<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240 14a-11(c) or Section 240 14a-12
</TABLE>
GOLDEN TELECOM, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
GOLDEN TELECOM, INC.
REPRESENTATIVE OFFICES OF GOLDEN TELESERVICES, INC.
12, KRASNOKAZARMENNAYA STREET
MOSCOW, RUSSIA 111250
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
ARLINGTON, VIRGINIA
April 25, 2000
To the Stockholders of
Golden Telecom, Inc.
The 2000 annual meeting of stockholders of Golden Telecom, Inc. (the
"Company" or "GTI") will be held at The Ritz-Carlton at Pentagon City, 1250 S.
Hayes Street, Arlington, Virginia 22202 on May 17, 2000 at 1:00 p.m. local time,
to consider and act on the following matters:
1. The election of nine directors for a term of one year (Item No. 1).
2. Approval of an amendment to the Company's Certificate of
Incorporation to increase the authorized common stock from 50 million
shares to 110 million shares and to authorize 10 million shares of
preferred stock (Item No. 2).
3. Approval of the Equity Participation Plan (Item No. 3).
4. Ratification of the selection of the auditors of the Company for
fiscal year 2000 (Item No. 4).
5. The transaction of such other business as may properly come before
the meeting.
Eligible stockholders of record at the close of business on April 25, 2000
will be entitled to vote at the meeting. If you will need special assistance at
the meeting because of a disability, please notify the Office of the General
Counsel of the Company at the Representative Offices of Golden TeleServices,
Inc., 12, Krasnokazarmennaya Street, Moscow, Russia 111250. A list of
stockholders entitled to vote at the meeting may be examined at the principal
executive offices of the Company at the Representative Offices of Golden
TeleServices, Inc., 12, Krasnokazarmennaya Street, Moscow, Russia 111250.
By Order of the Board of
Directors
JEFFREY A. RIDDELL
Secretary
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
GOLDEN TELECOM, INC.
REPRESENTATIVE OFFICES OF GOLDEN TELESERVICES, INC.
12, KRASNOKAZARMENNAYA STREET
MOSCOW, RUSSIA 111250
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board of Directors" or the "Board") of Golden
Telecom, Inc. (the "Company" or "GTI") of proxies to be voted at the annual
meeting of stockholders in Arlington, Virginia on May 17, 2000 (the "Annual
Meeting"). Enclosed with this Proxy Statement is notice of the meeting, together
with a proxy for your signature if you are unable to attend. Stockholders who
execute proxies may revoke them at any time before they are voted. Any proxy may
be revoked by the person giving it any time before it is voted by delivering to
the Corporate Secretary of the Company at the Representative Offices of Golden
TeleServices, Inc., 12, Krasnokazarmennaya Street, Moscow, Russia 111250, on or
before the business day prior to the meeting or at the meeting itself, a
subsequent written notice of revocation or a subsequent proxy relating to the
same shares or by attending the meeting and voting in person. The approximate
date on which this Proxy Statement and the accompanying form of proxy will first
be sent to the Company's stockholders is April 25, 2000.
Shares of the Company's Common Stock, par value $0.01 per share ("Common
Stock"), represented by properly executed proxies received prior to or at the
meeting, unless such proxies have been revoked, will be voted in accordance with
the instructions indicated in the proxies.
Common stockholders of record (the "Stockholders") at the close of business
on April 25, 2000 (the "Record Date") are entitled to vote at the meeting. On
April 25, 2000, the Company had outstanding 24,080,125 shares of Common Stock
(excluding treasury stock), with each share representing one vote.
If you return your signed proxy to the Company before the annual meeting,
GTI will vote your shares as you direct. You can specify on your proxy whether
your shares should be voted for all, some or none of the nominees for director.
You can also specify whether you approve, disapprove, or abstain from each of
the proposals. The proposals will be presented at the meeting by management.
IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR SHARES,
WE WILL VOTE THEM "FOR" THE ELECTION OF ALL NOMINEES FOR DIRECTOR AS SET FORTH
UNDER "ELECTION OF DIRECTORS" BELOW; AND "FOR" EACH OF THE PROPOSALS.
REQUIRED VOTES
The vote of the holders of a plurality of the votes cast by holders of
shares of Common Stock will elect candidates for director (Item 1 on your
proxy). The vote of the holders of at least a majority of the issued and
outstanding shares of Common Stock, voting together as a single class, is
required to approve the amendments to the Certificate of Incorporation for the
increase in authorized Common Stock and authorization of preferred stock (the
"Preferred Stock") (Item 2 on your proxy). The vote of the holders of at least a
majority of the shares of Common Stock present in person or represented by proxy
at the meeting and entitled to vote, voting together as a single class, is
required to (A) approve the Equity Participation Plan (Item 3 on your proxy),
and (B) ratify the Board of Directors' appointment of Ernst & Young (CIS)
Limited as the Company's independent public accountants for 2000 (Item 4 on your
proxy). Global TeleSystems Group, Inc. ("GTS") owns approximately 63 per cent of
GTI's issued and outstanding share capital, and will be able to approve all the
matters to be presented to the Company's shareholders. GTS has indicated that it
intends to cast all of its votes in favor of the proposals presented. See
"Certain Relationships and Related Transactions" herein.
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<PAGE> 4
Abstentions with respect to the proposal for the increase in authorized
Common Stock and authorization of Preferred Stock will have the same effect as
voting against it. With respect to the proposals to approve the Equity
Participation Plan and ratify the Board of Directors' appointment of Ernst &
Young (CIS) Limited as the Company's independent public accountants for 2000,
the affirmative votes must constitute at least a majority of the required
quorum. The required quorum is a majority of the outstanding shares of voting
stock of GTI. GTI intends to count abstentions both for purposes of determining
presence or absence of a quorum and in the total number of shares represented
and voting with respect to a proposal. Accordingly, abstentions will have the
same effect as a vote against a proposal.
The nominees for director receiving the highest number of affirmative votes
are elected. Therefore, votes against a nominee or votes withheld have no legal
effect. Unless authority to vote is withheld or another contrary instruction is
indicated, properly executed proxies received by GTI prior to or at the annual
meetings will be voted FOR the election of the nominees listed on the following
pages. Should any of the nominees become unavailable at the time of the meeting
to accept nomination or election as a director, the proxyholders named in the
proxy will vote for substitute nominees at their discretion.
Broker non-votes occur when brokers or nominees have voted on some of the
matters to be acted on at a meeting, but fail to vote on certain other matters
because they are not permitted to vote on such matters in the absence of
instructions from the beneficial owners of shares. Broker non-votes, if any,
with respect to a proposal will not be counted for purposes of determining the
presence or absence of a quorum, and will not be counted as shares represented
and voting with respect to that proposal. A broker non-vote will have the same
effect as a vote against any proposal other than the election of directors and
will have no effect on the outcome of the election of directors.
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<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
the Common Stock and rights to acquire Common Stock by stockholders that manage
or own, either beneficially or of record, five percent or more of the Common
Stock, by each of the Company's directors and executive officers, and all the
Company's directors and executive officers as a group. For the purposes of this
table, a person or a group of persons is deemed to have "beneficial ownership"
of any shares as of a date when such person or group has the right to acquire
such shares within 60 days after such date, but such shares are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person. Percentages of shares owned are based on 24,050,125 shares of Common
Stock issued and outstanding at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED OWNED
- ------------------------ ------------ ------------
<S> <C> <C>
Global TeleSystems Group, Inc............................... 15,056,328 62.60
4121 Wilson Boulevard, 8th Floor
Arlington, VA 22203
European Bank of Reconstruction and Development............. 3,032,531 12.61
One Exchange Square
London EC2A 2JN
Capital Group International, Inc. .......................... 1,678,600 6.98
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Ashley Dunster.............................................. -- --
Izzet Guney................................................. -- --
Alexandr M. Knaster......................................... -- --
Stewart J. Paperin.......................................... -- --
Grier C. Raclin............................................. 1,000 *
Robert A. Schriesheim....................................... -- --
H. Brian Thompson........................................... -- --
Jeffrey H. Von Deylen....................................... -- --
Stewart P. Reich............................................ 56,746 *
Stan M. Abbeloos............................................ 19,673 *
David J. Wisher............................................. 14,509 *
Jeff Howley................................................. 6,784 *
Kevin Cuffe................................................. 3,337 *
All Directors and Executive Officers as a group (14
persons).................................................. 102,237 *
</TABLE>
- ---------------
* Less than 1%
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<PAGE> 6
ELECTION OF DIRECTORS
(ITEM NO. 1 ON YOUR PROXY)
THE BOARD OF DIRECTORS
Nine directors will be elected at the Annual Meeting. Each director will
serve until the next annual meeting of the stockholders or until he or she is
succeeded by another qualified director who has been elected.
Each of the nominees is now a member of the Board of Directors of the
Company and has indicated that he is willing and able to serve as a director if
elected and has consented to being named as a nominee in this Proxy Statement.
More information on the nominees is provided below.
The following section sets forth the name and principal business occupation
or employment, and material occupations, positions or offices of each of the
Company's directors and executive officers.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES (ITEM 1 ON YOUR PROXY)
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NAME AGE PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ---- --- ------------------------------------------
<S> <C> <C>
Ashley Dunster............... 37 Vice President of Global Private Equity for
Capital International Research, Inc.
Izzet Guney.................. 41 Director of the EBRD Telecoms, Informatics, Media
Sector
Alexandr M. Knaster.......... 41 Chief Executive Officer of Alfa Bank, Moscow
Stewart J. Paperin........... 52 Chief Financial Officer of the Soros Foundations
Grier C. Raclin.............. 47 Senior Vice President -- External Affairs,
General Counsel and Corporate Secretary of GTS
Stewart P. Reich............. 56 President and Chief Executive Officer of GTI
Robert A. Schriesheim........ 39 Executive Vice President -- Corporate Development
and Chief Financial Officer of GTS
H. Brian Thompson............ 61 Chairman of the Board and Chief Executive Officer
of GTS
Jeffrey H. Von Deylen........ 36 Senior Vice President of Finance of GTS
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Board of Directors
Ashley Dunster was elected to GTI's Board of Directors in January 2000. Mr.
Dunster has served as a member of the Board's Audit Committee and as Chair of
the Compensation Committee since being elected a Director. Mr. Dunster is Vice
President of Global Private Equity for Capital International Research, Inc., a
subsidiary of The Capital Group Companies, Inc. Mr. Dunster is responsible for
private equity investments in Eastern Europe and Africa. Prior to joining
Capital International Research in 1997, Mr. Dunster spent four years at the
European Bank for Reconstruction and Development (EBRD) where he was a principal
banker in the Early Stage Equity Team, with private equity responsibilities
covering Russia, Kazakhstan, Hungary and Slovenia.
Izzet Guney was elected to GTI's Board of Directors in January 2000. Mr.
Guney has served as Chair of the Board's Audit Committee since being elected a
Director. Mr. Guney is the Director of the EBRD Telecoms, Informatics, Media
(TIM) Sector and has worked for the ERBD since 1997. Mr. Guney is responsible
for the overall supervision of origination, structuring and execution of deals
in EBRD's Region for the TIM sector. Prior to joining EBRD, Mr. Guney served as
Vice President of Corporate Development of Paging Network (PageNet)
International and Executive Director of SBC Communications from 1995 to 1996, as
Director from 1994 to 1995, and Associate Director and Manager of SBC's Mergers
and Acquisitions from 1991 to 1994.
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<PAGE> 7
Alexandr M. Knaster was elected to GTI's Board of Directors in September
1999 and has served on the Board's Executive Committee since November 1999 and
on the Compensation Committee since January 2000. Mr. Knaster has been Chief
Executive of Alfa Bank, a commercial bank headquartered in Moscow, since October
1998. Prior to joining Alfa Bank, from 1995-1998, Mr. Knaster was President and
Chief Executive Officer of Credit Suisse First Boston (Moscow) and was
responsible for that investment banking firm's operations in Russia and other
countries of the Commonwealth of Independent States. Before his tenure with
Credit Suisse First Boston (Moscow), Mr. Knaster spent ten years in the
investment banking industry as director with Deutsche Morgan Grenfell in Moscow,
as managing director with Bankers Trust in New York and London, and as managing
director and partner with Simmons & Company International in Houston.
Stewart J. Paperin was elected to GTI's Board of Directors in January 2000.
Mr. Paperin has also served as a director of GTS from March 1997. Mr. Paperin
serves as Chief Financial Officer of the Soros Foundations. In addition, he has
served as the President of Capital Resource East since October 1993. Prior to
that, Mr. Paperin was President of Brooke Group International from 1990 to 1993
where he was responsible for investments in the former Soviet Union. Mr. Paperin
also served as Chief Financial Officer of Western Union Corporation from 1989 to
1990. Mr. Paperin serves as a director of Global TeleSystems Group, Inc., Penn
Octane Corporation and Svyazinvest as well as several emerging Internet and
telecommunication companies.
Grier C. Raclin was elected to GTI's Board of Directors in June 1999. Mr.
Raclin has served as GTS's Senior Vice President -- External Affairs and General
Counsel since September 1997, and was elected Corporate Secretary of GTS in
December 1997. Prior to joining GTS, Mr. Raclin served as Vice Chairman and a
Managing Partner of the Washington, D.C. office of Gardner, Carton & Douglas, a
250-attorney, corporate law firm based in Chicago, Illinois, where his practice
was concentrated in the area of international telecommunications. Mr. Raclin
received his undergraduate and law degrees from Northwestern University and
attended the University of Chicago School of Business Executive Program.
Stewart P. Reich was elected to GTI's Board of Directors in June 1999 and
became President and Chief Executive Officer of GTI in June 1999. Mr. Reich has
served on the Board's Executive Committee since January 2000. Prior to joining
the Company as President and Chief Executive Officer, Mr. Reich was with GTS as
President/GTS-CIS from September 1997 until September 1999. Prior to joining
GTS, Mr. Reich completed 34 years of service with AT&The. His last assignment
was from September 1992 to August 1997 as President of Utel, a joint venture of
AT&The, Deutsche Telekom, PTT Telecom (Netherlands) and Ukrtelekom, a Ukrainian
company which provides international and domestic services in Ukraine.
Robert A. Schriesheim was elected to GTI's Board of Directors in September
1999. Mr. Schriesheim has been Executive Vice President and Chief Corporate
Development Officer of GTS since February 1999. In September 1999, Mr.
