AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
STARTEC GLOBAL HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
----------------
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DELAWARE 4813 52-2099559
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
----------------
10411 MOTOR CITY DRIVE
BETHESDA, MD 20817
(301) 365-8959
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
RAM MUKUNDA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
10411 MOTOR CITY DRIVE
BETHESDA, MD 20817
(301) 365-8959
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
Robert B. Murphy, Esq.
Thomas L. Hanley, Esq.
Schnader Harrison Segal & Lewis LLP
1225 Eye Street, NW, Suite 600
Washington, DC 20005
(202) 216-4200
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE AND
ALL OTHER CONDITIONS TO THE REORGANIZATION (AS DEFINED) PURSUANT TO THE
AGREEMENT AND PLAN OF MERGER DESCRIBED IN THE ENCLOSED PROXY/PROSPECTUS
HAVE BEEN SATISFIED OR WAIVED.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. -
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. -
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. -
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CALCULATION OF REGISTRATION FEE
======================================================================================================================
PROPOSED
MAXIMUM
PROPOSED AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE PRICE FEE
- ----------------------------------------------------------------------------------------------------------------------
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Common Stock, $.01 par value(1)......... 10,593,088 shares(2) $ 13.125(3) $139,034,280 $41,015.11(3)
======================================================================================================================
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(1) Preferred stock purchase rights are attached to and will trade with the New
Common Stock (as defined).
(2) Represents the maximum number of shares of New Common Stock to be issuable
upon consummation of the Merger (as defined) as described herein.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rules 457(f)(l) and 457(c) of the Securities Act of 1933,
as amended, based on the last reported sales price of a share of Company
Common Stock (as defined) on June 29, 1998. $43,930.80 was previously paid
in connection with the filing of preliminary proxy materials under Section
14(a) of the Exchange Act by the Company (as defined).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 31, 1998
To the Stockholders
of Startec Global Communications Corporation:
The Annual Meeting of Stockholders of Startec Global Communications
Corporation, a Maryland corporation (the "Company"), will be held at The Capitol
Hilton, 1001 16th Street, N.W., Washington, D.C. 20036 on July 31, 1998
commencing at 10:00 A.M. (Eastern Daylight Time), for the following purposes, as
more fully described in the Proxy Statement/Prospectus accompanying this Notice:
1. To elect the Class I members of the Board of Directors;
2. To approve the Amended and Restated 1997 Performance Incentive Plan;
3. To approve the proposed reorganization of the Company into a holding
company structure; and
4. To transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has no knowledge of any other business to be
presented or transacted at the meeting.
Only stockholders of record on June 25, 1998 are entitled to notice of and
to vote at the Annual Meeting. Further information as to the matters to be
considered and acted upon at the Annual Meeting can be found in the accompanying
Proxy Statement/Prospectus.
By Order of the Board of Directors,
PRABHAV V. MANIYAR
Secretary
July 2, 1998
YOU ARE CORDIALLY INVITED AND URGED TO ATTEND THE ANNUAL MEETING IN PERSON. TO
ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON. STOCKHOLDERS
WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY
DESIRE.
<PAGE>
STARTEC GLOBAL COMMUNICATIONS CORPORATION
STARTEC GLOBAL HOLDING CORPORATION
10411 MOTOR CITY DRIVE
BETHESDA, MD 20817
----------------
PROXY STATEMENT/PROSPECTUS
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 31, 1998
----------------
This Proxy Statement/Prospectus, the foregoing Notice of Annual Meeting of
Stockholders and the enclosed form of proxy are first being sent or delivered to
stockholders on or about July 2, 1998, in connection with the solicitation of
proxies for use by the Board of Directors ("Board of Directors") of Startec
Global Communications Corporation ("Company"), at its Annual Meeting of
Stockholders ("Annual Meeting") which will be held at The Capitol Hilton in
Washington, D.C. on July 31, 1998, commencing at 10:00 A.M. (Eastern Daylight
Time), for the purposes set forth in the foregoing Notice of Annual Meeting of
Stockholders, and at any and all adjournments or postponements thereof.
At the Annual Meeting, stockholders of the Company will be asked to elect
two directors to the Board of Directors. See "Proposal I: Election of
Directors." In addition, stockholders will be asked to approve amendments to
and restatement of the Company's 1997 Performance Incentive Plan ("1997 Plan"),
a copy of which is attached hereto as ANNEX A. See "Proposal II: Amended and
Restated 1997 Performance Incentive Plan."
Stockholders will also be asked to approve a reorganization of the
Company's corporate structure to that of a publicly traded holding company with
a series of wholly-owned operating subsidiaries (the "Reorganization"). See
"Proposal III: The Reorganization."
The Reorganization will be effected pursuant to an Agreement and Plan of
Merger dated as of June 30, 1998 ("Merger Agreement"), by and between the
Company and Startec Global Holding Corporation, a recently formed Delaware
corporation and a wholly owned subsidiary of the Company ("New Parent"). The
Merger Agreement, a copy of which is attached hereto as ANNEX B, contemplates,
among other things, that the Company will merge with and into New Parent, with
New Parent as the surviving corporation ("Merger"). As a result of the Merger
each outstanding share of the common stock, par value $.01 per share, of the
Company ("Company Common Stock"), will be converted into one share of the common
stock, par value $.01 per share, of New Parent ("New Common Stock"). See
"Proposal III: The Reorganization."
This Proxy Statement/Prospectus also serves as the prospectus for New
Parent under the Securities Act of 1933, as amended ("Securities Act"), with
respect to the issuance of up to 10,593,088 shares of New Common Stock in
connection with the Reorganization. Further information concerning the shares
offered hereby is contained in "Proposal III: The Reorganization -- Certain
Differences Between the Corporation Laws of Maryland and Delaware" and "--
Description of New Parent Capital Stock."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<PAGE>
If the Reorganization is approved by stockholders, the required regulatory
approvals are received and the Reorganization is implemented, it will not be
necessary for holders of Company Common Stock to surrender their existing stock
certificates for stock certificates representing shares of New Common Stock. The
certificates representing shares of Company Common Stock will automatically
represent shares of New Common Stock at that time. See "Proposal III: The
Reorganization -- Introduction."
Following the Reorganization, the newly-elected directors of the Company
(as well as those whose tenure will be continuing) will be the directors of New
Parent and the 1997 Plan, as (and if) amended and restated, will be assumed by
New Parent.
The principal executive offices of the Company and New Parent are located
at 10411 Motor City Drive, Bethesda, Maryland 20817. It is anticipated that this
Proxy Statement/Prospectus and the accompanying proxy will first be sent or
delivered to stockholders on or about July 2, 1998. A copy of the Company's 1997
Annual Report and its Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 accompany this Proxy Statement/Prospectus.
The presence in person or by proxy of holders of record of a majority of
the outstanding shares of Company Common Stock is required to constitute a
quorum for the transaction of business at the Annual Meeting. Abstentions and
broker nonvotes are counted for purposes of determining the presence of a quorum
for the transaction of business at the Annual Meeting.
If the accompanying form of proxy is properly executed and returned, the
shares represented thereby will be voted in accordance with the instructions
specified therein. In the absence of instructions to the contrary, such shares
will be voted "FOR" each of the proposals set forth therein. Any stockholder
executing a proxy has the power to revoke it at any time prior to the voting
thereof on any matter (without, however, affecting any vote taken prior to such
revocation) by delivering written notice to the Secretary of the Company, by
executing another proxy dated as of a later date or by voting in person at the
Annual Meeting.
----------------
The date of this Proxy Statement/Prospectus is July 2, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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AVAILABLE INFORMATION ............................................................ iii
ANNUAL REPORT AND QUARTERLY FINANCIAL INFORMATION ................................ iii
FORWARD-LOOKING STATEMENTS ....................................................... iv
SUMMARY .......................................................................... 1
Election of Directors ........................................................... 1
Amended and Restated 1997 Performance Incentive Plan ............................ 1
The Reorganization .............................................................. 1
THE COMPANIES .................................................................... 6
THE ANNUAL MEETING ............................................................... 6
PROPOSAL I: ELECTION OF DIRECTORS ................................................ 9
Nominees for Election ........................................................... 9
Continuing Directors ............................................................ 9
Certain Key Employees ........................................................... 9
Background of Nominees .......................................................... 10
Backgrounds of Continuing Directors and Key Employees ........................... 10
Board and Committee Meetings .................................................... 11
Compensation of Directors ....................................................... 11
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS ................................. 11
Annual Compensation ............................................................. 11
Certain Employment Agreements ................................................... 12
Stock Option Grants ............................................................. 13
Option Exercises and Holdings ................................................... 14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION .......................... 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION ................................................................... 15
COMPARATIVE STOCK PERFORMANCE .................................................... 16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................................... 17
PROPOSAL II: AMENDED AND RESTATED 1997 PERFORMANCE
INCENTIVE PLAN .................................................................. 18
Introduction .................................................................... 18
Federal Income Tax Implications to the 1997 Plan ................................ 21
Vote Required for Approval ...................................................... 22
PROPOSAL III: THE REORGANIZATION ................................................. 23
Introduction .................................................................... 23
Dissenters' Rights of Appraisal ................................................. 24
</TABLE>
i
<PAGE>
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PAGE
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Principal Reasons for the Reorganization ........................................ 24
Federal Income Tax Matters ...................................................... 25
Change in State of Incorporation as a Result of the Merger ...................... 27
Certain Differences between the Charter and Bylaws of the Company and New Parent 28
Certain Differences Between Corporation Laws of Maryland and Delaware ........... 30
Certain Effects of the Reorganization ........................................... 32
Description of New Parent Capital Stock ......................................... 33
Description of Senior Notes and Warrants ........................................ 34
Shareholders Rights Plan ........................................................ 34
Name Change ..................................................................... 35
Recommendation of Board of Directors ............................................ 35
VALIDITY OF SHARES ............................................................... 35
EXPERTS .......................................................................... 35
COST OF SOLICITATION OF PROXIES .................................................. 35
OTHER MATTERS .................................................................... 36
STOCKHOLDER PROPOSALS ............................................................ 36
ANNUAL AND QUARTERLY REPORTS TO STOCKHOLDERS ..................................... 36
ANNUAL REPORT ON FORM 10-K ....................................................... 36
ANNEX A: AMENDED AND RESTATED 1997 PERFORMANCE INCENTIVE PLAN .................... A-1
ANNEX B: FORM OF AGREEMENT AND PLAN OF MERGER .................................... B-1
ANNEX C: FORM OF RESTATED CERTIFICATE OF INCORPORATION OF STARTEC
GLOBAL HOLDING CORPORATION .............................................. C-1
ANNEX D: FORM OF BYLAWS OF STARTEC GLOBAL HOLDING CORPORATION..................... D-1
</TABLE>
ii
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the U.S. Securities and Exchange Commission ("Commission"). Such reports,
proxy and information statements and other information filed by the Company can
be inspected and copied at the public reference facilities of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as
well as at the following Commission Regional Offices: Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies can be obtained from the
Commission by mail at prescribed rates. Requests should be directed to the
Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that are filed electronically with the
Commission. In addition, the Company Common Stock is quoted on The Nasdaq
National Market ("NNM"), where reports, proxy and information statements and
other information concerning the Company may also be inspected. Following
completion of the Reorganization, New Parent will file such reports and other
information as required under the Exchange Act and the rules of the NNM.
New Parent has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act registering the shares of New Common Stock
that will be issued in the Reorganization. See "Proposal III: The
Reorganization." This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted from this Proxy Statement/Prospectus in accordance with the rules and
regulations of the Commission. Statements made in this Proxy Statement/
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete. With respect to each such contract, agreement or other
document, if any, filed as an exhibit to the Registration Statement, reference
is made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. Items omitted from this Proxy Statement/Prospectus but contained in
the Registration Statement may be inspected and copied as described above.
Upon completion of the Reorganization, the New Common Stock will be quoted
on the NNM and will continue to trade under the current ticker symbol "STGC." At
the time of such listing, the Company Common Stock will be withdrawn from
listing on the NNM and its registration under Section 12 of the Exchange Act
will be terminated.
ANNUAL REPORT AND QUARTERLY FINANCIAL INFORMATION
In accordance with the rules and regulations of the Commission, the Company
is furnishing herewith its Annual Report for the year ended December 31, 1997,
and its Quarterly Report on Form 10-Q for the three months ended March 31, 1998.
Reference is made to such documents for an understanding of the financial
condition and results of operations of the Company for such periods.
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Proxy
Statement/Prospectus, and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company or New Parent.
This Proxy Statement/Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. This Proxy Statement/Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than those to which it relates. The delivery of this Proxy
Statement/Prospectus at any time does not imply that the information herein or
therein is correct as of any time subsequent to its date.
iii
<PAGE>
FORWARD-LOOKING STATEMENTS
The statements contained in this Proxy Statement/Prospectus that are not
historical facts are "forward-looking statements" (as such term is defined in
the Private Securities Litigation Reform Act of 1995), which can be identified
by the use of forward-looking terminology such as "believes," "expects,"
"intends," "foresees," "plans," "may," "will," "should," or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. In addition, from
time to time the Company, New Parent, or its or their representatives have made
or may make forward-looking statements, orally or in writing. Furthermore, such
forward-looking statements may be included in, but are not limited to, press
releases or oral statements made by or with the approval of an authorized
officer of the Company.
Management of the Company and of New Parent wish to caution the reader that
the forward-looking statements contained in this Proxy Statement/Prospectus
involve predictions. No assurance can be given that anticipated results will be
achieved; actual results could differ materially from those anticipated by the
forward-looking statements as a result of certain factors such as, changes in
market conditions, government regulation, technology, the international
telecommunications industry, and the global economy; availability of
transmission facilities; management of rapid growth; entry into new and
developing markets; competition; customer concentration and attrition; and the
expansion of the global network. These risk factors are discussed in further
detail in the Company's filings with the Commission, including the prospectus
relating to Company's initial public offering (Commission File. No. 333-32753),
Annual Report on Form 10-K for the year ended December 31, 1997, and Quarterly
Report on Form 10-Q for the three months ended March 31, 1998.
iv
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS AND THE
ANNEXES HERETO. STOCKHOLDERS ARE URGED TO READ THIS PROXY STATEMENT/PROSPECTUS
AND THE ANNEXES IN THEIR ENTIRETY.
ELECTION OF DIRECTORS..... Two persons have been nominated for election as
Class I directors of the Company for terms
expiring at the annual meeting of stockholders to
be held in the year 2001 and until their
successors are duly elected and qualified. The
nominees are Messrs. Nazir G. Dossani and Richard
K. Prins, each of whom currently serves as a
director. See "Proposal I: Election of Directors."
If the Reorganization is approved and implemented,
the persons currently serving as directors of the
Company (as well as those elected at the Annual
Meeting) will serve as the directors of New
Parent.
AMENDED AND RESTATED
1997 PERFORMANCE
INCENTIVE PLAN............ The Board of Directors has amended the 1997 Plan,
subject to stockholder approval, to increase the
number of shares of Company Common Stock available
for issuance upon exercise of options granted
thereunder from 750,000 shares to a percentage of
outstanding shares of the Company Common Stock,
and to revise the 1997 Plan in order to continue
to qualify awards thereunder as "performance-based
compensation" not subject to the limitation on
deductibility under Section 162(m) of the Internal
Revenue Code (the "Code"). The purpose of the 1997
Plan is to support the Company's ongoing efforts
to develop and retain highly qualified leaders in
key positions and to provide the Company with the
ability to provide incentives more directly linked
to the profitability of the Company's businesses
and increases in stockholder value. See "Proposal
II: Amended and Restated 1997 Performance
Incentive Plan."
THE REORGANIZATION
THE COMPANIES............. The Company is a rapidly growing, facilities-based
international long distance telecommunications
provider. The Company was founded in 1989 to
capitalize on the significant opportunity to
provide international long distance services to
select ethnic communities in major U.S.
metropolitan markets that generate substantial
long-distance traffic to their countries of
origin. Until 1995, the Company concentrated its
marketing efforts in the New York-Washington, D.C.
corridor and focused on the delivery of
international calling services to India. At the
end of 1995, the Company expanded its marketing
efforts to include the West Coast of the United
States, and began targeting other ethnic groups in
the United States, such as the Middle Eastern,
Philippine and Russian communities. International
traffic generated by the Company currently
terminates primarily in Asia, the Pacific Rim, the
Middle East, Africa, Eastern
<PAGE>
and Western Europe and North America. In order to
achieve economies of scale in its network
operations and to balance its residential
international traffic, in late 1995, the Company
began marketing its excess network capacity to
international carriers seeking competitive rates
and high-quality transmission capacity. The
Company is located at 10411 Motor City Drive,
Bethesda, Maryland 20817, and its telephone number
is (301) 365-8959.
New Parent is a newly-organized company recently
incorporated under the laws of the State of
Delaware and was formed for the purpose of
effecting the Reorganization. After the
consummation of the Reorganization, New Parent
will be a holding company, the primary assets of
which will be its equity interests in its
wholly-owned subsidiaries. Following the
Reorganization, the stockholders of the Company
will become the stockholders of New Parent. After
the effective date of the Merger, New Parent will
be renamed Startec Global Communications
Corporation. New Parent is located at 10411 Motor
City Drive, Bethesda, Maryland 20817, and its
telephone number is (301) 365-8959.
THE REORGANIZATION........ The Board of Directors has unanimously approved
the Reorganization pursuant to which, subject to
stockholder approval, the Company's corporate
structure will be realigned to that of a publicly
traded Delaware holding company. The
Reorganization will consist of the transfer of
substantially all of the Company's assets to New
Parent and the subsequent transfer of those assets
by New Parent to certain recently formed
subsidiary companies and the Merger of the Company
with and into New Parent. As a result of the
Merger, each outstanding share of Company Common
Stock will be converted into one share of New
Common Stock, and each outstanding option, warrant
or other right to acquire Company Common Stock
will be converted into an identical option,
warrant or other right to acquire New Common
Stock. After the Reorganization, New Parent's
operations will be carried out primarily through
operating subsidiary companies of New Parent each
of which will be responsible for distinct aspects
of the Company's pre-Reorganization business,
including separate subsidiaries responsible for
(i) U.S. operations, (ii) finance and investments,
and (iii) ownership of licenses. When and where
appropriate, New Parent anticipates forming
additional subsidiary companies under the laws of
foreign countries in order to optimize tax
benefits and other advantages associated with such
jurisdictions. See "Proposal III: The
Reorganization."
RECOMMENDATION OF THE BOARD;
REASONS FOR THE REORGANI-
ZATION.................... The Board of Directors has unanimously approved
the Reorganization and adopted the Merger
Agreement and recommends the approval of the
Reorganization (which includes approval of the
Merger Agreement) by the stockholders of the
Company. In making its decision to recommend the
Reorgani-
2
<PAGE>
zation to the stockholders, the Board of Directors
considered a number of factors, including (i)
flexibility for both the management and business
of the Company and New Parent within the resulting
corporate structure, (ii) broader alternatives for
future financing, and (iii) the modern,
comprehensive and flexible nature of the Delaware
General Corporation Law ("DGCL"). See "Proposal
III: The Reorganization -- Recommendation of Board
of Directors" and "-- Principal Reasons for the
Reorganization."
VOTE REQUIRED.............. The affirmative vote of the holders of not less
than a majority of the outstanding shares of
Company Common Stock is required to approve the
Reorganization. See "Proposal III: The
Reorganization -- Recommendation of Board of
Directors."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES.............. Subject to the discussion below, for federal
income tax purposes (i) the Merger will qualify as
a tax-free reorganization pursuant to Section 368
of the Internal Revenue Code of 1986, as amended
("Code"), (ii) no gain or loss will be recognized
by the holders of Company Common Stock as a result
of the conversion of Company Common Stock solely
into New Common Stock pursuant to the Merger,
(iii) the tax basis of the New Common Stock
received by each such holder pursuant to the
Merger will be the same as the holder's basis in
Company Common Stock converted in the Merger, and
(iv) the holding period of such New Common Stock
will include the period during which such holder
held the Company Common Stock converted in the
Merger, provided that such Company Common Stock
was held as a capital asset on the date of the
exchange. See "Proposal III: The Reorganization --
Federal Income Tax Matters." Each holder of
Company Common Stock should consult his or her own
tax advisor to determine the particular tax
consequences of the Merger to him or her.
MERGER AGREEMENT........... The Merger Agreement has been unanimously adopted
and approved by the Board of Directors of each of
the Company and New Parent, and by the Company as
sole stockholder of New Parent. The Merger
Agreement provides, among other things, that (i)
the Company will be merged with and into New
Parent, with New Parent being the surviving
corporation, and (ii) each outstanding share of
Company Common Stock (including the preferred
stock purchase rights attached thereto)
outstanding immediately prior to the Effective
Time (as hereinafter defined) will automatically
be converted into one share of New Common Stock,
and (iii) each outstanding option, warrant or
other right to acquire Company Common Stock will
be converted into an identical option, warrant or
other right to acquire New Common Stock.
The Merger Agreement provides that the Company and
New Parent may by written agreement amend the
Merger Agreement at any time prior to the
Effective Time, and that the Merger Agreement may
be terminated and abandoned at any
3
<PAGE>
time by unilateral action of the Board of
Directors of the Company or New Parent. See
"Proposal III: The Reorganization."
DIRECTORS AND MANAGEMENT... If the Reorganization is approved by the
stockholders and implemented, the persons elected
as directors of the Company at the Annual Meeting,
as well as those persons whose terms as directors
of the Company that are scheduled to continue
after the Annual Meeting, will serve as the
directors of New Parent. It is expected that the
executive officers of New Parent following the
completion of the Reorganization will mirror the
executive officers of the Company. See "Proposal
III: The Reorganization."
DIVIDEND POLICY............ The Company currently has not paid cash dividends
on the Company Common Stock, and the Company (and,
upon consummation of the Reorganization, New
Parent) intends to retain available funds to
finance the growth and operations of its business.
In addition, the payment of dividends is
restricted by the terms of the Company's 12%
Senior Notes due 2008 as well as credit agreements
of the Company. See "Proposal III: The
Reorganization."
NASDAQ LISTING............. New Parent will apply to transfer the listing of
Company Common Stock to the New Common Stock on
the NNM. It is expected that such listing will
become effective at the effective time of the
Merger, subject to the rules of The Nasdaq Stock
Market, and New Parent will be identified on the
NNM by the Company's current symbol, "STGC." See
"Proposal III: The Reorganization."
TRANSFER AGENT............. Continental Stock Transfer & Trust Company, the
transfer agent and registrar of the Company Common
Stock, will presently serve in the same capacities
for the New Common Stock.
CERTAIN EFFECTS OF THE
REORGANIZATION............ The Company's currently outstanding 12% Senior
Notes due 2008 in the aggregate principal amount
of $160,000,000 ("Senior Notes"), and its
$15,000,000 credit facility with First Union Bank,
as successor to Signet Bank ("Credit Facility"),
will remain in place following consummation of the
Reorganization. See "Proposal III: The
Reorganization -- Description of Senior Notes and
Warrants."
Upon consummation of the Reorganization, in
accordance with the terms of the Merger Agreement,
New Parent will assume certain obligations and
liabilities of the Company, including the Senior
Notes and the Credit Facility and obligations
under the current employment agreements with
certain officers of the Company and the Company's
obligations under the Amended and Restated 1997
Performance Incentive Plan. A vote in favor of the
Reorganization, including the Merger, will
constitute approval of New Parent's assumption of
the Company's obligations thereunder. See
"Proposal III: The Reorganization -- Certain
Effects of the Reorganization."
4
<PAGE>
CERTAIN SUBSTANTIVE DIFFER-
ENCES IN CORPORATION LAWS... As a result of the Merger, New Parent's business
and legal affairs will be governed by the laws of
the State of Delaware. There are certain
differences between the corporation laws of
Maryland and Delaware, which will result in
changes in the rights of stockholders if the
Merger is consummated, including differences with
respect to (i) the indemnification of officers and
directors, (ii) provisions affecting business
combinations, (iii) limitation of liability of
directors and officers, (iv) special meetings of
stockholders, (v) dissenters' rights, (vi)
stockholders' inspection rights, and (vii)
stockholder action taken without a meeting. See
"Proposal III: The Reorganization -- Certain
Differences Between the Corporation Laws of
Maryland and Delaware."
NO DISSENTERS' RIGHTS...... Under the Maryland General Corporation Law (the
"MGCL") a record holder of Company Common Stock
will not have the right to dissent or to receive
any cash payments from the Company with respect to
the Merger. See "Proposal III: The Reorganization:
Dissenters' Rights of Appraisal."
REGULATORY MATTERS......... The Reorganization and related transfer of the
Company's telecommunications assets are subject to
advance approval by various state public utilities
commissions ("PUCs") and the U.S. Federal
Communications Commission ("FCC"). Applications
for such approvals have been submitted as
required. The Merger will not become effective
until the Company has received all such approvals
and the stockholders of the Company have approved
the Reorganization (the "Effective Time"). See
"Proposal III: The Reorganization."
5
<PAGE>
THE COMPANIES
STARTEC GLOBAL COMMUNICATIONS CORPORATION
The Company is a rapidly growing, facilities-based international long
distance telecommunications provider. The Company was founded in 1989 to
capitalize on the significant opportunity to provide international long distance
services to select ethnic communities in major U.S. metropolitan markets that
generate substantial long-distance traffic to their countries of origin. Until
1995, the Company concentrated its marketing efforts in the New York-Washington,
D.C. corridor and focused on the delivery of international calling services to
India.
At the end of 1995, the Company expanded its marketing efforts to include
the West Coast of the United States, and began targeting other ethnic groups in
the United States, such as the Middle Eastern, Philippine and Russian
communities. International traffic generated by the Company currently terminates
primarily in Asia, the Pacific Rim, the Middle East, Africa, Eastern and Western
Europe and North America. In order to achieve economies of scale in its network
operations and to balance its residential international traffic, in late 1995,
the Company began marketing its excess network capacity to international
carriers seeking competitive rates and high-quality transmission capacity.
The Company markets its services to select ethnic residential communities
throughout the United States and to leading international long distance
carriers. The Company provides its services through a flexible, high-quality
network of owned and leased transmission facilities, operating and termination
agreements and resale arrangements. The Company currently owns and operates an
international gateway switch in New York City and has ordered another
international gateway switch expected to be deployed in Los Angeles in 1998. The
Company also owns an international gateway switch in Washington, D.C. that is
expected to be redeployed as a domestic switch in Chicago during the third
quarter of 1998.
The Company uses sophisticated database marketing techniques and a variety
of media to reach its targeted residential customers, including focused print
advertising in ethnic newspapers, advertising on ethnic radio and television
stations, direct mail, sponsorship of ethnic events and customer referrals. The
Company's strategy is to provide overall value to its customers and combine
competitive pricing with high levels of service, rather than to compete on the
basis of price alone. The Company provides responsive customer service 24 hours
a day, seven days a week, in each of the languages spoken by the Company's
targeted residential customers.
