SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) (Rule 14a-101) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant|X|
Filed by a Party other than the Registrant
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(2))
|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)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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:
- ------------------------------------------------------------------------
(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):
- ------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------
(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: ___________________________________________
(2) Form, Schedule or Registration No._________________________________
(3) Filing party: _____________________________________________________
(4) Date filed: _______________________________________________________
<PAGE>
HUNGARIAN TELEPHONE 100 First Stamford Place
AND CABLE CORP. Stamford, CT 06902
April 12, 2000
Dear Stockholder:
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, 2000 at the New York
Marriott East Side Hotel, 525 Lexington Avenue, New York, New York 10017.
In addition to the election of directors and the ratification of the
appointment of auditors, at the Annual Meeting the holders of Common Stock of
the Company will consider and vote upon a proposal to amend the Company's 1992
Incentive Stock Option Plan, as amended, to increase the number of shares of
Common Stock available thereunder from 1,000,000 to 1,250,000 for use as
incentive awards to certain key employees, directors and consultants.
Your Board of Directors has unanimously concluded that each of the
proposals is in the best interests of the Company and its stockholders.
Accordingly, the Board recommends a vote "FOR" the election of directors, the
ratification of the appointment of auditors and the increase in the number of
shares available under the Stock Option Plan.
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, 2000
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, 2000, at 10:00 a.m., local time,
for the following purposes:
1. To elect seven directors of the Company to serve until the
2001 Annual Meeting of Stockholders or until their successors
have been duly elected and qualified;
2. To vote upon a proposal to amend the Company's 1992 Incentive
Stock Option Plan, as amended, to increase the number of
shares of the Company's common stock available thereunder from
1,000,000 to 1,250,000 for use as incentive awards to certain
key employees, directors and consultants;
3. To ratify the appointment of KPMG Hungaria Kft. as auditors
of the Company for the fiscal year ending December 31, 2000;
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 11, 2000 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 12, 2000
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.......................................4
Potential Change in Control.........................................5
I. ELECTION OF DIRECTORS....................................................6
General.............................................................6
Current Directors and Nominees for Director.........................6
Standard Remuneration of Directors and Other Arrangements...........8
Director Stock Option Plan..........................................9
Executive Compensation..............................................9
Employment Agreements..............................................11
Report on Repricing of Options.....................................13
Committees and Meetings of the Board of Directors..................14
Compensation Committee Interlocks and Insider Participation........14
Certain Relationships and Related Party Transactions...............15
Indebtedness of Management.........................................16
Section 16(a) Beneficial Ownership Reporting Compliance............16
Compensation Committee Report on Executive Compensation............17
Stock Performance Graph............................................18
II. PROPOSAL TO AMEND THE COMPANY'S 1992 INCENTIVE
STOCK OPTION PLAN, AS AMENDED, TO INCREASE THE NUMBER
OF SHARES OF COMMON STOCK AVAILABLE THEREUNDER FROM
1,000,000 TO 1,250,000.................................................20
Background of Proposed Amendment...................................20
Description of the Stock Option Plan...............................20
Benefits Under Stock Option Plan...................................22
Certain Interests of Directors.....................................23
III. RATIFICATION OF THE APPOINTMENT OF AUDITORS...........................23
STOCKHOLDER PROPOSALS.......................................................24
OTHER BUSINESS..............................................................24
EXPENSES OF SOLICITATION....................................................24
<PAGE>
HUNGARIAN TELEPHONE AND CABLE CORP.
100 First Stamford Place
Stamford, Connecticut 06902 April 12, 2000
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 2000
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, on May 25, 2000 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,
2000.
At the Meeting, the stockholders of the Company are being asked
to consider and vote upon: (i) the election of seven directors of the
Company to serve until the 2001 Annual Meeting of Stockholders or until
their successors are duly elected and qualified; (ii) a proposal to
amend the Company's 1992 Incentive Stock Option Plan, as amended (the
"Stock Option Plan"), to increase the number of shares of common stock
available thereunder from 1,000,000 to 1,250,000 for use as incentive
awards to certain key employees, directors and consultants; and (iii)
the ratification of the appointment of KPMG Hungaria Kft. as auditors
of the Company for the fiscal year ending December 31, 2000.
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,
for the approval of the proposal regarding the Stock Option Plan 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
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<PAGE>
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.
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. The affirmative vote of a majority of the shares present in
person or by proxy and voted on such matter at the Meeting is required
for approval of the proposal to amend the Stock Option Plan to increase
the number of shares available thereunder. Accordingly, abstentions
will have the same effect as a vote against such matter and proxies
returned by brokers as "non-votes" will not affect the outcome of such
vote. 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 each of the
proposals set forth herein. Accordingly, the Board recommends a vote
FOR the election of directors, the proposal to amend the Stock Option
Plan and the ratification of the appointment of auditors.
Voting Securities
April 11, 2000 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 12,009,479 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 11, 2000, certain
information as to those persons who were known by management to be
beneficial owners of more than 5% of the Common Stock.
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<PAGE>
Shares
Beneficially Percent of
Name and Address of Beneficial Owner Owned (1) Class (1)
------------------------------------ ------------ -----------
CU CapitalCorp. 7,117,230(2) 42.3%
c/o Citizens Utilities Company
High Ridge Park
Stamford, Connecticut 06905
Danish Investment Fund for Central 1,285,714 10.7%
and Eastern Europe
4, Bremerholm
DK 1069 Copenhagen K, Denmark
Postabank Rt. 2,428,572 20.2%
Jozsef nador ter 1
H-1920 Budapest, Hungary
Tele Danmark A/S 2,565,587 21.4%
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 11, 2000. "Percent of Class" is calculated by
dividing the "Shares Beneficially Owned" by such entity by the
shares of Common Stock outstanding as of April 11, 2000 plus only
those shares which such entity may have the right to acquire within
60 days of April 11, 2000.
(2) Includes 4,511,322 shares subject to purchase pursuant to options
granted by the Company to CU CapitalCorp., all of which are
presently exercisable. It also includes 300,000 shares of Common
Stock which are issuable upon the conversion by CU CapitalCorp. of
its 30,000 shares of the Company's Series A Preferred Stock. 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 11, 2000, certain
information as to the shares of Common Stock beneficially owned by
certain executive officers, officers, employees and former executive
officers 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
Ole Bertram 100,000(2) *
Gregory A. Bordelon -- --
Peter T. Noone 47,600(3) *
Directors and Executive 166,000(4) 1.4%
Officers as a Group (8 persons)
Former Executive Officers
Francis J. Busacca, Jr. 61,990(5) *
John G. Tesmer -- --
-----------
* 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 11, 2000 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 11, 2000 plus only those shares which the
individual (or group) has the right to acquire within 60 days of
April 11, 2000.
