Document:

First Amendment to Loan Agreement

 EXHIBIT 10.38
 FIRST AMENDMENT TO LOAN AGREEMENT
            THIS FIRST AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is made and entered into as of March 31, 2003 by and among CARROLS CORPORATION, a Delaware
corporation  (the “Borrower”); each of the Lenders which is or may from time to time become a party to the Loan Agreement (as defined below) (individually, a “Lender” and, collectively, the
“Lenders”), BANK OF AMERICA, N.A., as Syndication Agent, SUNTRUST BANK, ATLANTA, as Documentation Agent, MANUFACTURERS AND TRADERS TRUST COMPANY, as Co-Agent, and JPMORGAN CHASE BANK, acting as agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Agent”).
  RECITALS
            A.          The Borrower, the Lenders and the Agent executed and delivered that certain Loan Agreement
dated as of December 19, 2000.  Said Loan Agreement, as amended, supplemented and restated, is herein called the “Loan Agreement.”  Any capitalized term used in this Amendment and not otherwise defined shall have the
meaning ascribed to it in the Loan Agreement.
            B.           The Borrower, the Lenders
and the Agent desire to amend the Loan Agreement in certain respects.
            NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and further good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the Agent do hereby agree as follows:

          SECTION 1.  Amendment to Loan Agreement.  
             (a)           The reference to “$10,000,000” set forth in subsection (a) of Section 3.2 of
the Loan Agreement [Letters of Credit] is hereby amended to read “$20,000,000”.
            SECTION 2.  Ratification. 
Except as expressly amended by this Amendment, the Loan Agreement and the other Loan Documents shall remain in full force and effect.  None of the rights, title and interests existing and to exist under the Loan Agreement are hereby released,
diminished or impaired, and the Borrower hereby reaffirms all covenants, representations and warranties in the Loan Agreement.
            SECTION
3.  Expenses.  The Borrower shall pay to the Agent all reasonable fees and expenses of its respective legal counsel (pursuant to Section 11.3 of the Loan Agreement) incurred in connection with the execution of this
Amendment.

            SECTION 4.  Certifications.  The Borrower hereby certifies that (a) no material adverse change in
the assets, liabilities, financial condition, business or affairs of the Borrower has occurred and (b) no Default or Event of Default has occurred and is continuing or will occur as a result of this Amendment.
            SECTION 5.  Miscellaneous.  This Amendment (a) shall be binding upon and inure to the benefit of the Borrower, the Lenders and the Agent and their
respective successors, assigns, receivers and trustees; (b) may be modified or amended only by a writing signed by the required parties; (c) shall be governed by and construed in accordance with the laws of the State of New York and the United
States of America; (d) may be executed in several counterparts by the parties hereto on separate counterparts, and each counterpart, when so executed and delivered, shall constitute an original agreement, and all such separate counterparts shall
constitute but one and the same agreement and (e) together with the other Loan Documents, embodies the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter.  The headings herein shall be accorded no significance in interpreting this Amendment.
 NOTICE PURSUANT TO TEX. BUS. &
COMM. CODE §26.02
            THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES PRIOR HERETO OR SUBSTANTIALLY CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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            IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have caused this Amendment to be signed by their
respective duly authorized officers, effective as of the date first above written.

	  
 	  CARROLS CORPORATION,
 a Delaware corporation
 
	  
 	  
 
	  
 	 By:
 	/S/    JOSEPH ZIRKMAN  
	  
 	  
 	 
 
	  
 	 Name:
 	Joseph Zirkman 
	  
 	 Title:
 	Vice President 

  3

	  
 	   JPMORGAN CHASE BANK, as Agent and as a Lender
 
	  
 	  
 
	  
 	  By:
 	/S/    WILLIAM P. WALLACE 
	  
 	  
 	 
 
	  
 	  Name:
 	William P. Wallace 
	  
 	  Title:
 	Vice President 

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 	  BANK OF AMERICA, N.A.,
 as Syndication Agent and as a Lender
 
	  
 	  
 
	  
 	  By:
 	 /S/     BOBBY RYAN OLIVER, JR. 
 
	  
 	  
 	 
 
	  
 	  Name:
 	  Bobby Ryan Oliver, Jr.
 
	  
 	  Title:
 	  Vice President 
 

  5

	  
 	 SUNTRUST BANK,
 as Documentation Agent and as a Lender
 
	  
 	  
 
	  
 	  By:
 	  /S/     CHARLES J. JOHNSON
 
	  
 	  
 	 
 
	  
 	  Name:
 	  Charles J. Johnson
 
	  
 	  Title: 
 	  Managing Director
 

  6

	  
 	  MANUFACTURERS AND TRADERS TRUST COMPANY, 
 as Co-Agent and as a Lender
 
	  
 	  
 
	  
 	 By:
 	/S/    TIMOTHY P. MCDEVITT  
	  
 	  
 	 
 
	  
 	 Name:
 	Timothy P. McDevitt  
	  
 	 Title:
 	Vice President 

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 	  THE NORTHERN TRUST COMPANY
 
	  
 	  
 
	  
 	  By: 
 	  /S/    LAURIE A. KIETA
 
	  
 	  
 	 
 
	  
 	 Name:
 	 Laurie A. Kieta
 
	  
 	  Title:
 	  Vice President 
 

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 	  BSB BANK & TRUST COMPANY
 
	  
 	  
 
	  
 	  By:
 	/S/    C. PATRICK O’NEIL
	  
 	  
 	 
 
	  
 	 Name:    
 	C. Patrick O’Neil
	  
 	  Title:
 	Vice President

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 	  STEIN ROE FLOATING RATE LIMITED
 LIABILITY
COMPANY
 
	  
 	  
 
	  
 	 By:
 	 /S/    KATHLEEN A. ZARN
 
	  
 	  
 	 
 
	  
 	  Name:
 	 Kathleen A. Zarn
 
	  
 	  Title:
 	 Senior Vice President
 
	 	 	 
	  
 	  
 	  
 
	  
 	  SRF 2000 LLC
 
	  
 	  
 
	  
 	  By:
 	 /S/    ANN E. MORRIS
 
	  
 	  
 	 
 
	  
 	 Name:
 	 Ann E. Morris
 
	  
 	  Title:
 	 Asst. Vice President
 
	  
 	  
 	  
	  
 	  
 	  
 
	  
 	  STEIN ROE & FARNHAM CLO I LTD.
 