Schriesheim was appointed Executive Vice President, Corporate Development and
Chief Financial Officer of GTS. Prior to GTS, from 1997, he was President, Chief
Executive Officer and Director of SBC Equity Partners, Inc., a private equity
firm affiliated with Sanwa Business Credit Corporation that invested in
technology-based service and manufacturing companies. From 1996-1997, Mr.
Schriesheim was Vice President -- Corporate Business Development for Ameritech
Corp., the regional Bell operating company, and Managing Director -- Ameritech
Development Corporation. From 1993-1996, he was Vice President -- Acquisitions
and New Business Development (1993-1994) and Vice President -- Global Corporate
Development (1995-1996) of A.C. Nielsen Company, a consumer marketing research,
information and decision-support services company.
H. Brian Thompson was elected Chairman of GTI's Board of Directors in
September 1999 and has served as Chair of the Board's Executive Committee since
November 1999. In March 1999, Mr. Thompson was elected Chairman of the Board and
Chief Executive Officer of GTS. From January to March 1999, he served as
non-executive chairman of Telecom Eireann. From 1991 until June 1998, Mr.
Thompson was Chairman and Chief Executive Officer of LCI International, Inc., a
provider of telecommunications services in the United States and to more than
230 international locations. In June 1998, LCI was acquired by Qwest
Communications International, Inc. and Mr. Thompson became Vice Chairman of
Qwest. He resigned from the Board of Directors of Qwest in December 1998. He
serves as a member of the boards of directors of Bell
5
<PAGE> 8
Canada International, Inc., PageNet do Brazil, DynCorp and Williams
Communications Group, Inc. He also serves as Co-Chairman of the Global
Information Infrastructure Commission and served as Chairman of the Advisory
Committee for Telecommunications for Ireland's Department of Public Enterprise.
Mr. Thompson is chairman of the Executive Committee of the Board of Directors
for GTS.
Jeffrey H. Von Deylen was elected to GTI's Board of Directors in January
2000 and has served as a member of the Board's Audit Committee since being
elected a Director. Mr. Von Deylen joined GTS as Senior Vice President, Finance
in October 1999. Prior to his appointment, Mr. Von Deylen was Vice President,
Corporate Controller at Qwest Communications International, Inc. He was with
Qwest and LCI International, which Qwest acquired in 1998, for six years. Before
his tenure at Qwest and LCI, Mr. Von Deylen was with Arthur Andersen, the
auditing firm.
Executive Officers
Steward P. Reich Mr. Reich's biography may be found under "Board of
Directors".
Stan M. Abbeloos joined GTI as Chief Operating Officer in June 1999. Prior
to that, Mr. Abbeloos was appointed General Director of Sovam Teleport (GTS-CIS)
from October 1997 and also Deputy General Director of TeleRoss from October
1998. Prior to that, Mr. Abbeloos was Commercial Director of Sovintel from July
1996 until October 1997. From 1991 through 1996, Mr. Abbeloos worked for Alcatel
as General Director of LenBell, a joint venture between Alcatel and Krasnaya
Zaria, which produces and sell Alcatel's switching and transmission equipment in
Russia. Mr. Abbeloos is a citizen of Belgium.
David J. Wisher joined GTI as Chief Financial Officer in June 1999. Prior
to that, Mr. Wisher was with GTS as Vice President-Finance -- GTS-CIS from
January 1997 through June 1999. From 1992 through 1996, Mr. Wisher was the
Assistant Controller for Andrew Corporation, a telecommunications equipment
manufacturer that has made extensive investments in Russia.
Jeffrey A. Riddell joined GTI as General Counsel and Secretary in June
1999. Prior to that, Mr. Riddell was with GTS as Legal Director -- GTS-CIS from
August 1998 until June 1999, and Deputy Director of the Legal
Department -- GTS-CIS from July 1997 to August 1998. Prior to joining GTS, Mr.
Riddell was in private practice from May 1996 until July 1997 with Salans,
Hertzfeld & Heilbronn. Prior to that, he worked at the Pacific Law Center in
Vladivostok and Khabarovsk from May 1994 until June 1996.
Jeffrey L. Howley joined GTI as Chief Operating Officer of Golden Telecom
Ukraine GSM division in September 1999. Prior to that, Mr. Howley served in the
same capacity within GTS-CIS, since May 1999. Mr. Howley joined GTS in May 1995,
initially as Director of Operations and Venture Support based in Moscow. From
July 1997 he served as Cellular Business Director based in Kiev and from January
1998 served as Chief Operating Officer of Golden Telecom Ukraine. Prior to May
1995, Mr. Howley served as Executive Vice President of Russian Telecom, Inc.
based in Houston, Texas.
Kevin J. Cuffe joined GTI as Commercial Director for Sovintel in September
1999. Prior to that, Mr. Cuffe had served in the same capacity within GTS-CIS,
since joining in April 1998. From December 1996 until April 1998, Mr. Cuffe was
the AT&T Business Market Division's Area Director for Southern Europe, Middle
East and Africa. Prior to that, he served with AT&T Russia as Projects
Director -- New Ventures, based in Moscow from April 1995 until October 1996.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company was incorporated on June 10, 1999. The Board of Directors met
six times after June 10, 1999, the date that the three original directors of the
Company were elected to the Board of Directors. On September 30, 1999, the
Common Stock became publicly traded on the Nasdaq National Market. Prior to that
date, the Company was a wholly owned indirect subsidiary of GTS, and the Board
of Directors regularly took action by unanimous consent or the Company acted on
the basis of written consent of the sole stockholder. During 1999, each of the
incumbent directors attended 75 percent or more of the meetings of the Board of
Directors and of the committees on which the directors served.
6
<PAGE> 9
The Board of Directors has the following standing committees: Audit
Committee, Executive Committee and Compensation Committee. During 1999, the
Audit Committee, the Executive Committee and the Compensation Committees held no
meetings. In the year 2000, the Audit Committee has met three times and the
Compensation Committee has met one time.
The Audit Committee assists the Board in fulfilling its oversight
responsibilities by reviewing proposed financial plans, the financial
information provided to shareholders and others, systems of internal controls
which management and the Board of Directors have established and the audit
process. The Audit Committee, in consultation with financial officers of the
Company and the independent public accountants, will assist in establishing the
scope of the annual audit. The Audit Committee interacts with the outside
auditors to ensure the outside auditors' ultimate accountability to the Board
and the Committee.
The Securities and Exchange Commission recently adopted new rules and
amendments to its current rules to require, among other things, that the Company
include in its proxy statements relating to votes of shareholders occurring
after December 15, 2000 certain disclosures about GTI's Audit Committee and
reports from GTI's Audit Committee containing certain disclosures. Similarly,
the Nasdaq, where the Company's shares are traded, enacted new rules concerning
primarily the composition, independence, financial literacy and expertise of the
members of the Audit Committee. The Company must comply with the new NASD rules
prior to June 2001. The Company believes that it has taken adequate steps to
ensure that it is currently in compliance with the new rules of both the SEC and
the NASD.
The current members of the Audit Committee are Izzet Guney (chair), Ashley
Dunster, and Jeffrey Von Deylen.
AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE
COMMON STOCK AND TO AUTHORIZE PREFERRED STOCK
(ITEM NO. 2 ON YOUR PROXY)
The Board of Directors has voted unanimously to approve an amendment to a
provision of the Company's Certificate of Incorporation and to recommend the
amendment to the Stockholders. The proposed amendment, if approved, would
increase the aggregate number of authorized shares of Common Stock from 50
million to 110 million and authorize the issue of 10 million shares of Preferred
Stock (Item No. 2). If approved by the stockholders of a majority of the
outstanding shares of Common Stock, the proposed amendment to the Company's
Certificate of Incorporation will become effective upon the filing of one or
more Certificates of Amendment with the Secretary of State of the State of
Delaware, which will occur as soon as practicable after authorization.
The Company believes the increase in the number of authorized shares of
Common Stock will provide flexibility in connection with financings,
acquisitions of other companies, other investment opportunities, stock dividends
or splits, and for other corporate purposes that the Board of Directors deems
advisable.
One purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of Preferred Stock and
the additional Common Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes such as raising
additional equity capital, could have the effect of making it more difficult or
tend to discourage a merger, tender offer or proxy contest, the assumption of
control by a holder of a large block of the Company's securities or the removal
of incumbent management. Under certain circumstances, this could have the effect
of decreasing the market price of the Common Stock. The Company has no present
plans to issue any shares of Preferred Stock or Common Stock.
After approval by the shareholders to amend the Company's Certificate of
Incorporation, the Company's Board of Directors may, without further action by
the Company's stockholders (unless required by applicable law or regulation),
from time to time, direct the issuance of shares of Preferred Stock and the
additional Common Stock. Under the terms of the amended Certificate of
Incorporation, the Board of Directors would be authorized, subject to any
limitations prescribed by law, to issue such shares of Preferred Stock in one or
more series. Each such series of Preferred Stock shall have such rights,
preferences, privileges and restrictions,
7
<PAGE> 10
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be determined by the Board of
Directors. The Board of Directors of the Company, without stockholder approval
unless required by applicable law or regulation, may issue shares of Preferred
Stock with voting and conversion rights which could adversely affect the holders
of shares of Common Stock. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds available
for the payment of dividends on shares of Common Stock. Holders of shares of
Preferred Stock may be entitled to receive a preference payment in the event of
any liquidation, dissolution or winding-up of the Company before any payment is
made to the holders of shares of Common Stock.
If stockholders approve this proposal, the first paragraph of Article
Fourth of the Company's certificate of incorporation will be amended to read as
follows:
"The total number of shares of all classes of stock that the Corporation
shall have authority to issue is 110,000,000 of which there shall be 100,000,000
shares of common stock, par value $0.01 per share, and 10,000,000 shares of
preferred stock, par value $0.01 per share."
Currently, the Company has no specific plans or proposals to use shares of
its Common Stock or Preferred Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE INCREASE IN
THE AUTHORIZED COMMON STOCK AND AUTHORIZATION OF PREFERRED STOCK (ITEM 2 ON YOUR
PROXY)
APPROVAL OF THE GOLDEN TELECOM, INC. EQUITY PARTICIPATION PLAN
(ITEM NO. 3 ON YOUR PROXY)
GOLDEN TELECOM, INC. EQUITY PARTICIPATION PLAN
Prior to the Company's initial public offering (the "IPO"), the independent
directors on the compensation committee of GTI's parent company and, at the
time, the Company's sole shareholder and GTI's Board of Directors approved the
1999 Equity Participation Plan of GTI, (the "Equity Plan"). A total of 4,023,551
shares of Common Stock are reserved for issuance under the Equity Plan. The
principal purpose of the Equity Plan is to align the interests of GTI's
directors, officers and employees with the interests of GTI's shareholders. The
Equity Plan provides incentives for GTI's officers and employees through
granting of options and restricted stock, and induces officers and employees to
remain with the Company. The Equity Plan is also intended to assist the Company
in attracting and retaining qualified independent directors (that is, directors
who are not employed by the Company and may be categorized as independent in
accordance with NASD rules and applicable securities and tax legislation), by
providing for the grant of options to independent directors.
Under the Equity Plan, not more than 4,023,551 shares of Common Stock
(subject to antidilution and other adjustment provisions) are authorized for
issuance upon exercise of options or upon vesting of restricted or deferred
stock awards. Of these 4,023,551 shares, not more than 402,355 are designated
for issuance solely pursuant to Incentive Stock Options, which are described
below. Furthermore, the maximum number of shares, which may be granted as
options and restricted stock granted under the Equity Plan to any individual in
any calendar year cannot exceed 750,000 (subject to antidilution and other
adjustment provisions).
The principal features of the Equity Plan are summarized below, but the
summary is qualified in its entirety by reference to the Equity Plan. The full
Equity Plan, which was filed as an exhibit to the registration statement dated
September 30, 1999, has been amended and is attached as an Appendix to this
Proxy Statement.
Administration
The Compensation Committee of the Board of Directors or another committee
or subcommittee appointed under the terms of the Equity Plan (the "Committee")
which other committee or subcommittee
8
<PAGE> 11
consists solely of two or more members of the Board of Directors, each of whom
is both a "non-employee director" for purposes of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (which is referred to as the
"Exchange Act") and an "outside director" for the purposes of Section 162(m) of
the Internal Revenue Code (which is referred to as the "Code"), will administer
the Equity Plan with respect to grants to GTI's employees or consultants and the
full Board of Directors will administer the Equity Plan with respect to options
granted to independent directors.
Notwithstanding the foregoing, the full Board of Directors may administer
the Equity Plan with respect to grants to GTI's employees or consultants, except
with respect to matters which under Rule 16b-3 of the Exchange Act or Section
162(m) of the Code are required to be determined by the Committee.
Subject to the terms and conditions of the Equity Plan, the Committee has
the authority to select the persons to whom awards are to be made, to determine
the number of shares to be subject thereto and the terms and conditions thereof,
to interpret the provisions of the Equity Plan, and to make all other
determinations and to take all other actions necessary or advisable for the
administration of the Equity Plan with respect to grants or awards made to
employees or consultants. The Committee (and the Board of Directors) is also
authorized to adopt, amend and rescind rules relating to the administration of
the Equity Plan. Notwithstanding the foregoing, the Board shall conduct the
general administration of the Equity Plan with respect to options granted to
independent directors.
Eligibility
Options and restricted stock under the Equity Plan may be granted to
individuals who are GTI's employees, directors or consultants (or employees or
consultants of any of GTI's current or future subsidiaries) selected by the
Committee for participation in the Equity Plan. In addition, the Equity Plan
provides for certain periodic grants of non-qualified stock options to
independent directors. Approximately 50 employees and consultants and four
directors are eligible for participation.
Independent Directors
The Equity Plan provides for periodic grants of non-qualified stock options
to independent directors. Each person who is elected to serve as an independent
director will receive, as of the date of such election, an option to purchase
10,000 shares of Common Stock, and will receive an option to purchase 2,500
shares of Common Stock on a date which occurs during the first quarter of each
calendar year after such initial election. Each such option will have a
per-share exercise price equal to the fair market value per share at the close
of the trading day previous to the day that the option is granted. Each such
option will become exercisable in accordance with the terms of the Equity Plan.
