HUNGARIAN TELEPHONE AND CABLE CORP. 2004 Long-Term Incentive Plan

Exhibit 4.3

 

HUNGARIAN TELEPHONE AND CABLE CORP.

2004 Long-Term Incentive Plan

HUNGARIAN TELEPHONE AND CABLE CORP.

 

2004 LONG-TERM INCENTIVE PLAN

 

Table of Contents

 

 

 

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ARTICLE I

PURPOSE AND EFFECTIVE DATE

 

1.1 Purpose . The purpose of the Plan is to provide financial incentives for selected Employees of Hungarian Telephone and Cable Corp. (“HTCC”) and its Subsidiaries and for the non-employee Directors of HTCC, thereby promoting the long-term growth and financial success of the Company by (1) attracting and retaining employees and Directors of outstanding ability, (2) strengthening the Company’s capability to develop, maintain, and direct a competent management team, (3) providing an effective means for selected Employees and non-employee Directors to acquire and maintain ownership of HTCC Stock, (4) motivating Employees to achieve long-range Performance Goals and objectives, and (5) providing incentive compensation opportunities competitive with those of other corporations.

 

1.2 Effective Date and Expiration of Plan . The Plan is subject to approval by a majority of the votes cast at the annual meeting of Shareholders to be held on May 19, 2004, or at any adjournment thereof by the holders of shares of HTCC stock entitled to vote thereon. If so approved, the Plan shall be effective as of such date. Unless earlier terminated by the Board pursuant to Section 11.3, the Plan shall terminate on the tenth anniversary of its Effective Date. No Award shall be made pursuant to the Plan after its termination date, but Awards made prior to the termination date may extend beyond that date.

 

ARTICLE II

DEFINITIONS

 

The following words and phrases, as used in the Plan, shall have these meanings:

 

2.1 “ Administrator ” means the individual or individuals to whom the Committee delegates authority under the Plan in accordance with Section 3.3.

 

2.2 “ Award ” means, individually or collectively, any Option, SAR, Restricted Stock, Restricted Stock Unit, Restricted Performance Stock, unrestricted HTCC Stock or Performance Unit Award or any other form of Award authorized pursuant to Section 4.1(b).

 

2.3 “ Award Statement ” means a written confirmation of an Award under the Plan furnished to the Participant.

 

2.4 “ Board ” means the Board of Directors of HTCC.

 

2.5 “ Cause ” except for purposes of Article XII, with respect to any Participant, means (i) the definition of “Cause” as set forth in any individual employment agreement applicable to such Participant, or (ii) in the case of a Participant who does not have an individual employment agreement that defines Cause, and unless the Committee shall authorize a different definition of “Cause” for such Participant, then “Cause” means the termination of a Participant’s employment by reason of his or her (1) engaging in gross misconduct that is injurious to the Company, monetarily or otherwise, (2) misappropriation of funds, (3) willful misrepresentation to the directors or officers of the Company regarding matters relating to the business of the Company, (4) gross negligence in the performance of the Participant’s duties that has or may reasonably be expected to have an adverse effect on the business, operations, assets, properties or financial

 

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condition of the Company, (5) commission of a felony or any crime involving moral turpitude, or (6) entering into competition with the Company. The determination of whether a Participant’s employment was terminated for Cause shall be made by the Company in its sole discretion.

 

2.6 “ Code ” means the Internal Revenue Code of 1986, as amended.

 

2.7 “ Committee ” means the Stock Option—Compensation Committee of the Board or a subcommittee thereof.

 

2.8 “ Company ” means Hungarian Telephone and Cable Corp. and all of its Subsidiaries on and after the Effective Date.

 

2.9 “ Deferred Account ” means an account established for a Participant under Section 10.1.

 

2.10 “ Deferred Compensation Plan ” means any deferred compensation plan established by the Company in which the Participants may participate.

 

2.11 “ Director ” means a member of the Board of Directors of HTCC.

 

2.12 “ Effective Date ” means the date on which the Plan is approved by the shareholders of HTCC, as provided in Section 1.2.

 

2.13 “ Employee ” means a salaried employee of the Company.

 

2.14 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

2.15 “ Fair Market Value ” means, when used with reference to HTCC Stock, “fair market value” determined pursuant to a valuation methodology approved by the Committee or, if the Committee does not approve a different valuation methodology, means, on any day, the daily closing price of a share of HTCC 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 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.

 

2.16 “ Fiscal Year ” means the fiscal year of the Company, which, as of the date the Plan was approved by the Board, is the year ending December 31.