	  
 	  
 
	  
 	  By:
 	  Stein Roe & Farnham Incorporated,
 as Portfolio Manager
 
	  
 	  
 	  
 
	  
 	  By:
 	/S/    KATHLEEN A. ZARN 
	  
 	  
 	 
 
	  
 	 Name:
 	Kathleen A. Zarn 
	  
 	  Title:
 	Senior Vice President 
					

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 	  INDOSUEZ CAPITAL FUNDING IIA, LIMITED
 
	  
 	  
 
	  
 	 By:
 	  Indosuez Capital Luxembourg,
 as Collateral Manager
 
	  
 	  
 	  
 
	  
 	 By:
 	 /S/    CHARLES KOBAYASHI 
 
	  
 	  
 	 
 
	  
 	 Name:
 	 Charles Kobayashi 
 
	  
 	 Title:
 	 Principal & Portfolio Manager 
 
	  
 	  
 	  
	  
 	  
 	  
 
	  
 	  INDOSUEZ CAPITAL FUNDING VI, LIMITED
 
	  
 	  
 
	  
 	 By:
 	  Indosuez Capital,
 as Collateral Manager
 
	  
 	  
 	  
 
	  
 	 By:
 	 /S/    JACK C. HENRY 
 
	  
 	  
 	 
 
	  
 	 Name:
 	 Jack C. Henry 
 
	  
 	 Title:
 	 Principal & Portfolio Manager 
 

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 	  RIVIERA FUNDING LLC
 
	  
 	  
 
	  
 	  By:
 	  /S/     ANN E. MORRIS 
 
 
	  
 	  
 	 
 
	  
 	  Name:
 	 Ann E. Morris 
 
	  
 	  Title:
 	 Asst. Vice President 
 
	  
 	  
 	  
 

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            The undersigned hereby join in this Amendment to evidence their consent to execution by Borrower of this Amendment,
to confirm that each Loan Document now or previously executed by the undersigned applies and shall continue to apply to the Loan Agreement, as amended hereby, to acknowledge that without such consent and confirmation, Lender would not execute this
Amendment and to join in the notice pursuant to Tex. Bus. & Comm. Code §26.02 set forth above.

	  
 	  CARROLS HOLDINGS CORPORATION, a Delaware corporation, CARROLS REALTY HOLDINGS
CORP., a Delaware corporation, and CARROLS REALTY I CORP., a Delaware corporation, POLLO FRANCHISE, INC., a Florida corporation, and
POLLO OPERATIONS, INC., a Florida corporation, TACO CABANA, INC., a Delaware corporation, T.C. MANAGEMENT, INC., a Delaware
corporation, and TACO CABANA MANAGEMENT, INC., a Texas corporation
 
	  
 	  
 
	 
 	 By:
 	 /S/    JOE A. ZIRKMAN 
 
	 
 	  
 	 
 
	  
 	 	 Joe A. Zirkman, Vice President 
 
	 	 
	  
 	 
 
	  
 	  TP ACQUISITION CORP.,
 a Texas corporation
 
	  
 	  
 
	 
 	 By:
 	 /S/    JOE A. ZIRKMAN 
 
	  
 	  
 	 
 
	  
 	  
 	 Joe A. Zirkman, President 
 
	 	 
	  
 	 
 
	  
 	  GET REAL, INC.,
 a Delaware corporation
 
	  
 	  
 
	 
 	 By:
 	 /S/    CARLOS LEIVA  
 
	  
 	  
 	 
 
	 
 	 Name:
 	 Carlos Leiva  
 
	 
 	 Title:
 	 Treasurer 
 

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 	  TEXAS TACO CABANA, L.P.,
 
	  
 	  
 
	  
 	  By:
 	  Taco Cabana Management, Inc.,
 a Texas corporation, General Partner
 
	  
 	  
 	  
 
	  
 	  
 	 By: 
 	 /S/    JOE A.
ZIRKMAN
 
	  
 	  
 	  
 	 
 
	  
 	  
 	  
 	 Joe A. Zirkman, Vice President
 

 22Universal Service Agreement

Exhibit 10.1 
 
TO THE MINISTER IN CHARGE OF THE OFFICE OF THE PRIME MINISTER OF 
HUNGARY 
 
HUNGAROTEL TAVKOZLESI KONCESSZIOS RESZVENYTARSASAG 
 

 
UNIVERSAL SERVICE AGREEMENT 
 
FOR THE PROVISION OF UNIVERSAL TELECOMMUNICATIONS SERVICES IN THE  
AREA OF BEKESCSABA,
OROSHAZA, PAPA, SALGOTARJAN AND SARVAR 
 

 
UNIVERSAL
SERVICE AGREEMENT 
 
FOR THE PROVISION OF
UNIVERSAL TELECOMMUNICATIONS SERVICES IN THE 
AREA OF BEKESCSABA, OROSHAZA, PAPA, SALGOTARJAN AND SARVAR

 
Universal Service Agreement (“Agreement”) entered
into on this day by and between the minister in charge of the Prime Minister’s office, acting on behalf of the Republic of Hungary (“Minister”) and Hungarotel Rt. (head office: 1066 Budapest, Terez krt. 46.; registration number:
01-10-043040) as universal Service Provider (“Universal Service Provider”) under the conditions set out in this Agreement. 
 