No portion of an option granted to any independent director shall be exercisable
ten years from the date of grant or, except under certain circumstances, after
the termination of the independent director's services as GTI's director.
Awards Under the Equity Plan
The Equity Plan provides that the Committee may grant or issue stock
options and restricted stock, or a combination thereof, to any eligible
employee, director or consultant. Each such award will be set forth in a
separate agreement with the person receiving the award and will indicate the
type, terms and conditions of the award.
Nonqualified Stock Options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which, except with respect to NQSOs intended
to qualify as performance-based compensation under Section 162(m) of the Code,
which price may be less than Fair Market Value on the date of grant, and usually
will become exercisable (in the discretion of the Committee) in one or more
installments after the grant date, subject to the participant's continued
employment with the Company and/or subject to the satisfaction of individual
performance targets established by the Committee. NQSOs may be granted for any
term specified by the Committee. Notwithstanding the foregoing, NQSOs granted to
independent directors shall be subject to the terms described above. There are
2,922,500 securities underlying the options. The
9
<PAGE> 12
market value of the securities underlying the options is variable, based on the
Fair Market Value of the securities.
Incentive Stock Options ("ISOs") will be designed to comply with certain
restrictions contained in the Internal Revenue Code. Among such restrictions,
ISOs: (1) must have an exercise price not less than the fair market value of a
share of Common Stock on the date of grant, (2) may only be granted to
employees, (3) must expire within a specified period of time following the
optionee's termination of employment, and (4) must be exercised within ten years
after the date of grant; but may be subsequently modified to disqualify them for
treatment as ISOs. In the case of an ISO granted to an individual who owns (or
is deemed to own) at least 10% of the total combined voting power of all of
GTI's classes of stock, the Equity Plan provides that the exercise price must be
at least 110% of the fair market value of a share of Common Stock on the date of
grant and the ISO must expire upon the fifth anniversary of the date of its
grant. No ISOs have been granted at this time.
Restricted Stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Committee. Restricted stock, typically, may be repurchased by the Company at
the original purchase price if the conditions or restrictions are not met. In
general, restricted stock may not be sold, or otherwise transferred, until
restrictions are removed or expire. Purchasers of restricted stock, unlike
recipients of options, will have voting rights and will receive dividends in
escrow prior to the time when the restrictions lapse.
Plan Benefits. GTI cannot determine the amounts of awards under the Plan
that will be granted under the Equity Plan or the benefits thereof to the
executive officers named in the Summary Compensation Table herein, the executive
officers as a group, and employees who are not executive officers as a group
because, under the Equity Plan, the number of awards to be granted is within the
discretion of the Committee. GTI also cannot determine the number of options to
be granted under the Equity Plan to the non-employee directors as a group
because such number is dependent upon, among other things, whether any new
directors are appointed or elected to the Board. GTI also cannot provide
disclosure on the dollar value of options or restricted stock as the price of
stock varies according to market fluctuation.
Under the Equity Plan, options for the purchase of Common Stock were
granted at the time of the initial public offering of GTI's Common Stock on
September 30, 1999 to the individuals, groups and to one outside director, as
set out in the following table. Options were granted to two additional outside
directors upon their appointment to the Board in January 2000. Mr. Ashley
Dunster waived his right as an independent director to receive options under the
Equity Plan. The exercise price of the options granted at the time of the IPO
was set at the IPO price of the Common Stock, which was determined to be the
Fair Market Value (as defined in the Equity Plan) of GTI Common Stock at the
date of the grant. The exercise price of the options granted to the two outside
directors in January 2000 was the Fair Market Value of the Common Stock at that
time. The other terms of the options granted under the Equity Plan were set by
the Committee in accordance with the Plan. The options were granted in
consideration of the recipient's past and future service to GTI. Details of the
exercise of options are set forth in the Option Exercise Table under "Executive
Compensation" herein. The Committee does not intend to award any Restricted
Stock in the foreseeable future.
10
<PAGE> 13
The following table sets out the number of options for the purchase of
Common Stock which have been granted and will be granted within a foreseeable
time to the following individuals and groups. Because the vesting of these
options is contingent on approval of the Equity Plan and achieving certain
vesting dates, the dollar value is not determinable.
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS DOLLAR VALUE
- ----------------- ----------------- ------------
<S> <C> <C>
Stewart P. Reich........................................... 500,000 Not determinable
President and Chief Executive Officer
Stan Abbeloos.............................................. 300,000 Not determinable
Senior Vice President and Chief Operating Officer
David J. Wisher............................................ 300,000 Not determinable
Senior Vice President, Chief Financial Officer and
Treasurer
Jeff Howley................................................ 110,000 Not determinable
Chief Operating Officer of Golden Telecom (Ukraine)
Kevin Cuffe................................................ 60,000 Not determinable
Commercial Director -- Sovintel
Current Executive Officers as a Group (6 persons).......... 1,570,000 Not determinable
Current Non-Employee Director Group (3 persons)............ 32,500 Not determinable
Current Non-Executive Officer Employee Group (20
persons*)................................................ 1,320,000 Not determinable
</TABLE>
- ---------------
* Includes a trust to which options are issued for the benefit of an
indeterminable number of employees.
The terms of the options granted to the named executive officers at the
time of the IPO are set forth in the Options Grants Table under "Executive
Compensation" herein. No awards have been granted to the associates of outside
directors, the named executive officers, or director nominees, and no other
awards have been granted under the plan.
Securities Laws and Federal Income Taxes
Securities Laws. The Equity Plan is intended to conform with all provisions
of the Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the SEC thereunder, including, without limitation, Rule 16b-3. To
the extent permitted by applicable law, the Equity Plan and options or
restricted stock granted thereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
General Federal Tax Consequences. Under current federal laws, in general,
recipients of awards and grants of nonqualified stock options and restricted
stock under the Equity Plan are generally not taxable at the time of grant but
are taxable under Section 83 of the Code upon their receipt of Common Stock or
cash with respect to the exercise or vesting of such awards or grants and,
subject to Section 162(m) of the Code, the Company will be entitled to an income
tax deduction with respect to the amounts taxable to these recipients. Under
Sections 421 and 422 of the Code, recipients of ISOs are generally not taxable
at the time of grant or on their receipt of Common Stock upon their exercises of
ISOs if the ISOs and option stock are held for certain minimum holding periods
and, in such event, GTI is not entitled to income tax deductions with respect to
such exercises.
Section 162(m) Limitation. In general, under Section 162(m) of the Internal
Revenue Code, income tax deductions of publicly-held corporations may be limited
to the extent total compensation (including base salary, annual bonus, stock
option exercises and non-qualified benefits paid) for certain executive officers
exceeds $1 million in any one year. However, under Section 162(m), the deduction
limit does not apply to certain "performance-based compensation" established by
an independent compensation committee which is adequately disclosed to, and
approved by, stockholders. In particular, stock options will satisfy the
"performance-based compensation" exception if the awards are made by a
qualifying compensation committee, the plan sets the maximum number of shares
that can be granted to any person within a specified period and the
11
<PAGE> 14
compensation is based solely on an increase in the stock price after the grant
date (that is, the option exercise price is equal to or greater than the fair
market value of the stock subject to the award on the grant date). Under an
Internal Revenue Code Section 162(m) transition rule for compensation plans of
corporations which are privately held and which become publicly held in an
initial public offering, the Equity Plan will not be subject to Section 162(m)
until the transition date, which is the earliest of (1) the material
modification of the Equity Plan; (2) the issuance of all Common Stock and other
compensation that has been allocated under the Equity Plan; or (3) the first
meeting of shareholders at which directors are to be elected that occurs after
December 31, 2002. After this transition date, rights and awards granted under
the Equity Plan, other than options will not qualify as "performance-based
compensation" for purposes of Section 162(m) unless such rights and awards are
granted or vest upon preestablished objective performance goals, the material
terms of which are disclosed to and approved by GTI's shareholders.
GTI have attempted to structure the Equity Plan in such a manner that,
after the transition date discussed above, subject to obtaining shareholder
approval of the Equity Plan, the remuneration attributable to stock options
which meet the other requirements of Section 162(m) will not be subject to the
$1,000,000 limitation. GTI has not, however, requested a ruling from the IRS or
an opinion of counsel regarding this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
EQUITY PARTICIPATION PLAN (ITEM 3 ON YOUR PROXY)
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM NO. 4 ON YOUR PROXY)
The Board of Directors has selected Ernst & Young (CIS) Limited ("Ernst &
Young"), independent public accountants, to audit the consolidated financial
statements of the Company for the fiscal year ending December 31, 2000 and
recommends that the stockholders ratify such selection.
The submission of the appointment of Ernst & Young is not required by law
or by the By-laws of the Company. The Board of Directors is nevertheless
submitting it to the stockholders to ascertain their views. If the stockholders
do not ratify the appointment, the selection of other independent public
accountants will be considered by the Board of Directors. If Ernst & Young shall
decline to accept or become incapable of accepting its appointment, or if its
appointment is otherwise discontinued, the Board of Directors will appoint other
independent public accountants.
A representative of Ernst & Young is expected to be present at the Annual
Meeting, will have the opportunity to make a statement, and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF AUDITORS (ITEM 4 ON YOUR PROXY)
EXECUTIVE COMPENSATION
Compensation of Directors and Executive Officers
Each non-employee member of GTI's Board of Directors will receive an annual
retainer fee of $15,000. In addition, each non-employee member of the Board of
Directors will receive a fee of $1,000 for each Board meeting attended in person
and a fee of $500 for each Board meeting attended by telephone. Non-employee
members will also receive a fee of $750 for each Board committee meeting
attended in person and a fee of $500 for each Board committee attended by
telephone. However, Board committee fees will not be paid if the meeting is held
on the same day as a Board meeting.
Directors who are also GTS employees have waived their rights to all forms
of Director compensation, including rights to stock options, which is in line
with GTS' company policy. Mr. Dunster has also waived his rights to all forms of
Director compensation, including rights to stock options, which is in line with
the policy of Capital International Research, Inc.
12
<PAGE> 15
Report from the Compensation Committee
The Compensation Committee of the Company was established in November 1999
and constituted in January 2000 when a sufficient number of independent
directors were appointed to the Board of Directors so as to optimize the
composition of the Committee. The Company's board of directors, the sole
shareholder, or a subcommittee of the board of directors of the sole
stockholder, as appropriate, took decisions regarding compensation in the
Company prior to the January 2000.
The role of the Compensation Committee is to oversee and direct the
development of executive compensation policies and programs that are consistent
with, explicitly linked to, and supportive of the strategic objectives of
growing the Company's businesses and maximizing shareholder value. The
Committee's specific responsibilities include determining the appropriate levels
of compensation, including salaries, annual incentives, long-term incentives and
employee benefits, for members of the Company's senior management, including
executive officers. The Company believes that a strong link should exist between
executive compensation and management's ability to maximize shareholder value.
This belief is adhered to by developing incentive compensation programs that
provide competitive compensation and reflect Company performance.
Compensation Philosophy
The four fundamental principles to which the Committee adheres in
discharging its responsibilities are as follows. First, the majority of annual
and long-term compensation for the Company's executive officers should be at
risk, with actual compensation levels correlating with the Company's performance
in certain key areas determined by the Committee. Second, over time, incentive
compensation of the Company's executive officers should focus more heavily on
long-term rather than short-term accomplishments and results. Third, equity-
based compensation should be used on an increasing basis so as to provide
executive officers with clear and direct links to the shareholders' interests.
Fourth, the overall executive compensation program should be competitive,
equitable and structured so as to ensure the Company's ability to attract,
retain, motivate and reward the talented executives who are essential to the
Company's continuing success. Total compensation, rather than individual
compensation elements, is the focus of the Company's intent to provide
competitive compensation opportunities.
Compensation Elements
The Company's compensation program for executives and senior management
consists of four principal elements, each of which is vitally important in
meeting the Company's need to attract, retain, motivate and reward
highly-qualified executives. The four principal elements are:
Base Salaries
Base salaries for executive officers and senior management are generally
set at levels that reflect the competitive marketplace for companies that are of
comparable size and complexity and would be considered competitors of the
Company in attracting and retaining qualified executives. The salaries of the
executive officers are reviewed and approved by the Compensation Committee based
on its assessments of each executive's experience and performance and a
comparison of salaries of peers in other companies.
Annual Performance Incentives
Incentive awards have been made on a periodic basis to executive officers
and senior management on the basis of Company, business unit and individual
performance relative to budget in such areas as revenue, cash flow, operating
income, operating margin and the like. The Company intends to continue providing
incentives in concert with other compensation elements in order to maintain a
competitive total compensation program for its executive officers. The Committee
reviews and approves all performance measures and goals established under the
annual and long-term incentive plans. The Committee also approves all incentive
payments to executive officers.
13
<PAGE> 16
Long-Term Incentives
The Company relies on stock options as the principal means of providing
long-term incentive compensation. Stock options have been, and will continue to
be, granted to executive officers under the 1999 Equity Participation Plan.
Benefits
Benefits offered to executive officers serve a different purpose than do
other elements of the total compensation program. In general, they provide for
retirement income and serve as a safety net against problems that can arise from
illness, disability or death. Benefits offered to executive officers are
basically those offered to other employees of the Company.
Evaluation Procedures
In determining matters regarding executive officer compensation (other than
the Chief Executive Officer), the Committee, with the Chairman and Chief
Executive Officer, reviews the key executives including the executive officers,
the respective areas of authority and responsibility of the various executive
officers, and the performance and contribution of each to the efforts of the
Company in meeting its goals.
The Committee has confirmed that the compensation paid in 1999 to the named
executive officers is consistent with the Company's compensation philosophy and
objectives.
Compensation of the Chief Executive Officer
Prior to the Company's IPO, decisions regarding the compensation of the
President and Chief Executive Officer, Mr. Stewart Reich, were the
responsibility of the sole stockholder and the compensation committee of the
sole stockholder. Upon assuming his position as President and Chief Executive
Officer of the Company, Mr. Reich continued his employment under the terms and
conditions of the employment agreement that he entered into with the sole
stockholder in April 1999. Under that agreement, Mr. Reich's annual base salary
is set at $275,000 and he is eligible for a bonus of up to 75% of his base
salary, depending on the financial results of the Company. For the year 1999,
Mr. Reich served as President of the division of GTS known as GTS-CIS until June
1999 and as the President and Chief Executive Officer of Golden Telecom Inc.
thereafter. During 1999, Mr. Reich received $268,750 as his base salary and
$213,006 as a bonus payment. This bonus payment reflects the Company's
performance in revenues, earnings, strategy development and execution and the
completion of the initial public offering of the Company. In evaluating Mr.
