SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(2))
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HUNGARIAN TELEPHONE AND CABLE CORP.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration No.
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(3) Filing party:
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(4) Date filed:
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<PAGE>
HUNGARIAN TELEPHONE 100 First Stamford Place
AND CABLE CORP. Stamford, CT 06902
Dear Stockholder: April 16, 1999
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Meeting of Stockholders of Hungarian Telephone and Cable Corp. (the
"Company") to be held at 10:00 a.m. local time, on May 25, 1999 at the New York
Marriott East Side Hotel, 525 Lexington Avenue, New York, New York 10017.
At the Annual Meeting the holders of Common Stock of the Company will
consider and vote upon the election of directors and the ratification of the
appointment of auditors. The Board unanimously recommends a vote "FOR" the
election of directors and the ratification of the appointment of auditors.
The attached Proxy Statement more fully describes the matters to be
voted upon at the Annual Meeting and also includes information concerning the
Company. I urge you to read carefully the information contained in the Proxy
Statement.
I hope that you will be able to attend the Annual Meeting. If you
cannot attend, your shares of Common Stock can be represented by completing,
signing and dating the enclosed proxy, and returning it in the envelope provided
(which requires no postage if mailed in the United States). You may, of course,
withdraw your proxy if you attend the Annual Meeting and choose to vote in
person.
Sincerely,
/s/David A. Finley
David A. Finley
Chairman of the Board
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP.
100 First Stamford Place
Stamford, Connecticut 06902
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Hungarian Telephone and Cable Corp., a Delaware corporation (the
"Company"), will be held at the New York Marriott East Side Hotel, 525 Lexington
Avenue, New York, New York 10017, on May 25, 1999, at 10:00 a.m., local time,
for the following purposes:
1. To elect eight directors of the Company to serve until the
2000 Annual Meeting of Stockholders or until their successors
have been duly elected and qualified; and
2. To ratify the appointment of KPMG LLP as auditors of the
Company for the fiscal year ending December 31, 1999; and
to transact such other business as may properly come before the Meeting and any
adjournment or postponement thereof. The Board of Director is not aware of any
other business to come before the Meeting.
The Board of Directors has fixed April 9, 1999 as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Meeting and any adjournment or postponement thereof. A complete list of
stockholders of record entitled to vote at the Meeting will be maintained in the
offices of the Company's stock transfer agent, Continental Stock Transfer &
Trust Company, 2 Broadway, New York, NY 10004, for ten days prior to the
Meeting.
Whether or not you plan to attend the Meeting in person, please mark,
execute, date and return the enclosed proxy promptly in the envelope provided.
Should you attend the Meeting in person you may, if you wish, withdraw your
proxy and vote your shares in person.
By Order of the Board of Directors,
/s/Peter T. Noone
Peter T. Noone
Secretary
Stamford, Connecticut
April 16, 1999
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A PRE-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP.
PROXY STATEMENT
TABLE OF CONTENTS
Page
INTRODUCTION...................................................................1
Voting Rights and Proxy Information...................................1
Vote Required for Approval............................................2
Voting Securities.....................................................2
Stock Ownership of Certain Beneficial Owners..........................2
Stock Ownership of Management.........................................3
Potential Change in Control...........................................4
I. ELECTION OF DIRECTORS......................................................5
General...............................................................5
Current Directors and Nominees for Director...........................5
Executive Officers Who Are Not Directors..............................8
Standard Remuneration of Directors and Other Arrangements.............8
Director Stock Option Plan............................................8
Executive Compensation................................................9
Employment Agreements................................................11
Committees and Meetings of the Board of Directors....................13
Compensation Committee Interlocks and Insider Participation..........13
Certain Relationships and Related Party Transactions.................14
Indebtedness of Management...........................................15
Section 16(a) Beneficial Ownership Reporting Compliance..............15
Compensation Committee Report on Executive Compensation..............15
Stock Performance Graph..............................................17
II. RATIFICATION OF THE APPOINTMENT OF AUDITORS.............................19
STOCKHOLDER PROPOSALS.........................................................19
OTHER BUSINESS................................................................19
EXPENSES OF SOLICITATION......................................................19
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP.
100 First Stamford Place
Stamford, Connecticut 06902 April 16, 1999
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1999
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of
Hungarian Telephone and Cable Corp. (the "Company") to be used at the
Annual Meeting of Stockholders of the Company, to be held at 10:00 a.m.
local time, May 25, 1999 at the New York Marriott East Side Hotel, 525
Lexington Avenue, New York, New York 10017, or at any adjournment or
postponement thereof (the "Meeting"). This Proxy Statement and the
accompanying Notice of Annual Meeting of Stockholders and form of proxy
are first being sent or given to stockholders on or about April 16,
1999.
At the Meeting, the stockholders of the Company are being
asked to consider and vote upon: (i) the election of eight directors of
the Company to serve until the 2000 Annual Meeting of Stockholders or
until their successors are duly elected and qualified; and (ii) the
ratification of the appointment of KPMG LLP as auditors of the Company
for the fiscal year ending December 31, 1999.
Voting Rights and Proxy Information
All shares of Common Stock, par value $.001 per share, of the
Company (the "Common Stock"), represented at the Meeting by properly
executed proxies received prior to or at the Meeting, and not revoked,
will be voted at the Meeting in accordance with the instructions
thereon. If no instructions are indicated, properly executed proxies
will be voted for election of all nominees for director named below and
for the ratification of the appointment of auditors. The Company does
not know of any matters, other than as described in the Notice of
Annual Meeting, that are to come before the Meeting. If any other
matters are properly presented at the Meeting for action, the persons
named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best
judgment. Proxies should not be sent by the stockholder to the Company,
but to Continental Stock Transfer & Trust Company, the Company's
Registrar and Transfer Agent, at 2 Broadway, 19th Floor, New York, New
York 10004. A pre-addressed, postage-paid envelope is provided for this
purpose.
A proxy delivered pursuant to this solicitation may be revoked
at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company at or before the Meeting a written
notice of revocation bearing a later date than the proxy, (ii) duly
executing a subsequent proxy relating to the same shares and delivering
it to the Secretary of the Company at or before the Meeting, or (iii)
attending the Meeting and voting in person (although attendance at the
Meeting will not in and of itself constitute revocation of a proxy).
Any written notice revoking a proxy should be delivered to Peter T.
Noone, Secretary, Hungarian Telephone and Cable Corp., 100 First
Stamford Place, Stamford, Connecticut 06902.