1. CHAPTER 
TERMS AND DEFINITIONS 
 
The basic terms used in this Agreement are as set out below: 
 

	 “Universal Telecommunications Service Fund”
	 	 the state monetary fund established according to Section 53 of Act XL of 2001 on Telecommunications (hereinafter
referred to as: Telecommunications Act);

	
	 “Subscriber Access Point”
	 	 the point of a telecommunications network to which the subscriber connects his end device and through which the
subscriber can make use of the telephone service;

	
	 “Geographic Numbering Area”
	 	 in the understanding of schedule F2 of Decree KHVM 26/1993. (IX.9.) on the structure plan of the public telephone
network, which sorts the country’s settlements into areas for the purpose of telephone services accessible through the network;

	
	 “Telecommunications Supervision”
	 	 meaning the Telecommunications Head Supervision (and, as the case may be, the local supervision), with the tasks and
authority set out in Govt. Decree 248/2001. (XII.18.);

	
	 “Service Provider’s Services”
	 	 services accessible through a certain dialling number provided by the International Division Plan of Identifiers
(hereinafter referred to as: ANFT) and which involve the services of a Service Provider (e.g. manual connection);

	
	 “Concession Contract”
	 	 the concession contract entered into between the Universal Service Provider and the Minister on 6 May 1994 as amended
from time to time;

	
	 “Minister”
	 	 the Minister in charge and assigned according to the constitution of the Republic of Hungary, as it may be in
effect

 
 

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	 	 	 from time to time, entitled to execute the rights under the Universal Service Agreement by the Telecommunications Act
or the law amending or replacing it;

	
	 “Quality Requirements”
	 	 the provisions regarding the quality of services set out in Decree 23/2001. (XII.22.) MeHVM on the detailed technical
requirements of universal telecommunications service;

	
	 “International Call”
	 	 a call where accessing the called subscriber or service requires dialling an international code;

	
	 “Public telephone booth”
	 	 a telephone booth located in public places or operated in places being open to the public, the services of which are
accessible to anyone if compensation is paid by card or coins (except emergency calls). Access to public telephone booths located in places being open to the public (hereinafter referred to as: location interior) is depending on the opening hours of
such place;

	
	 “Service Area”
	 	 a Geographical Numbering Area (or areas) in detailed geographical breakdown where the Universal Service Provider is
entitled and obliged to provide his services according to Attachment No. 2. Should the regulation regarding the network’s structure be amended, such amendment does not affect the geographical extension of the original undertaking at the time of
entry into force of the Agreement with respect to the Geographical Numbering Areas.

	
	 “Telephone Network”
	 	 transfer systems and—if applicable—devices for call routing as well as other resources for transferring
signs between certain ending points by wire, radio, optical or electro-magnetic substances;

	
	 “Telephone Service”
	 	 a service for direct real-time voice transfer and connection, by which any subscriber of such service is able to
communicate with another network ending point by a call initiated from an ending device connected to a local network ending point, the access of which is possible via the choosing procedure set out in the ANFT;

	
	 “Telecommunications Service Provider”
	 	 a legal person, economic undertaking or private entrepreneur entitled to provide Telecommunications Services for
others (Service Providers, customers, subscribers) (See point 26. of Telecommunications Act.);

 

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	 “Commencement Day”
	 	 the day on which the provision of universal Telecommunications Services is commenced.

 
Terms not listed above shall have the meaning set out in the Telecommunications Act and applicable legislation. 
 
2. CHAPTER 
AIM OF THE AGREEMENT—UNIVERSAL TELECOMMUNICATIONS SERVICES 
 

	2.1	 	The aim of this Agreement is that the Minister ensures the provision of the Universal Service as a duty of the state with respect to the Service Area by entering
into a service agreement with the Universal Service Provider, on the basis of the power set out in Section 50(1) of Telecommunications Act. With respect to the concession agreement concluded by and between them earlier, the Parties enter into an
Agreement for the provision of Universal Services. 

 

	2.2	 	Within the scope of the Universal Service, the Universal Service Provider shall provide on the Service Area the Telecommunications Services set out below which shall
be available to every user for a tariff compliant with applicable laws: 

 

	 	a)	 	access to telephone service through the local subscribers’ network ending point (offering access to fix-line telephone services, sending telefax transmissions
in accordance with “T” series ITU-T recommendations and modem data transmission with a speed of at least 9600 bit/s according to “V” series ITU-T recommendations; 

 

	 	b)	 	to operate one public telephone booth per every five hundred inhabitants or, in settlements with less inhabitants, one public telephone booth, with a special design
for hearing impaired i.e. disabled people per every two-thousand five hundred inhabitants; 

 

	 	c)	 	maintaining Operator Services and making accessible the list of subscribers, and 

 

	 	d)	 	toll-free emergency calls. 

 

	2.3	 	This Agreement shall enter into force at midnight on February 1, 2002. 

 

	2.4	 	The Parties undertake to perform their obligations arising with respect to the subject of this Agreement and the universal service in accordance with the applicable
relevant legislation, as it may be in force from time to time. In case of divergence between the Agreement and the applicable relevant legislation, the provisions of this Agreement being in contradiction with the binding provisions of the modified
law shall become ineffective and replaced with the contents as amended by the law. In case of modification of the scope of Universal Services or the modification of the regulations thereof, the Parties shall proceed according to section 54 (2)
Communications Act. The Parties undertake to conduct such negotiations in good faith taking into consideration the interests of the other Party. 

 

	2.5	 	The Parties acknowledge that none of the Parties may base any damage compensation claims to the other on the basis of the provisions of the Agreement and that no
claims from the Agreement shall be set-off against the other Party’s claim, except for the cases set out in Section 314 Subsection 1 Civil Code. 

 

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	2.6	 	The Service Provider is entitled to enforce its claims related to the compensation set out in section 52 (2) of the Communications Act only against the Universal
Telecommunication Support Fund 

 

	2.7	 	If not provided otherwise by the law, the Service Provider shall deal with subscribers being in equal position in reasonably identical treatment and shall not apply
any detrimental discrimination or unjustified advantage with respect to the conditions or tariffs of providing the universal service. 