Reich's compensation, the sole stockholder and its compensation consultant
compared the Company's compensation practices and levels to those of other
companies involved in similar businesses, including but not limited to, the
companies included in the Performance Graph. Based on this review, the sole
stockholder and its compensation committee determined Mr. Reich's compensation
to be appropriate. For the year 2000, the Company's Compensation Committee will
make decisions regarding the compensation of Mr. Reich.
Deductibility of Certain Executive Compensation
Beginning in 1994, the Omnibus Reconciliation Act of 1993 limits to $1
million the amount that may be deducted by a publicly-held corporation for
compensation paid to each of its named executive officers in a taxable year,
unless the compensation in excess of $1 million is "qualified performance-based
compensation." The Committee and the Company have determined that the Company's
practice is to design its short-term and long-term compensation plans to qualify
for the exemption from the deduction limitations of Section 162(m) of the
Internal Revenue Code and to be consistent with providing appropriate
compensation to executives. Shareholder approval of incentive compensation plans
and various provisions thereunder covering the executive officers has been
sought and obtained and will be sought in the future to continue to qualify
performance-based compensation for the exemption. Although it is the Company's
intent to qualify compensation for the exemption from the deduction limitations,
the Company's compensation practices have been, and will continue to be,
designed to serve the best interests of the shareholders regardless of whether
specific compensation qualifies for the exemption.
14
<PAGE> 17
Compensation Committee Members of GTS during 1999:
Bernard J. McFadden, Chairman
W. James Peet
Frank V. Sica
Adam Solomon
David Dey (no longer on the Committee as of July 1999)
Michael Greeley (resigned from Board in March 1999)
Stewart J. Paperin (no longer on the Committee as of July 1999)
Compensation Committee Member of the Company after January 2000:
Ashley Dunster, Chairman
Alexandr Knaster
H. Brian Thompson, ex officio
15
<PAGE> 18
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid or awarded to, or
earned by, GTI's Chief Executive Officer and the four other most highly
compensated executive officers serving the operations of GTI in 1997, 1998, and
1999. Each bonus listed below represents a cash bonus paid in the year indicated
for services rendered in the immediately preceding year except for bonuses paid
in 1999, which is for services rendered in 1998 and the first three quarters of
1999. The number of securities underlying stock options refers to shares of GTS
and GTI common stock underlying stock options awarded under the GTS and GTI
Stock Option Plan. Note that, prior to the Company's IPO, the amounts shown were
paid by GTS.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------- RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ SAR COMPENSATION(1)
- ------------------ ---- -------- -------- ------------ ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stewart P. Reich........ 1999 $268,750 $213,006 $1,349,915(3) 56,746 500,000(9) $5,451
President and Chief 1998 $243,750 $ 98,300 $ 187,008(3) 0 300,000(10) $5,197
Executive Officer(2) 1997 $ 78,333 $ 75,000 $ 59,772(3) 0 225,000(10) $ 384
Stan Abbeloos........... 1999 $182,000 $102,450 $ 794,340(4) 19,673 300,000(9) $ 0
Senior Vice President 1998 $173,837 $ 66,700 $ 93,600(4) 0 60,000(10) $ 0
and Chief Operating 1997 $160,000 $ 64,000 $ 93,600(4) 0 72,000(10) $ 0
Officer
David J. Wisher......... 1999 $158,500 $ 55,658 $ 455,294(5) 14,509 300,000(9) $4,332
Senior Vice President, 1998 $152,999 $ 35,000 $ 225,373(5) 0 60,000(10) $4,418
Chief Financial 1997 $145,000 $ 15,000 $ 170,472(5) 0 54,000(10) $4,000
Officer and Treasurer
Jeff Howley............. 1999 $140,000 $ 73,339 $ 257,637(6) 6,784 110,000(9) $4,245
Chief Operating 1998 $140,000 $ 32,942 $ 599,276(6) 0 36,000(10) $4,269
Officer of Golden 1997 $121,233 $ 39,600 $ 94,807(6) 0 27,000(10) $4,000
Telecom (Ukraine)
Kevin Cuffe............. 1999 $137,500 $ 62,233 $ 134,726(8) 3,337 60,000(9) $4,134
Commercial 1998 $101,250 $ 50,000 $ 88,332(8) 0 28,000(10) $2,205
Director-Sovintel(7) 1997 $ 0 $ 0 $ 0 0 0 $ 0
</TABLE>
- ---------------
(1) Amounts disclosed represent the sum of premiums paid by the company for $1
million in term life insurance for each named executive officer and
contributions by the company under the GTS 401(k) Plan to each named
executive's account, except Mr. Abbeloos, who does not participate in the
401(k) Plan because of his non-US citizenship. In each case in which the
company paid 401(k) Plan contributions, $4,000 was paid in 1999, 1998, and
1997 to the named executive officers, except for Mr. Reich in 1997 and Mr.
Cuffe in 1998, as they had not completed an entire year of service with the
company.
(2) Mr. Reich commenced his employment with the company in 1997.
(3) For 1999, the amount disclosed includes an overseas living allowance of
$72,000, rent on a residence in Moscow of $87,000, and stock option income
of $1,208,500 less a tax equalization repayment of $27,017 that Mr. Reich
reimbursed to the Company to settle his final 1998 tax computation.
For 1998, the amount disclosed includes an overseas living allowance of
$72,000, rent on a residence in Moscow of $90,000, and a tax equalization
payment of $19,844 that compensated Mr. Reich for the higher taxes he pays
because he resides in Russia instead of the United States.
For 1997, the amount disclosed includes an overseas living allowance of
$24,000 and rent on a residence in Moscow of $30,300.
(4) For 1999, the amount disclosed includes an overseas living allowance of
$42,000, rent on a residence in Moscow of $48,900 and stock option income
of $699,440.
16
<PAGE> 19
For 1998, the amount disclosed includes an overseas living allowance of
$42,000 and rent on a residence in Moscow of $51,600.
For 1997, the amount disclosed includes an overseas living allowance of
$42,000 and rent on a residence in Moscow of $51,600.
(5) For 1999, the amount disclosed includes an overseas living allowance of
$53,400, rent on a residence in Moscow of $57,072, dependent tuition of
$30,400, and stock option income of $283,400.
For 1998, the amount disclosed includes an overseas living allowance of
$53,400, rent on a residence in Moscow of $90,000, a tax equalization
payment of $42,271 that compensated Mr. Wisher for the higher taxes he
pays because he resides in Moscow instead of the United States, and
dependent tuition of $22,500.
For 1997, the amount disclosed includes an overseas living allowance of
$53,400, rent on a residence in Moscow of $90,000 and dependent tuition of
$25,300.
(6) For 1999, the amount disclosed includes an overseas living allowance of
$53,400, rent on a residence in Moscow of $50,400, and stock option income
of $144,233.
For 1998, the amount disclosed includes an overseas living allowance of
$43,429, rent on a residence in Moscow of $49,800, and stock option income
of $423,486.
For 1997, the amount disclosed includes an overseas living allowance of
$42,000 and rent on a residence in Moscow of $40,000.
(7) Mr. Cuffe commenced his employment with the Company in 1998.
(8) For 1999, the amount disclosed includes an overseas living allowance of
$42,000 and rent on a residence in Moscow of $60,000.
For 1998, the amount disclosed includes an overseas living allowance of
$31,500 and rent on a residence in Moscow of $45,000
(9) Shares of Common Stock underlying stock options awarded under the Equity
Plan.
(10) Nonvested options at December 31, 1999 were surrendered for a mixture of
restricted shares and options to purchase shares of GTI.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on stock option grants of GTI
Common Stock to the five most highly compensated officers in 1999 under the GTS
stock option plan. The exercise price for all of the GTI stock options awarded
approximated the fair market value of GTI Common Stock on the date of grant.
One-third of the options noted in the second column will vest on September 30,
2000. Thereafter, the options will vest in equal monthly installments for a
period of 24 months. The present value of each grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: dividend yield 0%, expected volatility of 1,
risk-free interest rate of 5.90% and expected life of five years.
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS GRANTED
SECURITIES TO GTI
UNDERLYING EMPLOYEES IN EXERCISE OR BASE EXPIRATION GRANT DATE
OPTIONS GRANTED FISCAL YEAR PRICE (PER SHARE) DATE VALUE
--------------- --------------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Stewart P. Reich.......... 500,000 18.28 $12.00 10/1/09 $4,025,000
Stan Abbeloos............. 300,000 10.97 12.00 10/1/09 2,415,000
David J. Wisher........... 300,000 10.97 12.00 10/1/09 2,415,000
Jeff Howley............... 110,000 4.02 12.00 10/1/09 885,500
Kevin Cuffe............... 60,000 2.19 12.00 10/1/09 483,000
</TABLE>
17
<PAGE> 20
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table provides information on the number and value of GTS
stock options exercised by the five most highly compensated officers during
1999, the number of options under the GTS and GTI Stock Option Plan held by such
persons at December 31, 1999, and the value of all unexercised options held by
such persons as of that date. The value of the options stated in the last column
is based on the closing price of $34.75 for GTS on the New York Stock Exchange
and the closing price of $32.00 for GTI on the Nasdaq National Stock Market on
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT FY-END AT FY-END
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Stewart P. Reich..... 50,000 1,208,500 162,500/500,000 $3,870,500/$10,000,000
Stan Abbeloos........ 28,000 699,440 28,000/300,000 $ 652,960/$ 6,000,000
David J. Wisher...... 10,000 283,400 37,000/300,000 $ 902,845/$ 6,000,000
Jeff Howley.......... 6,200 144,233 19,300/110,000 $ 462,586/$ 2,200,000
Kevin Cuffe.......... -- -- 7,000/ 60,000 $ 147,700/$ 1,200,000
</TABLE>
Exercisable options in the above table represent options granted by GTS and
unexercisable options represent options granted by GTI.
STOCK-RELATED COMPENSATION
Before GTI's IPO, the executive officers and some of the Company's
employees participated in GTS stock option plans, pursuant to which they were
granted options to purchase GTS common stock. At the time of the consummation of
the IPO on September 30, 1999, such persons surrendered all their GTS options
that did not vest by the end of 1999, and received restricted shares and options
to purchase shares of GTI. These restricted shares and the shares underlying
these options represented 12% of GTI's fully diluted share capital immediately
after the IPO. These restricted shares and options are intended as long-term
compensation and to align the interests of the grantees with GTI's stockholders.
The restricted shares of GTI vest on September 30, 2001. Each of the GTI
options have an exercise price equal to the public offering price in the IPO, or
$12.00 per share. One-third of these options will vest on September 30, 2000.
Thereafter, the options will vest in equal monthly installments for a period of
24 months.
GOLDEN TELECOM, INC. EQUITY PARTICIPATION PLAN
See discussion above pertaining to Item 4 on your proxy.
GOLDEN TELECOM, INC. 401(K) PLAN
GTI's Board of Directors has approved a 401(k) retirement savings plan (the
"401(k) Plan"), which will be a defined contribution retirement benefit plan
that GTI intends to have qualified for favorable tax treatment under Section 401
of the Code. All employees of GTI, subject to certain regulatory qualifications,
who are US citizens and at least 21 years of age and have completed the minimum
service requirement will be eligible to participate in GTI's 401(k) Plan. The
401(k) Plan participants will be able to defer pre-tax income by contributing to
the plan up to the maximum amount permitted by law. After-tax contributions will
also be permitted under the 401(k) Plan. GTI intends to match 50% of each
participant's pre-tax contribution to the 401(k) Plan, up to 5% of the
participant's total compensation. In addition, GTI may, in its sole discretion
and in a nondiscriminatory manner, contribute additional amounts as profit
sharing to each participant's account. The amounts deposited into each
participant's account will be invested among various investment options
according to the direction of the participant. Each participant's pre-tax and
after-tax contributions will be immediately vested and nonforfeitable. Our
matching contribution and profit sharing allocations to each participant's
account will not vest until the participant has completed three years of service
either with GTI or with GTS before this offering, at which time the matching
contribution and profit sharing allocations become 100% vested.
18
<PAGE> 21
COMPARISON OF 3 MONTH CUMULATIVE TOTAL RETURN*
AMONG GOLDEN TELECOM, INC.
THE NASDAQ STOCK MARKET (U.S. & FOREIGN) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
9/99 10/99 11/99 12/99
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Golden Telecom, Inc. 100.00 106.57 132.85 373.72
NASDAQ Stock Market (U.S. & Foreign) 100.00 107.53 119.87 146.44
NASDAQ Telecommunications 100.00 118.40 123.46 142.21
</TABLE>
* $100 invested on 09/30/99 in stock or index including reinvestment of
dividends for fiscal year ending December 31.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GTS owns 15,056,328 shares of GTI's outstanding Common Stock, which
represents approximately 63% of the combined voting power of all of the
Company's outstanding Common Stock. As long as GTS continues to own more than
50% of GTI's Common Stock, it will be able to determine any corporate action
requiring approval of GTI's stockholders, including the election of the entire
Board of Directors, amendments to GTI's certificate of incorporation and by-laws
and approval of certain mergers and other control transactions, without the
consent of GTI's other shareholders.
In addition, through its ownership of GTI's Common Stock and its control of
GTI's Board of Directors, GTS will be able to control certain decisions,
including decisions with respect to GTI's dividend policy, GTI's access to
capital, mergers or other business combinations, the acquisition or disposition
of GTI's assets and any change in GTI's control. Subject to applicable
securities and other laws, GTS may sell or distribute its shares, other than as
restricted by the IPO underwriting agreement, in which GTS has agreed that it
will not offer, sell, contract to sell, announce an intention to sell, pledge or
otherwise dispose of, directly or indirectly, any shares of GTI Common Stock or
securities convertible into or exchangeable or exercisable for any of GTI Common
Stock without the prior written consent of Deutsche Bank AG London, which
consent may not be unreasonably withheld, for a period of 360 days after the
date of GTI's IPO.