(2) Consists of 100,000 shares subject to options presently
exercisable at $4.125 per share granted pursuant to Mr. Bertram'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, 15,000 shares subject to options
presently exercisable at $4.625 per share, and 15,000 options
presently exercisable at $5.93 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. Leonard Tow, a director of the Company, serves as an
executive officer of both the parent company and an affiliate of
CU CapitalCorp. Daryl A. Ferguson, a director of the Company,
served as an executive officer of both the parent company and an
affiliate of CU CapitalCorp. during 1999. Does not include shares
reported to be beneficially owned by Tele Danmark A/S. Torben V.
Holm and Lennart F. Meineche, directors of the Company, serve as
officers of Tele Danmark A/S.
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<PAGE>
(5) Includes 50,000 shares subject to options presently exercisable at
$5.46 per share and 9,990 shares subject to options presently
exercisable at $3.25 per share granted pursuant to Mr. Busacca's
employment. See "Election of Directors - Employment Agreements."
Potential Change in Control
From May 1995 through May 1999, 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, 1999,
Citizens, directly or through subsidiaries, provided telecommunications
services and public services including gas distribution, electric
distribution, water distribution and wastewater treatment services to
approximately 1.9 million customers. Citizens also owns 82% of Electric
Lightwave, Inc. (NASDAQ: ELIX) a facilities-based, integrated
communications provider that offers a broad range of services to
telecommunications-intensive businesses throughout the United States.
As of April 11, 2000, Citizens beneficially owned 2,305,908 of
the outstanding shares of Common Stock. Pursuant to the Citizens
Agreements, Citizens was granted certain options to acquire an
additional 4,511,322 shares of Common Stock at prices ranging from
$12.75 to $18.00 per share. Citizens also owns 30,000 shares of the
Company's Series A Preferred Stock which are convertible into 300,000
shares of Common Stock. If Citizens were to exercise in full all of its
options and convert its preferred shares, Citizens would own 40.1% of
the shares of Common Stock that would be outstanding if all the
outstanding options and warrants exercisable in 2000, including those
held by Citizens, were exercised. If only Citizens were to exercise in
full all of its options and convert its preferred shares, Citizens
would own 42.3% of the shares of Common Stock that would be
outstanding. If all of the options held by Citizens were exercised,
Citizens would be in a position to exert significant influence on the
Company. The Citizens Agreements provide for certain preemptive rights
which presently enable Citizens to maintain its percentage ownership
interest on an outstanding basis.
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 exercised all of its options. Presently,
Leonard Tow, an executive officer of Citizens Utilities Company and
Daryl A. Ferguson, a former executive officer of Citizens, 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. 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
11, 2000, regarding the Company's current Board of Directors and
nominees for election to the Board of Directors, including beneficial
ownership of Common Stock.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Position(s) Held Director Common Stock Percent
Name Age in the Company Since Beneficially Owned Owned
Current Directors who are Nominees for Reelection
Ole Bertram 64 Director, President and August 1997 100,000(1) *
Chief Executive Officer
Daryl A. Ferguson 61 Director March 1998 --(2) --
Torben V. Holm 49 Director March 1999 --(3) --
John B. Ryan 69 Director September 1992 26,000(4) *
William E. Starkey 64 Director July 1996 20,000(5) *
Leonard Tow 71 Director August 1997 --(2) --
Other Current Directors
David A. Finley 67 Director (Chairman) July 1996 20,000(5) *
Lennart F. Meineche 33 Director May 1999 --(3) --
Nominee for Director
Torben A. Lange 51 --(3)
</TABLE>
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* Less than one percent.
(1) Consists of 100,000 shares subject to options presently exercisable
at $4.125 per share granted pursuant to Mr. Bertram's employment
agreement. See " - Employment Agreements."
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(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." Mr. Tow is
currently an executive officer of Citizens Utilities Company.
Mr. Ferguson was an executive officer of Citizens in 1999. See "-
Certain Relationships and Related Party Transactions - The
Citizens Agreements."
(3) 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."
(4) Includes 10,000 shares subject to options presently exercisable at
$9.44 per share, 5,000 shares subject to options presently
exercisable at $6.78 per share, and 5,000 shares subject to options
exercisable within 60 days at $6.00 per share granted under the
Non-Employee Director Stock Option Plan. Also includes 5,000 shares
subject to options, presently exercisable at $9.44 per share,
granted under the 1992 Incentive Stock Option Plan, as amended.
(5) Consists of 10,000 shares subject to options presently exercisable
at $9.44 per share, 5,000 shares subject to options presently
exercisable at $6.78 per share, and 5,000 shares subject to options
exercisable within 60 days at $6.00 per share granted under the
Non-Employee Director Stock Option Plan.
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 was President
and Chief Operating Officer from 1990 to 1999. Mr. Ferguson retired
as an executive officer of Citizens in 1999 and now serves as a
consultant to Citizens. 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
Elite Information Systems Incorporated, a software and services
company in which he served as Chief Financial Officer of its
predecessor company until November 1997. Mr. Finley was also a
director of Intelligroup, Inc. until May 1999 and, MRJ Group, Inc.
until September 1999. He is currently a director of Naviant Inc.
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.
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. See "- Certain
Relationships and Related Party Transactions - The Tele Danmark
Agreements."
Torben A. Lange. Mr. Lange has been with Tele Danmark for six
years. He is currently the Director of Operational Support for Tele
Danmark International with a particular specialization in Germany,
Hungary and Ukraine. While working for Tele Danmark, he has been
involved in Sales and Marketing, Account Management and IT. Prior to
joining Tele Danmark, he was a President and Chief Executive Officer in
the computer industry. See "- Certain Relationships and Related Party
Transactions - The Tele Danmark Agreements."
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<PAGE>
Lennart F. 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. See "- Certain Relationships
and Related Party Transactions - The Tele Danmark Agreements."
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, 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.
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 was Chief
Executive Officer and a Director of Century Communications Corp., a
cable television company, since its organization in 1973 to October
1999, and Chairman of the Board from 1989 to October 1999 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."
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.
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Mr. Finley received $30,000 for consulting services that he
provided to the Company during 1999.
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. Ryan and Starkey are eligible for continuing participation in
the Director Stock Option Plan.
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 May 25, 1999, the Company granted each of
Messrs. Finley, Ryan and Starkey options to purchase 5,000 shares of
Common Stock, which options vest on May 25, 2000.
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 the Company's Chief Executive Officer and each of
certain current or former officers or employees of the Company whose
total annual salary and bonus exceeded $100,000 during the fiscal year
ended December 31, 1999 (collectively, the "Named Executives").