 
3. CHAPTER 
OBLIGATIONS OF THE UNIVERSAL SERVICE PROVIDER 
 

	3.1	 	Access provision 

 

	 	3.1.1	 	The Service Provider is obliged to enter into a subscription agreement on the basis of an application for the establishment of an access point. The Service Provider
shall not be obliged to enter into such agreement if 

 

	 	(a)	 	the applicant is in default of more than three months with a fee payment from the use of any universal telecommunications service to any universal service provider;
or 

 

	 	(b)	 	if the applicant’s earlier subscription agreement has been terminated during six months preceding the application due to a reason of termination set out in a
law. 

 

	 	3.1.2	 	The Universal Service Provider shall register the application for the establishment of a subscriber’s access point. If the application does not contain
substantial data for the conclusion of a subscription agreement, the Universal Service Provider shall request the applicant in writing for amending his application by setting a deadline of 15 days. Should the applicant not amend the application
within 15 days, the Universal Service Provider shall be entitled to delete the application from his register. 

 

	 	3.1.3	 	In the notice of acceptance of the application containing substantial data for the conclusion of the subscription agreement, the Service Provider shall set, in 90 %
of all cases, a deadline shorter than 5 months from registering such application and in 98 % of all cases, a deadline shorter than 11 months from registering such application for entering into the individual subscription agreement. The Service
Provider shall measure compliance with these deadlines according to Section 12 Subsections 1-2 of MeHVM Decree 23/2001. (XII.22.) on the Detailed Technical Requirements of the Universal Telecommunications Services (“Emr.”).

 

	 	3.1.4	 	The Service Provider shall list all the data being necessary for the conclusion of the written agreement in his General Terms of Business (the
“ASZF”). 

 

	 	3.1.5	 	Establishment of a subscriber’s access point on the basis of a subscription agreement concluded with respect to making use of universal telecommunications
services in the service area and according to the deadline set out in the Agreement, the Universal Service Provider shall establish subscriber’s access points in compliance with the target value set out in Schedule No. 1.

 

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	 	3.1.6	 	The Universal Telecommunications Service Provider shall establish the subscriber’s access point in such way which enables the subscriber to connect thereto an
end-device complying with legal provisions. 

 

	 	3.1.7	 	On the basis of a universal telecommunications service, the Universal Service Provider shall, if requested by the subscriber, provide access to the following
services through the Subscriber’s access point: 

 

	 	a)	 	initiation and reception of local, national long-distance and international telephone calls; 

 

	 	b)	 	call initiation to mobile radio telephones and reception of calls made from such devices. 

 
The Service Provider shall ensure that the scope of services set out in paragraphs a) and b) are continuously
accessible through the subscriber’s access point, but at least with compliance to the target values set out in Points 9 and 11 of Schedule No. 1. 
 

	3.2	 	Public telephone booths 

 
The Universal Telecommunications Service Provider shall maintain on his Service Area 1 public telephone booth per 500 inhabitants or, on
settlements with less inhabitants, 1 public telephone booth. The Universal Service Provider shall maintain at least one public telephone booth with special design for hearing impaired/disabled people per 2500 inhabitants. 
 
Concerning the decision on the establishment of public
telephone booths consequent to the entry into force of the present Agreement, the Service Provider shall take into consideration the suggestions made by local municipalities and registered civil organizations of the hearing impaired and disabled
when making the decision on the location of public telephone booths usable by hearing impaired and/or disabled people. The rate of outdoor booths useable by disabled people may not be lower than 2% of all public telephone booths. The Universal
Telecommunications Service Provider shall provide access to at least the following services and functions through public telephone booths maintained by the Universal Service Provider: 
 

	 	a)	 	telephone service; 

 

	 	b)	 	toll-free emergency calls; 

 

	 	c)	 	telephone error reporting service (provided by the Universal Telecommunications Service Provider); 

 

	 	d)	 	inquiry (information) service; 

 

	 	e)	 	call-back facility. 

 
The Service Provider shall ensure that the rate of operational outdoor public telephone booths achieves the value set out in Point 10 of
Schedule No. 1.—except for cases of vandalism—on areas where the Service Provider provides universal telecommunications services, and shall also ensure the establishment of a voice exchange connection according to the Quality Requirements.
Public telephone booths shall be accessible for subscribers during 24 hours on all days of the week, except public booths located indoors. 
 

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The Service
Provider shall put on display the following information in public telephone booths operated by the Service Provider, on clearly visible places: 
 

	 	(a)	 	dial number of the public telephone booth, 

 

	 	(b)	 	free of charge emergency call dial numbers, dial numbers of error reporting and national inquiry service; 

 

	 	(c)	 	data of the nearest public telephone booth; 

 

	 	(d)	 	name of the service provider operating the public telephone booth; 

 

	 	(e)	 	indication of accepted coins and/or cards. 

 

	3.3	 	Operator services 

 
The Universal Service Provider shall ensure that the Operator services are accessible for the subscriber through subscriber’s access
points for 24 hours on every day of the week. 
 
The Quality Requirements contain the regulations regarding the answering time of Operator Provider services maintained by the Universal Telecommunications Service Provider. 
 

	3.4	 	Accessibility of subscribers’ directories 

 
At least once a year, the Service Provider shall issue the subscribers’ directory. In areas where the Service Provider maintains the
subscribers’ access, he shall offer the subscribers’ directory to the subscriber, in other cases – in counties affected by a geographic numbering area maintained by the Service Provider – it shall hand over free of charge the
subscribers’ directory to service providers maintaining subscriber’s access, and to co-operate with the service provider maintaining subscriber’s access for this goal. 
 
Within the geographic area of the universal service, the subscribers’ directory shall contain at least
the data of subscribers of telephone services with subscribers’ access in the county (or in Budapest, if the subscribers’ access point is operated in Budapest) where the subscribers’ access point is located, pending on the
authorization given by the subscriber listed in the directory. 
 