STARTEC GLOBAL HOLDING CORPORATION
New Parent is a company incorporated under the laws of the State of
Delaware and was recently formed for the purpose of effecting the
Reorganization. After the consummation of the Reorganization, New Parent will be
a holding company, the primary assets of which will be its equity interests in
its wholly-owned subsidiaries. Following the Reorganization, the stockholders of
the Company will become the stockholders of New Parent. After the effective date
of the Merger, New Parent will be renamed Startec Global Communications
Corporation.
THE ANNUAL MEETING
RECORD DATE AND OUTSTANDING STOCK
The record date ("Record Date") for determining those stockholders entitled
to notice of and to vote at the Annual Meeting was June 25, 1998. At that date,
the Company had outstanding 8,939,315 shares of Company Common Stock.
PROXIES
Solicitation. Solicitation of proxies is being made by management at the
direction of the Board of Directors, without additional compensation, through
the mail, in person or by telegraph or telephone. The cost will be borne by the
Company. In addition, the Company will request brokers and other custodians,
nominees and fiduciaries to forward proxy soliciting material to the beneficial
owners of shares held of record by such persons, and the Company will reimburse
them for their reasonable expenses in so doing.
6
<PAGE>
Revocation. The execution of a proxy does not affect the right to vote in
person at the Annual Meeting. A proxy may be revoked by the person giving it at
any time before it has been voted at the Annual Meeting by submitting a later
dated proxy or by giving written notice to the Secretary of the Company. Unless
a proxy is revoked or there is a direction to abstain on one or more proposals,
it will be voted on each proposal and, if a choice is made with respect to any
matter to be acted upon, in accordance with such choice. If no choice is
specified, the proxy will be voted as recommended by the Board of Directors.
Signatures in Certain Cases. If a stockholder is a corporation, the
enclosed proxy should be signed in its corporate name by an authorized officer
and his or her title should be indicated. If stock is registered in the name of
two or more trustees or other persons, the proxy must be signed by a majority of
them. If stock is registered in the name of a decedent, the proxy should be
signed by an executor or administrator, and his or her title as such should
follow the signature.
QUORUM AND VOTING
The presence, in person or by proxy, of stockholders entitled to cast a
majority of all the votes entitled to be cast at the Annual Meeting is necessary
for a quorum. Approval of the Reorganization requires the affirmative vote of a
majority of all the votes entitled to be cast by the holders of Company Common
Stock. The directors will be elected by at least a plurality of the votes cast
at the election. Under Maryland law, an abstention as to any particular matter
does not constitute a vote "for" or "against" and will be disregarded in
calculating votes cast as to such matter. "Broker non-votes" (i.e., where a
broker or nominee submits a proxy specifically indicating the lack of
discretionary authority to vote on a matter) will be treated in the same manner
as abstentions. As of the Record Date, directors and executive officers of the
Company and their affiliates had the power to vote approximately 45.1% of the
outstanding Company Common Stock. All of the directors and executive officers
have expressed an intention to vote in favor of all of the proposals described
below.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the ownership of the
Company's voting securities on the Record Date, including options and warrants
by (i) each person known by the Company to be the beneficial owner of more than
five percent of any class of its voting securities, (ii) each director and
executive officer, and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT & NATURE OF OUTSTANDING
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) COMMON STOCK
- ----------------------------------------- ------------------------- --------------
<S> <C> <C>
Ram Mukunda ........................ 3,579,675 40.0%
Blue Carol Enterprises(3) .......... 807,124 9.0%
Vijay Srinivas(4) .................. 311,200 3.5%
Prabhav V. Maniyar ................. 118,616 1.3%
Nazir G. Dossani(5) ................ 11,000 *
Richard K. Prins(6) ................ 18,000 *
All Directors and Executive Officers
as a group (5 persons) ........... 4,038,491 45.1%
</TABLE>
- ----------
* Represents beneficial ownership of one percent or less of the outstanding
shares of Company Common Stock.
(1) Unless otherwise indicated, the address of all persons listed is c/o
Startec Global Communications Corporation, 10411 Motor City Drive,
Bethesda, MD 20817.
(2) Unless otherwise indicated, each person possesses sole voting and
investment power with respect to the shares identified as beneficially
owned in the table. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission. Shares of Company
Common Stock subject to options, warrants or other rights to purchase which
are
7
<PAGE>
currently exercisable within 60 days of June 25, 1998 are deemed
outstanding for the purpose of computing the percentage ownership of the
persons holding such options, warrants or rights, but are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(3) The address of Blue Carol Enterprises Ltd. is 930 Ocean Center Harbour
City, Kowloon, Hong Kong. Blue Carol Enterprises Ltd. is an affiliate of
Portugal Telecom International.
(4) Such shares are held by Mr. Srinivas and his wife as joint tenants. Mr. and
Mrs. Srinivas are the brother-in-law and sister of Ram Mukunda, the
Company's President and Chief Executive Officer.
(5) Includes options to purchase 5,000 shares of Company Common Stock.
(6) Includes options to purchase 5,000 shares of Company Common Stock. Excludes
warrants to purchase 33,000 shares of Company Common Stock. Mr. Prins is a
Senior Vice President of Ferris, Baker Watts, Incorporated, one of the
underwriters of the Company's initial public offering, which received
warrants to purchase up to 150,000 shares of Company Common Stock in
connection with the closing of the initial public offering. Mr. Prins
received 33,000 of such warrants. The warrants are not currently
exercisable.
8
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors each
containing, as nearly as possible, an equal number of directors. Directors
within each class are elected to serve three-year terms, and approximately
one-third of the directors stand for election at each annual meeting of the
stockholders. At the Annual Meeting, the stockholders will elect the persons to
serve as Class I directors of the Company.
Messrs. Nazir G. Dossani and Richard K. Prins were nominated by the Board
of Directors to serve as Class I directors of the Company. All nominees have
consented to be named herein and to serve if elected. If a nominee, at the time
of his election, is unable or unwilling to serve, and as a result another
nominee is designated, the persons named in the enclosed proxy or their
substitute will have discretionary authority to vote or to refrain from voting
for the other nominee in accordance with their judgment. Unless contrary
instructions are given, the shares represented by the enclosed proxy will be
voted "FOR" the election of Nazir G. Dossani and Richard K. Prins.
THE BOARD RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR DIRECTOR
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
NAME AGE SINCE POSITION WITH THE COMPANY
- ---------------------------------- ----- ------- --------------------------
<S> <C> <C> <C>
Nazir G. Dossani .......... 56 1997 Director(1)(2)
Richard K. Prins .......... 41 1997 Director(1)(2)
</TABLE>
CONTINUING DIRECTORS
<TABLE>
<S> <C> <C> <C>
CLASS II
Prabhav V. Maniyar ........ 39 1997 Senior Vice President, Chief
Financial Officer,
Secretary and Director
Vijay Srinivas ............ 45 1989 Director
CLASS III
Ram Mukunda ............... 39 1989 President, Chief Executive
Officer, Treasurer and
Director
</TABLE>
- ----------
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
CERTAIN KEY EMPLOYEES
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- -------------------------------- ----- -------------------------------
<S> <C> <C>
Anthony Das .............. 44 Vice President of
Corporate and International
Affairs
Subhash Pai .............. 32 Vice President, Controller and
Assistant Secretary
Gustavo Pereira .......... 44 Vice President of Engineering
Dhruva Kumar ............. 28 Vice President of Global
Carrier Services
Tracy Behzad ............. 35 Vice President of Human
Resources
Ron Vassallo ............. 32 Director, Global Marketing
</TABLE>
9
<PAGE>
BACKGROUND OF NOMINEES
The business experience, principal occupation and employment of the
nominees have been as follows:
Nazir G. Dossani joined the Company as a director in October 1997 at the
completion of the Company's initial public offering. Mr. Dossani has been Vice
President for Asset/Liability Management at the Federal Home Loan Mortgage
Corp. since January 1993. Prior to this position, Mr. Dossani was Vice
President -- Pricing and Portfolio Analysis at the Federal National Mortgage
Association. Mr. Dossani received a Ph.D. in Regional Science from the
University of Pennsylvania and an M.B.A. from the Wharton School of the
University of Pennsylvania.
Richard K. Prins joined the Company as a director in October 1997 at the
completion of the Company's initial public offering. Mr. Prins is a Senior Vice
President with Ferris, Baker Watts, Incorporated. From July 1988 through March
1996, he served as Managing Director of Investment Banking with Crestar
Securities Corporation. Mr. Prins received an M.B.A. from Oral Roberts
University and a B.A. from Colgate University. He currently serves on the Board
of Directors of Path Net, Inc., a domestic telecommunications company, and The
Association for Corporation Growth, National Capital Chapter.
BACKGROUNDS OF CONTINUING DIRECTORS AND KEY EMPLOYEES
Ram Mukunda is the founder of the Company. Prior to 1989, Mr. Mukunda was
an Advisor in Strategic Planning with INTELSAT, an international consortium
responsible for global satellite services. While at INTELSAT, he was
responsible for issues relating to corporate, business, financial planning and
strategic development. Prior to joining INTELSAT, he worked as a fixed-income
analyst with Caine, Gressel. Mr. Mukunda earned a M.S. in Electrical
Engineering from the University of Maryland. Mr. Mukunda and Mr. Srinivas are
brothers-in-law.
Prabhav V. Maniyar joined the Company as Chief Financial Officer in
January 1997. From June 1993 until he joined the Company, Mr. Maniyar was the
Chief Financial Officer of Eldyne, Inc., Unidyne Corporation and Diversified
Control Systems, LLC, collectively known as the Witt Group of Companies. The
Witt Group of Companies was acquired by the Titan Corporation in May 1996. From
June 1985 to May 1993, he held progressively more responsible positions with
NationsBank. Mr. Maniyar earned a B.S. in Economics from Virginia Commonwealth
University and an M.A. in Economics from Old Dominion University.
Vijay Srinivas is the brother-in-law of Ram Mukunda and is a founding
director of the Company. He has a Ph.D. in Organic Chemistry from the University
of North Dakota and is a senior research scientist at ELF Atochem, North
America, a diversified chemical Company.
Anthony Das joined the Company in February 1997 and is Vice President of
Corporate and International Affairs. Prior to joining the Company, Mr. Das was a
Senior Consultant at Armitage Associates from April 1996 to January 1997. Prior
to joining Armitage Associates, he served as a Senior Career Executive in the
Office of the Secretary, Department of Commerce from 1993 to 1995. From 1990 to
1993, Mr. Das was the Director of Public Communication at the State Department.
In connection with his divorce in 1996, Mr. Das filed a voluntary petition of
bankruptcy in the Eastern District Court of Virginia.
Subhash Pai joined the Company in January 1992 and serves as Vice
President, Controller and Assistant Secretary. He is a CA/CPA. Prior to joining
the Company, Mr. Pai held various positions with a multinational shipping
company.
Gustavo Pereira joined the Company in August 1995 and is Vice President for
Engineering. From 1989 until he joined the Company, Mr. Pereira served as
Director of Switching Systems for Marconi in Portugal. In this capacity he
supervised more than 100 engineers and was responsible for Portugal's
international telecommunications network.
Dhruva Kumar joined the Company in April 1993 and is Vice President of
Global Carrier Services. Prior to managing the carrier services group, Mr.
Kumar held a series of progressively more responsible positions within the
Company.
10
<PAGE>
Tracy Behzad joined the Company in January 1998 and is Vice President of
Human Resources. Ms. Behzad's background includes over 15 years of progressively
responsible positions in human resources management, including experience in
labor relations and in the development of human resources departments within
organizations.
Ron Vassallo joined the Company in January 1998 and is Director, Global
Marketing. Prior to joining the Company, Mr. Vassallo was Vice President and a
founding partner of MultiServices, Inc., a strategic marketing firm, and General
Manager of World Access, Inc., an international affinity marketing Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held five meetings in 1997. During 1997, each
incumbent director attended at least 75% of the aggregate of the total number of
meetings of the Board during the period for which such incumbent was a director,
and the total number of meetings held by all committees on which such incumbent
served.
The Board of Directors has established a Compensation Committee and an
Audit Committee. The Compensation Committee is responsible for reviewing and
approving salaries, bonuses and benefits paid or given to all executive officers
of the Company and making recommendations to the Board of Directors with regard
to employee compensation and benefit plans. The Compensation Committee also
administers the Company's Amended and Restated Option Plan and the 1997 Plan.
This committee met one time during 1997. The Audit Committee is charged with
recommending the engagement of independent accountants to audit the Company's
financial statements, discussing the scope and results of the audit with the
independent accountants, reviewing the functions of the Company's management and
independent accountants pertaining to the Company's financial statements,
reviewing management's procedures and policies regarding internal accounting
controls, and performing such other related duties and functions as are deemed
appropriate by the Audit Committee and the Board of Directors. This committee
met one time during 1997.
COMPENSATION OF DIRECTORS
Currently, the Company's directors do not receive cash compensation for
their service on the Board of Directors. In the future, however, directors who
are not executive officers or employees of the Company may receive meeting fees,
committee fees and other compensation relating to their service. The Company's
practice is to grant to each member of the Board of Directors who is not an
officer of the Company an award of options to purchase 5,000 shares of Company
Common Stock upon joining the Board and an additional option to purchase 2,000
shares of Company Common Stock per year of service thereafter. All directors
will be reimbursed for reasonable out-of-pocket expenses incurred in connection
with attendance at Board and committee meetings.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Commission and the National Association of Securities
Dealers, Inc. Officers, directors and beneficial owners of more than 10% of the
Company Common Stock are required by Commission regulations to furnish the
Company with copies of all Section 16(a) forms that they file. Based solely on
review of the copies of such forms or written representations that no reports on
Form 5 were required, the Company believes that for the period from October 9,
1997 (the effective date of the Company's initial public offering) through
December 31, 1997, all of its officers, directors and greater-than-10%
beneficial owners complied with Section 16(a) filing requirements applicable to
them, except that, due to an electronic formating error, the Form 3 filed on
behalf of Mr. Prins was untimely.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
ANNUAL COMPENSATION
The following table sets forth certain summary financial information
concerning compensation for services in all capacities awarded to, earned by or
paid to, the Company's Chief Executive Officer and the other most highly
compensated officers of the Company, whose aggregate cash and cash equivalent
compensation exceeded $100,000 ("Named Officers"), with respect to the last
three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES ALL
NAME AND UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION
- ------------------------------- ------ --------------------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Ram Mukunda ................... 1997 $ 345,833(1) -- -- $ 30,800(2)
President/Chief .............. 1996 $ 165,872 -- -- $ 18,000(2)
Executive Officer ............ 1995 $ 150,000 -- -- --
Prabhav V. Maniyar(3) ......... 1997 $ 149,585 -- 157,616 --
Chief Financial .............. 1996 -- -- -- --
Officer/Secretary ............ 1995 -- -- -- --
Gustavo Pereira ............... 1997 $ 110,000 -- 7,500 --
Vice President- .............. 1996 $ 110,000 -- -- --
Engineering .................. 1995 $ 32,000 -- -- --
</TABLE>
- ----------
(1) Includes $150,000 accrued salary for prior periods.
(2) This amount includes the value of an automobile allowance.
(3) Mr. Maniyar joined the Company in January 1997.
(4) Mr. Pereira joined the Comany in August 1995.
CERTAIN EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Ram Mukunda on July
1, 1997 (the "Mukunda Agreement"), pursuant to which Mr. Mukunda holds the
positions of President, Chief Executive Officer and Treasurer of the Company, is
paid an annual base salary of $250,000 per year, is entitled to participate in
the 1997 Plan, is eligible to receive a bonus of up to 40% of his base salary as
determined by the Compensation Committee based upon the financial and operating
performance of the Company, and is entitled to receive an automobile allowance
of $1,500 per month. In addition, the Mukunda Agreement provides that, if there
is a "Change of Control" (as defined therein), Mr. Mukunda will receive, for the
longer of 12 months or the balance of the term under his employment agreement
(which initially could be for a period of up to three years), the following
benefits: (1) a severance payment equal to $20,830 per month; (2) a pro rata
portion of the bonus applicable to the calendar year in which such termination
occurs; (3) all accrued but unpaid base salary and other benefits as of the date
of termination; and (4) such other benefits as he was eligible to participate in
at and as of the date of termination.
The Company also entered into an employment agreement with Prabhav V.
Maniyar on July 1, 1997 (the "Maniyar Agreement"), pursuant to which Mr. Maniyar
holds the positions of Senior Vice President, Chief Financial Officer and
Secretary of the Company, is paid an annual base salary of $175,000 per year, is
entitled to participate in the 1997 Plan, is eligible to receive a bonus of up
to 40% of his base salary, as determined by the Compensation Committee based
upon the financial and operating performance of the Company, and is entitled to
receive an automobile allowance of $750 per month. In addition, the Maniyar
Agreement provides that if there is a "Change of Control" (as defined therein),
Mr. Maniyar will receive, for the longer of 12 months or the balance of the term
under his employment agreement (which initially could be for a period of up to
three years), the following benefits: (1) a
12
<PAGE>
severance payment equal to $14,580 per month; (2) a pro rata portion of the
bonus applicable to the calendar year in which such termination occurs; (3) all
accrued but unpaid base salary and other benefits; and (4) such other benefits
as he was eligible to participate in at and as of the date of termination.
The Mukunda Agreement and the Maniyar Agreement each has an initial term of
three years and is renewable for successive one year terms. In addition, the
agreements also contain provisions which restrict the ability of Messrs. Mukunda
and Maniyar to compete with the Company for a period of one year following
termination.
For purposes of the Mukunda Agreement and the Maniyar Agreement, a "Change
of Control" shall be deemed to have occurred if (A) any person becomes a
beneficial owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of all classes of the
Company's then outstanding voting securities; or (B) during any period of two
consecutive calendar years individuals who at the beginning of such period
constitute the Board of Directors, cease for any reason to constitute at least a
majority thereof, unless the election or nomination for the election by the
Company's stockholders of each new director was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the two-year period or whose election or nomination for
election was previously so approved; or (C) the stockholders of the Company
approve a merger or consolidation of the Company with any other company or
entity, other than a merger or consolidation that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation (exclusive of the situation where the merger or consolidation
is effected in order to implement a recapitalization of the Company in which no
person acquires more than 30% of the combined voting power of the Company's then
outstanding securities); or (D) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
The Board of Directors in consultation with the Compensation Committee
recently approved increases in the compensation of Messrs. Mukunda and Maniyar,
which increases are consistent with compensation levels of other comparable
companies in the telecommunications industry. Effective July 1, 1998, Mr.
Mukunda's annual base salary will be increased to $325,000 and Mr. Maniyar's
annual base salary will be increased to $225,000.
STOCK OPTION GRANTS
The following table sets forth certain information regarding grants of
options to purchase Company Common Stock made by the Company during the fiscal
year ended December 31, 1997, to each of the Named Officers. No stock
appreciation rights were granted during fiscal 1997. On June 25, 1998, the
closing price of the Company Common Stock was $15.00. The information set forth
below supercedes and replaces similar information included in the Company's
amended Annual Report on Form 10-K.
<TABLE>
<CAPTION>
PERCENTAGE REALIZED VALUE AT
NUMBER OF OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTIONS TERM(3)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------
NAME GRANTED(#) IN 1997(1) ($/SH)(2) DATE 5%($) 10%($)
- ---------------------------- ------------ ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ram Mukunda ................ -- -- -- -- -- --
Prabhav V. Maniyar ......... 107,616 16.10% $ 1.85 1/19/07 125,206 317,297
50,000 7.48% $ 10.00 8/17/07 314,447 796,871
Gustavo Pereira ............ 7,500 1.12% $ 10.00 8/17/07 47,167 119,530
</TABLE>
- ----------
(1) During 1997, the Company granted options to purchase a total of 668,366
shares of Company Common Stock.
(2) The exercise price was equal to the per share fair market value of the
Company Common Stock underlying the options on the date of grant.
(3) Amounts reflected in these columns represent amounts that may be realized
upon exercise of options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (5% and 10%) on the
Company Common Stock over the term of the options. Actual gains, if any, on
the stock option exercises and Company Common Stock holdings are dependent
upon the timing of such exercise and the future performance of the Company
Common Stock. There can be no assurance that the rates of appreciation
assumed in this table can be achieved or that the amounts reflected will be
received by the holder of the option.
13
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information as of December 31, 1997,
regarding the number and year end value of unexercised stock options to purchase
Company Common Stock held by each of the Named Officers. No stock appreciation
rights were exercised during fiscal 1997.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING "IN-THE-MONEY"
UNEXERCISED OPTIONS OPTIONS AT
AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
-------------------------- ---------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------- -------------------------- ---------------------------
<S> <C> <C>
Ram Mukunda ................ -- --
Prabhav V. Maniyar ......... 107,616/50,000 2,208,818/618,750
Gustavo Pereira ............ 0/7,500 0/92,813
</TABLE>
- ----------
(1) Options are "in-the-money" if the fair market value of underlying securities
exceeds the exercise price of the options. The amounts set forth represent
the difference between $22.375 per share, the fair market value of the
Common Stock issuable upon exercise of options at December 31, 1997 and the
exercise price of the option, multiplied by the applicable number of shares
underlying the options. On June 25, 1998, the closing price of the Company
Common Stock was $15.00.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is not deemed to be "soliciting material" or deemed to be
"filed" with the Commission or subject to the Commission's proxy rules or to the
liabilities of Section 18 of the Exchange Act, and the report shall not be
deemed to be incorporated by reference into any prior or subsequent filing by
the Company under the Securities Act or the Exchange Act.
General. In connection with its initial public offering of Company Common
Stock in late 1997, the Company formed a Compensation Committee of the Board of
Directors consisting of Messrs. Prins and Dossani. The Compensation Committee
evaluates and recommends to the Board the base salary and incentive compensation
for the Chief Executive Officer of the Company, as well as its senior officers.
The Compensation Committee also administers and grants awards under the 1997
Plan. The Committee consists solely of non-employee directors whose
participation in the 1997 Plan is under the control of the Board of Directors.
The Committee intends to retain a professional consultant to research the
executive compensation levels of similar companies and to assist and advise it
in the future in the setting of the Company's own executive compensation levels.
Executive Compensation. The Company's executive compensation program as
implemented by the Compensation Committee is intended to provide a competitive
compensation program that will enable the Company to attract, retain and reward
experienced and highly motivated executive officers who have the skills,
experience and talents required to promote the short- and long-term financial
performance and growth of the Company. The compensation policy is generally
based on the principle that the financial rewards to the executive must be
aligned with the financial interests of the stockholders of the Company.
Officers of the Company are paid salaries in line with their
responsibilities and generally comparable to industry standards. Senior officers
are also eligible to receive discretionary bonuses based upon the overall growth
in revenue and profit and the performance of the Company. Likewise, stock option
or other stock-based awards to officers and other employees are intended to
promote the success of the Company by aligning employee financial interests with
long-term stockholder value. Such awards are generally based on various
subjective factors primarily relating to the responsibilities of the individual
officers or employees, and also their expected future contributions and prior
awards.
The Committee will consider establishing standard salary ranges for all
executive positions below the level of the chief executive officer in the future
with the assistance of experienced compensation consultants. These salary ranges
will be developed in coordination with such consultants and the Company's human
resources staff from surveys using competitive market data from similarly sized
companies
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in the telecommunications industry, as well as other industry groups. An
executive's salary within these ranges will depend upon the executive's
experience and capabilities, the executive's unique talents and strengths and
the executive's overall contribution to the Company.
Compensation of the Chief Executive Officer. The Compensation Committee
will annually review and approve the compensation of Mr. Mukunda, the Chief
Executive Officer of the Company. The compensation package for the Chief
Executive Officer includes elements of base salary, annual incentive
compensation and long-term incentive compensation. Mr. Mukunda's total
compensation is designed to be competitive within the industry while creating
rewards for short- and long-term performance in line with the financial
interests of the Company's stockholders.
With regard to Mr. Mukunda's compensation, the Committee considers in
particular the Company's performance as evidenced by changes in the market price
of the Company Common Stock during the year as compared to changes in the
telecommunications industry and the broader economic environment. Mr. Mukunda is
a significant stockholder in the Company, and to the extent his performance as
Chief Executive Officer translates into an increase in the value of the Company
Common Stock, all Company stockholders, including him, share the benefits. The
Committee also considers the Chief Executive Officer's leadership in continuing
to improve the strategic position of the Company and its positive financial
performance during 1997 with respect to revenue growth, expense control, net
income, and earnings per share, compared to other telecommunications companies.
Section 162(m). The Commission requires that this report comment upon the
Company's policy with respect to Section 162(m) of the Code, which limits the
deductibility on the Company's tax return of compensation over $1 million to any
of the named executive officers of the Company unless, in general, the
compensation is paid pursuant to a plan which is performance related,
non-discretionary and has been approved by the Company's stockholders. The
Company's policy with respect to Section 162(m) is to make every reasonable
effort to insure that compensation is deductible to the extent permitted, while
simultaneously providing Company executives with appropriate awards for their
performance. None of the Company's executives earned sufficient compensation
income in 1997 nor are any of the Company's executives anticipated to have
sufficient compensation in the near future to be subject to Section 162(m). The
Compensation Committee, however, reserves the right to use its judgment, where
merited by the Committee's need for flexibility to respond to changing business
conditions or by an executive's individual performance, to authorize
compensation which may not, in a specific case, be fully deductible by the
Company.
Conclusion. The Compensation Committee intends to base its executive
compensation practices on stock price and other financial performance criteria,
as well as on its qualitative evaluation of individual performance. In addition,
the Committee will augment these components of the compensation process with
quantitative measures of individual performance. The Committee believes that its
compensation policies promote the goals of attracting, motivating, rewarding and
retaining talented executives who will maximize value for the Company's
shareholders.
THE COMPENSATION COMMITTEE
Nazir G. Dossani
Richard K. Prins
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Company's initial public offering, the Board of Directors did
not have a Compensation Committee or any committee performing a similar
function. Accordingly, the entire Board of Directors, including directors who
are executive officers of the Company, historically have made all determinations
concerning compensation of executive officers. The Board of Directors has
established a Compensation Committee which consists entirely of directors who
are not employees of the Company.
