>


                  The Group's Senior Interest Cover Ratio shall be calculated on
                  a quarterly basis until the Trigger Date and, thereafter,
                  semi-annually as follows:

                  A = B / (C - D)

                  where:

                  A =  the Group's Senior Interest Cover Ratio;

                  B =  EBITDA for the Group determined on a consolidated basis
                       with reference to the preceding four (4) quarter
                       financial years of Hungarian Telephone and Cable Corp.;

                  C =  the aggregate amount of all gross cash interest payable
                       by and all hedging costs for the Group, on a consolidated
                       basis, during the preceding four (4) quarter financial
                       years of Hungarian Telephone and Cable Corp.;

                  D =  the aggregate amount of all cash interest paid in
                       respect of the Notes during the preceding four (4)
                       quarter financial years of Hungarian Telephone and Cable
                       Corp.;

         (c)      the Group's Senior Debt Service Cover Ratio shall not in
                  respect of any quarter financial year, as determined as at the
                  date up to which such quarter financial year relates, at any
                  time from 30 June 2001 until 31 December 2007 be less than one
                  point one five to one (1.15:1). The Group's Senior Debt
                  Service Cover Ratio shall be calculated on a quarterly basis
                  until the Trigger Date and, thereafter, semi-annually as
                  follows:

                  A = (B - C) / D

                  where:

                  A =  the Group's Senior Debt Service Cover Ratio;

                  B =  EBITDA for the Group determined on the basis of the
                       preceding four (4) quarter financial years of Hungarian
                       Telephone and Cable Corp.;

                  C =  the aggregate of an amount equal to all reductions in
                       working capital, capital expenditure and payments of Tax
                       by the Group, on a consolidated basis, during the
                       preceding four (4) quarter financial years of Hungarian
                       Telephone and Cable Corp.;

                  D =  the aggregate of an amount equal to all net hedging
                       costs, gross interest and scheduled repayment of
                       indebtedness, including without limitation under this
                       Agreement, payable by the Group (other than by Hungarian
                       Telephone and Cable Corp. in respect of the Notes), on a
                       consolidated basis, during the preceding four (4) quarter
                       financial years of Hungarian Telephone and Cable Corp.;
                       and

         (d)      the EBITDA of the Group for the preceding four (4) quarter
                  financial years of Hungarian Telephone and Cable Corp. taken
                  in aggregate, expressed in forint, shall not, during the
                  period commencing on the date of this Agreement and ending on
                  and including the earlier of 31 December 2003 and the Trigger
                  Date, as at the last day of each of its quarter financial
                  years, be less than the value provided for at such time in the
                  column headed "Covenant-minimum EBITDA (HUF)" of Schedule 10
                  (EBITDA


                                       62
<PAGE>

                  Variance Table), adjusted on the basis provided for in
                  Schedule 10 (EBITDA Variance Table).

21.      GENERAL UNDERTAKINGS
         The undertakings in this Clause 21 remain in force from the date of
         this Agreement for so long as any amount is outstanding under the
         Finance Documents or any Commitment is in force.

21.1     Authorisations
(a)      Each Obligor shall promptly:

         (i)      obtain, comply with and do all that is necessary to maintain
                  in full force and effect; and

         (ii)     supply certified copies to the Facility Agent of,

         any Authorisation required under any law or regulation of its
         jurisdiction of incorporation to enable such Obligor to perform such
         Obligor's obligations under the Finance Documents and to ensure the
         legality, validity, enforceability or admissibility in evidence in such
         Obligor's jurisdiction of incorporation, in any jurisdiction in which
         such Obligor has any assets and/or in which such Obligor carries on any
         business, of any Finance Document including, but not limited to, duly
         notarising the Fixed Charge Agreements and the Floating Charge
         Agreements before a Notary Public and duly registering the Mortgage
         Agreement at the relevant Land Registry Provided that in respect of
         those Finance Documents which are not already available as official
         translations in the Hungarian language, such Obligor shall only be
         obligated to have such Finance Documents officially translated into the
         Hungarian language upon receipt of a written request from the Facility
         Agent, acting reasonably and, on the receipt of such a written request,
         the Borrower shall arrange for the prompt official translation into the
         Hungarian language of such Finance Documents and the prompt delivery of
         such translations to the Facility Agent.

(b)      Each Obligor shall (and Hungarian Telephone and Cable Corp. shall
         procure and ensure that each of its Subsidiaries other than PILISTAV
         Tavkozlesi, Epito es Szolgaltato Korlatolt Felelossegu Tarsasag shall)
         take all actions and steps necessary to maintain such Obligor's
         corporate existence.

21.2     Compliance with laws
         Each Obligor shall comply in all respects with all Applicable Law, if
         failure so to comply would materially impair such Obligor's ability to
         perform its obligations under the Finance Documents.

21.3     Negative pledge
(a)      Subject to paragraph (c) below, no Obligor shall (and Hungarian
         Telephone and Cable Corp. shall procure and ensure that no other member
         of the Group will) create or permit to subsist any Encumbrance over any
         of its assets.

(b)      Subject to paragraph (c) below, no Obligor shall (and Hungarian
         Telephone and Cable Corp. shall procure and ensure that no other member
         of the Group will):

         (i)      sell, transfer or otherwise dispose of any of its assets on
                  terms whereby they are or may be leased to or re-acquired by
                  an Obligor or any other member of the Group;

         (ii)     sell, transfer or otherwise dispose of any of its receivables
                  on recourse terms;

         (iii)    enter into any arrangement under which money or the benefit of
                  a bank or other account may be applied, set-off or made
                  subject to a combination of accounts; or


                                       63
<PAGE>


         (iv)     enter into any other preferential arrangement having a similar
                  effect,

         in circumstances where the arrangement or transaction is entered into
         primarily as a method of raising Financial Indebtedness or of financing
         the acquisition of an asset.

(c)      Paragraphs (a) and (b) above do not apply to:

         (i)      any Encumbrance detailed in the Letter of Borrowings and
                  Encumbrances which is not to be eliminated, discharged or
                  released by Postabank es Takarekpenztar Reszvenytarsasag
                  pursuant to the releases provided for in paragraph 3(t) of
                  Schedule 2 (Conditions Precedent);

         (ii)     any Encumbrance arising in respect of any assets of an Obligor
                  by mandatory operation of Applicable Law which such Obligor
                  has, upon becoming aware of such an Encumbrance, confirmed in
                  writing to the Facility Agent;

         (iii)    any Encumbrance arising pursuant to the Security Agreements;

         (iv)     any lien arising by operation of law and in the ordinary
                  course of trading;

         (v)      any Encumbrance created with the prior written consent of the
                  Facility Agent acting on the instruction of the Majority
                  Lenders; or

         (vi)     any Encumbrance in respect of assets with an aggregate value
                  which does not exceed two million five hundred thousand euro
                  (EUR 2,500,000) securing indebtedness the principal amount of
                  which (when aggregated with the principal amount of any other
                  indebtedness which has the benefit of an Encumbrance other
                  than any permitted under paragraphs (i) to (v) above) does not
                  exceed two million five hundred thousand euro (EUR 2,500,000)
                  (or their equivalent in another currency or currencies).

21.4     Disposals
(a)      Subject to paragraph (b) below, no Obligor shall (and Hungarian
         Telephone and Cable Corp. shall procure and ensure that no other member
         of the Group will), enter into a single transaction or a series of
         transactions (whether related or not) and whether voluntary or
         involuntary to sell, lease, transfer or otherwise dispose of any asset.

(b)      Paragraph (a) above does not apply to any sale, lease, transfer or
         other disposal:

         (i)      made in the ordinary course of business of the disposing
                  entity;

         (ii)     of assets on an arm's length and open market basis with the
                  prior written consent of the Facility Agent acting on the
                  instructions of the Majority Lenders;

         (iii)    of assets which are certified by an officer or director, as
                  applicable, of the relevant Obligor as being redundant or
                  obsolete;

         (iv)     of assets which are being exchanged for comparable or superior
                  assets and where the assets of the Obligor being exchanged are
                  not worth materially more than the value of the assets being
                  acquired or otherwise obtained; or

         (v)      where the higher of the market value or consideration
                  receivable (when aggregated with the higher of the market
                  value or consideration receivable for any other sale, lease,


                                       64
<PAGE>


                  transfer or other disposal, other than any permitted under
                  paragraphs (i) to (iv) above) does not in any financial year
                  exceed the equivalent of two million, five hundred thousand
                  dollars (USD 2,500,000).

21.5     Merger and acquisition
         No Obligor shall (and Hungarian Telephone and Cable Corp. shall procure
         and ensure that no other member of the Group other than PILISTAV
         Tavkozlesi, Epito es Szolgaltato Korlatolt Felelossegu Tarsasag will,
         without the prior written consent of the Facility Agent, acting on the
         instructions of the Majority Lenders ):

         (a)      enter into any amalgamation, demerger, merger or corporate
                  reconstruction other than any such transaction in respect of
                  two (2) or more Obligors (other than Hungarian Telephone and
                  Cable Corp.) which has been notified to the Facility Agent in
                  writing no less than twenty one (21) Business Days prior to
                  the date on which any resolutions are passed by the founder,
                  general meeting or analogous body of any such Obligor and
                  which would not in all reasonable likelihood, save as
                  expressly approved in advance in writing by the Facility
                  Agent, acting on the instructions of the Majority Lenders,
                  taken as a whole adversely affect the interests of the Finance
                  Parties under the Finance Documents; or

         (b)      acquire or create any person which results or gives rise to
                  any loss, payment, cost, liability or other obligation
                  whatsoever (whether present or future, actual or contingent)
                  which in aggregate with all other such losses, payments, costs
                  and liabilities exceeds, in any financial year, an amount
                  equivalent to one million dollars (USD 1,000,000) and/or
                  during the period from the date of this Agreement up to and
                  including the Final Maturity Date, an amount equivalent to
                  five million dollars (USD 5,000,000).

21.6     Change of business
         Each Obligor and Hungarian Telephone and Cable Corp. shall procure and
         ensure that no substantial change is made to the general nature of the
         business of Hungarian Telephone and Cable Corp. or the Group from that
         carried on at the date of this Agreement. No Obligor shall, without the
         prior written consent of the Facility Agent, acting on the instruction
         of the Majority Lenders, create any subsidiaries and/or become a party
         to a joint venture agreement or arrangement and/or enter or become
         involved in areas or types of activities or business in each such case
         that would fall outside the scope of activities and business
         specifically provided for pursuant to the Concession Contracts or
         activities and business related to the telecommunications business
         which are specified in Government Decree Number 48 of 1997 of Hungary
         which are significantly different to those currently being carried on
         by the Obligors and as envisaged in the Finance Documents, the overall
         effect of which would be reasonably expected to change the overall
         nature of the credit risk of the Obligors, as determined by the
         Facility Agent, acting on the instructions of the Majority Lenders.

21.7     Insurance
(a)      Each Obligor shall take out and maintain insurances on and in relation
         to its respective activities, business, operations and assets with
         reputable underwriters or insurance companies against such risks and to
         such extent as is usual and is available upon commercial terms, in
         respect of Hungarian Telephone and Cable Corp., in the United States
         and, in respect of the other Obligors, in Hungary for companies
         carrying on similar activities, businesses and operations such as those
         carried on by it and its subsidiaries whose practice is not to
         self-insure.

(b)      Each Obligor as quickly as practicable shall, upon it taking out any
         such insurance pursuant to this Clause 21.7, notify the Facility Agent
         in writing, providing sufficient information on such


                                       65
<PAGE>


         insurance as reasonably required by the Facility Agent and execute an
         assignment of contractual rights agreement in respect of such material
         insurance, substantially in the form of the Assignment of Contractual
         Rights Agreements, as appropriate, if the Facility Agent (acting on the
         instructions of the Majority Lenders, acting reasonably) so requires.
         Each Obligor shall also not act or fail to act in any way which could
         by such action or failure to act cause any material adverse effect on
         the validity and enforceability of such insurances.

(c)      In the event that fact(s), event(s) and/or circumstance(s) arise(s)
         whereby an Obligor intends to make a material claim under such
         insurance policies, such Obligor will promptly notify the Facility
         Agent in writing of such fact(s), event(s) and/or circumstance(s),
         together with an estimate of the amount of the damage or loss and an
         estimate of the likely amount of such claim and, at any time when: (i)
         a Default or Event of Default is continuing; and/or (ii) when the
         amount of such claim, when aggregated with all other claims of the
         Obligors which are outstanding at such time and with all other amounts
         claimed and paid but not at such time already applied by the Obligors
         towards repairs and/or reinstatement, as appropriate, exceeds an amount
         equivalent to two hundred and fifty thousand euro (EUR 250,000), such
         Obligor(s) will, as soon as reasonably practicable thereafter, enter
         into negotiations in good faith with the Facility Agent in order to
         determine an appropriate strategy for the use of any monies paid out as
         a result of such a claim.

21.8     Untrue representations
         After the delivery of any Utilisation Request and before the making of
         the Loan(s) requested in such Utilisation Request, each Obligor shall
         immediately notify the Facility Agent in writing of the existence or
         occurrence of any fact(s), event(s) and/or circumstance(s) which
         result(s) in or which would reasonably be expected to result in any of
         the representations contained in Clause 18 (Representations) being
         untrue at or before the time of the making of such Loan.

         21.9 Notification of Events of Default Each Obligor shall, promptly
         upon becoming aware of such occurrence, inform the Facility Agent of
         the occurrence of any Default or Event of Default, howsoever described
         under any of the Finance Documents, or of the receipt of any
         correspondence from any person relating to the obligations of any
         Borrower under the relevant Concession Contract which gives rise to a
         Material Adverse Effect and, upon receipt of a written request to that
         effect from the Facility Agent, confirm to the Facility Agent that,
         save as previously notified to the Facility Agent or as notified in
         such confirmation, no Default or Event of Default, howsoever described
         under any of the Finance Documents, has, to the best of its knowledge
         and belief, having made all reasonable enquiries thereto, occurred and
         no such correspondence has been received by any Obligor.

