<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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PLD TELEKOM INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PLD TELEKOM INC.
1270 AVENUE OF THE AMERICAS
SUITE 2218
NEW YORK, NEW YORK 10020
-------------------------------
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 12, 1997
-------------------------------
TO THE STOCKHOLDERS OF
PLD TELEKOM INC.:
Notice is hereby given that the 1997 annual meeting of stockholders
(the "Annual Meeting") of PLD Telekom Inc. (the "Company" or "PLD") will be held
at the Inter-Continental Hotel, 111 East 48th Street , New York, New York
10017-1297 on June 12, 1997, at 10:00 a.m., local time, for the following
purposes:
1. To elect ten directors;
2. To consider approval of the amendment and restatement of the
PLD Telekom Inc. Stock Option Plan; and
3. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only stockholders of record as of the close of business on April 28,
1997 will be entitled to notice of the Annual Meeting and to vote at the Annual
Meeting and any adjournments thereof. A list of stockholders of the Company as
of the close of business on April 28, 1997 will be available for inspection
during normal business hours for ten days prior to the Annual Meeting at the
Company's executive offices at 1270 Avenue of the Americas, Suite 2218, New
York, New York.
By order of the Board of Directors,
James R.S. Hatt
Chairman, President and
Chief Executive Officer
New York, New York
April 30, 1997
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. IF A STOCKHOLDER DECIDES TO ATTEND THE MEETING, HE OR
SHE MAY, IF SO DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
<PAGE> 3
PLD TELEKOM INC.
1270 AVENUE OF THE AMERICAS
SUITE 2218
NEW YORK, NEW YORK 10020
-------------------------------
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JUNE 12, 1997
-------------------------------
This proxy statement and the accompanying form of proxy are being
mailed on or about April 30, 1997, to the stockholders of PLD Telekom Inc. (the
"Company"). These materials are being furnished in connection with the
solicitation by the Board of Directors of the Company of proxies to be voted at
the 1997 Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Inter-Continental Hotel, 111 East 48th Street, New York, New York 10017-1297 on
June 12, 1997, at 10:00 a.m., local time, and at any adjournments thereof.
The entire cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by telephone by
officers and directors and a small number of regular employees of the Company
who will not be specially compensated for such services. The Company also will
request banks and brokers to solicit proxies from their customers, where
appropriate, and will reimburse such persons for reasonable expenses incurred in
that regard.
VOTING AT THE MEETING
Only stockholders of record at the close of business on April 28, 1997
are entitled to notice of, and to vote at, the Annual Meeting. As of April 28,
1997, there were 31,731,034 shares of the Company's common stock, par value $.01
(the "Common Stock") outstanding. Each stockholder entitled to vote shall have
the right to one vote for each share of Common Stock outstanding in such
stockholder's name.
The Company presently has no other class of stock outstanding and
entitled to be voted at the Annual Meeting (pursuant to the Company's
Certificate of Incorporation, holders of the Company's Series II Convertible
Preferred Stock, par value $.01 and Series III Convertible Preferred Stock, par
value $.01 are not entitled to receive notice of or to attend the Annual Meeting
or to vote at the Annual Meeting). The presence in person or by proxy of holders
entitled to cast a majority of all votes entitled to be cast at the Annual
Meeting will constitute a quorum.
Shares cannot be voted at the Annual Meeting unless the holder of
record is present in person or by proxy. The enclosed form of proxy is a means
by which a stockholder may authorize the voting of his or her shares at the
Annual Meeting. Directors are to be elected at the Annual Meeting by a plurality
of the votes cast by holders of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote. In the case of shares that are
present at the Annual Meeting for quorum purposes, not voting those shares for a
particular nominee for director (including by withholding authority on the
proxy) will not operate to prevent the election of that nominee if he otherwise
receives affirmative votes; an abstention on any other item, including the
approval of the amendment and restatement of the PLD Telekom Inc. Stock Option
Plan (the "Existing Plan"), will operate to prevent approval of the item to the
same extent as a vote against approval of such item and a broker "non-vote" on
any item (which results when a broker holding shares for a beneficial owner has
not received timely voting instructions on certain matters from such beneficial
owner and those matters are matters with respect to which the broker has no
discretion to vote) will have no effect on the outcome of the vote on such item.
The shares of Common Stock represented by each properly executed proxy will
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<PAGE> 4
be voted at the Annual Meeting in accordance with each stockholder's directions.
Stockholders are urged to specify their choices by marking the appropriate boxes
on the enclosed proxy card. If no choice has been specified and the enclosed
proxy card is properly executed and returned, the shares will be voted for all
nominees listed herein under "Election of Directors" and for approval of the
adoption of the Plan. If any other matters are properly presented to the Annual
Meeting for action, the proxy holders will vote the proxies (which confer
discretionary authority to vote on such matters) in accordance with their best
judgment.
Execution of the accompanying proxy will not affect a stockholder's
right to attend the Annual Meeting and vote in person. Any stockholder giving a
proxy has the right to revoke it by giving written or oral notice of revocation
to the Secretary of the Company, or by delivering a subsequently executed proxy,
at any time before the proxy is voted.
Your proxy vote is important. Accordingly, you are asked to complete,
sign and return the accompanying proxy card whether or not you plan to attend
the Annual Meeting. If you plan to attend the Annual Meeting to vote in person
and your shares are registered with the Company's transfer agent in the name of
a broker or bank, you must secure a proxy from your broker or bank assigning
voting rights to you for your shares of Common Stock.
3
<PAGE> 5
PLD TELEKOM INC. SECURITY OWNERSHIP
The following table sets forth certain information (as of March 31,
1997, except as otherwise noted), with respect to shares of Common Stock
beneficially owned by owners of more than five percent of the outstanding Common
Stock, by all current directors and nominees, by the executive officers of the
Company named in the Summary Compensation Table included elsewhere in this proxy
statement and by all current directors and executive officers of the Company as
a group.
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT
BENEFICIALLY OF
BENEFICIAL OWNER OWNED(1) CLASS(2)
---------------- ------------ --------
<S> <C> <C>
Navona Communications Corporation Ltd.(3)................................... 10,305,034 32.2%
Merrill Lynch & Co., Inc.(4)................................................ 6,441,407 17.4
Dominion Capital, Inc.(5)................................................... 2,572,330 8.1
David L. Heavenridge(6)..................................................... 2,572,330 8.1
BEA Associates(7)........................................................... 1,812,954 5.7
James R.S. Hatt(8).......................................................... 170,000 *
Simon Edwards(9)............................................................ 152,000 *
Alan G. Brooks(10).......................................................... 151,500 *
Robert Smith(11)............................................................ 83,500 *
David M. Stovel(12)......................................................... 42,500 *
Douglas T. Waite(13)........................................................ 27,500 *
Clayton A. Waite(14)........................................................ 25,313 *
Conor Carroll(15)........................................................... 20,167 *
Ronald R. Cripps(16)........................................................ 16,537 *
Dr. Boris Antoniuk(17)...................................................... -0- *
Edward Charles Dilley....................................................... -0- *
Gennadi Kudreatsev.......................................................... -0- *
Dr. Vladimir Kvint.......................................................... -0- *
Timothy Lowry............................................................... -0- *
Richard Wainright-Lee....................................................... -0- *
All current directors and executive officers of the Company as a group 3,261,347 10.0
(12 persons)................................................................
</TABLE>
(1) In accordance with Securities and Exchange Commission regulations, the
table lists all shares as to which such persons have or share the power
to vote or to direct disposition. The number of shares indicated
includes shares issuable upon the exercise of outstanding stock
options, warrants or convertible securities held by each
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<PAGE> 6
individual or group to the extent exercisable or convertible at March
31, 1997 or within 60 days thereafter. Unless otherwise indicated, each
person has the sole power to vote and to direct disposition of the
shares listed as beneficially owned by such person.
(2) Percentage for each individual or group calculated with reference to
an aggregate of 31,731,034 shares of Common Stock outstanding at
March 31, 1997 and all shares issuable upon the exercise of
outstanding stock options, warrants or convertible securities that are
exercisable by such individual or group within 60 days of March 31,
1997. Percentages of less than 1% have not been indicated.
(3) The amount shown includes currently exercisable warrants to purchase
250,000 shares of Common Stock held by Cable and Wireless plc, a
corporation organized under the laws of England ("Cable & Wireless")
located at 124 Theobalds Road, London WC1X 8RX. The remaining shares
are held by Navona Communications Corporation Ltd., a Bermuda
corporation ("Navona") and a wholly owned indirect subsidiary of Cable
& Wireless. Navona is located at Cedar House, 41 Cedar Avenue, Hamilton
HM 12, Bermuda.
(4) This information is as of December 31, 1996 and is based upon Amendment
No. 1 to Schedule 13G, filed February 13, 1997, with the Securities and
Exchange Commission by Merrill Lynch & Co., Inc. ("ML&Co."), Merrill
Lynch Group, Inc. ("ML Group"), Princeton Services, Inc. ("PSI") and
Merrill Lynch Asset Management, L.P. ("Merrill Lynch Asset
Management"). ML&Co. and ML Group are located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281. PSI
and Merrill Lynch Asset Management are located at 800 Scudders Mill
Road, Princeton, New Jersey 08536. The amount shown includes shares of
Common Stock issuable upon the conversion of 9% Convertible
Subordinated Notes of the Company (CUSIP 69340T10) (the "Convertible
Notes") and upon exercise of warrants to purchase shares of Common
Stock. In the aggregate, ML&Co. may be deemed to beneficially own
1,061,200 shares of Common Stock, $19,200,000 aggregate principal
amount of Convertible Notes and 76,400 warrants. Each such warrant may
be exercised for 34 shares of Common Stock. Merrill Lynch Global
Allocation Fund, Inc. owns 4,190 and Merrill Lynch Asset Management
owns 1,057,010 of the currently issued and outstanding shares of Common
stock. ML&Co. disclaims beneficial ownership of the securities of the
Company.
(5) The amount shown includes currently exercisable warrants to purchase
150,000 shares of Common Stock. David L. Heavenridge, a director of the
Company, is President and Chief Operating Officer of Dominion Capital,
Inc. ("Dominion"), a wholly owned subsidiary of Dominion Resources,
Inc., of which Mr. Heavenridge is Executive Vice President. Mr.
Heavenridge exercises shared investment and voting power with respect
to such shares, but disclaims beneficial ownership of such shares. See
Note (6) below. Dominion is located at 901 East Byrd Street, 10th
Floor, West Tower, Richmond, Virginia 23219.
(6) The amount includes shares in Note (5) above. Mr. Heavenridge, a
director of the Company, is President and Chief Operating Officer of
Dominion Capital, Inc., a wholly owned subsidiary of Dominion
Resources, Inc., of which Mr. Heavenridge is Executive Vice President.
Mr. Heavenridge exercises shared investment and voting power with
respect to such shares, but disclaims beneficial ownership of such
shares.
(7) This information is as of December 31, 1996 and is based upon Schedule
13F, filed March 11, 1997, with the Securities and Exchange Commission
by BEA Associates, Inc., which is located at 153 East 53rd Street, New
York, New York 10022.
(8) The amount shown includes currently exercisable options to purchase
160,000 shares of Common Stock.
(9) The amount shown includes currently exercisable options to purchase
150,000 shares of Common Stock.
(10) The amount shown includes currently exercisable options to purchase
150,000 shares of Common Stock.
(11) The amount shown includes currently exercisable options to purchase
82,500 shares of Common Stock.
(12) The amount shown consists entirely of currently exercisable options to
purchase shares of Common Stock.
5
<PAGE> 7
(13) The amount shown includes 4,000 shares held by Mr. Waite's spouse, for
which Mr. Waite disclaims beneficial ownership, and currently
exercisable options to purchase 17,500 shares of Common Stock.
(14) The amount shown includes 13 shares held by Mr. Waite's children, for
which Mr. Waite disclaims beneficial ownership, and currently
exercisable options to purchase 25,000 shares of Common Stock.
(15) The amount shown includes currently exercisable options to purchase
16,667 shares of Common Stock.
(16) The amount shown includes currently exercisable options to purchase
10,000 shares of Common Stock.