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<PAGE>
Vote Required for Approval
The presence, in person or by proxy, of a majority of the
shares of Common Stock entitled to vote is required to constitute a
quorum for the transaction of business at the Meeting. The election of
directors requires the affirmative vote of a plurality of the shares of
Common Stock voting in person or by proxy at the Meeting. Thus,
abstentions and proxies returned by brokers as "non-votes" on behalf of
shares held in "street name" will have no effect on the outcome of the
election of directors. Proxies submitted which contain abstentions or
broker "non-votes" will be deemed present at the Meeting in determining
the presence of a quorum.
Your Board of Directors has unanimously approved the
nomination of the persons named herein for election of directors and
the appointment of KPMG LLP. Accordingly, the Board recommends a vote
FOR the election of directors and the ratification of the appointment
of auditors.
Voting Securities
April 9, 1999 has been set as the record date (the "Record
Date") for determining stockholders entitled to notice of, and to vote
at, the Meeting. As of the close of business on the Record Date, there
were outstanding 5,395,864 shares of Common Stock. Each holder thereof
is entitled to one vote per share.
Stock Ownership of Certain Beneficial Owners
The following table sets forth, as of April 9, 1999, certain
information as to those persons who were known by management to be
beneficial owners of more than 5% of the Common Stock.
Shares
Beneficially Percent of
Name and Address of Beneficial Owner Owned (1) Class (1)
------------------------------------ ----------- -----------
CU CapitalCorp. 7,628,126(2) 63.5%
c/o Citizens Utilities Company
High Ridge Park
Stamford, Connecticut 06905
Tele Danmark A/S 994,158 18.4%
Larslejsstraede 5
0900 Copenhagen C, Denmark
(1) "Shares Beneficially Owned" includes shares held directly as well
as shares which such entity may have the right to acquire within 60
days of April 9, 1999. "Percent of Class" is calculated by dividing
the "Shares Beneficially Owned" by such entity by the shares of
Common Stock outstanding as of April 9, 1999 plus only those shares
which such entity may have the right to acquire within 60 days of
April 9, 1999.
(2) Includes 6,622,218 shares subject to options granted by the Company
to CU CapitalCorp., all of which are presently exercisable. See
"Potential Change in Control" and "Election of Directors - Certain
Relationships and Related Party Transactions - The Citizens
Agreements."
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<PAGE>
Stock Ownership of Management
The following table sets forth, as of April 9, 1999, certain
information as to the shares of Common Stock beneficially owned by
certain executive officers, officers, employees and a former executive
officer of the Company, and as to the shares of Common Stock
beneficially owned by all directors and executive officers of the
Company as a group.
Shares
Beneficially Percent of
Name of Beneficial Owner Owned (1) Class (1)
------------------------ -------------- -----------
Current Officers and Employees
Francis J. Busacca, Jr. 31,990(2) *
Gary D. Carpenter -- --
Peter T. Noone 32,600(3) *
John G. Tesmer -- --
Directors and Executive 190,590(4) 3.4%
Officers as a Group (12
persons)
Former Executive Officer
James G. Morrison 82,500(5) 1.5%
-----------
* Less than one percent
(1) "Shares Beneficially Owned" includes shares held directly, as well
as shares which such persons have the right to acquire within 60
days of April 9, 1999 and shares held by certain members of such
persons' families, over which such persons may be deemed to have
sole or shared voting power or investment power. "Percent of
Class" is calculated by dividing the "Shares Beneficially Owned"
by the individual (or group) by the shares of Common Stock
outstanding as of April 9, 1999 plus only those shares which the
individual (or group) has the right to acquire within 60 days of
April 9, 1999.
(2) Includes 20,000 shares subject to options presently exercisable at
$8.00 per share and 9,990 shares subject to options presently
exercisable at $3.25 per share granted pursuant to Mr. Busacca's
employment agreement. See "Election of Directors - Employment
Agreements."
(3) Includes 15,000 shares subject to options presently exercisable at
$11.69 per share, 2,500 shares subject to options presently
exercisable at $8.00 per share and 15,000 shares subject to
options presently exercisable at $4.625 per share granted pursuant
to Mr. Noone's employment agreement. See "Election of Directors
Employment Agreements."
(4) Does not include shares reported to be beneficially owned by CU
CapitalCorp. Daryl A. Ferguson and Leonard Tow, directors of the
Company, serve as executive officers of both the parent company
and an affiliate of CU CapitalCorp. Does not include shares
reported to be beneficially owned by Tele Danmark A/S. Torben V.
Holm and Finn Schkolnik, directors of the Company, serve as
officers of Tele Danmark A/S.
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<PAGE>
(5) Includes 30,000 shares subject to options presently exercisable at
$8.75 per share and 52,500 shares subject to options presently
exercisable at $8.00 per share granted pursuant to Mr. Morrison's
employment agreement. See "Election of Directors - Employment
Agreements."
Potential Change in Control
From May 1995 through September 1998, the Company entered into
certain agreements (as amended and restated in certain cases to date,
the "Citizens Agreements") with CU CapitalCorp. ("CUCC") and Citizens
International Management Services Company ("CIMS"), both of which are
wholly-owned subsidiaries of Citizens Utilities Company (together with
CUCC and CIMS, "Citizens"). The Company entered into the Citizens
Agreements for financial, operating, management and other reasons that
the Board of Directors believed to be consistent with the Company's
business requirements and growth strategy. As of December 31, 1998,
Citizens, directly or through subsidiaries, provided communications
services, competitive local exchange carrier services and public
services including electric transmission and distribution, natural gas
transmission and distribution, water distribution and wastewater
treatment services to approximately 1.8 million customers in 22 states
throughout the United States.
As of April 9, 1999, Citizens beneficially owned 1,005,908 of
the outstanding shares of the Company's Common Stock. Pursuant to the
Citizens Agreements, Citizens was granted certain options to acquire an
additional 6,622,218 shares of Common Stock at prices ranging from
$12.75 to $18.00 per share. If Citizens were to exercise in full all of
its options, Citizens would own 58.7% of the shares of Common Stock
that would be outstanding if all the outstanding options and warrants,
including those held by Citizens, were exercised. If only Citizens were
to exercise in full all of its options, Citizens would own 63.5% of the
shares of Common Stock that would be outstanding. If any or all of the
options held by Citizens were exercised, Citizens would be in a
position to exert significant influence on the Company. If all of its
options were exercised, Citizens would be able to elect all the members
of the Company's Board of Directors so that it would be in control of
the Company and be able to effectively direct corporate transactions.
The Citizens Agreements provide for certain preemptive rights which
presently enable Citizens to maintain its right to acquire control in
the event of, among other things, a change in the capitalization or
number of outstanding shares of the Company.