19
<PAGE> 22
Our relationship with GTS is governed by agreements that GTI entered into
at the time of the completion of the Company's IPO. The principal terms of these
agreements are summarized below. The descriptions set forth below are summaries
and are qualified in their entirety by reference to the relevant agreement.
Complete forms of these agreements are filed as exhibits to the registration
statement, dated September 30, 1999.
Immediately before the IPO, GTS transferred to the Company all the
properties that currently constitute GTI's business, including the shares of
GTI's operating and holding companies that were currently owned, directly or
indirectly, by GTS. Except as discussed in this document, because all GTI's
agreements with third parties are made through these operating and holding
companies, GTS did not transfer to the Company any additional rights or
obligations that were made through companies retained by GTS.
ADMINISTRATIVE SERVICES AGREEMENT
GTI entered into an administrative services agreement with GTS. Pursuant to
this agreement, GTS provides the Company with certain accounting, tax and
financial management and budgeting services, legal and regulatory services and
human resources services. Under the terms of the administrative services
agreement, GTS provides these administrative services subject to the oversight,
supervision and approval of GTI's executive officers. GTI pays GTS a fixed
monthly fee each month for these services, which is intended to be comparable to
the fees that GTI would pay if an independent third party provided the services.
The administrative services agreement became effective upon the
consummation of the IPO, and may be terminated by either party upon at least 90
days' written notice and, in the case of a termination by the Company, with the
consent of GTS, which consent may not be unreasonably withheld. In addition, the
administrative services agreement will be terminated if the Company experiences
a change of control. A change of control shall be deemed to have occurred if:
- a majority of the seats on GTI's Board of Directors shall be occupied by
persons who are neither nominated by GTS or by its Board of Directors,
nor appointed by GTI's directors nominated by GTS; or
- any person or group other than GTS or the companies controlled by GTS
shall directly or indirectly have the power to exercise control over 50%
of the voting securities of GTI.
EMPLOYEE BENEFITS AGREEMENT
GTI entered into an employee benefits agreement with GTS. Pursuant to this
agreement, GTI's employees participate in the employee benefit plans (including
all retirement plans and welfare benefit plans) which, immediately prior to the
consummation of the IPO, covered these employees. GTI pays GTS a management fee
equal to 25% of the aggregate amount of all employees' base salaries, as in
effect from time to time.
INDEMNIFICATION AGREEMENT
GTI entered into an indemnification agreement with GTS. This agreement
provides for a full and complete release and discharge between GTS and the
Company as of the closing date of all liabilities existing or arising on or
before the closing date of the IPO, except as expressly set forth in the
indemnification agreement. Except as set forth in the indemnification agreement,
GTS agreed to indemnify and hold harmless GTI and each of GTI's directors,
officers, employees and agents against all liabilities relating to, arising out
of or resulting from any material breach by GTS under any of the separation
agreements.
20
<PAGE> 23
Except as set forth in the indemnification agreement, GTI agreed to
indemnify and hold harmless each of GTS and its directors, officers, employees
and agents from and against all liabilities relating to, arising out of or
resulting from:
- GTI's failure to pay, perform or otherwise promptly discharge any of
GTI's liabilities arising out of GTI's business, operations or assets on
or after the closing date of the IPO, whether or not expressly assumed by
GTI;
- any liabilities attributable to GTI in connection with any United States
federal or state tax audit of GTS;
- any material breach by GTI of any of the separation agreements; and
- any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact required to be
stated in the prospectus for the Company's IPO or necessary to make the
statements in the prospectus for the Company's IPO not misleading, with
respect to all information contained in the prospectus for the Company's
IPO or the registration statement, as amended or supplemented, of which
it forms a part.
The indemnification agreement also provides that GTI will indemnify and
hold harmless GTS for any liabilities incurred by GTS under any of its
guarantees of GTI's obligations or liabilities and that GTI will pay GTS for its
direct costs, if any, of maintaining such guarantees.
Neither GTI nor GTS intends to make any representation or warranty to one
another or to any other person or party as to:
- the assets, businesses or liabilities transferred or assumed as part of
the separation,
- any consent or liability transferred or assumed as part of the separation
of GTI and GTS,
- any consent or approval required in connection therewith,
- the value or freedom from any security interests of any of the assets
transferred,
- the absence of any defense or freedom from counterclaim with respect to
any claim or any part thereof, or
- the legal sufficiency of any assignment, document or instrument delivered
to convey title to any asset transferred.
Except as expressly set forth in any separation agreements, all assets were
transferred to GTI on an "as is, where is" basis, and GTI and GTS have agreed to
bear the economic and legal risks that the conveyance is insufficient to vest in
the transferee good and marketable title, free and clear of any encumbrances.
REGISTRATION RIGHTS AGREEMENT
GTI entered into a registration rights agreement with GTS. This agreement
provides that, on up to three occasions, following the 360-day lock-up on sales
of GTI's shares of Common Stock held by GTS and on GTS's written request, GTI
will use its reasonable best efforts to register under the applicable federal
and state securities laws the resale of any of GTS's shares of the Company's
Common Stock. GTS will also have the right, following the 360-day lock-up on
sales of GTI's shares of Common Stock held by GTS, to include its shares of the
Company's Common Stock in future registrations initiated by GTI on its own
behalf or on behalf of other shareholders. This right is subject to certain
limitations as to whether and to what extent GTS may request registration. GTS
will pay the out-of-pocket costs for registrations, which it initiates. GTI has
agreed to pay all of GTI's out-of-pocket costs and expenses, other than
underwriting discounts and commissions pertaining to shares resold by GTS, in
connection with registrations in which GTS participates but does not initiate.
In addition to the above rights, when GTS owns less than 25% of GTI's
outstanding shares of capital stock, it may request that GTI register such
remaining shares in a shelf registration statement, at GTS's
21
<PAGE> 24
expense. Subject to certain limitations, such registration rights may be
assigned by GTS. The registration rights agreement contains customary
indemnification and contribution provisions between GTI and GTS.
SHAREHOLDERS' AGREEMENT
GTI entered into a shareholders' agreement with GTS. This agreement
provides GTS with pre-emptive rights for any subsequent equity that GTI issues.
Specifically, among other things, GTI will grant to GTS the right to purchase
any new equity securities that GTI issues so that GTS can maintain its
percentage ownership in GTI immediately prior to the issuance of such new equity
securities. These pre-emptive rights will terminate when GTS owns less than 25%
of the Company's shares of Common Stock.
The shareholders' agreement also provides for certain corporate governance
matters. The shareholders' agreement provides that certain "interested
transactions" between GTI or its affiliates, on the one hand, and GTS or its
affiliates, on the other hand, will require the approval of a majority of GTI's
independent directors, unless the transaction has been described in a business
plan or a budget that had already been separately approved by GTI's independent
directors.
TRADEMARK TRANSFER AGREEMENT
GTI entered into a trademark transfer agreement with GTS, pursuant to which
GTS transferred all rights and interests in all trademarks used by GTI,
including, without limitation, Sovintel, Sovam Teleport, TeleRoss, TCM,
Russia-On-Line, Golden Telecom, GlasNet and PrimTelefone. If GTS's ownership of
GTI falls below 50% or a majority of GTI's Board of Directors is not appointed
by GTS, then GTS will have the right to require GTI to cease using certain other
trademarks and service marks that are GTS-specific.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons or entities who own more than 10% of the
Company's Common Shares, to file with the SEC and the Nasdaq Stock Market or the
New York Stock Exchange, as the case may be, initial reports of beneficial
ownership and changes in beneficial ownership of the company's equity
securities. Such persons are also required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on a review of the copies of such reports furnished to
the Company as to transactions for which reports are required, all Section 16(a)
filing requirements applicable to such individuals or entities were complied
with during 1999.
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which may come before the
meeting except that indicated above. However, if other business is brought
before the meeting, the persons acting under the enclosed form of proxy may vote
thereunder in accordance with their best judgment.
COST AND METHOD OF PROXY SOLICITATION
Proxies will be solicited by mail. The expenses of such solicitation will
be paid by the Company. Directors, officers, or regular employees of the company
may solicit proxies by telephone or in person. The cost of such solicitation
will be nominal, but GTI may pay brokers, nominees, fiduciaries and other
custodians their reasonable fees and expenses for sending proxy materials to
beneficial owners and obtaining their instructions. In addition, Georgeson
Shareholder Communication, Inc. has been retained by the Company to assist in
soliciting proxies from brokerage firms, bank nominees and other institutional
holders to assure a timely vote by the beneficial owners of stock held of
records by such firms, banks and institutions. This firm will receive a fee not
to exceed $5,000 for its services. In addition to solicitation by mail, proxies
may be solicited in person, or by telephone, facsimile transmission or other
means of electronic communication, by directors, officers and other employees of
the Company.
22
<PAGE> 25
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 2001 annual meeting of stockholders, must be
received at the Company's principal executive offices no later than January 10,
2001.
ANNUAL REPORT AND OTHER MATTERS
The Company's 1999 Annual Report on Form 10-K, including financial
statements, which was filed with the SEC on March 21, 2000, was mailed to you
with this Proxy Statement. This Proxy Statement incorporates by reference the
financial statements therein. A list of the stockholders of record entitled to
vote at the annual meeting will be available for review by any stockholder, for
any purpose relating to the meeting between 9:00 a.m. and 5:00 p.m. at the
executive offices of the Company at the Representative Offices of Golden
TeleServices, Inc., 12 Krasnokazarmennaya Street, Moscow, Russia 111250.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM THIS PROXY
STATEMENT IS DELIVERED, UPON WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999.
REQUESTS SHOULD BE ADDRESSED TO VICE PRESIDENT -- INVESTOR RELATIONS AND
CORPORATE COMMUNICATIONS, GOLDEN TELECOM, INC., 12 KRASNOKAZARMENNAYA STREET,
MOSCOW, RUSSIA 111250; FAX NO. +7 501 797 9332.
23
<PAGE> 26
THE 1999 EQUITY PARTICIPATION PLAN
OF
GOLDEN TELECOM, INC.
Golden Telecom, Inc., a Delaware corporation, has adopted The
1999 Equity Participation Plan of Golden Telecom, Inc. (the "Plan"), effective
September 30, 1999, for the benefit of its eligible employees, consultants and
directors.
The purposes of the Plan are as follows:
(1) To provide an additional incentive for directors, key
Employees and Consultants (as such terms are defined below) to further the
growth, development and financial success of the Company by personally
benefiting through the ownership of Company stock and/or rights which recognize
such growth, development and financial success.
(2) To enable the Company to obtain and retain the services
of directors, key Employees and Consultants considered essential to the long
range success of the Company by offering them an opportunity to own stock in
the Company and/or rights which will reflect the growth, development and
financial success of the Company.
ARTICLE I.
DEFINITIONS
1.1. General. Wherever the following terms are used in the
Plan they shall have the meanings specified below, unless the context clearly
indicates otherwise.
1.2. Administrator. "Administrator" shall mean the entity
that conducts the general administration of the Plan as provided herein. With
reference to the administration of the Plan with respect to Options granted to
Independent Directors, the term "Administrator" shall refer to the Board or its
delegee. With reference to the administration of the Plan with respect to any
other Award, the term "Administrator" shall refer to the Committee unless the
Board has assumed the authority for administration of the Plan generally as
provided in Section 8.2.
1.3. Affiliate. "Affiliate" shall mean any entity which
directly or indirectly controls, is controlled by, or is under common control
with the Company.
1.4. Award. "Award" shall mean an Option or a Restricted
Stock award which may be awarded or granted under the Plan (collectively,
"Awards").
1.5. Award Agreement. "Award Agreement" shall mean a written
agreement executed by an authorized officer or director of the Company and the
Holder which shall contain such terms and conditions with respect to an Award
as the Administrator shall determine, consistent with the Plan.
1.6. Award Limit. "Award Limit" shall mean 750,000 shares of
Common Stock, as adjusted pursuant to Section 9.3 of the Plan.
<PAGE> 27
1.7. Board. "Board" shall mean the Board of Directors of the
Company.
1.8. Change in Control. "Change in Control" shall mean,
unless otherwise determined by the Committee:
(a) the dissolution or liquidation of the Company and its
Subsidiaries,
(b) a merger, consolidation or reorganization of the Company
and its Subsidiaries with one or more other corporations (other than a parent,
Subsidiary, or Affiliate of the Company) in which the Company is not the
surviving corporation,
(c) a sale of all or substantially all of the assets of the
Company to another corporation (other than a parent, Subsidiary or Affiliate of
the Company), or
(d) any transaction (including, without limitation, a merger
or reorganization in which the Company is the surviving corporation) approved
by the Board which results in any person or entity (other than a parent,
Subsidiary or Affiliate of the Company) owning more than 50% of the combined
voting power of all classes of stock of the Company.
1.9. Code. "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.10. Committee. "Committee" shall mean the Compensation
Committee of the Board or another committee or subcommittee of the Board,
appointed as provided in Section 8.1.
1.11. Common Stock. "Common Stock" shall mean the common
stock of the Company, par value $.01 per share, and any equity security of the
Company issued or authorized to be issued in the future, but excluding any
preferred stock and any warrants, options or other rights to purchase Common
Stock.
1.12. Company. "Company" shall mean Golden Telecom, Inc., a
Delaware corporation.
1.13. Consultant. "Consultant" shall mean any consultant or
adviser if:
(a) the consultant or adviser renders bona fide services to
the Company;
(b) the services rendered by the consultant or adviser are
not in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for
the Company's securities; and
(c) the consultant or adviser is an entity which has
contracted directly with the Company to render such services.
1.14. Director. "Director" shall mean a member of the Board.
1.15. Disability. "Disability" shall mean the absence of an
Independent Director from the Independent Director's duties to the Company on a
full-time basis for a total of six
2
<PAGE> 28
months during any twelve month period as a result of incapacity to perform the
regular duties of an Independent Director due to a single or related mental or
physical illness which is determined to be reasonably likely to extend beyond
the completion of the Independent Director's elected term on the Board by a
physician selected by the Company and acceptable to the Optionee (such
agreement as to acceptability not to be withheld unreasonably).
1.16. DRO. "DRO" shall mean a domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or any foreign law determined by the Administrator to be
equivalent, or the rules thereunder.
1.17. Employee. "Employee" shall mean any officer or other
employee of the Company, or of any corporation which is a Subsidiary.