 

2.17 “ HTCC ” means Hungarian Telephone and Cable Corp., a Delaware corporation.

 

2.18 “ HTCC Stock ” means common stock, par value $0.001 of Hungarian Telephone and Cable Corp.

 

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2.19 “ Incentive Stock Option ” means an option within the meaning of Section 422 of the Code.

 

2.20 “ Nonqualified Stock Option ” means an option granted under the Plan other than an Incentive Stock Option.

 

2.21 “ Option ” means either a Nonqualified Stock Option or an Incentive Stock Option to purchase HTCC Stock.

 

2.22 “ Option Price ” means the price at which HTCC Stock may be purchased under an Option as provided in Section 5.4, or in the case of a SAR granted under Section 5.8, the price determined in such Section 5.8.

 

2.23 “ Participant ” means a Employee or a non-employee Director to whom an Award has been made under the Plan or a Transferee.

 

2.24 “ Performance Goals ” means goals established by the Committee pursuant to Section 4.5.

 

2.25 “ Performance Period ” means a period of time over which performance is measured.

 

2.26 “ Performance Unit ” means the unit of measure determined under Article IX by which is expressed the value of a Performance Unit Award.

 

2.27 “ Performance Unit Award ” means an Award granted under Article IX.

 

2.28 “ Personal Representative ” means the person or persons who, upon the death, disability, or incompetency of a Participant, shall have acquired, by will or by the laws of descent and distribution or by other legal proceedings, the right to exercise an Option or SAR or the right to any Restricted Stock Award, Restricted Stock Unit Award or Performance Unit Award theretofore granted or made to such Participant.

 

2.29 “ Plan ” means this Hungarian Telephone and Cable Corp. 2004 Long-Term Incentive Plan.

 

2.30 “ Predecessor Plans ” means the Hungarian Telephone and Cable Corp. 2002 Incentive Stock Option Plan, as amended, and the Hungarian Telephone and Cable Corp. Non-Employee Director Stock Option Plan, as amended.

 

2.31 “ Restricted Performance Stock ” means HTCC Stock subject to Performance Goals.

 

2.32 “ Restricted Stock ” means HTCC Stock subject to the terms and conditions provided in Article VI and including Restricted Performance Stock.

 

2.33 “ Restricted Stock Award ” means an Award of Restricted Stock granted under Article VI.

 

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2.34 “ Restricted Stock Unit ” means a contractual undertaking by the Company to deliver to the Participant one share of HTCC Stock (or its equivalent value in cash) on a specified settlement date, subject to the terms and conditions provided in Article VI. Each Restricted Stock Unit awarded to a Participant shall correspond to one share of HTCC Stock.

 

2.35 “ Restricted Stock Unit Award ” means an Award of a Restricted Stock Unit granted under Article VI

 

2.36 “ Restriction Period ” means a period of time determined under Section 6.2 during which Restricted Stock or Restricted Stock Awards, or Restricted Stock Units or Restricted Stock Unit Awards, are subject to the terms and conditions provided in either Section 6.3 or Section 6.4.

 

2.37 “ SAR ” means a stock appreciation right granted under Section 5.8.

 

2.38 “ Shares ” means shares of HTCC Stock.

 

2.39 “ Shareholders ” means the Shareholders of HTCC.

 

2.40 “ Stock Option ” means a Incentive Stock Option or a Nonqualified Stock Option.

 

2.41 “ Subsidiary ” means a corporation or other entity the majority of the voting stock of which is owned directly or indirectly by HTCC.

 

2.42 “ Transferee ” means a person to whom a Participant has transferred his or her rights to an Award under the Plan in accordance with Section 11.1 and procedures and guidelines adopted by the Company.

 

ARTICLE III

ADMINISTRATION

 

3.1 Committee to Administer . The Plan shall be administered by the Committee.

 

3.2 Powers of Committee .

 

(a) The Committee shall have full power and authority to interpret and administer the Plan and to establish and amend rules and regulations for its administration. The Committee’s decisions shall be final and conclusive with respect to the interpretation of the Plan and any Award made under it.

 

(b) Subject to the provisions of the Plan, the Committee shall have authority, in its discretion, to determine those Employees who shall receive an Award, the time or times when such Award shall be made, the vesting schedule, if any, for the Award and the type of Award to be granted, the number of shares to be subject to each Award of Options, SARs, Restricted Stock, Restricted Stock Units, and unrestricted HTCC Stock and the value of each Performance Unit.