15
<PAGE>
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Company Common Stock for the period from October 9, 1997 (the date the Company
Common Stock began trading on the NNM) through December 31, 1997 with the
cumulative total return on (i) the "NASDAQ-US Index", and (ii) the "NASDAQ
Telecommunications Index". The comparisons assume the investment of $100 on
October 9, 1997 in the Company Common Stock and in each of the indices and, in
each case, assumes reinvestment of all dividends. The Company has not paid any
dividends on the Company Common Stock and does not intend to do so in the
foreseeable future. The performance graph is not necessarily indicative of
future performance.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
MONTHLY CUMULATIVE TOTAL VALUES($)*
------------------------------------------------------------------------
1997 THE NASDAQ THE NASDAQ
MONTH-END THE COMPANY STOCK MARKET -- U.S. INDEX TELECOMMUNICATIONS INDEX
- ------------------ ------------- ---------------------------- -------------------------
<S> <C> <C> <C>
10/31/97 ......... 88.81 91.28 95.44
11/28/97 ......... 95.52 91.68 95.79
12/31/97 ......... 133.58 89.95 99.27
</TABLE>
- ----------
* Assumes $100 invested on October 9, 1997 in Company Common Stock or an index,
including reinvestment of dividends.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an agreement with Companhia Santomensed De
Telecommunicacoes ("CST"), an affiliate of Blue Carol Enterprises Ltd. ("Blue
Carol"), which currently holds 9% of the outstanding shares of Company Common
Stock, for the purchase and sale of long distance services. Revenues generated
from this affiliate amounted to approximately $1,035,000, $1,501,000 and
$1,900,000, or 10%, 5% and 2% of the Company's total revenues for the years
ended December 31, 1995, 1996 and 1997, respectively. Services provided to the
Company by this affiliate amounted to approximately $134,000, $663,000 and
$680,000 of the Company's costs of services for the years ended December 31,
1995, 1996 and 1997, respectively. The Company also has a lease agreement with
an affiliate of Blue Carol, Companhia Portuguesa Radio Marconi, S.A.
("Marconi"), for rights to use undersea fiber optic cable under which the
Company is obligated to pay Marconi $38,330 semi-annually for five years on a
resale basis.
The Company provided long distance services to EAA, Inc. ("EAA"), an
affiliate owned by Ram Mukunda, the Company's President and Chief Executive
Officer. Payments received by the Company from EAA amounted to approximately
$396,000 and $262,000 for the years ended December 31, 1995 and 1996,
respectively. No services were provided in 1997. Accounts receivable from EAA
were $167,000 and $64,000 as of December 31, 1995 and 1996, respectively. The
Company believes that the services provided were on standard commercial terms,
which are no less favorable than those available on an arms-length basis with an
unaffiliated third party.
The Company was indebted to Vijay and Usha Srinivas and Mrs. B.V. Mukunda
under certain notes payable in the amounts of $46,000 and $100,000
respectively, which amounts were repaid in July 1997. Mr. and Mrs. Srinivas are
the brother-in-law and sister, and Mrs. B.V. Mukunda is the mother, of Ram
Mukunda, the Company's President and Chief Executive Officer. The interest
rates on these notes ranged from 15% to 25%.
In July 1997, the Company offered to exchange shares of its voting Common
Stock for all of the issued and outstanding shares of its non-voting common
stock, or alternatively, to repurchase such shares of non-voting common stock
for cash. In connection therewith, Mr. Mukunda exchanged 17,175 shares of
non-voting stock for an equal number of shares of voting Common Stock.
During the second quarter of 1998, the Company made loans to certain of its
employees and officers. These loans were all made on substantially the same
terms, including interest rates. In this regard, the Company advanced an
aggregate of $736,676 to such persons, including $550,000 to Prabhav V. Maniyar,
in connection with the prior exercise by such persons of outstanding options to
purchase Company Common Stock and the payments of taxes related thereto. The
loans bear interest at a rate of 7.87% per year with interest payable quarterly
in arrears. Principal and any unpaid interest is due and payable on December 31,
1998. The loan to Mr. Maniyar is secured by a pledge of all of his assets other
than assets that may be subject to any pre-existing security interests.
17
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PROPOSAL II
AMENDED AND RESTATED 1997 PERFORMANCE INCENTIVE PLAN
INTRODUCTION
The Company's Board of Directors has adopted an amendment and restatement
of the 1997 Plan which stockholders will be asked to approve at the Annual
Meeting. The amendment makes two significant changes: First, the amendment
increases the number of shares reserved for issuance under Awards. Second, the
amendment will modify the provisions of the Plan and secure stockholder approval
of certain terms relating to performance-based awards so that such awards,
including certain cash-denominated annual and long-term incentive awards,
potentially can qualify as "performance-based compensation" under Section 162(m)
of the Code. Section 162(m) limits the deductions a publicly held company can
claim for compensation in excess of $1 million paid to certain executive
officers (generally, the officers who are "named executive officers" in the
summary compensation table in the company's proxy statement). "Performance-based
compensation" is not counted against the $1 million deductibility cap.
The Board of Directors and the Compensation Committee (the "Committee")
believe that attracting and retaining executives, other employees, non-employee
directors, and other service providers of high quality is essential to the
Company's growth and success. Important advantages to the Company are gained by
a comprehensive compensation program which may include different types of
incentives for motivating such persons and rewards for outstanding service. In
particular, stock options have been and will continue to be an important element
of compensation for executives and other employees, because such awards enable
such persons to acquire or increase their proprietary interest in the Company,
thereby promoting a closer identity of interests between them and the Company's
stockholders. Such awards also provide an increased incentive for the recipient
to expend his or her maximum efforts for the success of the Company's business.
The following is a brief description of the material features of the 1997
Plan, as proposed to be amended and restated. Such description is qualified in
its entirety by reference to the full text of the 1997 Plan, a copy of which is
attached to this Proxy Statement as Annex A. The Plan is a broad-based plan
authorizing the grant of options and other awards potentially to every employee
of the Company as well as to directors and consultants. The Company has granted
options to a substantial number of its approximately 257 employees.
Shares Available and Award Limitations. Under the 1997 Plan, as amended,
the number of shares of Company Common Stock reserved and available for awards
("Awards") will be eighteen and one-half percent (18.5%) of the issued and
outstanding shares of Company Common Stock, determined at the time of grant of
the Award. Presently, the 1997 Plan provides for the issuance of up to 750,000
shares of Company Common Stock, of which approximately 500,000 shares are
subject to outstanding Awards. The new percentage-based calculation will provide
the Company with added flexibility in making additional Awards to the employees
directors and consultants of the Company. Based upon the presently outstanding
8,939,315 shares of Company Common Stock, the 1997 Plan would authorize Awards
for up to 1,653,773 shares of Company Common Stock. Because the 1997 Plan
permits an Award to be granted to the extent that such Award, together with all
other Awards then outstanding, do not authorize the issuance or otherwise relate
to more than 18.5% of the outstanding class of Common Stock at the date of grant
of such Award, the shares available will increase if the Company issues
additional shares and as Awards are exercised, settled, or otherwise expire or
terminate. In addition, the 1997 Plan limits the number of shares issuable in
connection with restricted stock, deferred stock, or other awards that are akin
to options or stock appreciation rights to a total of 30% of the shares reserved
under the 1997 Plan, and the 1997 Plan limits the number of shares issuable in
connection with incentive stock options ("ISOs," which are discussed below) to
one million shares. Shares delivered under the 1997 Plan may be either newly
issued shares or treasury shares.
In addition, the 1997 Plan includes a limitation on the amount of Awards
that may be granted to any one participant in a given calendar year in order to
qualify Awards as "performance-based" compensation not subject to the limitation
on deductibility under Section 162(m) of the Code. Under this
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<PAGE>
annual per-person limitation, no participant may in any year be granted
stock-denominated Awards with respect to more than 1 million shares of Company
Common Stock, and the maximum cash amount that may be earned by any participant
upon achievement of performance goals measured over a specified period shall be
$1.5 million in the case of annual incentive Awards and, in the case of
performance-based awards with a performance period longer than one year, the
maximum value that may accrue to any one participant in any one year for all
such long-term Awards shall be $1.5 million.
Adjustments to the number and kind of shares subject to the share
limitations and annual per-person limitations relating to stock-denominated
Awards are authorized in the event that a dividend or other distribution
(whether in cash, shares, or other property), recapitalization,
reclassification, stock split, reorganization, business combination, or other
similar corporate transaction or event affects the Company Common Stock. The
Compensation Committee is also authorized to adjust performance conditions and
other terms of Awards in response to these kinds of events or to changes in
applicable laws, regulations, or accounting principles, except that any
adjustments to Awards intended to qualify as "performance-based" must conform to
requirements under Section 162(m).
Eligibility. All officers and employees of the Company and its
subsidiaries, directors of the Company (including non-employee directors), and
consultants and other service providers to the Company and its subsidiaries are
eligible to be granted Awards under the 1997 Plan. At present, approximately 200
persons would be eligible to receive Awards. Awards to non-employee directors
under the 1997 Plan are made by the Board of Directors.
Administration. The Plan will be administered by the Committee, except that
the Board may appoint any other committee to administer the Plan and may itself
act to administer the Plan and will so act in connection with Awards to
non-emloyee directors. (References to "Committee" below mean the Compensation
Committee or full Board exercising authority with respect to a given type of
Award.) Subject to the terms and conditions of the 1997 Plan, the Committee is
authorized to select participants, to determine the type and number of Awards to
be granted and the number of shares to which Awards will relate or the amount of
an annual incentive award, to specify times at which Awards will be exercisable
or settled, including performance conditions that may be required as a condition
thereof, to set other terms and conditions of such Awards, to prescribe forms of
Award agreements, interpret and specify rules and regulations relating to the
1997 Plan, and to make all other determinations which may be necessary or
advisable for the administration of the 1997 Plan. Nothing in the 1997 Plan
precludes the Committee from authorizing payment of other compensation,
including bonuses based upon performance, to officers, employees and directors
including the executive officers. The 1997 Plan provides that Committee members
shall not be personally liable, and shall be fully indemnified, in connection
with any action, determination, or interpretation taken or made in good faith
under the 1997 Plan.
Stock Options and SARs. The Committee is authorized to grant stock options,
including both ISOs, which can result in potentially favorable tax treatment to
the participant, and non-qualified stock options, and stock appreciation rights
("SARs") entitling the participant to receive the excess of the fair market
value of a share on the date of exercise or other specified date over the grant
price of the SAR. The exercise price of an option and the grant price of a SAR
is determined by the Committee, but generally may not be less than the fair
market value of the stock on the date of grant (except as described below). The
maximum term of each option or SAR, the times at which each option or SAR will
be exercisable, and provisions requiring forfeiture of unexercised options at or
following termination of employment, generally are fixed by the Committee,
subject to a restriction that no ISO, or SAR in tandem therewith, may have a
term exceeding ten years. Options may be exercised by payment of the exercise
price in cash, stock or other property (possibly including notes or obligations
to make payment on a deferred basis) or by surrender of other outstanding
awards, having a fair market value equal to the exercise price. Methods of
exercise and settlement, vesting and other terms of SARs will be determined by
the Committee. SARs granted under the Plan may include "limited SARs"
exercisable for a stated period of time following a "change of control" of the
Company, as discussed below.
Restricted Stock. The Committee is authorized to make Awards of restricted
stock. Prior to the end of the restricted period, shares received as restricted
stock may not be sold or disposed of by participants, and may be forfeited in
the event of termination of employment. The restricted period generally
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<PAGE>
is established by the Committee. An Award of restricted stock entitles the
participant to all of the rights of a stockholder of the Company, including the
right to vote the shares and the right to receive any dividends thereon, unless
otherwise determined by the Committee. Deferred stock and restricted stock
units, which are economically similar to restricted stock, may be granted as
"other stock-based awards" under the 1997 Plan. Such Awards would give
participants the right to receive shares at the end of a specified deferral
period, and may be subject to forfeiture in the event of termination of
employment under certain circumstances prior to the end of a specified
restricted period (which need not be the same as the deferral period). Prior to
settlement, deferred stock and restricted stock units carry no voting or
dividend rights or other rights associated with stock ownership, but dividend
equivalents may be paid on such Awards.
Other Stock-Based Awards, Bonus Stock, and Awards in lieu of Cash
Obligations. The 1997 Plan authorizes the Committee to grant Awards that are
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to Company Common Stock. The Committee will
determine the terms and conditions of such Awards, including the consideration
to be paid to exercise Awards in the nature of purchase rights, the periods
during which Awards will be outstanding, and any forfeiture conditions and
restrictions on Awards. In addition, the Committee is authorized to grant shares
as a bonus free of restrictions, or to grant shares or other Awards in lieu of
the Company's obligations under other plans or compensatory arrangements,
subject to such terms as the Committee may specify.
Performance-Based Awards. The Committee may require satisfaction of
pre-established performance goals, consisting of one or more business criteria
and a targeted performance level with respect to such criteria, as a condition
of Awards being granted or becoming exercisable or settleable under the 1997
Plan, or as a condition to accelerating the timing of such events. If so
determined by the Committee, in order to avoid the limitations on deductibility
under Section 162(m) of the Code, the business criteria used by the Committee in
establishing performance goals applicable to performance Awards to the chief
executive officer and the four other most highly compensated executive officers
will be selected from among the following: (i) earnings, (ii) earnings per
share, (iii) stock price, (iv) total shareholder return, (v) operating income,
(vi) net income, (vii) cash flow, (viii) return on equity, (ix) return on
capital, (x) customer additions, (xi) network infrastructure deployment and
(xii) new product launches.
Incentive Awards. The Committee is authorized to grant incentive awards
which are performance-based Awards that are denominated in cash. Incentive
Awards may be annual incentive Awards, earnable based on performance measured in
a period of one year or less, or long-term incentive Awards, earnable based on
performance over a period of longer than one year. Incentive Awards may be
settled in cash or by issuance of shares under the Plan. As stated above,
incentive Awards granted to named executives may be intended to constitute
"performance-based compensation" not subject to the limitation on deductibility
under Code Section 162(m). In such case, the performance objectives will be
based on the business criteria described in the preceding paragraph.
Other Terms of Awards. Awards may be settled in cash, stock, other Awards
or other property, in the discretion of the Committee. The Committee may require
or permit participants to defer the settlement of all or part of an Award in
accordance with such terms and conditions as the Committee may establish,
including payment or crediting of interest or dividend equivalents on any
deferred amounts. The Committee is authorized to place cash, shares or other
property in trusts or make other arrangements to provide for payment of the
Company's obligations under the 1997 Plan. The Committee may condition Awards on
the payment of taxes such as by withholding a portion of the stock or other
property to be distributed (or previously acquired stock or other property
surrendered by the participant) in order to satisfy tax obligations. Awards
granted under the 1997 Plan generally may not be pledged or otherwise encumbered
and are not transferable except by will or by the laws of descent and
distribution, or to a designated beneficiary upon the participant's death,
except that the Committee may permit transfers in individual cases, including
for estate planning purposes.
Awards under the 1997 Plan are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant
(as distinguished from the exercise), except to the extent required by law. The
Committee may, however, grant Awards in substitution for other Awards
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under the 1997 Plan, awards under other Company plans, or other rights to
payment from the Company, and may grant Awards in addition to and in tandem with
such other Awards, awards, or rights as well.
Vesting, Forfeitures, and Acceleration Thereof. The Committee may, in its
discretion, determine the vesting schedule of options and other Awards, the
circumstances that will result in forfeiture of the Awards, the post-termination
exercise periods of options and similar Awards, and the events that will result
in acceleration of the ability to exercise and the lapse of restrictions, or the
expiration of any deferral period, on any Award. In addition, the 1997 Plan
provides that, in the event of a "change in control" of the Company, as defined,
outstanding Awards will immediately vest and be fully exercisable and any
restrictions, and forfeiture conditions of such Awards will lapse.
Amendment and Termination of the Plan. The Board of Directors may amend,
alter, suspend, discontinue, or terminate the 1997 Plan without stockholder
approval at any time, provided that no such amendment shall be made without
stockholder approval if such approval is required under applicable law or deemed
advisable. Thus, stockholder approval will not necessarily be required for
amendments which might increase the cost of the 1997 Plan or broaden
eligibility. Unless earlier terminated, the 1997 Plan will terminate at July 31,
2010.
Effect of Stockholder Approval on Awards. For purposes of Code Section
162(m), shareholder approval of the 1997 Plan, as amended and restated, relates
particularly to eligibility, per-person award limitations, the performance
objectives inherent in stock options and stock appreciation rights ("SARs"), and
the business criteria incorporated in performance goals under certain designated
performance-based awards. See "Eligibility," "Shares Available and Award
Limitations," "Stock Options and SARs," and "Performance-Based Awards." In the
event that stockholders fail to approve these material terms of the performance
goals relating to 1997 Plan awards to be granted after the Annual Meeting, such
awards will not be granted to the extent necessary to meet the requirements of
Treasury Regulations 1.162-27(e)(4). All Awards granted to date have been
granted under the 1997 Plan as currently in effect so such Awards will be
unaffected by the action of stockholders relating to the 1997 Plan at the Annual
Meeting of Stockholders.
FEDERAL INCOME TAX IMPLICATIONS TO THE 1997 PLAN
The following is a brief description of the federal income tax consequences
generally arising with respect to Awards that may be granted under the 1997
Plan. The grant of an option or SAR (including a stock-based award in the nature
of a purchase right) will create no federal income tax consequences for the
participant or the Company. A participant will not have taxable income upon
exercising an ISO (except that the alternative minimum tax may apply). Upon
exercising an option other than an ISO, the participant must generally recognize
ordinary income equal to the difference between the exercise price and the fair
market value of the freely transferable and nonforfeitable stock acquired on the
date of exercise. Upon exercising a SAR, the participant must generally
recognize ordinary income equal to the difference between the grant price and
the fair market value of the underlying stock.
Upon a disposition of shares acquired upon exercise of an ISO before the
end of the applicable ISO holding periods, the participant must generally
recognize ordinary income equal to the lesser of (i) the fair market value of
the shares at the date of exercise of the ISO minus the exercise price or (ii)
the amount realized upon the disposition of the ISO shares minus the exercise
price. Otherwise, a participant's disposition of shares acquired upon the
exercise of an option or SAR generally will result in short-term or long-term
capital gain or loss measured by the difference between the sale price and the
participant's tax basis in such shares (generally, the exercise price plus any
amount previously recognized as ordinary income in connection with the exercise
of the option or SAR).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with
options and SARs. The Company generally is not entitled to a tax deduction
relating to amounts that represent a capital gain to a participant. Accordingly,
the Company will not be entitled to any tax deduction with respect to an ISO if
the participant holds the shares for the applicable ISO holding periods prior to
disposition of the shares.
With respect to other Awards granted under the 1997 Plan that may be
settled either in cash or in stock or other property that is either not
restricted as to transferability or not subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair
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market value of stock or other property actually received. Except as discussed
below, the Company generally will be entitled to a deduction for the same
amount. With respect to awards involving stock or other property that is
restricted as to transferability and subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the fair market value of the shares or other property at the first time the
shares or other property become transferable or not subject to a substantial
risk of forfeiture, whichever occurs earlier. Except as discussed below, the
Company generally will be entitled to a deduction in an amount equal to the
ordinary income recognized by the participant. A participant may elect to be
taxed at the time of receipt of shares or other property rather than upon lapse
of restrictions on transferability or the substantial risk of forfeiture, but if
the participant subsequently forfeits such shares or property he would not be
entitled to any tax deduction, including as a capital loss, for the value of the
shares or property on which he previously paid tax.
The foregoing provides only a general description of the application of
federal income tax laws to certain types of awards under the 1997 Plan. This
discussion is intended for the information of stockholders considering how to
vote at the Annual Meeting of Stockholders and not as tax guidance to
participants in the 1997 Plan as the consequences may vary with the types of
Awards made, the identity of the recipients and the method of payment or
settlement. In addition, other tax rules may apply, such as in the case of
variations in transactions that are permitted under the 1997 Plan (such as
payment of the exercise price of an option by surrender of previously acquired
shares). The summary does not address the effects of other federal taxes
(including possible "golden parachute" excise taxes) or taxes imposed under
state, local, or foreign tax laws.
As discussed above, compensation that qualifies as "performance-based"
compensation is excluded from the $1,000,000 deductibility cap of Section 162(m)
of the Code, and therefore remains fully deductible by the company that pays it.
Under the 1997 Plan, options and SARs granted with an exercise price or grant
price at least equal to 100% of fair market value of the underlying stock at the
date of grant, annual incentive awards to employees the Committee expects to be
named executives at the time compensation is received under such Awards, and
certain other Awards which are conditioned upon achievement of performance goals
may be intended by the Committee to qualify as such "performance-based"
compensation. A number of requirements must be met in order for particular
compensation to so qualify, however, so there can be no assurance that such
compensation under the 1997 Plan will be fully deductible under all
circumstances. In addition, other Awards under the 1997 Plan generally will not
so qualify, so that compensation paid to certain executives in connection with
such Awards may, to the extent it and other compensation subject to Section
162(m)'s deductibility cap exceed $1,000,000 in a given year, be subject to the
limitation of Section 162(m).
VOTE REQUIRED FOR APPROVAL
Approval of the 1997 Plan, as amended and restated, will require the
affirmative vote of holders of a majority of the voting power of the issued and
outstanding voting securities present in person or represented by proxy and
entitled to vote.
The Board of Directors considers the amended and restated 1997 Plan to be
in the best interests of the Company and its stockholders and recommends that
the stockholders vote FOR approval.
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PROPOSAL III
THE REORGANIZATION
INTRODUCTION
The Board of Directors has unanimously approved, and for the reasons
described below, recommends that the stockholders approve, the Reorganization
pursuant to which the Company would be reorganized into a holding company
structure with the parent company incorporated under the laws of the State of
Delaware.
The Board of Directors has devised, and seeks approval of, a plan of
Reorganization which will consist, generally, of the following steps (some of
which have already been taken): (i) the Company has caused four new Delaware
companies to be formed; (ii) New Parent is the wholly-owned subsidiary of the
Company and the three remaining newly formed Delaware companies are wholly-owned
subsidiaries of New Parent ("New Parent Subsidiaries"); (iii) upon receipt of
the necessary regulatory approvals and as permitted by applicable law, the
Company will transfer substantially all of its assets and liabilities to New
Parent as partial consideration for its purchase of 100% of the issued and
outstanding New Common Stock; (iv) following such transfer, New Parent will
transfer substantially all of its (newly-acquired) assets and liabilities to the
New Parent Subsidiaries as partial consideration for its purchases of 100% of
the issued and outstanding shares of the common stock of the New Parent
Subsidiaries; (v) following the foregoing asset transfers and upon receipt of
stockholder and regulatory approvals, the Merger will take place pursuant to
which the Company (sometimes referred to in this discussion as
"Startec-Maryland") will be merged with and into New Parent (sometimes referred
to in this discussion as "Startec-Delaware"), with each outstanding share of
Company Common Stock being exchanged for one share of New Common Stock.
The Company believes that the Reorganization is important to its future
success. However, the Company also wishes to maximize its flexibility to adapt
to changing circumstances and to exploit new opportunities. Therefore, if the
stockholders approve the Reorganization, the Company, acting through its Board,
reserves for itself the power to vary the terms of the Reorganization consistent
with the purposes of the Reorganization. The Board may implement all, some or
none of the Reorganization, or may implement additional transactions not
specified therein, including the sale of equity interests of one or more
subsidiaries or other indirectly owned and newly formed subsidiaries to third
parties. The final structure of the Company after the Reorganization may be
substantially different from the structure as currently contemplated.
Upon completion of the Reorganization, all of the previously outstanding
shares of Company Common Stock will be automatically converted into shares of
New Common Stock and Startec-Delaware will be a holding company whose primary
assets will be its equity interests in the New Parent Subsidiaries. In addition,
all currently outstanding options, warrants or other rights to acquire shares of
Company Common Stock will be converted into an identical option, warrant or
other right to acquire New Common Stock. At such time, the business and
operations which are currently being performed by the Company will be performed
by the New Parent Subsidiaries. Pursuant to the terms of the Merger Agreement (a
copy of which is attached to this Proxy Statement/Prospectus as Annex B)
Startec-Maryland will be merged with and into Startec-Delaware, and as a result,
Startec-Maryland will cease to exist and the Company will be a holding company
corporation subject to the laws of the State of Delaware.
At and after the effective date of the Reorganization, each certificate
that previously represented shares of Company Common Stock will be deemed for
all purposes to evidence the right to receive the number of shares of New
Common Stock into which those shares of Company Common Stock have been
converted as a result of the Merger. IT WILL NOT BE NECESSARY FOR STOCKHOLDERS
OF STARTEC-MARYLAND TO HAVE THEIR STOCK CERTIFICATES EXCHANGED FOR STOCK
CERTIFICATES REPRESENTING THE SHARES OF STARTEC-DELAWARE. The Company Common
Stock is qualified for trading on the NNM under the symbol "STGC," and after the
Reorganization, New Common Stock will continue to be traded on the NNM under the
symbol "STGC."
At and after the effective date of the Reorganization, additional financing
transactions, including the issuance of debt and/or equity instruments may occur
at the level of New Parent or of the New
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Parent Subsidiaries. Debt or equity of a subsidiary, rather than of New Parent,
may be issued, among other reasons, to reduce the total cost of capital to New
Parent and the subsidiaries, minimize risk to New Parent and its stockholders,
or to allow for the most economic and efficient development of a subsidiary's
business.
Startec-Delaware will be governed by the General Corporation Law of the
State of Delaware ("the Delaware Law") and a new Certificate of Incorporation
and Bylaws (attached hereto as Annex C and Annex D, respectively (together, the
"Delaware Charter")), which will result in certain changes in the rights of
stockholders. See "Certain Differences between the Charter and Bylaws of the
Company and New Parent," and "Certain Differences in State Corporation Laws." As
discussed further below, the Reorganization will result in changes in the
business and management of the Company. The Reorganization will not, however,
result in any change in the assets, liabilities or net worth of the Company on a
consolidated basis.
Assuming that the Reorganization is approved and implemented, the Amended
and Restated Stock Option Plan and the 1997 Plan (together, the "Option Plans")
and certain warrants and other rights outstanding to purchase Company Common
Stock (the "Startec Warrants") will be assumed by Startec-Delaware. In addition,
the Merger Agreement provides that Startec-Delaware will assume the Startec
Warrants and all options outstanding under the Option Plans, and that such
warrants and options will be exercisable for shares of New Common Stock on the
same terms upon which outstanding warrants and options are currently
exercisable.
Stockholders should note that approval of the Reorganization will
constitute approval of the assumption of the Option Plans and the outstanding
options and the Startec Warrants by Startec-Delaware and approval of the
Delaware Charter.
The affirmative vote of holders of a majority of the total number of
outstanding shares will be required to approve the Merger Agreement. If approved
by the stockholders, it is anticipated that the Reorganization would be
completed within 30-60 days of such approval. That time frame, however, may be
delayed pending receipt of the state PUC regulatory approvals necessary to
complete the Reorganization. Furthermore, the Reorganization may be delayed or
abandoned, either before or after stockholder approval, if circumstances arise
that, in the opinion of the Board of Directors, make it inadvisable to proceed.
Important aspects of the Reorganization are outlined below.
DISSENTERS' RIGHTS OF APPRAISAL
Although under the Maryland General Corporation Law (the "Maryland Law")
stockholders have the right, in some circumstances, to dissent from certain
corporate reorganizations and receive cash for their shares, Maryland Law does
not permit dissenters' rights in connection with the Reorganization presently
proposed by the Company and described herein.