21.10    Claims pari passu
         Each Obligor shall, subject to any Encumbrances permitted pursuant to
         Clause 21.3 (Negative Pledge), ensure that at all times the claims of
         each Finance Party against such Obligor under the Finance Documents to
         which it is a party rank at least pari passu with the claims of all its
         other unsecured and unsubordinated creditors save those whose claims
         are preferred by the operation of mandatory Applicable Law applying to
         companies generally.

21.11    Auditors
         No Obligor shall, without the prior written consent of the Facility
         Agent (such consent not to be unreasonably withheld) change or propose
         to/at such Obligor's founder, general meeting or analogous body, as
         applicable, the changing of such Obligor's Auditors except as provided
         for in the definition of Auditors in Clause 1.1 (Definitions).


                                       66
<PAGE>


21.12    Bank accounts
(a)      No Obligor shall, without the prior written consent of the Facility
         Agent, acting on the instructions of the Majority Lenders:

         (i)      open, have, maintain or otherwise operate at any time a bank
                  account (or similar account) with a bank, other financial
                  institution or person except for the Income Accounts; and

         (ii)     in the case of Hungarian Telephone and Cable Corp., open,
                  have, maintain or otherwise operate at any time a bank account
                  (or similar account) with a bank, other financial institution
                  or person which is a holder of any Note(s) at such time other
                  than for the Income Accounts of Hungarian Telephone and Cable
                  Corp. held with Postabank es Takarekpenztar Reszvenytarsasag
                  as at the date of this Agreement Provided that Hungarian
                  Telephone and Cable Corp. unconditionally and irrevocably
                  agrees and undertakes not to allow a payment into such Income
                  Account which on any day exceeds an amount equivalent to fifty
                  thousand euro (EUR 50,000) and in any calendar Month, exceed
                  in aggregate an amount equivalent to one hundred thousand euro
                  (EUR 100,000).

(b)      Each Obligor shall procure and ensure that all of its respective Income
         is paid into an Income Account.

(c)      Each Obligor agrees and undertakes that if it opens any additional bank
         or similar account(s) (having first received the prior written consent
         of the Facility Agent, acting on the instructions of the Majority
         Lenders), prior to or simultaneous with such account(s) becoming
         operational, such Obligor will create an Encumbrance over such
         account(s) in favour of the Security Agent, substantially in the form
         of a Pledge Over Bank Accounts Agreement, with such amendments as the
         Security Agent shall require to reflect the circumstances at such time
         and any changes in Applicable Law.

(d)      In the event that Hungarian Telephone and Cable Corp. receives any
         Income from any person whatsoever who is at such time exercising any
         call options, warrants or similar rights that such person holds in the
         equity capital of Hungarian Telephone and Cable Corp., other than in
         respect of any stock options awarded to employees (and former
         employees) of Hungarian Telephone and Cable Corp., Hungarian Telephone
         and Cable Corp. agrees and undertakes to open the Escrow Account and
         either:

         (i)      to deposit such moneys in the Escrow Account; or

         (ii)     to open a bank account with an Affiliate of the Escrow Bank in
                  the United States of America and deposit such moneys in such
                  bank account with such bank account being subject to an
                  unconditional and irrevocable instruction from Hungarian
                  Telephone and Cable Corp. to transfer immediately such moneys
                  to the Escrow Account,

         and to hold such moneys in the Escrow Account until such time as the
         Facility Agent, acting on the instructions of the Majority Lenders,
         determines, without undue delay, that no Event of Default under Clause
         22.22 (Ownership of Hungarian Telephone and Cable Corp.) has arisen and
         is continuing as a result of the exercise of such call options,
         warrants or rights, including those in respect of any stock options
         awarded to employees (and former employees) of Hungarian Telephone and
         Cable Corp. (and for the purposes of this paragraph (d) the term
         "employees" shall be construed so as to include directors, officers and
         employees).


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21.13    Loans and guarantees
(a)      Save as expressly permitted pursuant to this paragraph (a), no Borrower
         shall at any time, without the prior written consent of the Facility
         Agent, acting on the instructions of the Majority Lenders, make any
         loans, grant any credit or give any guarantee or indemnity whatsoever
         (except as required or provided for under any Finance Document) to or
         for the benefit of any person whatsoever or otherwise voluntarily
         assume any liability whatsoever, whether actual or contingent, in
         respect of any obligation of any other person. Each Borrower may from
         time to time extend a Permitted Inter-company Loan, being a loan or
         loans to other Borrower(s) and/or to HTCC Tanacsado Reszvenytarsasag
         for the purposes of, but not limited to, short-term working capital
         requirements of the recipient Borrower or HTCC Tanacsado
         Reszvenytarsasag, as applicable, the outstanding amount(s) of which in
         aggregate do(es) not at any time exceed an amount equivalent to two
         million dollars (USD 2,000,000). No Borrower (being a recipient
         Borrower), to which a loan has been extended by another Borrower, may
         itself extend a loan to any other Borrower(s) until such time as such
         recipient Borrower has repaid all amounts outstanding to each other
         Borrower prior to such time. The aggregate amount of all indebtedness
         arising pursuant to this paragraph (a) shall not at any time exceed an
         amount equivalent to six million dollars (USD 6,000,000).

(b)      Neither Hungarian Telephone and Cable Corp. nor HTCC Tanacsado
         Reszvenytarsasag shall, without the prior written consent of the
         Facility Agent, acting on the instructions of the Majority Lenders,
         make any loans, grant any credit or give any guarantee or indemnity
         whatsoever (except as required or provided for under any Finance
         Document) to or for the benefit of any person whatsoever or otherwise
         voluntarily assume any liability whatsoever, whether actual or
         contingent, in respect of any obligation of any other person, other
         than such loans granted to the Borrowers as are disclosed in the Letter
         of Borrowings and Encumbrances.

(c)      Each of Hungarian Telephone and Cable Corp. and HTCC Tanacsado
         Reszvenytarsasag will take such steps and actions as are necessary and
         appropriate and procure and ensure that within two (2) years of the
         date of this Agreement, the loans provided for in paragraph (b) above
         (other than such loans which arose directly from the funds resulting
         from the issue of the Notes) which are outstanding at such time are
         duly converted into registered paid-up share capital in the Borrowers,
         and such other member of the Group will provide Hungarian Telephone and
         Cable Corp. and HTCC Tanacsado Reszvenytarsasag with all assistance
         necessary to procure and complete such conversion.

(d)      Subject to paragraph (e) below, each of the Obligors shall, at all
         times, procure and ensure that any and all indebtedness of each
         Borrower owed to Hungarian Telephone and Cable Corp. and/or HTCC
         Tanacsado Reszvenytarsasag is at all times and in all respects fully
         subordinated to any indebtedness and/or other obligations of each such
         Borrower owing or expressed to be in favour of any Finance Party. Each
         Obligor will enter into the Subordination and Trust Deed and any other
         agreement, contract or arrangement deemed necessary or desirable by the
         Facility Agent, acting on the instructions of the Majority Lenders, to
         give full effect to such subordination.

         (e) Subject to there being no Default or Event of Default which is
         continuing at such time, the Borrowers shall, notwithstanding paragraph
         (d) above, be entitled to pay interest on the loans provided for in
         paragraph (c) above which arose directly from the funds resulting from
         the issue of the Notes (including, to the extent that such Borrower is
         able to do so from Net Cumulative Excess Cash Flow, represented by
         cash-at-bank, any such interest accruing during any period in which an
         Event of Default or Default is continuing, with such payment to be made
         only following receipt by such Borrower of a written waiver in respect
         of such Event of Default or Default from the Facility Agent, acting on
         the instructions of the Majority Lenders), with such rate of interest
         to be no higher than the rate of interest accruing pursuant to the
         Notes. Other


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         than as provided for in this paragraph (e), no Borrower shall, without
         the prior written consent of the Facility Agent, acting on the
         instructions of the Majority Lenders, make any payment of any interest
         on any indebtedness owed to another member of the Group (save, where
         such interest is at an arm's length open-market rate, in respect of
         inter-Borrower loans expressly permitted pursuant to paragraph (a)
         above).

21.14    Shares
         No Obligor shall, without the prior written consent of the Facility
         Agent, acting on the instructions of the Majority Lenders, alter any
         rights attaching to its issued ordinary shares, Preference Shares
         and/or Warrants in existence at the date of this Agreement. No Obligor
         shall, without the prior written consent of the Facility Agent, acting
         on the instructions of the Majority Lenders, issue any share or other
         equity instrument whatsoever which is redeemable at the option of the
         holder or which, does not expressly provide for, at all times up to the
         full discharge of all obligations and liabilities in favour of the
         Finance Parties under the Finance Documents, the obtaining, at the
         time(s) of any redemption(s), of the prior written consent of the
         Facility Agent, acting on the instructions of the Majority Lenders.

21.15    Distributions
(a)      Subject to paragraphs (b), (c) and (d) below, no member of the Group
         (other than PILISTAV Tavkozlesi, Epito es Szolgaltato Korlatolt
         Felelossegu Tarsasag) shall make any Distribution which is not a
         payment of amounts due and payable under any Permitted Management
         Contract, in respect of or on account of any due and payable Related
         Party Payment, in respect of or on account of any due and payable
         Permitted Fee Distribution or in respect of or on account of a due and
         payable Distribution arising under the Preference Shares or a repayment
         of any amount outstanding pursuant to and arising under a Permitted
         Inter-company Loan.

(b)      No member of the Group shall, without the prior written consent of the
         Facility Agent, acting on the instructions of the Majority Lenders,
         make any Distribution at a time when an Event of Default is continuing
         or would arise if such Distribution were made.

(c)      Subject to paragraph (b) above, prior to the later of the Trigger Date
         and 1 January 2003, no Borrower shall, without the prior written
         consent of the Facility Agent, acting on the instructions of the
         Majority Lenders make any Distribution to Hungarian Telephone and Cable
         Corp. and/or HTCC Tanacsado Reszvenytarsasag, other than any such
         Distribution being used to make the payments of interest arising under
         the Notes Provided that, in any event, a condition of any such consent
         for any other Distribution would include, but not be limited to, an
         amount equivalent to or more than the proposed amount of such
         Distribution being applied to prepay the Facility A Loan, such
         prepayment to be applied in inverse order of maturity.

(d)      Following the later of the Trigger Date and 1 January 2003, a Borrower
         may make a Distribution to Hungarian Telephone and Cable Corp. of an
         amount equivalent to the amount of Net Cumulative Excess Cashflow up to
         the date of such proposed Distribution, with the full amount of such
         Distribution being used to make the payments of interest and/or to
         prepay and redeem one or more of the Notes Provided that it is agreed
         that if the Trigger Date occurs on or before 30 September 2003, the
         Obligors will, in respect of the 2003 financial year of the Obligors,
         be entitled to calculate and determine the amount of Net Cumulative
         Excess Cashflow for the first three (3) quarters of such financial
         year, as evidenced by the relevant 10Q Document, and apply such amount,
         together with any other Net Cumulative Excess Cashflow towards the
         prepayment of Notes and any directly related payment then due and
         payable in respect of the relevant cancellation of Warrants on or after
         15 December 2003.


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21.16    Reduction of capital
         Save as may be required to comply with mandatory Applicable Law, no
         Obligor shall, without the prior written consent of the Facility Agent,
         acting on the instructions of the Majority Lenders, propose to/at any
         Obligor's founder or general meeting, as applicable, the reduction of
         such Obligor's registered and paid-up share capital or pass such
         resolution and each Obligor agrees that it shall not take any action or
         steps whatsoever to facilitate the reduction of its registered and
         paid-up share capital without the prior written consent of the Facility
         Agent, acting on the instructions of the Majority Lenders. Each Obligor
         shall not without the prior written consent of the Facility Agent,
         acting on the instructions of the Majority Lenders, agree, permit or
         otherwise allow or fail to take steps to prevent any person from
         withdrawing funds from an Obligor's assets and/or business save as
         provided for and permitted in the Finance Documents.

21.17    Material contracts
         No Obligor shall, without the prior written consent of the Facility
         Agent, acting reasonably, enter into any material agreement(s) and
         material contract(s) which is entered into on business terms that are
         worse than at arm's-length and/or which gives rise to a Material
         Adverse Effect.

21.18    Revocation
         No Obligor shall, without the prior written consent of the Facility
         Agent, take any formal action or fail to perform any duty or obligation
         which is likely to lead to the revocation of any Finance Document to
         which such Obligor is a party or to the cancellation or suspension of
         the rights of such Obligor included in any such agreement.

21.19    Articles of Association
         No Obligor shall, without the prior written consent of the Facility
         Agent, acting on the instruction of the Majority Lenders, propose to/at
         any Obligor's founder or general meeting, as applicable, an amendment
         to its Articles of Association which gives rise to a Material Adverse
         Effect.

21.20    Hedging Strategy
(a)      Each Borrower shall ensure that at all times it has devised a Hedging
         Strategy appropriate at such time and that such Hedging Strategy is
         duly being implemented pursuant to the Hedging Documents.

(b)      Each Borrower will notify the Facility Agent in writing of the Hedging
         Strategy and promptly of any changes to such Hedging Strategy.

(c)      No Obligor shall, without the prior written consent of the Facility
         Agent, acting on the instructions of the Majority Lenders, enter into
         any agreement, arrangement or contract whatsoever which might have a
         material adverse effect on the Hedging Strategy or on the
         implementation of the Hedging Strategy and/or which might amount to
         speculation, gambling or risk taking in respect of any fluctuation in
         any rate or price.