 

(c) The Committee shall determine and set forth in an Award Statement the terms of each Award. The Committee may correct any defect or supply any omission or

 

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reconcile any inconsistency in the Plan or in any Award Statement, in such manner and to the extent the Committee shall determine in order to carry out the purposes of the Plan. The Committee may, in its discretion, accelerate (i) the date on which any Option or SAR may be exercised, (ii) the date of termination of the restrictions applicable to a Restricted Stock Award or a Restricted Stock Unit Award, or (iii) the end of a Performance Period under a Performance Unit Award, if the Committee determines that to do so will be in the best interests of the Company and the Participants in the Plan.

 

3.3 Delegation by Committee . The Committee may, but need not, from time to time delegate some or all of its authority under the Plan to an Administrator consisting of one or more members of the Committee or of one or more officers of the Company; provided, however, that the Committee may not delegate its authority (i) to make Awards to Employees (A) who are subject on the date of the Award to the reporting rules under Section 16(a) of the Exchange Act, (B) whose compensation for such fiscal year may be subject to the limit on deductible compensation pursuant to Section 162(m) of the Code, or (C) who are officers of the Company who are delegated authority by the Committee hereunder, or (ii) to interpret the Plan or any Award, or (iii) under Section 11.3 of the Plan. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation or thereafter. Nothing in the Plan shall be construed as obligating the Committee to delegate authority to an Administrator, and the Committee may at any time rescind the authority delegated to an Administrator appointed hereunder or appoint a new Administrator. At all times the Administrator appointed under this Section 3.3 shall serve in such capacity at the pleasure of the Committee. Any action undertaken by the Administrator in accordance with the Committee’s delegation of authority shall have the same force and effect as if undertaken directly by the Committee, and any reference in the Plan to the Committee shall, to the extent consistent with the terms and limitations of such delegation, be deemed to include a reference to the Administrator.

 

ARTICLE IV

AWARDS

 

4.1 Awards .

 

(a) Awards under the Plan shall consist of Incentive Stock Options, Nonqualified Stock Options, SARs, Restricted Stock, Restricted Stock Units, Restricted Performance Stock, unrestricted HTCC Stock and Performance Units and any other form of Award that the Committee authorizes pursuant to Section 4.1(b). All Awards shall be subject to the terms and conditions of the Plan and to such other terms and conditions consistent with the Plan as the Committee deems appropriate. Awards under a particular section of the Plan need not be uniform and Awards under two or more sections may be combined in one Award Statement. Any combination of Awards may be granted at one time and on more than one occasion to the same Employee. Awards of Performance Units and Restricted Performance Stock shall be earned solely upon attainment of Performance Goals and the Committee shall have no discretion to increase such Awards.

 

(b) The Committee shall have the authority to specify the terms and provisions of other forms of equity-based or equity-related Awards not described above which the Committee determines to be consistent with the purpose of the Plan and the interests of the

 

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Company, which Awards may provide for cash payments based in whole, or in part, on the value or future value of HTCC Stock, for the acquisition or future acquisition by Participants of HTCC Stock, or any combination thereof. Other Awards shall also include cash payments (including the cash payment of dividend equivalents) under the Plan which may be based on one or more criteria determined by the Committee which are unrelated to the value of HTCC Stock and which may be granted in tandem with, or independent of, other Awards under the Plan.

 

4.2 Eligibility for Awards . An Award may be made to any Employee selected by the Committee. In making this selection and in determining the form and amount of the Award, the Committee may give consideration to the functions and responsibilities of the respective Employee, his or her present and potential contributions to the success of the Company, the value of his or her services to the Company, and such other factors deemed relevant by the Committee. Non-employee Directors are eligible to receive Awards pursuant to Article VII.

 

4.3 Shares Available Under the Plan .

 

(a) Subject to rules set forth in Section 4.3(b) and to adjustment as provided in Section 11.2, the total number of Shares that may be issued pursuant to the Plan (the “Section 4.3(a) Limit”) shall not exceed (i) 1,000,000 plus (ii) the number of Shares that remain available for issuance under the Predecessor Plans as of the date this Plan is approved by Shareholders (increased by any shares of HTCC Stock subject to any award (or portion thereof) outstanding under the Predecessor Plans on such date which lapses, expires or is otherwise terminated without the issuance of such HTCC Stock or is settled by delivery of consideration other than HTCC Stock).