1.18. Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.19. Fair Market Value. "Fair Market Value" of a share of
Common Stock as of a given date shall be (a) the closing price of a share of
Common Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares
were not traded on the trading day previous to such date, then on the next
preceding date on which a trade occurred, as reported in the Wall Street
Journal or (b) if Common Stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, the closing price of the Common Stock
on the trading day previous to such date or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, as reported by NASDAQ or such successor quotation system as
reported in the Wall Street Journal; or (c) if Common Stock is not publicly
traded on an exchange and not quoted on NASDAQ or a successor quotation system,
the Fair Market Value of a share of Common Stock as established by the
Administrator acting in good faith.
1.20. Holder. "Holder" shall mean a person who has been
granted or awarded an Award.
1.21 Incentive Stock Option. "Incentive Stock Option" shall
mean an option which conforms to the applicable provisions of Section 422 of
the Code and which is designated as an Incentive Stock Option by the
Administrator.
1.22 Independent Director. "Independent Director" shall mean
a director that is a "non-employee director" under Rule 16(b)(3) of the
Exchange Act. and an "outside director" under Section 162m of the Code.
1.23 Non-Qualified Stock Option. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock Option by
the Administrator.
1.24. Option. "Option" shall mean a stock option granted
under Article IV of the Plan. An Option granted under the Plan shall, as
determined by the Administrator, be either a
3
<PAGE> 29
Non-Qualified Stock Option or an Incentive Stock Option; provided, however,
that Options granted to Independent Directors and Consultants shall be
Non-Qualified Stock Options.
1.25. Performance Criteria. "Performance Criteria" shall mean
any objective business criterion with respect to the Company, any Subsidiary or
any division or operating unit as determined by the Committee. Such Performance
Criteria may include (a) net income, (b) pre-tax income, (c) operating income,
(d) cash flow, (e) earnings per share, (f) return on equity, (g) return on
invested capital or assets, (h) cost reductions or savings, (i) funds from
operations, (j) appreciation in the fair market value of Common Stock, (k)
earnings before any one or more of the following items: interest, taxes,
depreciation or amortization, (l) profit margin, (m) revenue, (n) revenue
growth and (o) comparison of any expense item (e.g. SG&A) to a specific target.
1.26. Plan. "Plan" shall mean The 1999 Equity Participation
Plan of Golden Telecom, Inc.
1.27. Restricted Stock. "Restricted Stock" shall mean Common
Stock awarded under Article VII of the Plan.
1.28. Retirement Date. "Retirement Date" with respect to an
Independent Director shall mean the later of (a) the date such Independent
Director reaches the age of 55 or (b) the date which is five years from such
Independent Director's initial election to the Board.
1.29. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule
16b-3 under the Exchange Act, as such Rule may be amended from time to time.
1.30. Section 162(m) Participant. "Section 162(m)
Participant" shall mean any key Employee designated by the Administrator as a
key Employee whose compensation for the fiscal year in which the key Employee
is so designated or a future fiscal year may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code.
1.31. Securities Act. "Securities Act" shall mean the
Securities Act of 1933, as amended.
1.32. Subsidiary. "Subsidiary" shall mean any corporation in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
1.33. Substitute Award. "Substitute Award" shall mean an
Option granted under this Plan upon the assumption of, or in substitution for,
outstanding equity awards previously granted by a company or other entity in
connection with a corporate transaction, such as a merger, combination,
consolidation or acquisition of property or stock; provided, however, that in
no event shall the term "Substitute Award" be construed to refer to an award
made in connection with the cancellation and repricing of an Option.
1.34. Termination of Consultancy. "Termination of
Consultancy" shall mean the time when the engagement of a Holder as a
Consultant to the Company or a Subsidiary is terminated for any reason, with or
without cause, including, but not by way of limitation, by
4
<PAGE> 30
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Administrator, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination of Consultancy.
Notwithstanding any other provision of the Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a Consultant's service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
1.35. Termination of Directorship. "Termination of
Directorship" shall mean the time when a Holder who is an Independent Director
ceases to be a Director for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death or
retirement. The Board, in its sole and absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Directorship
with respect to Independent Directors, including whether a Termination of
Directorship shall be deemed to have occurred with respect to an emeritus
Director.
1.36. Termination of Employment. "Termination of Employment"
shall mean the time when the employee-employer relationship between a Holder
and the Company or any Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (a) terminations
where there is a simultaneous reemployment or continuing employment of a Holder
by the Company or any Subsidiary, (b) at the discretion of the Administrator,
terminations which result in a temporary severance of the employee-employer
relationship, and (c) at the discretion of the Administrator, terminations
which are followed by the simultaneous establishment of a consulting
relationship by the Company or a Subsidiary with the former employee. The
Administrator, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether a
particular leave of absence constitutes a Termination of Employment; provided,
however, that, with respect to Incentive Stock Options, unless otherwise
determined by the Administrator in its discretion, a leave of absence, change
in status from an employee to an independent contractor or other change in the
employee-employer relationship shall constitute a Termination of Employment if,
and to the extent that, such leave of absence, change in status or other change
interrupts employment for the purposes of Section 422(a)(2) of the Code and the
then applicable regulations and revenue rulings under said Section.
ARTICLE II.
SHARES SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) The shares of stock subject to Awards shall be Common
Stock, initially shares of the Company's Common Stock, par value $.01 per
share. The aggregate number of such shares which may be issued upon exercise of
such Options or rights or upon any such
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Awards under the Plan shall not exceed 4,023,551, of which no more than 402,355
shares shall be issued with respect to Incentive Stock Options. The shares of
Common Stock issuable upon exercise of such Options or rights or upon any such
Awards may be either previously authorized but unissued shares or treasury
shares.
(b) The maximum number of shares which may be subject to
Awards, granted under the Plan to any individual in any calendar year shall not
exceed the Award Limit. To the extent required by Section 162(m) of the Code,
shares subject to Options, which are canceled, continue to be counted against
the Award Limit.
2.2. Add-back of Options and Other Rights. If any Option, or
other right to acquire shares of Common Stock under any other Award under the
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash (including pursuant to a broker assisted
cashless exercise) as permitted by the Plan, the number of shares subject to
such Option or other right but as to which such Option or other right was not
exercised prior to its expiration, cancellation or exercise may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. Furthermore, any shares subject to Awards which are adjusted pursuant to
Section 9.3 and become exercisable with respect to shares of stock of another
corporation shall be considered canceled and may again be optioned, granted or
awarded hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Holder or withheld by the Company upon the
exercise of any Award under the Plan, in payment of the exercise price thereof
or tax withholding thereon, may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 2.1. If any shares of
Restricted Stock are surrendered by the Holder or repurchased by the Company
pursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III.
GRANTING OF AWARDS
3.1. Award Agreement. Each Award shall be evidenced by an
Award Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements
evidencing Incentive Stock Options shall contain such terms and conditions as
may be necessary to meet the applicable provisions of Section 422 of the Code.
3.2. Provisions Applicable to Section 162(m) Participants.
(a) The Committee, in its discretion, may determine whether
an Award is to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code.
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(b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant, including
Restricted Stock the restrictions with respect to which lapse upon the
attainment of performance goals which are related to one or more of the
Performance Criteria and any performance or incentive award described in
Article VIII that vests or becomes exercisable or payable upon the attainment
of performance goals which are related to one or more of the Performance
Criteria.
(c) To the extent necessary to comply with any applicable
performance-based compensation requirements of Section 162(m)(4)(C) of the
Code, with respect to any Award granted under Articles VII and VIII which may
be granted to one or more Section 162(m) Participants, no later than ninety
(90) days following the commencement of any fiscal year in question or any
other designated fiscal period or period of service (or such other time as may
be required or permitted by Section 162(m) of the Code), the Committee shall,
in writing, (i) designate one or more Section 162(m) Participants, (ii) select
the Performance Criteria applicable to the fiscal year or other designated
fiscal period or period of service, (iii) establish the various performance
targets, in terms of an objective formula or standard, and amounts of such
Awards, as applicable, which may be earned for such fiscal year or other
designated fiscal period or period of service and (iv) specify the relationship
between Performance Criteria and the performance targets and the amounts of
such Awards, as applicable, to be earned by each Section 162(m) Participant for
such fiscal year or other designated fiscal period or period of service.
Following the completion of each fiscal year or other designated fiscal period
or period of service, the Committee shall certify in writing whether the
applicable performance targets have been achieved for such fiscal year or other
designated fiscal period or period of service. In determining the amount earned
by a Section 162(m) Participant, the Committee shall have the right to reduce
(but not to increase) the amount payable at a given level of performance to
take into account additional factors that the Committee may deem relevant to
the assessment of individual or corporate performance for the fiscal year or
other designated fiscal period or period of service.
(d) Furthermore, notwithstanding any other provision of the
Plan, any Award which is granted to a Section 162(m) Participant and is
intended to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described
in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to
the extent necessary to conform to such requirements.
3.3. Limitations Applicable to Section 16 Persons.
Notwithstanding any other provision of the Plan, the Plan, and any Award
granted or awarded to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such applicable exemptive rule.
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3.4. At-Will Employment. Nothing in the Plan or in any Award
Agreement hereunder shall confer upon any Holder any right to continue in the
employ of, or as a Consultant for, the Company or any Subsidiary, or as a
Director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Holder at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in a written agreement
between the Holder and the Company and any Subsidiary.
3.5. Trust. Notwithstanding any other provision of the Plan
to the contrary, the Administrator may, in its sole discretion for the purposes
of satisfying applicable foreign law, cause any Award hereunder which would
otherwise be made to a Holder to be made instead to a trust for the benefit of
the Holder containing such terms and conditions as the Administrator, in its
sole discretion, deems to be appropriate. All provisions of the Plan and any
Award Agreement shall apply equivalently to any Award made to such trust,
except as the Administrator determines is otherwise contemplated by the trust
arrangement.
ARTICLE IV.
GRANTING OF OPTIONS TO EMPLOYEES,
CONSULTANTS AND INDEPENDENT DIRECTORS
4.1. Eligibility. Any Employee or Consultant selected by the
Committee pursuant to Section 4.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be
granted Options at the times and in the manner set forth in Section 4.5.
4.2. Disqualification for Stock Ownership. No person may be
granted an Incentive Stock Option under the Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option conforms
to the applicable provisions of Section 422 of the Code.
4.3. Qualification of Incentive Stock Options. No Incentive
Stock Option shall be granted to any person who is not an Employee.
4.4. Granting of Options to Employees and Consultants.
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:
(i) Determine which Employees are key Employees and
select from among the key Employees or Consultants (including Employees or
Consultants who have previously received Awards under the Plan) such of them as
in its opinion should be granted Options;
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(ii) Subject to the Award Limit, determine the
number of shares to be subject to such Options granted to the selected key
Employees or Consultants;
(iii) Subject to Section 4.3, determine whether such
Options are to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such
Options, consistent with the Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not be limited
to, such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code.
(b) Upon the selection of a key Employee or Consultant to be
granted an Option, the Committee shall instruct the appropriate officers of the
Company to issue the Option and may impose such conditions on the grant of the
Option, as it deems appropriate.
(c) Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Holder, to disqualify such
Option from treatment as an "incentive stock option" under Section 422 of the
Code.
4.5. Granting of Options to Independent Directors.
During the term of the Plan, each person who is an
Independent Director automatically shall be granted (a) an Option to purchase
10,000 shares of Common Stock (subject to adjustment as provided in Section
9.3) on the date of such Independent Director's initial election and (b) an
Option to purchase 2,500 shares of Common Stock (subject to adjustment as
provided in Section 9.3) on a date which occurs during the first quarter of
each calendar year after such initial election which date shall be (i) selected
by the Administrator prior to the commencement of each applicable calendar
quarter or, if no such date is selected, (ii) the last day of the applicable
calendar quarter. Members of the Board who are employees of the Company who
subsequently retire from the Company and remain on the Board will not receive
an initial Option grant pursuant to clause (a) of the preceding sentence, but
to the extent that they are otherwise eligible, will receive, after retirement
from employment with the Company, Options as described in clause (b) of the
preceding sentence. All the foregoing Option grants authorized by this Section
4.5 are subject to stockholder approval of the Plan.
ARTICLE V.
TERMS OF OPTIONS
5.1. Option Price. The price per share of the shares subject
to each Option granted to Employees and Consultants shall be set by the
Committee; provided, however, that such price shall be no less than the par
value of a share of Common Stock, unless otherwise permitted by applicable
state law, and:
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(a) in the case of Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, such price shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted;
(b) in the case of Incentive Stock Options such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted (or the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code);
(c) in the case of Incentive Stock Options granted to an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code), such price shall not be less than 110% of the Fair
Market Value of a share of Common Stock on the date the Option is granted (or
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code).
5.2. Option Term. The term of an Option granted to an
Employee or consultant shall be set by the Committee in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term shall
not be more than ten years from the date the Incentive Stock Option is granted,
or five years from the date the Incentive Stock Option is granted if the
Incentive Stock Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code). Except as
limited by requirements of Section 422 of the Code and regulations and rulings
thereunder applicable to Incentive Stock Options, the Committee may extend the
term of any outstanding Option in connection with any Termination of Employment
or Termination of Consultancy of the Holder, or amend any other term or
condition of such Option relating to such a termination. No Option shall be
exercisable after the expiration of its term.
5.3. Option Vesting
(a) The period during which the right to exercise, in whole
or in part, an Option granted to an Employee or a Consultant vests in the
Holder shall be set by the Committee and the Committee may determine that an
Option may not be exercised in whole or in part for a specified period after it
is granted; provided, however, that, unless the Committee otherwise provides in
the terms of the Award Agreement or otherwise, no Option shall be exercisable
by any Holder who is then subject to Section 16 of the Exchange Act within the
period ending six months and one day after the date the Option is granted.
Unless the Committee specifically determines otherwise in the Option Agreement,
one-third of each Option shall vest and become exercisable on the first
anniversary of the date of the option grant, and 1/36 of each Option shall vest
and become exercisable on each monthly anniversary of the date of grant
thereafter, subject to the Holder's continuous employment or service. At any
time after the grant of an Option, the Committee may, in its sole and absolute
discretion and subject to whatever terms and conditions it selects, accelerate
the period during which an Option granted to an Employee or Consultant vests.