PRINCIPAL REASONS FOR REORGANIZATION
General. Upon completion of the Reorganization, the business operations of
the Company will be conducted primarily by operating subsidiaries each of which
will be responsible for a specific aspect of the Company's business. The Company
believes that this new structure will permit greater flexibility and efficiency
in the management and financing of existing and future business operations and
business opportunities. The new structure is expected to facilitate the
Company's entry into new businesses, and the financing or formation of joint
ventures or other business ventures with third parties. In addition, the
Reorganization is expected to further the objective of operating the Company's
businesses, and any additional businesses acquired or developed in the future,
on a more self-sufficient, stand-alone economic basis, decreasing the risk that
liabilities attributable to any one of the Company's businesses could be imposed
upon one or more of the Company's unrelated businesses. The Reorganization is
also expected to provide the consolidated Company with certain tax benefits.
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Effect on Stockholders' Rights. The Reorganization will not alter a
stockholder's percentage ownership interest in the Company, and the Company
Common Stock will not be affected by the proposed Reorganization except to the
extent that there are differences between Maryland Law and Delaware Law. See
"Certain Differences between the Charter and Bylaws of the Company and New
Parent" and "Certain Differences Between the Corporation Laws of Maryland and
Delaware." The stockholders of the Company will continue as the stockholders of
New Parent with the same voting, dividend, and liquidation rights and ownership
interests as before. Any dividends or other payments from the subsidiaries,
however, would be paid to New Parent and not New Parent's stockholders. As a
result of the Reorganization, the stockholders of New Parent will not directly
elect the governing bodies of the subsidiaries. The members of the governing
bodies of the subsidiaries will initially be elected at the discretion of the
Board of Directors of New Parent. Notwithstanding that fact, however, the
overall management of the affairs and operations of controlled subsidiaries will
be under the effective control of the Board of Directors of New Parent and are
not expected to change significantly in the near term as a result of the
Reorganization.
Other Effects on the Company and Its Stockholders. Except for the changes
described herein, consummation of the Reorganization is not expected to result
in any immediate material change in the overall operations of the Company on a
consolidated basis. Similarly, the Reorganization will not result in any changes
in the current membership of the Board, and the officers of the Company are
expected to be the officers of New Parent after consummation of the proposed
Reorganization. In addition, persons who currently are serving as officers of
the Company may become officers and/or directors of New Parent Subsidiaries.
While the Reorganization is not expected to create any conflict of interests
between New Parent and its stockholders, in the event that the New Parent
Subsidiaries, through public or private sale, should be owned in part by persons
other than New Parent or its stockholders, such conflicts could arise.
Possible Disadvantages. Some possible disadvantages of the Reorganization
include the requirement for observing corporate or organizational formalities
between and among New Parent and the New Parent Subsidiaries, together with
possible increases in accounting and administrative costs, and possible
duplication of some administrative and operational functions. The Board of
Directors believes, however, that these disadvantages are not likely to be
significant or material. Furthermore, in contemplation of the transfer of assets
to any of the New Parent Subsidiaries, New Parent may be required to obtain
regulatory approval from local, state and federal agencies (see "Required
Approvals," discussed below). The cost and length of time required for this
process is uncertain. As discussed above, the stockholders of New Parent will
not elect the governing bodies of any of the subsidiaries. However, the
stockholders will be electing the directors of New Parent who will have overall
responsibility for the management of New Parent and the New Parent Subsidiaries.
The Board believes that the advantages of the proposal as described above
outweigh any possible disadvantages.
Required Approvals. The business activities of the Company are regulated by
various local, state and federal agencies, and the Reorganization, as currently
proposed, may require at a minimum, the approval of the following agencies: (i)
the FCC and (ii) various state PUCs. The failure of the Company to obtain such
approvals on a timely basis could have a material impact on the timing of, or
the completion of, all or a portion of the Reorganization. The Reorganization
will also require the consent of certain Company contractors, customers,
creditors and/or suppliers (referred to collectively as a "Third Party" or
"Third Parties"). To the extent that certain Third Party consents to the
Reorganization are not received by the Effective Date, the Board reserves the
right to alter the structure, terms or timing of the Reorganization.
FEDERAL INCOME TAX MATTERS
General. The following discussion is based on current law and on certain
facts and circumstances relating to the Company and New Parent as of the date
hereof. Assurance cannot be given that future legislative enactments,
administrative pronouncements, or court decisions will not modify or rescind,
possibly on a retroactive basis, the legal basis for statements or conclusions
contained herein. Moreover, assurance cannot be given that facts or
circumstances will not exist that would, if known to the Company, New Parent or
its advisors, cause the Company to materially alter the statements or
conclusions contained herein. The Company does not anticipate seeking or
receiving a ruling from the Internal
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Revenue Service or any other taxing authority as to the tax effects of the
Reorganization. The discussion below addresses, in summary form, certain
principal aspects of the expected United States federal income taxation of the
Reorganization to the Company, New Parent and the New Parent Subsidiaries, based
on current expectations as to the manner in which the Reorganization will be
accomplished. In addition, the discussion summarizes certain anticipated
significant federal income tax consequences of the Reorganization for the
Company, New Parent and the New Parent Subsidiaries. Except as specifically set
forth herein, the discussion does not address the taxation of any operations or
transactions other than the Reorganization. The discussion does not purport to
deal with all federal tax considerations relating to or resulting from the
Reorganization, and the discussion does not address any state, local, or foreign
tax issues relating to the Reorganization. In addition, the discussion does not
address any taxes other than taxes on net income.
As a result of the Reorganization, alone or in combination with other
factors, the tax liabilities of New Parent and New Parent Subsidiaries may
differ materially and, perhaps, adversely, from the tax liabilities which would
be incurred by the Company and its subsidiaries in the absence of the
Reorganization. The Company can give no assurances relating to either the extent
of or the manner of determining its federal, state, local or foreign tax
liabilities following the Reorganization. Such liabilities will result from a
combination of facts and legal developments that cannot now be determined, and
the Company reserves sole discretion to take any actions which may affect such
liabilities, as well as sole discretion to report all operations and
transactions in the manner which the Company determines to be appropriate.
BECAUSE THE REORGANIZATION WILL NOT ALTER THE NATURE OF THE INTERESTS HELD BY
STOCKHOLDERS IN THE COMPANY, EXCEPT FOR THE JURISDICTION OF INCORPORATION, THE
REORGANIZATION GENERALLY IS NOT EXPECTED TO HAVE SIGNIFICANT DIRECT U.S. FEDERAL
TAX IMPLICATIONS FOR STOCKHOLDERS OF THE COMPANY. HOWEVER, THE DISCUSSION DOES
NOT PURPORT TO DEAL WITH THE TAX CONSIDERATIONS APPLICABLE TO PARTICULAR
STOCKHOLDERS OR HOLDERS OF OTHER INTERESTS IN THE COMPANY. STOCKHOLDERS AND
HOLDERS OF OTHER INTERESTS IN THE COMPANY ARE ENCOURAGED TO CONSULT, AND MUST
RELY ON, THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL, AND
FOREIGN TAX CONSEQUENCES OF THE REORGANIZATION.
Federal Income Tax Treatment of the Reorganization. The transfers of assets
to and assumptions of liabilities by New Parent and the New Parent Subsidiaries
generally are expected to qualify as a series of tax-free contributions of
capital to controlled corporations pursuant to Section 351 of the Code. Specific
expected federal tax consequences of the Reorganization are as follows: 1) The
Company generally will recognize no gain or loss on the transfer of the assets
and liabilities of each line of business to New Parent; 2) The Company generally
will obtain basis in the stock of New Parent equal to its basis in the assets
contributed to that subsidiary net of liabilities assumed by that subsidiary; 3)
The Company generally will recognize no gain or loss on the transfer of assets
and liabilities to New Parent; 4) New Parent generally will receive assets from
the Company with a carryover basis; 5) New Parent generally will receive assets
from the Company with a carryover holding period; 6) The general expectations
set forth in 1) through 5) above with respect to transfers to New Parent may not
apply if a less than 80% owned newly formed corporate subsidiary assumes certain
liabilities of the Company (or if the property transferred is subject to
liabilities) in excess of the Company's basis in the assets transferred to such
corporate subsidiary. In such event, the Company may realize gain equal to the
difference between such liabilities and the basis of the assets transferred, and
such gain would be treated as gain from the sale of assets and allocated among
the assets transferred. The Company's basis in its stock in such corporate
subsidiary would be decreased by the amount of liabilities assumed (or
liabilities to which the transferred property is subject) and increased by the
amount of gain recognized, and the corporate subsidiary would take such assets
with a carryover basis, adjusted to reflect any gain recognized, and a carryover
holding period; and 7) Immediately following the Reorganization, the Company and
its greater than 80% corporate subsidiaries expect to continue to be members of
a federal consolidated group, as that term is defined by Section 1504 of the
Code and the regulations thereunder, and expect to file a single consolidated
federal income tax return.
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Additional Federal Tax Consequences. In the event equity interests in
excess of 20% of the stock of any corporate subsidiary of the Company are sold
or issued to persons other than the Company or a subsidiary of the Company, such
subsidiary would cease to be a member of the consolidated group
("Deconsolidate"). A corporate subsidiary which Deconsolidates is referred to
herein as a "Deconsolidated Subsidiary." In certain circumstances, U.S. federal
tax liabilities may be triggered by a Deconsolidation. Generally, an "excess
loss account" is maintained to reflect losses of a company applied against
income of other members of a consolidated group over and above amounts invested
in the company by other members of the consolidated group. When a company which
has an excess loss account is Deconsolidated, the consolidated group may be
required to recognize income based on the excess loss account. Thus, if a
subsidiary of the Company produced losses in excess of investment in such
subsidiary by the Company and other subsidiaries, and if the subsidiary were
subsequently Deconsolidated, income may be triggered to the remaining members of
the consolidated group. Following a Deconsolidation, losses of a Deconsolidated
Subsidiary could not be used to offset gains or income of the consolidated group
for tax purposes; losses, including net operating loss carryforwards, of the
consolidated group could not offset gains or income of the Deconsolidated
Subsidiary; and income and gain of the Deconsolidated Subsidiary would be
separately taxed to the Deconsolidated Subsidiary. For U.S. federal income tax
purposes, the Company had carryforward net operating losses of approximately
$1.88 million as of the close of its last fiscal year, which carryforward net
operating losses expire from 2010 to 2011. Dividends distributed by a
Deconsolidated Subsidiary or a less than 80% owned newly formed corporate
subsidiary to the Company or to another subsidiary generally would be expected
to be taxable to the recipient except to the extent offset by a dividends
received deduction or by other credits, deductions, or losses of the recipient.
Federal Income Tax Treatment of the Merger Component. The Merger provided
for in the Merger Agreement is intended to qualify as a reorganization within
the meaning of Section 368 of the Code. Provided that the Merger does so qualify
under the Code, no gain or loss will be recognized by holders of Company Common
Stock upon the receipt of New Common Stock in the Merger, and no gain or loss
will be recognized by Startec-Maryland or Startec-Delaware upon consummation of
the Merger. In addition, each former holder of Company Common Stock will have
the same basis in the New Common Stock received by such holder in the Merger as
such holder had in the shares surrendered in the Merger, and such holder's
holding period with respect to the New Common Stock will include the period
during which the holder held the corresponding Company Common Stock surrendered
in exchange therefor, provided such shares were held by the holder as capital
assets at the time of the Merger.
In order for the Merger to qualify as a reorganization under the Code,
certain requirements must be satisfied including, without limitation, the
so-called "continuity of interest requirement." The continuity of interest
requirement may not be satisfied if holders of Company Common Stock pursuant to
a plan or intent existing at or prior to the Merger, dispose of or transfer so
much of either (i) shares of Company Common Stock in anticipation of the Merger
or (ii) their shares of New Common Stock to be received in the Merger, such that
the Startec-Maryland stockholders, as a group, would no longer have a
significant equity interest in the business being conducted by Startec-Delaware
after the Merger.
CHANGE IN STATE OF INCORPORATION AS A RESULT OF THE MERGER
For many years Delaware has followed a policy of encouraging incorporation
in that state, and, in furtherance of that policy, has adopted comprehensive,
modern and flexible corporation laws that are periodically updated and revised
to meet changing business needs. As a result, many major corporations are now
incorporated in Delaware. The Delaware courts have developed considerable
expertise in dealing with corporate issues, and a substantial body of case law
has developed construing Delaware Law and establishing public policies with
respect to corporate legal affairs.
In addition to these general reasons, the Board of Directors has
recommended a change in the state of incorporation in connection with the
Reorganization because it may permit New Parent to limit the liability of its
directors and provide indemnification to its officers, directors, and employees
to a degree greater than is presently possible under Maryland Law. The Company
seeks, and New Parent will seek, to retain the most capable individuals
available to serve as its officers and directors. The Board of
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Directors believes that the change in the state of incorporation could be a
significant factor in attracting such individuals and in encouraging existing
directors and officers to continue to serve in these capacities and freeing them
to make corporate decisions on their own merits rather than out of a desire to
avoid personal liability. The change in the state of incorporation does not
result from any pending legal action against the officers, directors or
employees of the Company that would be covered by such Delaware indemnification
provisions. It should be noted, however, that there may be an inherent conflict
of interest of the members of the Board of Director's recommendation of the
Reorganization due to the interest of the members of the Board of Directors in
obtaining the protection of such limited liability provisions.
CERTAIN DIFFERENCES BETWEEN THE CHARTER AND BYLAWS OF THE COMPANY AND NEW
PARENT
Upon completion of the Reincorporation, the Delaware Charter will be the
charter documents of New Parent. Although the provisions of the Delaware Charter
are similar in many respects to those of the Company's Articles of Incorporation
and Bylaws (the "Maryland Charter"), the Reincorporation includes implementation
of provisions in the Delaware Charter that affect the rights of stockholders and
management. Approval by the stockholders of the Reincorporation will constitute
approval of the terms of the Delaware Charter, including the provisions
described below. In addition, certain other changes altering the rights of
stockholders and powers of management could be implemented in the future by
amendment of the Certificate of Incorporation of Startec-Delaware following
stockholder approval, and certain changes could be implemented by amendment of
the Bylaws of Startec-Delaware without stockholder approval. This discussion of
the Delaware Charter is qualified in its entirety by those documents, attached
hereto as Annex C and Annex D, and by the general corporation laws of the states
of Maryland and Delaware.
Change in Authorized Stock. The Maryland Charter authorizes a total of
20,100,000 shares of stock, of which 20,000,000 are shares are classified as
common stock, $.01 par value, and 100,000 shares are classified as preferred
stock, $1.00 par value ("Preferred Stock"). Of the authorized shares of
Preferred Stock, 25,000 shares are classified as Series A Junior Participating
Preferred Stock in connection with the adoption by the Board of a Preferred
Stock Purchase Rights Agreement dated as of March 26, 1998 ("Rights Plan"). The
Board of Directors has the authority to classify and issue the remaining shares
of Preferred Stock in one or more series and to fix the price, rights,
preferences, privileges and restriction thereof. The Delaware Charter authorizes
Startec-Delaware to classify and issue an aggregate of 41,000,000 shares of
stock, of which 40,000,000 shares shall be common stock, $.01 par value per
share, and 1,000,000 shares shall be preferred stock, $1.00 par value per share.
APPROVAL OF PROPOSAL III CONSTITUTES APPROVAL OF AN INCREASE IN THE AUTHORIZED
STOCK TO 41,000,000 SHARES.
Change of Name. The Delaware Charter provides that the name of
Startec-Delaware is "Startec Global Holding Corporation." Upon the completion of
the Merger the name of the surviving corporation shall be "Startec Global
Communications Corporation." The stock of the Company that currently trades
under the symbol STGC on the NNM will continue to trade on the NNM under the
symbol STGC. APPROVAL OF PROPOSAL III WILL CHANGE THE NAME OF "STARTEC GLOBAL
HOLDING CORPORATION" TO "STARTEC GLOBAL COMMUNICATIONS CORPORATION."
Elimination of Stockholders' Power to Call Special Stockholders' Meeting
and to Act by Unanimous Written Consent. The Delaware Charter will provide that
stockholders may act only at an annual or special meeting of stockholders and
not by written consent. Although the Bylaws of Startec-Maryland authorize the
stockholders of Startec-Maryland to take action by unanimous written consent
without a meeting, this method of obtaining stockholder approval has not been
used since Startec-Maryland became a public company in 1997. Because of the
large number of stockholders of Startec-Maryland and its current practice of
soliciting proxies and holding meetings, Startec-Delaware does not expect to use
this procedure in the future. In addition, the Bylaws of Startec-Delaware
provide that a special meeting of the stockholders may only be called by the
Board of Directors, the Chairman of the Board of Directors, or the President.
The Bylaws of Startec-Maryland authorize a special meeting of the stockholders
to be called by the Board of Directors, the President, or the holders of stock
entitled to cast not less than 25% of the votes at such meeting. Although such a
provision is permitted by Delaware Law, the Bylaws of Startec-Delaware will
prohibit stockholders from calling a special meeting. As a result, if the
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Reorganization is approved, the stockholders of Startec-Delaware will be
permitted to act only at a duly called annual or special meeting of the
stockholders. APPROVAL OF PROPOSAL III IS APPROVAL TO ELIMINATE THE
STOCKHOLDERS' RIGHT TO ACT BY WRITTEN CONSENT AND TO CALL SPECIAL MEETINGS OF
THE STOCKHOLDERS.
Reasons for Elimination of Stockholder Action by Written Consent and Right
to Call Special Meetings. The provisions prohibiting stockholder action by
written consent will give all stockholders of the Company the opportunity to
participate in determining any proposed stockholder action and will prevent the
holders of a majority of the voting power of Startec-Delaware from using the
written consent procedure to take stockholder action. Persons attempting hostile
takeovers of corporations have attempted to use written consent procedures to
deal directly with stockholders and avoid negotiations with the boards of
directors of such corporations. The provisions eliminating the right of
stockholders to call a special meeting would mean that a stockholder could not
force stockholder consideration of a proposal over the opposition of the Board
of Directors by calling a special meeting of the stockholders prior to such time
as the Board of Directors believed such consideration to be appropriate. By
eliminating the use of the written consent procedure and the ability of
stockholders to call a special meeting, Startec-Delaware intends to encourage
persons seeking to acquire control of Startec-Delaware to initiate an
acquisition through arm's-length negotiations with Startec-Delaware's management
and its Board of Directors.
Possible Disadvantages of Elimination of Stockholder Actions by Written
Consent and Right to Call Special Meetings. The provisions restricting
stockholder action by written consent and the elimination of the stockholders'
ability to call special meetings may have the effect of delaying consideration
of a stockholder proposal until the next annual meeting unless a special meeting
is called by the Board of Directors. Because elimination of the procedures for
stockholders to act by written consent or to call special meetings could make
more difficult an attempt to obtain control of Startec-Delaware, such action
could have the effect of discouraging a third party from making a tender offer
or otherwise attempting to obtain control of Startec-Delaware. Because tender
offers for control usually involve a purchase price higher than the prevailing
market price, the provisions restricting stockholder action by written consent
and the elimination of the stockholders' ability to call special meetings may
have the effect of preventing or delaying a bid for Startec-Delaware's shares
that could be beneficial to Startec-Delaware and its stockholders. Elimination
of the written consent procedure also means that a meeting of the stockholders
would be required in order for Startec-Delaware's stockholders to replace the
Board of Directors. The restriction on the ability of stockholders to call a
special meeting means that a proposal to replace the Board of Directors could be
delayed until the next annual meeting. These provisions thus will make the
removal of directors more difficult.
Indemnification. The Maryland Charter provides that Startec-Maryland shall
indemnify its officers and directors to the maximum extent permitted by Maryland
Law from liability to the Company or its stockholders. Maryland Law
distinguishes between those instances in which indemnification of directors is
required and those in which it is permitted. Unless limited by its charter, a
Maryland corporation must indemnify directors against expenses incurred in the
successful defense of any proceeding the director is made a party to by reason
of his other service in that capacity. Indemnification of a director made a
party to a proceeding by reason of service in that capacity is permitted, unless
it is established that: (i) the act or omission of the director was material to
the matter giving rise to the proceeding and was committed in bad faith or was
the result of active and deliberate dishonesty; (ii) the director actually
received an improper personal benefit; or (iii) in the case of any criminal
proceeding, the director had reasonable cause to believe that the act or
omission was unlawful. Additionally, a court, upon application, may in certain
circumstances, order indemnification. Indemnification with respect to any
proceeding by or in the right of the corporation, however, or in which the
director is adjudged liable for receipt of an improper personal benefit is
limited to expenses. Unless limited by its charter, officers of a Maryland
corporation are required to be indemnified to the same extent as directors are
required to be indemnified. Indemnification of non-director officers, employees,
and agents is permitted to the same extent that indemnification of directors is
permitted and to such further extent, consistent with law, as may be provided by
its charter, bylaws, general or specific action of its board of directors, or
contract. The termination of any proceeding by conviction, or a plea of nolo
contendere or its equivalent, or an
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entry of an order of probation prior to judgment, creates a rebuttable
presumption that the director did not meet that standard of conduct under
Maryland Law. In contrast, the Delaware Charter incorporates indemnification
provisions to the maximum extent permitted by Delaware Law and provides that
directors, officers, employees and other individuals shall be indemnified
against liability to Startec-Delaware or its stockholders, other than an action
by or in the right of Startec-Delaware, if the indemnified person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of Startec-Delaware and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. With respect to this standard, under Delaware Law, termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that such person is prohibited from
being indemnified. In the event of any action by or in the right of
Startec-Delaware, indemnification extends only to expenses incurred in
connection with defense or settlement of such an action. In addition, under
Delaware Law, upon court approval, a corporation may indemnify an individual
found liable to the corporation, whereas under Maryland Law, a corporation may
not indemnify an individual who has been found liable to the corporation in a
proceeding brought by or in the right of the corporation or on the basis that a
personal benefit was improperly received except, as specified above, for
expenses upon a court order.
Delaware Law states that the indemnification provided by statute shall not
be deemed exclusive of any other rights under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise. Under Delaware Law,
therefore, Startec-Delaware is permitted to enter into indemnification
agreements with its directors. APPROVAL OF PROPOSAL III WILL CONSTITUTE
AUTHORIZATION AND APPROVAL OF STARTEC-DELAWARE ENTERING INTO INDEMNIFICATION
AGREEMENTS IN THE FUTURE WITH OFFICERS AND DIRECTORS OF STARTEC-DELAWARE.
Possible Disadvantages of New Indemnification Provisions. Although the
Board of Directors believes that the indemnification provisions of Delaware Law
and the Delaware Charter will enhance the ability of the Company to attract and
retain outstanding members for its Board of Directors, there may be an inherent
conflict of interest in the desire of the Board of Directors to have the benefit
of indemnification under Delaware Law.
Interested Director Transactions. The Maryland Charter provides that no
transaction of the corporation shall be invalidated due to the involvement of an
interested director if the interest is disclosed to, or known by, the board and
the transaction is authorized by a majority of the disinterested directors, even
if the number of disinterested directors is less than a quorum, or if the
transaction is approved by some other manner authorized by Maryland Law. The
Delaware Charter contains no similar provision, but the application of Delaware
Law is similar in that such transactions will not be invalidated if: (i) the
material facts of the relationship are disclosed to the board of directors and a
majority of the disinterested directors, even if they do not constitute a
quorum, in good faith authorize the transaction; (ii) the material facts are
disclosed to the stockholders entitled to vote thereon and the transaction is
approved in good faith by a vote of the stockholders; or (iii) the transaction
is fair at the time it was authorized, approved or ratified by the board of
directors, a committee of the board, or the stockholders.
CERTAIN DIFFERENCES BETWEEN THE CORPORATION LAWS OF MARYLAND AND DELAWARE
Maryland Law and Delaware Law are similar in many respects, but there are
important differences that affect the rights of stockholders and management. The
following is a summary of certain similarities and differences between Delaware
Law and Maryland Law. The discussion is not exhaustive and is qualified in its
entirety by reference to the specific provisions of Delaware Law and Maryland
Law.
Redemption Retirement. Delaware Law prohibits the purchase or redemption of
stock when the capital of a corporation is or will be impaired; except that a
corporation may purchase or redeem out of capital any of its own shares which
are entitled upon any distribution of its assets, whether by dividend or in
liquidation, to a preference over another class or series of its stock. Maryland
Law, on the other hand, prohibits the purchase or redemption of stock if the
corporation would be unable to pay its indebtedness as the indebtedness becomes
due in the usual course of business, or if the corporations's total assets are,
or would be, less than the sum of the total liabilities plus, unless the charter
provides otherwise, the amount needed to satisfy preferential rights.
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Dividends. Delaware Law provides that a corporation can pay dividends out
of capital surplus or out of net profits for the current or immediately
preceding fiscal year. Maryland Law, however, restricts the payment of dividends
if the corporation is, or would be unable to, pay its indebtedness as the
indebtedness becomes due in the usual course of business or the corporation's
total assets are, or would be, less than the sum of the total liabilities plus,
unless the charter provides otherwise, the amount needed to satisfy preferential
rights of stockholders whose preferential rights are superior to those receiving
the distribution.
Dissenters' Rights. Under Delaware Law and Maryland Law, a dissenting
stockholder of a corporation participating in certain transactions such as
certain mergers or consolidations, may, under varying circumstances, receive
cash in the amount of the fair value of such stockholder's shares (as determined
by a court) in lieu of the consideration such stockholder otherwise would have
received in such transaction. Delaware Law does not generally require such
dissenters' rights of appraisal with respect to (i) a sale of assets, (ii) an
amendment of the certificate of incorporation (unless otherwise provided for in
the certificate of incorporation), (iii) a merger or consolidation by a
corporation, the shares of which are either listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 stockholders, if such stockholders received shares
of the surviving corporation or of another listed or widely-held corporation, or
(iv) stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the merger.
Maryland Law has similar provisions, but under Maryland Law, dissenters' rights
of appraisal would apply: (i) with respect to a sale of all or substantially all
of a corporation's assets (except a transfer of assets by a corporation to one
or more persons if all of the equity interests of the person or persons are
owned directly or indirectly by the transferor, in which event dissenters'
rights of appraisal would not apply) or (ii) if a corporation amends its charter
in a way that would alter express contractual rights of any outstanding stock
and substantially adversely affect the existing stockholder's rights unless the
corporation's charter reserves the right to do so. Under Maryland Law, a
stockholder does not generally have appraisal rights in a merger or
consolidation if such stockholder's stock is listed on a national exchange or if
such stockholder's stock is that of the surviving corporation in the merger and
the merger does not change such stock.