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
------------------------------- -------- ------------------------------------- -----------------
Annual Compensation Long-Term
Compensation
Other
Annual Securities
Compensation Underlying
Name and Principal Year Salary Bonus ($) ($)(2) Options
Position ($)(1) (#)
------------------------------- -------- ------------- ---------- ------------ -----------------
------------------------------- -------- ------------- ---------- ------------ -----------------
Ole Bertram 1999 233,696 -- 36,000 100,000
President and Chief 1998 -- -- -- --
Executive Officer 1997 -- -- -- --
------------------------------- -------- ------------- ---------- ------------ -----------------
------------------------------- -------- ------------- ---------- ------------ -----------------
Gregory A. Bordelon 1999 124,449 3,000 18,000 --
Project Manager 1998 70,000 10,000 110,745 --
1997 70,000 10,000 119,387 --
------------------------------- -------- ------------- ---------- ------------ -----------------
------------------------------- -------- ------------- ---------- ------------ -----------------
Francis J. Busacca, Jr. 1999 112,500 20,000 122,612 59,990
Former Deputy Chief 1998 125,000 -- 88,307 30,000
Executive Officer 1997 -- -- -- --
------------------------------- -------- ------------- ---------- ------------ -----------------
------------------------------- -------- ------------- ---------- ------------ -----------------
Peter T. Noone 1999 123,375 24,675 -- 15,000
General Counsel and Secretary 1998 123,375 4,167 -- 2,500
1997 118,479 25,000 -- 15,000
------------------------------- -------- ------------- ---------- ------------ -----------------
John G. Tesmer 1999 123,509 35,000 110,858 --
Former Vice President 1998 110,000 56,000 157,544 --
1997 92,018 10,000 129,506 --
------------------------------- -------- ------------- ---------- ------------ -----------------
</TABLE>
(1) Consists of salaries paid pursuant to employment agreements.
See "- Employment Agreements."
(2) The amounts reported in 1997, 1998 and 1999 include housing and
vacation allowances pursuant to employment agreements. The 1997
amounts include housing and vacation allowances of $40,750 and
$39,000 for Messrs. Bordelon and Tesmer, respectively. The 1998
amounts include housing and vacation allowances of $38,997,
$30,000, and $39,000 for Messrs. Bordelon, Busacca and Tesmer,
respectively. The 1999 amounts include housing and vacation
allowances of $36,000, $18,000, $27,000 and $44,029 for Messrs.
Bertram, Bordelon, Busacca and Tesmer, respectively. The amounts
reported in 1997, 1998 and 1999 include the reimbursement by the
Company of certain Hungarian income taxes. The 1997 amounts include
the reimbursement of Hungarian taxes in the amounts of $78,637 and
$90,506 paid by Messrs. Bordelon and Tesmer, respectively. The 1998
amounts included the reimbursement of Hungarian taxes in the
amounts of $71,748, 58,307, and $118,544 paid by Messrs. Bordelon,
Busacca and Tesmer, respectively. The 1999 amounts include the
reimbursement of Hungarian taxes in the amounts of $95,612 and
$66,829 paid by Messrs. Busacca and Tesmer, respectively.
-10-
<PAGE>
The following table sets forth certain information with
respect to options granted to the Named Executives during the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
Number of Percent of Total Exercise
Securities Options Granted Price on
Underlying to Employees in Date of Expiration
Name Options Granted Fiscal Year Grant Date 5% ($) 10% ($)
Ole Bertram 100,000 57.2 4.125 12/31/03 113,966 251,835
Francis J. Busacca, Jr. 9,990 5.7 3.25 12/31/03 8,970 19,822
30,000 17.1 5.46 3/31/03 29,248 62,102
20,000 11.4 5.46 6/30/01 8,962 18,259
Peter T. Noone 15,000 8.6 4.625 1/17/04 19,167 42,354
</TABLE>
The following table summarizes the exercise of stock options
during fiscal 1999 by the Named Executives and provides information as
to the unexercised stock options held by them at the end of the fiscal
year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
<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
Ole Bertram -- -- 100,000/-- 312,500/--
Francis J. Busacca, Jr. -- -- 59,990/-- 129,460/--
Peter T. Noone -- -- 32,500/-- 39,375/--
---------------------
</TABLE>
Employment Agreements
Ole Bertram - Mr. Bertram's employment agreement provides for
a two-year term beginning on January 1, 1999 with a current annual
salary of $210,000, an annual $30,000 Company contribution to a
retirement account and a $3,000 per month housing allowance. The
agreement also provides for a potential target cash bonus of $90,000
and an annual award of five-year options to purchase 100,000 shares of
Common Stock. The cash bonus is tied to certain corporate objectives
set by the Compensation - Stock Option Committee of the Board of
Directors. The Company has not yet determined Mr. Bertram's cash bonus
for 1999. The options vest every six months in 50,000 share increments.
The employment agreement for Mr. Bertram 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
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<PAGE>
control of the Company, Mr. Bertram has the right to terminate the
agreement. In the event of any such termination, Mr. Bertram would be
entitled to receive (i) six months' salary, (ii) payment of any accrued
entitlement to salary, expenses and allowances, and (iii) the immediate
vesting and release of any unvested options.
Gregory A. Bordelon - Mr. Bordelon has a two-year employment
agreement beginning on January 1, 1999 which provides for an annual
base salary of $117,400 and a monthly housing allowance of $2,416.
Francis J. Busacca, Jr. - On March 1, 1998, the Company
entered into a two year employment agreement with Mr. Busacca to become
the Company's Executive Vice President and Chief Financial Officer. Mr.
Busacca's employment agreement provided 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 remained with the Company. Mr. Busacca was 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. In 1999, the Board agreed to promote Mr. Busacca from Chief
Financial Officer to Deputy Chief Executive Officer. In connection with
such promotion, the Board agreed to revise Mr. Busacca's compensation
package which included the grant of an additional option to purchase
20,000 shares of Common Stock and the effective revision of the
exercise price on Mr. Busacca's existing option which was terminated
and replaced by a new option to purchase 30,000 shares. As part of such
revised compensation package, the Company also paid Mr. Busacca
$131,328 in January 2000 following the termination of Mr. Busacca's
employment with the Company on December 31, 1999, which payment
included Mr. Busacca's full revised salary for October through December
1999 and additional salary for Mr. Busacca's services as Deputy Chief
Executive Officer from January to September 1999.
Peter T. Noone - Mr. Noone's employment agreement provides for
a three-year term ending in 1999 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 provided 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. The
Company entered into a new employment agreement with Mr. Tesmer in
October 1999 which provided for an annual salary of $120,600, a monthly
housing allowance of $2,000 and a $3,333 monthly Company contribution
to a retirement agreement. Mr. Tesmer terminated his employment with
the Company in January 2000.
-12-
<PAGE>
Report on Repricing of Options.
The Compensation - Stock Option Committee (the "Compensation
Committee") of the Board of Directors agreed to effectively revise the
exercise price on an option granted to Francis J. Busacca, Jr. to
purchase 30,000 shares. The original exercise price was $8.00 per
share. The revised exercise price was $5.46. The Company hired Mr.