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(b) No portion of an Option granted to an Employee or
Consultant which is unexercisable at Termination of Employment or Termination
of Consultancy, as applicable, shall thereafter become exercisable, except as
may be otherwise provided by the Committee either in the Award Agreement or by
action of the Committee following the grant of the Option.
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by a Holder during any calendar year (under the
Plan and all other incentive stock option plans of the Company and any parent
or subsidiary corporation, within the meaning of Section 422 of the Code) of
the Company, exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth
in the preceding sentence shall be applied by taking Options into account in
the order in which they were granted. For purposes of this Section 5.3(c), the
Fair Market Value of stock shall be determined as of the time the Option with
respect to such stock is granted.
5.4. Terms of Options Granted to Independent Directors. The
price per share of the shares subject to each Option granted to an Independent
Director shall equal 100% of the Fair Market Value of a share of Common Stock
on the date the Option is granted. Options granted to Independent Directors
shall become exercisable on the first anniversary of the date of Option grant
and, subject to Section 6.6, the term of each Option granted to an Independent
Director shall be ten years from the date the Option is granted, except that
any Option granted to an Independent Director shall become immediately
exercisable in full upon the Retirement Date, Disability, or death of the
Independent Director or upon a Change in Control. No portion of an Option,
which is unexercisable at Termination of Directorship, shall thereafter become
exercisable.
5.5. Substitute Awards. Notwithstanding the foregoing
provisions of this Article V to the contrary, in the case of an Option that is
a Substitute Award, the price per share of the shares subject to such Option
may be less than the Fair Market Value per share on the date of grant,
provided, that the excess of:
(a) the aggregate Fair Market Value (as of the date such
Substitute Award is granted) of the shares subject to the Substitute Award;
over
(b) the aggregate exercise price thereof; does not exceed the
excess of;
(c) the aggregate fair market value (as of the time
immediately preceding the transaction giving rise to the Substitute Award, such
fair market value to be determined by the Committee) of the shares of the
predecessor entity that were subject to the grant assumed or substituted for by
the Company; over
(d) the aggregate exercise price of such shares.
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ARTICLE VI
EXERCISE OF OPTIONS
6.1. Partial Exercise. An exercisable Option may be exercised
in whole or in part. However, an Option shall not be exercisable with respect
to fractional shares and each partial exercise must be with respect to a
minimum number of 10 shares.
6.2. Manner of Exercise. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company (or his designee) or his office:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion thereof,
is exercised. The notice shall be signed by the Holder or other person then
entitled to exercise the Option or such portion of the Option;
(b) Such representations and documents as the Administrator,
in its absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations. The Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to
effect such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant
to Section 9.1 by any person or persons other than the Holder, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full payment to the Company for the shares with respect
to which the Option, or portion thereof, is exercised:
(i) in cash or cash equivalents;
(ii) through the delivery of shares of Common Stock
which have been owned by the Holder for at least six months, duly endorsed for
transfer to the Company with a Fair Market Value on the date of delivery equal
to the aggregate exercise price of the Option or exercised portion thereof;
(iii) by delivering a written direction to the
Company that the Option be exercised pursuant to a "cashless" exercise/sale
procedure through a licensed broker acceptable to the Company whereby the stock
certificate or certificates for the shares for which the Option is exercised
will be delivered to such broker as the agent for the person exercising the
Option and the broker will deliver to the Company cash (or cash equivalents
acceptable to the Company) equal to the option price for the Shares purchased
pursuant to the exercise of the Option, plus the amount (if any) of Federal and
other taxes that the Company may, in its judgment, be required to withhold with
respect to the exercise of the Option; or
(iv) by a combination of the methods described in
(i), (ii) and (iii).
6.3. Conditions to Issuance of Stock Certificates. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:
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(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification
of such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body which the Administrator shall, in its absolute discretion, deem
necessary or advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.
6.4. Rights as Stockholders. Holders shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such Holders.
6.5. Ownership and Transfer Restrictions. The Administrator,
in its absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder or (b) one year after the transfer of such shares to such
Holder.
6.6. Limitations on Exercise of Options Granted to
Independent Directors. No Option granted to an Independent Director may be
exercised to any extent by anyone after the first to occur of the following
events:
(a) The expiration of twelve months from the date of the
Holder's death;
(b) The expiration of twelve months from the date of the
Holder's Termination of Directorship by reason of Holder's permanent and total
Disability; (within the meaning of Section 22(e)(3) of the Code);
(c) The expiration of three months from the date of the
Holder's Termination of Directorship for any reason other than such Holder's
death or his permanent and total Disability, unless the Holder dies within said
three-month period; or
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(d) The expiration of ten years from the date the Option was
granted; or
(e) The effective date of a Change in Control, unless the
Board provides otherwise pursuant to Section 9.3(b).
6.7. Additional Limitations on Exercise of Options. Holders
may be required to comply with any timing or other restrictions with respect to
the settlement or exercise of an Option, including a window-period limitation,
as may be imposed in the discretion of the Administrator.
ARTICLE VII
AWARD OF RESTRICTED STOCK
7.1. Eligibility. Subject to the Award Limit, Restricted
Stock may be awarded to any Employee who the Committee determines is a key
Employee or any Director or Consultant who the Committee determines should
receive such an Award.
7.2. Award of Restricted Stock.
(a) The Committee may from time to time, in its absolute
discretion:
(i) Determine which Employees are key Employees and select
from among the key Employees, Directors, or Consultants (including Employees,
Directors, or Consultants who have previously received other awards under the
Plan) such of them as in its opinion should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent with the Plan.
(b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; provided, however, that such purchase
price shall be no less than the par value of the Common Stock to be purchased,
unless otherwise permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted Stock.
(c) Upon the selection of a key Employee, Director or
Consultant to be awarded Restricted Stock, the Committee shall instruct the
Secretary of the Company to issue such Restricted Stock and may impose such
conditions on the issuance of such Restricted Stock as it deems appropriate.
7.3. Rights as Stockholders. Subject to Section 7.4, upon
delivery of the shares of Restricted Stock to the escrow holder pursuant to
Section 7.6, the Holder shall have, unless otherwise provided by the Committee,
all the rights of a stockholder with respect to said shares, subject to the
restrictions in his Award Agreement, including the right to receive all
dividends and other distributions paid or made with respect to the shares;
provided, however, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 7.4.
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7.4. Restriction. All shares of Restricted Stock issued under
the Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or any
other form of recapitalization) shall, in the terms of each individual Award
Agreement, be subject to such restrictions as the Committee shall provide,
which restrictions may include, without limitation, restrictions concerning
voting rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual performance;
provided, however, that, unless the Committee otherwise provides in the terms
of the Award Agreement or otherwise, no share of Restricted Stock granted to a
person subject to Section 16 of the Exchange Act shall be sold, assigned or
otherwise transferred until at least six months and one day have elapsed from
the date on which the Restricted Stock was issued, and provided, further, that,
except with respect to shares of Restricted Stock granted to Section 162(m)
Participants, by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Award Agreement. Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. If no consideration was paid by the
Holder upon issuance, a Holder's rights in unvested Restricted Stock shall
lapse, and such Restricted Stock shall be surrendered to the Company without
consideration, upon Termination of Employment or, if applicable, upon
Termination of Consultancy with the Company; provided, however, that the
Committee in its sole and absolute discretion may provide that such rights
shall not lapse in the event of a Termination of Employment following a "change
of ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or
because of the Holder's death or disability; provided, further, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants,
the Committee in its sole and absolute discretion may provide that no such
lapse or surrender shall occur in the event of a Termination of Employment, or
a Termination of Consultancy, without cause or following any Change in Control
of the Company or because of the Holder's retirement, or otherwise.
7.5. Repurchase of Restricted Stock. The Committee shall
provide in the terms of each individual Award Agreement that the Company shall
have the right to repurchase from the Holder the Restricted Stock then subject
to restrictions under the Award Agreement immediately upon a Termination of
Employment or, if applicable, upon a Termination of Consultancy between the
Holder and the Company, at a cash price per share equal to the price paid by
the Holder for such Restricted Stock; provided, however, that the Committee in
its sole and absolute discretion may provide that no such right of repurchase
shall exist in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or
because of the Holder's death or disability; provided, further, that, except
with respect to shares of Restricted Stock granted to Section 162(m)
Participants, the Committee in its sole and absolute discretion may provide
that no such right of repurchase shall exist in the event of a Termination of
Employment or a Termination of Consultancy without cause or following any
Change in Control of the Company or because of the Holder's retirement, or
otherwise.
7.6. Escrow. The Secretary of the Company or such other
escrow holder as the Committee may appoint shall retain physical custody of
each certificate representing Restricted Stock (but not any cash dividends or
other distributions paid thereon which dividends or
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distributions shall be paid by the escrow holder, as soon as practicable, to
the Holder of the applicable Restricted Stock) until all of the restrictions
imposed under the Award Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
7.7. Legend. In order to enforce the restrictions imposed
upon shares of Restricted Stock hereunder, the Committee shall cause a legend
or legends to be placed on certificates representing all shares of Restricted
Stock that are still subject to restrictions under Award Agreements, which
legend or legends shall make appropriate reference to the conditions imposed
thereby.
7.8. Section 83(b) Election. If a Holder makes an election
under Section 83(b) of the Code, or any successor section thereto, to be taxed
with respect to the Restricted Stock as of the date of transfer of the
Restricted Stock rather than as of the date or dates upon which the Holder
would otherwise be taxable under Section 83(a) of the Code, the Holder shall
deliver a copy of such election to the Company immediately after filing such
election with the Internal Revenue Service.
ARTICLE VIII.
ADMINISTRATION
8.1. Compensation Committee. The Compensation Committee (or
another committee or a subcommittee of the Board assuming the functions of the
Committee under the Plan) shall consist solely of two or more Independent
Directors appointed by and holding office at the pleasure of the Board, each of
whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside
director" for purposes of Section 162(m) of the Code. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members
may resign at any time by delivering written notice to the Board. From time to
time, the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, and fill vacancies, however caused.
8.2. Duties and Powers of Committee. It shall be the duty of
the Committee to conduct the general administration of the Plan in accordance
with its provisions. The Committee shall have the power to interpret the Plan
and the Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such rules and to amend any Award Agreement
provided that the rights or obligations of the Holder of the Award that is the
subject of any such Award Agreement are not affected adversely. Any such grant
or award under the Plan need not be the same with respect to each Holder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and
all rights and duties of the Committee under the Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any
regulations or rules issued thereunder, are required to be determined in the
sole discretion of the Committee. Notwithstanding the foregoing, the full
Board, acting by a majority of its members in office, shall conduct the general
administration of the Plan with respect to Options granted to Independent
Directors.
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<PAGE> 42
8.3. Majority Rule; Unanimous Written Consent. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all
members of the Committee.
8.4. Compensation; Professional Assistance; Good Faith
Actions. Members of the Committee shall receive such compensation for their
services, if any, as members as may be determined by the Board. All expenses
and liabilities which members of the Committee incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Holders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or Awards, and all members of the Committee and the Board
shall be fully protected by the Company in respect of any such action,
determination or interpretation. All decisions, determinations and
interpretations of the Committee shall be final and binding on all potential or
actual Holders, any other holder of an Option or other equity security of the
Company and all other persons. In any controversy regarding the administration
of the Plan, any arbitrator or court reviewing any decision, determination or
interpretation by the Committee shall not set aside or modify such decision,
determination or interpretation unless it is arbitrary, capricious or clearly
contrary to the terms of the Plan.
8.5. Delegation of Authority to Grant Awards. The Committee
may, but need not, delegate from time to time some or all of its authority to
grant Awards under the Plan to a committee consisting of one or more members of
the Committee or of one or more officers of the Company; provided, however,
that the Committee may not delegate its authority to grant Awards to
individuals (i) who are subject on the date of the grant to the reporting rules
under Section 16(a) of the Exchange Act, (ii) who are Section 162(m)
Participants or (iii) who are officers of the Company who are delegated
authority by the Committee hereunder. Any delegation hereunder shall be subject
to the restrictions and limits that the Committee specifies at the time of such
delegation of authority and may be rescinded at any time by the Committee. At
all times, any committee appointed under this Section 8.5 shall serve in such
capacity at the pleasure of the Committee.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
9.1. Not Transferable. No Award under the Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws
of descent and distribution or, subject to the consent of the Administrator,
pursuant to a DRO, unless and until such Award has been exercised, or the
shares underlying such Award have been issued, and all restrictions applicable
to such shares have lapsed. No Award or interest or right therein shall be
liable for the debts, contracts or engagements of the Holder or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other
17
<PAGE> 43
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition
is permitted by the preceding sentence.
During the lifetime of the Holder, only he may exercise an
Option or other Award (or any portion thereof) granted to him under the Plan,
unless it has been disposed of with the consent of the Administrator pursuant
to a DRO. After the death of the Holder, any exercisable portion of an Option
or other Award may, prior to the time when such portion becomes unexercisable
under the Plan or the applicable Award Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Holder's
will or under the then applicable laws of descent and distribution.
9.2 Amendment, Suspension or Termination of the Plan. Except
as otherwise provided in this Section 9.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Administrator. However, without approval of the Company's
stockholders given within twelve months before or after the action by the
Administrator, no action of the Administrator may, except as provided in
Section 9.3, increase the limits imposed in Section 2.1 on the maximum number
of shares which may be issued under the Plan. No amendment, suspension or
termination of the Plan shall, without the consent of the Holder, alter or
impair any rights or obligations under any Award theretofore granted or
awarded, unless the Award itself otherwise expressly so provides. No Awards may
be granted or awarded during any period of suspension or after termination of
the Plan, and in no event may any Incentive Stock Option be granted under the
Plan after the first to occur of the following events:
(a) The expiration of ten years from the date the Plan is
adopted by the Board; or
(b) The expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 9.4.
9.3. Changes in Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 9.3 (d), in the event that the
Administrator determines that any dividend or other distribution (whether in
the form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, or
exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the
Administrator's sole discretion, affects the Common Stock such that an
adjustment is determined by the Administrator to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan or with respect to an Award, then the
Administrator shall, in such manner as it may deem equitable, adjust any or all
of
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<PAGE> 44
(i) the number and kind of shares of Common Stock
(or other securities or property) with respect to which Awards may be granted
or awarded (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock
(or other securities or property) subject to outstanding Awards, and
(iii) the grant or exercise price with respect to
any Award.