Inspection of Stockholder List. The rights of stockholders of a Maryland
corporation and a Delaware corporation to inspect and copy corporation records
differ in certain respects. Under Maryland Law, any stockholder may inspect the
bylaws, minutes of the proceedings of stockholders, annual statements of
affairs, and voting trust agreements of the corporation at the corporation's
principal office. Any stockholder may also present a written request for a
statement showing all stock and securities issued by the corporation during a
specified period of not more than 12 months before the date of the request, the
consideration received per share or unit and the value of any consideration
other than money as set forth in a resolution of the board of directors. In
addition, stockholders of record who own and have owned for at least six months
at least five percent of the outstanding stock of any class may inspect and copy
the corporation's books of account and its stock ledger, and request an account
of the corporation's affairs with no statutory restriction upon the purpose of
such inspection. Under Delaware Law, on the other hand, any stockholder may upon
written demand under oath stating the stockholder's purpose, inspect and copy
for any proper purpose the corporation's stock ledger, list of stockholders, and
its other books and records. A proper purpose is one reasonably related to such
person's interest as a stockholder. Accordingly, for stockholders holding less
than five percent of the outstanding stock of any class, the right of inspection
of some records may be broader under Delaware Law than under Maryland Law. For
some stockholders, however, the Maryland rights of inspection that are available
may be less restrictive with respect to the purpose for which the right may be
exercised, and the lack of access to stockholder records under Delaware Law
could result in the impairment of the stockholder's ability to coordinate
opposition to management proposals, including proposals with respect to a change
in control of the corporation.
Limitation of Liability. Under Delaware Law, directors' liability for
monetary damages cannot be limited by the charter for (i) breaches of their duty
of loyalty to the Company and its stockholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
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law; (iii) monetary damages relating to willful or negligent violations
regarding the prohibition on the payment of unlawful dividends or unlawful stock
purchases or redemptions; or (iv) transactions from which a director derives
improper personal benefit. The liability of officers may not be limited under
Delaware Law, unless the officers are also directors. Under Maryland Law, the
charter of a corporation may include any provision expanding or limiting the
liability of its directors and officers to the corporation and its stockholders.
See "Changes in Company's Charter and Bylaws To Be Effected by Reincorporation,"
"Indemnification" and "Possible Disadvantages of New Indemnification
Provisions."
Restrictions on Voting of Securities. Maryland Law provides for
control-share voting restrictions. If applicable, the Maryland Law restriction
provides that the voting rights of the persons who make a "control-share"
acquisition of a corporation's stock (at least 20% of the voting power of the
corporation) are eliminated unless the acquisition is exempt from the
restriction or the holders of two-thirds of the non-control share stock of the
corporation vote in favor of the acquisition. In contrast, Delaware Law does not
provide for a similar control-share voting restriction. Thus, if the
Reincorporation is approved, this provision will not be available under Delaware
Law by amendment or otherwise.
Voting Requirements for Business Combination. Maryland Law requires a vote
of two-thirds of all stockholders entitled to vote to approve a business
combination, although, as permitted by Maryland Law, the Maryland Charter
provides for the effectiveness and validity of such an action if authorized by
the affirmative vote of a majority of the total number of votes entitled to be
cast thereon. Delaware Law and the Delaware Charter require the vote of a
majority of the shares represented at a stockholder meeting for all corporate
actions requiring stockholder approval. In addition, Delaware Law requires that
certain transactions between a corporation and an "interested stockholder"
(generally, a stockholder acquiring 15% or more of the voting stock of a
corporation) may not occur for three years following the date such person became
an interested stockholder unless (i) prior to such date the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares controlled by the interested stockholder); (iii) the
business combination is approved by the board of directors and authorized at an
annual or special meeting of stockholders by two-thirds of the outstanding
voting stock not held by the interested stockholder; or (iv) an exemption is
available. In contrast, Maryland Law provides that, unless the Board of
Directors has approved the acquisition of voting stock pursuant to which a
person becomes an interested stockholder (generally, a stockholder acquiring 10%
or more of the voting stock of a corporation), a Maryland corporation may not
engage in certain business combinations with any interested stockholder for five
years following the most recent date on which the interested stockholder became
an interested stockholder. Moreover, Maryland Law provides that business
combinations with an interested stockholders after such five-year period must be
recommended by the board of directors and approved by (i) at least 80% of the
outstanding shares of the voting stock of the corporation and (ii) at least
two-thirds of the outstanding shares of voting stock (other than voting stock
held by an interested stockholder or an affiliate thereof), unless certain value
and other standards are met or an exemption is available.
CERTAIN EFFECTS OF THE REORGANIZATION
The following is a discussion of the material effects of the
Reincorporation on the Company and New Parent and their respective directors,
officers and stockholders in addition to those set forth above. Management does
not believe any of such effects will result in any material benefit to the
Company's and/or New Parent's officers, directors or New Parent advisers or any
material detriment to the Company's and/or New Parent's stockholders.
Stockholders' Inspection Rights. Upon completion of the Reincorporation,
under Delaware Law a stockholder will be entitled to inspect a stockholder list
of New Parent at any time only for a purpose reasonably related to such person's
interest as a stockholder, but all stockholders are afforded this same right
regardless of the number of shares held. As a result of the Reincorporation, New
Parent will no longer be able to restrict, as the Company could under Maryland
Law, access to the stockholder list to
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one or more persons who together have been stockholders for at least six months
and hold an aggregate of at least five percent of the outstanding stock, but
will be able to restrict access to stockholders that have a purpose reasonably
related to such person's interest as a stockholder, in contrast to Maryland Law
which allows inspection by stockholders without statutory restriction as to
purpose. The foregoing provisions have no effect on any stockholder's right
pursuant to regulations under the Exchange Act, to require New Parent to either
provide a list of security holders or mail the requesting stockholder's proxy
materials if New Parent has made or intends to make a proxy solicitation.
Limitations on Liability of Directors and Officers. The Delaware and
Maryland Charters each protect directors from liability to the maximum extent
permissible under Delaware and Maryland Law, respectively. As described above,
however, Maryland Law differs from Delaware Law with respect to when a finding
of director liability may be made. As a result of the Reincorporation, the
liability of directors of New Parent will be modified, affecting the
circumstances under which stockholders may be able to establish claims for
monetary damages against directors.
The Maryland Charter also differs from the Delaware Charter in that it
protects officers of the Company against liability for monetary damages to the
same extent that it protects directors. The Delaware Charter cannot, under
Delaware Law, limit the liability of officers unless they are also directors.
Although the Delaware Charter does not limit the personal liability of officers,
it does provide for broad indemnification of officers pursuant to which an
officer found liable to the New Parent would be protected substantially to the
same extent as if his personal liability were limited by the Delaware Charter.
As of the date of this Proxy Statement/Prospectus, neither the Company nor
New Parent is aware of (i) any proposed or anticipated changes to Delaware Law
that would authorize the further limitation of the personal liability of
directors or officers of New Parent or (ii) any pending or threatened claims in
respect of any acts or omissions or any recent litigation that would have been
affected by the aforementioned provisions of the Delaware Charter.
Dividends. Under Delaware Law, even in the absence of surplus, New Parent
will be permitted to pay a dividend on its common and preferred stock out of net
profits for the current year or immediately preceding fiscal year or both. Also,
Delaware Law permits a revaluation of assets in order to increase the surplus
for dividend purposes. Thus, under Delaware Law, New Parent will be able to take
steps, if necessary or desirable, to pay or continue to pay the payment of the
dividends on its common and preferred stock. The Company has not paid cash
dividends, however, on the Company Common Stock and the Board of Directors of
New Parent has no current intention to pay cash dividends for the foreseeable
future.
DESCRIPTION OF NEW PARENT CAPITAL STOCK
General. Upon the completion of the Reorganization, New Parent will be
authorized to issue 40,000,000 shares of New Common Stock, par value $.01 per
share and 1,000,000 shares of preferred stock, par value $1.00 per share ("New
Preferred Stock").
New Common Stock. The holders of New Common Stock will be entitled to one
vote per share on all matters to be voted on by stockholders, including with
respect to the election of directors. There are no cumulative voting rights in
the election of directors. Subject to the prior rights of holders of New
Preferred Stock, if any, the holders of New Common Stock are entitled to receive
such dividends, if any, as may be declared from time to time by the Board of
Directors in its discretion from funds legally available therefor. Upon
liquidation or dissolution of the Company, the remainder of the assets of the
Company will be distributed ratably among the holders of New Common Stock after
payment of liabilities and the liquidation preferences of any outstanding shares
of New Preferred Stock. The New Common Stock has no preemptive or other
subscription rights and there are no conversion rights or redemption or sinking
fund provisions with respect to such shares.
New Preferred Stock. The Board of Directors of New Parent will have the
authority to issue up to 1,000,000 shares of New Preferred Stock in one or more
series and to fix the price, rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting a series or the designation of such series,
without any further vote or action by the Company's
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stockholders. The issuance of New Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the stockholders and may
adversely affect the market price of, and the voting and other rights of, the
holders of New Common Stock. There are no shares of New Preferred Stock
outstanding, and the Company has no current plans to issue any shares of
Preferred Stock. Of the 1,000,000 authorized shares of New Preferred Stock,
25,000 have been designated "Series A Junior Participating Preferred Stock, in
connection with the adoption in March 1998 of a Shareholders' Rights Plan
("Rights Plan"). See, "Shareholders' Rights Plan."
DESCRIPTION OF SENIOR NOTES AND WARRANTS
General. On May 21, 1998 the Company completed an offering of 160,000 units
consisting of $160,000,000 12% Senior Notes (the "Notes") and Warrants (the
"Warrants") to purchase 200,226 shares of Company Common Stock.
Notes. Interest on the Notes will be payable semi-annually in arrears on
May 15 and November 15 of each year, commencing November 15, 1998. The Notes
will be redeemable at the option of the Company, in whole or in part, at any
time on or after May 15, 2003, at specified redemption prices, plus accrued and
unpaid interest and certain liquidated damages, if any, to the date of
redemption. In addition, at any time prior to May 15, 2001, the Company may
under certain circumstances redeem from time to time up to 35.0% of the
originally issued aggregate principal amount of the Notes at the redemption
price, plus accrued and unpaid interest and liquidated damages, if any, to the
date of redemption; provided that at least 65.0% of the originally issued
aggregate principal amount of the Notes remains outstanding after any such
redemption. In the event of a change of control event, each holder of the Notes
will have the right to require the Company to purchase all or any part of such
holder's Notes at a purchase price in cash equal to 101.0% of the aggregate
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase.
The Company used a portion of the proceeds of the unit offering to purchase
a portfolio of U.S. Government obligations which are pledged as security for the
first six scheduled interest payments on the Notes and other obligations
thereunder.
Other than the portfolio of U.S. Government obligations, the Notes will be
unsecured obligations of the Company, will rank senior in right of payment to
any existing and future obligations of the Company expressly subordinated in
right of payment to the Notes and will rank pari passu in right of payment with
all other existing and future unsecured and unsubordinated obligations of the
Company. Upon the completion of the Reorganization, the Company's rights and
obligations with respect to the Notes will be assumed by New Parent and New
Parent will become the obligor on the Notes. The New Parent Subsidiaries will
not be guarantors of the Notes.
Warrants. Each Warrant entitles the holder thereof to purchase, on or after
November 15, 1998, 1.25141 shares of Company Common Stock at an exercise price
of $24.20 per share, subject to adjustment in certain circumstances. The
Warrants will, unless exercised, automatically expire on May 15, 2008. Upon the
completion of the Reorganization, the Company's rights and obligations with
respect to the Warrants will be assumed by New Parent and each Warrant will
entitle the holder thereof to purchase, on or after November 15, 1998, 1.25141
shares of New Common Stock.
SHAREHOLDERS RIGHTS PLAN
The Board of Directors has adopted a shareholder rights plan (the "Plan").
In implementing the Plan, the Board of Directors declared a dividend of one
right (collectively, the "Rights") for each outstanding share of Company Common
Stock. Each Right, when exercisable, would entitle the holder thereof to
purchase 1/1,000th of a share of Series A Junior Participating Preferred Stock
at a price of $175 per 1/1,000th share.
Subject to certain limited exceptions, the Rights will be exercisable only
if a person or group, other than an Exempt Person, as defined in the Plan,
becomes the beneficial owner of 10% or more of the Company Common Stock or
announces a tender or exchange offer which would result in its ownership of 10%
or more of the Company Common Stock. Ten days after a public announcement that a
person has become the
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beneficial owner of 10% or more of the Company Common Stock, or ten days
following the commencement of a tender offer or exchange offer which would
result in a person becoming the beneficial owner of 10% or more of the Company
Common Stock (the earlier of which is called the "Distribution Date"), each
holder of a Right, other than the acquiring person, would be entitled to
purchase a certain number of shares of Company Common Stock for each Right at
one-half of the then-current market price. If the Company is acquired in a
merger, or 50% or more of the Company's assets are sold in one or more related
transactions, each Right would entitle the holder thereof to purchase common
stock of the acquiring company at one half of the then-market price of such
common stock.
At any time after a person or group becomes the beneficial owner of 10% or
more of the Company Common Stock, the Board of Directors may exchange one share
of Company Common Stock for each Right, other than Rights held by the acquiring
person. Generally, the Board of Directors may redeem the Rights at any time
until 10 days following the public announcement that a person or group of
persons has acquired beneficial ownership of 10% or more of the outstanding
Common Stock. The Rights will expire on March 25, 2008.
Until a Right is exercised, the holder thereof will have no rights as a
stockholder of the Company, including without limitation, the right to vote or
to receive dividends. In addition, other than those provisions relating to the
principal economic terms of the Rights (other than an increase in the purchase
price), any of the provisions of the Plan may be amended by the Board of
Directors prior to the Distribution Date.
Upon the completion of the Reorganization, the Company's rights and
obligations under the Plan will be assumed by New Parent and the Rights will
attach to the New Common Stock.
NAME CHANGE
The Reincorporation to be effected by the Merger Agreement provides for the
change of Startec-Delaware's name from Startec Global Holding Corporation to
"Startec Global Communications Corporation."
RECOMMENDATION OF BOARD OF DIRECTORS
The Company is seeking the affirmative vote of the holders of a majority
of all votes entitled to be cast by holders of the Company Common Stock voting
together for approval of the Reorganization. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR THIS PROPOSAL.
VALIDITY OF SHARES
The validity of the shares of New Common Stock to be issued in the Merger
will be passed upon for Startec Global Holding Corporation by Schnader Harrison
Segal & Lewis LLP, 1225 Eye Street, N.W., Suite 600, Washington, DC 20005.
COST OF SOLICITATION OF PROXIES
The Company will bear the cost of soliciting proxies for the Annual
Meeting, including the cost of preparing, assembling and mailing proxy
materials, the handling and tabulation of proxies received and charges of
brokerage houses and other institutions, nominees and fiduciaries in forwarding
such materials to beneficial owners. In addition to the mailing of the proxy
material, such solicitation may be made in person or by telephone or facsimile
by directors, officers or regular employees of the Company without any special
remuneration, or by a professional proxy solicitation organization engaged by
the Company.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented
for action at the Annual Meeting or any adjournment thereof. If any other
matters come before the Annual Meeting, however, it is intended that shares
represented by proxy will be voted in accordance with the judgment of the
persons named on the enclosed proxy card.
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If the Merger is approved, the Company will no longer be in existence after
the Effective Time Merger and there will be no meetings of stockholders of the
Company in 1999 or thereafter.
STOCKHOLDER PROPOSALS
If the proposal relating to the approval of the Reorganization is adopted
and the Reorganization is implemented, then any stockholder who, in accordance
with and subject to the provisions and rules of the Commission and applicable
laws of the State of Delaware, wishes to submit a proposal for inclusion in New
Parent's proxy statement for its 1999 annual meeting of stockholders, must
deliver such proposal, in writing, to the principal executive offices of New
Parent, 10411 Motor City Drive, Bethesda, Maryland 20817, Attention: Secretary,
on or prior to March 31, 1999. If the proposal relating to the approval of the
Reorganization is not adopted, then stockholder proposals will be due by the
same date and to the same place, but will be with respect to the 1999 Annual
Meeting of the Company.
ANNUAL AND QUARTERLY REPORTS TO STOCKHOLDERS
A copy of the Company's 1997 Annual Report to Stockholders and its Form
10-Q for the three months ended March 31, 1998, which include the Company's
financial statements and schedules thereto, are being transmitted herewith, but
do not form a part of the proxy solicitation materials.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR ITS
MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO PRABHAV V.
MANIYAR, SECRETARY, AT 10411 MOTOR CITY DRIVE, BETHESDA, MD 20817.
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STARTEC GLOBAL COMMUNICATIONS CORPORATION
1997 PERFORMANCE INCENTIVE PLAN
AS AMENDED AND RESTATED
SECTION 1 -- PURPOSE; DEFINITIONS.
The name of the Plan is the Startec Global Communications Corporation 1997
Performance Incentive Plan (the "Plan"). The purpose of the Plan is to provide
an additional means for Startec Global Communications Corporation (the
"Company") and its subsidiaries to attract and retain highly qualified officers,
directors, advisers and key persons upon whose judgment, initiative and efforts
the Company largely depends for the successful conduct of its business and to
encourage and enable such persons to acquire a proprietary interest in the
Company.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Annual Incentive Award" means an Incentive Award made pursuant to
Section 5(a)(v) with a Performance Cycle of one year or less.
b. "Awards" mean grants under this Plan of Incentive Awards, Stock
Options, Stock Appreciation Rights, Restricted Stock or Other Stock-Based
Awards.
c. "Board " means the Board of Directors of the Company.
d. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
e. "Commission" means the Securities and Exchange Commission or any
successor agency.
f. "Committee" means the Compensation Committee of the Board or such other
committee as may be designated by the Board to administer the Plan.
g. "Common Stock" or "Stock" means the Common Stock, par value $.01 per
share, of the Company.
h. "Company" means Startec Global Communications Corporation, a corporation
organized under the laws of the State of Maryland, or any successor thereto.
i. "Exercise Period" means the 60-day period from and after a Change in
Control.
j. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
k. "Fair Market Value" of a share of the Stock on any given date means the
fair market value of a share of Stock determined in good faith by the Committee;
provided, however, that unless otherwise determined by the Committee (i) if the
Stock is admitted to quotation on the Nasdaq, the Fair Market Value on any given
date shall be the average of the highest bid and lowest asked prices of the
Stock reported for such date or, if no bid and asked prices were reported for
such date, for the last day preceding such date for which such prices were
reported, or (ii) if the Stock is admitted to trading on a national securities
exchange or the Nasdaq National Market, the Fair Market Value on any date shall
be the closing price reported for the Stock on such exchange or system for such
date or, if no sales were reported for such date, for the last date preceding
the date for which such a sale was reported.
l. "Incentive Award" means any Award that is either an Annual Incentive
Award or a Long-Term Incentive Award.
m. "Incentive Stock Option" means any Stock Option that complies with
Section 422 of the Code.
n. "Long-Term Incentive Award" means an Incentive Award made pursuant to
Section 5(a)(v) with a Performance Cycle of more than one year.
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o. "Non-Employee Adviser" means any consultant or independent contractor or
principal of a consultant or independent contractor who is not an employee of
the Company or any affiliate but is in a position to make a significant
contribution to the management, growth, or profitability of the business of the
Company or any affiliate, as determined by the Board.
p. "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
q. "Other Stock-Based Award" means an Award made pursuant to Section
5(a)(iv).
r. "Performance Cycle" means the period selected by the Committee during
which the performance of the Company or any subsidiary, affiliate or unit
thereof or any individual is measured for the purpose of determining the extent
to which an Award subject to Performance Goals has been earned.
s. "Performance Goals" mean the objectives for the Company or any
subsidiary or affiliate or any unit thereof or any individual that may be
established by the Committee for a Performance Cycle with respect to any
performance-based Awards contingently awarded under the Plan. The Performance
Goals for Awards that are intended to constitute "performance-based"
compensation within the meaning of Section 162(m) of the Code shall be based on
one or more of the following criteria: earnings, earnings per share, stock
price, total shareholder return, operating income, net income, cash flow, return
on equity, and return on capital.
t. "Plan" means this 1997 Performance Incentive Plan, as amended from time
to time.
u. "Restricted Period" means the period during which an Award may not be
sold, assigned, transferred, pledged or otherwise encumbered.
v. "Restricted Stock" means an Award of shares of Common Stock pursuant to
Section 5(a)(iii).
w. "Spread Value" means, with respect to a share of Common Stock subject to
an Award, an amount equal to the excess of the Fair Market Value, on the date
such value is determined, over the Award's exercise or grant price, if any.
x. "Stock Appreciation Right" or "SAR" means a right granted pursuant to
Section 5(a)(ii).
y. "Stock Option" means an option granted pursuant to Section 5(a)(i).
z. "Ten Percent Stockholder" means a person owning Stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
Stock as defined in Section 422 of the Code.
In addition, the terms "Business Combination," "Change in Control,"
"Incumbent Board," "Outstanding Company Stock," "Outstanding Company Voting
Securities" and "Person" have the meanings set forth in Section 6.
SECTION 2 -- ADMINISTRATION.
The Plan shall be administered by the Committee, which shall have the power
to interpret the Plan and to adopt such rules and guidelines for carrying out
the Plan as it may deem appropriate. Subject to the terms of the Plan, the
Committee shall have the authority to determine those persons eligible to
receive Awards and the amount, type and terms of each Award, to establish and
administer any Performance Goals applicable to such Awards, and to take all
other actions and make all other determinations which the Committee deems
necessary or appropriate for the administration of the Plan. The Committee shall
have the authority to adopt such modifications, procedures and subplans and to
waive any conditions or other restrictions as may be necessary or desirable to
comply with the laws, regulations, compensation practices and tax and accounting
principles of the countries in which the Company, a subsidiary or an affiliate
may operate to assure the viability of the benefits of Awards made to
individuals employed in such countries and to meet the objectives of the Plan.
Other provisions of the Plan notwithstanding, the Board shall perform the
functions of the Committee for purposes of granting Awards to non-employee
directors, and the Board may perform any function of the Committee under the
Plan for any other purpose, including without limitation for the purpose of
ensuring that transactions under the Plan by participants who are then subject
to Section 16
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of the Exchange Act in respect of the Company are exempt under Rule 16b-3. In
any case in which the Board is performing a function of the Committee under the
Plan, each reference to the Committee herein shall be deemed to refer to the
Board, except where the context otherwise requires.
The Committee may delegate to officers of the Company or any subsidiary, or
committee thereof, the authority, subject to such terms as the Committee shall
determine, to perform such functions under the Plan as the Committee may
determine, to the extent that such delegation will not result in the loss of an
exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to
Section 16 of the Exchange Act in respect of the Company and will not cause
Awards intended to qualify as "performance-based compensation" under Code
Section 162(m) to fail to so qualify. The Committee may appoint agents to assist
it in administering the Plan.
Any determination made by the Committee or pursuant to delegated authority
in accordance with the provisions of the Plan with respect to any Award shall be
made in the sole discretion of the Committee or such delegate, and all decisions
made by the Committee or any appropriately designated officer pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company and Plan participants.
SECTION 3 -- ELIGIBILITY.
Participants in the Plan will be such officers, directors, non-employee
advisers and employees of the Company, its subsidiaries and affiliates who are
responsible for or contribute to the management, growth, profitability or
success of the Company, its subsidiaries or its affiliates as are selected from
time to time by the Committee, in its sole discretion. Directors who are not
employees of the Company are eligible to participate in the Plan.
SECTION 4 -- COMMON STOCK SUBJECT TO PLAN; PER PERSON LIMITATIONS
(a) Shares Available. An Award may be granted to the extent that such
Award, together with all other Awards then outstanding, do not authorize the
issuance or otherwise relate to more than eighteen and one-half percent (18.5%)
of the outstanding class of Common Stock at the date of grant of such Award;
provided, however, that the maximum number of shares of Common Stock issued and
delivered upon exercise of Incentive Stock Options shall not exceed one million
shares. Shares delivered in connection with Awards may consist, in whole or in
part, of authorized and unissued shares or treasury shares. If any Award is
exercised, cashed out or terminates or expires without a payment being made to
the Participant in the form of Common Stock, the shares subject to such Award,
if any, shall again be available for distribution in connection with Awards
under the Plan. Any shares of Common Stock that are received by the Company as
full or partial payment of withholding or other taxes or as payment for the
exercise or conversion price of an Award shall be available for distribution in
connection with Awards under the Plan.
(b) Annual Per-Person Limitations. In each calendar year during any part of
which the Plan is in effect, a Participant may not be granted Stock Options,
Stock Appreciation Rights, and Other Stock-Based Awards relating to more than
one million shares of Common Stock, subject to adjustment as provided in Section
4(c). In addition, in the case of Incentive Awards, the maximum cash amount that
may be earned by any one Participant under the Plan upon achievement of
Performance Goals measured over a specified period shall be $1.5 million in the
case of Annual Incentive Awards hereunder and, in the case of Incentive Awards
with a performance period longer than one year, the maximum value that may
accrue to any one Participant under the Plan in any one year for all such
long-term Incentive Awards shall be $1.5 million. For this purpose, the term
"earned" refers to satisfaction of the performance conditions, regardless of any
additional period of deferral or period in which the Award may be forfeitable
upon termination of service by the participant.
(c) Adjustments. In the event of any changes in the outstanding shares of
Common Stock after the effective date of the Plan by reason of any share
dividend or split, reorganization, recapitalization, merger, consolidation,
spin-off, combination or exchange of shares, repurchase, liquidation,
dissolution, or other corporate exchange, any large, special and non-recurring
dividend or distribution to stockhold-
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ers, or other similar corporate transaction, the Committee may make such
substitution or adjustment, if any, as it deems to be equitable and in order to
preserve, without enlarging, the rights of Participants, as to (i) the number
and kind of shares which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of shares by which annual per-person Award
limitations are measured under Section 5 hereof, (iii) the number and kind of
shares subject to or deliverable in respect of outstanding Awards, and (iv) the
exercise price, grant price or purchase price relating to any Award and/or make
provision for payment of cash, other Awards or other property in respect of any
outstanding Award. In addition, the Committee is authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards (including
Incentive Awards, Annual Incentive Awards, and Performance Goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any subsidiary
or any business unit, or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the making of
such adjustment would cause awards intended to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder to otherwise
fail to so qualify.
SECTION 5 -- AWARDS.
(a) General. The types of Awards that may be granted under the Plan are set
forth below. Awards may be granted singly, in combination or in tandem with
other Awards.
(i) STOCK OPTIONS. A Stock Option represents the right to purchase a
share of Stock at a predetermined grant price. Stock Options granted under
this Plan may be in the form of Incentive Stock Options or Nonqualified
Stock Options, as specified in the Award agreement. The term of each Stock
Option shall be set forth in the Award agreement, but no Incentive Stock
Option shall be exercisable more than ten years after the grant date. The
exercise price per share of Common Stock purchasable under a Stock Option
shall be not less than 100% of the Fair Market Value on the date of grant.