The Citizens Agreements also provide for the nomination of one
representative of Citizens for election to the Company's Board of
Directors and for the number of directors to be set at no less than
six, without classified or staggered terms. These provisions could
facilitate the replacement of the Company's then-existing Board by
Citizens in the event Citizens chooses to exercise its right to acquire
shares constituting a controlling interest in the Company. Presently,
Daryl A. Ferguson and Leonard Tow who are executive officers of
Citizens Utilities Company serve on the Company's Board of Directors.
For a further description of certain of the Citizens
Agreements, See "Election of Directors - Certain Relationships and
Related Party Transactions - The Citizens Agreements."
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<PAGE>
I. ELECTION OF DIRECTORS
General
Pursuant to the Company's By-laws, directors are elected to
serve for a one-year term or until their respective successors have
been elected and qualified. Six of the nominees are incumbent directors
who were elected at the last annual meeting of stockholders and one of
the nominees is an incumbent director who was elected to the board by
the Board of Directors since the last annual meeting of stockholders.
It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one
or more nominees) will be voted at the Meeting for the election of the
nominees identified below. If any nominee is unable to serve, the
shares represented by all valid proxies will be voted for the election
of such substitute as the Board of Directors may recommend. At this
time, the Board of Directors knows of no reason why any of the nominees
might be unable to serve, if elected. Except as described below, there
are no arrangements or understandings between any director or nominee
and any other person pursuant to which such director or nominee was
selected.
Current Directors and Nominees for Director
The table below sets forth certain information, as of April 9,
1999, regarding the Company's current Board of Directors and nominees
for election to the Board of Directors, including beneficial ownership
of Common Stock.
<TABLE>
Shares of
Position(s) Held Director Common Stock Percent
Name Age in the Company Since Beneficially Owned Owned
Current Directors who are Nominees for Reelection
<S> <C> <C> <C> <C> <C>
Ole Bertram 63 Director August 1997 50,000(1) *
Daryl A. Ferguson 60 Director March 1998 --(2) --
David A. Finley 66 Director (Chairman) July 1996 15,000(3) *
Torben V. Holm 48 Director March 1999 --(4) --
John B. Ryan 68 Director September 1992 26,000(5) *
William E. Starkey 63 Director July 1996 15,000(3) *
Leonard Tow 70 Director August 1997 --(2) --
Other Current Directors
Finn Schkolnik 53 Director October 1997 --(4) --
James H. Season 55 Director September 1995 20,000(6) *
Nominee for Director
Lennart Meineche 32 Director --(4) --
</TABLE>
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<PAGE>
-----------------
* Less than one percent.
(1) Consists of 50,000 shares subject to options exercisable within 60
days at $4.125 per share granted pursuant to Mr. Bertram's
employment agreement. See " - Employment Agreements."
(2) Does not include shares reported to be beneficially owned by
Citizens. See "Introduction - Stock Ownership of Certain Beneficial
Owners." and "Potential Change in Control." Messrs. Ferguson and
Tow are currently executive officers of Citizens Utilities Company.
See "- Certain Relationships and Related Party Transactions - The
Citizens Agreements."
(3) Consists of 10,000 shares subject to options presently exercisable
at $9.44 per share and 5,000 shares subject to options exercisable
within 60 days at $6.78 per share granted under the Non-Employee
Director Stock Option Plan.
(4) Does not include shares reported to be beneficially owned by Tele
Danmark A/S. See "Introduction - Stock Ownership of Certain
Beneficial Owners." Messrs. Holm and Meineche are currently
officers of Tele Danmark A/S. See "- Certain Relationships and
Related Party Transactions - The Tele Danmark Agreements."
(5) Includes 10,000 shares subject to options presently exercisable at
$9.44 per share and 5,000 shares subject to options exercisable
within 60 days at $6.78 per share granted under the Non-Employee
Director Stock Option Plan and 10,000 shares subject to options,
presently exercisable at $9.44 to $12.25 per share, granted under
the 1992 Incentive Stock Option Plan, as amended.
(6) Includes 10,000 shares subject to options presently exercisable at
$9.44 per share and 5,000 shares subject to options exercisable
within 60 days at $6.78 per share granted under the Non-Employee
Director Stock Option Plan and 5,000 shares subject to options,
presently exercisable at $9.44 per share, granted under the 1992
Incentive Stock Option Plan, as amended.
Ole Bertram. Mr. Bertram was appointed as the Company's
President and Chief Executive Officer effective January 1, 1999.
Prior to joining the Company, Mr. Bertram was the Senior Vice
President of Tele Danmark International since June 1997. Prior to
that, Mr. Bertram was Technical Director of Tele Danmark
International from May 1995 to June 1997, and Technical Director
and Vice President of the Copenhagen Telephone Company from 1988 to
May 1995.
Daryl A. Ferguson. Mr. Ferguson has been associated with
Citizens Utilities Company since July 1989 where he has been President
and Chief Operating Officer since June 1990. He is currently the Chief
Executive Officer and Vice Chairman of the Board of Electric Lightwave,
Inc., a U.S. public company. See "- Certain Relationships and Related
Party Transactions - The Citizens Agreements."
David A. Finley. Mr. Finley is currently a private
investor and consultant with software, money-management, finance
and telecommunications companies. He currently is a director of
Broadway & Seymour, a software and services company in which he served
as Chief Financial Officer until November 1997. Mr. Finley is also a
director of Intelligroup, Inc., MJR Group, Inc., and Naviant
Technology Solutions. Mr. Finley was with IBM from 1959 to 1989
when he retired as Treasurer. While at IBM, he held various
international and domestic posts involving treasury, controllership,
business development, strategic planning and general management.
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<PAGE>
Torben V. Holm. Mr. Holm has been a Senior Vice President
of Tele Danmark International since 1994. Mr. Holm is also a member
of the Management Committee of Tele Danmark International and is a
member of the boards of several communications companies in which
Tele Danmark International holds investments. Mr. Holm was elected
a director of the Company by the Board of Directors in March 1999.
Lennart Meineche. Mr. Meineche has been the Senior Vice
President and Chief Financial Officer of Tele Danmark International
since 1998. Prior to that, Mr. Meineche was the head of financial
planning in Tele Danmark International from 1994 to 1998. From 1991
to 1994, Mr. Meineche was the financial controller in Tele Danmark's
Corporate Finance Department.
John B. Ryan. Mr. Ryan has been a financial consultant since
1988. From 1984 through 1987 he was a Senior Vice President and member
of the Executive Committee of Josephthal & Co., Inc., a member of the
New York Stock Exchange. From 1967 to 1984, he was a General Partner,
Director of Compliance and a member of the Executive Committee of
Herzfeld & Stern, a member of the New York Stock Exchange. He is a
member of the Arbitration Panel of the New York Stock Exchange, the
National Association of Securities Dealers and the American Arbitration
Association.