(d)      Each Borrower will promptly notify the Facility Agent and the Security
         Agent of the execution of any Hedging Document and take all steps and
         actions to procure and ensure that the benefit of each such Hedging
         Document is assigned as quickly as practicable in favour of the
         Security Agent (acting on behalf of the Finance Parties) on terms and
         conditions required by the Security Agent (in consultation with the
         other Finance Parties) at such time.

(e)      Each Borrower shall procure and ensure that:


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         (i)      in respect of any Hedging Document entered into on or prior to
                  the date of this Agreement, on the date of this Agreement, the
                  other party to such Hedging Document becomes a party to the
                  Subordination and Trust Deed (in the capacity of Hedging
                  Director); and

         (ii)     in respect of any Hedging Document entered into after the date
                  of this Agreement, the other party to such Hedging Document
                  becomes a party to the Subordination and Trust Deed (in the
                  capacity of Hedging Director) within five (5) Business Days of
                  entering into such Hedging Document.

21.21    Alteration or amendment of Finance Documents
         No Obligor shall alter or amend, or cause to be altered or amended, any
         of the Finance Documents to which it is a party, without the prior
         written consent of the Facility Agent acting on the instructions of the
         Majority Lenders or, if expressly provided for in such a Finance
         Document, all of the Lenders Provided that each Obligor will promptly
         take any actions or other steps required or desirable under Applicable
         Law to give full force and effect to the Finance Documents (and to the
         rights, security interests and Encumbrances created in such Finance
         Documents) to which it is a party.

21.22    Filing of tax returns
         Each Obligor shall file or cause to be filed all tax returns required
         to be filed in all jurisdictions in which it and/or any of its
         subsidiaries is situated or carries on business or otherwise subject to
         pay tax and will promptly pay all taxes which are due and payable on
         such returns or any assessment made against it except to the extent
         contested in good faith and by appropriate means and either adequate
         reserves have been set aside with respect to the unpaid amount or the
         Obligor has established to the satisfaction of the Facility Agent,
         acting on the instructions of the Majority Lenders, that the setting
         aside of adequate reserves is not necessary Provided that an Obligor
         will notify the Facility Agent in writing as soon as practicable after
         such Obligor decides to contest the amount of tax due and/or payable by
         it.

21.23    Amount of Loan specified in the Utilisation Request
         Each Obligor will ensure that the amounts specified in any issued
         Utilisation Request is in full accordance with the amount(s) provided
         for pursuant to this Agreement.

21.24    Environment Each Obligor shall comply with:

         (a)      all Applicable Law concerning the protection of the
                  environment; and

         (b)      the terms of all permits and authorisation required by any
                  Applicable Law in respect of the environment for the ownership
                  and operation of its business,

         in the manner and to the extent required to procure and ensure the
         avoidance of the occurrence of a Material Adverse Effect.

21.25    No new Financial Indebtedness
(a)      Hungarian Telephone and Cable Corp. shall not without (subject to
         paragraph (d) of Clause 34.2 (Exceptions)) the prior written consent of
         the Facility Agent, acting on the instructions of the Majority Lenders,
         make or enter into any agreement or arrangement whatsoever whereby any
         additional Financial Indebtedness will be created, established or
         incurred, by Hungarian Telephone and Cable Corp., or otherwise permit
         to subsist any such additional Financial Indebtedness other than in
         respect of the Notes Provided that, for the avoidance of doubt, any


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         Financial Indebtedness arising pursuant to and/or in respect of
         Hungarian Telephone and Cable Corp.'s obligations and liabilities
         towards the Finance Parties under the Finance Documents to which
         Hungarian Telephone and Cable Corp. is a party shall not fall within
         the scope of the restriction expressly provided for in this paragraph
         (a).

(b)      HTCC Tanacsado Reszvenytarsasag shall not, without (subject to
         paragraph (e) of Clause 34.2 (Exceptions)) the prior written consent of
         the Facility Agent, acting on the instructions of the Majority Lenders,
         make or enter into any agreement or arrangement whatsoever whereby any
         additional Financial Indebtedness will be created, established or
         incurred, by HTCC Tanacsado Reszvenytarsasag, or otherwise permit to
         subsist any such additional Financial Indebtedness other than:

         (i)      in respect of any vendor finance provided to HTCC Tanacsado
                  Reszvenytarsasag by any telecommunications or civil works
                  contractor or telecommunications equipment supplier, in each
                  case with an initial maturity of up to one hundred and twenty
                  (120) days, as extended in the ordinary course of trade; or

         (ii)     indebtedness expressly contemplated and/or permitted pursuant
                  to paragraph (a) of Clause 21.13 (Loans and guarantees),

         Provided that, for the avoidance of doubt, any Financial Indebtedness
         arising pursuant to and/or in respect of HTCC Tanacsado
         Reszvenytarsasag's obligations and liabilities towards the Finance
         Parties under the Finance Documents to which HTCC Tanacsado
         Reszvenytarsasag is a party shall not fall within the scope of the
         restriction expressly provided for in this paragraph (b).

(c)      No Borrower shall, without (subject to paragraph (f) of Clause 34.2
         (Exceptions)) the prior written consent of the Facility Agent, acting
         on the instructions of the Majority Lenders, make or enter into any
         agreement or arrangement whatsoever whereby any additional Financial
         Indebtedness will be created, established or incurred, by such Borrower
         or any of them, or otherwise permit to subsist any such additional
         Financial Indebtedness other than:

         (i)      in respect of the Loans utilised pursuant to this Agreement;

         (ii)     in respect of the Hedging Documents;

         (iii)    in respect of any vendor finance provided to any Borrower by
                  any telecommunications or civil works contractor or
                  telecommunications equipment supplier, in each case with an
                  initial maturity of up to one hundred and twenty (120) days,
                  as extended in the ordinary course of trade,

         (iv)     indebtedness expressly contemplated and/or permitted pursuant
                  to paragraph (a) of Clause 21.13 (Loans and guarantees); or

         (v)      in respect of any indebtedness not already falling into the
                  scope of paragraphs (i) to (iv) inclusive above, is in
                  aggregate for an amount not more than the equivalent of five
                  million euro (EUR 5,000,000),

         Provided that, for the avoidance of doubt, any Financial Indebtedness
         arising pursuant to and/or in respect of any of the Borrower's
         obligations and liabilities towards the Finance Parties under the
         Finance Documents to which such Borrower(s) is/are a party shall not
         fall within the scope of the restriction expressly provided for in this
         paragraph (c).


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21.26    Stamp Taxes
         Each Obligor shall as quickly as practicable upon becoming aware of any
         requirement to do so (including following the receipt of written
         notification by the Facility Agent in respect thereof) take and/or
         procure the taking of all actions required to be done, fulfilled or
         performed in order to pay any stamp, registration or similar Tax or
         charges arising under any of the Finance Documents.

21.27    Litigation
         Each Obligor shall, promptly upon becoming aware of the same, notify
         the Facility Agent in writing of any material litigation, arbitration,
         administrative proceedings or other actions, whatsoever, of or before
         any court, arbitral body, agency or similar body whatsoever, involving
         any Obligor not previously disclosed to each Finance Party pursuant to
         this Agreement including, inter alia, in each 10K Document and 10Q
         Document, which, if adversely determined, would give rise to a Material
         Adverse Effect and will continue to provide written updates of any
         material developments in respect of any such material litigation,
         arbitration, administrative proceedings or other actions to the
         Facility Agent.

21.28    Purpose of the Loans
         Each of the Borrowers shall apply each Facility A Loan and each
         Facility B Loan to its intended purpose as specified in Clause 3.1
         (Purpose).

21.29    Additional security
         Each Obligor except Hungarian Telephone and Cable Corp. shall:

         (a)      maintain an inventory ("Leltar") of each of its assets which
                  are of a type and/or class capable of being the subject of a
                  fixed charge pursuant to a Fixed Charge Agreement which exceed
                  a value of ten million forints (HUF 10,000,000), a copy of
                  which shall from time to time at the request of the Facility
                  Agent acting reasonably and in any event within thirty (30)
                  days of the acquisition of any such asset and within ninety
                  (90) days of the end of each financial year be delivered to
                  the Facility Agent;

         (b)      once the aggregate value of assets detailed in the Inventory
                  of Business Assets, which are not already subject to a fixed
                  charge pursuant to a Fixed Charge Agreement, equals or exceeds
                  an amount equivalent to two hundred and fifty thousand euro
                  (EUR 250,000), such Obligor shall promptly and in any event
                  within ten (10) days of a request in writing by the Facility
                  Agent, acting reasonably, execute a Fixed Charge Agreement in
                  favour of the Security Agent acting on behalf of all of the
                  Finance Parties over such assets as identified to it by the
                  Facility Agent; and

         (c)      promptly upon the written request of the Facility Agent,
                  acting reasonably, execute further assignment of contractual
                  agreements in favour of the Security Agent in respect of new
                  contracts and agreements which give rise to interests, rights
                  and benefits in favour of such Obligor which are capable of
                  being assigned with such further assignment of contractual
                  rights agreements to be substantially in the form of an
                  Assignment of Contractual Rights Agreement, with such
                  amendments as the Security Agent shall require to reflect the
                  circumstances at such time and any changes in Applicable Law.

21.30    Notes
(a)      Hungarian Telephone and Cable Corp. shall not alter the terms and
         conditions of the Notes without the prior written consent of the
         Facility Agent, acting on the instructions of the Majority Lenders.


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(b)      Prior to the occurrence of a Default or Event of Default which is
         continuing, Hungarian Telephone and Cable Corp. will duly pay all
         interest arising under the Notes on the dates such interest falls due
         and payable.

(c)      Following the occurrence of a Default or Event of Default, Hungarian
         Telephone and Cable Corp. will not, without the prior written consent
         of the Facility Agent, acting on the instructions of the Lenders, pay
         any interest or other amounts whatsoever arising under the Notes until
         the Obligors have duly performed and discharged in full their
         respective obligations and liabilities to the Finance Parties under the
         Finance Documents.

21.31    Preference Shares
         If Citizens at any time exercises its conversion rights under all or
         any of the Preference Shares, Hungarian Telephone and Cable Corp. shall
         inform the Facility Agent of such exercise with three (3) Business Days
         of becoming aware of such occurrence.

21.32    Minority shareholders
         If any minority shareholder of a Borrower at any time converts, swaps
         or in any way exchanges its shareholding in such Borrower for issued
         and fully paid-up shares in Hungarian Telephone and Cable Corp.,
         Hungarian Telephone and Cable Corp. shall promptly thereafter grant an
         Encumbrance over such issued and fully paid-up shares in such Borrower
         in favour of the Security Agent acting on behalf of the Lenders. Such
         Encumbrance(s) are to be created by and constituted in a security
         deposit agreement in all material respects in the form of Security
         Deposit Agreements, with such changes as the Security Agent may require
         to reflect changes in Applicable Law.

21.33    Further assurance
         Each Obligor shall, at its own expense, execute and do all such
         assurances, acts and things as the Facility Agent and/or the Security
         Agent may reasonably require for perfecting, or protecting the
         interests of the Finance Parties under, the security and subordination
         constituted or evidenced or purported to be constituted or evidenced by
         any of the Finance Documents.

21.34    Concession Contracts
(a)      Each Borrower will take all best efforts to maintain in full force and
         effect and to comply in all material respects with the Concession
         Contracts to which such Borrower is a party.

(b)      Each Borrower will promptly copy to the Facility Agent any material
         correspondence in respect of the Concession Contracts received from any
         other party to and/or in connection with such Concession Contracts
         and/or the Telecommunications Authority.

21.35    Related Party Payments
         No Obligor shall, without the prior written consent of the Facility
         Agent, acting on the instructions of the Majority Lenders, make any
         prepayment or otherwise accelerate any payment of, on account of or
         otherwise in respect of any Related Party Payment.

22.      EVENTS OF DEFAULT
         Each of the facts, events or circumstances set out in Clause 22 is an
         Event of Default.

22.1     Non-payment
         An Obligor does not pay on the due date any amount payable pursuant to
         any Finance Document at the place at and in the currency in which it is
         expressed to be payable unless:

         (i)      its failure to pay is caused by administrative or technical
                  error; and


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         (ii)     payment is made within three (3) Business Days of its due
                  date.

22.2     Financial covenants
         Any requirement of Clause 20 (Financial Covenants) is not satisfied
         Provided that it shall not be an Event of Default under this Clause
         22.2 if, between the last day of the financial accounting period to
         which a 10K Document or 10Q Document relates and the delivery of such
         10K Document or 10Q Document to the Facility Agent in compliance with
         the requirements under this Agreement, one or more shareholders of
         Hungarian Telephone and Cable Corp. provide funds to Hungarian
         Telephone and Cable Corp., in the form of non-redeemable paid-up share
         capital and/or Financial Indebtedness fully subordinated to the Senior
         Credit (as defined in the Subordination Trust Deed), with such
         shareholder(s) becoming a party (or parties, as applicable) to the
         Subordination and Trust Deed, as a Subordinated Creditor (as defined in
         the Subordination and Trust Deed), in a minimum amount of five million
         dollars (USD 5,000,000) or such greater amount as would have ensured
         that, if Hungarian Telephone and Cable Corp. had received such funds
         during the relevant financial accounting period, there would have been
         no breach of or failure to comply with the requirements of Clause 20
         (Financial Covenants).

22.3     Other obligations
(a)      An Obligor does not comply with any provision of the Finance Documents
         (other than those referred to in Clause 22.1 (Non-payment) and Clause
         22.2 (Financial covenants)).

(b) No Event of Default under paragraph (a) above will occur:

         (i)      in relation to Clause 21 (General Undertakings) if the failure
                  to comply is capable of remedy and is remedied within ten (10)
                  Business Days or, if in order to effect such remedy, an
                  application must be made to an organ, agency or other
                  administrative or regulatory body of Hungary, then such period
                  shall be extended by a further twenty (20) Business Days; or

         (ii)     any other obligation which is deemed to be material by the
                  Facility Agent, expressed to be assumed by any Obligor in any
                  of the Finance Documents to which such Obligor is a party and
                  such failure, if capable of remedy, is remedied within twenty
                  five (25) Business Days or, if in order to effect such remedy,
                  an application must be made to an organ, agency or other
                  administrative or regulatory body of Hungary, then such period
                  shall be extended by a further fifteen (15) Business Days.