(17) Elite International Limited, an Irish company beneficially owned by a
trust advised by Dr. Antoniuk ("Elite") is the beneficial owner of 39
ordinary shares, par value US$1.00, of Technocom Limited, an Irish
corporation and subsidiary of the Company ("Technocom"), representing
19.6% of the outstanding ordinary shares of Technocom. The Company
understands that Dr. Antoniuk has the power to exercise the voting
rights of the shares of Technocom owned by Elite. None of the current
directors and executive officers of the Company own any ordinary shares
of Technocom, in which the Company owns a 50.75% equity interest.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of nine
members. Each director is elected each year to hold office for a one year term
and until the election and qualification of the director's successor or until
the director's death, removal or resignation. Pursuant to the Company's By-Laws,
the Board of Directors has increased the number of directors of the Company from
nine to ten. At the Annual Meeting, ten directors are to be elected, each of
whose term of office will expire at the 1998 annual meeting of stockholders.
James R.S. Hatt, David L. Heavenridge, Timothy P. Lowry, Robert Smith
and David M. Stovel, who are current members of the Board of Directors, have
been nominated by the Board of Directors for election as directors at the Annual
Meeting. Boris Antoniuk, Edward Charles Dilley, Simon Edwards, Gennadi
Kudreatsev and Vladimir Kvint have also been nominated by the Board of Directors
for election as directors at the Annual Meeting.
Ronald R. Cripps, Richard Wainright-Lee, Clayton A. Waite and Douglas
T. Waite (the father of Clayton A. Waite), who are current members of the Board
of Directors, are not standing for re-election at the Annual Meeting.
All nominees have consented to be named and to serve if elected. Unless
otherwise instructed by the stockholders, the persons named in the proxies will
vote the shares represented thereby for the election of such nominees. The Board
of Directors believes that all nominees will be able to serve as directors; if
this should not be the case, however, the proxies may be voted for one or more
substitute nominees to be designated by the Board of Directors or the board may
decide to reduce the number of directors. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
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<PAGE> 8
-----------------------------------------------------------
NOMINEES FOR ELECTION
-----------------------------------------------------------
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- --------------------------------------------------------
<S> <C> <C>
Dr. Boris Antoniuk 48 Dr. Antoniuk has many years' experience in the telecommunications
field, having worked for various government agencies and trade
delegations in the Soviet Union and Russia since 1974, including six
years as head of the U.S. department of the USSR State Committee for
Science and Technology in Moscow and three years as economic adviser to
a deputy Prime Minister of the USSR Council of Ministers. Since the
economic liberalization of Russia, he has been involved in a number of
commercial ventures, including the publishing of several Russian
computer magazines. Dr. Antoniuk has served as general manager of
Technocom and Chairman and Chief Executive Officer of Teleport-TP since
1992. Both Technocom and Teleport-TP are operating subsidiaries of the
Company. He also holds the post of Deputy Chairman of Technopark, a
subsidiary of Technocom.
Edward Charles Dilley(1) 58 Since January 1996, Mr. Dilley has been Director of Corporate Finance
for Cable & Wireless. Prior to joining Cable & Wireless, he was
employed by Barclays Bank for 40 years, including in several executive
positions.
Simon Edwards 34 Mr. Edwards is currently Senior Vice President, Chief Financial Officer
and Treasurer of the Company. He has served as Chief Financial Officer
of the Company since October 1995 and Senior Vice President and
Treasurer since February 1997. He was previously Director of Finance
for Cable & Wireless Europe from October 1994 to September 1995. From
July 1992 to October 1994, he held a number of corporate finance
positions within Cable & Wireless. From July 1988 to June 1992 he was a
management consultant with Arthur Andersen.
James R.S. Hatt 37 Mr. Hatt has served as a Director of the Company since June 1994, as
Chief Executive Officer since January 1995 and as Chairman since June
1995. From 1987 to 1995, he served as Director of Business Development,
Europe, for Cable & Wireless.
David L. Heavenridge 49 Mr. Heavenridge has served as a Director of the Company since October
1996. He has held several positions with Dominion since 1991 and has
been the President and Chief Executive Officer of Dominion since April
1994.
Gennadi Kudreatsev 57 Mr. Kudreatsev has many years' of telecommunications experience in
Russia and the former Soviet Union. He has served as Director General
of Intersputnik, a Russian state-owned satellite operator since 1992.
Prior to the breakup of the former Soviet Union, he served as Minister
of Communications of the USSR.
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- --------------------------------------------------------
<S> <C> <C>
Dr. Vladimir Kvint 48 Since 1992, Dr. Kvint has been Director, Emerging Markets for Arthur
Andersen LLP. He is also currently Professor, Management Systems and
International Business at Fordham University Graduate School of
Business and Adjunct Professor of Management Strategy at the Stern
School of Business, New York University. Dr. Kvint is a Full Lifetime
Member of the Russian Academy of Natural Sciences. From 1989 until 1995
he was a consultant to Cable & Wireless Executive Chairman Lord David
Young. He has published numerous articles and books on emerging Eastern
European markets.
Timothy P. Lowry(1) 41 Mr. Lowry has served as a Director of the Company since November 1995.
Since June 1995, Mr. Lowry has been Director, Central and Eastern
Europe, for Cable & Wireless. From June 1991 to May 1995, he was
Project Director, South Africa, for Cable & Wireless.
Robert Smith 59 Mr. Smith has served as a Director of the Company since September 1993.
He has been President of Newmark Capital Limited ("Newmark"), a private
investment and consulting company since 1992. From 1990 to 1992, he was
Chief Executive Officer of the First Hungarian Investment Advisory RT.
He also serves as Chairman of BECET International ("BECET"), an
operating subsidiary of the Company and sits on the boards of other
companies including Rogers Cantel Mobile Communications Inc.
David M. Stovel 47 Mr. Stovel has served as a Director of the Company since February 1993.
He has been President of Brawley Cathers Limited, an investment bank
headquartered in Toronto, Canada since 1987.
</TABLE>
- ----------
(1) Pursuant to an agreement dated March 3, 1994 between Navona and the
Company, the Company agreed to nominate two individuals designated by
Navona to the Company's board of directors so long as Navona holds at
least 25% of the total voting shares of the Company. Messrs. Dilley and
Lowry are the nominees of Navona.
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company met on 11 occasions during 1996.
Each director attended at least 75% of the aggregate of the meetings of the
Board of Directors held during the period for which he was a director, except
for Mr. Wainright-Lee, who attended eight of the 11 meetings of the Board of
Directors. Pursuant to applicable Canadian law, to which the Company was subject
prior to February 28, 1997 as a corporation organized under the Business
Corporations Act (Ontario), the Company was required to have an audit committee
of the Board of Directors. The Delaware General Corporation Law, to which the
Company was subject as of February 28, 1997, provides that the Board of
Directors, by resolution adopted by a majority of the entire board, may
designate one or more committees, each of which shall consist of one or more
directors. While domiciled in Canada during 1996, the Board of Directors
annually elected from its members a Compensation Committee and an Audit
Committee.
Compensation Committee. The Compensation Committee, consisting of David
L. Heavenridge (Chairman), David M. Stovel and Douglas T. Waite, currently has
the authority to approve salaries, bonuses, stock option grants and other
compensation matters for officers of the Company and to approve employee health
and benefit plans. Mr. Waite is a director not standing for reelection. Prior to
the continuance of the Company from Ontario to Delaware in February
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<PAGE> 10
1997, Robert Smith also served on the Compensation Committee. In addition, prior
to the continuance, the Compensation Committee did not have the authority to
approve stock option grants, which were approved by the entire Board of
Directors. The Compensation Committee met twice during 1996. Each member of the
Compensation Committee attended the meeting or meetings of the Compensation
Committee in 1996 held during the period for which he was a member of the
committee.
Audit Committee. The Audit Committee, consisting of Richard
Wainright-Lee (Chairman), Robert Smith, David M. Stovel and Douglas T. Waite has
the authority to recommend the appointment of the Company's independent auditors
and review the results and scope of audits, internal accounting controls and tax
and other accounting related matters. The Audit Committee met three times during
1996. Messrs. Smith, Stovel and Wainright-Lee attended two of these meetings and
Mr. Waite attended all of these meetings.
CERTAIN BUSINESS RELATIONSHIPS WITH DIRECTORS AND NOMINEES
In April 1996, the Company acquired 100% of the outstanding share
capital of Baltic Communications Limited ("BCL"), which provides dedicated
international telecommunications over fiber optic cable from St. Petersburg, for
$3.0 million plus an additional capital commitment of up to $1.5 million to
cover certain existing liabilities of BCL. A portion of the $3.0 million
consideration was paid directly to Cable & Wireless as a shareholder of BCL.
During 1994 and 1995, Cable & Wireless provided services to and met
certain liabilities of the Company. At December 31, 1995, the aggregate amount
owed to Cable & Wireless under these arrangements was $1,843,000. These amounts
were repaid in 1996.
The Company entered into an agreement as of January 1, 1995 with
Newmark with respect to the provision of the services of Robert Smith as a
consultant to the Company and to act as Chairman of BECET. The agreement
provides for the payment of $100,000 per annum (plus additional amounts
depending on the amount of time devoted by Mr. Smith to the affairs of the
Company or BECET) and is terminable for cause or by either party upon two years
notice of termination. In addition, Newmark has the option of terminating the
agreement in the event of a change of control of the Company (defined as control
of more than 30% of all outstanding voting shares being acquired by any person
or persons acting in concert other than Cable & Wireless and its affiliates) and
shall be terminated if Mr. Smith shall be removed from the office of Chairman of
BECET, in which events Newmark shall be entitled to the payment of two years
remuneration. In 1996, Newmark received $145,833 with respect to the provision
of Mr. Smith's services. Mr. Smith is President of Newmark.
Technocom has entered into a consulting agreement with Elite for the
provision to Technocom of the services of Dr. Antoniuk for a period expiring on
June 30, 2002, pursuant to which Technocom pays Elite fees equal to $108,333 per
annum for the term of the agreement, reviewable periodically, plus the
reasonable expenses of Dr. Antoniuk.
9
<PAGE> 11
PROPOSAL NO. 2
APPROVAL OF THE PLD TELEKOM INC. EQUITY COMPENSATION PLAN
At the Annual Meeting, there will be presented to the stockholders a
proposal to approve the amendment and restatement of the Existing Plan,
including the renaming of the Existing Plan as the "PLD Telekom Inc. Equity
Compensation Plan (as, so amended, restated and renamed, the "Amended Plan").
The Amended Plan was adopted by the Board of Directors on April 28, 1997,
subject to stockholder approval. The purpose of the Amended Plan is to amend and
restate the terms of the Existing Plan, which has been in existence since 1987.
Following the Company's continuance from Ontario to Delaware in February 1997,
the Board of Directors adopted a number of technical amendments to the Existing
Plan to conform its provisions to applicable U.S. law. Since that time, the
Board of Directors (through the Compensation Committee) has engaged in a review
of the provisions of the Existing Plan to determine whether it is adequate to
serve the Company's needs as a U.S. corporation seeking to attract, retain and
reward executives in the light of current practices in the U.S. respecting
equity compensation for such executives. Pursuant to this review, the Board of
Directors has determined that a number of changes are required to update the
Existing Plan, to make it more flexible in terms of the range of incentives
which can be offered to executives and also to provide a competitive
compensation package to attract, retain and reward personnel. The Amended Plan
will not be effective unless or until stockholder approval is obtained. No
further grants shall be made under the Existing Plan upon approval of the
Amended Plan and grantees under the Existing Plan will have the option of
continuing to have their existing grants covered by the terms of the Existing
Plan or (by so electing in writing) having their grants covered by the terms of
the Amended Plan.
Specifically, the amendments to the Existing Plan will achieve the
following:
- expand the range of eligible participants to include certain
key advisors. This amendment will permit the Company to use
equity as an alternative to other modes of compensation for
its outside advisors;
- provide for annual formula grants of non-qualified stock
options to non-employee directors;
- broaden the range of grants which may be made to eligible
participants from non-qualified stock options to: incentive
stock options, stock appreciation rights ("SARs"), restricted
stock and "performance units", which is more in line with
other comparable equity compensation plans;
- amend the maximum number of shares which may be issued under
the Amended Plan, the maximum number of shares which may be
subject to grants of incentive stock options and the maximum
number of shares which may be issued to any individual under
the Amended Plan, as well as a maximum term during which
options may be exercised; and
- liberalize the provisions regarding the time periods after
death, or termination of employment by reason of disability or
otherwise, during which options and other grants may be
exercised, as well as permitting grantees to assign rights to
grants to family members.
The Amended Plan is intended to qualify grants of stock options, stock
appreciation rights and certain specified grants of restricted stock and
performance units made under the Amended Plan as "performance-based
compensation" pursuant to section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Section 162(m) of the Code disallows a public company's
deductions for employee remuneration exceeding $1,000,000 per year for the chief
executive officer and the other four most highly compensated officers, but
contains an exception for qualified "performance-based compensation." Certain
actions must be taken by a compensation committee of two or more outside
directors and the material terms of the Amended Plan must be approved by the
stockholders to qualify remuneration paid under the Amended Plan as
"performance-based compensation."