Finn Schkolnik. Mr. Schkolnik has been an Executive Vice
President of Tele Danmark A/S since 1996. From 1994 to 1996, he was
with the Management Board of Copenhagen Telephone Company. From
1992 to 1996, Mr. Schkolnik was Copenhagen Telephone Company's Chief
Financial Officer.
James H. Season. Mr. Season is currently the Vice President
and Chief Financial Officer of PICK Communications Corp. Prior to
that he was the Chief Financial Officer of Hungarian Broadcasting
Corp. ("HBC") from 1996 to 1998. He remains a director of HBC.
He had been a managing director with RHL Management Group, Inc.,
based in Greenwich, Connecticut, from 1990 through 1996, where he was
involved in financial consulting, crisis management, investment
banking, and merger and acquisition work.
William E. Starkey. Mr. Starkey is currently a consultant. He
was with GTE Corporation from 1964 to 1993, when he retired as a Senior
Executive. While at GTE, he held various posts involving operations,
marketing and customer service, regulatory, human resources,
information systems, management and planning. He was the Chairman of
the Tampa Chamber of Commerce in 1990 and the Chairman of Enterprise
Corporation from 1994 to 1996 (a private non-profit organization, with
over 60 employees providing management, technical and financial
assistance to small- and medium-sized companies).
Leonard Tow. Mr. Tow has been the Chairman and Chief
Executive Officer of Citizens Utilities Company since 1990, where
he served as Chief Financial Officer from 1991 to 1997. He has
been Chief Executive Officer and a Director of Century Communications
Corp., a cable television company, since its organization in 1973,
and has served as Chairman of the Board since 1989 and was Chief
Financial Officer from 1973 to 1996. He is Chairman of the Board of
Electric Lightwave, Inc. and a Director of the United States Telephone
Association. See "- Certain Relationships and Related Party
Transactions - The Citizens Agreements."
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<PAGE>
Executive Officers Who Are Not Directors
Francis J. Busacca, Jr., Mr. Busacca, age 57, was appointed to
the position of Executive Vice President and Chief Financial Officer of
the Company effective March 2, 1998. He served as the Company's interim
President and Chief Executive Officer from April to December 1998. Mr.
Busacca, a CPA, was previously the Executive Vice President and Chief
Financial Officer of Monor Telefon Tarsasag, a Hungarian local
telephone operator, from 1995 to 1997. Mr. Busacca was with IBM from
1966 to 1995 where he held various financial, management and strategic
positions.
Peter T. Noone. Mr. Noone, age 36, was appointed General
Counsel and Secretary of the Company in November 1996. For six years
prior to such appointment Mr. Noone practiced law with two law firms
in New York City and Washington, D.C.
Standard Remuneration of Directors and Other Arrangements
Since July 1996, directors who are not officers or employees
of the Company or any of its 10% shareholders were paid, in addition to
the reimbursement of out-of-pocket expenses, fees of $1,200 for
attendance at meetings in the United States, $2,000 for attendance at
meetings in Hungary and $800 for meetings held via telephonic
conference call. For committee meetings, the directors were paid $500
($900 for the Chairman) for attendance at meetings and $300 ($500 for
the Chairman) for meetings held via telephonic conference call. In
March 1999, the Board adopted a revised compensation structure for its
non-employee directors effective with the 1999 - 2000 Board term.
Pursuant to the revised compensation structure, the Chairman of the
Board is to be compensated with a fixed quarterly fee of $3,500, a per
meeting fee of $1,400 and $700 for meetings held via telephonic
conference call. Directors will be compensated with a fixed quarterly
fee of $2,500, a per meeting fee of $800 and $400 for meetings held via
telephonic conference call. For committee meetings, the directors are
to be paid $500 ($800 for the Chairman) for attendance at meetings and
$250 ($400 for the Chairman) for meetings held via telephonic
conference call.
From February 1998 to February 1999, Mr. Finley received
$195,000 for consulting services that he provided to the Company.
Director Stock Option Plan
In January 1997, the Board adopted the Hungarian Telephone and
Cable Corp. Non-Employee Director Stock Option Plan (the "Director
Stock Option Plan") for the Company's directors who are not officers or
employees of the Company or any of its 10% shareholders. Presently,
Messrs. Finley, Ryan and Starkey are eligible for continuing
participation in the Director Stock Option Plan.
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<PAGE>
The Director Stock Option Plan has 250,000 shares of Common
Stock available for issuance pursuant to options to the eligible
directors. The Compensation-Stock Option Committee administers the
Director Stock Option Plan. The options will have ten-year terms and
may not be transferred other than by will or the laws of descent and
distribution.
As of the date each year that any non-employee director is
elected or re-elected to serve as a director by the stockholders of the
Company at the Annual Meeting of Stockholders of the Company, each
non-employee director is automatically granted an option to purchase
5,000 shares of Common Stock with an exercise price per share equal to
the fair market value of a share of Common Stock on the date of such
grant. Each automatic grant of any such options vests in the optionee,
and thus become exercisable, at the earlier of (x) the date of the next
Annual Meeting of Stockholders of the Company, or (y) one year from the
date of such annual grant. On June 10, 1998, the Company granted each
of Messrs. Finley, Ryan, Season and Starkey options to purchase 5,000
shares of Common Stock, which options vest on May 25, 1999.
Executive Compensation
The following table sets forth certain information, for each
of the Company's last three fiscal years, with respect to compensation
awarded to, earned by or paid to each individual who served as the
Company's Chief Executive Officer for 1998 and each of certain officers
or employees of the Company whose total annual salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 1998
(collectively, the "Named Executives").
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long-Term
Compensation
--------------------------------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Other
Annual Securities
Compensation Underlying All Other
Name and Principal Year Salary Bonus ($)(3) Options Compensation
Position ($)(1) ($)(2) (#) ($)(4)
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
Francis J. Busacca, Jr. 1998 125,000 -- 88,307 30,000 --
Executive Vice President 1997 -- -- -- -- --
and Chief Financial Officer 1996 -- -- -- -- --
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
Gary D. Carpenter 1998 90,000 30,000 130,283 -- --
Managing Director 1997 83,333 -- 115,797 -- --
1996 60,961 -- 3,000 -- --
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
James G. Morrison 1998 57,750 92,188 48,459 52,500 115,500
former President and Chief 1997 168,438 -- 321,227 30,000 --
Executive Officer 1996 140,978 63,125 41,000 -- --
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
Peter T. Noone 1998 123,375 4,167 -- 2,500 --
General Counsel and 1997 118,479 25,000 -- 15,000 --
Secretary 1996 19,583 --- -- -- --
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
John G. Tesmer 1998 110,000 56,000 157,544 -- --
Vice President 1997 92,018 10,000 129,506 -- --
1996 49,500 12,000 -- --
---------------------------- -------- -------------- ---------- ------------- ----------------- ---------------
</TABLE>
(1) Consists of salaries paid pursuant to employment agreements. See
"Employment Agreements."