Subject to the applicable Award agreement, Stock Options may be exercised,
in whole or in part, by giving written notice of exercise to the Company
specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price by certified or bank
check or such other instrument as the Company may accept (including a copy
of instructions to a broker or bank acceptable to the Company to deliver
promptly to the Company an amount of sale or loan proceeds sufficient to
pay the purchase price). As determined by the Committee, payment in full or
in part may also be made in the form of Common Stock already owned by the
optionee valued at the Fair Market Value on the date the Stock Option is
exercised; provided, however, that such Common Stock shall not have been
acquired within the preceding six months upon the exercise of a Stock
Option or stock unit or similar Award granted under the Plan or any other
plan maintained at any time by the Company or any subsidiary, unless
otherwise determined by the Committee. The Committee shall otherwise
determine the time or times at which and the circumstances under which a
Stock Option may be exercised in whole or in part and the methods by which
such exercise price may be paid or deemed to be paid, and the methods by or
forms in which Stock will be delivered or deemed to be delivered to
Participants.
(ii) STOCK APPRECIATION RIGHTS. An SAR represents the right to receive
a payment, in cash, shares of Common Stock or both (as determined by the
Committee), equal to the Spread Value on the date the SAR is exercised. The
grant price per share subject to an SAR shall be set forth in the
applicable Award agreement and shall be not less than 100% of the Fair
Market Value on the date of grant. Subject to the terms of the applicable
Award agreement, an SAR shall be exercisable, in whole or in part, by
giving written notice of exercise to the Company.
(iii) RESTRICTED STOCK. Shares of Restricted Stock are shares of
Common Stock that are awarded to a participant and that during the
Restricted Period may be forfeitable to the Company
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upon such conditions as may be set forth in the applicable Award agreement.
Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Restricted Period. The Restricted Period
shall be no less than one year, unless otherwise determined by the
Committee. Except as provided in this subsection (iii) and in the
applicable Award Agreement, a participant holding Restricted Stock shall
have all the rights of a holder of Common Stock, including the rights to
receive dividends and to vote during the Restricted Period. Dividends with
respect to Restricted Stock that are payable in Common Stock shall be paid
in the form of Restricted Stock.
(iv) OTHER STOCK-BASED AWARDS. Other Stock-Based Awards are Awards,
other than Stock Options, SARs or Restricted Stock, that are denominated
in, valued in whole or in part by reference to, or otherwise based on or
related to, Common Stock, including, without limitation, restricted share
units and deferred shares, shares awarded as a bonus or in lieu of other
rights to compensation, convertible or exchangeable debt securities, other
rights convertible or exchangeable into shares, purchase rights for shares,
and Awards valued by reference to the book value of shares or the value of
securities of or the performance of specified subsidiaries. The vesting,
forfeiture, purchase, exercise, exchange or conversion of Other Stock-Based
Awards granted under this subsection (iv) shall be on such terms and
conditions and by such methods as shall be specified by the Committee.
Where the value of an Other Stock-Based Award is based on the Spread Value,
the grant price for such an Award will be not less than 100% of the Fair
Market Value on the date of grant.
(v) INCENTIVE AWARDS. Incentive Awards are performance-based Awards
that are denominated in U.S. currency. Incentive Awards shall either be
Annual Incentive Awards or Long-Term Incentive Awards.
(b) Limits on Certain Awards. An amount not in excess of 30% of the shares
of Common Stock reserved for distribution pursuant to the Plan may be issued
pursuant to Restricted Stock Awards and Other Stock-Based Awards, except that
Other Stock-Based Awards with values based on Spread Values shall not be
included in this limitation.
(c) Incentive Stock Option Restrictions. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the shares of Stock
with respect to which Incentive Stock Options granted under the Plan and any
other plan of the Company become exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000. If an Incentive Stock Option
is granted to a Ten Percent Stockholder, the exercise price per share shall not
be less than 110% of the Fair Market Value of a share on the date of grant.
Incentive Stock Options may be granted only to employees of the Company or any
subsidiary that is a "subsidiary corporation" within the meaning of Section
424(f) of the Code. To the extent that any Stock Option exceeds these
restrictions, it shall constitute a Nonqualified Stock Option.
(d) Performance-Based Awards. Any Awards granted pursuant to the Plan may
be in the form of performance-based Awards through the application of
Performance Goals and Performance Cycles. In the case of Incentive Awards,
including Annual Incentive Awards, intended to constitute "performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder, the Committee shall grant and administer such awards in a manner
complying with the requirements of Code Section 162(m) and Treasury Regulation
1.162-27 thereunder, unless compliance is deemed by the Committee not
practicable or otherwise not in the best interests of the Company. With respect
to any such Award, the terms of the Plan and the Award shall be interpreted in a
manner consistent with Code Section 162(m) and regulations thereunder. If any
provision of the Plan as in effect on the date of adoption of any agreements
relating to such Award, or any provision of the Award agreement, does not comply
or is inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements, unless otherwise determined by the
Committee.
(e) Awards granted under the Plan may, in the discretion of the Committee,
be granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any subsidiary, or any business entity to be acquired by the
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Company or a subsidiary or any other right of a Participant to receive payment
from the Company or any subsidiary. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award or award, the Committee shall
re-quire the surrender of such other Award or award in consideration for the
grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the
Company or any subsidiary, in which the value of Shares subject to the Award is
equivalent in value to the cash compensation (for example, deferred shares or
restricted shares units granted as Other Stock-Based Awards), or in which the
exercise price, grant price, or purchase price of the Award in the nature of a
right that may be exercised is equal to the Fair Market Value of the underlying
Shares minus the value of the cash compensation surrendered (for example,
Options granted with an exercise price "discounted" by the amount of the cash
compensation surrendered). The Committee may require payment of other
consideration for Awards, including such amounts as may be required to comply
with requirements under the Delaware General Corporation Law upon the issuance
of Restricted Stock.
SECTION. 6 -- CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary (except Section 6(c), in the event of a Change in Control:
(i) All Stock Options and Stock Appreciation Rights outstanding as of
the date such Change in Control occurs shall become fully vested and
exercisable.
(ii) The restrictions and other conditions applicable to any
Restricted Stock or Other Stock-Based Awards, including vesting
requirements, shall lapse, and such Awards shall become free of all
restrictions and fully vested.
(iii) Any Incentive Awards relating to Performance Cycles completed
prior to the Change in Control that have been earned but not paid shall
become immediately payable in cash. In addition, each participant who has
been awarded an Incentive Award relating to an on-going Performance Cycle
shall be deemed to have earned a pro rata Incentive Award equal to the
product of (y) such participant's maximum award opportunity for such
Performance Cycle, and (z) a fraction, the numerator of which is the number
of full or partial months that have elapsed since the beginning of such
Performance Cycle to the date on which the Change in Control occurs, and
the denominator of which is the total number of months in such Performance
Cycle; provided, however, that such Incentive Award shall remain
outstanding and the terms thereof shall be adjusted to preserve the portion
of the award opportunity for the remainder of the Performance Cycle, which
shall be earned based on performance for the entire Performance Cycle (but
without offset for the pro-rate portion earned at the time of the Change in
Control.
(b) Definition of Change in Control. A "Change in Control" means the
happening of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person"))
of voting securities following which such Person is the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then outstanding shares of Common Stock (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute acquisitions which trigger a Change in Control: (1) any
acquisition directly from the Company, (2) any acquisition by the Company,
(3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (4) any acquisition by any corporation pursuant to a transaction
described in clauses (A), (B) and (C) of paragraph (iii) of this Section
6(b); and provided further, no acquisition by Ram Mukunda, a member of his
immediate family, or an entity controlled by Mr. Mukunda or such a family
member or members shall constitute a Change in Control for purposes of this
paragraph (i), and no acquisition by any
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other Person after which such other Person's beneficial ownership of
Outstanding Company Common Stock or Outstanding Company Voting Securities
is less than such beneficial ownership of Mr. Mukunda shall constitute a
Change in Control for purposes of this paragraph (i); or
(ii) Individuals who, as of July 31, 1988, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for election by the
stockholders of the Company, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(iii) Approval by the stockholders of the Company of , and
satisfaction of all other material contingencies to, reorganization,
merger, share exchange or consolidation (a "Business Combination"), unless,
in each case following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively,
the then-outstanding shares of common stock and the combined voting power
of the then-outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation that as a result of such transaction owns the Company through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then-outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then-outstanding voting securities of such corporation except
to the extent that such Person owned 20% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities prior to the Business
Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the stockholders of the Company of, and satisfaction
of all other material contingencies to, (A) a complete liquidation or
dissolution of the Company or (B) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a corporation
with respect to which, following such sale or other disposition, (1) more
than 60% of, respectively, the then-outstanding shares of common stock of
such corporation and the combined voting power of the then- outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case
may be, (2) less than 20% of, respectively, the then-outstanding shares of
common stock of such corporation and the combined voting power of the
then-outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by any Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation), except to the extent
that such Person owned 20% or more of the Outstanding Company Common Stock
or Outstanding Company Voting Securities prior to the sale or disposition
and (3) at least a majority of the members of the board of directors of
such corporation were members of the Incumbent Board at the time of the
execution of
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the initial agreement, or of the action of the Board, providing for such sale
or other disposition of assets of the Company or were elected, appointed or
nominated by the Board.
(c) Notwithstanding the foregoing, if any right granted pursuant to this
Section 6 would make a Change in Control transaction ineligible for pooling of
interests accounting under generally accepted accounting principles that but for
this Section 6 would otherwise be eligible for such accounting treatment, the
Committee shall have the ability to substitute for the cash payable pursuant to
this Section 6 shares Common Stock with a Fair Market Value equal in value to
the cash that would otherwise be payable hereunder.
SECTION 7 -- PLAN AMENDMENT AND TERMINATION.
The Board may amend, alter, suspend, discontinue or terminate the Plan
without stockholder approval at any time, provided that no such amendment shall
be made without stockholder approval if such approval is required under
applicable law. Except as set forth in any Award agreement, no amendment or
termination of the Plan may materially and adversely affect any outstanding
Award under the Plan without the Award recipient's consent.
SECTION 8 -- PAYMENTS AND PAYMENT DEFERRALS.
Payment of Awards may be in the form of cash, Stock, other Awards or
combinations thereof as the Committee shall determine, and with such
restrictions as it may impose. The Committee, either at the time of grant or by
subsequent amendment, may require or permit deferral of the payment of Awards
under such rules and procedures as it may establish. It also may provide that
deferred settlements include the payment or crediting of interest or other
earnings on the deferred amounts, or the payment or crediting of dividend
equivalents where the deferred amounts are denominated in Common Stock
equivalents.
SECTION 9 -- DIVIDENDS AND DIVIDEND EQUIVALENTS.
The Committee may provide that any Awards under the Plan earn dividends or
dividend equivalents. Such dividends or dividend equivalents may be paid
currently or may be credited to an account for deferred payment to the
participant. Any crediting of dividends or dividend equivalents may be subject
to such restrictions and conditions as the Committee may establish, including
reinvestment in additional shares of Common Stock or Common Stock equivalents.
SECTION 10 -- TRANSFERABILITY.
Unless otherwise required by law, Awards shall not be transferable or
assignable other than by will or the laws of descent and distribution, and
Options may be exercised during the lifetime of the participant only by the
participant (or the participant's guardian or legal representative). The
foregoing notwithstanding, the Committee may provide that any Award or right
under an Award, other than an Incentive Stock Option and any Award in tandem
therewith, shall be transferable, including for purposes of estate-planning
transfers to a participant=s immediate family members (i.e., spouse, children,
grandchildren, or siblings, and including the participant), to trusts for the
benefit of such immediate family members, and to partnerships in which such
family members and family trusts are the partners, or for any other purpose
deemed by the Committee to be not inconsistent with the purposes of the Plan,
and subject to such terms and conditions as may be specified by the Committee.
SECTION 11 -- AWARD AGREEMENTS.
Each Award under the Plan shall be evidenced by a written agreement (which
need not be signed by the recipient unless otherwise specified by the Committee)
that sets forth the terms, conditions and limitations for each Award. Such terms
may include, but are not limited to, the term of the Award, vesting and
forfeiture provisions, and the provisions applicable in the event the
recipient's employment terminates. The Committee may amend an Award agreement,
provided that no such amendment may materially and adversely affect an Award
without the Award recipient's consent. Award agreements need not be identical.
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SECTION 12 -- UNFUNDED STATUS OF PLAN.
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 13 -- GENERAL PROVISIONS.
(a) The Committee may require each person acquiring shares of Common Stock
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to the distribution thereof.
The certificates for such shares may include any legend that the Committee deems
appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock or other securities delivered
under the Plan shall be subject to such stop- transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Commission, any stock exchange or quotation system
upon which the Common Stock is then listed or quoted, as the case may be, and
any applicable Federal, state or foreign securities law, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Company, a subsidiary
or an affiliate from adopting other or additional compensation arrangements for
its employees, directors or other persons eligible for Awards hereunder.
(c) The adoption of the Plan shall not confer upon any employee any right
to continued employment nor shall it interfere in any way with the right of the
Company, a subsidiary or an affiliate to terminate the employment of any
employee at any time.
(d) No employee, participant or other person shall have any right to be
granted an Award. The grant of an Award to a director shall not confer any right
on such director to continue as a director of the Company, and the grant of an
Award to a Non-Employee Adviser shall not confer any right on such Non-Employee
Adviser or a business entity of which such Non-Employee Adviser is a principal
to continue as a Non-Employee Adviser.
(e) No later than the date as of which an amount first becomes includible
in the gross income of the participant for Federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee at or after the time of grant, withholding obligations arising from an
Award may be settled with Common Stock, including Common Stock that is part of,
or is received upon exercise or conversion of, the Award that gives rise to the
withholding requirement provided, however, that such settlement with Common
Stock shall not exceed the minimum withholding obligations under applicable law.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company, its subsidiaries and its affiliates
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the participant. The Committee may establish
such procedures as it deems appropriate, including the making of irrevocable
elections, for the settling of withholding obligations with Common Stock.
(f) On receipt of written notice of exercise, the Committee may elect to
cash out all or a portion of the shares of Common Stock for which a Stock Option
is being exercised by paying the optionee an amount, in cash or Common Stock,
equal to the Spread Value of such shares on the date such notice of exercise is
received. The Committee shall consider the accounting consequences, if any, of
such cash-out or settlement.
(g) Neither the adoption of the Plan by the Board, its submission to the
stockholders of the Company for approval, nor the making of any Award hereunder
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable, including incentive arrangements and awards which do not qualify
under Code Section 162(m).
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(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to principles of conflicts of laws.
(i) If any provision of the Plan is held invalid or unenforceable, the
invalidity or unenforceability shall not affect the remaining parts of the Plan,
and the Plan shall be enforced and construed as if such provision had not been
included.
(j) Except as otherwise provided by the Board, no Awards shall be granted
after July 31, 2010, but any Awards granted theretofore may extend beyond that
date.
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Merger Agreement") dated as of June 30,
1998, is made by and between Startec Global Holding Corporation, a Delaware
corporation ('`Startec-Delaware") and Startec Global Communications Corporation,
a Maryland corporation ("Startec-Maryland"). Startec-Delaware and
Startec-Maryland are sometimes referred to herein as the "Constituent
Corporations."
RECITALS
A. Startec-Delaware is a corporation duly organized and existing under the
Delaware General Corporation Law (the "DGCL"). Startec-Delaware has an
authorized capital of 41,000,000 shares, consisting of 40,000,000 shares of
common stock, par value $.01 per share ("Startec-Delaware Common Stock") and
1,000,000 shares of preferred stock, par value $1.00 per share
("Startec-Delaware Preferred Stock"). As of the date hereof, one (1) share of
Startec-Delaware Common Stock is issued and outstanding, which share is held by
Startec-Maryland.
B. Startec-Maryland is a corporation duly organized and existing under the
Maryland General Corporation Law (the "MGCL"). Startec-Maryland has an
authorized capital of 20,100,000 shares, consisting of 20,000,000 shares of
common stock, par value $.01 per share ("Startec-Maryland Common Stock") and
100,000 shares of preferred stock, par value $1.00 per share ("Startec-Maryland
Preferred Stock"). As of the date hereof, 8,939,315 shares of Startec-Maryland
Common Stock are issued and outstanding and no shares of Startec-Maryland
Preferred Stock are outstanding; although 25,000 shares of Startec-Maryland
Preferred Stock are designated "Series A Junior Participating Preferred Stock"
in connection with a Shareholders Rights Agreement (the "Rights Agreement")
adopted by the Board of Directors of Startec-Maryland on March 26, 1998. There
are also outstanding certain options and warrants to purchase shares of
Startec-Maryland Common Stock.
C. Startec-Maryland is the issuer of certain 12% Senior Notes due 2008 (the
"Notes") and in connection therewith, Startec-Maryland entered into an Indentue
(the "Indenture") dated as of May 21, 1998 by and between Startec-Delaware and
First Union National Bank, as Trustee.
D. The Board of Directors of Startec-Maryland has determined that, for the
purpose of effecting the reincorporation of Startec-Maryland in the State of
Delaware it is advisable and in the best interest of Startec-Maryland and its
stockholders that it merge with and into Startec-Delaware upon the terms and
conditions herein provided.
E. The Boards of Directors of Startec-Delaware and Startec-Maryland have
authorized and approved this Agreement and have directed that this Agreement be
submitted to a vote of their respective stockholders and executed by the
undersigned officers.
F. This Agreement is a Plan of Reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
agreements and covenants set forth herein, and other good and valuable
consideration, the Constituent Corporations agree as follows:
ARTICLE I
1.1 Merger. In accordance with the provisions of this Agreement, the DGCL
and the MGCL, Startec-Maryland shall merge with and into Startec-Delaware (the
"Merger"), the separate existence of Startec-Maryland shall cease, and
Startec-Delaware shall be, and is herein sometimes referred to as, the
"Surviving Corporation."
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1.2 Effectiveness. The Merger shall become effective when the last to occur
of the following actions shall have been completed:
a. This Agreement and the Merger shall have been adopted and approved
by the stockholders of each of the Constituent Corporations in accordance
with the requirements of the DGCL and the MGCL;
b. All of the conditions precedent to the consummation of the Merger
specified in this Agreement have been satisfied or duly waived;
c. An executed Certificate of Merger or an executed counterpart of
this Agreement meeting the requirements of the DGCL shall have been filed
with the Secretary of State of the State of Delaware;
d. An executed Articles of Merger or an executed counterpart of this
Agreement meeting the requirements of the MGCL shall have been filed with
the Maryland State Department of Assessments and Taxation (the "SDAT");
e. Startec-Maryland has received all necessary regulatory approvals
for the transfer of, and has in fact transferred, substantially all of its
assets and liabilities to Startec-Delaware; and
f. Startec-Delaware has received all necessary regulatory approvals
for the transfer of, and has in fact transferred, substantially all of its
assets and liabilities to its wholly-owned subsidiaries.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date."
1.3 Effect of Merger. Upon the Effective Date, the separate existence of
Startec-Maryland shall cease, and Startec-Delaware, as the Surviving Corporation
(i) shall continue to all of Startec-Delaware's assets, rights, powers and
property as constituted immediately prior to the Effective Date; (ii) shall be
subject to all actions previously taken by its and Startec-Maryland's Board of
Directors; (iii) shall succeed, without other transfer, to all of the assets,
rights, powers and property of Startec-Maryland including, without limitation,
all patents, trademarks, licenses, registrations, and all other intellectual
properties however defined; (iv) shall continue to be subject to all of
Startec-Delaware's debts, liabilities and obligations as constituted immediately
prior to the Effective Date, and (v) shall succeed, without other transfer, to
all of the debts, liabilities and obligations of Startec-Maryland in the same
manner as if Startec-Delaware had itself incurred them, all as more fully
provided under the applicable provisions of the DGCL and the MGCL.
ARTICLE II
2.1 Charter. The Restated Certificate of Incorporation of Startec-Delaware
as in effect immediately prior to the Effective Date shall continue in full
force and effect as the Certificate of Incorporation of the Surviving
Corporation until duly amended in accordance with the terms thereof and
applicable law. Notwithstanding the foregoing, after the Effective Date
Surviving Corporation intends to amend its Certificate of Incorporation to
change its name to Startec Global Communications Corporation.
2.2 Bylaws. The Bylaws of Startec-Delaware as in effect immediately prior
to the Effective Date shall continue in full force and effect as the Bylaws of
the Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
2.3 Directors and Officers. The directors and officers of Startec-Maryland
immediately prior to the Effective Date shall be the directors and officers of
the Surviving Corporation until their successors shall have been duly elected
and qualified.
ARTICLE III
3.1 Stock Conversion. Upon the Effective Date, each share of
Startec-Maryland Common Stock issued and outstanding immediately prior thereto
shall, by virtue of the Merger, and without any action by the Constituent
Corporations, the holder of such shares, or any other person, be converted into
and exchanged for one fully paid and nonassessable share of Startec-Delware
Common Stock.
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3.2 Options and Warrants. (a) Upon the Effective Date, the Surviving
Corporation shall assume and continue, on the terms provided therein, the stock
option plans (including the Amended and Restated Stock Option Plan and the
Amended and Restated 1997 Performance Incentive Plan) and all other employee
benefit plans of Startec-Maryland. Each outstanding and unexercised option,
warrant, or other right to purchase, or security convertible into
Startec-Maryland Common Stock, shall become an option, warrant, or right to
purchase or security convertible into, the Startec-Delaware's Common Stock on
the basis of one share of Startec-Delaware Common Stock for each share of
Startec-Maryland Common Stock issuable pursuant to such option, warrant, or
stock purchase right, or convertible security, on the same terms and conditions
and at an exercise or conversion price per share equal to the exercise or
conversion price per share applicable to such Startec-Maryland option, warrant,
stock purchase right, or convertible security, at the Effective Date.
(b) A number of shares of Startec-Delaware's Common Stock shall be
reserved for issuance upon the exercise of options, warrants, or stock
purchase rights, or upon the conversion of convertible securities, equal to
the number of shares of Startec-Maryland Common Stock so reserved
immediately prior to the Effective Date.
3.3 Rights Agreement. Upon the Effective Date, the Surviving Corporation
shall assume and continue, on the terms provided therein, the rights and
obligations of Startec-Maryland under the Rights Agreement.
3.4 Indenture. Upon the Effective Date, the Surviving Corporation shall
assume and continue, on the terms provided therein, the rights and obligations
of Startec-Maryland under the Indenture and as the issuer (and obligor) of the
Notes.
3.5 Cancellation of Stock. Upon the Effective Date, any authorized but
unissued shares of Startec-Maryland Common Stock (including Treasury shares)
shall be canceled and no shares of Startec-Delaware Common Stock shall be issued
in exchange therefor. Upon the Effective Date, the one share of Startec-Delaware
Common Stock presently issued and outstanding shall be canceled and returned to
the status of authorized but unissued shares, and no shares of common stock or
other securities of Surviving Corporation shall be issued in respect thereof.
3.6 Exchange of Certificates. (a) After the Effective Date, each holder of
an outstanding certificate representing shares of Startec-Maryland Common Stock
may, at such stockholder's option, surrender the same for cancellation to
Continental Stock Transfer & Trust Company, as exchange agent ("Exchange
Agent"), and each such holder shall be entitled to receive in exchange therefor
a certificate or certificates representing the number of shares of
Startec-Delaware Common Stock into which the surrendered shares were converted
as herein provided. Until so surrendered, each outstanding certificate
theretofore representing shares of Startec-Maryland Common Stock shall be deemed
for all purposes to represent the number of whole shares of the Startec-Delaware
Common Stock into which such shares of Startec-Maryland Common Stock were
converted in the Merger.
(b) The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or
conversion or otherwise accounted for to the Surviving Corporation or the
Exchange Agent, have and be entitled to exercise any voting and other rights
with respect to and to receive dividends and other distributions upon the
shares of Startec-Delaware Common represented by such outstanding
certificate as provided above.
(c) Each certificate representing Startec-Delaware Common Stock so issued
in the Merger shall bear the same legends, if any, with respect to
restrictions on transferability as the certificates of Startec-Maryland
Common Stock so converted and given in exchange therefore, unless otherwise
determined by the Board of Directors of the Surviving Corporation in
compliance with applicable laws.
(d) If any certificate for shares of Startec-Delaware Common Stock is to
be issued in a name other than that in which the certificate surrendered in
exchange therefore is registered, it shall be a condition of issuance
thereof that the certificate so surrendered shall be properly endorsed and
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otherwise in proper form for transfer, that such transfer otherwise be proper
and the person requesting such transfer pay to the Exchange Agent any
transfer or other taxes payable by reason of the issuance of such new
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of Startec-Delaware
that such tax has been paid or is not payable.
ARTICLE IV
4.1 Further Assurances. From time to time, as and when required by
Startec-Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Startec-Maryland such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions,
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by Startec-Delaware the title to and possession of all
the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Startec-Maryland and otherwise to carry out the
purposes of this Agreement.
4.2 Abandonment. At any time before the Effective Date, this Agreement may
be terminated and the Merger may be abandoned for any reason whatsoever by the
Board of Directors of either of the Constituent Corporations, notwithstanding
the approval of this Agreement by the stockholders of Startec-Maryland or by the
sole stockholder of Startec-Delaware, or by both.
4.3 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the State of
Delaware and the SDAT; provided, however, that an amendment made subsequent to
the adoption of this Agreement by the stockholders of either of the Constituent
Corporations shall not (a) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (b) alter or change any term of the Restated
Certificate of Incorporation of the Surviving Corporation, or (c) alter or
change any of the terms and conditions of this Agreement if such alteration or
change would adversely affect the holders of any class or series thereof of such
Constituent Corporation.
4.4 Registered Office. The registered and principal office of the Surviving
Corporation in the State of Delaware is located at 1013 Centre Road, in the City
of Wilmington, County of New Castle, 19805. Corporation Services Company is the
registered agent of the Surviving Corporation at such address.
4.5 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with the laws of the State of Delaware
and, so far as applicable, the merger provisions of the MGCL.
4.6 Counterpart. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement is hereby executed, acknowledged, and
attested as of the date written above.
ATTEST: STRATEC GLOBAL COMMUNICATIONS
CORPORATION, a Maryland corporation
By:
- ----------------------------- --------------------------------------
Prabhav V. Maniyar, Senior Ram Mukunda, President and
Vice President and Secretary Chief Executive Officer
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STRATEC GLOBAL HOLDING
CORPORATION, a Delaware corporation
By:
- --------------------------------- ---------------------------------------
Prabhav V. Maniyar, Senior Ram Mukunda, President and
Vice President and Secretary Chief Executive Officer
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RESTATED CERTIFICATE OF INCORPORATION
OF
STARTEC GLOBAL HOLDING CORPORATION
Startec Global Holding Corporation, a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Startec Global Holding Corporation.
Startec Global Holding Corporation was originally incorporated under the name
"STGC Holding Corporation," and the original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware on
April 21, 1998.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL"), this Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Certificate of
Incorporation of this corporation.
3. This Restated Certificate of Incorporation was duly adopted in
accordance with Sections 242 and 245 of the DGCL.
4. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
ARTICLE I -- NAME
The name of the corporation (which is hereinafter called the
"Corporation") is: Startec Global Holding Corporation.