22.4     Misrepresentation
         Any representation or statement made or deemed to be made by an Obligor
         in the Finance Documents or any other document delivered by or on
         behalf of any Obligor under or in connection with any Finance Document
         is or proves to have been incorrect or misleading in any material
         respect when made or deemed to be made and, if the circumstance(s)
         giving rise to or causing such misrepresentation are, in the opinion of
         the Facility Agent, acting on the instructions of the Majority Lenders,
         capable of remedy, the Obligor has failed to remedy such
         circumstance(s) within ten (10) Business Days of the making or deemed
         making of such incorrect or misleading representation or statement.

22.5     Cross default
(a)      Any Financial Indebtedness (other than any Financial Indebtedness which
         is owed to any other member of Group and which is subject to the
         Subordination and Trust Deed) of any member of the Group (other than
         PILISTAV Tavkozlesi, Epito es Szolgaltato Korlatolt Felelossegu
         Tarsasag) is not paid when due or within any originally applicable
         grace period.


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(b)      Any Financial Indebtedness (other than any Financial Indebtedness which
         is owed to any other member of Group and which is subject to the
         Subordination and Trust Deed) of any member of the Group (other than
         PILISTAV Tavkozlesi, Epito es Szolgaltato Korlatolt Felelossegu
         Tarsasag) is or is capable of being declared to be or otherwise becomes
         due and payable prior to its specified maturity as a result of an event
         of default (however described or provided for).

(c)      Any commitment for any Financial Indebtedness of any member of the
         Group (other than PILISTAV Tavkozlesi, Epito es Szolgaltato Korlatolt
         Felelossegu Tarsasag) is cancelled or suspended by a creditor of any
         member of the Group as a result of an event of default (however
         described or provided for).

(d)      Any creditor of any member of the Group (other than PILISTAV
         Tavkozlesi, Epito es Szolgaltato Korlatolt Felelossegu Tarsasag)
         becomes entitled to declare any Financial Indebtedness (other than any
         Financial Indebtedness which is owed to any other member of Group and
         which is subject to the Subordination and Trust Deed) of any member of
         the Group (other than PILISTAV Tavkozlesi, Epito es Szolgaltato
         Korlatolt Felelossegu Tarsasag) due and payable prior to its specified
         maturity as a result of an event of default (however described or
         provided for).

(e)      Any Encumbrance securing Financial Indebtedness over any asset of any
         of the Borrowers becomes enforceable as a result or by virtue of the
         occurrence of an event of default (however described or provided for).

(f)      No Event of Default will occur under this Clause 22.5 if the aggregate
         amount of Financial Indebtedness or commitment for Financial
         Indebtedness falling within paragraphs (a) to (e) above is less than
         two hundred and fifty thousand euro (EUR 250,000) (or its equivalent in
         any other currency or currencies aggregated with the anticipated
         monetary value, cost or other expense of all then applicable claims
         provided for in Clause 22.10 (Litigation)).

22.6     Insolvency
(a)      A member of the Group is unable or admits inability to pay its debts as
         they fall due, suspends making payments on any of its debts makes a
         general assignment for the benefit of or a composition with its
         creditors, or seeks any of the protections provided for in the
         Bankruptcy Act or in its relevant jurisdiction, becomes subject to any
         of the procedures provided for in the Bankruptcy Act or in its relevant
         jurisdiction, and in the case of any such proceeding instituted against
         it (but not instituted by it), either such proceeding shall remain
         undismissed or unstayed for a period of forty five (45) days, or any of
         the actions sought in such proceeding (including the entry of an order
         for relief against it or the appointment of a receiver, trustee,
         custodian or other similar official for it or for any part of its
         assets) shall occur or, by reason of actual or anticipated financial
         difficulties, commences negotiations with one or more of its creditors
         with a view to rescheduling any of its indebtedness Provided that a
         mere claimant against an Obligor shall not be regarded as a creditor
         until such claim is recognised by such Obligor pursuant to Applicable
         Law or otherwise.

(b)      To the extent that, at any time, the value of the assets of any
         Borrower is less than its liabilities (taking into account contingent
         and prospective liabilities) such Borrower fails at such time to take
         all appropriate and applicable steps to procure and ensure full
         compliance with mandatory Applicable Law and the requirements under the
         Concession Contracts.

(c)      A moratorium is declared in respect of any indebtedness of any member
         of the Group.


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22.7     Insolvency proceedings
         Any corporate action, legal proceedings or other procedure or step is
         taken in relation to:

         (a)      the suspension of payments, a moratorium of any indebtedness,
                  winding-up, dissolution, administration or reorganisation (by
                  way of voluntary arrangement, scheme of arrangement or
                  otherwise) of any member of the Group other than a solvent
                  liquidation or reorganisation of any member of the Group which
                  is not an Obligor;

         (b)      a composition, assignment or arrangement with any creditor of
                  any member of the Group;

         (c)      the appointment of a liquidator (other than in respect of a
                  solvent liquidation of a member of the Group which is not an
                  Obligor), receiver, administrator, administrative receiver,
                  compulsory manager or other similar officer in respect of any
                  member of the Group or any of its assets; or

         (d)      enforcement of any Encumbrance over any assets of any member
                  of the Group.

22.8     Unlawfulness
(a)      It is or becomes unlawful and/or in conflict with any Applicable Law
         for an Obligor to comply, perform and/or discharge any of its payment
         obligations under the Finance Documents which, in the opinion of the
         Facility Agent, acting on the instructions of the Majority Lenders,
         cannot be fully addressed and/or mitigated so as to leave the Finance
         Parties in no worse a position than that prior to such unlawfulness.

(b)      It is or becomes unlawful and/or in conflict with any Applicable Law
         for an Obligor to comply, perform and/or discharge any or all of such
         Obligor's material non-payment obligations and liabilities under the
         Finance Documents which, in the opinion of the Facility Agent, acting
         on the instructions of the Majority Lenders, gives rise to a Material
         Adverse Effect.

22.9     Repudiation
         An Obligor repudiates a Finance Document or clearly evidences an
         intention to repudiate a Finance Document.

22.10    Litigation
         Notwithstanding any notification to the Facility Agent pursuant to this
         Agreement, any litigation, arbitration, administrative proceedings or
         other actions whatsoever are commenced against any Obligor and/or any
         other member(s) of the Group or the nature of any existing such
         proceedings or other actions changes in any way whatsoever which, if it
         were to be adversely determined, in the opinion of the Facility Agent,
         acting on the instructions of the Majority Lenders, gives rise to a
         Material Adverse Effect and which such Obligor and/or such other
         member(s) of the Group fail(s) within a reasonable period of time (as
         determined by the Facility Agent, acting on the instructions of the
         Majority Lenders) to demonstrate, to the satisfaction of the Facility
         Agent, acting on the instructions of the Majority Lenders, that such
         Obligor and other member of the Group is contesting such proceedings or
         actions in good faith and that such contesting has a reasonable
         expectation of being successful and/or that the reasonably anticipated
         monetary value, cost or other expense of such claim(s) individually
         does not exceed the equivalent of one million euro (EUR 1,000,000) and
         in aggregate do(es) not exceed the equivalent of one million five
         hundred thousand euro (EUR 1,500,000) when aggregated with the amount,
         if any, of Financial Indebtedness to which the operative provisions of
         Clause 22.5 (Cross default) then applies.


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22.11    Execution or distress
         Any execution or distress is levied against, or an encumbrancer takes
         possession of, the whole or any part of, the property, undertaking or
         assets of any Obligor which when aggregated with all other execution
         and distress exceeds an amount equivalent to one hundred and twenty
         five thousand euro (EUR 125,000) which such Obligor fails to
         demonstrate within a reasonable period of time (as determined by the
         Facility Agent, acting reasonably) to the satisfaction of the Facility
         Agent, acting reasonably, are frivolous or vexatious and/or will be
         paid out and/or duly discharged within thirty (30) Business Days, or
         such later date as the Facility Agent, acting on the instructions of
         the Majority Lenders, may agree.

22.12    Analogous events
         Any event occurs in respect of an Obligor which under the laws of any
         jurisdiction has a similar or analogous effect to any of those events
         mentioned in Clause 22.6 (Insolvency), Clause 22.7 (Insolvency
         proceedings) or Clause 22.11 (Execution or distress).

22.13    Governmental intervention
         By or under the authority of any government any of the following events
         occur or threaten to occur: (a) the management of any Obligor is wholly
         or partially displaced or the authority of any Obligor in the conduct
         of its business is wholly or partially curtailed; or (b) all or a
         majority of the issued and paid-up shares of any Obligor or the whole
         or any part of its respective revenues or assets is seized,
         nationalised, expropriated or compulsorily acquired.

22.14    Control of Hungarian Telephone and Cable Corp.
         Other than pursuant to any transaction made in compliance with
         paragraph (c) of Clause 22.22 (Ownership of Hungarian Telephone and
         Cable Corp.) or as expressly approved in advance in writing by the
         Facility Agent, acting on the instructions of the Majority Lenders, any
         person and/or Related Party of such person and/or any other person
         acting in concert with such person gains control over Hungarian
         Telephone and Cable Corp. and, for these purposes, control of Hungarian
         Telephone and Cable Corp. shall include the ability to, directly or
         indirectly, direct its affairs and/or direct and/or control the
         composition of its board of directors or equivalent body as well as
         ownership, beneficially and/or legally, directly and/or indirectly, of
         more than half the issued share capital of Hungarian Telephone and
         Cable Corp.

22.15    Ownership of the Borrowers
         Other than as expressly approved in advance in writing by the Facility
         Agent, acting on the instructions of the Majority Lenders, other than
         for the purposes of consolidation with another Borrower or in
         connection with an issue of shares on the Budapest Stock Exchange for
         the purpose of meeting the Hungarian ownership requirements of the
         relevant Concession Contract, Hungarian Telephone and Cable Corp.
         sells, transfers or otherwise disposes of any of its issued share
         capital of a Borrower or of HTCC Tanacsado Reszvenytarsasag.

22.16    The Obligors' business
         Any Obligor ceases to carry on or changes in any material respect the
         business it carries on at the date of this Agreement or enters into any
         unrelated business which in the opinion of the Facility Agent, acting
         on the instructions of the Majority Lenders, gives rise to a Material
         Adverse Effect and such circumstance(s), if capable of remedy, is/are
         not remedied within ten (10) Business Days.

22.17    Validity and admissibility
         At any time any act, condition or thing required to be done, fulfilled
         or performed in order: (a) to enable an Obligor lawfully to enter into,
         exercise its rights under and perform the obligations expressed to be
         assumed by it under any of the Finance Documents to which it is a
         party; or (b) to ensure that the obligations expressed to be assumed by
         an Obligor under any of the Finance


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<PAGE>


         Documents to which it is a party are legal, valid, in full force and
         effect, binding on and enforceable against it; or (c) to make the
         Finance Documents admissible in evidence in Hungary is not done,
         fulfilled or performed and, if such failure to do, fulfil or perform is
         capable of being remedied, the same is not so remedied within twenty
         (20) Business Days of the date of any written notice given by the
         Facility Agent to such Obligor in respect of such failure or, if in
         order to effect such remedy, an application must be made to an organ,
         agency or other administrative or regulatory body of any jurisdiction,
         then such period shall be extended by a further twenty (20) Business
         Days Provided that in respect of those Finance Documents which were not
         executed in the Hungarian language and for which no official
         translation is available in the Hungarian language, the Borrower shall
         be only be obligated to have such Finance Documents officially
         translated into the Hungarian language upon receipt of a written
         request from the Facility Agent, acting reasonably, and on the receipt
         of such a written request the Borrowers shall arrange for the prompt
         translation into the Hungarian language of such Finance Documents and
         the prompt delivery of such translations to the Facility Agent.

22.18    Performance of obligations
         Any fact(s), event(s) or other circumstance(s) or series of the
         foregoing arise(s) (other than any such fact(s), event(s) or other
         circumstance(s) which already fall fully into the scope of any other
         specific Event of Default expressly provided for in this Clause 22)
         which in the opinion of the Facility Agent, acting on the instructions
         of the Majority Lenders, gives rise to a Material Adverse Effect.

22.19    Failure to implement Hedging Strategy
         An Obligor, at any time, fails to duly and properly comply with the
         terms of Clause 21.20 (Hedging Strategy) and/or in the opinion of the
         Facility Agent, acting on the instructions of the Majority Lenders, the
         strategy (if any) adopted by the Obligors is inappropriate and/or
         inadequate and gives rise to a Material Adverse Effect and such
         circumstances, if capable of remedy are not remedied within ten (10)
         Business Days.

22.20    Failure to comply with final judgment
         Any Obligor fails to comply with or pay any sum due from it under any
         material final judgment or any final order made or given by any court
         of competent jurisdiction.

22.21    Concession Contracts
         Any Borrower publicly announces that it is abandoning or intends to
         abandon the activities which it carries out pursuant to a Concession
         Contract or the decision of a Borrower to abandon such activities
         becomes public or a Borrower fails or is unable to comply with any of
         the terms of a Concession Contract or any other contract which is
         material to such Borrower's ability to carry on its business or
         revocation, cancellation or surrender of a Concession Contract occurs.