Busacca as its Executive Vice President and Chief Financial Officer on
March 1, 1998. Pursuant to Mr. Busacca's original employment agreement,
the Company granted Mr. Busacca the option to purchase 30,000 shares of
Common Stock. From April to December 1998, Mr. Busacca was the
Company's interim President and Chief Executive Officer. Effective
January 1, 1999 Ole Bertram assumed the offices of President and Chief
Executive Officer. In 1999, the Board agreed to promote Mr. Busacca
from Chief Financial Officer to Deputy Chief Executive Officer. In
connection with such promotion, the Board agreed to revise Mr.
Busacca's compensation package which included the grant of an
additional option to purchase 20,000 shares of Common Stock and the
effective revision of the exercise price on Mr. Busacca's existing
option which was terminated and replaced by a new option to purchase
30,000 shares of Common Stock. As part of such revised compensation
package, the Company also paid Mr. Busacca $131,328 in January 2000
following the termination of Mr. Busacca's employment with the Company
on December 31, 1999 which payment included Mr. Busacca's full revised
salary for October through December 1999 and additional salary for Mr.
Busacca's services as Deputy Chief Executive Officer from January to
September 1999.
Daryl A. Ferguson
John B. Ryan
William E. Starkey
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
10-YEAR OPTION REPRICINGS
---------------------------------------------------------------------------------------------------------------
Number of Market Length of
Securities Price of Exercise Original
Underlying Stock at Price at Option Term
Options Time of Time of New Remaining
Repriced or Repricing Repricing or Exercise at Date of
Amended or Amend- Amendment Price Repricing or
Name Date (#) ment ($) ($) ($) Amendment
---------------------------- ----------- ------------- ------------ -------------- ------------ ---------------
Francis J. Busacca, Jr. 11/19/99 30,000 5.46 8.00 5.46 3.33 years
---------------------------- ----------- ------------- ------------ -------------- ------------ ---------------
</TABLE>
-13-
<PAGE>
Committees and Meetings of the Board of Directors
During the Company's fiscal year ended December 31, 1999, the
Board of Directors held five meetings. Each of the incumbent directors
except for Messrs. Meineche and Tow attended at least 75% of the
meetings of the Board of Directors that were held during the 1999
fiscal year. Each of the incumbent directors except for Mr. Holm
attended at least 75% of the meetings of each committee on which he
served that were held during the 1999 fiscal year while he was serving
as a member of such committee. Mr. Holm missed the only Audit Committee
meeting held during 1999 while he was a member of such committee.
The Company has standing Compensation-Stock Option, Audit and
Nominating Committees. The Nominating Committee, which was established
in January 2000 recommends to the full Board of Directors a slate of
nominees for election to the Board of Directors. While the Nominating
Committee 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 120 days prior to the annual meeting.
The Compensation - Stock Option Committee consists of Daryl A.
Ferguson, John B. Ryan and William E. Starkey. 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 two meetings during the fiscal year ended December 31,
1999.
From April 1998 to May 25, 1999, the Audit Committee consisted
of Daryl A. Ferguson, John B. Ryan and James H. Season. Effective May
25, 1999 Torben V. Holm replaced Mr. Season on the Audit Committee.
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, 1999 the Audit Committee held two meetings.
Compensation Committee Interlocks and Insider Participation
The Compensation - Stock Option Committee consists of Daryl A.
Ferguson, John B. Ryan and William E. Starkey. 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 two meetings during the fiscal year ended December 31,
1999.
No current or former members of the committee during such
period were officers of the Company. Mr. Ferguson retired as an
executive officer of Citizens in 1999. See "Certain Relationships
and Related Party Transactions - The Citizens Agreements."
-14-
<PAGE>
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
"Danish Fund") if TD acquired such shares within twelve (12) months. As
a result of such agreement, the Board of Directors elected Torben V.
Holm, an officer of TD, to its Board in March 1999 and Mr. Holm was
reelected to the Board by the Company's stockholders for the 1999 to
2000 term. The Board of Directors is nominating Mr. Holm for reelection
for the 2000 to 2001 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 Danish 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 May 1999, as part of a series of agreements to revise the
Company's capital structure, TD purchased an additional 1,571,429
shares of Common Stock from the Company for $11 million.
In addition to Mr. Holm, the Board of Directors is nominating
Torben A. Lange, an officer of TD, for election to the Board of
Directors for the 2000 to 2001 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 1,902,908 shares of Common Stock and 30,000 shares of the
Company's Series A Preferred Stock convertible into 300,000 shares of
Common Stock, pursuant to certain agreements entered into with the
Company (as amended and restated in certain cases to date, the
"Citizens Agreements"). Citizens also purchased 103,000 shares of
Common Stock on the open market bringing its ownership of the
outstanding Common Stock as of April 11, 2000, to 19.2%. 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 on September 12, 2000, with per share exercise prices ranging
from $12.75 to $18.00. The Citizens Agreements provide Citizens with
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<PAGE>
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. Leonard Tow, an executive officer of
Citizens Utilities Company, and Daryl A. Ferguson, a former executive
officer of Citizens Utilities Company, are directors of the Company and
nominees for reelection to the Board of Directors for the 2000 to 2001
term.
The Postabank Agreements
In October 1996, the Company entered into a $170 million
10-year credit facility with Postabank Rt. (the "Postabank Credit
Facility"). In May 1999, as part of a series of agreements with
Citizens, TD, Postabank, and the Danish Fund to revise the Company's
capital structure, the Company and Postabank entered into a $138
million Dual Currency Bridge Loan Agreement (the "Postabank Bridge
Loan"). The Company also (i) issued 2,428,572 shares of Common Stock to
Postabank for $34 million and (ii) issued to Postabank subordinated
notes in the amount of $25 million and warrants to purchase 2,500,000
shares of Common Stock at an exercise price of $10 per share beginning
on January 1, 2004. The Company also granted Postabank the right to
have one person designated by Postabank to be nominated for election to
the Company's Board of Directors. Postabank has not yet exercised this
right.
As a result of such agreements to revise the Company's capital
structure, the Company paid off the outstanding balance on the
Postabank Credit Facility. In April 2000, the Company entered into a
new syndicated senior security credit facility which proceeds will be
used to pay off the Postabank Bridge Loan.
The Danish Fund Agreements
As part of such agreements to revise the Company's capital
structure, the Company issued 1,285,714 shares of Common Stock to the
Danish Fund in May 1999.
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, 1999, the Company has identified two untimely filed
reports. Lennart Meineche filed his Form 3 five days late and the
Danish Fund filed its Form 3 late.
-16-
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation - Stock Option Committee (`Compensation
Committee") consists of Daryl A. Ferguson, John B. Ryan and William E.
Starkey. 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 Committee held two meetings during the fiscal year ended
December 31, 1999.
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 the grant of stock options.
Employment Contracts. The Company has traditionally entered
into an employment agreement with an executive officer 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.
Chief Executive Officer's Compensation. The Compensation
Committee negotiated a two-year employment agreement with the Company's
Chief Executive Officer, Ole Bertram. The Compensation Committee
provided Mr. Bertram with a base salary based on comparable industry
standards and a grant of options also based on comparable industry
standards. The options are intended to provide Mr. Bertram with
incentive to increase the Company's market value. The employment
agreement with Mr. Bertram also provides for a potential cash bonus
tied to certain Company objectives established by the Compensation
Committee. The Company's objectives are tied to its revenue growth,
customer growth, capital expenditures and its financial performance.