10
<PAGE> 12
The Company believes that the Amended Plan will cause the participants
to contribute to the growth and well being of the Company, thereby benefitting
the Company's stockholders, as well as aligning the economic interests of the
participants with those of the stockholders. The text of the Amended Plan is
attached as Schedule A to this Proxy Statement. The description of the terms of
the Amended Plan which follows is qualified in its entirety by reference to the
actual text of the Amended Plan attached hereto as Schedule A.
Approval of the proposal to amend and restate the Existing Plan
requires the affirmative vote of the holders of a majority of shares present in
person or represented by proxy at the Annual Meeting. Abstentions may be
specified on the proposal and will be considered present at the Annual Meeting,
but will not be counted as affirmative votes. Abstentions, therefore, will have
the practical effect of voting against the proposal. Broker non-votes are
considered not present at the Annual Meeting with respect to this matter and,
therefore, will not be voted or have any effect upon the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL.
GENERAL DESCRIPTION OF THE AMENDED PLAN
The Amended Plan permits the award of incentive stock options (within
the meaning of Section 422 of the Code), non-qualified stock options, SARs
(separately or in tandem with any grant of an option), restricted stock and
performance units (pursuant to which cash payments may be made depending upon
the achievement within certain specified periods of certain goals, such as
increases in stock price, earnings or revenues (of either a discrete business
unit or the Company as a whole), decreases in costs, or achievement of market
share or business expansion targets).
ADMINISTRATION OF THE PLAN
The Amended Plan is administered by a committee (the "Committee")
appointed by the Board of Directors of the Company. All members of the Committee
must be "outside directors" as defined in Section 162(m) of the Code. Currently,
under the Existing Plan, the Committee consists of the members of the
Compensation Committee, namely, David L. Heavenridge (Chairman), David M. Stovel
and Douglas T. Waite, although the composition of this Committee will change
following the Annual Meeting as a result of Mr. Waite's decision not to stand
for re-election to the Board of Directors. The Committee has the sole authority
to determine the individuals to whom grants shall be made under the Amended
Plan, the type, size and terms of the grants to be made to each such individual,
the time when the grants will be made and the duration of any applicable
exercise or restriction period, including the criteria for exercisability and
the acceleration of exercisability. The Committee is given broad authority to
administer and interpret the Amended Plan, to make factual determinations, to
vary or create exceptions to the provisions of the Amended Plan and to adopt or
amend such rules, regulations, agreements and instruments for implementing the
Amended Plan and for the conduct of its business.
SHARES SUBJECT TO THE AMENDED PLAN; LIMITATIONS ON GRANTS
The maximum aggregate number of shares of the Company's common stock
that may be reserved for issuance or issued under the Amended Plan may not
exceed ten percent (10%) of the total issued and outstanding shares of such
common stock plus the aggregate number of shares already reserved for issuance
or issued under the Existing Plan. In addition, the maximum number of shares
which may be granted pursuant to incentive stock options is 1,000,000 shares,
the maximum number of shares of common stock that may be reserved for issuance
or issued to any individual in any calendar year is 1,500,000 shares, the
maximum number of shares which may be granted to any individual with respect to
performance units or pursuant to any grant of restricted stock in relation to
any performance period is 750,000 shares, and the maximum amount that may be
paid to any individual in cash in respect of any performance units in relation
to any performance period is $5,000,000. If options or SARs granted under the
Amended Plan terminate, expire, or are canceled, forfeited, exchanged or
surrendered without having been exercised, or if any shares of restricted stock
or performance units are forfeited, such shares may be made available for
purposes of the Amended Plan.
11
<PAGE> 13
The Committee is authorized to adjust the maximum number of shares that
any individual participating in the Amended Plan may be granted in any year, the
number of shares covered by outstanding grants, the kind of shares issued under
the Amended Plan, and the price per share or the applicable market value of such
grants in the event that there is any change in the number or kind of shares of
common stock outstanding by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, a merger,
reorganization or consolidation in which the Company is the surviving
corporation, a reclassification or change in par value, or any other
extraordinary or unusual event affecting the outstanding common stock as a class
without the Company's receipt of consideration, or if the value of outstanding
shares of common stock is substantially reduced as a result of a spinoff or the
Company's payment of an extraordinary dividend or distribution.
ELIGIBILITY
All employees of the Company and designated key employees of its
subsidiaries, including employees who are officers or members of the Board of
Directors, are eligible to participate in the Amended Plan. Key advisors who
perform services for the Company or any of its subsidiaries are also eligible to
participate in the Amended Plan so long as the services they render are bona
fide and substantial and are not in connection with the offer or sale of
securities in a capital-raising transaction. Members of the Board of Directors
who are not Employees (as defined in the Plan) are also eligible to participate,
but are only permitted to receive non-qualified stock options, pursuant to
arrangements under which, subject to approval by the Board of Directors, such
individuals are automatically awarded 10,000 options upon becoming a director,
and a further 5,000 options annually thereafter.
STOCK OPTIONS
The Committee is authorized to grant options that are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code (and which can result in potentially favorable tax treatment to the
participant) or options that are not intended so to qualify ("non-qualified
options") or any combination thereof. Incentive stock options may be granted
only to Employees. Furthermore, the maximum value of the shares as to which any
incentive stock option may first become exercisable by any individual during any
calendar year is limited to $100,000, any excess being treated as a
non-qualified option.
The exercise price for any non-qualified option is set by the Committee
and may be equal to, greater than, or less than the fair market value of a share
on the date the option is granted. The exercise price of an incentive stock
option must be equal to, or greater than, the fair market value of a share on
the date the option is granted. The fair market value of a share of Common Stock
on April 28, 1997 (determined by the closing price on the NASDAQ Stock Market)
was $5.16. Furthermore, an incentive stock option may not be granted to an
employee who, at the time of grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary of the Company, unless the exercise price per share is not less
than 110% of the fair market value of a share on the date of grant and the term
of such incentive stock option is not more than five years. Except as set forth
in the preceding sentence, the term of any option may not exceed ten years from
the date of grant.
In general, an option may only be exercised while the grantee is
employed by the Company, or is serving as a key advisor or member of the Board
of Directors. In the event that a grantee ceases to be employed by the Company
or to serve in such capacity for any reason other than a termination for
"cause", the grantee (or his legal representative) is given certain specified
periods ranging from three months to two years (which periods may be modified by
the Committee) during which time outstanding options may be exercised. Unless
the terms of the grant specify otherwise, options that are otherwise exercisable
as of the date on which the grantee ceases to be employed by the Company will
terminate unless exercised within one year after the date upon which the grantee
ceases to be employed by the Company in the case of non-qualified options or
three months after such date in the case of incentive stock options, but in no
event after the end of the option term. In addition, options held by an employee
terminated for "cause" terminate as of the date the grantee ceases to be an
employee, unless otherwise determined by the Committee.
An option is exercised by delivering a notice of exercise to the
Company with payment of the exercise price. The exercise price may be paid in
cash or, with the approval of the Committee, by delivering shares of common
stock owned by the grantee (including stock acquired in connection with the
exercise of an option, subject to such restrictions
12
<PAGE> 14
as the Committee deems appropriate) and having a fair market value on the date
of exercise equal to the exercise price, or by such other method as the
Committee may approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board; provided that
any shares of Common Stock used to exercise an option will have been held by the
grantee for the requisite period of time to avoid adverse accounting consequence
to the Company.
STOCK APPRECIATION RIGHTS
The Committee may grant SARs to an employee or key advisor separately
or in tandem with any option (for all or a portion of the applicable option).
Tandem SARs may be granted either at the time the option is granted or at any
time thereafter while the option remains outstanding, except that SARs related
to incentive stock options may only be granted at the time of the grant of the
option. Unless the Committee determines otherwise, the base amount of each SAR
is to be equal to the per share exercise price of the related option or, if
there is no related option, the fair market value of a share as of the date of
grant.
In the case of tandem SARs, the number of SARs granted to a grantee
that shall be exercisable during a specified period may not exceed the number of
shares that the grantee may purchase upon the exercise of the related option
during such period. Upon the exercise of an option, the SARs relating to the
shares covered by such option terminate. Upon the exercise of SARs, the related
option terminates to the extent of an equal number of shares.
An SAR is exercisable during the period and is subject to such vesting
and other restrictions as may be specified by the Committee. The Committee may
accelerate the exercisability of any or all outstanding SARs at any time for any
reason. SARs may only be exercised while the grantee is employed by the Company
or during certain specified periods after termination of employment. A tandem
SAR may be exercisable only during the period when the option to which it is
related is also exercisable.
When a grantee exercises SARs, the grantee shall receive in settlement
of such SARs an amount equal to the value of the stock appreciation for the
number of SARs exercised, payable in cash. The stock appreciation for an SAR is
the amount by which the fair market value of the underlying shares on the date
of exercise of the SAR exceeds the base amount of the SAR.
RESTRICTED STOCK GRANTS
Grants of restricted stock may be made to employees or key advisors
upon such terms as the Committee deems appropriate. The Committee is given broad
discretion as to the terms of such grants, including the number of shares
granted, the consideration (if any), the restrictions on such shares and the
conditions under which the restrictions lapse. The Committee is also authorized
to waive any such restrictions. While the restrictions are in place, a grantee
may generally not transfer the shares, but does have the right, unless the
Committee specifies otherwise, to vote the shares and to receive dividends. If a
grantee ceases to be employed by the Company during any restriction period, or
if other specified conditions for the grant are not met, the restricted stock
grant terminates as to all shares covered by the grant as to which the
restrictions have not lapsed. The Committee may, however, provide for complete
or partial exceptions to this requirement as it deems appropriate.
PERFORMANCE UNITS
Employees and key advisors are also eligible to receive performance
units. Each performance unit represents the right of the grantee to receive an
amount based on the value of the performance unit if performance goals
established by the Committee are met. The Committee is given broad authority to
determine the terms of each grant, including the number of performance units to
be granted, the measurement base, the period over which performance is to be
measured, the performance goals and any other requirements. Performance goals
may relate to the financial performance of the Company or its operating units,
the performance of the Company's stock, individual performance, or such other
criteria as the Committee deems appropriate. At the end of each performance
period, the Committee shall
13
<PAGE> 15
determine to what extent the performance goals and other conditions of the
performance units have been met and the amount, if any, to be paid with respect
to the performance units. All payments with respect to performance units will be
made in cash. If a grantee ceases to be employed by the Company during a
performance period, or if any of the other conditions established by the
Committee are not met, the grantee's performance units shall be forfeited. The
Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
QUALIFIED PERFORMANCE-BASED COMPENSATION (RESTRICTED STOCK GRANTS AND GRANTS OF
PERFORMANCE UNITS)
The Committee may specify that grants of restricted stock and
performance units will be considered "qualified performance-based compensation"
under section 162(m) of the Code. The Committee will specify in writing the
following requirements for grants that are specified as "qualified
performance-based compensation": (i) objective performance goals; (ii) the
performance period during which the performance goals must be met; (iii) the
threshold, target and maximum amounts that may be paid if the performance goals
are met, and (iv) any other conditions that the Committee deems to be
appropriate and consistent with the Amended Plan and section 162(m) of the Code.
The performance goals may relate to the grantee's business unit or the
performance of the Company and its subsidiaries as a whole, or any combination
of the foregoing. The Committee will use objectively determinable performance
goals based on one or more of the following criteria: stock price, earnings per
share, net earnings, operating earnings, return on assets, shareholder return,
return on equity, growth in assets, unit volume, sales, market share, or
strategic business criteria consisting of one or more objectives based on
meeting specified revenue goals, market penetration goals, geographic business
expansion goals, cost targets or goals relating to acquisitions or divestitures.
The performance goals must be set by the Committee either before the
beginning of the performance period or during a period ending no later then the
earlier of (i) 90 days after the beginning of the performance period and the
date on which 25% of the performance period has been completed, or (ii) such
other date as may be required or permitted under applicable regulations under
section 162(m) of the Code. The Committee does not have discretion to increase
the amount of compensation payable upon satisfaction of the performance goals.
The maximum amount of restricted stock or performance units that may be granted
to any individual for any performance period is an amount equal to 750,000
shares of Common Stock. If performance units are not measured in terms of Common
Stock, the maximum amount payable to any individual for any performance period
is $5,000,000.
The Committee will certify and announce the results for each
performance period. If and to the extent that the Committee does not certify
that the performance goals have been met, the grants of restricted stock and
performance units will be forfeited.