 

(b) For purposes of determining the number of Shares that remain available for issuance pursuant to the Plan, the following rules shall apply:

 

(i) In connection with the granting of an Award (other than an Award denominated in dollars), the number of Shares in respect of which the Award is granted or denominated shall be counted against the Section 4.3(a) Limit;

 

(ii) If any Shares subject to an Award are forfeited or if any Award based on Shares is settled for cash, or expires or otherwise is terminated without issuance of such Shares (excluding Shares subject to an Option cancelled upon the exercise of a related SAR), the Shares subject to such Award shall, to the extent of such cash settlement, forfeiture or termination, be added back to the Section 4.3(a) Limit and be available for future Awards under the Plan;

 

(iii) There shall be added back to the Section 4.3(a) Limit, and there shall again be available for future Awards, Shares that are

 

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(A) tendered in payment of the Option Price of Options or the exercise price of other Awards or the tax or other withholding obligations arising upon exercise, vesting or settlement of an Award;

 

(B) withheld from any Award to satisfy a Participant’s tax or other withholding obligations or, if applicable, to pay the Option Price of an Option or the exercise price of other Awards; or

 

(C) acquired by the Company on the open market using the cash proceeds received by the Company from the exercise of Options granted under the Plan; provided, however, that there shall not be added back to the Section 4.3(a) Limit pursuant to this Section 4.3(b)(iii)(C) in respect of any Option a number of Shares greater than (x) the amount of such cash proceeds, divided by (y) the Fair Market Value on the date of exercise of the Option;

 

(iv) Anything to the contrary in this Section 4.3(b) notwithstanding, if a SAR is settled in whole or in part in Shares, the excess, if any, of the number of Shares subject to the SAR over the number of Shares delivered to the Participant upon exercise of the SAR shall be added back to the Section 4.3(a) Limit and shall again be available for future Awards.

 

(c) Any shares of HTCC Stock issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or Shares purchased in the open market or otherwise.

 

4.4 Limitation on Awards . The maximum aggregate dollar value of Restricted Stock, Restricted Stock Units and Performance Units awarded to any Employee with respect to a Performance Period may not exceed $5 million for each Fiscal Year included in such Performance Period. The maximum number of shares for which Options may be granted to any Participant in any one Fiscal Year shall not exceed 500,000.

 

4.5 General Performance Goals . Prior to the beginning of a Performance Period the Committee will establish in writing Performance Goals for the Company. The goals will be comprised of specified levels of one or more of the following performance criteria as the Committee may deem appropriate: earnings per share, net earnings, operating earnings, EBITDA, unit volume, number of access lines, net sales, market share, balance sheet measurements, revenue, customers, economic profit, cash flow, cash return on assets, shareholder return, return on equity, and return on capital. In addition, for any Awards not intended to meet the requirements of Section 162(m) of the Code, the Committee may establish goals based on other performance criteria as it deems appropriate. The Committee may disregard or offset the effect of any special charges or gains or cumulative effect of a change in accounting in determining the attainment of Performance Goals.

 

4.6 Awards in Lieu of Salary or Bonus . The Committee may, in its sole discretion, and on such terms and conditions as the Committee may prescribe, give Participants the opportunity to receive Awards in lieu of future salary, bonus or other compensation.

 

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ARTICLE V

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

 

5.1 Award of Stock Options . The Committee may, from time to time, and on such terms and conditions as the Committee may prescribe, award Stock Options (which may, in the discretion of the Committee be Incentive Stock Options or Nonqualified Stock Options) to any Employee.

 

5.2 Period of Option .

 

(a) An Option granted under the Plan shall be exercisable in accordance with any vesting schedule approved by the Committee. The Committee may in its discretion prescribe additional conditions, restrictions or terms on the vesting of an Option, including the full or partial attainment of Performance Goals pursuant to Section 4.5. After the Option vests, the Option may be exercised at any time during the term of the Option, in whole or in installments, as specified in the related Award Statement (but exercise may be subject to a Participant’s compliance with employee trading or similar policies adopted by the Company). Subject to Section 5.6, the duration of each Option shall not be more than ten years from the date of grant.

 

(b) Except as provided in Section 5.6, a Participant may not exercise an Option unless such Participant is then, and continually (except for sick leave, military service, or other approved leave of absence) after the grant of the Option has been, an employee or Director of the Company.

 

5.3 Award Statement or Agreement . Each Option shall be evidenced by an Award Statement or an option agreement.

 

5.4 Option Price, No Repricing, Exercise and Payment . The Option Price of HTCC Stock under each Option shall be determined by the Committee but shall be a price not less than 100 percent of the average Fair Market Value of HTCC Stock for the twenty (20) trading days immediately prior to the date such Option is granted, as determined by the Committee.