The Compensation Committee has not yet determined Mr. Bertram's bonus
for his 1999 performance.
For a description of certain provisions of the Company's
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
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<PAGE>
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
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,
1995 through December 31, 1999. 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, 1995, with dividends reinvested on the date
paid.
-18-
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, AMEX MARKET INDEX
AND TELECOMMUNICATIONS INDUSTRY INDEX
[chart]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Hungarian Telephone and $100.00 101.19 89.29 91.07 30.95 69.05
Cable Corp.
Telecommunications 100.00 130.57 128.85 167.02 254.27 387.41
Industry Index
Amex Market Index 100.00 128.90 136.01 163.66 161.44 201.27
</TABLE>
-19-
<PAGE>
II. PROPOSAL TO AMEND THE COMPANY'S 1992 INCENTIVE STOCK OPTION PLAN,
AS AMENDED, TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
AVAILABLE THEREUNDER FROM 1,000,000 TO 1,250,000
Background of Proposed Amendment
The Stock Option Plan presently provides that the aggregate
number of shares of Common Stock subject to options granted thereunder
shall not exceed 1,000,000. Following a review of the options granted
to date under the Stock Option Plan and the number of options which the
Board of Directors believes should be available for awards in the
future, the Board of Directors has determined that the number of shares
presently available for awards under the Stock Option Plan is
insufficient to achieve the purposes of the Stock Option Plan. Based
upon that determination, the Board of Directors has determined that an
increase in the number of shares of Common Stock subject to Options
under the Stock Option Plan would be in the best interests of the
Company and its stockholders. Accordingly, on April 11, 2000, the Board
of Directors unanimously determined that the number of shares of Common
Stock subject to stock options available for grants under the Stock
Option Plan be increased from 1,000,000 shares to 1,250,000 shares in
order to provide incentive for certain key employees, directors and
consultants. The Board of Directors also unanimously recommended that
the Company's stockholders approve such increase. No other changes to
the Stock Option Plan are proposed at this time.
Description of the Stock Option Plan
The following description of the Stock Option Plan does not
purport to be complete and is qualified in its entirety by reference to
the full text of the Stock Option Plan, which may be obtained by any
stockholder of the Company by contacting Hungarian Telephone and Cable
Corp., Attn: Peter T. Noone, Secretary, 100 First Stamford Place, Suite
204, Stamford, CT 06902.
Purpose. The purpose of the Stock Option Plan is to provide an
incentive to employees of the Company (including directors and officers
of the Company), to encourage proprietary interest in the Company, to
encourage employees to remain in the employ of the Company and to
attract to the Company individuals of experience and ability to serve
as employees, directors and consultants.
Shares Subject to the Stock Option Plan. The maximum number of
shares of Common Stock as to which options may be granted under the
Stock Option Plan (subject to adjustment as described below) presently
is 1,000,000 shares. Any shares subject to an option which for any
reason expires or terminates unexercised may again be the subjected of
another option granted under the Stock Option Plan. As of the Record
Date, options with respect to 858,490 shares of Common Stock have been
granted and are either outstanding or have been exercised under the
Stock Option Plan.
Administration. The Stock Option Plan presently is
administered by the Compensation - Stock Option Committee (the
"Compensation Committee") appointed by the Board of Directors. The
Compensation Committee shall from time to time, at its discretion, make
determinations with respect to individuals who shall be granted options
(Incentive Stock Options or Non-Qualified Stock Options, which may be
referred to collectively as "Options"), the number of shares subject to
Options and the designations of such Options as Incentive Stock Options
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<PAGE>
(an option described in Section 422(b) of the Internal Revenue Code of
1986, as amended, and also known as a "Qualified Option") or
Non-Statutory Stock Options (an option not described in Section 422(b)
or 423(b) of the Internal Revenue Code of 1986, as amended, and also
known as a "Non-Qualified Option"). Notwithstanding such designations,
to the extent that the aggregate fair market value of the shares with
respect to which Options designated as Incentive Stock Options are
exercisable for the first time by any optionee during any calendar year
exceeds $100,000, such Options shall be treated as Non-Qualified
Options. The Compensation Committee determines vesting requirements and
other conditions of such awards, interprets the Stock Option Plan, and
makes all other decisions relating to the operation of the Stock Option
Plan.
Eligibility. All key employees (including directors who are
employees), or directors who are not employees, and consultants (who
are neither employees nor directors) (individually, an "Optionee", and
together, the "Optionees") of the Company or any of its subsidiaries
who perform services of special importance to the management, operation
and development of the business of the Company as the Compensation
Committee may select presently are eligible to receive Options under
the Stock Option Plan. As of the April 11, 2000, there were
approximately 20 persons eligible to participate in the Stock Option
Plan as directors, employees or consultants.
Option Contracts. Each grant of an Option is evidenced by a
written contract between the Company and the Optionee receiving the
grant, containing terms and conditions not inconsistent with the Stock
Option Plan. Each Optionee shall agree to remain in the employ of, and
to render to, the Company his or her services for a period of one (1)
year from the date of the granting of any Option, but such agreement
shall not impose upon the Company any obligation to retain the Optionee
for any period of time.
Terms and Conditions of Options. Options may be granted for
terms determined by the Committee; provided, however, that no Option
shall be exercisable after the expiration of 10 years from the date of
grant; and provided further that the exercise period for an Incentive
Stock Option may not exceed 5 years if the option holder owns (or is
deemed to own) stock possessing more than 10% of the voting power of
the Company. In the case of an Incentive Stock Option, the per share
exercise price shall be no less than 100% of the fair market value per
share on the date of grant, except that, if granted to an employee who,
at the time of the grant of such Incentive Stock Option, owns (or is
deemed to own) stock representing more than 10% of the voting power of
all classes of stock of the Company or any parent or subsidiary, the
per share exercise price shall be no less than 110% of the fair market
value per share on the date of grant. In the case of a Non-Qualified
Option, the per share exercise price may be less than, equal to, or
greater than the fair market value per share on the date of grant, as
determined by the Compensation Committee.
The consideration to be paid for shares to be issued upon
exercise of an Option shall be United States dollars; provided,
however, that, with the consent of the Compensation Committee, the
purchase price may be paid by the surrender of shares of Common Stock
in good form for transfer owned by the person exercising the Option and
having a fair market value on the date of exercise equal to the
purchase price or in any combination of cash and shares, so long as the
total of the cash so paid and the fair market value of the shares
surrendered equals the purchase price. No shares shall be issued
pursuant to the exercise of an option until full payment therefor has
been made.