TRANSFERS OF GRANTS
Transfers of grants are generally restricted to transfers by will or by
the laws of descent or distribution, pursuant to a domestic relations order, or
(in the case of non-qualified stock options only, and subject to compliance with
a number of conditions) to members of the grantee's immediate family (or trusts
for their benefit).
ACCELERATION OF VESTING
The Committee is given the right to accelerate the exercisability, the
lapsing of restrictions and the expiration of deferral or vesting periods of any
grant. In addition, such accelerated exercisability, lapse, expiration or
vesting may occur automatically, and outstanding performance units shall be
subject to immediate settlement, in the case of a "change of control" of the
Company. A "change of control" is deemed to have occurred if (i) any person or
group becomes a beneficial owner of securities of the Company representing 50%
or more of the voting power of the then outstanding securities of the Company,
(ii) the shareholders of the Company approve (or, if shareholder approval is not
required, the Board of Directors approves) an agreement providing for (A) the
merger or consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to 50% or more
14
<PAGE> 16
of all votes to which all shareholders of the surviving corporation would be
entitled in the election of directors (without consideration of the rights of
any class of stock to elect directors by a separate class vote), or where the
members of the Board of Directors, immediately prior to the merger or
consolidation, would not, immediately after the merger or consolidation,
constitute a majority of the board of directors of the surviving corporation,
(B) the sale or other disposition of all or substantially all of the assets of
the Company (other than to a wholly owned subsidiary), or (C) a liquidation or
dissolution of the Company, (iii) any person has commenced a tender offer or
exchange offer for 50% or more of the voting power of the then outstanding
shares of the Company; or (iv) after the date the Amended Plan is approved by
the shareholders of the Company, directors are elected such that a majority of
the members of the Board of Directors shall have been members of the Board of
Directors for less than two years, unless the election or nomination for
election of each new director who was not a director at the beginning of such
two-year period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period.
AMENDMENT AND TERMINATION OF THE AMENDED PLAN; EFFECT ON OUTSTANDING AWARDS
The Board of Directors may amend or terminate the Amended Plan at any
time, subject to obtaining shareholder approval if such approval is required by
Section 162(m) or Section 422 of the Code or under the rules of any stock
exchange or automated quotation system on which the Company's shares are listed
or quoted. The Amended Plan will terminate, and no further awards or grants may
be made thereunder, on the day immediately preceding the tenth anniversary of
its effective date, unless the Amended Plan is terminated earlier by the Board
of Directors or is extended by the Board of Directors with the approval of the
stockholders. A termination or amendment of the Amended Plan that occurs after a
grant is made will not materially impair the rights of a grantee unless the
grantee consents or unless such amendment is required in order to comply with
applicable law.
Adoption of the Amended Plan by the stockholders of the Company will
not have any adverse effect upon grants of stock options under the Existing
Plan. A description of the currently outstanding options is available upon
request from the Company. The amount and type of the grants which may be made
under the Amended Plan in the future cannot presently be determined.
FEDERAL INCOME TAX CONSEQUENCES
The current federal income tax treatment of grants made under the
Amended Plan is generally described below. Local and state tax authorities may
also tax incentive compensation awarded under the Amended Plan, and tax laws are
subject to change. Grantees are urged to consult with their personal tax
advisors concerning the application of the general principles discussed below to
their own situations and the application of state and local tax laws.
NON-QUALIFIED STOCK OPTIONS
There are no federal income tax consequences to a grantee or to the
Company upon the grant of a non-qualified stock option under the Amended Plan.
Upon the exercise of a non-qualified stock option a grantee will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the shares at the time of exercise over the option price of the
non-qualified stock option, and the Company generally will be entitled to a
corresponding federal income tax deduction. Upon the sale of shares acquired by
the exercise of an non-qualified stock option a grantee will have a capital gain
or loss (long-term or short-term depending upon the length of time the shares
were held) in an amount equal to the difference between the amount realized upon
the sale and the grantee's adjusted tax basis in the shares (the exercise price
plus the amount of ordinary income recognized by the grantee at the time of
exercise of the non-qualified stock option).
15
<PAGE> 17
INCENTIVE STOCK OPTIONS
A grantee of an incentive stock option will not recognize taxable
income for purposes of the regular income tax, upon either the grant or exercise
of the incentive stock option. However, for purposes of the alternative minimum
tax imposed under the Code, the amount by which the fair market value of the
shares acquired upon exercise exceeds the option price will be treated as an
item of adjustment and included in the computation of the recipient's
alternative minimum taxable income in the year of exercise. If a grantee
disposes of the shares acquired upon exercise of an incentive stock option after
two years from the date the incentive stock option was granted, and after one
year from the date such shares were transferred to him or her upon exercise of
the incentive stock option, the grantee will recognize long-term capital gain or
loss in the amount of the difference between the amount realized on the sale and
the option price (or the grantee's other tax basis in the shares), and the
Company will not be entitled to any tax deduction by reason of the grant or
exercise of the incentive stock option. As a general rule, if a grantee disposes
of the shares acquired upon exercise of an incentive stock option before
satisfying both holding period requirements (a "disqualifying disposition"), his
or her gain recognized on such a disposition will be taxed as ordinary income to
the extent of the difference between the fair market value of such shares on the
date of exercise and the option price, and the Company will be entitled to a
deduction in that amount. The gain, if any, in excess of the amount recognized
as ordinary income on such a disqualifying disposition will be long-term or
short-term capital gain, depending upon the length of time the grantee held his
or her shares prior to the disposition.
STOCK APPRECIATION RIGHTS
There are no federal income tax consequences to a grantee or to the
Company upon the grant of an SAR under the Amended Plan. Upon the exercise of an
SAR, the grantee will recognize ordinary compensation income in an amount equal
to the cash received. The Company generally will be entitled to a corresponding
federal income tax deduction at the time of the exercise of the SAR.
RESTRICTED STOCK
A grantee normally will not recognize taxable income upon receiving a
restricted stock grant, including a restricted stock grant specified as
"qualified performance-based compensation," and the Company will not be entitled
to a deduction, until such stock is transferable by the grantee or no longer
subject to a substantial risk of forfeiture for federal tax purposes, whichever
occurs earlier. When the stock is either transferable or is no longer subject to
a substantial risk of forfeiture, the grantee will recognize ordinary
compensation income in an amount equal to the fair market value of the shares
(less any amounts paid for such shares) at that time, and the Company will be
entitled to a deduction in the same amount. A grantee may, however, elect to
recognize ordinary compensation income in the year the restricted stock grant is
awarded in an amount equal to the fair market value of the shares subject to the
restricted stock grant (less any amounts paid for such shares) at that time,
determined without regard to the restrictions. In such event, the Company
generally will be entitled to a corresponding deduction in the same year. Any
gain or loss recognized by the grantee upon subsequent disposition of the shares
will be capital gain or loss. If, after making the election, any shares subject
to a restricted stock grant are forfeited, or if the market value declines
during the restriction period, the grantee will not be entitled to any tax
deduction or tax refund, other than with respect to any amounts paid for such
shares.
PERFORMANCE UNITS
Generally, a grantee will not recognize any income upon the grant of
the performance unit, including performance units specified as "qualified
performance-based compensation," and the Company will not be entitled to a
deduction, until the grantee receives payment of the performance unit. At the
time that the performance unit is paid to the grantee, the grantee will
recognize ordinary compensation income in the amount of the payment and the
Company will be entitled to a deduction in the same amount.
16
<PAGE> 18
TAX WITHHOLDING
The Company has the right to deduct from all grants paid in cash or
from other wages paid to an employee of the Company, any federal, state or local
taxes required by law to be withheld with respect to grants, and the participant
or other person receiving shares under the Amended Plan will be required to pay
to the Company the amount of any such taxes which the Company is required to
withhold with respect to such shares. With approval by the Committee, a grantee
may elect to satisfy the Company's income tax withholding obligation by
withholding shares received from the exercise of a stock option or restricted
stock grant.
SECTION 162(m)
Under section 162(m) of the Code, the Company may be precluded from
claiming a federal income tax deduction for total remuneration in excess of
$1,000,000 paid to the chief executive officer or to any of the other four most
highly compensated employees in any one year. Total remuneration may include
amounts received upon the exercise of stock options, SARs and performance units
granted under the Plan, the value of shares subject to restricted stock grants
when such shares become nonforfeitable (or such other time when income is
recognized) and the amounts received pursuant to other grants under the Amended
Plan. An exception does exist, however, for "performance-based compensation."
The Amended Plan is generally intended to make grants of stock options and SARs,
and performance units and restricted stock grants designated as "qualified
performance-based compensation" thereunder meet the requirements of
"performance-based compensation." Restricted stock grants and performance units
granted under the Amended Plan generally will not qualify as "performance-based
compensation," unless the grants are designated as "qualified performance-based
compensation."
NEW PLAN BENEFITS
The following table sets forth certain benefits related to the Amended
Plan. Future awards under the Amended Plan other than automatic grants of
non-qualified stock options to non-employee directors are not determinable
because awards are granted at the discretion of the Committee depending upon a
variety of factors. No awards have been granted as of the date hereof under the
Amended Plan.
<TABLE>
<CAPTION>
Name of Non-Employee Director(1) Number of Shares Subject to Non-Qualified Stock Options
- -------------------------------- -------------------------------------------------------
<S> <C>
Dr. Boris Antoniuk 10,000
Edward Charles Dilley 10,000
Gennadi Kudreatsev 10,000
Dr. Vladimir Kvint 10,000
David L. Heavenridge 5,000
Timothy P. Lowry 5,000
Robert Smith 5,000
David M. Stovel 5,000
</TABLE>
(1) Assumes election at the Annual Meeting.
17
<PAGE> 19
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding each of the current
executive officers of the Company.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AGE POSITION
------------------ --- --------
<S> <C> <C>
James R.S. Hatt(1)....... 37 President and Chief Executive Officer
Simon Edwards(1) ........ 34 Senior Vice President, Chief Financial Officer and Treasurer
Alan G. Brooks(2) ....... 54 Senior Vice President and Chief Operating Officer
Conor Carroll(3) ........ 30 Vice President, Operations
Robert Smith(1).......... 59 Chairman, BECET International
</TABLE>
(1) See "Directors" for biographical information.
(2) Mr. Brooks has served as Chief Operating Officer of the
Company since January 1996 and Senior Vice President since
February 1997. Previously, he served in a number of senior
management positions with Cable & Wireless for over 30 years,
most recently in Sweden, Japan, Papua New Guinea and the
Middle East. Mr. Brooks was on secondment to the Company from
Cable & Wireless from March 1995 until December 1995.
(3) Mr. Carroll has served as Vice President, Operations of the
Company since February 1997. From January 1995 until February
1997 he was Vice President, Business Development of the
Company. From 1991 to 1994, Mr. Carroll was Business
Development Manager for Cable & Wireless Europe.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act"), requires that directors and certain officers of the Company,
and persons who own more than ten percent of the Company's Common Stock, file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes of ownership of such Common Stock.
Prior to February 28, 1997, the Company was (i) domiciled in Canada,
(ii) a "foreign private issuer" as defined in Rule 3b-4(c) of the Exchange Act
and (iii) eligible to file annual reports with the SEC on Form 20-F. Therefore,
the Company's securities were exempt from the requirements of Section 16 of the
Exchange Act during 1996.
18
<PAGE> 20
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth for the years ended December 31, 1996
and December 31, 1995 certain compensation paid by the Company to its Chief
Executive Officer and the four other most highly paid executive officers of the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION
--------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS
--------------------------- ---- --------- ----- ------------ -------
<S> <C> <C> <C> <C> <C>
James R.S. Hatt 1996 $290,000 $191,000 $58,000 250,000
Chairman, President and Chief Executive 1995 $220,000 $ 75,000 $44,000 200,000
Officer ..........................................
Simon Edwards 1996 $225,000 $165,000 $45,000 200,000
Senior Vice President, Chief Financial 1995 $ 43,750 $ 15,000 $ 8,750 150,000
Officer and Treasurer ............................
Conor Carroll 1996 $150,700 $ 90,280 $30,140 150,000
Vice President, Operations ....................... 1995 $110,000 $ 14,300 $22,000 50,000
Robert Smith 1996 $145,833(2) -0- -0- 100,000
Chairman of BECET International .................. 1995 $200,000(2) -0- -0- -0-
Alan G. Brooks 1996 $149,500 $ 40,000 -0- -0-
Senior Vice President and Chief Operating 1995 -- -- -- --
Officer(3) .......................................