(b) Subject to Sections 9.3(b)(vii) and 9.3(d), in the event
of any transaction or event described in Section 9.3(a) or any unusual or
nonrecurring transactions or events affecting the Company, any Affiliate of the
Company, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, the
Administrator, in its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by
action taken prior to the occurrence of such transaction or event and either
automatically or upon the Holder's request, is hereby authorized to take any
one or more of the following actions whenever the Administrator determines that
such action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Award under the Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:
(i) To provide for either the purchase of any such
Award for an amount of cash equal to the amount that could have been attained
upon the exercise of such Award or realization of the Holder's rights had such
Award been currently exercisable or payable or fully vested or the replacement
of such Award with other rights or property selected by the Administrator in
its sole discretion;
(ii) To provide that the Award cannot vest, be
exercised or become payable after such event;
(iii) To provide that such Award shall be
exercisable as to all shares covered thereby, notwithstanding anything to the
contrary in Section 5.3 or 5.4 or the provisions of such Award;
(iv) To provide that such Award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or shall
be substituted for by similar options, rights or awards covering the stock of
the successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices; and
(v) To make adjustments in the number and type of
shares of Common Stock (or other securities or property) subject to outstanding
Awards, and in the number and kind of outstanding Restricted Stock or Deferred
Stock and/or in the terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding options, rights and awards
and options, rights and awards which may be granted in the future.
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<PAGE> 45
(vi) To provide that, for a specified period of time prior to
such event, the restrictions imposed under an Award Agreement upon some or all
shares of Restricted Stock or Deferred Stock may be terminated, and, in the
case of Restricted Stock, some or all shares of such Restricted Stock may cease
to be subject to repurchase under Section 7.5 or forfeiture under Section 7.4
after such event.
(vii) Notwithstanding any other provision of the Plan, in the
event of a Change in Control, the Administrator will provide that the Plan and
all Options outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such transaction or in an Award
Agreement for the Administrator to take one or more of the optional actions
described in this Section 9.3(b), and, provided that, in the event of a Change
in Control, Section 5.4 of this Plan will govern with respect to Options
granted to Independent Directors.
(c) Subject to Sections 9.3(d), 3.2 and 3.3, the
Administrator may, in its discretion, include such further provisions and
limitations in any Award, agreement or certificate, as it may deem equitable
and in the best interests of the Company.
(d) With respect to Awards which are granted to Section
162(m) Participants and are intended to qualify as performance-based
compensation under Section 162(m)(4)(C), no adjustment or action described in
this Section 9.3 or in any other provision of the Plan shall be authorized to
the extent that such adjustment or action would cause such Award to fail to so
qualify under Section 162(m)(4)(C), or any successor provisions thereto. No
adjustment or action described in this Section 9.3 or in any other provision of
the Plan shall be authorized to the extent that such adjustment or action would
cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such
adjustment or action shall be authorized to the extent such adjustment or
action would result in short-swing profits liability under Section 16 or
violate the exemptive conditions of Rule 16b-3 unless the Administrator
determines that the Award is not to comply with such exemptive conditions. The
number of shares of Common Stock subject to any Award shall always be rounded
to the next whole number.
(e) Notwithstanding the foregoing, in the event that the
Company becomes a party to a transaction that is intended to qualify for
"pooling of interests" accounting treatment and, but for one or more of the
provisions of this Plan or any Award Agreement would so qualify, then this Plan
and any Award Agreement shall be interpreted so as to preserve such accounting
treatment, and to the extent that any provision of the Plan or any Award
Agreement would disqualify the transaction from pooling of interests accounting
treatment (including, if applicable, an entire Award Agreement), then such
provision shall be null and void. All determinations to be made in connection
with the preceding sentence shall be made by the independent accounting firm
whose opinion with respect to "pooling of interests" treatment is required as a
condition to the Company's consummation of such transaction.
(f) The existence of the Plan, the Award Agreement and the
Awards granted hereunder shall not affect or restrict in any way the right or
power of the Company or the shareholders of the Company to make or authorize
any adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation of the
Company, any issue of stock or of options, warrants or rights to purchase
20
<PAGE> 46
stock or of bonds, debentures, preferred or prior preference stocks whose
rights are superior to or affect the Common Stock or the rights thereof or
which are convertible into or exchangeable for Common Stock, or the dissolution
or liquidation of the company, or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
9.4. Approval of Plan by Stockholders. The Plan will be
submitted for the approval of the Company's stockholders within twelve months
after the date of the Board's initial adoption of the Plan. Awards may be
granted or awarded prior to such stockholder approval, provided that such
Awards shall not be exercisable nor shall such Awards vest prior to the time
when the Plan is approved by the stockholders, and provided further that if
such approval has not been obtained at the end of said twelve-month period, all
Awards previously granted or awarded under the Plan shall thereupon be canceled
and become null and void. In addition, if the Board determines that Awards
other than Options which may be granted to Section 162(m) Participants should
continue to be eligible to qualify as performance-based compensation under
Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to
and approved by the Company's stockholders no later than the first stockholder
meeting that occurs in the fifth year following the year in which the Company's
stockholders previously approved the Performance Criteria.
9.5. Tax Withholding. No later than the date as of which an
amount first becomes includable in the gross income of the Holder for
applicable income tax purposes with respect to any Award under the Plan, the
Participant shall pay to the Company or make arrangements satisfactory to the
Committee regarding the payment of any federal, state or local (or applicable
foreign) taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Committee, the minimum required
withholding obligations may be settled with Common Stock (held with no
restrictions), including Common Stock that is part of the Award that gives rise
to the withholding requirement. The obligations of the Company under the Plan
shall be conditional upon such payment or arrangements and the Company shall to
the extent permitted by law have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant.
9.6. Forfeiture Provisions. Pursuant to its general authority
to determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right to provide, in the terms of Awards made
under the Plan, or to require a Holder to agree by separate written instrument,
that (a) (i) any proceeds, gains or other economic benefit actually or
constructively received by the Holder upon any receipt or exercise of the
Award, or upon the receipt or resale of any Common Stock underlying the Award,
must be paid to the Company, and (ii) the Award shall terminate and any
unexercised portion of the Award (whether or not vested) shall be forfeited, if
(b)(i) a Termination of Employment, Termination of Consultancy or Termination
of Directorship occurs prior to a specified date, or within a specified time
period following receipt or exercise of the Award, or (ii) the Holder at any
time, or during a specified time period, engages in any activity in competition
with the Company, or which is inimical, contrary or harmful to the interests of
the Company, as further defined by the Administrator or (iii) the Holder incurs
a Termination of Employment, Termination of Consultancy or Termination of
Directorship for cause.
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<PAGE> 47
9.7. Effect of Plan Upon Options and Compensation Plans. The
adoption of the Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company (a) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (b) to grant or assume options or other rights or
awards otherwise than under the Plan in connection with any proper corporate
purpose including but not by way of limitation, the grant or assumption of
options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any
corporation, partnership, limited liability company, firm or association.
9.8. Compliance with Laws. The Plan, the granting and vesting
of Awards under the Plan and the issuance and delivery of shares of Common
Stock and the payment of money under the Plan or under Awards granted or
awarded hereunder are subject to compliance with all applicable federal, state,
and applicable foreign laws, rules and regulations (including but not limited
to state and federal securities law and federal margin requirements) and to
such approvals by any listing, regulatory or governmental authority as may, in
the opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under the Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all
applicable legal requirements. To the extent permitted by applicable law, the
Plan and Awards granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
9.9. Parachute Payments. If the gross amount of any payment
or benefit under the Plan, either separately or in combination with any other
payment or benefit payable by the Company or pursuant to a plan of the Company
would constitute a parachute payment within the meaning of Code Section 280G,
then the total payments and benefits accrued and payable under this Plan shall
not exceed the amount necessary to maximize the amount received by the Holder
after payment of all employment, income and excise taxes imposed on the Holder
with respect to such payments and benefits. The Holder may elect, by written
notice to the Committee, which items of compensation, if any, shall be reduced
so as to meet the requirements of the preceding sentence. If there is a dispute
between the Company and the Holder regarding (i) the extent, if any, to which
any payments or benefits to the Holder are parachute payments or excess
parachute payments, under Code Section 280G, (ii) the base amount of such
Holder's compensation, under Code Section 280G, or (iii) the status of such
Holder as a disqualified individual, under Code Section 280G, such dispute
shall be resolved as provided in Section 9.13 below. Within 30 days of the
Holder's receiving notice of (a) a change in control of the Company within the
meaning of Section 280G or (b) the Holder's termination of service following a
Change in Control with the Company or the Company's receiving notice of such
termination, either the Holder or the Company may request, in accordance with
Section 9.13 below, (a) a determination of the amount of any parachute payment,
excess parachute payment, or base amount of compensation, or (b) a
determination of the reduction necessary to maximize the amount receivable by
the Holder as described above. The Holder shall pay any fees, costs or expenses
incurred by the Holder in connection with such determinations.
22
<PAGE> 48
9.10. Time of Granting Options. Unless otherwise specified by
the Committee or as may be required by applicable law, regulation or rule
(including rules of stock exchanges or other self-regulatory organizations),
the date of grant of an Option under the Plan shall be the date on which the
Committee makes the determination to grant such Option or, if later, the date
on which are satisfied any conditions precedent to such grant. As soon as
feasible after the Committee makes its determination regarding the grant of an
Option, the Committee shall notify the person or class of persons who are the
recipients of the grant.
9.11. Reservation of Shares. During the term of this Plan,
the Company will at all times reserve and keep available the number of shares
as shall be sufficient to satisfy the requirements of the Plan. Inability of
the Company to obtain from any regulatory body having jurisdiction and
authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect to the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained.
9.12. Information to Holder. During the term of any Option
granted under the Plan, the Company shall provide or otherwise make available
to each Holder a copy of its annual report to shareholders and financial
information which is provided to its shareholders in accordance with the
provisions of the Company's bylaws and applicable law.
9.13. Mandatory Arbitration. Any dispute arising out of or
relating to this Plan or any Option Agreement shall be resolved solely by
arbitration before one arbitrator in accordance with the Employee Benefit Plan
Claim Rules of the American Arbitration Association. The location of the
arbitration proceeding shall be in McLean, Virginia. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction.
Each party to any dispute regarding the Plan or an Option Agreement shall pay
the costs and fees (including attorneys' fees) of presenting his, her or its
case in arbitration. All other costs of arbitration, including the costs of any
transcript of the proceedings, administrative fees and the arbitrator's fees,
shall be borne equally by the parties. All statutes of limitation, which would
otherwise be applicable, shall apply to any arbitration proceeding. The
provisions of this Section 9.13 are exclusive for all purposes and applicable
to any and all disputes arising out of or relating to the Plan or any Option
Agreement. The arbitrator who hears and decides any dispute shall have
jurisdiction and authority to award only compensatory damages to make whole a
person or entity sustaining foreseeable economic loss, and shall not have
jurisdiction or authority to make any other award of any type, including,
without limitation, punitive damages, unforeseeable economic damages, adverse
tax consequences, damages for pain, suffering or emotional distress, or any
other kind or form of damages. The remedy, if any, awarded by the arbitrator
shall be the sole and exclusive remedy for any dispute which is subject to
arbitration under this Plan.
9.14. Titles. Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or construction of the Plan.
9.15. Governing Law. The Plan and any agreements hereunder
shall be administered, interpreted and enforced under the internal laws of the
State of Delaware without regard to conflicts of laws thereof.
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<PAGE> 49
* * * *
I hereby certify that the foregoing Plan was duly adopted by
the Board of Directors of Golden Telecom, Inc. on September 30, 1999.
Executed on this thirtieth day of September, 1999.
------------------------------------------
Name: Jeff Riddell Secretary
Title: Secretary
24
<PAGE> 50
COMMON STOCK
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.,
12, Krasnokazarmennaya Street, Moscow, Russia 111250
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints David Wisher and Jeff
Riddell as proxies with full power of substitution to each, and hereby
authorizes them to represent and to vote, as designated hereon, all shares of
Common Stock of GOLDEN TELECOM INC. (the "Company") which the undersigned is
entitled to vote on all matters that come before the Annual Meeting of
Stockholders to be held on May 17, 2000, and any adjournments thereof.
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
[x] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR (I) THE ELECTION OF THE NOMINATED DIRECTORS, (II) APPROVAL OF AN
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION FOR AN INCREASE IN THE
AUTHORIZED COMMON STOCK AND FOR THE AUTHORIZATION OF PREFERRED STOCK, (III)
APPROVAL OF THE COMPANY'S EQUITY PARTICIPATION PLAN, AND (IV) RATIFICATION OF
THE SELECTION OF ERNST & YOUNG (CIS) LIMITED AS INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR 2000.
1. Election of Directors
(See Reverse)
FOR WITHHOLD
ALL FOR ALL
[ ] [ ]
<PAGE> 51
Ashley Dunster, Izzet Guney,
Alexandr M. Knaster, Stewart J. Paperin,
Grier C. Raclin, Stewart P. Reich,
Robert A, Schriesheim, H. Bryan Thompson,
Jeffrey H. Von Deylen
For, except vote withheld from the following nominees(s):
- ------------------------------------------------------------------------
2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION FOR
THE INCREASE IN THE AUTHORIZED COMMON STOCK AND THE AUTHORIZATION OF
PREFERRED STOCK
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF THE COMPANY'S EQUITY PARTICIPATION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. RATIFICATION OF THE SELECTION OF ERNST & YOUNG (CIS) LIMITED AS INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
CHECK HERE IF YOU PLAN TO ATTEND THE [ ]
STOCKHOLDERS MEETING ON MAY 17, 2000.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or authorized person. If a
partnership. Please sign in full partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
THE NOMINATED DIRECTORS, THE APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION FOR THE INCREASE IN THE AUTHORIZED COMMON STOCK
AND AUTHORIZATION OF PREFERRED STOCK, THE APPROVAL OF THE COMPANY'S EQUITY
PARTICIPATION PLAN, AND RATIFICATION OF THE SELECTION OF ERNST & YOUNG (CIS)
LIMITED AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR 2000.
SIGNATURE(S) DATE
------------------------- -------------------------
<PAGE> 52
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
GOLDEN TELECOM, INC. LOGO
ANNUAL MEETING OF STOCKHOLDERS
MAY 17, 2000