Options may not be transferred other than by will or by the
laws of descent and distribution, and may be exercised during the
Optionee's lifetime only by him or his legal representatives. With
respect to an Option granted to an employee, if the employment of such
employee is terminated for any reason other than death or a permanent
and total disability, the Option may be exercised, to the extent
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<PAGE>
exercisable by the holder at the time of termination of
employment, within three months following termination in the case of a
Qualified Option and eighteen months following termination in the case
of a Non-Qualified Option (twelve months if termination was due to
disability in the case of a Qualified Option). In the case of death of
the Optionee while employed or following the termination of employment,
his executor or administrator of his estate may exercise the Option, to
the extent exercisable on the date of death.
Adjustment in Event of Capital Changes. Subject to any
required action by the Company's stockholders, the number of shares
covered by the Stock Option Plan, the number of shares covered by each
outstanding Option, and the exercise price thereof shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a subdivision or
consolidation of the Common Stock, stock split, or the payment of a
stock dividend.
Subject to any required action by the Company's stockholders,
if the Company shall be the surviving corporation in any merger or
consolidation, each outstanding Option shall pertain and apply to the
securities to which a holder of the number of shares subject to the
Option would have been entitled. A dissolution or liquidation of the
Company or a merger or consolidation in which the Company is not the
surviving corporation shall cause each outstanding Option to terminate,
unless the agreement of merger or consolidation shall otherwise
provide; provided that, each Optionee shall in such event, if a period
of one year from the date of the grant of the Option shall have
elapsed, have the right immediately prior to such dissolution or
liquidation, or merger or consolidation in which the Company is not the
surviving corporation, to exercise the Option in whole or in part,
subject to limitations on exercise under the Stock Option Plan.
In the event of a change in the Common Stock as presently
constituted, which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different
par value or without par value, the shares resulting from any such
change shall be deemed to be the Common Stock within the meaning of the
Stock Option Plan.
To the event that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive.
Duration and Amendments of the Stock Option Plan. Options may
be granted pursuant to the Stock Option Plan until the termination of
the Stock Option Plan on April 30, 2002. The Board of Directors may at
any time, subject to applicable law, suspend, terminate or amend the
Stock Option Plan in any respect; provided, however, that, without the
approval of the Company's stockholders, no amendment may be made which
would (a) increase the number of shares available for the grant of
Options (except the anti-dilution adjustments described above), (b)
materially increase benefits accruing to participants under the Stock
Option Plan or (c) change the eligibility requirements for
participating in the Stock Option Plan.
Benefits under Stock Option Plan
The benefits to be awarded to and received by the employees,
directors and consultants of the Company under the Stock Option Plan,
as proposed to be amended, in the future are not presently
determinable. There would have been no additional benefits received by
the employees, directors and consultants of the Company for the last
completed fiscal year if the Stock Option Plan, as proposed to be
amended, had been in effect. All shares currently subject to Options,
as well as any additional shares that may become subject to future
Options (including the proposed increase in shares subject to
stockholder approval), under the Stock Option Plan are comprised of
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<PAGE>
authorized but unissued shares of Common Stock. Accordingly, the
exercise of any such Options and the issuance of shares pursuant
thereto will have the effect of diluting the interests of existing
stockholders to the extent of such issuance.
On April 10, 2000, the closing price for the Common Stock as
reported by the American Stock Exchange was $7-11/16.
Certain Interests of Directors
In considering the recommendation of the Board of Directors
with respect to the increase in the number of shares available under
the Stock Option Plan, stockholders should be aware that the members of
the Board of Directors have certain interests which may present them
with conflicts of interest in connection with such proposal. As
discussed above, all current directors of the Company are eligible to
participate in the Stock Option Plan.
The Board of Directors recognizes that approval of the
proposal to increase the number of shares available under the Stock
Option Plan may benefit such individual directors of the Company and
their successors, but it believes that approval of the additional
shares available under the Stock Option Plan will strengthen the
Company's ability to continue to attract, motivate and retain certain
qualified employees, directors and consultants. Furthermore, the Board
of Directors believes that such approval will advance the interests of
the Company and its stockholders by encouraging key employees,
directors and consultants to make significant contributions to the
long-term success of the Company. The Board of Directors believes that
the increase in the number of shares available under the Stock Option
Plan is in the best interests of the Company and its stockholders, and
therefore, unanimously recommends a vote FOR the approval of the
proposal to increase the number of shares of Common Stock available
under the Stock Option Plan from the current 1,000,000 shares to
1,250,000 shares for use as incentive awards for key employees,
directors and consultants. In considering the foregoing recommendation
of the Board of Directors, stockholders should be aware that the
current members of the Board of Directors own as of April 11, 2000, in
the aggregate, approximately 1.4% of the shares of the Company's issued
and outstanding Common Stock, assuming full exercise of options and
warrants exercisable by them within 60 days of the Record Date.
The Board of Directors recommends that stockholders vote "FOR"
approval of the proposal to amend the Stock Option Plan to increase the
number of shares of Common Stock available thereunder from 1,000,000 to
1,250,000 for use as incentive awards to certain key employees,
directors and consultants.
III. RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors, on the recommendation of the Audit
Committee, has appointed the firm of KPMG Hungaria Kft. as independent
auditors of the Company for the fiscal year ending December 31, 2000,
subject to the ratification of the appointment by the Company's
stockholders. A representative of KPMG Hungaria Kft. 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.
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<PAGE>
The Board of Directors recommends that stockholders vote "FOR"
the ratification of the appointment of KPMG Hungaria Kft. as auditors
of the Company for the fiscal year ending December 31, 2000.
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 2001 Proxy Statement. Any such stockholder proposals must be
submitted in writing to the Secretary of the Company no later than
December 29, 2000. A shareholder proposal submitted outside the
processes of Rule 14a-8 is considered untimely if the Company did not
have notice of such proposal at least 45 days before the date on which
the Company first mailed its proxy materials for the prior year's
annual meeting of stockholders. 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 2001
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 2000 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 2001 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 12, 2000
New York, New York
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<PAGE>
PROXY HUNGARIAN TELEPHONE AND CABLE CORP. PROXY
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 25, 2000
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, 2000, 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, the increase in the number of shares available under the Stock Option
Plan, and the ratification of the appointment KPMG Hungaria Kft.
1. The election as directors of all nominees listed below to serve until
the 2001 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 DARLY A. FERGUSON TORBEN V. HOLM
TORBEN A. LANGE JOHN B. RYAN WILLIAM E. STARKEY
LEONARD TOW
VOTE
FOR |_| WITHHELD |_|
2. Proposal to amend the Company's 1992 Incentive Stock Option Plan, as
amended, to increase the number of shares of the Company's common stock
available thereunder from 1,000,000 to 1,250,000 for use as incentive
awards to certain key employees, directors and consultants.
FOR |_| AGAINST |_| ABSTAIN |_|
3. Ratification of the appointment of KPMG Hungaria Kft. as auditors of
the Company for the fiscal year ending December 31, 2000.
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,
1999.