	3.5	 	Ensuring toll-free emergency calls 

 
The Universal Telecommunications Service Provider shall ensure continual accessibility of emergency numbers as set out by the ANFT and the
harmonized European emergency number. 
 

	3.6	 	Maintenance of toll-free emergency calls 

 
The Universal Telecommunications Service Provider shall correct errors hindering accessibility of the toll-free emergency service on all
days of the week, within 24 hours from the error report i.e. from noticing the error by the Universal Telecommunications Service Provider. 
 

	3.7	 	Error report service 

 
The Universal Service Provider shall ensure that the subscriber can report any errors to the error report service, which is provided by
the Universal Service Provider toll-free during 24 

 

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hours on all days of the week. The Universal Service Provider shall record error reports by a provable electronic method and keep such
records for a period of a least one year, complying with the rules on data protection. 
 

	3.8	 	Telegram services 

 
The Universal Service Provider shall enter into a telegram service agreement with the universal postal Service Provider in order to
provide telegram services on the Service Area, whereby the service shall be accessible from any part of the country with uniform conditions for a consideration set out in the ÁSZF. 
 

	3.9	 	Quality Requirements applying to the Universal Service 

 
The Universal Service Provider shall comply with the Quality Requirements when providing the Universal Service. 
 

	3.10	 	Penalty fee payment obligation 

 

	 	3.10.1	 	Penalty fee payable on quality and technical faults related to the performance of the subscriber contracts for universal service 

 
The Service Provider shall pay the penalty fee set out in
Schedule No. 1. if he deviates from any requirements set out in Schedule No. 1 of this Agreement, as proved by measures filed with the authorities, detrimentally to the users, in a calendar year being the period of reviewing the performance of
requirements. If there is a deviation from more than one requirements, penalty fee shall be paid after each requirement. 
 
The penalty fee shall be paid to the fund for informatics, development of telecommunications and frequency business, by the end of the
quarter year following the respective measuring period. 
 
If the authority orders the service provider to pay a penalty fee for non-compliance with the quality requirements set out in Schedule No. 1. of Decree MeHVM 23/2001. (XII.22.) on the Detailed Technical Conditions of the Provision of
Universal Telecommunications Services, the Minister may not enforce his claim to default payment due to non-compliance with the same indicator. 
 
In case a circumstance occurs which entails a penalty fee, the penalty fee shall be calculated taking into consideration the deviation
point (i.e. percentage point or day) related to that circumstance or its entire multiple as a multiplier having regard to the exceeded deviation 
 

	 	3.10.2	 	Other cases of (default) penalty payment obligation 

 
Besides the cases set out above, the Service Provider shall pay penalty fee if he ceases to perform his service obligations under this
Agreement due to unlawful reasons being attributable to the Service Provider (except ordinary termination). The rate of such penalty fee shall be 150 Million HUF per geographic numbering area. 
 

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	 	3.10.3	 	Simultaneous contractual consequences 

 
If both this Agreement and the Concession Contract provide the same legal consequence for a certain breach of contract, the provisions of
this Agreement setting out such legal consequences shall prevail.. 
 

	3.11	 	Data provision 

 
The Universal Service Provider shall maintain records suitable for proving compliance with (i) this Agreement, the Telecommunications Act
and other applicable laws and (ii) undergo reasonable supervisory checks. If the Minister does not decide otherwise—as made possible by the law—data provided by the Universal Service Provider shall be public, except confidential
information (e.g. significant business or shareholder information) or business secrets. 
 
The Universal Service Provider shall on the basis of its data provision obligation provide quarterly the local telecommunication office in written electronic form data regarding compliance with the
Quality Requirements (service quality target values), within 30 days from the last day of the respective quarter year. If the result of such monitoring does not meet the Quality Requirements, the Universal Service Provider shall immediately take the
appropriate measures and notice thereof the Telecommunication Supervision. 
 
The Universal Service Provider shall file his method for monitoring Quality Requirements with the Telecommunication Supervision, within 90 days from commencing provision of the Universal Service.

 
The Universal Service Provider shall prepare
records and registers being the base of Universal Telecommunications Service Fund contributions i.e. payment rights by basing them on accounting certificates which enable the organization being entitled to control this to duly check the authenticity
of such data. 
 

	3.12	 	Suspension of service 

 
The Universal Service Provider shall ensure that suspensions due to technical errors which can be repaired only with the suspension of the
service do not exceed the time limits set out in the Quality Requirements. 
 

	3.13	 	Accounting regulations 

 
The Universal Service Provider shall in his books and records continuously indicate his revenues, costs and expenditures relating to
services provided in the form of targeted tariff packages within the scope of Universal Services, separately, as if each service would be provided by separate business entities. 
 
4. CHAPTER 
UNIVERSAL SERVICE TARIFFS, TARIFF PACKAGES 
 

	4.1	 	Tariff packages 

 
In order to ensure that the Universal Service is affordable, the Universal Service Provider shall prepare tariff packages for certain
groups of consumers, as defined in a separate law. During the establishment of Universal Service tariff packages, the Universal Service Provider may 

 

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connect the Universal Services with the provision of other, non-universal Telecommunications Services. 
 
The Universal Service Provider shall prepare a discount tariff
package for private subscribers making use of the Universal Service, and another package containing the subscription tariff and call tariffs of the Universal Service (regular package). The Universal Service Provider shall publish the conditions of
the tariff packages according to Govt. Decree 249/2001. (XII. 8.) on Telecommunication Subscription Agreements. 
 

	4.2	 	Limitations of discount tariff packages 

 
In the relation to subscribers purchasing the discount tariff package of the Universal Service, the Universal Service Provider shall not
be obliged to provide a choice of service providers. 
 
5. CHAPTER 
RIGHTS OF THE UNIVERSAL SERVICE PROVIDER 
 

	5.1	 	Support from the Universal Telecommunications Service Fund 

 
The Universal Service Provider shall be entitled to support for reducing his reasonable and authorized financial burden—compared to
the estimated expenses in case of exclusive business-oriented service provision—arising from providing the Universal Service. The Universal Service Provider’s claim for such support is based on his revenues lost in connection with
Universal Services provided on the basis of targeted tariff packages. 
 