</TABLE>
- ----------
(1) All amounts are stated in U.S. Dollars. Certain amounts were paid to
Messrs. Hatt, Edwards and Carroll in British Pounds and have been
converted to U.S. Dollars at a conversion rate of $1.50/(pound
sterling)1.00.
(2) Amounts classified as "salary" were paid as a consulting fee to Newmark
for the provision of Mr. Smith's services to BECET and the Company. See
"Certain Business Relationships with Directors and Nominees."
(3) Mr. Brooks has served as Chief Operating Officer of the Company since
July 1996 and Senior Vice President since February 1997.
19
<PAGE> 21
The following table summarizes stock options granted during 1996 to the
persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
INDIVIDUAL GRANTS OF STOCK PRICE
--------------------------------------- APPRECIATION FOR OPTION
PERCENT OF TOTAL TERM(1)
OPTIONS GRANTED -------
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED 1996 PRICE DATE 5% 10%
- ---- ------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
175,000 18.6% $8.00 6/20/01 $386,794 $854,714
James R. S. Hatt ....... 75,000 8.0% $6.25 6/20/01 $129,507 $286,177
140,000 14.9% $8.00 6/20/01 $309,435 $683,771
Simon Edwards .......... 60,000 6.4% $6.25 6/20/01 $103,606 $228,941
105,000 11.2% $8.00 6/20/01 $232,077 $512,828
Conor Carroll .......... 45,000 4.8% $6.25 6/20/01 $ 77,704 $171,706
70,000 7.4% $8.00 6/20/01 $154,718 $341,886
Robert Smith ........... 30,000 3.2% $6.25 6/20/01 $ 51,803 $114,471
Alan G. Brooks ......... -0- -- -- -- -- --
</TABLE>
- ----------
(1) Potential Realizable Values are based on an assumption that the stock
price of the Common Stock starts equal to the exercise price shown for
each particular option grant and appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the term
of the option. These amounts are reported net of the option exercise
price, but before any taxes associated with exercise or subsequent sale
of the underlying stock. The actual value, if any, an option holder may
realize will be a function of the extent to which the stock price
exceeds the exercise price on the date the option is exercised. The
actual value to be realized by the option holder may be greater or less
than the values estimated in this table.
20
<PAGE> 22
The following table summarizes option exercises during 1996 and the
value of vested and unvested options for the persons named in the Summary
Compensation Table at December 31, 1996. Year-end values are based upon a price
of $6.125 per share, which was the closing market price of a share of the
Company's Common Stock on the NASDAQ Stock Market on December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST YEAR AND
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1996 DECEMBER 31, 1996
---------------------------- ----------------------------
SHARES ACQUIRED
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. S. Hatt .... 40,000 $66,454.95(1) 160,000 250,000 -0- -0-
Simon Edwards ....... -0- -- 150,000 200,000 $43,221(2) -0-
Conor Carroll........ -0- -- 16,667 183,333 -0- -0-
Robert Smith......... -0- -- 82,500 100,000 -0- -0-
Alan G. Brooks....... -0- -- -0- -0- -- --
</TABLE>
(1) Based on an exercise price of Cdn $8.4375, a conversion rate on
September 18, 1996 (date of exercise) of Cdn $1.3717/$1.00 and a
closing price on the NASDAQ Stock Market on September 18, 1996 of
$7.8125.
(2) Assuming a conversion rate of Cdn $1.3706/$1.00 on December 31, 1996.
The exercise price of these options is Cdn $8.00.
The Company does not currently grant any long-term incentives, other
than stock options, to its executives or other employees. Similarly, the Company
does not sponsor any defined benefit or actuarial plans at this time.
EMPLOYMENT AGREEMENTS
Pursuant to employment agreements, dated as of January 1, 1995, with
the Company and PLD Management Services Limited, a wholly owned English
subsidiary of the Company ("PLDMS"), James Hatt was employed (i) as Chief
Executive Officer of the Company at an initial annual salary of $167,500 and
(ii) as an Executive of PLDMS at an initial annual salary of (pound
sterling)35,000. During 1996, Mr. Hatt's annual salaries under these agreements
were $237,500 and (pound sterling)35,000, respectively. The agreement with the
Company may be terminated without cause by either party upon two years prior
written notice or for cause as specified; provided, that if Mr. Hatt gives
notice of termination of employment with the Company, the Company may, in its
sole discretion, terminate employment immediately upon the payment of the lump
sum of six months' gross salary. Mr. Hatt may also terminate his employment with
the Company upon three months prior written notice upon a change in control of
the Company or a material diminution of his duties as a consequence of the
actions of one or more affiliated entities beneficially owning greater than 30%
of the Company's outstanding voting shares. The agreement with PLDMS may be
terminated without cause by either party upon thirty days prior written notice
or for cause as specified. Upon termination without cause by the Company, Mr.
Hatt is to receive as a termination fee a specific multiple of his then current
annual salary from the Company, as determined from time to time by the board of
directors. As of December 31, 1996, the applicable multiple for Mr. Hatt is
2.442. In addition to his salary from the Company and PLDMS, an amount equal to
ten percent of the then current termination fee is payable by the Company to Mr.
Hatt annually in lieu of all other benefits. No termination payment is payable
to Mr. Hatt by PLDMS.
Pursuant to employment agreements, dated as of October 1, 1995, with
the Company and PLDMS, Mr. Edwards was employed (i) as Chief Financial Officer
of the Company at an initial annual salary of $107,500 and (ii) as an Executive
of PLDMS at an initial annual salary of (pound sterling)45,000. During 1996,
Mr. Edwards' annual salaries under these agreements were $157,500 and (pound
sterling)45,000, respectively. As of February, 1997, Mr. Edwards became Senior
Vice
21
<PAGE> 23
President, Chief financial Officer and Treasurer of the Company. The agreement
with the Company may be terminated without cause by either party upon two years
prior written notice or for cause as specified; provided, that if Mr. Edwards
gives notice of termination of employment with the Company, the Company may, in
its sole discretion, terminate employment immediately upon the payment of the
lump sum of six months' gross salary. Mr. Edwards may also terminate his
employment with the Company upon three months prior written notice upon a change
in control of the Company or a material diminution of his duties as a
consequence of the actions of one or more affiliated entities beneficially
owning greater than 30% of the Company's outstanding voting shares. The
agreement with PLDMS may be terminated without cause by either party upon thirty
days prior written notice or for cause as specified. Upon termination without
cause by the Company, Mr. Edwards is to receive as a termination fee a specific
multiple of his then current annual salary from the Company, as determined from
time to time by the board of directors. As of December 31, 1996, the applicable
multiple for Mr. Edwards was 2.857. In addition to his salary from the Company
and PLDMS, an amount equal to ten percent of the then current termination fee is
payable by the Company to Mr. Edwards annually in lieu of all other benefits. No
termination payment is payable to Mr. Edwards by PLDMS.
Pursuant to employment agreements, dated as of January 1, 1995, with
the Company and PLDMS, Mr. Carroll was employed (i) as Vice President, Business
Development of the Company at an initial annual salary of $55,000 and (ii) as
an Executive of PLDMS at an initial annual salary of (pound sterling)36,000.
During 1996, Mr. Carroll's annual salaries under these agreements were $75,000
and (pound sterling)50,000, respectively. As of February 1997, Mr. Carroll
became Vice President, Operations of the Company. The agreement with the
Company may be terminated without cause by either party upon two years prior
written notice or for cause as specified; provided, that if Mr. Carroll gives
notice of termination of employment with the Company, the Company may, in its
sole discretion, terminate employment immediately upon the payment of the lump
sum of six months' gross salary. Mr. Carroll may also terminate his employment
with the Company upon three months prior written notice upon a change in
control of the Company or a material diminution of his duties as a consequence
of the actions of one or more affiliated entities beneficially owning greater
than 30% of the Company's outstanding voting shares. The agreement with PLDMS
may be terminated without cause by either party upon thirty days prior written
notice or for cause as specified. Upon termination without cause by the
Company, Mr. Carroll is to receive as a termination fee a specific multiple of
his then annual current salary from the Company, as determined from time to
time by the board of directors. As of December 31, 1996, the applicable
multiple for Mr. Carroll is 4.000. In addition to his salary from the Company
and PLDMS, an amount equal to ten percent of the then current termination fee
is payable by the Company to Mr. Carroll annually in lieu of all other
benefits. No termination payment is payable to Mr. Carroll by PLDMS.
See "Certain Business Relationships with Directors and Nominees" for a
description of the Company's consulting agreement with Newmark for the provision
of services by Robert Smith during the last fiscal year.
Pursuant to an employment agreement, dated August 6, 1996, with PLDMS,
Mr. Brooks was employed as Chief Operating Officer as of July 1, 1996 at an
initial annual salary of $200,000 and for an initial term of 18 months. During
1996, Mr. Brooks' prorated annual salary under this agreement was $100,000. The
agreement may be terminated without cause by either party upon three months
prior written notice prior to the end of the initial term or at any time
thereafter or for cause as specified. In addition to his salary, an amount equal
to ten percent of the then current fixed salary is payable to Mr. Brooks
as a bonus in addition to any other bonus paid to him. No termination payment
is payable to Mr. Brooks by PLDMS.
COMPENSATION OF DIRECTORS
Non-employee directors are paid an annual retainer of Cdn $10,000 and
directors' fees of Cdn $750 for each board meeting attended, and are reimbursed
for expenses incurred in connection with attendance at Board of Directors and
Committee meetings. Messrs. Lowry and Wainright-Lee declined the retainer and
all fees during 1996. All directors are eligible to participate in the Existing
Plan, and all directors will continue to be eligible to participate in the
Amended Plan. However, non-employee directors are only permitted to receive
non-qualified stock options under the Amended Plan, pursuant to arrangements
under which, subject to approval by the Board of Directors, such individuals are
automatically awarded 10,000 options upon becoming a director and a further
5,000 options annually, thereafter.
22
<PAGE> 24
See "Certain Business Relationships with Directors and Nominees" for a
description of (i) the Company's consulting agreement with Newmark for the
provision of services by Robert Smith during 1996 and (ii) a description of
certain arrangements between the Company and Cable & Wireless.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Thomas E. Capps, David L. Heavenridge, Robert Smith,
David M. Stovel and Douglas T. Waite served on the Compensation Committee of
the Board of Directors. Mr. Heavenridge replaced Mr. Capps during 1996 when Mr.
Capps resigned as a director of the Company and Mr. Heavenridge was appointed
by the Board of Directors to fill the resulting vacancy.
Mr. Smith served as a member of the Compensation Committee of the Board
of Directors during 1996. Mr. Smith was Chairman of BECET. See "Certain
Relationships with Directors and Nominees" for a description of the relationship
between Newmark, a company controlled by Mr. Smith, and the Company.
Mr. Hatt was on the board of directors of BECET during 1996. He was
also on the board of directors of NWE Capital (Cyprus) Limited ("NWE Cyprus"), a
Cypriot intermediate holding company through which the Company holds its equity
investments in several of its Russian operating subsidiaries. Mr. C. Waite, a
director of the Company, was a director and executive officer of NWE Cyprus
during 1996.
The following Compensation Committee Report and the Comparative Stock
Performance Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors created the Compensation Committee (the
"Committee") to have the responsibility for implementing and administrating the
Company's compensation policies and programs for its executive officers.
The Compensation Committee is responsible for setting the base salaries
and the total compensation levels of the Chief Executive Officer (the "CEO") and
the other executive officers of the Company and for determining which
executives, including the CEO, will be granted stock options and the size of
such grants. Mr. Hatt does not participate in the approval of his compensation.
Prior to the continuance of the Company from Ontario to Delaware in
February 1997, the Compensation Committee did not have the authority to approve
stock option grants, which were approved by the entire Board of Directors.
Robert Smith served on the Compensation Committee during 1996, but was no longer
a member of the committee as of February 1997. Thomas E. Capps served on the
Committee during his tenure as a director of the Company during 1996, and was
replaced by David L. Heavenridge upon his resignation as a director and the
appointment of Mr. Heavenridge as a director of the Company to fill the
resulting vacancy.
COMPENSATION POLICIES
The Company's compensation policies for executive officers are designed
to (a) provide competitive compensation packages that will attract and retain
superior executive talent, (b) link a significant portion of compensation to
financial results, so as to reward successful performance, and (c) provide
long-term equity compensation, to further align the interests of executive
officers with those of stockholders and further reward successful performance.
The principal components of the Company's executive officer compensation program
are base salary, annual cash incentive awards, and grants of stock options.