DATED: , 2000
------------------------------------
Signature
------------------------------------
Signature
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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.
HUNGARIAN TELEPHONE AND CABLE CORP.
1992 INCENTIVE STOCK OPTION PLAN, AS AMENDED AS OF JANUARY 10, 2000
1. Purpose. The purpose of the 1992 Incentive Stock Option
Plan of Hungarian Telephone and Cable Corp. (the "Corporation") is to provide
incentive to employees of the Corporation, to encourage employee proprietary
interest in the Corporation, to encourage employees to remain in the employ of
the Corporation, and to attract to the Corporation individuals of experience and
ability to serve as employees, directors and consultants.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986
as amended from time to time.
(c) "Common Stock" shall mean the $.001 par value Common
stock of the Corporation.
(d) "Committee" shall mean the Committee appointed by the
Board in accordance with Section 4 of the Plan.
(e) "Corporation" shall mean Hungarian Telephone and
Cable Corp., a Delaware corporation, its parent or any of its
subsidiaries.
(f) "Disability" shall mean the condition of an Employee
who is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months.
(g) "Employee" shall mean an individual (who may be an
officer or a director) employed by the Corporation (within the meaning
of the Code section 3401 and the regulations thereunder).
(h) "Exercise Price" shall mean the price per Share of
Common Stock, determined by the Committee, at which an Option may be
exercised.
(i) "Fair Market Value" of a share of Common Stock on any
day shall mean the average of the daily closing prices for the prior
twenty (20) trading days of a share of the Company's Common Stock on
the American Stock Exchange, or, if the shares are not listed or
admitted to trading on such Exchange, on the principal United States
securities exchange or on the NASDAQ/NMS on which the shares are
listed or admitted to trading, or if the shares are not listed or
admitted to trading on any such exchange or on the NASDAQ/NMS, the mean
<PAGE>
between the closing high bid and low asked quotations with respect to
a share on such dates on the National Association of Securities
Dealers, Inc. Automated Quotations System, or any similar system then
in use, or if no such quotations are available, the fair market value
on such date of a share as the Committee shall determine.
(j) "Incentive Stock Option" shall mean an Option
described in Code section 422(b).
(k) "Nonstatutory Stock Option" shall mean an Option not
described in Code sections 422(b) or 423(b).
(l) "Option" shall mean a stock option granted pursuant
to the Plan.
(m) "Purchase Price" shall mean the Exercise Price times the
number of whole Shares with respect to which an Option is exercised.
(n) "Optionee" shall mean an Employee to whom an option
has been granted.
(o) "Plan" shall mean this Hungarian Telephone and Cable
Corp. 1992 Incentive Stock Option Plan.
(p) "Share" shall mean one Share of Common Stock,
adjusted in accordance with Section 10 of the Plan (if applicable).
(q) "Subsidiary" shall mean those subsidiaries of the
Corporation as defined in section 424(f) of the code.
3. Effective Date. This Plan was approved by the Board and
Shareholders effective April 30, 1992.
4. Administration. The Plan shall be administered by the Board
of Directors or by the Stock Option Committee (the `Committee") appointed by
the Board, consisting of not less than two members thereof. The Board may from
time to time remove members from, or add members to, the Committee. Vacancies
on the Committee, however caused, shall be filled by the Board.
The Committee shall hold meetings at such times and places as
it may determine. Acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be the valid acts of the Committee. The Committee shall
from time to time at its discretion make determinations with respect to
Employees who shall be granted Options, the number of Shares to be optioned to
each and the designation of such Options as Incentive Stock Options or
Nonstatutory Stock Options.
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<PAGE>
The interpretation and construction by the Committee of any
provisions of the Plan or of any Option granted thereunder shall be final. No
member of the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted thereunder.
5. Eligibility. Optionees shall be such key Employees (who may
be officers, whether or not they are directors), or directors or consultants of
the Corporation who perform services of special importance to the management,
operation and development of the business of the Corporation as the Committee
shall select, but subject to the terms and conditions set forth below.
(a) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonqualified Stock
Option. However, notwithstanding such designations, to the extent that
the aggregate fair market value of the Shares with respect to which
Options designated as Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under all plans of
the Company) exceeds $100,000, such Options shall be treated as
Nonqualified Stock Options.
(b) For purposes of Section 5(a), Options shall be taken into
account in the order in which they were granted, and the fair market
value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(c) Nothing in the Plan or any Option granted hereunder shall
confer upon any Optionee any right with respect to continuation of
employment with the Company, nor shall it interfere in any way with the
Optionee's right or the Company's right to terminate the employment
relationship at any time, with or without cause.
6. Stock. The stock subject to Options granted under the Plan
shall be Shares of the Corporation's authorized but unissued or reacquired
Common Stock. The aggregate number of Shares which may be issued under Options
exercised under this Plan shall not exceed 1,000,000. The number of Shares
subject to Options outstanding under the Plan at any time may not exceed the
number of Shares remaining available for issuance under the Plan. In the event
that any Option outstanding under the Plan expires for any reason or is
terminated, the Shares allocable to the unexercised portion of such Option may
again be subjected to an Option under the Plan.
The limitations established by this Section 6 shall be subject
to adjustment upon the occurrence of the events specified and in the manner
provided in Section 10 hereof.
7. Terms and Conditions of Options. Options granted pursuant
to the Plan shall be evidenced by written agreements in such form as the
Committee shall from time to time determine, which agreements shall comply with
and be subject to the following terms and conditions:
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<PAGE>
(a) Date of Grant. Each option shall specify its effective
date (the "date of grant"), which shall be the date specified by the
Board or the Committee, as the case may be, in its action relating to
the grant of the Option.
(b) Optionee's Agreement. Each Optionee shall agree to remain
in the employ of and to render to the Corporation his or her services
for a period of one (1) year from the date of the granting of the
Option, but such agreement shall not impose upon the Corporation any
obligation to retain the Optionee in their employ for any period.
(c) Number of Shares. Each Option shall state the number of
Shares to which it pertains and shall provide for the adjustment
thereof in accordance with the provisions of Section 10 hereof.
(d) Exercise Price and Consideration.
(i) The per Share exercise price under each Option
shall be such price as is determined by the Board, subject to
the following:
a) In the case of an Incentive Stock Option
i) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock
representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than
110% of the fair market value per share on the date of grant.
ii) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the fair
market value per Share on the date of grant.
b) In the case of a Nonqualified Stock Option the per
Share exercise price may be less than, equal to, or greater
than the fair market value per Share on the date of grant.
(ii) The fair market value per Share shall be the
closing price per share of the Common Stock on the National
Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System on the date of grant. If the
Common Stock ceases to be listed on the NASDAQ National Market
System, the Board shall designate an alternative method of
determining the fair market value of the Common Stock.