22.22    Ownership of Hungarian Telephone and Cable Corp.
         Prior to the later of: (i) 31 December 2001; and (ii) the Trigger Date:

         (a)      Tele Danmark A/S and/or any person which at all times and in
                  all respects is a wholly owned Subsidiary of Tele Danmark A/S
                  and the IO Fund, together or individually, fail to maintain
                  ownership of a minimum of thirty point one per cent. (30.1%)
                  of the issued and paid-up share capital of Hungarian Telephone
                  and Cable Corp.; or

         (b)      Tele Danmark A/S and/or any person which at all times and in
                  all respects is a wholly owned Subsidiary of Tele Danmark A/S
                  fails to maintain ownership of the issued and paid-up share
                  capital of Hungarian Telephone and Cable Corp. which Tele
                  Danmark A/S holds at the date of this Agreement; or


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<PAGE>

         following the Trigger Date,

         (c)      Tele Danmark A/S and/or any person which at all times and in
                  all respects is a wholly owned Subsidiary of Tele Danmark A/S
                  sells, transfers or otherwise disposes of any or all of its
                  issued and paid-up shares in Hungarian Telephone and Cable
                  Corp. without the prior written consent of the Majority
                  Lenders Provided that such consent shall be based on the
                  determination by the Majority Lenders, acting reasonably, that
                  the proposed new shareholder in Hungarian Telephone and Cable
                  Corp. is an internationally recognised telecommunications
                  operator of similar standing to Tele Danmark A/S and has a
                  minimum long-term credit rating of A2 or better from Moody's
                  Investor Services or A or better from Standard and Poor's
                  Investor Services.

22.23    Technical and Management Support
         Tele Danmark A/S fails duly to provide any of the Obligors with
         technical and management support as such support is required by such
         Obligor from time to time until the later of: (i) 31 December 2001; and
         (ii) the Trigger Date.

22.24    Authorisations
         Any Authorisation of any Competent Authority required for the
         execution, delivery or performance of any Finance Document is modified
         in any material respect, revoked or withdrawn or ceases to remain in
         full force and effect and, in any such case, in the opinion of the
         Facility Agent, acting on the instructions of the Majority Lenders, it
         gives rise to a Material Adverse Effect and such circumstance is not
         remedied within twenty five (25) Business Days, or if in order to
         effect such remedy, an application must be made to an organ, agency or
         other administrative or regulatory body of Hungary, then such period
         shall be extended by a further fifteen (15) Business Days.

22.25    Financial Indebtedness
         Any Obligor wilfully enters into any agreement, arrangement or contract
         whatsoever with the primary intention of directly and/or indirectly
         causing and/or giving rise to a breach of the provisions of the Finance
         Documents regarding Financial Indebtedness, and/or Permitted Financial
         Indebtedness.

22.26    Enforceability
         Any of the Finance Documents cease to be enforceable and valid under
         any Applicable Law or any of the Encumbrances created by and
         constituted in the Security Agreements ceases to constitute a valid
         first ranking Encumbrance, in a manner and to an extent which in the
         opinion of the Facility Agent, acting on the instructions of the
         Majority Lenders, has or would in all reasonable likelihood have a more
         than nominal adverse effect on the interests of any of the Finance
         Parties.

22.27    The Notes
         Hungarian Telephone and Cable Corp. fails to make full payment under
         the Notes on the date such interest falls due and payable.

22.28    Acceleration and cancellation
         On and at any time after the occurrence of an Event of Default which is
         continuing and which has not been expressly waived in writing by the
         Facility Agent, acting on the instructions of the Majority Lenders or
         Lenders, as appropriate, the Facility Agent may, and shall if so
         directed by the Majority Lenders, by notice (by the Facility Agent or
         any person on the Facility Agent's behalf) to the Obligors:


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         (a)      cancel the Total Commitments whereupon they shall immediately
                  be cancelled;

         (b)      declare that all or part of the Loans, together with accrued
                  interest, and all other amounts accrued under the Finance
                  Documents be immediately due and payable, whereupon they shall
                  become immediately due and payable; and/or

         (c)      declare that all or part of the Loans be payable on demand,
                  whereupon they shall immediately become payable on demand by
                  the Facility Agent on the instructions of the Majority
                  Lenders.

22.29    Loans Due on demand
         If, pursuant to Clause 22.28 (Acceleration and cancellation), the
         Facility Agent declares the Loan(s) to be due and payable on demand of
         the Facility Agent, then, and at any time thereafter, the Facility
         Agent may (and, if so instructed by the Majority Lenders, shall) by
         written notice (by the Facility Agent or any person on the Facility
         Agent's behalf) to the Borrowers:

         (a)      require repayment of the Loan(s) on such date as it may
                  specify in such notice (whereupon the same shall become due
                  and payable on such date together with accrued interest
                  thereon and any other sums then owed by the Borrowers under
                  this Agreement) or withdraw its declaration with effect from
                  such date as it may specify in such notice; and/or

         (b)      select as the duration of any Interest Period which begins
                  whilst such declaration remains in effect a period of three
                  (3) Months or less; and/or

         (c)      without prejudice to the provisions of any other Finance
                  Documents, declare that the Security Agreements (or any of
                  them) shall have become enforceable and enforce any or all of
                  the same.


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<PAGE>


                         SECTION 8 - CHANGES TO PARTIES

23.      CHANGES TO THE LENDERS

23.1     Assignments and transfers by the Lenders
         Subject to this Clause 23, a Lender (the "Existing Lender") may:

         (a)      assign any of its rights; or

         (b)      transfer by novation any of its rights and obligations,

         to another bank or financial institution (the "New Lender").

23.2     Conditions of assignment or transfer
(a)      The consent of the Obligors is required for an assignment or transfer
         by a Lender, unless the assignment or transfer is to another Lender or
         an Affiliate of a Lender and/or an Event of Default at such time is
         continuing.

(b)      The consent of the Obligors to an assignment or transfer must not be
         unreasonably withheld or delayed. The Obligors will be deemed to have
         given their consent five (5) Business Days after the Lender has
         requested it unless consent is expressly refused by the Obligors within
         that time.

(c)      The consent of the Obligors to an assignment or transfer must not be
         withheld solely because the assignment or transfer may result in an
         increase to the Associated Costs.

(d)      An assignment will only be effective on receipt by the Facility Agent
         of written confirmation from the New Lender (in form and substance
         satisfactory to the Facility Agent) that the New Lender will assume the
         same obligations to the other Finance Parties as it would have been
         under if it was an Original Lender.

(e)      A transfer will only be effective if the procedure set out in Clause
         23.5 (Procedure for transfer) is complied with.

(f)      Any assignment or transfer by an Existing Lender to a New Lender shall
         only be effective if it transfers or assigns the Existing Lender's
         share of each Facility pro rata.

(g)      If:

         (i)      a Lender assigns or transfers any of its rights or obligations
                  under the Finance Documents or changes its Facility Office;
                  and

         (ii)     as a result of circumstances existing at the date the
                  assignment, transfer or change occurs, an Obligor would be
                  obliged to make a payment to the New Lender or Lender acting
                  through its new Facility Office under Clause 13 (Tax Gross-up
                  and Indemnities) or Clause 14 (Increased Costs),

         then the New Lender or Lender acting through its new Facility Office is
         only entitled to receive payment under those Clauses to the same extent
         as the Existing Lender or Lender acting through its previous Facility
         Office would have been if the assignment, transfer or change had not
         occurred.


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23.3     Assignment or transfer fee
         In respect of any assignment or transfer which takes place after the
         period commencing on the date of this Agreement and ending on the
         earlier of date on which the Arrangers notify the Facility Agent in
         writing that the syndication of the Facility has been completed and the
         date falling thirty (30)] days after the date of this Agreement, the
         New Lender shall, on the date upon which an assignment or transfer
         takes effect, pay to the Facility Agent (for the Facility Agent's own
         account) a fee of one thousand euro (EUR 1,000).

23.4     Limitation of responsibility of Existing Lenders
(a)      Unless expressly agreed to the contrary, an Existing Lender makes no
         representation or warranty and assumes no responsibility to a New
         Lender for:

         (i)      the legality, validity, effectiveness, adequacy or
                  enforceability of the Finance Documents or any other
                  documents;

         (ii)     the financial condition of any Obligor;

         (iii)    the performance and observance by any Obligor of such
                  Obligor's obligations under the Finance Documents or any other
                  documents; or

         (iv)     the accuracy of any statements (whether written or oral) made
                  in or in connection with any Finance Document or any other
                  document,

         and any representations or warranties implied by Applicable Law are
         excluded.

(b)      Each New Lender confirms to the Existing Lender and the other Finance
         Parties that such New Lender:

         (i)      has made (and shall continue to make) such New Lender's own
                  independent investigation and assessment of the financial
                  condition and affairs of each Obligor and such Obligor's
                  related entities in connection with such New Lender's
                  participation in this Agreement and has not relied exclusively
                  on any information provided to such New Lender by the Existing
                  Lender in connection with any Finance Document; and

         (ii)     will continue to make such New Lender's own independent
                  appraisal of the creditworthiness of each Obligor and such
                  Obligor's related entities whilst any amount is or may be
                  outstanding under the Finance Documents or any Commitment is
                  in force.

(c)      Nothing in any Finance Document obliges an Existing Lender to:

         (i)      accept a re-transfer from a New Lender of any of the rights
                  and obligations assigned or transferred under this Clause 23;
                  or

         (ii)     support any losses directly or indirectly incurred by the New
                  Lender by reason of the non-performance by any Obligor of such
                  Obligor's obligations under the Finance Documents or
                  otherwise.

23.5     Procedure for transfer
(a)      Subject to the conditions set out in Clause 23.2 (Conditions of
         assignment or transfer) a transfer is effected in accordance with
         paragraph (b) below when the Facility Agent executes an otherwise duly
         completed Transfer Certificate delivered to the Facility Agent by the
         Existing Lender and the New Lender. The Facility Agent shall, as soon
         as reasonably practicable after receipt by the Facility Agent of a duly
         completed Transfer Certificate appearing on such Transfer Certificate's


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<PAGE>


         face to comply with the terms of this Agreement and delivered in
         accordance with the terms of this Agreement, execute that Transfer
         Certificate.

(b)      On the Transfer Date:

         (i)      to the extent that in the Transfer Certificate the Existing
                  Lender seeks to transfer by novation such Existing Lender's
                  rights and obligations under the Finance Documents each of the
                  Obligors and the Existing Lender shall be released from
                  further obligations towards one another under the Finance
                  Documents and their respective rights against one another
                  shall be cancelled (being the "Discharged Rights and
                  Obligations");

         (ii)     each of the Obligors and the New Lender shall assume
                  obligations towards one another and/or acquire rights against
                  one another which differ from the Discharged Rights and
                  Obligations only insofar as that Obligor and the New Lender
                  have assumed and/or acquired the same in place of that Obligor
                  and the Existing Lender;

         (iii)    each Agent, each Arranger, the New Lender and other Lenders
                  shall acquire the same rights and assume the same obligations
                  between themselves as they would have acquired and assumed had
                  the New Lender been an Original Lender with the rights and/or
                  obligations acquired or assumed by such New Lender as a result
                  of the transfer and to that extent each Agent, each Arranger
                  and the Existing Lender shall each be released from further
                  obligations to each other under this Agreement; and

         (iv)     the New Lender shall become a Party as a "Lender".

(c)      At the same time as any Transfer Certificate is delivered to the
         Facility Agent in accordance with this Agreement, the New Lender will
         simultaneously deliver or procure the delivery of a duly completed
         power of attorney in favour of the Security Agent in respect of the
         Security Agreements, such power of attorney to be substantially in the
         form set out in Part II (Form of the power of attorney to be provided
         by the New Lender in favour of the Security Agent) of Schedule 4 (Form
         of Transfer Certificate).

23.6     Disclosure of information
         Any Lender may disclose to any of its Affiliates and any other person
         (subject to such other person agreeing to enter into a Confidentiality
         Agreement):

         (a)      to (or through) whom that Lender assigns or transfers (or may
                  potentially assign or transfer) all or any of such Lender's
                  rights and obligations under this Agreement;

         (b)      with (or through) whom that Lender enters into (or may
                  potentially enter into) any sub-participation in relation to,
                  or any other transaction under which payments are to be made
                  by reference to, this Agreement or any Obligor;

         (c)      to whom, and to the extent that, information is required to be
                  disclosed by any applicable law or regulation,

         (d)      with whom it does share data, information and similar matters;

         any information about any Obligor, the Group and the Finance Documents
         as that Lender shall consider appropriate.


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<PAGE>


24.      CHANGES TO THE OBLIGORS

24.1     Assignments and transfer by Obligors
         No Obligor may assign any of its rights or transfer any of its rights
         or obligations under the Finance Documents to which it is a party save
         in the case of any such transfer to a legal successor arising pursuant
         to a transaction contemplated by and in accordance with paragraph (a)
         of Clause 21.5 (Merger and acquisition).



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                         SECTION 9 - THE FINANCE PARTIES

25       ROLE OF THE AGENTS AND THE ARRANGERS

25.1     Appointment of the Agents
(a)      Each Arranger and each Lender appoints each of the Facility Agent and
         the Security Agent to act as its agent under and in connection with the
         Finance Documents.

(b)      Each Arranger and each Lender authorises each Agent to exercise the
         rights, powers, authorities and discretions specifically given to such
         Agent under or in connection with the Finance Documents together with
         any other incidental rights, powers, authorities and discretions.

25.2     Duties of the Agents
(a)      Each Agent shall promptly forward to a Party the original or a copy of
         any document which is delivered to such Agent for that Party by any
         other Party. Without prejudice to Clause 30.1 (Communications in
         writing), an Agent may discharge its duty to forward a copy of any
         document supplied to it pursuant to Clause 19 (Information
         Undertakings) by sending such document to a relevant Party by e-mail
         where such relevant Party has informed such Agent of an e-mail address
         pursuant to Clause 30.2 (Addresses) or by reference to a web site where
         such Agent has previously informed a relevant Party of the address of
         such web site and the location of the relevant document on such web
         site pursuant to Clause 30.2 (Addresses).