(2) Includes bonus awards of 5,000 shares of Common Stock in 1996 and
6,250 shares of Common Stock in 1998 issued to Mr. Morrison pursuant
to his employment agreement. The valuation is based on the fair market
value of the stock price on the date of award. See "- Employment
Agreements."
(3) The amounts reported in 1996, 1997 and 1998 include housing and
vacation allowances pursuant to employment agreements. The 1996 amounts
include housing and vacation allowances of $3,000, $41,000 and $12,000
for Messrs. Carpenter, Morrison and Tesmer, respectively. The 1997
amounts include housing and vacation allowances of $37,500, $36,000,
and $39,000 for Messrs. Carpenter, Morrison and Tesmer, respectively.
The 1998 amounts include housing and vacation allowances of $30,000,
$39,000, $12,000 and $39,000 for Messrs. Busacca, Carpenter,
Morrison and Tesmer. The amounts reported in 1997 and 1998 include the
reimbursement by the Company of certain Hungarian income taxes. The
1997 amounts including the reimbursement of Hungarian taxes in the
amount of $78,297, $285,227 and $90,506 paid by Messrs. Carpenter,
Morrison and Tesmer, respectively. The 1998 amounts include the
reimbursement of Hungarian taxes in the amount of $58,307, $91,283,
$36,459 and $118,544 paid by Messrs. Busacca, Carpenter, Morrison and
Tesmer, respectively.
(4) In 1998 the Company paid Mr. Morrison $115,500 pursuant to
a one-year consulting agreement entered into between the Company
and Mr. Morrison following Mr. Morrison's retirement as an
executive officer of the Company. The consulting agreement which
terminates in April 1999 contains a $14,437.50 monthly consulting fee.
-10-
<PAGE>
The following table sets forth certain information with
respect to options granted to the Named Executives during the fiscal
year ended December 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
<S> <C> <C> <C> <C> <C> <C>
Number of Percent of Total Exercise
Securities Options Granted Price on
Underlying to Employees in Date of Expiration
Name Options Granted Fiscal Year Grant Date 5% ($) 10%($)
------------------- --------------- ----------------- --------- ------- ------- -------
Francis J. Busacca, Jr. 30,000 22.9% $8.00 3/31/03 66,300 146,400
James G. Morrison 52,500 40.1% $8.00 3/31/03 116,025 256,200
Peter T. Noone 2,500 1.9% $8.00 3/31/03 5,562 12,200
</TABLE>
The following table summarizes the exercise of stock options
during fiscal 1998 by the Named Executives and provides information as
to the unexercised stock options held by them at the end of the fiscal
year.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<S> <C> <C> <C> <C>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Acquired Options at Fiscal Year End at Fiscal Year End
Name on Exercise Value Realized Exercisable/Unexercisable Exercisable/Unexercisable
Francis J. Busacca, Jr. -- -- 20,000/10,000 --/--
James G. Morrison -- -- 82,500/-- --/--
Peter T. Noone -- -- 17,500/-- --/--
---------------------
</TABLE>
Employment Agreements
Francis J. Busacca, Jr. - On March 1, 1998, the Company
entered into a two year employment agreement with Mr. Busacca, the
Company's Executive Vice President and Chief Financial Officer. Mr.
Busacca's employment agreement provides for an annual salary of
$150,000 and a $3,000 per month housing allowance. Pursuant to such
employment agreement, the Company granted Mr. Busacca options to
purchase 30,000 shares of the Company's Common Stock at $8.00 per share
with the options vesting in increments of 10,000 every six months so
long as Mr. Busacca remains with the Company. Mr. Busacca is also
eligible to receive an annual bonus at the Company's discretion up to
the equivalent of $40,000 in stock, additional options, cash, or a
combination thereof. From April to December 1998, Mr. Busacca was the
Company's interim President and Chief Executive Officer. For such
additional duties, the Company awarded Mr. Busacca options, effective
January 1, 1999, to purchase 9,990 shares of the Company's Common
Stock.
-11-
<PAGE>
Gary D. Carpenter - In September 1997, the Company entered
into a two year employment agreement with Gary D. Carpenter, a
managing director of one of the Company's operating subsidiaries. Mr.
Carpenter's employment agreement provides for an annual salary of
$90,000, a $3,000 per month housing allowance and the reimbursement of
any Hungarian income taxes payable by Mr. Carpenter.
James G. Morrison - In October 1996, the Company entered into
an amended and restated employment agreement with James G. Morrison,
the Company's former President and Chief Executive Officer, which was
effective as of July 26, 1996, the date Mr. Morrison was promoted to
President and Chief Executive Officer. Mr. Morrison's employment
agreement provided for a four-year term with an annual salary of
$165,000, which was increased to $173,250 in 1997. Mr. Morrison's
employment agreement also provided for a $3,000 per month housing
allowance and the reimbursement of any Hungarian income taxes payable
by Mr. Morrison. Pursuant to Mr. Morrison's employment agreement, the
Company granted Mr. Morrison 50,000 restricted shares of Common Stock.
12,500 of such restricted shares vested and were released to Mr.
Morrison on each October 10th of 1996 and 1997. In addition, the
Company awarded Mr. Morrison 5,000 shares of Common Stock as
consideration for, among other things, his agreement to amend his prior
employment agreement and to waive rights to certain benefits under such
prior employment agreement. The employment agreement also provided for
the annual award of five-year options to purchase a target of 30,000
shares of Common Stock based on certain objectives to be set by the
Compensation - Stock Option Committee of the Board of Directors. In
March 1997, the Company granted Mr. Morrison options to purchase 30,000
shares of Common Stock at an exercise price of $8.75 per share for his
services in 1996. In March 1998, the Company awarded Mr. Morrison
options to purchase 52,500 shares of Common Stock at an exercise price
of $8.00 per share, a cash bonus of $37,500 and 6,250 shares of Common
Stock for his services in 1997. Mr. Morrison retired as an executive
officer of the Company on April 30, 1998. As a result, Mr. Morrison
forfeited his 25,000 restricted shares. As part of Mr. Morrison's
retirement arrangements, the Company retained the services of Mr.