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<PAGE>
(e) Medium and Time Payment. The Purchase Price shall be
payable in full in United States dollars upon the exercise of the
Option; provided, however, that, with the consent of the Committee, the
Purchase Price may be paid by the surrender of Shares in good form for
transfer, owned by the person exercising the option and having a Fair
Market Value on the date of exercise equal to the Purchase Price or in
any combination of cash and Shares, so long as the total of the cash so
paid and the Fair Market Value of the Shares surrendered equals the
Purchase Price. No Share shall be issued until full payment therefore
has been made.
(f) Term and Exercise of Options; Nontransferability of
Options. Each Option shall state the time or times when it becomes
exercisable. No option shall be exercisable after the expiration of ten
(10) years from the date it is granted. During the lifetime of the
Optionee, the Option shall be exercisable only by the Optionee and
shall not be assignable or transferable. In the event of the Optionee's
death, no Option shall be transferable by the Optionee otherwise than
by will or the laws of descent and distribution.
(g) Termination of Employment Except Death. In the event that
an Optionee shall cease to be employed by the Corporation for any
reason other than his or her death, such Optionee shall have the right,
subject to the restrictions of Subsection (f) hereof, to exercise the
Option at any time within the earlier of (x) the original expiration
date of the Option or (y) three (3) months after such termination of
employment in the case of an Incentive Stock Option and eighteen (18)
months after such termination of employment in the case of a
Nonstatutory or Non-Qualified Stock Option, (twelve (12) months if
termination was due to Disability in the case of an Incentive Stock
Option), to the extent that, on the day preceding the date of
termination of employment, the Optionee's right to exercise such Option
had accrued pursuant to the terms of the option agreement pursuant to
which such Option was granted, and had not previously been exercised.
For this purpose, the employment relationship will be treated
as continuing intact while the Optionee is on military leave, sick
leave or other bona fide leave of absence (to be determined in the sole
discretion of the Committee, in accordance with rules and regulations
construing Code section 422(a)(2)). Notwithstanding the foregoing, in
the case of an Incentive Stock Option, employment shall not be deemed
to continue beyond the ninetieth (90th) day after the Optionee ceased
active employment, unless the Optionee's reemployment rights are
guaranteed by statute or by contract.
(h) Death if Optionee. If the Optionee shall die while in the
employ of the Corporation and shall not have fully exercised the
Option, an Option may be exercised in full, subject to the restrictions
of Subsection (f) hereof, to the extent it had not previously been
exercised, at any time within twelve (12) months after the Optionee's
death, by the executors or administrators of his or her estate or by
any person or persons who shall have acquired the Option directly from
the Optionee by bequest or inheritance.
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<PAGE>
If the Optionee shall die following the termination of his
employment with the Company and such death shall occur prior to the
earlier of (x) the original expiration date of the option or (y) three
(3) months following the termination of employment in the case of an
Incentive Stock Option, and (18) months following the termination of
employment in the case of a Nonstatutory or Non-Qualified Stock Option,
and such Option shall not have been fully exercised, an Option may be
exercised (subject to the limitations on exercisability set forth in
Subsection (f) hereof) to the extent that, at the date of termination
of employment, the Optionee's right to exercise such Option had accrued
pursuant to the terms of the applicable option agreement and had not
previously been exercised, at any time within twelve (12) months after
the Optionee's death, by the executors or administrators of the
Optionee's estate or by any person or persons who shall have acquired
the Option directly from the Optionee by bequest or inheritance.
(i) Rights as a Stockholder. An Optionee or a transferee of an
Optionee shall have no rights as a stockholder with respect to any
Shares covered by his or her Option until the date of the issuance of a
stock certificate for such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record
date is prior to the date such stock certificate is issued, except as
provided in Section 10.
(j) Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Options granted under
the Plan, or accept the exchange of outstanding Options (to the extent
not theretofore exercised and subject to the provisions of paragraph
7(d) above) for the granting of new Options in substitution therefor.
Notwithstanding the foregoing, however, no modification of an Option
shall, without the consent of the optionee, alter or impair any rights
or obligations under any Option theretofore granted under the Plan.
(k) Other Provisions. The option agreements authorized under
the Plan shall contain such other provisions not inconsistent with the
terms of the Plan, including, without limitation, restrictions upon the
exercise of the Option, as the Committee shall deem advisable.
8. Limitation on Annual Awards.
General Rule. Each Option shall be designated in the written
option agreement as either an Incentive Stock Option or a Nonqualified Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate fair market value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company) exceeds
$100,000, such Options shall be treated as Nonqualified Stock Options.
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<PAGE>
9. Term of Plan. Options may be granted pursuant to the Plan
until the termination of the Plan on April 30, 2002.
10. Recapitalization. Subject to any required action by the
stockholders, the number of Shares covered by this Plan as provided in Section
6, the number of Shares covered by each outstanding Option, and the Exercise
Price thereof shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a subdivision or consolidation of
Shares, stock split, or the payment of a stock dividend.
Subject to any required action by the stockholders, if the
Corporation shall be the surviving corporation in any merger or consolidation,
each outstanding Option shall pertain and apply to the securities to which a
holder of the number of Shares subject to the Option would have been entitled. A
dissolution or liquidation of the Corporation or a merger or consolidation in
which the Corporation is not the surviving corporation shall cause each
outstanding Option to terminate, unless the agreement of merger or consolidation
shall otherwise provide, provided that each Optionee shall in such event, if a
period of one (1) year from the date of the grant of the Option shall have
elapsed, have the right immediately prior to such dissolution or liquidation, or
merger or consolidation in which the Corporation is not the surviving
corporation, to exercise the Option in whole or in part, subject to limitations
on exercisability under Section 7(k) hereof.
In the event of a change in the Common Stock as presently
constituted, which is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.
To the extent that the foregoing adjustments related to stock
or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
Except as hereinbefore expressly provided in this Section 10,
the Optionee shall have no rights by reason of any subdivision or consolidation
of shares of stock of any class, stock split, or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class or by reason of any dissolution, liquidation, merger, or consolidation
or spin-off of assets or stock of another corporation, and any issue by the
Corporation of shares of stock of any class or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares subject to
the Option.
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The grant of an Option pursuant to the Plan shall not affect
in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.
11. Securities Law Requirements. No Shares shall be issued upon
the exercise of any Option unless and until the Corporation has determined that:
(i) it and the Optionee have taken all actions required to register the Shares
under the Securities Act of 1933 or perfect an exemption from the registration
requirements thereof; (ii) any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and (iii) any
other applicable provision of state or Federal Law has been satisfied.
12. Amendment of the Plan. The Board may, insofar as permitted by
law, from time to time, with respect to any Shares at the time not subject to
Options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders, no such revision
or amendment shall:
(a) Increase the number of Shares issuable pursuant to
the Plan; or
(b) Change the requirements as to eligibility for
participation in the Plan.
(c) Materially increase benefits accruing to participants
under the Plan.
13. Application of Funds. The proceeds received by the
Corporation from the sale of Common Stock pursuant to the exercise of an Option
will be used for general corporate purposes.
14. No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon the Optionee to exercise such Option.
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