ARTICLE II -- REGISTERED OFFICE
The address of the Corporation in the State of Delaware is 1013 Centre
Road, in the City of Wilmington, County of New Castle, 19805. The Registered
Agent at such address is Corporation Service Company.
ARTICLE III -- PURPOSE
(a) The purposes for which and any of which the Corporation is formed and
the business and objects to be carried on and promoted by it are:
(1) To seek out, identify, and engage in any lawful business acts or
activities now or hereafter permitted by the laws of the State of Delaware.
(2) To engage in any one of more businesses or transactions, or to
acquire all or any portion of any entity engaged in any one or more
businesses or transactions which the Board of Directors may from time to
time authorize or approve, whether or not related to the business described
elsewhere in this Article or to any other business at the time or
theretofore engaged in by the Corporation.
(3) To have one or more offices and places of business, and to carry
on any and all of its operations and business without restriction or
limitation as to amount or place in any other State of the United States of
America, or the District of Columbia, or any foreign country, subject to
the laws of the State of Delaware.
(4) To conduct and promote any business or purpose for which the
Corporation may be organized in any and all parts of the world, subject to
the laws of the State of Delaware, or to the laws of the United States of
America.
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(b) The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other Article of the charter of the Corporation, and each
shall be regarded as independent; and they are intended to be and shall be
construed as powers as well as purposes and objects of the Corporation and shall
be in addition to and not in limitation of the general powers of corporations
under the DGCL.
ARTICLE IV -- AUTHORIZED CAPITAL
(a) The total number of shares of capital stock of all classes which the
Corporation has authority to issue is forty-one million (41,000,000) shares,
forty million (40,000,000) shares of which are shares of common stock, par value
one cent ($.01) per share ("Common Stock") and one million (1,000,000) shares of
which are shares of blank check preferred stock, par value One Dollar ($1.00)
per share ("Preferred Stock"). Of the authorized shares of Preferred Stock,
Twenty Five Thousand (25,000) shares are designated as Series A Junior
Participating Preferred Stock (the description of which is set forth in (c)
below). The Board of Directors may classify and reclassify in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of stock.
(b) The following is a description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the Common Stock:
(1) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter classified or
reclassified, the exclusive voting power for all purposes shall be vested
in the holders of the Common Stock.
(2) Subject to the provisions of law and any preferences of any class
of stock hereafter classified or reclassified, dividends, including
dividends payable in shares of another class of the Corporation's stock,
may be paid on the Common Stock at such time and in such amounts as the
Board of Directors of the Corporation may deem advisable.
(3) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Common
Stock shall be entitled, after payment or provision for payment of the
debts and other liabilities of the Corporation and the amount to which the
holders of any class of stock hereafter classified or reclassified having a
preference on distributions in the liquidation, dissolution or winding up
of the Corporation shall be entitled, together with the holders of any
other class of stock hereafter classified or reclassified not having a
preference on distributions in the liquidation, dissolution or winding up
of the Corporation, to share ratably in the remaining net assets of the
Corporation.
(c) The following is a description of the Series A Junior Participating
Preferred Stock, and of the preferences, rights, voting powers, restrictions,
dividends, qualifications and terms and conditions thereof:
(1) Designation and Amount. The shares of such series, par value $1.00
per share, shall be designated as "Series A Junior Participating Preferred
Stock" and the number of shares constituting such series shall be
Twenty-Five Thousand (25,000). Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Series A Junior Participating
Preferred Stock to a number less than the number of shares then outstanding
plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Junior Participating Preferred Stock.
(2) Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to
the shares of Series A Junior Participating Preferred Stock with respect
to dividends, the holders of shares of Series A Junior Participating
Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors
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out of funds legally available for the purpose, quarterly dividends
payable in cash on the 15th day of April, July, October and January, in
each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 or (b)
subject to the provision for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares
of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock,
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior
Participating Preferred Stock. In the event the Corporation shall at any
time after March 26, 1998 (the "Rights Declaration Date") (i) declare or
pay any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
amount to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such
shares of Series A Junior Participating Preferred Stock, unless the date
of issue of such shares is prior to the record date set for the first
Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of
shares of Series A Junior Participating Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which
record date shall be no more than 50 days prior to the date fixed for
the payment thereof.
(3) Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each one one-thousandth of a share of Series A Junior Participating
Preferred Stock shall entitle the holder thereof to one vote on all
matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time after the Rights Declaration
Date (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) Subdivide the outstanding
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Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the number of votes per
share to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event; provided
that in no event shall each share of Series A Junior Participating
Preferred Stock entitle the holder thereof to more than one vote on all
matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided by law, the holders of shares of
Series A Junior Participating Preferred Stock and the holders of shares
of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
(4) Certain Restrictions.
(A) Whenever dividends or distributions payable on the Series A Junior
Participating Preferred Stock as provided in Section 2 are not paid,
thereafter and until such dividends and distributions, whether or not
declared, on shares of Series A Junior Participating Preferred Stock
outstanding shall have been paid in full, the Corporation shall not: (i)
declare or pay dividends on, or make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating
Preferred Stock; or (ii) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Participating Preferred Stock, except dividends paid
ratably on the Series A Junior Participating Preferred Stock and all
such parity stock on which dividends are payable in proportion to the
total amounts to which the holders of all such shares are then entitled;
or (iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Junior Participating Preferred Stock, or any shares
of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock
of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
(5) Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
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(6) Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of
shares of Series A Junior Participating Preferred Stock shall have
received $10.00 per share, plus any unpaid dividends and distributions
payable thereon, whether or not declared, to the date of such payment
(the "Series A Liquidation Preference"). Following the payment of the
full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of Series A Junior
Participating preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted
as set forth in subparagraph (C) below to reflect such events as stock
splits, stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii) immediately above being referred to
as the "Adjustment Number"). Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in respect
of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of the remaining
assets to be distributed in the ratio of the Adjustment Number to one
(1) with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of
Preferred Stock, if any, which rank on a parity with the Series A Junior
Participating Preferred Stock, then such remaining assets shall be
distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences. In the event, however, that
there are sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares outstanding immediately
prior to such event.
(7) Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 1,000 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series A Junior Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
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(8) Redemption. The outstanding shares of Series A Junior Participating
Preferred Stock shall not be redeemable by the Corporation. The preceding
sentence shall not limit the ability of the Corporation to purchase or
otherwise deal in such shares of stock to the extent permitted by law.
(9) Ranking. Notwithstanding anything contained herein to the contrary,
the Series A Junior Participating Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock as to voting rights, the
payment of dividends and the distribution of assets in liquidation, unless
the terms of any such series shall provide otherwise.
(10) Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series A Junior Participating
Preferred Stock, voting separately as a class.
(11) Fractional Shares. Series A Junior Participating Preferred Stock may
by issued in fractions of a share which shall entitle the holders, in
proportion to such holders fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of
all other rights of holders of Series A Junior Participating Preferred
Stock.
(d) Subject to the foregoing, the power of the Board of Directors to
classify and reclassify any of the shares of capital stock shall include,
without limitation, subject to the provisions of the charter, authority to
classify or reclassify any unissued shares of such stock into a class or classes
of preferred stock, preference stock, special stock or other stock, and to
divide and classify shares of any class into one or more series of such class,
by determining, fixing, or altering one or more of the following:
(1) The distinctive designation of such class or series and the number of
shares to constitute such class or series; provided that, unless otherwise
prohibited by the terms of such or any other class or series, the number of
shares of any class or series may be decreased by the Board of Directors in
connection with any classification or reclassification of unissued shares
and the number of shares of such class or series may be increased by the
Board of Directors in connection with any such classification or
reclassification, and any shares of any class or series which have been
redeemed, purchased, otherwise acquired or converted into shares of Common
Stock or any other class or series shall become part of the authorized
capital stock and be subject to classification and reclassification as
provided in this subparagraph.
(2) Whether or not and, if so, the rates, amounts and times at which, and
the conditions under which, dividends shall be payable on shares of such
class or series, whether any such dividends shall rank senior or junior to
or on a parity with the dividends payable on any other class or series of
stock, and the status of any such dividends as cumulative, cumulative to a
limited extent or non-cumulative and as participating or non-participating.
(3) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(4) Whether or not shares of such class or series shall have conversion
or exchange privileges and, if so, the terms and conditions thereof,
including provision for adjustment of the conversion or exchange rate in
such events or at such times as the Board of Directors shall determine.
(5) Whether or not shares of such class or series shall be subject to
redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable and
the amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates; and whether or
not there shall be any sinking fund or purchase account in respect thereof,
and if so, the terms thereof.
(6) The rights of the holders of shares of such class or series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution or winding up is
voluntary or involuntary and, if voluntary, may vary at different dates, and
whether such rights shall rank senior or junior to or on a parity with such
rights of any other class or series of stock.
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(7) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of distributions on, or the acquisition of, or the use
of moneys for purchase or redemption of, any stock of the Corporation, or
upon any other action of the Corporation, including action under this
sub-paragraph, and, if so, the terms and conditions thereof.
(e) For the purposes hereof and of any articles supplementary to the
charter providing for the classification or reclassification of any shares of
capital stock or of any other charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
capital stock of the Corporation shall be deemed to rank.
(1) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable on liquidation, dissolution
or winding up, as the case may be, in preference or priority to holders of
such other class or series;
(2) on a parity with another class or series either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation price per share thereof be different from those
of such others, if the holders of such class or series of stock shall be
entitled to receipt of dividends or amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to their
respective dividend rates or redemption or liquidation prices, without
preference or priority over the holders of such other class or series; and
(3) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable
upon liquidation, dissolution or winding up, as the case may be.
ARTICLE V -- DIRECTORS
(a) The number of directors of the Corporation shall be five, which number
may only be increased or decreased, in the manner prescribed in the Bylaws, by
at least two-thirds of the directors then in office, but shall never be less
than the minimum number permitted by the DGCL now or hereafter in force.
(b) Subject to the rights of the holders of any class of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies on the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the stockholders or
the directors then in office. A director so chosen shall hold office for the
balance of the term then remaining. No decrease in the number of directors
constituting the Board of Directors shall affect the tenure of office of any
director.
(c) Whenever the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a class, to elect one or more directors of
the Corporation, the Board of Directors shall consist of said directors so
elected in addition to the number of directors fixed as provided above in
paragraph (a) of this Article FIFTH or in the Bylaws. Notwithstanding the
foregoing, and except as otherwise may be required by law, whenever the holders
of any one or more series of Preferred Stock shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
terms of the director or directors elected by such holders shall expire at the
next succeeding annual meeting of stockholders.
(d) Subject to the rights of the holders of any class separately entitled
to elect one or more directors, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and then only by the
affirmative vote of the holders of at least a majority of the combined voting
power of all classes of shares of capital stock entitled to vote in the election
for directors voting together as a single class.
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(e) The Board of Directors shall be divided into three classes (denominated
Class I, Class II and Class III), as nearly equal in number as reasonably
possible, with the term of office of the Class I Directors to expire at the 2001
annual meeting of the stockholders, the term of office of the Class II Directors
to expire at the 1999 annual meeting of stockholders, and the term of office of
the Class III Directors to expire at the 2000 annual meeting of stockholders. At
each annual meeting of stockholders, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three-year term.
(1) The following persons shall serve as directors until the 2001 annual
meeting of stockholders (Class I Directors):
Nazir G. Dossani
Richard K. Prins
(2) The following persons shall serve as directors until the 1999 annual
meeting of stockholders (Class II Directors):
Prabhav V. Maniyar
Vijay Srinivas
(3) The following person shall serve as a director until the 2000 annual
meeting of stockholders (Class III Directors):
Ram Mukunda
ARTICLE VI -- POWERS
(a) The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors, officers and stockholders:
(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of the Corporation's capital stock of
any class, whether now or hereafter authorized, or securities convertible
into shares of its capital stock of any class or classes, now or hereafter
authorized, for such consideration as may be deemed advisable by the Board
of Directors and without any action by the stockholders.
(2) No holder of any stock or any other securities of the Corporation
whether now or hereafter authorized, shall have any preemptive right to
subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other
terms as the Board of Directors, in its sole discretion, may fix; and any
stock or other securities which the Board of Directors may determine to
offer for subscription may, as the Board of Directors in its sole
discretion shall determine, be offered to the holders of any class, series
or type of stock or other securities at the time outstanding to the
exclusion of the holders of any or all other classes, series or types of
stock or other securities at the time outstanding.
(3) The Board of Directors of the Corporation shall, consistent with
applicable law, have the power in its sole discretion to determine from
time to time, in accordance with sound accounting practice or other
reasonable valuation methods, what constitutes annual or other net profits,
earnings, surplus, or net assets in excess of capital; to fix and vary from
time to time the amount to be reserved as working capital, or determine
that retained earnings or surplus shall remain in the hands of the
Corporation; to set apart out of any funds of the Corporation such reserve
or reserves in such amount or amounts and for such proper purpose or
purposes as it shall determine and to abolish any such reserve or any part
thereof; to distribute and pay distributions or dividends in stock, cash or
other securities or property, out of surplus or any other funds or amounts
legally available
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therefor, at such times and to the stockholders of record on such dates as it
may, from time to time, determine; and to determine whether and to what
extent and at what times and places and under what conditions and regulations
the books, accounts and documents of the Corporation, or any of them, shall
be open to the inspection of stockholders, except as otherwise provided by
statute or by the Bylaws, and, except as so provided, no stockholder shall
have any right to inspect any book, account or document of the Corporation
unless authorized so to do by resolution of the Board of Directors.
ARTICLE VII -- LIMITATION OF LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If the
DGCL is amended after the effective date of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a director at the time of such repeal or
modification.
ARTICLE VIII -- INDEMNIFICATION
The Corporation shall indemnify any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise to the fullest extent permitted by the DGCL, as the same may
hereafter be amended, or as otherwise permitted by law.
ARTICLE IX -- MISCELLANEOUS
(a)(1) Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meeting of stockholders may be
made by the Board of Directors of the Corporation or by any stockholder of the
Corporation entitled to vote generally in the election of directors. In order
for a stockholder of the Corporation to make any such nominations and/or
proposals, he or she shall give notice thereof in writing, delivered or mailed
by first-class United States mail, postage prepaid, to the Secretary of the
Corporation not later than the close of the tenth day following the day on which
notice of the meeting was mailed to stockholders. Each such notice given by a
stockholder with respect to nominations for the election of directors shall set
forth (i) the name, age, business address and, if known, residence address of
each nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of capital stock of
the Corporation which are beneficially owned by each such nominee, (iv) such
other information as would be required to be included in a proxy statement
soliciting proxies for the election of the proposed nominee pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended, including,
without limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director, if elected, and (v) as to
the stockholder giving such notice, his name and address as they appear on the
Corporation's books and the class and number of shares of capital stock of the
Corporation which are beneficially owned by such stockholder. In addition, the
stockholder making such nomination shall promptly provide any other information
reasonably requested by the Corporation.
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(2) Each such notice given by a stockholder to the Secretary of the
Corporation with respect to business proposals to bring before a meeting shall
set forth in writing as to each matter; (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business; (iii) the class
and number of shares of the capital stock of the Corporation which are
beneficially owned by the stockholders; and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in this charter to the
contrary, no business shall be conducted at the meeting except in accordance
with the procedures set forth in this sub-paragraph(a)(2).
(3) The Chairman of the annual or special meeting of stockholders may, if
the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if he
should so determine, he shall so declare to the meeting, and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding adjourned, special or annual meeting of the stockholders taking place
30 days or more thereafter. This provision shall not require the holding of any
adjourned or special meeting of stockholders for the purpose of considering such
defective nomination or proposal.
(b) In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
make, repeal, alter, amend and rescind the Bylaws of the Corporation upon vote
of not less than two-thirds of the directors then in office. Notwithstanding any
other provision of this charter or the Bylaws of the Corporation (and
notwithstanding the fact that some lesser percentage may be specified by law),
the Bylaws shall not be made, repealed, altered, amended or rescinded by the
stockholders of the Corporation except by the vote of the holders of not less
than 80% of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for that purpose
(provided that notice of such proposed adoption, repeal, alteration, amendment
or rescission is included in the notice of such meeting), or, as set forth
above, by the Board of Directors.
(c) The Corporation reserves the right from time to time to make any
amendments of its charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its charter, of any of its outstanding capital stock by classification,
reclassification or otherwise, but no such amendment which changes such terms or
contract rights of any of its outstanding capital stock shall be valid unless
such amendment shall have been authorized by not less than a majority of the
aggregate number of the votes entitled to be cast thereon, by a vote at a
meeting or in writing with or without a meeting; provided, however, that any
amendment to, repeal or adopt any provision inconsistent with Article V shall
have been authorized by not less than 80% of the aggregate votes entitled to be
cast thereon (considered for this purpose as a single class), by vote at a
meeting or in writing with or without a meeting.
(d) The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the DGCL.
(e) Any action required or permitted to be taken by the holders of the
outstanding securities of the Corporation then entitled to vote generally in the
election of directors, must be taken at a meeting of the stockholders and may
not be taken by written consent regardless of whether such consent or consents
are signed by all holders of such securities.
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ARTICLE X -- DURATION
The duration of the Corporation shall be perpetual.
IN WHEREOF, this Restated Certificate of Incorporation has been signed by
Ram Mukunda, the corporation's authorized officer, this day of , 1998.
STARTEC GLOBAL HOLDING CORPORATION
By:
----------------------------------------
Ram Mukunda, President
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BYLAWS
OF
STARTEC GLOBAL HOLDING CORPORATION
----------------
ARTICLE I -- OFFICES
Section 1.01 -- Registered Office. The registered office of the Corporation
shall be located in the State of Delaware at such place as may be fixed from
time to time by the Board of Directors upon filing of such notices as may be
required by law, and the registered agent shall have a business office identical
with such registered office.
Section 1.02 -- Principal Office. The principal office of the Corporation
shall be located at 10411 Motor City Drive, Bethesda, Maryland 20817. The
location of the principal office of the Corporation, however, may be changed
from time to time by the Board of Directors.
Section 1.02 -- Other Offices. The Corporation may also maintain offices at
such other places within or without the State of Delaware, and within or without
the United States, as the Board of Directors may determine or the business of
the Corporation may require.
ARTICLE II -- STOCKHOLDERS
Section 2.01 -- Annual Meeting. The Corporation shall hold an annual
meeting of its stockholders to elect directors and transact any other business
within its powers, on such date following the end of each fiscal year as shall
be set by the Board of Directors. Except as otherwise required by the
Certificate of Incorporation or by law, any business may be considered at an
annual meeting without the purpose of the meeting having been specified in the
notice. Failure to hold an annual meeting does not invalidate the Corporation's
existence or affect any otherwise valid corporate acts.
Section 2.02 -- Special Meetings. At any time in the interval between
annual meetings, a special meeting of the stockholders may be called by the
President or by a majority of the Board of Directors by vote at a meeting or in
writing (addressed to the Secretary of the Corporation) with or without a
meeting. Special meeting of the stockholders shall be called by the Secretary at
the request of the stockholders only as may be required by law. A request for a
special meeting shall state the purpose of the meeting and the matters proposed
to be acted on at it. The Secretary shall inform the stockholders who make the
request of the reasonably estimated costs of preparing and mailing a notice of
the meeting and proxy and, on payment of these costs to the Corporation, notify
each stockholder entitled to notice of the meeting. Unless requested by
stockholders entitled to cast a majority of all the votes entitled to be cast at
the meeting, a special meeting need not be called to consider any matter which
is substantially the same as a matter voted on at any special meeting of
stockholders held in the preceding 12 months.
Section 2.03 -- Place of Meetings Meetings of stockholders shall be held at
such place in the United States as is set from time to time by the Board of
Directors.
Section 2.04 -- Notice of Meetings, Waiver of Notice. Not less than ten nor
more than 60 days before each stockholders' meeting, the secretary of the
Corporation shall give written notice of the meeting to each stockholder
entitled to vote at the meeting and each other stockholder entitled to notice of
the meeting. The notice shall state the time and place of the meeting and, if
the meeting is a special meeting or notice of the purpose is required by law,
the purpose of the meeting. Notwithstanding the foregoing, notice of a
stockholders' meeting at which the stockholders will be called to act on an
amendment to the certificate of incorporation, a plan of merger, a proposed sale
of all or substantially all of the assets of or the dissolution of the
Corporation shall be given not fewer than 20 days and not more than 60 days
before the meeting date. Notice is given to a stockholder when it is personally
delivered to him or her, left at his or her residence or usual place of
business, or mailed to him or her at his or her address as it appears on the
records of the Corporation. Notwithstanding the foregoing provisions, each
person who is entitled to notice waives notice if he or she before or after the
meeting signs a waiver of the notice which is filed with the records of
stockholders' meetings, or is present at the meeting in person or by proxy.
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Section 2.05 -- Quorum; Voting. Unless the law or the Certificate of
Incorporation provides otherwise, at a meeting of stockholders the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting constitutes a quorum, and a majority of all
the votes cast at a meeting at which a quorum is present is sufficient to
approve any matter which properly comes before the meeting, except that a
plurality of all the votes cast at a meeting at which a quorum is present is
sufficient to elect a director.
Section 2.06 -- Adjournments. Any meeting of stockholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.07 -- General Right to Vote; Proxies. Unless the Certificate of
Incorporation provides for a greater or lesser number of votes per share or
limits or denies voting rights, each outstanding share of stock, regardless of
class, is entitled to one vote on each matter submitted to a vote at a meeting
of stockholders. In all elections for directors, each share of stock may be
voted for as many individuals as there are directors to be elected and for whose
election the share is entitled to be voted. A stockholder may vote the stock the
stockholder owns of record either in person or by proxy. A stockholder may sign
a writing authorizing another person to act as proxy. Signing may be
accomplished by the stockholder or the stockholder's authorized agent signing
the writing or causing the stockholder's signature to be affixed to the writing
by any reasonable means, including facsimile signature. A stockholder may
authorize another person to act as proxy by transmitting, or authorizing the
transmission of, a telegram, cablegram, datagram, or other means of electronic
transmission to the person authorized to act as proxy or to a proxy solicitation
firm, proxy support service organization, or other person authorized by the
person who will act as proxy to receive the transmission. Unless a proxy
provides otherwise, it is not valid more than three years after its date. A
proxy is revocable by a stockholder at any time without condition or
qualification unless the proxy states that it's irrevocable and the proxy is
coupled with an interest. A proxy may be made irrevocable for so long as it is
coupled with an interest. The interest with which a proxy may be coupled
includes an interest in the stock to be voted under the proxy or another general
interest in the Corporation or its assets or liabilities.
Section 2.08 -- List of Stockholders. After fixing a record date for a
stockholders' meeting, the Corporation shall prepare an alphabetical list of the
names of all its stockholders on the record date who are entitled to notice of a
stockholders' meeting. Such list shall be arranged by voting group, and within
each voting group by class or series of shares, and show the address of an
number of shares held by each stockholder. The stockholders' list shall be kept
on file at the registered office of the Corporation for a period beginning ten
days prior to such meeting and shall be kept open at the time and place of such
meeting for the inspection by any stockholder, or any stockholder's agent or
attorney.
Section 2.09 -- Stockholder Proposals. In connection with an annual meeting
of stockholders of the Corporation, including any proposal relating to the
nomination of a director to be selected to the Board of Directors of the
Corporation, the stockholders must be given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Such stockholder's notice shall be
set forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the
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proxy statement as a nominee and to serving as a director if elected); (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and. number
of shares of stock of the Corporation which are owned beneficially and of record
by such stockholders and such beneficial owner. For the 1999 annual meeting the
previous year's meeting shall be deemed to have take place on July 31, 1998;
provided that this sentence shall cease to be a part of the Bylaws after the
holding of the 1999 annual meeting and any adjournments thereof.
ARTICLE III -- BOARD OF DIRECTORS
Section 3.01 -- Function of Directors. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred on or reserved to the stockholders by law or by
the Certificate of Incorporation or Bylaws of the Corporation.
Section 3.02 -- Number of Directors. The Corporation shall have the number
of directors provided in the Certificate of Incorporation until changed as
herein provided. Two-thirds of the entire Board of Directors may alter the
number of directors set by the Certificate of Incorporation to not a number not
to exceed 25 nor less than the minimum number then permitted by law, but the
action may not affect the tenure of office of any director.
Section 3.03 -- Election and Tenure of Directors. The directors shall be
divided into three classes as nearly equal in number as possible. At each
successive annual meeting of stockholders, the holders of stock present in
person or by proxy at such meeting and entitled to vote thereat shall elect
members of each successive class to serve for three year terms and until their
successors are elected and qualify. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class shall, subject to Section 3.05, hold office for
a term that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of directors shorten the term of any incumbent
director.
Section 3.04 -- Removal of Director. Subject to the rights of the holders
of any class separately entitled to elect one or more directors, any director,
or the entire Board of Directors, may be removed from office at any time, but
only for cause and then only by the affirmative vote of the holders of a
majority of the combined voting power of all classes of shares of capital stock
entitled to vote in the election for directors.
Section 3.05 -- Vacancy on Board. Subject to the rights of the holders of
any class of stock separately entitled to elect one or more directors, the
stockholders may elect a successor to fill a vacancy on the Board of Directors
which results from the removal of a director. A director elected by the
stockholders to fill a vacancy which results from the removal of a director
serves for the balance of the term of the removed director. Subject to the
rights of the holders of any class of stock separately entitled to elect one or
more directors, a majority of the remaining directors, whether or not sufficient
to constitute a quorum, may fill a vacancy on the Board of Directors which
results from any cause except an increase in the number of directors, and a
majority of the entire Board of Directors may fill a vacancy which results from
an increase in the number of directors. A director elected by the Board of
Directors to fill a vacancy serves until the next annual meeting of stockholders
and until his successor is elected and qualifies.
Section 3.06 -- Regular Meetings. After each meeting of stockholders at
which directors shall have been elected, the Board of Directors shall meet as
soon as practicable for the purpose of organization and the transaction of other
business. In the event that no other time and place are specified by resolution
of the Board, the President or the Chairman, with notice in accordance with
Section 3.08, the Board
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of Directors shall meet immediately following the close of, and at the place of,
such stockholders' meeting. Any other regular meeting of the Board of Directors
shall be held on such date and at any place as may be designated from time to
time by the Board of Directors.
Section 3.07 -- Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or the
President or by one-third of the Board of Directors by vote at a meeting, or in
writing with or without a meeting. A special meeting of the Board of Directors
shall be held on such date and at any place as may be designated from time to
time by the Board of Directors. In the absence of designation such meeting shall
be held at such place as may be designated in the call.