The service provider shall be entitled to support if an amount not exceeding the subscription tariff of discounted tariff packages purchased by a number of private subscribers determined as a ratio of all private
subscribers, as set out in applicable law as it may be in force from time to time. The Parties acknowledge that the ratio at the time of concluding this contract is maximized at 25 percent. 
 
The Service Provider shall be entitled to support from the
Fund as of the effective day set out in Section 2.3., the conditions whereof shall be ensured by the Minister. 
 
The Service Provider shall be entitled to support from the Fund for his justified and authorized financial expenses, which are additional
in relation to expenses estimated for the application of exclusive business reasons, arising from the provision of universal telecommunications services. 
 
The Universal Service Provider shall report his recommendation referring to the amount of support he is entitled to in the respective
year—based on the audited annual report of the calendar year preceding the respective year and detailed according to the MeHVM Decree on the rate of Universal Telecommunications Support Fund contribution and payable support, as well as the
calculation thereof (hereinafter: ETTA Decree) by June 10 of the respective year to the Fund and the Supervision. 
 
The amount of support the Universal Service Provider is entitled to shall be calculated as the result of multiplying by twelve the annual
average number of private subscribers purchasing the discount tariff package and the difference between subscription price of the regular and the 

 

10 

discount tariff package, according to the law on contributions to the Fund and the rate of payable support as well as of the calculation
thereof. 
 
The amount of support is equal to the
difference between the subscription price of the regular and the discounted tariff package multiplied by the number of subscribers purchasing the discounted package, but this rate may not exceed the maximum rate of subscribers set out in the ETTA
Decree. The increase rate of the difference between the subscription price of the two tariff packages may in a single year not exceed the increase of the consumers’ price index forecast for the respective year plus 2 percent points, but not
more than 6.5 %. The tariff difference to be claimed from the Fund shall be 1085 HUF in 2003 and subsequently, at least 1085 HUF. 
 
The Service Provider shall pay contribution to the Fund, for the calculation of which he shall report to the Fund and to the Authority by
June 10 of the respective year the amount of his annual revenues from telecommunications services – based on the audited annual report of the year preceding the respective year – and the amount of the decreasing expenses set out below.

 
The revenues can be reduced by the following
posts: 
 

	 	(a)	 	expenses and costs of interconnection service fees, 

 

	 	(b)	 	in case of universal service providers, revenues from the provision of universal services performed on the basis of discounted tariff packages,

 

	 	(c)	 	payments made from the Fund to the obliged service provider. 

 
In every respective year, payments to the Fund shall be made each quarter year, broken down to quarter years. Payments to the Fund shall
be made not later than the last day of the second month following the quarter year and payments by the Fund shall be made by the last day of the third month following the respective quarter year. 
 
In the first two quarter years, payment to and from the Fund
shall be made in the last quarter of the calendar year preceding the respective year, in the determined amount, and in subsequent quarter years, on the basis of the audited annual report of the year preceding the respective year. The difference of
the amount actually paid or received and the amount calculated for this period on the basis of the audited annual report shall be settled in the payments due in the third quarter of the respective year. 
 
The first contributions—regarding the year
2002—shall be due by February 28, 2003, and payments from the Fund by March 31, 2003. 
 

	5.2	 	Substitute services 

 
The Universal Service Provider shall be entitled to render a substitute service to the Universal Service, provided that the Universal
Service would lead to unreasonably high expenses in the Universal Service Provider’s network and equipment with respect to certain access points of the Universal Service. 
 
In such case, the Universal Service Provider shall be entitled to request the Telecommunication Arbitration
Committee’s approval of providing the Universal Service by a different technology through one or more different service providers. The Universal Service Provider shall to his 

 

11 

application filed with the Telecommunication Arbitration Committee enclose the draft agreement between the service providers and a
presentation showing that substituting the service will have a favorable effect on the payable support. 
 

	5.3	 	Suspension of Universal Services 

 

	 	5.3.1	 	The Universal Service may be suspended only with the prior written consent of the Minister and giving satisfactory notice to all affected customers in due time.
During the suspension period, the Universal Service Provider shall not be entitled to the support set out in Point 5.1. 

 

	 	5.3.2	 	The Minister’s approval is not required: 

 

	 	(a)	 	in the case of unforeseeable, inevitable alien reasons (force majeure), 

 

	 	(b)	 	in the case of a technical defect that can only be repaired through suspension of service or maintenance, 

 

	 	c)	 	for the protection of the defense, national security, financial and public security (in particular prevention of terrorism and fight against traffic of drugs)
interests of the Republic of Hungary, as specified by the law. 

 
6. CHAPTER 
DUTIES OF THE MINISTER 
 

	6.1	 	Equal treatment 

 
The Minister may not exercise negative discrimination or provide unjustified advantages to the provider of any service, registered
telecommunications service provider or universal service provider. 
 

	6.2	 	Supervision 

 
The Minister may review the activity of Universal Service Providers by himself or through a directly controlled state administration body.
The Telecommunication Supervision shall review the compliance of Universal Services with this Agreement or the laws within the scope of its market supervision activity. 
 
The authority shall be entitled to make accessible to the public the measuring results filed by the Universal
Service Provider. 
 

	6.3	 	Suspension of the Universal Service 

 
The Minister may suspend the Universal Service: 
 

	 	(a)	 	in the case of unforeseeable, inevitable alien reasons (force majeure), 

 

	 	(b)	 	for the protection of the defense, national security, financial and public security (in particular prevention of terrorism and fight against traffic of drugs)
interests of the Republic of Hungary, as specified by the law. 

 

12 

 

	6.4	 	Remote location access point 

 
The Minister undertakes to ensure through appropriate laws that if a universal service access point is requested to a remote location and
the one-off fee does not cover the direct connection costs of the Universal Service Provider, the applicant shall pay 50 percent of the actual costs of setting up the section of the circuit from the border of the built-up area to the location of the
access point. 
 