(b)      If an Agent receives notice from a Party referring to this Agreement,
         describing a Default and stating that the fact(s), event(s) and/or
         circumstance(s) described in such notice is/are a Default, it shall
         promptly notify the Lenders in writing.

(c)      Each Agent shall promptly notify the Lenders in writing of any Default
         arising under Clause 22.1 (Non-payment).

(d)      Each Agent's duties under the Finance Documents are solely mechanical
         and administrative in nature.

(e)      Upon any request from the Facility Agent, or as otherwise contemplated
         and/or required pursuant to this Agreement, the Security Agent will in
         good time notify the Facility Agent of the relevant Security Agent's
         Spot Rate of Exchange required pursuant to this Agreement.

25.3     Role of the Arrangers
         Except as specifically provided in the Finance Documents, no Arranger
         has any obligations of any kind to any other Party under or in
         connection with any Finance Document.

25.4     No fiduciary duties
(a)      Nothing in this Agreement constitutes any Agent or any Arranger as a
         trustee or fiduciary of any other person.

(b)      Neither any Agent nor any Arranger shall be bound to account to any
         Lender for any sum or the profit element of any sum received by such
         Agent or Arranger, as applicable, for its own account.

25.5     Business with the Group
         Each Agent and each Arranger may accept deposits from, lend money to
         and generally engage in any kind of banking or other business with any
         member of the Group.


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<PAGE>


25.6     Rights and discretions of the Agent
(a)      Each Agent may rely on:

         (i)      any representation, notice or document believed by it to be
                  genuine, correct and appropriately authorised; and

         (ii)     any statement made by a director, authorised signatory or
                  employee of any person regarding any matters which may
                  reasonably be assumed to be within his knowledge or within his
                  power to verify.

(b)      Each Agent may assume (unless it has received notice to the contrary in
         its capacity as agent for the Lenders) that:

         (i)      no Default has occurred (unless it has actual knowledge of a
                  Default arising under Clause 22.1 (Non-payment));

         (ii)     any right, power, authority or discretion vested in any Party
                  or the Majority Lenders has not been exercised; and

         (iii)    any notice or request made by an Obligor is made on behalf of
                  and with the consent and knowledge of all the Obligors.

(c)      Each Agent may engage, pay for and rely on the advice or services of
         any lawyers, accountants, surveyors or other experts.

(d)      Each Agent may act in relation to the Finance Documents through its
         personnel and agents.

25.7     Majority Lenders' instructions
(a)      Unless a contrary indication appears in a Finance Document, each Agent
         shall: (a) act in accordance with any instructions given to it by the
         Majority Lenders (or, if so instructed by the Majority Lenders, refrain
         from acting or exercising any right, power, authority or discretion
         vested in it as Agent); and (b) not be liable for any act (or omission)
         if such Agent acts (or refrains from taking any action) in accordance
         with such an instruction of the Majority Lenders.

(b)      Unless a contrary indication appears in a Finance Document, any
         instructions given by the Majority Lenders will be binding on all the
         Lenders and all the Arrangers.

(c)      Each Agent may refrain from acting in accordance with the instructions
         of the Majority Lenders (or, if appropriate, the Lenders) until such
         Agent has received such security as such Agent may require for any
         cost, loss or liability (together with any associated VAT) which such
         Agent may incur in complying with the instructions.

(d)      In the absence of instructions from the Majority Lenders, (or, if
         appropriate, the Lenders) each Agent may act (or refrain from taking
         action) as such Agent considers to be in the best interest of the
         Lenders.

(e)      Each Agent is not authorised to act on behalf of a Lender (without
         first obtaining that Lender's consent) in any legal or arbitration
         proceedings relating to any Finance Document.

25.8     Responsibility for documentation
         No Agent nor any Arranger:


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         (a)      is responsible for the adequacy, accuracy and/or completeness
                  of any information (whether oral or written) supplied by any
                  Agent, any Arranger, any Obligor or any other person given in
                  or in connection with any Finance Document or the Information
                  Memorandum; or

         (b)      is responsible for the legality, validity, effectiveness,
                  adequacy or enforceability of any Finance Document or any
                  other agreement, arrangement or document entered into, made or
                  executed in anticipation of or in connection with any Finance
                  Document.

25.9     Exclusion of liability
(a)      Without limiting paragraph (b) below, no Agent will be liable for any
         action taken by such Agent under or in connection with any Finance
         Document, unless directly caused by such Agent's gross negligence or
         wilful misconduct.

(b)      No Party may take any proceedings against any officer, employee or
         agent of any Agent in respect of any claim such Party might have
         against such Agent or in respect of any act or omission of any kind by
         that officer, employee or agent in relation to any Finance Document and
         any officer, employee or agent of an Agent may rely on this Clause 25.

(c)      An Agent will not be liable for any delay (or any related consequences)
         in crediting an account with an amount required under the Finance
         Documents to be paid by an Agent if such Agent has taken all necessary
         steps as soon as reasonably practicable to comply with the regulations
         or operating procedures of any recognised clearing or settlement system
         used by such Agent for that purpose.

25.10    Lenders' indemnity to each Agent
         Each Lender shall (in proportion to its share of the Total Commitments
         or, if the Total Commitments are then zero (0), to such Lender's share
         of the Total Commitments immediately prior to their reduction to zero
         (0)) indemnify each Agent, within three (3) Business Days of demand,
         against any cost, loss or liability incurred by such Agent (otherwise
         than by reason of such Agent's gross negligence or wilful misconduct)
         in acting as Agent under the Finance Documents (unless such Agent has
         been reimbursed by an Obligor pursuant to a Finance Document).

25.11    Resignation of the Agents
(a)      Each Agent may resign and appoint one of its Affiliates located in: (i)
         any jurisdiction in which a Lender is situated; (ii) Hungary; (iii) any
         jurisdiction in the European Union; and/or (iv) any jurisdiction which
         is a party to a double taxation agreement in force on the date of such
         appointment the effect of which is to provide for all payments made (by
         the relevant Obligor) under the Finance Documents to be made (subject
         to the completion of any necessary procedural formalities) without a
         Tax Deduction, as successor by giving notice to the Lenders and the
         Obligors.

(b)      Alternatively an Agent may resign by giving notice to the Lenders and
         the Obligors, in which case the Majority Lenders (after consultation
         with the Obligors) may appoint a successor Agent located in: (i) any
         jurisdiction in which a Lender is situated; (ii) Hungary; (iii) any
         jurisdiction in the European Union; and/or (iv) any jurisdiction which
         is a party to a double taxation agreement in force on the date of such
         appointment the effect of which is to provide for all payments made (by
         the relevant Obligor) under the Finance Documents to be made (subject
         to the completion of any necessary procedural formalities) without a
         Tax Deduction.


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(c)      If the Majority Lenders have not appointed a successor Agent in
         accordance with paragraph (b) above within thirty (30) days after
         notice of resignation was given, the relevant Agent (after consultation
         with the Obligors) may appoint a successor Agent located in: (i) any
         jurisdiction in which a Lender is situated; (ii) Hungary; (iii) any
         jurisdiction in the European Union; and/or (iv) any jurisdiction which
         is a party to a double taxation agreement in force on the date of such
         appointment the effect of which is to provide for all payments made (by
         the relevant Obligor) under the Finance Documents to be made (subject
         to the completion of any necessary procedural formalities) without a
         Tax Deduction.

(d)      A retiring Agent shall, at its own cost, make available to the
         successor Agent such documents and records and provide such assistance
         as the successor Agent may reasonably request for the purposes of
         performing its functions as Agent under the Finance Documents.

(e)      An Agent's resignation notice shall only take effect upon the
         appointment of a successor.

(f)      Upon the appointment of a successor, the retiring Agent shall be
         discharged from any further obligation in respect of the Finance
         Documents but shall remain entitled to the benefit of this Clause 25.
         Its successor and each of the other Parties shall have the same rights
         and obligations amongst themselves as they would have had if such
         successor had been an original Party.

(g)      After consultation with the Obligors, the Majority Lenders may, by
         notice to an Agent, require such Agent to resign in accordance with
         paragraph (b) above. In this event, such Agent shall resign in
         accordance with paragraph (b) above.

25.12    Confidentiality
(a)      In acting as agent for the Finance Parties, each Agent shall be
         regarded as acting through its agency division which shall be treated
         as a separate entity from any other of its divisions or departments.

(b)      If information is received by another division or department of an
         Agent, such information may be treated as confidential to that division
         or department and such Agent shall not be deemed to have notice of such
         information.

(c)      Notwithstanding any other provision of any Finance Document to the
         contrary, neither the Agent nor the Arranger are obliged to disclose to
         any other person (i) any confidential information or (ii) any other
         information if the disclosure would or might in its reasonable opinion
         constitute a breach of any law or a breach of a fiduciary duty.

25.13    Relationship with the Lenders
(a)      Each Agent may treat each Lender as a Lender, entitled to payments
         under this Agreement and acting through its Facility Office unless it
         has received not less than five (5) Business Days prior notice from
         that Lender to the contrary in accordance with the terms of this
         Agreement.

(b)      Each Lender shall supply the Agent with any information required by the
         Agent in order to calculate the Associated Costs.

25.14    Credit appraisal by the Lenders
         Without affecting the responsibility of any Obligor for information
         supplied by such Obligor or on such Obligor's behalf in connection with
         any Finance Document, each Lender confirms to each Agent and each
         Arranger that such Finance Party has been, and will continue to be,
         solely responsible for making such Finance Party's own independent
         appraisal and investigation of all risks arising under or in connection
         with any Finance Document including, but not limited to:


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         (a)      the financial condition, status and nature of each member of
                  the Group;

         (b)      the legality, validity, effectiveness, adequacy or
                  enforceability of any Finance Document and any other
                  agreement, arrangement or document entered into, made or
                  executed in anticipation of, under or in connection with any
                  Finance Document;

         (c)      whether that Lender has recourse, and the nature and extent of
                  that recourse, against any Party or any of its respective
                  assets under or in connection with any Finance Document, the
                  transactions contemplated by the Finance Documents or any
                  other agreement, arrangement or document entered into, made or
                  executed in anticipation of, under or in connection with any
                  Finance Document; and

         (d)      the adequacy, accuracy and/or completeness of the Information
                  Memorandum and any other information provided by any Agent,
                  any Party or by any other person under or in connection with
                  any Finance Document, the transactions contemplated by the
                  Finance Documents or any other agreement, arrangement or
                  document entered into, made or executed in anticipation of,
                  under or in connection with any Finance Document.

25.15    Lenders' tax status confirmation
(a)      Each Original Lender confirms in favour of the Facility Agent on the
         date of this Agreement that either:

         (i)      it is not resident for tax purposes in the United Kingdom and
                  is beneficially entitled to its share of the Loan and
                  associated interest; or

         (ii)     it is a bank as defined for the purposes of section 349 of the
                  Taxes Act and is beneficially entitled to its share of the
                  Loan and associated interest,

         and each Lender shall promptly notify the Facility Agent in writing if
         there is any change in its position from that set out above.

(b)      Each Lender which becomes a Party pursuant to a transfer or assignment
         shall, in the case of a transfer, confirm in favour of the Facility
         Agent in the relevant Transfer Certificate, or otherwise, confirm by
         written notice to the Facility Agent, as to whether or not such Lender
         is:

         (i)      resident for tax purposes in the United Kingdom and is
                  beneficially entitled to its share of the Loan and associated
                  interest;

         (ii)     a bank as defined for the purposes of section 349 of the Taxes
                  Act and is beneficially entitled to its share of the Loan and
                  associated interest; and/or

         (iii)    a Qualifying lender,

         and each lender shall promptly notify the Facility Agent in writing if
         there is any change in its position from that set out in the relevant
         Transfer Certificate of written notice to the Facility Agent.

25.16    Relevant Reference Banks
         If a Relevant Reference Bank (or, if a Relevant Reference Bank is not a
         Lender, the Lender of which it is an Affiliate) ceases to be a Lender,
         the Facility Agent shall (in consultation with the


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         Obligors) appoint another Lender or an Affiliate of a Lender to replace
         that Relevant Reference Bank.

25.17    Agent's management time
         In the event that any Agent, acting reasonably, determines that, as a
         result of the occurrence or existence, as appropriate, of any event(s),
         fact(s) and/or circumstance(s), the scope and/or extent of such Agent's
         management time or other resources necessary and/or desirable to enable
         and facilitate such Agent to properly discharge and perform such
         Agent's obligations under the Finance Documents is significantly
         greater than that originally contemplated (in the context of the
         relevant Fee Letter(s)), such Agent shall confirm such determination in
         writing to the Obligors and the Lenders, following which any amount
         payable to an Agent under Clause 15.3 (Indemnity to each Agent), Clause
         17 (Costs and expenses) and Clause 25.10 (Lenders' indemnity to each
         Agent) shall include the cost of utilising such Agent's management time
         or other resources and will be calculated on the basis of such
         reasonable daily or hourly rates as such Agent may notify to the
         Obligors and the Lenders in writing, and is in addition to any fee paid
         or payable to such Agent under Clause 12 (Fees).

26.      CONDUCT OF BUSINESS BY THE FINANCE PARTIES
         No provision of this Agreement will:

         (a)      interfere with the right of any Finance Party to arrange its
                  affairs (tax or otherwise) in whatever manner such Finance
                  Party thinks fit;

         (b)      oblige any Finance Party to investigate or claim any credit,
                  relief, remission or repayment available to such Finance Party
                  or the extent, order and manner of any claim; or

         (c)      oblige any Finance Party to disclose any information relating
                  to its affairs (tax or otherwise) or any computations in
                  respect of Tax.