Section 3.08 -- Notice of Meeting. Except as provided in Section 3.06, the
Secretary shall give notice to each director of each regular and special meeting
of the Board of Directors. The notice shall state the time and place of the
meeting. Notice is given to a director when it is delivered personally to him or
her, left at his or her residence or usual place of business, or sent by
telegraph, facsimile transmission or telephone, at least 24 hours before the
time of the meeting or, in the alternative by mail to his or her address as it
shall appear on the records of the Corporation, at least 72 hours before the
time of the meeting. Unless the Bylaws or a resolution of the Board of Directors
provides otherwise, the notice need not state the business to be transacted at
or the purposes of any regular or special meeting of the Board of Directors. No
notice of any meeting of the Board of Directors need be given to any director
who attends except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened, or to any director who, in writing executed and filed with
the records of the meeting either before or after the holding thereof, waives
such notice. Any meeting of the Board of Directors, regular or special, may
adjourn from time to time to reconvene at the same or some other place, and no
notice need be given of any such adjourned meeting other than the announcement.
Section 3.09 -- Action by Directors. Unless the law or the Certificate of
Incorporation or Bylaws requires a greater proportion, the action of a majority
of the directors present at a meeting at which a quorum is present is action of
the Board of Directors. A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. In the absence of a quorum,
the directors present by majority vote and without notice other than by
announcement may adjourn the meeting from time to time until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified. Any action required or permitted to be taken at a meeting
of the Board of Directors may be taken without a meeting, if an unanimous
written consent which sets forth the action is signed by each member of the
Board and filed with the minutes of proceedings of the Board.
Section 3.10 -- Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting, but shall not constitute attendance
for the purpose of compensation pursuant to Section 3.11.
Section 3.11 -- Compensation. By resolution of the Board of Directors a
fixed sum and expenses, if any, for attendance at each regular or special
meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. Directors who are full-time employees of
the Corporation need not be paid for attendance at meetings of the Board or
committees thereof for which fees are paid to other directors. A director who
serves the Corporation in any other capacity also may receive compensation for
such other services, pursuant to a resolution of the directors.
Section 3.12 -- Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the Corporation
addressed to the Chairman of the Board or the President. Unless otherwise
specified herein such resignation shall take effect upon receipt thereof by the
Chairman of the Board or the President.
Section 3.13 -- Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent or abstention shall be entered in the minutes of the
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meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who votes in favor of such action.
Section 3.14 -- Advisory Directors. The Board of Directors may by
resolution appoint advisory directors to the Board, who may also serve as
directors emeriti, and shall have such authority and receive such compensation
and reimbursement as the Board of Directors shall provide. Advisory directors or
directors emeriti shall not have the authority to participate by vote in the
transaction of business.
Section 3.15 -- Indemnification of Directors. The Corporation shall
indemnify its officers and directors to the full extent allowed under the
Delaware General Corporation Law.
Section 3.16 -- Advancing Expenses Prior to a Decision. The Corporation
shall advance expenses to its directors and officers entitled to mandatory
indemnification to the maximum extent permitted by the Delaware General
Corporation Law, as from time to time amended, and may in the discretion of the
Board of Directors advance expenses to employees, agents and others who may be
granted indemnification.
Section 3.17 -- Other Provisions for Indemnification. The Board of
Directors may, by bylaw, resolution or agreement, make further provision for
indemnification of directors, officers, employees and agents. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Corporation
pursuant to the foregoing provisions, or otherwise, the Corporation has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
Section 3.18 -- Limiting Liability of Directors. The liability of a
director or officer of the Corporation to the Corporation shall be limited as
provided in the Certificate of Incorporation.
ARTICLE IV -- COMMITTEES
Section 4.01 -- Committees. The Board of Directors may appoint from among
its members an Audit Committee, a Compensation Committee, and other committees
composed of at least one director, and delegate to these committees any of the
powers of the Board of Directors, except the power to declare dividends or other
distributions on stock, elect directors, issue stock other than as provided in
the next sentence, recommend to the stockholders any action which requires
stockholder approval, amend the Bylaws, or approve any merger or share exchange
which does not require stockholder approval. If the Board of Directors has given
general authorization for the issuance of stock, a committee of the Board, in
accordance with a general formula or method specified by the Board by resolution
or by adoption of a stock option or other plan, may fix the terms of stock
subject to classification or reclassification and the terms on which any stock
may be issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
Section 4.02 -- Committee Procedure. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of the
committee. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if a unanimous
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written consent which sets forth the action is signed by each member of the
committee and filed with the minutes of the committee. The members of a
committee may conduct any meeting thereof by conference telephone in accordance
with the provisions of Section 3.10.
Section 4.03 -- Audit Committee. The principal functions of the Audit
Committee, if one shall be formed, shall include making recommendations to the
Board of Directors regarding the annual selection of independent public
accountants, reviewing the proposed scope of each annual audit and reviewing the
recommendations of the independent public accountants as a result of their audit
of the Corporation's financial statements. In general, the Audit Committee shall
perform such duties as are customarily performed by an audit committee of a
corporation and shall perform such other duties and have such other powers as
are from time to time assigned to it by the Board of Directors.
Section 4.04 -- Compensation Committee. The principal functions of the
Compensation Committee, if one shall be formed, shall include establishing the
compensation of officers of the Corporation and to establish and administer the
Corporation's compensation programs, including the grant of options under the
Corporation's incentive compensation plans. In general, the Compensation
Committee shall perform such duties as are customarily performed by a
compensation committee of a corporation and shall perform such other duties and
have such other powers as are from time to time assigned to it by the Board of
Directors.
ARTICLE V -- OFFICERS
Section 5.01 -- Executive and Other Officers. The Corporation shall have a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary,
and a Treasurer. The Board of Directors shall designate who shall serve as chief
executive officer, who shall have general supervision of the business and
affairs of the Corporation, and may designate a chief operating officer, who
shall have supervision of the operations of the Corporation; a chief financial
officer, who shall have supervision of the financial and accounting functions of
the Corporation; and a chief information officer, who shall have supervision of
the Corporation's information systems. In the absence of any designation the
Chairman of the Board shall serve as chief executive officer and the President
shall serve as chief operating officer. The same person may hold the offices of
Chairman of the Board and President. The Corporation may also have one or more
Vice-Presidents, assistant officers, and subordinate officers as may be
established by the Board of Directors. A person may hold more than one office in
the Corporation except that no person may serve concurrently as both President
and Vice-President of the Corporation. The Chairman of the Board shall be a
director; the other officers may be directors.
Section 5.02 -- Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors and of the stockholders at
which he or she shall be present. Unless otherwise specified by the Board of
Directors, he or she shall be the chief executive officer of the Corporation. In
general, he or she shall perform such duties as are customarily performed by the
chief executive officer of a corporation and may perform any duties of the
President and shall perform such other duties and have such other powers as are
from time to time assigned to him or her by the Board of Directors.
Section 5.03 -- President. Unless otherwise provided by resolution of the
Board of Directors, the President, in the absence of the Chairman of the Board,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he or she shall be present. Unless otherwise specified by the Board of
Directors, the President shall be the chief executive officer of the Corporation
and perform the duties customarily performed by chief operating officers. He or
she may execute, in the name of the Corporation, all authorized deeds,
mortgages, bonds, contracts or other instruments, except in cases in which the
signing and execution thereof shall have been expressly delegated to some other
officer or agent of the Corporation. In general, he or she shall perform such
other duties customarily performed by a president of a corporation and shall
perform such other duties and have such other powers as are from time to time
assigned to him or her by the Board of Directors of the Corporation.
Section 5.04 -- Vice-Presidents. The Vice-President or Vice-Presidents, at
the request of the chief executive officer or the President, or in the
President's absence or during his or her inability to act, shall perform the
duties and exercise the functions of the President, and when so acting shall
have the powers
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of the President. If there be more than one Vice-President, the Board of
Directors may determine which one or more of the Vice-Presidents shall perform
any of such duties or exercise any of such functions, or if such determination
is not made by the Board of Directors, the chief executive officer, or the
President may make such determination; otherwise any of the Vice-Presidents may
perform any of such duties or exercise any of such functions. Each
Vice-President shall perform such other duties and have such other powers, and
have such additional descriptive designations in their titles (if any), as are
from time to time assigned to them by the Board of Directors, the chief
executive officer, or the President.
Section 5.05 -- Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders, of the Board of Directors and of any committees,
in books provided for the purpose; he or she shall see that all notices are duly
given in accordance with the provisions of the Bylaws or as required by law; he
or she shall be custodian of the records of the Corporation; he or she may
witness any document on behalf of the Corporation, the execution of which is
duly authorized, see that the corporate seal is affixed where such document is
required or desired to be under its seal, and, when so affixed, may attest the
same. In general, he or she shall perform such other duties customarily
performed by a secretary of a corporation, and shall perform such other duties
and have such other powers as are from time to time assigned to him or her by
the Board of Directors, the chief executive officer, or the President.
Section 5.06 -- Treasurer. The Treasurer, shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the Board of
Directors; he or she shall render to the President and to the Board of
Directors, whenever requested, an account of the financial condition of the
Corporation. In general, he or she shall perform such other duties customarily
performed by a treasurer of a corporation, and shall perform such other duties
and have such other powers as are from time to time assigned to him or her by
the Board of Directors, the chief executive officer, or the President.
Section 5.07 -- Assistant and Subordinate Officers. The assistant and
subordinate officers of the Corporation are all officers below the office of
Vice-President, Secretary, or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board of
Directors, the Chief Executive Officer, or the President.
Section 5.08 -- Election, Tenure and Removal of Officers. The Board of
Directors shall elect the officers of the Corporation. The Board of Directors
may from time to time authorize any committee or officer to appoint assistant
and subordinate officers. Election or appointment of an officer, employee or
agent shall not of itself create contract rights. All officers shall be
appointed to hold their offices, respectively, during the pleasure of the Board.
The Board of Directors (or, as to any assistant or subordinate officer, any
committee or officer authorized by the Board) may remove an officer at any time.
The removal of an officer does not prejudice any of his or her contract rights.
The Board of Directors (or, as to any assistant or subordinate officer, any
committee or officer authorized by the Board) may fill a vacancy which occurs in
any office for the unexpired portion of the term.
Section 5.09 -- Compensation. The Board of Directors shall have power to
fix the salaries and other compensation and remuneration, of whatever kind, of
all officers of the Corporation. No officer shall be prevented from receiving
such salary by reason of the fact that he or she is also a director of the
Corporation. The Board of Directors may authorize any committee or officer, upon
whom the power of appointing assistant and subordinate officers may have been
conferred, to fix the salaries, compensation and remuneration of such assistant
and subordinate officers.
ARTICLE VI -- DIVISIONAL TITLES
Section 6.01 -- Conferring divisional titles. The Board of Directors may
from time to time confer upon any employee of a division of the Corporation the
title of President, Vice President, Director, Treasurer or Controller of such
division or any other title or titles deemed appropriate, or may authorize the
Chairman of the Board or the President to do so. Any such titles so conferred
may be discontinued and withdrawn at any time by the Board of Directors, or by
the Chairman of the Board or the President
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if so authorized by the Board of Directors. Any employee of a division
designated by such a divisional title shall have the powers and duties with
respect to such division as shall be prescribed by the Board of Directors, the
Chairman of the Board or the President.
Section 6.02 -- Effect of Divisional Titles. The conferring of divisional
titles shall not create an office of the Corporation under Article V unless
specifically designated as such by the Board of Directors; but any person who is
an officer of the Corporation may also have a divisional title.
ARTICLE VII -- STOCK
Section 7.01 -- Certificates for Stock. Each stockholder is entitled to
certificates which represent and certify the shares of stock he or she holds in
the Corporation. Each stock certificate shall include on its face the name of
the Corporation, the name of the stockholder or other person to whom it is
issued, and the class of stock and number of shares it represents. It shall be
in such form, not inconsistent with law or with the Certificate of
Incorporation, as shall be approved by the Board of Directors or any officer or
officers designated for such purpose by resolution of the Board of Directors.
Each stock certificate shall be signed by the Chairman of the Board, the
President, or a Vice-President, and countersigned by the Secretary, an Assistant
Secretary, the Treasurer, or an Assistant Treasurer. Each certificate may be
sealed with the actual corporate seal or a facsimile of it or in any other form
and the signatures may be either manual or facsimile signatures. A certificate
is valid and may be issued whether or not an officer who signed it is still an
officer when it is issued.
Section 7.02 -- Transfers. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates of stock; and may appoint
transfer agents and registrars thereof. The duties of transfer agent and
registrar may be combined.
Section 7.03 -- Record Dates or Closing of Transfer Books. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be prior to the close of business on the day the
record date is fixed nor, subject to Section 2.06, more than 60 days before the
date on which the action requiring the determination will be taken; the transfer
books may not be closed for a period longer than 20 days; and, in the case of a
meeting of stockholders, the record date or the closing of the transfer books
shall be at least ten days before the date of the meeting.
Section 7.04 -- Stock Ledger. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of shares
of stock of each class which the stockholder holds. The stock ledger may be in
written form or in any other form which can be converted within a reasonable
time into written form for visual inspection. The original or a duplicate of the
stock ledger shall be kept at the offices of a transfer agent for the particular
class of stock, or, if none, at the principal office in the State of Delaware or
the principal executive offices of the Corporation.
Section 7.05 -- Certification of Beneficial Owners. The Board of Directors
may adopt by resolution a procedure by which a stockholder of the Corporation
may certify in writing to the Corporation that any shares of stock registered in
the name of the stockholder are held for the account of a specified person other
than the stockholder, The resolution shall set forth the class of stockholders
who may certify; the purpose for which the certification may be made; the form
of certification and the information to be contained in it; if the certification
is with respect to a record date or closing of the stock transfer books, the
time after the record date or closing of the stock transfer books within which
the certification must be received by the Corporation; and any other provisions
with respect to the procedure which the Board considers necessary or desirable.
On receipt of a certification which complies with the procedure adopted by the
Board in accordance with this Section, the person specified in the certification
is, for the purpose set forth in the certification, the holder of record of the
specified stock in place of the stockholder who makes the certification.
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Section 7.06 -- Lost Stock Certificates. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen, or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
ARTICLE VIII -- FINANCE
Section 8.01 -- Checks, Drafts, etc. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the name
of the Corporation, shall, unless otherwise provided by resolution of the Board
of Directors, be signed by the President, a Vice-President or an Assistant
Vice-President and countersigned by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary.
Section 8.02 -- Annual Statement of Affairs. The President, chief financial
officer or principal accounting officer shall prepare annually a full and
correct statement of the affairs of the Corporation, to include a balance sheet
and a financial statement of operations for the preceding fiscal year. The
statement of affairs shall be submitted at the annual meeting of the
stockholders and, within 20 days after the meeting, placed on file at the
Corporation's principal office.
Section 8.03 -- Fiscal Year. The fiscal year of the Corporation shall be
the twelve calendar months period ending December 31 in each year, unless
otherwise provided by the Board of Directors.
Section 8.04 -- Dividends. If declared by the Board of Directors at any
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Certificate of
Incorporation.
Section 8.05 -- Contracts. To the extent permitted by applicable law, and
except as otherwise prescribed by the Certificate of Incorporation or these
Bylaws with respect to certificates for shares, the Board of Directors may
authorize any officer, employee, or agent of the Corporation to enter into any
contract or execute and deliver any instrument in the name of and on behalf of
the Corporation. Such authority may be general or confined to specific
instances.
Section 8.06 -- Loan. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 8.07 -- Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the Board of Directors may select.
ARTICLE IX -- INDEMNIFICATION
Section 9.01 -- Procedure. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made promptly, and
in any event within 60 days, upon the written request of the director or officer
entitled to seek indemnification (the "Indemnified Party"). The right to
indemnification and advances hereunder shall be enforceable by the Indemnified
Party in any court of competent Jurisdiction, if (i) the Corporation denies such
request, in whole or in part, or (ii) no disposition thereof is made within 60
days. The Indemnified Party's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be reimbursed by the Corporation. It shall
be a defense to any action for advance for expenses that (a) a determination has
been made that the facts then known to those making the determination would
preclude indemnification or (b) the Corporation has not received both (i) an
undertaking as required by law to repay such advances in the event it shall
ultimately be determined that the standard of conduct has not been met and (ii)
a written affirmation by the Indemnified Party of such Indemnified Party's good
faith belief that the standard of conduct necessary for indemnification by the
Corporation has been met.
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Section 9.02 -- Exclusivity, etc. The indemnification and advance of
expenses provided by the Certificate of Incorporation and these Bylaws shall not
be deemed exclusive of any other rights to which a person seeking
indemnification or advance of expenses may be entitled under any law (common or
statutory), or any agreement, vote of stockholders or disinterested directors or
other provision that is consistent with law, both as to action in his or her
official capacity and as to action in another capacity while holding office or
while employed by or acting as agent for the Corporation, shall continue in
respect of all events occurring while a person was a director or officer after
such person has ceased to be a director or officer, and shall inure to the
benefit of the estate, heirs, executors and administrators of such person. All
rights to indemnification and advance of expenses under the Certificate of
Incorporation of the Corporation and hereunder shall be deemed to be a contract
between the Corporation and each director or officer of the Corporation who
serves or served in such capacity at any time while this Bylaw is in effect.
Nothing herein shall prevent the amendment of this Bylaw, provided that no such
amendment shall diminish the rights of any person hereunder with respect to
events occurring or claims made before its adoption or as to claims made after
its adoption in respect of events occurring before its adoption. Any repeal or
modification of this Bylaw shall not in any way diminish any rights to
indemnification or advance of expenses of such director or officer or the
obligations of the Corporation arising hereunder with respect to events
occurring, or claims made, while this Bylaw or any provision hereof is in force.
Section 9.03 -- Severability; Definitions. The invalidity or
unenforceability of any provision of this Article IX shall not affect the
validity or enforceability of any other provision hereof. The phrase "this
Bylaw" in this Article IX means this Article IX in its entirety.
ARTICLE X -- SUNDRY PROVISIONS
Section 10.01 -- Books and Records. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors. The
books and records of a Corporation may be in written form or in any other form
which can be converted within a reasonable time into written form for visual
inspection. Minutes shall be recorded in written form but may be maintained in
the form of a reproduction. The original or a certified copy of the Bylaws shall
be kept at the principal office of the Corporation.
Section 10.02 -- Corporate Seal. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the charge
of the secretary of the Corporation. The Board of Directors may authorize one or
more duplicate seals and provide for the custody thereof. If the Corporation is
required to place its corporate seal to a document, it is sufficient to meet the
requirement of any law, rule, or regulation relating to a corporate seal to
place the word "Seal" adjacent to the signature of the person authorized to sign
the document on behalf of the Corporation.
Section 10.03 -- Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his or her duties, with one or more
sureties and in such amount as may be satisfactory to the Board of Directors.
Section 10.04 -- Voting stock in other corporations. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice-President, or a proxy appointed by either of
them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
Section 10.05 -- Mail. Any notice or other document which is required by
these Bylaws to be mailed shall be deposited in the United States mails, postage
prepaid.
Section 10.06 -- Execution of Documents. A person who holds more than one
office in the Corporation may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer.
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Section 10.07 -- Amendments. Subject to the special provisions of Section
3.02, these Bylaws may be repealed, altered, amended or rescinded and new Bylaws
may be adopted (a) by the stockholders of the Corporation by vote of not less
than 80% of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (considered for this purpose as
one class) cast at any meeting of the stockholders called for that purpose
(provided that notice of such proposal is included in the notice of such
meeting) or (b) by the Board of Directors by a vote of not less than two-thirds
of the Board of Directors at a meeting held in accordance with the provisions of
these Bylaws.
Section 10.08 -- Reliance. Each director, officer, employee and agent of
the Corporation shall, in the performance of his or her duties with respect to
the Corporation, be fully justified and protected with regard to any act or
failure to act in reliance in good faith upon the books of account or other
records of the Corporation, upon an opinion of counsel or upon reports made to
the Corporation by any of its officers or employees or by the adviser,
accountants, appraisers or other experts or consultants selected by the Board of
Directors or officers of the Corporation, regardless of whether such counsel or
expert may also be a director.
Section 10.09 -- Certain Rights of Directors, Officers, Employees and
Agents. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his or her personal capacity or in a capacity as an
affiliate, employee, or agent of any other person, or otherwise, may have
business interests and engage in business activities similar to or in addition
to those of or relating to the Corporation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Charter provides that Startec-Delaware shall indemnify any
person who is or was a director, officer, employee or agent of Startec-Delaware,
or is or was serving at the request of the Startec-Delaware as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise to the fullest extent permitted
by the DGCL, as the same may hereafter be amended, or as otherwise permitted by
law.
Section 145 of the DGCL permits a corporation to indemnify its directors
and officers against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties, if such
directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reason to believe
their conduct was unlawful. In a derivative action, i.e., one by or in the right
of the corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors and officers in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they shall have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
officers or directors are fairly and reasonable entitled to indemnity for such
expenses despite such adjudication of liability.
As permitted by Section 102(b)(7) of the DGCL, the Delaware Charter
provides that no director of Startec-Delaware will be liable to Startec-Delaware
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to Startec-Delaware; (2) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of the law; (3) under
Section 174 of the DGCL regarding improper dividends; or (4) for any transaction
from which a director derived an improper benefit.
Startec-Delaware intends to maintain, at its expense, a policy of insurance
which insures its directors and officers, subject to certain exclusions and
deductions as are usual in such insurance policies, against certain liabilities
which may be incurred in such capacities.
ITEM 21. EXHIBITS
The following exhibits are filed herewith or incorporated herein by
reference.
2(a) Agreement and Plan of Merger (attached to Proxy
Statement/Prospectus as Annex B).
3(a) Form of Restated Certificate of Incorporation of Startec-Delaware
(attached to Proxy Statement Prospectus as Annex C).
3(b) Form of Bylaws of Startec-Delaware (attached to Proxy
Statement/Prospectus as Annex D).
5 Opinion of Schnader Harrison Segal & Lewis LLP.
21(a) List of Subsidiaries.
23(a) Consent of Schnader Harrison Segal & Lewis LLP (included in Exhibit
5).
24.1 Power of Attorney (included on signature page).
99(a) Form of Proxy Card.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes
(1) To file, during any period in which offers or sates are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933,
(ii) To reflect in the prospectus any facts or events arising after
the Effective Time of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the Low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) The undersigned Registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities
which remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned Registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the Registration Statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Com-
II-2
<PAGE>
mission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bethesda, State of
Maryland, on the 29 of June, 1998.
STARTEC GLOBAL HOLDING CORPORATION
By: /s/ RAM MUKUNDA
--------------------------------------
Name: Ram Mukunda
Title: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Ram Mukunda and Prabhav V. Maniyar
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-4, or any
related registration statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------- --------------------------------------------- --------------
<S> <C> <C>
/s/ RAM MUKUNDA President, Chief Executive Officer, June 29, 1998
- --------------------------- Treasurer and Director (Principal
Ram Mukunda Executive Officer)
/s/ PRABHAV V. MANIYAR Senior Vice President, Chief Financial June 29, 1998
- --------------------------- Officer, Secretary and Director
Prabhav V. Maniyar (Principal Financial and Accounting Officer)
/s/ VIJAY SRINIVAS Director June 29, 1998
- ---------------------------
Vijay Srinivas
/s/ RICHARD K. PRINS Director June 29, 1998
- ---------------------------
Richard K. Prins
/s/ NAZIR G. DOSSANI Director June 29, 1998
- ---------------------------
Nazir G. Dossani
</TABLE>
II-4
EXHIBIT 5
Law Firm
Schnader Harrison Segal & Lewis LLP
1225 Eye Street, NW, Suite 600
Washington, D.C. 2005
June 30, 1998
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Registration Statement on Form S-4
Ladies and Gentleman:
We are acting as counsel to Startec Global Holding Corporation, a
Delaware corporation (the "Company"), in connection with the registration of
10,593,088 shares of the Company's Common Stock, par value $0.01 per share (the
"Shares"), pursuant to a Registration Statement on Form S-4 (the "Registration
Statement"), filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
As counsel for the Company, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and other instruments as we
have deemed necessary for the purposes of rendering this opinion. In our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity with the
originals of all documents submitted to us as copies. As to various questions of
fact material to such opinion, we have relied, to the extent we deemed
appropriate, upon representations, statements and certificates of officers and
representatives of the Company and others.
Based upon the foregoing, we are of the opinion that the Shares to be
registered by the Company have been duly authorized by the Company, and when
issued and delivered in accordance with the Agreement and Plan of Merger
referred to in the Registration Statement and in accordance with the resolutions
adopted by the Board of Directors of the Company, will be, validly issued, fully
paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement, and we consent to the use of our name under the caption
"Legal Maters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ SCHNADER HARRISON SEGAL & LEWIS LLP
EXHIBIT 21(A)
SUBSIDIARIES OF STARTEC GLOBAL HOLDING CORPORATION
Startec Global Operating Company (Delaware corporation and direct wholly owned
subsidiary)
Startec Global Finance Company (Delaware corporation and direct wholly owned
subsidiary)
Startec Global License Company (Delaware corporation and direct wholly owned
subsidiary)
- --------------------------------------------------------------------------------
PROXY
STARTEC GLOBAL COMMUNICATIONS CORPORATION PROXY FOR ANNUAL
MEETING OF STOCKHOLDERS JULY 31, 1998.
The undersigned hereby appoints RAM MUKUNDA and PRABHAV V. MANIYAR, or
either of them acting in the absence of the other, with full power of
substitution, the proxy or proxies of the undersigned to attend the annual
meeting of stockholders of Startec Global Communications Corporation, to be held
on July 31, 1998, and at any adjournments thereof, to vote the shares of stock
that the signer would be entitled to vote if personally present as indicated
below and on the reverse side hereof and on any other matters brought before the
meeting, all as set forth in the Proxy Statement of Startec Global
Communications Corporation dated July 2, 1998, receipt of which is hereby
acknowledged.
Please date, sign and return promptly.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STARTEC GLOBAL
COMMUNICATIONS CORPORATION
1. ELECTION OF DIRECTORS: Nominees: Nazir G. Dossani and Richard K. Prins.
[ ] FOR ALL NOMINEES. [ ] WITHHOLD AUTHORITY FOR ALL NOMINEES.
WITHHOLD AUTHORITY FOR THE FOLLOWING NOMINEE(S) AND VOTE FOR ALL OTHER
NOMINEES.
-------------------------------------------------------------------
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. APPROVAL OF THE AMENDED AND RESTATED 1997 PERFORMANCE INCENTIVE PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF REORGANIZATION.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The Board of Directors recommends that you vote FOR all nominees and for
proposals 2 and 3.
Your signature(s) on this form of proxy should be exactly as your name
and/or names appear on this proxy. If the stock is held jointly, each holder
should sign. If signing is by an attorney, executor, administrator, trustee or
guardian, please give full title.
Dated: 1998
----------------------
------------------------------------
Signature
------------------------------------
Signature
THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS
GIVEN WHEN THE FULLY EXECUTED PROXY
IS RETURNED, SUCH SHARES WILL BE
VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF
DIRECTORS FOR ALL NOMINEES AND FOR
PROPOSALS 2 AND 3.
- --------------------------------------------------------------------------------