	6.5	 	The Minister endeavors to make the best efforts to ensure that the Government Decree on the rules regarding the operation, supervision and use of the Universal
Telecommunications Support Fund provides for the efficient fulfillment in due time of the payments to the Universal Telecommunications Support Fund. 

 

	6.6	 	The Minister endeavors to make—within the legal framework—the best efforts in order to ensure that the operators obliged to pay to the Fund the
compensation due to the Service Providers pay the sum in full within the deadline set out by the laws. 

 

	6.7	 	The Minister undertakes to analyze the possibility of reducing the reasonable and justified additional costs incurred in connection with the operation of the public
telephone booths in addition to the estimated costs that would be incurred by the Service Provider on the basis of exclusively business considerations. 

 
7. CHAPTER 
DURATION OF THE AGREEMENT 
 

	7.1	 	The Parties agree that this Agreement shall be entered into for an indefinite period of time. 

 
8. CHAPTER 
AMENDMENT AND TERMINATION OF THE AGREEMENT 
 

	8.1	 	Amendment of the Agreement with mutual consent 

 
The Parties may amend this Agreement with mutual consent in written form. A Party shall review the request by another Party to amend the
Agreement within 30 days from learning of the amendment request and reply thereto, including appropriate reasons. 
 

	8.2	 	Termination of the Universal Service Agreement by the Minister 

 

	 	8.2.1	 	The Minister may terminate this Agreement with a notice of 12 months. 

 

	 	8.2.2	 	In the possession of evidences referring to the circumstances set out below, defined in the protocol recorded during the negotiations under Point 10.2, the Minister
may terminate this Agreement with respect to one or all Service Areas defined in the Agreement with a notice period of 6 months, provided that the Universal Service Provider becomes the subject of a liquidation procedure or if the Universal Service
Providers initiates a winding-up procedure. 

 
If the Universal Service Provider becomes subject of any of the above procedures, he shall notice thereof the Minister within 8 days from the commencement of such procedure. 
 

13 

 
The Minister
reserves the right to terminate this Agreement with a notice period differing from the notice period set out in Point 8.2.1, but at least six months, or to declare one or several provisions of this Agreement as invalid with respect to the Parties,
if this is necessary for compliance with requirements set out by Act I of 1994 on the promulgation of the European Agreement signed on December 16, 1994 in Brussels by the Republic of Hungary and the European Communities and the member states
thereof on the association between them, as well as any requirements set as result of association negotiations between the Republic of Hungary and the European Union i.e. the member states thereof. 
 

	8.3	 	Termination of the Agreement by the Universal Service Provider 

 

	 	8.3.1	 	The Universal Service Provider may terminate this Agreement with one year’s notice. In his notice of termination, the Universal Service Provider shall undertake
that if the new entering universal service provider does not have the capacity needed for providing the obligatory supply, he shall agree with such universal service provider with respect to the transfer of ownership or utilization rights on
structures and equipment necessary for the provision of the Universal Service. The Universal Service Provider shall be entitled to compensation for the financial burden until the day on which the Agreement terminates. 

 
9. CHAPTER 
FORCE MAJEUR 
 
In case of a failure to perform his obligations under this Agreement, the Universal Service Provider shall be freed from his liabilities
only to the extent and for the period of time of a declared or undeclared war, civil unrest, acts of terrorism, strike – except strike by the Universal Service Provider’s employees –, natural disaster, fire, explosions or other
emergency situation or any event which in the understanding of the Civil Code results in the performance becoming impossible, materially hindered or made impossible. 
 
10. CHAPTER 
SETTLEMENT OF DISPUTES AND CONCILIATION 
 

	10.1	 	Negotiations 

 
The Parties shall settle their disputes and claims arising from this Agreement by direct negotiations. 
 

	10.2	 	Conciliatory procedure 

 
The Minister shall hold the conciliatory procedure described hereunder prior to termination by mutual consent or amendment of this
Agreement or in connection with issues in connection with this Agreement. During such procedure, the Minister shall in writing notice the Universal Service Provider, which notice shall contain the reasons of the recommended measure. Subsequently,
subject to the deadline set out in clause 8.1, the Universal Service Provider shall have the possibility to explain his point of view, whereby he can deliver an oral or written declaration, provide further evidence and comment arguments and
evidences brought up against 

 

14 

him. The Minister shall hold such conciliatory procedure at a reasonable pace and—in the absence of extraordinary
circumstances—make his decision within three (3) months from receiving the written notice. In extremely difficult cases, the Minister may extend the conciliatory procedure by further 3 months. 
 
11. CHAPTER 
MISCELLANEOUS PROVISIONS 
 

	11.1	 	Concession agreements 

 
The Parties undertake to start bona fide negotiations within 30 days from the execution of this Agreement regarding the amendment or
cancellation of Concession Agreement provisions remaining in force. 
 

	11.2	 	Applicable law 

 
With respect to the application and interpretation of this Agreement and to questions not regulated by this Agreement, the laws of the
Republic of Hungary shall apply – with special regard to the provisions of the Civil Code –, as they may be in force from time to time, with special regard to the laws relating to this industry branch. 
 

	11.3	 	Partial invalidity 

 
The provisions of this Agreement shall become invalid only to the extent affected by the cause of invalidity. Other provisions of the
Agreement shall not be affected. 
 

	11.4	 	Language 

 
This Agreement has been prepared and signed by the Parties in Hungarian language. A potential translation into any other language can be
construed only as information prepared for foreign investor(s). 
 

	11.5	 	Jurisdiction 

 
For the case if disputes could not be settled by the conciliatory procedure until the deadline set out in Point 10.2, the Parties agree
upon the exclusive competence of the Central District Court of Pest or the Metropolitan Court as determined by the rules on general jurisdiction. 
 