Assuming adoption of the Amended Plan at the Annual Meeting, the Company's
executive officer compensation program will also include grants of stock
appreciation rights, restricted stock and performance units.
23
<PAGE> 25
Base salary levels for the Company's executive officers are reviewed on
an annual basis by the Committee and are set generally to be competitive with
other companies of comparable size and geographic location, taking into
consideration the positions' complexity, responsibility, need for special
expertise and personal hardships due to extensive international travel.
Individual salaries also take into account individual experience and
performance.
The bonus program in 1996 was based on the Company exceeding certain
share price targets and PeterStar Company Limited, an operating subsidiary of
the Company, exceeding revenue and EBITDA targets, both as established by the
Board of Directors. Bonuses in 1996 consisted of 40% of base salary, as well as
additional bonuses paid to management in connection with the successful
completion of the Company's private placement of senior and convertible debt in
June 1996 in which the Company realized net proceeds of approximately $104
million.
LONG-TERM COMPENSATION
The Committee periodically considers the desirability of granting stock
options to officers and other employees of the Company. Prior to the Company's
continuance as a Delaware corporation in February 1997, stock option grants were
subject to approval by the entire Board of Directors. After February 1997, in
conformance with U.S. practice, the Committee was granted the authority to make
such grants without approval by the entire Board of Directors. The objective of
these grants are to align senior management and stockholder long-term interest
by creating a strong and direct link between the executive's accumulation of
wealth and stockholder return and to enable executives to develop and maintain a
significant, long-term stock ownership position in the Company's Common Stock.
Individual grants of stock options are based upon individual performance. The
Committee believes that its past grants of stock options have successfully
focused the Company's executive officers and other members of senior management
on building stockholder value.
Assuming adoption of the Amended Plan at the Annual Meeting, the
Company's executive officer compensation program will also include grants of
stock appreciation rights, restricted stock and performance units. In addition,
non-employee directors will receive annual formula grants of non-qualified stock
options.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In determining the compensation of Mr. Hatt, the Committee has taken
into consideration his experience, dedication, performance and contribution to
the growth of the Company and its operating subsidiaries over the past two
years, the personal hardships resulting from extensive international travel,
including long periods in the countries of the former Soviet Union, and Mr.
Hatt's overall management strengths and business acumen.
Presented by the Compensation Committee:
David L. Heavenridge
David M. Stovel
Douglas T. Waite
24
<PAGE> 26
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total stockholder return of (i) the
NASDAQ Stock Market Composite Index (the "NASDAQ Index"), and (ii) the NASDAQ
Telecommunications Index, assuming an investment of $100 on February 8, 1993
(the date the Company's Common Shares were first traded in the United States on
the NASDAQ Stock Market) in each of the Common Stock of the Company, the stocks
comprising the NASDAQ Index and the stocks comprising the NASDAQ
Telecommunications Index, and further assuming reinvestment of dividends, if
any. During previous years, the Company was domiciled in Canada. As a "foreign
private issuer", the Company was subject to Canadian proxy requirements in lieu
of Section 14 of the Exchange Act. Pursuant to these Canadian requirements, the
Company chose The Toronto Stock Exchange 300 Composite Index (the "TSE 300") as
a comparative index for use in its comparative stock performance graphs in its
Canadian annual information circulars for its annual general meetings of
shareholders. The TSE 300 index is a capitalization-weighted index designed to
measure market activity of 300 stocks listed on The Toronto Stock Exchange (the
"TSE") (where the Company's Common Shares were traded from 1987 until February
28, 1997, and where its Common Stock is still traded), representing 14 industry
sectors. As of March 6, 1997, the Company was no longer included in the TSE 300
because it was no longer a Canadian issuer. Since the NASDAQ Stock Market is the
principal trading market for the Company's Common Stock, the Company believes
that the TSE 300 may not provide the most meaningful basis for comparison of
stock performance.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NASDAQ NASDAQ
MEASUREMENT STOCK MARKET TELECOMMUNICATIONS
DATE PLD TELEKOM INC. COMPOSITE INDEX TSE 300 INDEX
---- ---------------- --------------- ------- -----
<S> <C> <C> <C> <C>
2/18/93 100.0 100.0 100.0 100.0
12/31/93 121.1 117.3 126.8 142.0
12/31/94 67.1 113.5 123.6 119.2
12/31/95 50.0 158.8 138.3 159.9
12/31/96 64.5 194.9 173.1 165.7
</TABLE>
25
<PAGE> 27
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth herein
that may come before the meeting. If, however, further business properly comes
before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
The accounting firm of KPMG Peat Marwick LLP has been selected as the
Company's independent auditors for the 1997 fiscal year. A representative of
KPMG, Chartered Accountants, the Company's Canadian auditors during 1996, is
expected to be present at the Annual Meeting. Such representative will have an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions from stockholders of the Company.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for
stockholder action at annual meetings in accordance with regulations adopted by
the SEC. To be considered for inclusion in the proxy statement and form of proxy
relating to the 1998 annual meeting, such proposals must be received by the
Company no later than December 31, 1997. Proposals should be directed to the
attention of the Secretary of the Company.
ANNUAL REPORT ON FORM 10-K
The Company will furnish without charge to each person whose proxy is
being solicited, upon the written request of such person, a copy of the
Company's annual report on Form 10-K for the year ended December 31, 1996,
including the financial statements, but excluding exhibits. Requests for copies
of such report should be directed to the Company, Attention: Secretary.
By order of the Board of Directors,
James R. S. Hatt
Chairman, President and
Chief Executive Officer
April 30, 1997
26
<PAGE> 28
SCHEDULE A
PLD TELEKOM INC.
EQUITY COMPENSATION PLAN
The purpose of the PLD Telekom Inc. Equity Compensation Plan
(the "Plan") is to provide (i) employees of PLD Telekom Inc. (the "Company") and
designated key employees of its subsidiaries, (ii) certain consultants and
advisors who perform services for the Company or its subsidiaries, and (iii)
non-employee members of the Board of Directors of the Company (the "Board"),
with the opportunity to receive grants of incentive stock options, nonqualified
stock options, stock appreciation rights, restricted stock and performance
units, to the extent and upon the terms hereinafter set forth. The Company
believes that the Plan will encourage the participants to contribute materially
to the growth of the Company, thereby benefitting the Company's shareholders,
and will align the economic interests of the participants with those of the
shareholders.
The Plan amends and supersedes in its entirety the PLD Telekom
Inc. Stock Option Plan (the "Prior Plan"). No further grants shall be made under
the Prior Plan following the adoption of this Plan and grantees under the Prior
Plan shall have the option of continuing to have their existing grants covered
by the terms of the Prior Plan or (by so electing in writing) having their
grants covered by the terms of the Plan.
1. Administration
(a) Committee. The Plan shall be administered and interpreted
by a committee appointed by the Board (the "Committee"). The Committee shall
consist of two or more persons appointed by the Board, all of whom shall be
"outside directors" as defined under section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code") and related Treasury regulations and may be
"non-employee directors" as defined under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Grants made to
Non-Employee Directors (as hereinafter defined in Section 4(a) below) shall be
made in accordance with Section 6 below.
(b) Committee Authority. Except as provided in Section 6, the
Committee shall have the sole authority to (i) determine the individuals to whom
grants shall be made under the Plan, (ii) determine the type, size and terms of
the grants to be made to each such individual, (iii) determine the time when the
grants will be made and the duration of any applicable exercise or restriction
period, including the criteria for exercisability and the acceleration of
exercisability and (iv) deal with any other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full
power and authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements and
instruments for implementing the Plan and for the conduct of its business as it
deems necessary or advisable, in its sole discretion. The Committee's
interpretations of the Plan and all determinations made by the Committee
pursuant to the powers vested in it hereunder shall be conclusive and binding on
all persons having any interest in the Plan or in any awards granted hereunder.
All powers of the Committee shall be executed in its sole discretion, in the
best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals.
2. Grants
Awards under the Plan may consist of grants of incentive stock
options as described in Section 5 ("Incentive Stock Options"), nonqualified
stock options as described in Section 5 and Section 6 ("Nonqualified Stock
Options") (Incentive Stock Options and Nonqualified Stock Options are
collectively referred to as "Options"), restricted stock as described in Section
7 (Restricted Stock"), stock appreciation rights as described in Section 8
("SARs"), and performance units as described in Section 9 ("Performance Units")
(hereinafter collectively referred to as "Grants"). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions consistent
Sch. A-1
<PAGE> 29
with this Plan as the Committee deems appropriate and as are specified in
writing by the Committee to the individual in a grant instrument (the "Grant
Instrument") or an amendment to the Grant Instrument. The Committee shall
approve the form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to the adjustment specified
below, (i) the maximum aggregate number of shares of the Company's Common Stock
(hereinafter, "Company Stock") that may be reserved for issuance or issued under
this Plan shall not at any time exceed ten percent (10%) of the total issued and
outstanding shares of Company Stock, plus the aggregate number of shares of
Company Stock issued or reserved for issuance under the Prior Plan prior to the
effective date of the adoption of this Plan (provided, however, that in no event
shall the number of shares of Company Stock reserved for issuance under the Plan
at any time be less than the number of shares subject to then outstanding
Grants), (ii) the maximum aggregate number of shares of Company Stock that may
be subject to the Grant of Incentive Stock Options under the Plan shall be
1,000,000, and (iii) the maximum aggregate number of shares of Company Stock
that shall be subject to the Grant of Options under this Plan to any individual
during any calendar year shall be 1,500,000 shares. Unless such reduction shall
occur as a result of the operation of any of the adjustments specified below, no
reduction in the total number of issued and outstanding shares of Common Stock
shall have the effect of reducing the number of shares of Common Stock which are
then issued or reserved for issuance under this Plan. The shares issued or
reserved for issuance may be authorized but unissued shares of Company Stock or
reacquired shares of Company Stock, including shares purchased by the Company on
the open market for purposes of the Plan. If and to the extent Options or SARs
granted under the Plan terminate, expire, or are canceled, forfeited, exchanged
or surrendered without having been exercised or if any shares of Restricted
Stock or Performance Units are forfeited, the shares subject to such Grants
shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind
of shares of Company Stock outstanding (i) by reason of a stock dividend,
spinoff, recapitalization, stock split, or combination or exchange of shares,
(ii) by reason of a merger, reorganization or consolidation in which the Company
is the surviving corporation, (iii) by reason of a reclassification or change in
par value, or (iv) by reason of any other extraordinary or unusual event
affecting the outstanding Company Stock as a class without the Company's receipt
of consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued under the
Plan, and the price per share or the applicable market value of such Grants
shall be appropriately adjusted by the Committee to reflect any increase or
decrease in the number of, or change in the kind or value of, issued shares of
Company Stock to preclude, to the extent practicable, the enlargement or
dilution of rights and benefits under such Grants; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated. If any
questions shall at any time arise with respect to any adjustment, such questions
shall be conclusively determined by the Company's auditors or, if they decline
to so act, any other member of so-called "Big Six" accounting firms that the
Company may designate and who shall have access to all appropriate records, and
such determination shall be binding upon the Company and the affected
Grantee(s).
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and
designated key employees of its subsidiaries (collectively, "Employees"),
including Employees who are officers or members of the Board, shall be eligible
to participate in the Plan. Members of the Board who are not Employees
("Non-Employee Directors") shall be eligible to receive Grants only under
Section 6 of the Plan. Consultants and advisors who perform services for the
Company or any of its subsidiaries ("Key Advisors") shall be eligible to
participate in the Plan only if the Key Advisors render services which are bona
fide and substantial and such services are not in connection with the offer or
sale of securities in a capital-raising transaction.
Sch. A-2
<PAGE> 30
(b) Selection of Grantees. The Committee shall select the
Employees and Key Advisors to receive Grants and shall determine the number of
shares of Company Stock subject to a particular Grant in such manner as the
Committee determines. Employees, Key Advisors and Non-Employee Directors who
receive Grants under this Plan shall hereinafter be referred to as "Grantees".
(c) Records. The Company shall maintain records of each Grant
made under the Plan, including a copy of the Grant Instrument and any other
details of the Grant not set forth therein. Upon request therefor from any
Grantee and at such other times as the Company shall determine, the Company
shall furnish each Grantee with a statement setting forth the details of his or
her Grants (which may be a copy of the Grant Instrument). Such statement shall
be deemed to have been accepted by the affected Grantee unless written notice to
the contrary is given to the Company within thirty (30) days after such
statement is given to such Grantee.