Morrison as a consultant for a one-year term at a fee of $173,250.
Peter T. Noone - Mr. Noone's employment agreement provides for
a three-year term with a current annual salary of $123,375. The
agreement also provides for a potential cash bonus equal to 20% of Mr.
Noone's base salary and an annual award of five-year options to
purchase a target of 15,000 shares of Common Stock. The employment
agreement for Mr. Noone provides that if his employment is terminated
by the Company other than for cause, or if he suffers a demotion other
than for cause or if there is a change in control of the Company, Mr.
Noone has the right to terminate the agreement. In the event of any
such termination, Mr. Noone would be entitled to receive (i) nine
months' salary and allowances, (ii) all restricted shares, whether
vested or unvested as of the date of termination, (iii) payment of any
accrued entitlement to salary, expenses and allowances, and (iv) a
pro-rata share of stock options, if any, to be awarded under the
agreement.
John G. Tesmer - In October 1997, the Company entered into
a two year employment agreement with John Tesmer, a Vice President
of the Company. Mr. Tesmer's employment agreement provides for an
annual salary of $110,000, a $3,000 per month housing allowance and
the reimbursement of any Hungarian income taxes payable by Mr. Tesmer.
-12-
<PAGE>
Committees and Meetings of the Board of Directors
During the Company's fiscal year ended December 31, 1998, the
Board of Directors held eight meetings. Each of the incumbent directors
except for Messrs. Schkolnik and Tow attended at least 75% of the
meetings of the Board of Directors that were held during the 1998
fiscal year. Each of the incumbent directors attended at least 75% of
the meetings of each committee on which he served that were held during
the 1998 fiscal year while he was serving as a member of such
committee.
The Company has standing Compensation-Stock Option and Audit
Committees. The full Board of Directors acts as a nominating committee
for the annual selection of its nominees for election as directors.
While the Board of Directors will consider nominees recommended by
stockholders, it has not actively solicited such nominations. Such
nominations, together with appropriate biographical information, should
be submitted to the Secretary of the Company at least 90 days prior to
the annual meeting.
From June 1997 to March 1998, the Compensation - Stock Option
Committee consisted of Ronald E. Spears and William E. Starkey with one
vacancy. Following the resignation of Mr. Spears from the Board in
March 1998, the Compensation - Stock Option Committee had a second
vacancy. On April 8, 1998, the Board of Directors reconstituted the
Compensation - Stock Option Committee, which consisted of Ole Bertram,
John B. Ryan and William E. Starkey. Following the appointment of Mr.
Bertram as the Company's President and Chief Executive Officer in
September 1998, Mr. Bertram resigned from the committee and was
replaced by Daryl A. Ferguson. The function of this committee is to
administer the 1992 Incentive Stock Option Plan, as amended, and the
Director Stock Option Plan, and advise the Board regarding the
compensation of officers. The Compensation-Stock Option Committee held
six meetings during the fiscal year ended December 31, 1998.
From June 1997 to January 1998, the Audit Committee consisted
of David A. Finley and William E. Starkey with one vacancy. Upon Mr.
Finley's appointment as Chairman of the Board on January 29, 1998, he
resigned from the Audit Committee which created a second vacancy on the
committee. On April 8, 1998, the Board of Directors reconstituted the
Audit Committee, which now consists of Daryl A. Ferguson, John B. Ryan
and James H. Season. This committee has the duties of recommending to
the Board of Directors the appointment of independent auditors,
reviewing their charges for services, reviewing the scope and results
of the audits performed, reviewing the adequacy and operation of the
Company's internal auditing, and performing such other duties or
functions with respect to the Company's accounting, financial and
operating controls as deemed appropriate by it or the Board of
Directors. During the fiscal year ended December 31, 1998 the Audit
Committee held one meeting.
Compensation Committee Interlocks and Insider Participation
From June 1997 to March 1998, the Compensation - Stock Option
Committee consisted of Ronald E. Spears and William E. Starkey with one
vacancy. Following the resignation of Mr. Spears from the Board in
March 1998, the Compensation - Stock Option Committee had a second
vacancy. On April 8, 1998, the Board of Directors reconstituted the
Compensation - Stock Option Committee, which consisted of Ole Bertram,
John B. Ryan and William E. Starkey. Following the appointment of Mr.
Bertram as the Company's President and Chief Executive Officer in
September 1998, Mr. Bertram resigned from the committee and was
replaced by Daryl A. Ferguson. The function of this committee is to
administer the 1992 Incentive Stock Option Plan, as amended, and the
Director Stock Option Plan, and advise the Board regarding the
compensation of officers. The Compensation-Stock Option Committee held
six meetings during the fiscal year ended December 31, 1998.
-13-
<PAGE>
No current or former members of the committee during such
period were officers of the Company. Mr. Bertram was an officer of
Tele Danmark A/S. Mr. Spears was an officer of Citizens and Mr.
Ferguson is currently an officer of Citizens. See "Certain
Relationships and Related Party Transactions - The Tele Danmark
Agreements" and "- The Citizens Agreements."
Certain Relationships and Related Party Transactions
The Tele Danmark Agreements
On July 1, 1997, Tele Danmark A/S ("TD") transferred to the
Company its 20% interest in the outstanding capital stock of each of
Kelet-Nograd Com Rt. ("KNC") and Raba Com Rt. ("Raba-Com"), both
Hungarian subsidiaries of the Company, in exchange for 420,908 shares
of Common Stock. The agreement provided for, among other things, (x)
the Company to nominate a representative of TD for election to the
Company's, KNC's and Raba-Com's Board of Directors as long as TD owns
at least 300,000 shares of the Company's outstanding Common Stock, (y)
certain preemptive rights of TD, upon issuance by the Company of shares
of its Common Stock, to maintain its then current percentage ownership
in the Company's outstanding Common Stock as long as TD continues to
own at least 300,000 shares of the Company's outstanding Common Stock,
and (z) the obligation of the Company to purchase, and the obligation
of TD to sell, the shares of capital stock of KNC and Raba-Com then
held by the Danish Investment Fund for Central and Eastern Europe (the
"Fund") if TD acquired such shares within twelve (12) months. As a
result of such agreement, the Board of Directors has elected Torben V.
Holm, an officer of TD, to its Board in March 1999 and the Board of
Directors is nominating Mr. Holm for election for the 1999 to 2000
term.
On September 30, 1997, TD transferred to the Company its 4.8%
interest in the outstanding capital stock of each of KNC and Raba-Com
(acquired by TD from the Fund) in exchange for 101,018 shares of Common
Stock. In addition, TD transferred to the Company its interest in an
aggregate of $5.5 million in loans owed by KNC and Raba-Com to TD in
exchange for 447,232 shares of Common Stock.