27.      SHARING AMONG THE LENDERS

27.1     Payments to Lenders
         If a Lender (a "Recovering Lender") receives or recovers any amount
         from an Obligor other than in accordance with Clause 28 (Payment
         Mechanics) and applies that amount to a payment due under the Finance
         Documents then:

         (a)      the Recovering Lender shall, within three (3) Business Days,
                  notify details of the receipt or recovery, to the Facility
                  Agent;

         (b)      the Facility Agent shall determine whether the receipt or
                  recovery is in excess of the amount the Recovering Lender
                  would have been paid had the receipt or recovery been received
                  or made by the Facility Agent and distributed in accordance
                  with Clause 28 (Payment Mechanics), without taking account of
                  any Tax which would be imposed on such Facility Agent in
                  relation to the receipt, recovery or distribution; and

         (c)      the Recovering Lender shall, within three (3) Business Days of
                  demand by the Facility Agent, pay to the Facility Agent an
                  amount (the "Sharing Payment") equal to such receipt or
                  recovery less any amount which the Facility Agent determines
                  may be retained by the Recovering Lender as such Recovering
                  Bank's share of any payment to be made, in accordance with
                  Clause 28.5 (Partial payments).


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27.2     Redistribution of payments
         The Facility Agent shall treat the Sharing Payment as if it had been
         paid by the relevant Obligor and distribute such Sharing Payment
         between the Finance Parties (other than the Recovering Lender) in
         accordance with Clause 28.5 (Partial payments).

27.3     Recovering Lender's rights
(a)      On a distribution by the Facility Agent under Clause 27.2
         (Redistribution of payments), the Recovering Lender will be subrogated
         to the rights of the Finance Parties which have shared in the
         redistribution.

(b)      If and to the extent that the Recovering Lender is not able to rely on
         its rights under paragraph (a) above, the relevant Obligor shall be
         liable to the Recovering Lender for a debt equal to the Sharing Payment
         which is immediately due and payable.

27.4     Reversal of redistribution
         If any part of the Sharing Payment received or recovered by a
         Recovering Lender becomes repayable and is repaid by that Recovering
         Lender, then:

(a)      each Lender which has received a share of the relevant Sharing Payment
         pursuant to Clause 27.2 (Redistribution of payments) shall, upon
         request of the Facility Agent, pay to the Facility Agent for account of
         that Recovering Lender an amount equal to its share of the Sharing
         Payment (together with an amount as is necessary to reimburse that
         Recovering Lender for its proportion of any interest on the Sharing
         Payment which that Recovering Lender is required to pay); and

(b)      that Recovering Lender's rights of subrogation in respect of any
         reimbursement shall be cancelled and the relevant Obligor will be
         liable to the reimbursing Lender for the amount so reimbursed.

27.5     Exceptions
(a)      This Clause 27 shall not apply to the extent that the Recovering Lender
         would not, after making any payment pursuant to this Clause, have a
         valid and enforceable claim against the relevant Obligor.

(b)      A Recovering Lender is not obliged to share with any other Lender any
         amount which the Recovering Lender has received or recovered as a
         result of taking legal or arbitration proceedings, if:

         (i)      it notified the other Lenders of the legal or arbitration
                  proceedings; and

         (ii)     the other Lender had an opportunity to participate in those
                  legal or arbitration proceedings but did not do so as soon as
                  reasonably practicable having received notice or did not take
                  separate legal or arbitration proceedings.


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                           SECTION 10 - ADMINISTRATION

28.      PAYMENT MECHANICS

28.1     Payments to the Facility Agent
(a)      On each date on which an Obligor or a Lender is required to make a
         payment under a Finance Document, that Obligor or Lender shall make the
         same available to the Facility Agent (unless a contrary indication
         appears in a Finance Document) for value on the due date at the time
         and in such funds specified by the Facility Agent as being customary at
         the time for settlement of transactions in the relevant currency in the
         place of payment.

(b)      Payment shall be made to such account in the principal financial centre
         of the country of that currency (or, in relation to euro, in a
         principal financial centre in a Participating Member State or London)
         with such bank as the Facility Agent specifies.

28.2     Distributions by the Facility Agent
         Each payment received by the Facility Agent under the Finance Documents
         for another Party shall, subject to Clause 28.3 (Distributions to an
         Obligor) and Clause 28.4 (Clawback) be made available by the Facility
         Agent as soon as practicable after receipt to the Party entitled to
         receive payment in accordance with this Agreement (in the case of a
         Lender, for the account of its Facility Office), to such account as
         that Party may notify to the Facility Agent by not less than five (5)
         Business Days' written notice with a bank in the principal financial
         centre of the country of that currency (or, in relation to euro, in the
         principal financial centre of a Participating Member State or London).

28.3     Distributions to an Obligor
         The Facility Agent may (with the consent of an Obligor or in accordance
         with Clause 29 (Set-Off)) apply any amount received by it for that
         Obligor in or towards payment (on the date and in the currency and
         funds of receipt) of any amount due from that Obligor under the Finance
         Documents or in or towards purchase of any amount of any currency to be
         so applied.

28.4     Clawback
(a)      Where a sum is to be paid to the Facility Agent under the Finance
         Documents for another Party, the Facility Agent is not obliged to pay
         that sum to that other Party (or to enter into or perform any related
         exchange contract) until it has been able to establish to its
         satisfaction that it has actually received that sum.

(b)      If the Facility Agent pays an amount to another Party and it proves to
         be the case that the Facility Agent had not actually received that
         amount, then the Party to whom that amount (or the proceeds of any
         related exchange contract) was paid by the Facility Agent shall on
         demand refund the same to the Facility Agent together with interest on
         that amount from the date of payment to the date of receipt by the
         Facility Agent, calculated by the Facility Agent to reflect its cost of
         funds.

28.5     Partial payments
(a)      If the Facility Agent receives a payment that is insufficient to
         discharge all the amounts then due and payable by an Obligor under the
         Finance Documents, the Facility Agent shall apply that payment towards
         the obligations of that Obligor under the Finance Documents in the
         following order:

         (i)      first, in or towards payment pro rata of any unpaid fees,
                  costs and expenses of the Agents under the Finance Documents;


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         (ii)     secondly, in or towards payment pro rata of any accrued
                  interest or commission due but unpaid under this Agreement;

         (iii)    thirdly, in or towards payment pro rata of any principal due
                  but unpaid under this Agreement; and

         (iv)     fourthly, in or towards payment pro rata of any other sum due
                  but unpaid under the Finance Documents.

(b)      The Facility Agent shall, if so directed by the Majority Lenders, vary
         the order set out in paragraphs (a)(ii) to (iv) above.

(c)      Paragraphs (a) and (b) above will override any appropriation made by an
         Obligor.

28.6     No set-off by Obligors
         All payments to be made by an Obligor under the Finance Documents shall
         be calculated and be made without (and free and clear of any deduction
         for) set-off or counterclaim.

28.7     Business Days
(a)      Any payment which is due to be made on a day that is not a Business Day
         shall, subject to the terms of this Agreement be made on the preceding
         Business Day.

(b)      During any extension of the due date for payment of any principal or an
         Unpaid Sum under this Agreement interest is payable on the principal at
         the rate payable on the original due date.

28.8     Currency of account
(a)      Subject to paragraphs (b) to (e) below, the Base Currency is the
         currency of account and payment for any sum due from an Obligor under
         any Finance Document.

(b)      A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum
         shall be made in the currency in which that Loan or Unpaid Sum is
         denominated on its due date.

(c)      Each payment of interest shall be made in the currency in which the sum
         in respect of which the interest is payable was denominated when that
         interest accrued.

(d)      Each payment in respect of costs, expenses or Taxes shall be made in
         the currency in which the costs, expenses or Taxes are incurred.

(e)      Any amount expressed to be payable in a currency other than the Base
         Currency shall be paid in that other currency.

28.9     Change of currency
(a)      Unless otherwise prohibited by Applicable Law, if more than one
         currency or currency unit are at the same time recognised by the
         central bank of any country as the lawful currency of that country,
         then:

         (i)      any reference in the Finance Documents to, and any obligations
                  arising under the Finance Documents in, the currency of that
                  country shall be translated into, or paid in, the currency or
                  currency unit of that country designated by the Facility Agent
                  (after consultation with the Obligors); and


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         (ii)     any translation from one currency or currency unit to another
                  shall be at the official rate of exchange recognised by the
                  central bank for the conversion of that currency or currency
                  unit into the other, rounded up or down by the Facility Agent
                  (acting reasonably).

(b)      If a change in any currency of a country occurs, this Agreement will,
         to the extent the Facility Agent (acting reasonably and after
         consultation with the Obligors) specifies to be necessary, be amended
         to comply with any generally accepted conventions and market practice
         in the Relevant Interbank Market and otherwise to reflect the change in
         currency.

29.      SET-OFF
         A Finance Party may set off any matured obligation due from an Obligor
         under the Finance Documents (to the extent beneficially owned by that
         Finance Party) against any matured obligation owed by that Finance
         Party to that Obligor, regardless of the place of payment, booking
         branch or currency of either obligation. If the obligations are in
         different currencies, the Finance Party may convert either obligation
         at a market rate of exchange in its usual course of business for the
         purpose of the set-off.

30.      NOTICES

30.1     Communications in writing
         Any communication to be made under or in connection with the Finance
         Documents shall (subject to the appropriate prior written agreement of
         the Obligors and Finance Parties, as appropriate, as contemplated by
         and provided for pursuant to Clause 9.4 (Notification of rates of
         interest), be made in writing and, unless otherwise stated, may be made
         by telex, fax, e-mail or letter to the extent that the relevant Party
         has specified such address pursuant to Clause 30.2 (Addresses) or, in
         addition to the foregoing and in the case of rates of interest to be
         notified by the Facility Agent pursuant to Clause 9.4 (Notification of
         rates of interest) and in the case of any document to be forwarded by
         an Agent pursuant to paragraph (a) of Clause 25.2 (Duties of the
         Agents) where such document has been supplied to such Agent pursuant to
         Clause 19 (Information Undertakings), the relevant Agent may refer the
         relevant Party or Parties to a web site and to the location of the
         relevant information on such web site.

30.2     Addresses
         The address, fax number, e-mail address, telex number and, where
         appropriate, web site (and the department or officer, if any, for whose
         attention the communication is to be made) of each Party for any
         communication or document to be made or delivered under or in
         connection with the Finance Documents is:

         (a)      in the case of each Obligor, that identified with its name
                  below;

         (b)      in the case of each Lender, that notified in writing to the
                  Facility Agent on or prior to the date on which it becomes a
                  Party; and

         (c)      in the case of each Agent, that identified with its name
                  below,

         or any substitute address, fax number, e-mail address, telex number,
         web site, department or officer as the Party may notify to the Facility
         Agent (or the Facility Agent may notify to the other Parties, if a
         change is made by the Facility Agent or a web site carrying relevant
         information has been set up by an Agent) by not less than five (5)
         Business Days' written notice.


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30.3     Delivery
(a)      Any communication or document made or delivered by one person to
         another under or in connection with the Finance Documents will only be
         effective:

         (i)      if by way of fax, e-mail or telex when a valid receipt has
                  been obtained by the sender and it has been received in
                  legible form;

         (ii)     if by way of letter, when it has been left at the relevant
                  address or five (5) Business Days after being deposited in the
                  post postage prepaid in an envelope addressed to it at that
                  address; or

         (iii)    if by way of posting such communication or document on a web
                  site, when such web site may be accessed and read;

         and, in the case of (i) and (ii) above, if a particular department or
         officer is specified as part of its address details provided under
         Clause 30.2 (Addresses), if addressed to that department or officer.

(b)      Any communication or document to be made or delivered to an Agent will
         be effective only when actually received by such Agent and then only if
         it is expressly marked for the attention of the department or officer
         identified with such Agent's signature below (or any substitute
         department or officer such Agent shall specify for this purpose).

(c)      All notices from or to an Obligor shall be sent through the Facility
         Agent.

(d)      Any communication or document made or delivered to any Obligor in
         accordance with this Clause 30 will be deemed to have been made or
         delivered to each of the Obligors.

30.4     Notification of address, fax number and telex number
         Upon receipt of notification of an address, fax number and telex number
         or change of address, fax number or telex number pursuant to Clause
         30.2 (Addresses) or changing its own address, fax number or telex
         number, the Facility Agent shall notify the other Parties accordingly
         in writing.

30.5     English language
(a)      Any notice given under or in connection with any Finance Document must
         be in English.

(b)      All other documents provided under or in connection with any Finance
         Document must be:

         (i)      in English; or

         (ii)     if not in English, and if so required by an Agent, accompanied
                  by a certified English translation and, in this case, the
                  English translation will prevail unless the document is a
                  constitutional, statutory or other official document.

30.6     Communications Through the Facility Agent
         The Facility Agent will act as facility agent with the intent of
         administering the Facility and centralising all communications between
         the Obligors and the Finance Parties and such communications will
         normally only be made through the Facility Agent and all communications
         from any of the Finance Parties to any Obligor will also only normally
         be made through the Facility Agent Provided that any Finance Party may
         in exceptional circumstances be entitled to communicate directly with
         any Obligor(s).


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31.      CALCULATIONS AND CERTIFICATES

31.1     Accounts
         In any litigation or arbitration proceedings arising out of or in
         connection with a Finance Document, the entries made in the accounts
         maintained by a Finance Party are, in the absence of manifest error,
         prima facie evidence of the matters to which they relate.

31.2     Certificates and Determinations
(a)      Any certification or determination by a Finance Party of a rate or
         amount under any Finance Document is, in the absence of manifest error,
         conclusive evidence of the matters to which it relates.