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number
of shares of Company Stock that will be subject to each Grant of Options to
Employees and Key Advisors.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options
that are intended to qualify as "incentive stock options" within the meaning of
section 422 of the Code or Nonqualified Stock Options that are not intended so
to qualify or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees. Nonqualified Stock
Options may be granted to Employees and Key Advisors and, pursuant to Section 6
of the Plan, to Non-Employee Directors.
(ii) The purchase price (the "Exercise Price") of
Company Stock subject to an Option shall be determined by the Committee and may
be equal to, greater than, or less than the Fair Market Value (as defined below)
of a share of Company Stock on the date the Option is granted; provided,
however, that (x) the Exercise Price of an Incentive Stock Option shall be equal
to, or greater than, the Fair Market Value of a share of Company Stock on the
date the Incentive Stock Option is granted and (y) an Incentive Stock Option may
not be granted to an Employee who, at the time of grant, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary of the Company, unless (A) the Exercise
Price per share is not less than 110% of the Fair Market Value of Company Stock
on the date of grant and (B) the term of such Incentive Stock Option is not more
than five years.
(iii) So long as the Company Stock is publicly
traded, then the Fair Market Value per share shall be determined as follows: (x)
if the principal trading market for the Company Stock is a national securities
exchange or the Nasdaq national market, the last reported sale price thereof on
the relevant date or (if there were no trades on that date) the latest preceding
date upon which a sale was reported, or (y) if the Company Stock is not
principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock
ceases to be publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of
each Option. The term of any Option shall not exceed ten years from the date of
grant. However, an Incentive Stock Option that is granted to an Employee who, at
the time of grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or any parent or
subsidiary of the Company, may not have a term that exceeds five years from the
date of grant.
Sch. A-3
<PAGE> 31
(d) Exercisability of Options. Options shall become
exercisable in accordance with such terms and conditions, consistent with the
Plan, as may be determined by the Committee and specified in the Grant
Instrument or an amendment to the Grant Instrument. The Committee may accelerate
the exercisability of any or all outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be
exercised while the Grantee is employed by the Company as an Employee, Key
Advisor or member of the Board. In the event that a Grantee ceases to be
employed by the Company for any reason other than a "disability", death, or
"termination for cause", any Option other than an Incentive Stock Option which
is otherwise exercisable by the Grantee shall terminate unless exercised within
one (1) year after the date on which the Grantee ceases to be employed by the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term, and any Incentive Stock Option shall terminate unless exercised by the
earlier of three (3) months after the date on which the Grantee ceases to be
employed by the Company (or within such other period of time as may be specified
by the Committee) but in any event no later than the date of expiration of the
Option term. Unless the terms of the Grant specify otherwise, any of the
Grantee's Options that are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed
by the Company on account of a "termination for cause" by the Company, any
Option held by the Grantee shall terminate as of the date the Grantee ceases to
be employed by the Company, or upon such other date as may be determined by the
Committee.
(iii) In the event the Grantee ceases to be employed
by the Company because the Grantee is "disabled", any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within one (1) year
after the date on which the Grantee ceases to be employed by the Company (or
within such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Unless the
terms of the Grant specify otherwise, any of the Grantee's Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by the Company by reason of disability shall terminate as of the date of
cessation of employment.
(iv) If the Grantee dies while employed by the
Company or within a period of time following such Grantee's termination of
employment during which the Option continues to be exercisable by the Grantee
pursuant to this Section 5(e), such Option to the extent that it is otherwise
exercisable by the Grantee shall terminate unless exercised within two (2) years
after the Grantee's date of death, but in any event no later than the date of
expiration of the Option term. Unless the terms of the Grant specify otherwise,
any of the Grantee's Options that are not otherwise exercisable as of the date
on which the Grantee dies shall terminate as of the date of death.
(v) For purposes of this Section 5(e) and Sections 6,
7, 8 and 9:
(A) the term "Company" shall mean the Company and its
subsidiary corporations.
(B) the term "employed by the Company" shall mean
employment or service as an Employee, Key Advisor or member of
the Board (so that, for purposes of exercising Options and
SARs and satisfying conditions with respect to Restricted
Stock and Performance Units, a Grantee shall not be considered
to have terminated employment or service until the Grantee
ceases to be an Employee, Key Advisor and member of the
Board), unless the Committee determines otherwise.
(C) the term "disability" shall mean a Grantee's
becoming disabled within the meaning of section 22(e)(3) of
the Code.
(D) the term "termination for cause" shall mean
termination of a Grantee's employment or other relationship
with the Company in connection with which the Committee has
made a finding that the Grantee has (i) materially breached
his or her employment or service contract with the Company,
(ii) failed (after due warning) to comply with announced
Company policies, (iii) failed (after due warning) to perform
his or
Sch. A-4
<PAGE> 32
her duties in a diligent and competent manner, (iv) engaged in
fraud, embezzlement, theft or proven dishonesty in the course
of his or her employment or service, or (v) engaged in other
acts of disloyalty to the Company, including without
limitation disclosing trade secrets or confidential
information of the Company to persons not entitled to receive
such information. In the event a Grantee's employment is
terminated for cause, in addition to the immediate termination
of all Grants, the Grantee shall automatically forfeit all
shares underlying any exercised portion of an Option for which
the Company has not yet delivered the share certificates, upon
refund by the Company of the Exercise Price paid by the
Grantee for such shares.
(f) Exercise of Options. A Grantee may exercise an Option that
has become exercisable, in whole or in part, by delivering a notice of exercise
to the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Committee (x) in cash, (y) with
the approval of the Committee, by delivering shares of Company Stock owned by
the Grantee (including Company Stock acquired in connection with the exercise of
an Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or (z) by such other method as the Committee may approve, including payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board. Shares of Company Stock used to exercise an Option shall
have been held by the Grantee for the requisite period of time to avoid adverse
accounting consequences to the Company with respect to the Option. The Grantee
shall pay the Exercise Price and the amount of any withholding tax due (pursuant
to Section 11) at the time of exercise. As of the date the Company receives such
payment, the Grantee (or any person claiming through him, as the case may be)
shall be entitled to be entered on the share register of the Company as the
holder of the number of shares of Company Stock in respect of which the Option
was exercised, and as promptly as possible thereafter shall be delivered a
certificate representing that number of shares.
(g) Limits on Incentive Stock Options. Each Incentive Stock
Option shall provide that, if the aggregate Fair Market Value of the stock on
the date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year, under the
Plan or any other stock option plan of the Company or a parent or subsidiary,
exceeds $100,000, then the option, as to the excess, shall be treated as a
Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any
person who is not an Employee of the Company or a subsidiary (within the meaning
of section 424(f) of the Code).
6. Formula Option Grants to Non-Employee Directors
A Non-Employee Director shall be entitled to receive
Nonqualified Stock Options in accordance with this Section 6.
(a) Initial Grant. Subject to the approval of the Board, each
Non-Employee Director who first becomes a member of the Board after the
effective date of this Plan as amended and restate, (as specified in Section 20)
shall receive a grant of a Nonqualified Stock Option to purchase 10,000 shares
of Company Stock on the date as of which he or she first becomes a member of the
Board.
(b) Annual Grants. Subject to the approval of the Board, on
each date that the Company holds its annual meeting of shareholders, commencing
with the 1998 annual meeting, each Non-Employee Director who is in office
immediately after the annual election of directors (other than a director who is
first elected to the Board at such meeting) shall receive a grant of a
Nonqualified Stock Option to purchase 5,000 shares of Company Stock. The date of
grant of each such annual Grant shall be the date of the annual meeting of the
Company's shareholders.
(c) Exercise Price. The Exercise Price per share of Company
Stock subject to an Option granted under this Section 6 shall be equal to the
Fair Market Value of a share of Company Stock on the date of grant.
(d) Option Term and Exercisability. The term of each Option
granted pursuant to this Section 6 shall be ten years or such shorter period as
shall be determined by the Board. Options granted under this Section 6 shall be
fully exercisable as of the date of grant.
Sch. A-5
<PAGE> 33
(e) Payment of Exercise Price.
(i) The Exercise Price for an Option granted under
this Section 6 shall be paid in cash. The Grantee shall pay the Exercise Price
and the amount of any withholding tax due at the time of exercise. Shares of
Company Stock shall not be issued upon exercise of an Option until the Exercise
Price is fully paid and any required withholding is made.
(ii) A Grantee may exercise an Option granted under
this Section 6 by delivering to the Committee a notice of exercise as described
below, with accompanying payment of the Exercise Price in accordance with
Section 6(e)(i) above. The notice of exercise may instruct the Company to
deliver shares of Company Stock due upon the exercise of the Option to any
registered broker or dealer designated by the Committee in lieu of delivery to
the Grantee, and shall designate the account into which the shares are to be
deposited. With the approval of the Board, a Grantee may exercise an Option by
delivering shares of Company Stock owned by the Grantee as permitted under
Section 5(f).
(f) Applicability of Plan Provisions. Except as otherwise
provided in this Section 6, Nonqualified Stock Options granted to Non-Employee
Directors shall be subject to the provisions of this Plan applicable to
Nonqualified Stock Options granted to other persons, provided however that (i)
if an event described in Section 3(b) occurs, appropriate adjustments, as
described in that Section, shall be made automatically, (ii) with respect to the
provisions of Section 5(e), the Committee shall not have discretion to modify
the terms of such provisions in the Grant Instrument, and (iii) in the event of
a Change of Control (as defined in Section 13), the provisions of Section 14
shall apply to Options granted pursuant to this Section 6, except that the
Committee shall not have discretion under Section 14(c) to modify the automatic
provisions of that Section.
(g) Administration. Except to the extent provided herein, the
provisions of this Section 6 are intended to operate automatically and not
require administration. To the extent that any administrative determinations are
required, any determinations with respect to the provisions of this Section 6
shall be made by the Board. If at any time there are not sufficient shares
available under the Plan to permit a Grant as described in this Section 6, the
Grant shall be reduced pro rata (to zero, if necessary) so as not to exceed the
number of shares then available under the Plan.
7. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock to
an Employee or Key Advisor under a Grant of Restricted Stock, upon such terms as
the Committee deems appropriate. The following provisions are applicable to
Restricted Stock:
(a) General Requirements. Shares of Company Stock issued or
transferred pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Committee. The
Committee may establish conditions under which restrictions on shares of
Restricted Stock shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate. The period of time during which the
Restricted Stock will remain subject to restrictions will be designated in the
Grant Instrument as the "Restriction Period."
(b) Number of Shares. The Committee shall determine the number
of shares of Company Stock to be issued or transferred pursuant to a Restricted
Stock Grant and the restrictions applicable to such shares.
(c) Requirement of Employment. If the Grantee ceases to be
employed by the Company (as defined in Section 5(e) above) during a period
designated in the Grant Instrument as the Restriction Period, or if other
specified conditions are not met, the Restricted Stock Grant shall terminate as
to all shares covered by the Grant as to which the restrictions have not lapsed,
and those shares of Company Stock must be immediately returned to the Company.
The Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate.
During the Restriction Period, a Grantee may not sell, assign, transfer, pledge
or otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 12(a). Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the stock
certificate
Sch. A-6
<PAGE> 34
covering the shares subject to restrictions when all restrictions on such shares
have lapsed. The Committee may determine that the Company will not issue
certificates for shares of Restricted Stock until all restrictions on such
shares have lapsed, or that the Company will retain possession of certificates
for shares of Restricted Stock until all restrictions on such shares have
lapsed.
(e) Right to Vote and to Receive Dividends. Unless the
Committee determines otherwise, during the Restriction Period, the Grantee shall
have the right to vote shares of Restricted Stock and to receive any dividends
or other distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on
Restricted Stock shall lapse upon the expiration of the applicable Restriction
Period and the satisfaction of all conditions imposed by the Committee. The
Committee may determine, as to any or all Restricted Stock Grants, that the
restrictions shall lapse without regard to any Restriction Period.
8. Stock Appreciation Rights
(a) General Requirements. The Committee may grant stock
appreciation rights ("SARs") to an Employee or Key Advisor separately or in
tandem with any Option (for all or a portion of the applicable Option). Tandem
SARs may be granted either at the time the Option is granted or at any time
thereafter while the Option remains outstanding; provided, however, that, in the
case of an Incentive Stock Option, SARs may be granted only at the time of the
Grant of the Incentive Stock Option. The Committee shall establish the base
amount of the SAR at the time the SAR is granted. Unless the Committee
determines otherwise, the base amount of each SAR shall be equal to the per
share Exercise Price of the related Option or, if there is no related Option,
the Fair Market Value of a share of Company Stock as of the date of Grant of the
SAR.