In addition to Mr. Holm, Finn Schkolnik, an officer of TD, has
been on the Board of Directors of the Company since October 1997. The
Board is nominating Lennart Meineche, an officer with TD, to replace
Mr. Schkolnik for election for the 1999 to 2000 term.
The Citizens Agreements
In May 1995, Citizens purchased 300,000 shares of Common Stock
from a former executive of the Company and has since acquired an
additional 602,908 shares pursuant to certain agreements entered into
with the Company (as amended and restated in certain cases to date, the
"Citizens Agreements") and 103,000 shares pursuant to certain open
market purchases bringing its ownership of the outstanding Common Stock
as of April 9, 1999, to approximately 18.6%. In addition, as a result
of the Citizens Agreements, Citizens has received certain options to
purchase 4.5 million shares of Common Stock. These options expire in
September 2000, with per share exercise prices ranging from $12.75 to
$18.00. Citizens also has an option to purchase 2.1 million shares of
Common Stock at an exercise price of $13.00 per share with an
expiration date of July 1, 1999. The Citizens Agreements provide
Citizens with certain preemptive rights to purchase, upon the issuance
of Common Stock in certain circumstances to third parties, shares of
Common Stock in order to maintain its percentage ownership interest on
a fully diluted basis. The Citizens Agreements also provide for one
representative of Citizens to be nominated for election to the
Company's Board of Directors for as long as Citizens holds at least
300,000 shares of Common Stock and for the number of directors on the
Company's Board of Directors to be set at no less than six, without
classified or staggered terms. Daryl A. Ferguson and Leonard Tow, both
executive officers of Citizens Utilities Company, are directors of the
Company and nominees for election to the Board of Directors for the
1999 to 2000 term.
-14-
<PAGE>
The Citizens Agreements include a certain Replacement and
Termination Agreement dated as of September 30, 1998 (the "Termination
Agreement") which provides for, among other things, payments by HTCC to
Citizens in the aggregate amount of $21 million payable in 28 quarterly
installments of $750,000 each year from 2004 through and including 2010
in part as agreement for Citizens' agreement to terminate a management
services agreement and in part as consideration for certain consulting
services to be provided by Citizens to the Company from 2004 through
and including 2010. Pursuant to the Termination Agreement, HTCC issued
100,000 shares of its Common Stock and a $8.4 million promissory note
to Citizens in settlement of accrued management fees pursuant to the
terminated management services agreement. The principal on the note is
payable in full in September 2004 and bears interest at a varying rate
per annum which is 2-1/2% per annum above the one-year LIBOR rate.
Accrued interest is payable annually.
Indebtedness of Management
No director, executive officer or nominee for election as a
director of the Company has been indebted to the Company or any of its
subsidiaries at any time during the last fiscal year in an amount in
excess of $60,000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors, officers and beneficial
owners of over 10% of the Common Stock to file reports of holdings and
transactions in the Common Stock. Based upon a review of the Forms 3, 4
and 5 required to be filed by such directors, officers and beneficial
owners pursuant to Section 16(a) for the Company's fiscal year ended
December 31, 1998, the Company has identified the following untimely
filed reports covering the number of transactions indicated: CU
CapitalCorp. failed to timely file one Form 4 with respect to one
transaction; William McGann, the Company's controller did not timely
file his report of his initial beneficial ownership of securities on
Form 3; and James G. Morrison failed to timely file a Form 4 with
respect to one transaction. All such Forms were subsequently filed.
Compensation Committee Report on Executive Compensation
From June 1997 to March 1998, the Compensation - Stock Option
Committee consisted of Ronald E. Spears and William E. Starkey with one
vacancy. Following the resignation of Mr. Spears from the Board in
March 1998, the Compensation - Stock Option Committee had a second
vacancy. On April 8, 1998, the Board of Directors reconstituted the
Compensation - Stock Option Committee, which consisted of Ole Bertram,
John B. Ryan and William E. Starkey. Following the appointment of Mr.
Bertram as the Company's President and Chief Executive Officer in
September 1998, Mr. Bertram resigned from the committee and was
replaced by Daryl A. Ferguson. The function of this committee is to
administer the 1992 Incentive Stock Option Plan, as amended, and the
Director Stock Option Plan, and advise the Board regarding the
compensation of officers. The Compensation-Stock Option Committee held
six meetings during the fiscal year ended December 31, 1998.
Executive Officer Compensation Policy
General. The Company's compensation policy is designed to
motivate, reward and retain the managerial and technical talent needed
to achieve the Company's business objectives. This policy provides for
incentives to achieve short- and long-term objectives and rewards
exceptional performance and accomplishments that contribute to the
Company's business. Compensation arrangements for the Company's
executive officers have been designed to align such compensation with
the achievement of the Company's business objectives and growth
strategy. The Company has traditionally sought to achieve such
alignment through employment contracts providing for fixed-base
salaries, cash bonuses and stock-based awards, as well as through the
grant of stock options.
-15-
<PAGE>
Employment Contracts. The Company entered into an employment
agreement with each of its executive officers effective with the
individual's appointment to an executive position. Employment
agreements for all executive officers, including the Chief Executive
Officer, have been for terms from two to four years, and provide for
fixed annual salaries over their terms. Base salaries are initially
established through negotiations with the executive officer during the
hiring process. The Company has also granted options to its executive
officers in order to align the interests of such executives with those
of the shareholders of the Company generally. In March 1998, the
Company awarded certain cash bonuses to certain officers based upon the
completion of the Company's network modernization and construction
program in all of its concession areas in 1998.
In March 1998, the Company awarded Mr. Morrison as a bonus for
his services in 1997 options to purchase 52,500 shares of Common Stock
at an exercise price of $8.00 per share, $37,500 and 6,250 shares of
Common Stock. The Company awarded such bonus to Mr. Morrison as a
reward for planning and overseeing the completion of the Company's
network modernization and construction program in all of its concession
areas. In addition, the Company rewarded Mr. Morrison for the
connection of approximately 175,000 telephone access lines by December
31, 1997. These accomplishments have led to an acceleration of revenues
from the Company's provision of telecommunications services. Mr.
Morrison retired as an employee of the Company on April 30, 1998. Upon
Mr. Morrison's retirement, the Company entered into a one year
consulting agreement with Mr. Morrison to retain his services for
$173,250. The Company awarded Francis J. Busacca, Jr. options to
purchase 9,990 shares of the Company's Common Stock for his performance
as interim President and Chief Executive Officer from April to December
1998.
For a description of certain provisions of the Company's
current employment contracts with its executive officers, See
"Employment Agreements."