	11.6	 	Notices 

 
Notices and other communication made on the basis of this Agreement shall be made via letter or telefax to the addresses of the Parties
indicated below or amended in written form, except if the Parties appoint in written form another correspondence address or person. Notices and communications made with respect to this Agreement shall be made in Hungarian language. Notices shall be
sent to the addresses set out hereunder: 
 
To the minister in charge of the Prime Minister’s Office: 
 
1055 Budapest 
 
Kossuth Lajos ter 2-4. 
 

15 

 
Telefax: 441-2502 
 
To the Universal Service Provider 
 
1066 Budapest, Terez krt. 46. 
 
To the attention of Kaj Ole Bertram 
 
Telefax: 474-0350 
 
Budapest, 6 March 2002 
 

16 

 
Schedule No. 1.

 
Default penalty 
 

	 	  	 SPECIFICS OF SERVICE

	  	 MEASUREMENT

	  	 	  	 TARGET VALUES

	  	 Default penalty
due to the Universal
Service
Provider from
the ETTA
contribution as
 % of the gross contribution
from the year preceding

	
	 1.
	  	 Deadline of the application for the creation of a subscriber access point
	  	 a) the time between the application and the conclusion of the individual subscriber agreement in 90 % of all
cases
  
 b) a) the time between the application and the
conclusion of the individual subscriber agreement in 98 % of all cases
	  	 	  	 5
 months
  
 11 months
	  	 1 % after each exceeded percent point deviation

	
	 2.
	  	 Connection time
	  	 The time calculated from the conclusion of the subscription agreement, based on the Universal Service Provider’s
records, if the annual rate of deviations exceeds the target value
	  	 	  	 30 days
	  	 1 % after each further exceeded day

	
	 3.
	  	 Responding time of error report service
	  	 the minimal rate of operator responses within the 30 sec maximal answering time, as ratio of all incoming survey
calls
	  	 	  	 92 %
	  	 0.1 % after each exceeded difference of one percent point

	
	 4.
	  	 Error repair
	  	 Errors repaired within 72 hours on the area served by the Universal Service Provider as the rate of received actual error
reports received in the same area, except if the error is due to any force majeur event.
	  	 	  	 90 %
	  	 0.1 % after each exceeded difference of one percent point

	
	 5.
	  	 Unsuccessful calls
	  	 Maximal rate of unsuccessful calls compared to the number of all survey calls initiated during peak period (Monday to
Friday between 9 AM to 5 PM)
	  	 a) calls in the network of the Universal Service Provider within a geographical numbering area
	  	 1. 4%
	  	 0.5 % after each
 exceeded difference of one thousandth point

	
	 	  	 	  	 	  	 b) national long-distance calls
	  	 2.7 %
	  	 0.5 % after each exceeded difference of one thousandth point

	
	 	  	 	  	 	  	 c) international calls
	  	 2.7 %
	  	 0.5 % after each difference of one thousandth point

	
	 6.
	  	 Successful calls
	  	 Maximum time of establishing successful calls (call establishment time) in case of incoming calls
	  	 	  	 45 sec
	  	 0.1 % after each exceeded further second

	
	 7.
	  	 Response time of operator services
	  	 Minimal rate of operator responses during the maximum response time of 30 seconds, compared to all incoming survey
calls
	  	 	  	 92 %
	  	 0.1 % after each exceeded difference of one percent point

 

17 

 

	
	 8.
	  	 Bill reclamation
	  	 Rate of justified reclamation’s with respect to telephone bills compared with the annual average number of connected
subscriber access points
	  	 	  	 1.6 %
	  	 0.5 % after each exceeded difference of one thousandth point

	
	 9.
	  	 Suspension
	  	 a) temporary suspension affecting the whole service area in a year, overall
	  	 	  	 4 hours
	  	 0.5 % after every exceeded deviation of 20 minutes

	
	 	  	 	  	 b) temporary suspension affecting a single geographic numbering area in a year, overall
	  	 	  	 8 hours
	  	 0.5 % after every exceeded deviation of 30 minutes

	
	 10.
	  	 Operational public telephone booths (public places)
	  	 Rate of public telephone booths operating on the Universal Service Provider’s service area found duly operational,
compared with the number of all checked public telephone booths.
	  	 	  	 92 %
	  	 0.1 % after each exceeded difference of one percent point

	
	 11.
	  	 Error
	  	 Number of subscribers access points malfunctioning due to average errors occurred during one months in the Universal
Service Provider’s network (calculated from the number of errors per year), compared with the annual average number of operational subscriber access points.
	  	 	  	 2 %
	  	 0.1 % after each exceeded difference of one percent point

	
	 12.
	  	 Data transfer quality
	  	 a) highest level of signal repetition (transfer time) increase in data transfer connections attributable to the Universal
Service Provider’s fault
	  	 	  	 10 %
	  	 0.1 % after each exceeded difference of one percent point

	
	 	  	 	  	 b) highest level of page repetition in telefax connections attributable to the Universal Service Provider’s
fault
	  	 	  	 10 %
	  	 0.1 % after each exceeded difference of one percent point

	
	 13.
	  	 Voice transfer quality
	  	 The lowest value calculated by the method set out in Schedule 2 of Decree 23/2001. (XII.22.) MeHVM on the detailed
technical requirements of universal telecommunication services
	  	 	  	 B=3,5
	  	 0.5 % after every exceeded difference of 0,1 in value B.

 

18 

 
Attachment No.
2. 
 
Service Area 
 
The list of areas where services are to be rendered shall be the list of
settlements designated as per primer areas in (herein: Geographic numbering area) the Schedule to Decree 26/1993 (IX.9.) KHVM on the structure plan of the public telephone network. Accordingly, upon the execution of the Agreement, the settlements of
the following primer areas shall be covered by the term of Service Area: 
 

	 Primer area:

	    	 Numbering:

	 Bekescsaba
	    	 66

	 Oroshaza
	    	 68

	 Papa
	    	 89

	 Salgotarjan
	    	 32

	 Sarvar
	    	 95

 

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