 

The Committee may not (i) amend an Option to reduce its Option Price, (ii) cancel an Option and regrant an Option with a lower Option Price than the original Option Price of the cancelled Option, or (iii) take any other action (whether in the form of an amendment, cancellation or replacement grant) that has the effect of repricing an Option, provided that nothing in this Section 5.4 shall prevent the Committee from making adjustments pursuant to Section 11.2.

 

Vested Options may be exercised from time to time by giving written notice to the Treasurer, Secretary, or General Counsel of the Company, or his or her designee, specifying the number of shares to be purchased. The Option Price for every Share purchased through the exercise of a Stock Option shall be paid for in full on or before the settlement date of the Shares issued pursuant to the exercise of the Option (i) in cash or in whole or in part through the transfer to the Company of shares of HTCC Stock in accordance with procedures established by the Committee from time to time. A Participant may also pay the Option Price in whole or in part pursuant to a “net share settlement” (“net exercise”) pursuant to which the participant elects to have shares of HTCC Stock withheld upon exercise to pay the Option Price in accordance with procedures established by the Committee from time to time. In addition, in accordance with the

 

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rules and procedures established by the Committee for this purpose, an Option may also be exercised through a “cashless exercise” procedure involving a broker or dealer, that affords Participants the opportunity to sell immediately some or all of the Shares underlying the exercised portion of the Option in order to generate sufficient cash to pay the Option Price and/or to satisfy withholding tax obligations related to the Option.

 

In the event such Option Price is paid in whole or in part with Shares, the portion of the Option Price so paid shall be equal to the value, as of the date of exercise of the Option, of such Shares. The value of such Shares shall be equal to the number of such Shares multiplied by the Fair Market Value of such Shares on the trading day coincident with the date of exercise of such Option (or the immediately preceding trading day if the date of exercise is not a trading day). The Company shall not issue or transfer HTCC Stock upon exercise of an Option until the Option Price is fully paid. Subject to such rules as the Committee may determine from time to time, a Participant may satisfy any amounts required to be withheld by the Company under applicable federal, state and local tax laws in effect from time to time, by electing to have the Company withhold a portion of the Shares to be delivered for the payment of such taxes.

 

5.5 Limitations on Incentive Stock Options . Each provision of the Plan and each Award Statement relating to an Incentive Stock Option shall be construed so that each Incentive Stock Option shall be an “incentive stock option” as defined in Section 422 of the Code, and any provisions of the Award Statement thereof that cannot be so construed shall be disregarded.

 

5.6 Termination of Employment . Subject to Article XII, the following provisions will govern the ability of a Participant to exercise any outstanding Options or SARs following the Participant’s termination of employment with the Company unless the Committee determines otherwise with respect to any individual Option or SAR.

 

(a) If the employment of a Participant with the Company is terminated for reasons other than (i) death, (ii) discharge for Cause, (iii) retirement, or (iv) resignation, such Participant’s outstanding SARs or Options may be exercised at any time within three years after such termination, to the extent of the number of shares covered by such Options or SARs which were exercisable at the date of such termination; except that an Option or SAR shall not be exercisable on any date beyond the expiration date of such Option or SAR.

 

(b) If the employment of a Participant with the Company is terminated for Cause, any Options or SARs of such Participant (whether or not then exercisable) shall expire and any rights thereunder shall terminate immediately.

 

(c) If the employment of a Participant is terminated due to resignation and the Participant is not eligible to retire under any Company pension plan, such Participant’s outstanding Options or SARs may be exercised at any time within three years of such resignation to the extent that the number of shares covered by such Options or SARs were exercisable at the date of such resignation, except that an Option or SAR shall not be exercisable on any date beyond the expiration date of such Option or SAR.

 

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(d) Should a Participant, who is not eligible to retire under any Company pension plan, die either while in the employ of the Company or after termination of such employment (other than discharge for Cause), the SARs or Options of such deceased Participant may be exercised by his or her Personal Representative at any time within three years after the Participant’s death to the extent of the number of shares covered by such Options or SARs which were exercisable at the date of such death, except that an Option or SARs shall not be exercisable on any date beyond the expiration date of such Option or SAR.

 

(e) Should a Participant who is eligible to retire under any Company pension plan die prior to the vesting of his or her outstanding Options or SARs, any installment or installments not then exercisable shall become fully exercisable as of the date of the Participant’s death and the SARs or Options may be exercised by the Participant’s Personal Representative at any time prior to the expirati