(b)      A certificate of a Finance Party to the Facility Agent and/or any
         Obligor(s) as to: (a) the amount by which a sum payable to such Finance
         Party under this Agreement is to be increased under Clause 13.2 (Tax
         gross-up) or Clause 14.1 (Increased costs); or (b) the amount for the
         time being required to indemnify such Finance Party against any loss,
         cost, payment or liability under Clause 13.3 (Tax indemnity), Clause
         13.5 (Stamp taxes), Clause 13.6 (Value added tax), Clause 15.1
         (Currency indemnity) and Clause 15.2 (Other indemnities), shall set out
         in reasonable details the basis of any such claim and the workings of
         such amount Provided that nothing in this Agreement shall require any
         Finance Party to disclose any confidential information in respect of
         such Finance Party Provided Further that the Facility Agent shall not
         have any obligation or incur any liability whatsoever to any person in
         respect of any such certification provided pursuant to this Agreement.

31.3     Day count convention
         Any interest, commission or fee accruing under a Finance Document will
         accrue from day to day and is calculated on the basis of the actual
         number of days elapsed and a year of three hundred and sixty (360) days
         or, in any case where the practice in the Relevant Interbank Market
         differs, in accordance with that market practice.

32.      PARTIAL INVALIDITY
         If, at any time, any provision of the Finance Documents is or becomes
         illegal, invalid or unenforceable in any respect under any Applicable
         Law of any jurisdiction, neither the legality, validity or
         enforceability of the remaining provisions nor the legality, validity
         or enforceability of such provision under the Applicable Law of any
         other jurisdiction will in any way be affected or impaired.

33.      REMEDIES AND WAIVERS
         No failure to exercise, nor any delay in exercising, on the part of any
         Finance Party, any right or remedy under the Finance Documents shall
         operate as a waiver, nor shall any single or partial exercise of any
         right or remedy prevent any further or other exercise or the exercise
         of any other right or remedy. The rights and remedies provided in this
         Agreement are cumulative and not exclusive of any rights or remedies
         provided by law.

34.      AMENDMENTS AND WAIVERS

34.1     Required consents
(a)      Subject to Clause 34.2 (Exceptions) any term of the Finance Documents
         may be amended or waived only with the consent of the Majority Lenders
         and the Obligors and any such amendment or waiver will be binding on
         all Parties.

(b)      The Facility Agent may effect, on behalf of any Finance Party, any
         amendment or waiver permitted by this Clause 34.




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34.2     Exceptions
(a)      An amendment or waiver that has the effect of changing or which relates
         to:

         (i)      the definition of "Majority Lenders" in Clause 1.1
                  (Definitions);

         (ii)     an extension to the date of payment of any amount under the
                  Finance Documents;

         (iii)    a reduction in the Applicable Margin or the amount of any
                  payment of principal, interest, fees or commission payable;

         (iv)     an increase in Commitment;

         (v)      any provision which expressly requires the consent of all the
                  Lenders; or

         (vi)     Clause 2.2 (Lenders' rights and obligations), Clause 23
                  (Changes to the Lenders) or this Clause 34,

         shall not be made without the prior consent of all the Lenders.

(b)      Any amendment or waiver that has the effect of changing or which
         relates to any releases or any of the Encumbrances created by and
         constituted in the Security Agreements, except for any release required
         to give effect to a disposal expressly permitted pursuant to Clause
         21.4 (Disposals), shall not be made without the prior written consent
         of all the Lenders, other than any Lender(s) which at such time hold(s)
         five per cent. (5%) or more of the equity share capital of Hungarian
         Telephone and Cable Corp.

(c)      An amendment or waiver which relates to the rights or obligations of
         any Agent or any Arranger may not be effected without the consent of
         such Agent or Arranger, as applicable.

(d)      Any amendment that relates to this paragraph (d) or any amendment or
         express waiver that relates to the restriction contained in paragraph
         (a) of Clause 21.25 (No new Financial Indebtedness) on the ability of
         Hungarian Telephone and Cable Corp. to incur additional Financial
         Indebtedness, shall, to the extent that at such time Postabank es
         Takarekpenztar Reszvenytarsasag is the legal and beneficial owner of
         any of the Notes, require the prior written consent of Postabank es
         Takarekpenztar Reszvenytarsasag, with Postabank es Takarekpenztar
         Reszvenytarsasag to confirm such approval or otherwise by written
         notice within fourteen (14) days of any request for such consent,
         failing which written notice (confirming or refusing such consent),
         Postabank es Takarekpenztar Reszvenytarsasag will be deemed to have
         given its consent.

(e)      Any amendment that relates to this paragraph (e) or any amendment or
         express waiver that relates to the restriction contained in paragraph
         (b) of Clause 21.25 (No new Financial Indebtedness) on the ability of
         HTCC Tanacsado Reszvenytarsasag to incur additional Financial
         Indebtedness which, when aggregated with any other amendment or express
         waiver in respect of the restriction contained in paragraph (c) (v) of
         Clause 21.25 (No new Financial Indebtedness) on the ability of the
         Borrowers to incur additional Financial Indebtedness, would result in
         the aggregate of any such additional Financial Indebtedness of the
         Group (other than any Financial Indebtedness owing to any another
         member(s) of the Group provided in accordance with the provisions of
         this Agreement) exceeding the equivalent of sixteen million euro (EUR
         16,000,000), shall, to the extent that at such time Postabank es
         Takarekpenztar Reszvenytarsasag is the legal and beneficial owner of
         any of the Notes, require the prior written consent of Postabank es
         Takarekpenztar Reszvenytarsasag, with Postabank es Takarekpenztar
         Reszvenytarsasag to


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         confirm such approval or otherwise by written notice within fourteen
         (14) days of any request for such consent, failing which written notice
         (confirming or refusing such consent), Postabank es Takarekpenztar
         Reszvenytarsasag will be deemed to have given its consent.

(f)      Any amendment that relates to this paragraph (f) or any amendment or
         express waiver that relates to the restriction contained in paragraph
         (c) (v) of Clause 21.25 (No new Financial Indebtedness) on the ability
         of the Borrowers to incur additional Financial Indebtedness which, when
         aggregated with any other amendment or express waiver in respect of the
         restriction contained in paragraph (b) of Clause 21.25 (No new
         Financial Indebtedness) on the ability of HTCC Tanacsado
         Reszvenytarsasag to incur additional Financial Indebtedness, would
         result in the aggregate of any such additional Financial Indebtedness
         of the Group (other than any Financial Indebtedness owing to any
         another member(s) of the Group provided in accordance with the
         provisions of this Agreement) exceeding the equivalent of sixteen
         million euro (EUR 16,000,000), shall, to the extent that at such time
         Postabank es Takarekpenztar Reszvenytarsasag is the legal and
         beneficial owner of any of the Notes, require the prior written consent
         of Postabank es Takarekpenztar Reszvenytarsasag, with Postabank es
         Takarekpenztar Reszvenytarsasag to confirm such approval or otherwise
         by written notice within fourteen (14) days of any request for such
         consent, failing which written notice (confirming or refusing such
         consent), Postabank es Takarekpenztar Reszvenytarsasag will be deemed
         to have given its consent.

35.      COUNTERPARTS
         Each Finance Document may be executed in any number of counterparts,
         and this has the same effect as if the signatures on the counterparts
         were on a single copy of the Finance Document.


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                   SECTION 11 - GOVERNING LAW AND ENFORCEMENT

36.      GOVERNING LAW
         This Agreement is governed by and shall be construed in accordance with
         English law.

37.      ENFORCEMENT

37.1     English courts
         Subject to Clause 37.7 (Facility Agent's option to refer disputes to
         arbitration) and Clause 37.3 (Non-exclusive jurisdiction), each of the
         Parties irrevocably agrees for the benefit of each of the Finance
         Parties that the courts of England shall have exclusive jurisdiction to
         hear and determine any suit, action or proceeding, and to settle any
         disputes, which may arise out of or in connection with this Agreement
         and, for such purposes, irrevocably submits to the jurisdiction of such
         courts.

37.2     Convenient forum
         Each Obligor irrevocably waives any objection which it might now or
         hereafter have to the courts referred to in Clause 37.1 (English
         courts) above being nominated as the forum to hear and determine any
         suit, action or proceeding, and to settle any disputes, which may arise
         out of or in connection with this Agreement and agrees not to claim
         that any such court is not a convenient or appropriate forum.

37.3     Non-exclusive jurisdiction
         This Clause 37.3 and Clause 37.1 (English courts) are for the benefit
         of the Finance Parties and nothing in Clause 37.1 (English courts)
         shall prevent any Finance Party from taking proceedings relating to a
         Dispute in any other courts with jurisdiction. To the extent allowed by
         law, the Finance Parties may take concurrent proceedings in any number
         of jurisdictions.

37.4     Service of process
         Each Obligor agrees that the documents which start any court
         proceedings ("Proceedings") and any other documents required to be
         served in relation to those Proceedings may be served on it at the
         offices of Clifford Chance Secretaries Limited, 200 Aldersgate Street,
         London EC1A 4JJ, England, United Kingdom. If the appointment of the
         person mentioned in this Clause 37.4 ceases to be effective, each
         Obligor shall immediately appoint another person in England to accept
         service of process on its behalf in England. If any Obligor fails to do
         so (and such failure continues for a period of not less than fourteen
         (14) days), the Facility Agent shall be entitled to appoint on behalf
         of such Obligor(s) such a person to accept service of proceedings by
         notice to the relevant Obligor(s). Nothing contained in this Agreement
         shall restrict the right of the Finance Parties to serve process in any
         other manner allowed by law. This Clause 37.4 applies to Proceedings in
         England and to Proceedings elsewhere. Each Obligor agrees that failure
         by a process agent to notify such Obligor of the process will not
         invalidate the proceedings concerned.

37.5     Waiver of immunity
         To the extent that any Obligor may in any jurisdiction claim for itself
         or its assets immunity from suit, execution, attachment (whether in
         respect of execution, before judgment or otherwise) or other legal
         process and to the extent that in any such jurisdiction there may be
         attributed to such Obligor or its assets such immunity (whether or not
         claimed), such Obligor hereby unconditionally and irrevocably agrees
         not to claim and hereby irrevocably waives such immunity to the full
         extent permitted by the Applicable Law of such jurisdiction.

37.6     Obligors' consent to ancillary measures
         The Obligors hereby consent generally in respect of any legal action or
         proceeding arising out of or in connection with this Agreement to the
         giving of any relief or the issue of any process in


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         connection with such action or proceeding including, without
         limitation, the making, enforcement or execution against any property
         whatsoever (irrespective of its use or intended use) of any order or
         judgment whether final, interim or otherwise, which may be made or
         given in such action or proceeding.

37.7     Facility Agent's option to refer disputes to arbitration
         Notwithstanding the provisions of Clause 37.1 (English courts), if any
         dispute or difference arises out of or in connection with this
         Agreement, including any question as to its existence, validity or
         termination (a "Dispute"), and on condition that the Facility Agent,
         acting on the instructions of the Majority Lenders, shall have elected
         by giving notice in writing to each of the other Parties, such Dispute
         shall be referred to and finally settled by arbitration in accordance
         with the UNCITRAL Arbitration Rules as at present in force (the
         "UNCITRAL Rules"), which are deemed to be incorporated by reference
         into this Clause 37.

37.8     Appointment of the arbitral tribunal
(a)      Any arbitral tribunal appointed pursuant to Clause 37.7 (Facility
         Agent's option to refer disputes to arbitration) shall be composed of
         three (3) arbitrators one of whom shall be the presiding arbitrator.
         The appointing authority shall be the London Court of International
         Arbitration (the "LCIA") The LCIA shall appoint all three (3) members
         of the arbitral tribunal and shall nominate which of them shall act as
         the presiding arbitrator.

(b)      In all matters relating to the appointment of arbitrators under this
         Agreement or under any other Finance Document, the Parties agree that
         the LCIA shall be free to appoint whomsoever the LCIA considers
         appropriate in the LCIA's sole discretion, save that the LCIA shall
         take account of the views of the Parties and shall give effect to any
         agreement of the Parties in relation to the appointment of the
         arbitrators unless the LCIA determines in the LCIA's absolute
         discretion that it is not appropriate to do so.

37.9     Initiation of arbitration proceedings
         Subject to Clause 37.7 (Facility Agent's option to refer disputes to
         arbitrators), any of the Parties which wishes to initiate an
         arbitration shall simultaneously:

         (a)      give a notice of arbitration to the other Parties in
                  accordance with Article 3 of the UNCITRAL Rules; and

         (b)      request in writing the LCIA to appoint the three (3)
                  arbitrators and to nominate the presiding arbitrator and give
                  a copy of such request to all the other parties to this
                  agreement. Each party may make its own representations to the
                  LCIA concerning the appointment of arbitrators within twenty
                  one (21) days of receipt of such notice of arbitration. For
                  the avoidance of doubt, the Parties agree that the LCIA may
                  take note of any such representations, but shall otherwise be
                  free in the LCIA's discretion to appoint whomsoever the LCIA
                  consider appropriate as the three (3) arbitrators.

37.10    Place and language of the proceedings
         The place and seat of the arbitration shall be London and language of
         the arbitral proceedings shall be English.

37.11    The award
         All and any awards of the arbitral tribunal shall be made in accordance
         with the UNCITRAL Rules in writing and shall be final and binding on
         the relevant Parties. All and any awards shall be made by majority
         decision. If there be no majority, the award shall be made by the
         presiding arbitrator alone. The final award shall be made within six
         (6) months from the appointment of




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         the third arbitrator, but insofar as this is impractical it shall be
         made as soon as possible thereafter.

37.12    Notice of arbitration
         In relation to any arbitration proceedings, the provisions of Clause 30
         (Notices) of this Agreement shall apply in respect of this Clause 37 in
         addition to the notification provisions of the UNCITRAL Rules.

37.13    Expedition of arbitration
         The appointed arbitrators shall conduct the arbitration in accordance
         with the UNCITRAL Rules and at all times in such a manner as to ensure
         a speedy resolution of the Dispute.


AND EACH OBLIGOR expressly agrees and consents to each of the provisions of this
Clause 37.

This Agreement has been entered into on the date stated at the beginning of this
Agreement.



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