In 1993, Section 162(m) was added to the Internal Revenue Code
of 1986, as amended, the effect of which is to eliminate the
deductibility of compensation of over $1 million, with certain
exceptions, paid to each of certain highly compensated executive
officers of publicly held corporations, such as the Company. Section
162(m) applies to all remuneration (both cash and non-cash) that would
otherwise be deductible for tax years beginning on or after January 1,
1994, unless expressly excluded. Because the compensation of each of
the Company's current executive officers is well below the $1 million
threshold, the Company has not yet considered its policy regarding this
provision.
Daryl A. Ferguson
William E. Starkey
John B. Ryan
-16-
<PAGE>
Stock Performance Graph
The line graph below compares the cumulative total stockholder
return of the Company's Common Stock to the cumulative total return of
(i) the American Stock Exchange Market Index and (ii) a
telecommunications industry index, for the period commencing January 1,
1994 through December 31, 1998. The Common Stock was first listed for
quotation on the Nasdaq Small-Cap Market on December 28, 1992 and was
quoted on the Nasdaq National Market from December 8, 1994 through
December 19, 1995. On December 20, 1995, the Common Stock began trading
on the American Stock Exchange. The graph assumes that $100 was
invested on January 1, 1994, with dividends reinvested on the date
paid.
-17-
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, AMEX MARKET INDEX
AND TELECOMMUNICATIONS INDUSTRY INDEX
[CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Hungarian Telephone $100.00 71.19 72.03 63.56 64.83 22.03
and Cable Corp.
Telecommunications 100.00 87.05 113.67 112.17 145.40 221.36
Industry Index
Amex Market Index 100.00 88.33 113.86 120.15 144.57 142.61
</TABLE>
-18-
<PAGE>
II. RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors, on the recommendation of the Audit
Committee, has reappointed the firm of KPMG LLP as independent auditors
of the Company for the fiscal year ending December 31, 1999, subject to
the ratification of the appointment by the Company's stockholders. A
representative of KPMG LLP is expected to attend the Meeting to respond
to appropriate questions and will have an opportunity to make a
statement if he or she so desires.
The Board of Directors recommends that stockholders vote "FOR"
the ratification of the appointment of KPMG LLP as auditors of the
Company for the fiscal year ending December 31, 1999.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, some stockholder proposals may be eligible for inclusion in the
Company's 2000 Proxy Statement. Any such stockholder proposals must be
submitted in writing to the Secretary of the Company no later than
December 29, 1999. Stockholders interested in submitting such a
proposal are advised to contact knowledgeable counsel with regard to
the detailed requirements of applicable securities laws. The submission
of a stockholder proposal does not guarantee that it will be included
in the Company's Proxy Statement. If the date of the 2000 Annual
Meeting of Stockholders is advanced by more than 30 days or delayed
(other than as a result of adjournment) by more than 30 days from the
anniversary of the 1999 Annual Meeting, the stockholder must submit any
such proposal no later than the close of business on the later of the
60th day prior to the 2000 Annual Meeting of Stockholders or the 10th
day following the day on which public announcement of the date of such
meeting is first made.
OTHER BUSINESS
The Board of Directors is not aware of any matter other than
the matters described above to be presented for action at the Meeting.
However, if any other proper items of business should come before the
Meeting, it is the intention of the person or persons acting under the
enclosed form of proxy to vote in accordance with their best judgment
on such matters.
EXPENSES OF SOLICITATION
The Company will pay the expenses of this proxy solicitation.
In addition to solicitation by mail, some of the officers and regular
employees of the Company may solicit proxies personally or by
telephone. The Company will request brokers and other fiduciaries to
forward proxy soliciting material to the beneficial owners of shares
which are held of record by them, and the Company may reimburse
them for certain reasonable out-of-pocket expenses incurred by them
in connection therewith.
By Order of the Board of Directors,
/s/David A. Finley
David A. Finley
Chairman of the Board
April 16, 1999
New York, New York
-19-
<PAGE>
PROXY PROXY
HUNGARIAN TELEPHONE AND CABLE CORP.
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints DAVID A.
FINLEY and PETER T. NOONE, and each of them, with full power of substitution in
each, as proxies for the undersigned, to represent the undersigned and to vote
all the shares of Common Stock of the Company which the undersigned would be
entitled to vote, as fully as the undersigned could vote and act if personally
present, at the Annual Meeting of Stockholders (the "Meeting") to be held on May
25, 1999, at 10:00 a.m. local time, at the New York Marriott East Side, 525
Lexington Avenue, New York, New York 10017, or at any adjournment or
postponement thereof.
Should the undersigned be present and elect to vote at the Meeting or
at any adjournments or postponements thereof, and after notification to the
Secretary of the Company at the Meeting of the stockholder's decision to
terminate this proxy, then the power of such attorneys or proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by filing a written notice of revocation with the Secretary of the
Company or by duly executing a proxy bearing a later date.
The Board of Directors recommends a vote "FOR" all nominees for
director and the ratification of the appointment of KPMG LLP.
1. The election as directors of all nominees listed below to serve until
the 2000 Annual Meeting of Stockholders or until their successors have
been duly elected and qualified (except as marked to the contrary).
INSTRUCTION: To withhold your vote for any individual nominee, strike
a line in that nominee's name in the list below.
OLE BERTRAM TORBEN V. HOLM WILLIAM E. STARKEY
DARYL A. FERGUSON LENNART MEINECHE LEONARD TOW
DAVID A. FINLEY JOHN B. RYAN
VOTE
FOR [ ] WITHHELD [ ]
2. Ratification of the appointment of KPMG LLP as auditors of the Company
for the fiscal year ending December 31, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The shares represented by this proxy will be voted as directed by the
stockholder, but if no instructions are specified, this proxy will be voted for
the election of the Board nominees and for the listed proposals. If any other
business is presented at the Meeting, this proxy will be voted by those named in
this proxy in their best judgment. At the present time, the Board of Directors
knows of no other business to be presented at the Meeting.
<PAGE>
The undersigned acknowledges receipt
from the Company, prior to the
execution of this proxy, of the
Notice of Annual Meeting and
accompanying Proxy Statement
relating to the Meeting and an
Annual Report to Stockholders for
the fiscal year ended December 31,
1998.
DATED: , 1999
Signature
Signature
Please mark, date and sign as your
name(s) appear(s) to the left and
return in the enclosed envelope. If
acting as an executor,
administrator, trustee, guardian,
etc., you should so indicate when
signing. If the signer is a
corporation, please sign the full
corporate name, by duly authorized
officer. If shares are held jointly,
each shareholder named should sign.