(b) Tandem SARs. In the case of tandem SARs, the number of
SARs granted to a Grantee that shall be exercisable during a specified period
shall not exceed the number of shares of Company Stock that the Grantee may
purchase upon the exercise of the related Option during such period. Upon the
exercise of an Option, the SARs relating to the Company Stock covered by such
Option shall terminate. Upon the exercise of SARs, the related Option shall
terminate to the extent of an equal number of shares of Company Stock.
(c) Exercisability. An SAR shall be exercisable during the
period specified by the Committee in the Grant Instrument and shall be subject
to such vesting and other restrictions as may be specified in the Grant
Instrument. The Committee may accelerate the exercisability of any or all
outstanding SARs at any time for any reason. SARs may only be exercised while
the Grantee is employed by the Company or during the applicable period after
termination of employment as described in Section 5(e). A tandem SAR shall be
exercisable only during the period when the Option to which it is related is
also exercisable.
(d) Value of SARs. When a Grantee exercises SARs, the Grantee
shall receive in settlement of such SARs an amount equal to the value of the
stock appreciation for the number of SARs exercised, payable in cash. The stock
appreciation for an SAR is the amount by which the Fair Market Value of the
underlying Company Stock on the date of exercise of the SAR exceeds the base
amount of the SAR as described in Section (8)(a).
9. Performance Units
(a) General Requirements. The Committee may grant performance
units ("Performance Units") to an Employee or Key Advisor. Each Performance Unit
shall represent the right of the Grantee to receive an amount based on the value
of the Performance Unit, if performance goals established by the Committee are
met. A Performance Unit shall be based on the Fair Market Value of a share of
Company Stock or on such other measurement base as the Committee deems
appropriate. The Committee shall determine the number of Performance Units to be
granted and the requirements applicable to such Units.
(b) Performance Period and Performance Goals. When Performance
Units are granted, the Committee shall establish the performance period during
which performance shall be measured (the "Performance Period"), performance
goals applicable to the Units ("Performance Goals") and such other conditions of
the Grant as the
Sch. A-7
<PAGE> 35
Committee deems appropriate. Performance Goals may relate to the financial
performance of the Company or its operating units, the performance of Company
Stock, individual performance, or such other criteria as the Committee deems
appropriate.
(c) Payment with respect to Performance Units. At the end of
each Performance Period, the Committee shall determine to what extent the
Performance Goals and other conditions of the Performance Units are met and the
amount, if any, to be paid with respect to the Performance Units. Payments with
respect to Performance Units shall be made in cash.
(d) Requirement of Employment. If the Grantee ceases to be
employed by the Company (as defined in Section 5(e) above) during a Performance
Period, or if other conditions established by the Committee are not met, the
Grantee's Performance Units shall be forfeited. The Committee may, however,
provide for complete or partial exceptions to this requirement as it deems
appropriate.
10. Qualified Performance-Based Compensation
(a) Designation as Qualified Performance-Based Compensation.
The Committee may determine that Performance Units or Restricted Stock granted
to an Employee shall be considered "qualified performance-based compensation"
under Section 162(m) of the Code. The provisions of this Section 10 shall apply
to Grants of Performance Units and Restricted Stock that are to be considered
"qualified performance-based compensation" under Section 162(m) of the Code.
(b) Performance Goals. When Performance Units or Restricted
Stock that are to be considered "qualified performance-based compensation" are
granted, the Committee shall establish in writing (i) the objective performance
goals that must be met in order for restrictions on the Restricted Stock to
lapse or amounts to be paid under the Performance Units, (ii) the Performance
Period during which the performance goals must be met, (iii) the threshold,
target and maximum amounts that may be paid if the performance goals are met,
and (iv) any other conditions, including without limitation provisions relating
to death, disability, other termination of employment or Change of Control, that
the Committee deems appropriate and consistent with the Plan and Section 162(m)
of the Code. The performance goals may relate to the Employee's business unit or
the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall use objectively determinable
performance goals based on one or more of the following criteria: stock price,
earnings per share, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, unit volume, sales,
market share, or strategic business criteria consisting of one or more
objectives based on meeting specified revenue goals, market penetration goals,
geographic business expansion goals, cost targets or goals relating to
acquisitions or divestitures.
(c) Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the Performance
Period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the Performance Period and (ii) the date on which 25% of the
Performance Period has been completed, or such other date as may be required or
permitted under applicable regulations under Section 162(m) of the Code. The
performance goals shall satisfy the requirements for "qualified
performance-based compensation", including the requirement that the achievement
of the goals be substantially uncertain at the time they are established and
that the goals be established in such a way that a third party with knowledge of
the relevant facts could determine whether and to what extent the performance
goals have been met. The Committee shall not have discretion to increase the
amount of compensation that is payable upon achievement of the designated
performance goals.
(d) Maximum Payment. If Restricted Stock, or Performance Units
measured with respect to the Fair Market Value of Company Stock, are granted,
not more than 750,000 shares of Company Stock may be granted to an Employee
under the Performance Units or Restricted Stock for any Performance Period. If
Performance Units are measured with respect to other criteria, the maximum
amount that may be paid to an Employee with respect to a Performance Period is
$5,000,000.
Sch. A-8
<PAGE> 36
(e) Announcement of Grants. The Committee shall certify and
announce the results for each Performance Period to all Grantees immediately
following the announcement of the Company's financial results for the
Performance Period. If and to the extent that the Committee does not certify
that the performance goals have been met, the grants of Restricted Stock or
Performance Units for the Performance Period shall be forfeited.
11. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be
subject to applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid in
cash, or from other wages paid to the Grantee, any federal, state or local taxes
required by law to be withheld with respect to such Grants. In the case of
Options and other Grants paid in Company Stock, the Company may require the
Grantee or other person receiving such shares to pay to the Company the amount
of any such taxes that the Company is required to withhold with respect to such
Grants, or the Company may deduct from other wages paid by the Company the
amount of any withholding taxes due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits,
a Grantee may elect to satisfy the Company's income tax withholding obligation
with respect to an Option or Restricted Stock paid in Company Stock by having
shares withheld up to an amount that does not exceed the Grantee's applicable
marginal tax rate for federal (including FICA), state and local tax liabilities.
The election must be in a form and manner prescribed by the Committee and shall
be subject to the prior approval of the Committee. With respect to Options
granted to Non-Employee Directors, the approval of the Board shall be required
with respect to any election made under this Section 11(b).
12. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below,
only the Grantee may exercise rights under a Grant during the Grantee's
lifetime. A Grantee may not transfer those rights except by will or by the laws
of descent and distribution or, with respect to Grants other than Incentive
Stock Options, if permitted in any specific case by the Committee pursuant to a
domestic relations order (as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder). When a Grantee dies, the personal representative or other person
entitled to succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights. A Successor Grantee must furnish proof satisfactory to the
Company of his or her right to receive the Grant under the Grantee's will or
under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding
the foregoing, a Grantee may transfer Nonqualified Stock Options to his or her
spouse or children or grandchildren (natural or adopted), or one or more trusts
established for their benefit; provided that: (i) the maximum number of Options
transferred shall not exceed 50% of the total number of Options granted to him
at any time under the Plan; (ii) each transfer is an absolute transfer of title,
such that the transferor ceases to have any further dominion or control over the
Options transferred or to any Company Stock acquired as a result of the exercise
of any Options, waives all rights with respect to such Options or Company Stock
and retains no interest, whether by way of pledge or otherwise, in such Options
or Company Stock; (iii) written notice of any transfer is given by the
transferor and the transferee within thirty (30) days of the transfer, together
with the address to which notices and other communications from the Company to
the transferee relating to the Plan shall be sent; (iv) the transferee
acknowledges that the Options transferred may not be further transferred or
alienated by such transferee either by pledge, assignment or in any other manner
whatsoever and, during his or her lifetime, shall be vested only in him or her,
but shall thereafter enure to the benefit and be binding upon the legal personal
representatives of such transferee, provided that such transferee shall be
permitted to transfer any Company Stock acquired upon the exercise of any Option
so long as such transfer is otherwise permitted; (v) the transferee undertakes
to comply with and be bound by the terms of the Plan as in effect on the date of
the transfer, and any amendments thereto, and any restatements thereof or
successor plan thereto; (vi) the transferee acknowledges that the Company has no
obligation to register any Options transferred or any Company Stock acquired as
a result of the exercise of any Options, or to take any other action to
facilitate the transfer of such Options or Company Stock, including complying
with any conditions to permit transfers pursuant to Rule 144 promulgated by the
Securities and Exchange Commission; and (vii) the Grantee receives no
consideration for the transfer of any such Option.
Sch. A-9
<PAGE> 37
13. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have
occurred if:
(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) becomes a "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the voting power of the
then outstanding securities of the Company;
(b) the shareholders of the Company approve (or, if
shareholder approval is not required, the Board approves) an agreement providing
for (i) the merger or consolidation of the Company with another corporation
where the shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to 50% or more of all votes to
which all shareholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), or where the members of the Board,
immediately prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the surviving corporation, (ii) the sale or other disposition of all or
substantially all of the assets of the Company (other than to a wholly owned
subsidiary), or (iii) a liquidation or dissolution of the Company;
(c) any person has commenced a tender offer or exchange offer
for 50% or more of the voting power of the then outstanding shares of the
Company; or
(d) after the date this Plan is approved by the shareholders
of the Company, directors are elected such that a majority of the members of the
Board shall have been members of the Board for less than two years, unless the
election or nomination for election of each new director who was not a director
at the beginning of such two-year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.
14. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control, (i) the
Company shall provide each Grantee with outstanding Grants written notice of
such Change of Control, (ii) all outstanding Options and SARs shall
automatically accelerate and become fully exercisable, (iii) the restrictions
and conditions on all outstanding Restricted Stock shall immediately lapse, and
(iv) Grantees holding Performance Units shall receive a payment in settlement of
such Performance Units, in an amount determined by the Committee, based on the
Grantee's target payment for the Performance Period and the portion of the
Performance Period that precedes the Change of Control.
(b) Assumption of Grants. Upon a Change of Control where the
Company is not the surviving corporation (or survives only as a subsidiary of
another corporation), all outstanding Options and SARs that are not exercised
shall be assumed by, or replaced with comparable options or rights by, the
surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject
to Section 14(e) below, in the event of a Change of Control, the Committee may
require that Grantees surrender their outstanding Options and SARs in exchange
for a payment by the Company in cash in an amount equal to the amount by which
the then Fair Market Value of the shares of Company Stock subject to the
Grantee's unexercised Options and SARs exceeds the Exercise Price of the Options
or the base amount of the SARs, as applicable. Such surrender shall take place
as of the date of the Change of Control or such other date as the Committee may
specify.
(d) Limitations. Notwithstanding anything in the Plan to the
contrary, in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without limitation
actions described in Section 14 (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
Sch. A-10
<PAGE> 38
(e) Committee. The Committee making the determinations under
this Section 14 following a Change of Control must be comprised of the same
members as those on the Committee immediately before the Change of Control. If
the Committee members do not meet this requirement, then, at the discretion of
any affected Grantee, the Committee shall be required to take the actions set
forth in Section 14(c) above, without regard to the provisions of Section 14(d)
above.
15. Limitations on Issuance or Transfer of Shares
No Company Stock shall be issued or transferred in connection
with any Grant hereunder unless and until all legal requirements applicable to
the issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Grant made to any Grantee hereunder on such Grantee's undertaking in writing
to comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable as a
result of any applicable law, regulation or official interpretation thereof, and
certificates representing such shares may be legended to reflect any such
restrictions. Certificates representing shares of Company Stock issued or
transferred under the Plan will be subject to such stop-transfer orders and
other restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
16. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at
any time; provided, however, that the Board shall not amend the Plan without
shareholder approval if such approval is required by section 162(m) or section
422 of the Code.
(b) Termination of Plan. The Plan shall terminate on March 31,
2007, unless the Plan is terminated earlier by the Board or is extended by the
Board with the approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A
termination or amendment of the Plan that occurs after a Grant is made shall not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 23(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 23(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling
document. No other statements, representations, explanatory materials or
examples, oral or written, may amend the Plan in any manner. The Plan shall be
binding upon and enforceable against the Company and its successors and assigns.
17. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
18. Rights of Participants
Nothing in this Plan shall entitle any Employee, Non-Employee
Director, Key Advisor or other person to any claim or right to be granted a
Grant under this Plan, except as provided in Section 6. Neither this Plan nor
any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Company or any other employment
rights.
Sch. A-11
<PAGE> 39
20. No Fractional Shares
No fractional shares of Company Stock shall be issued or
delivered pursuant to the Plan or any Grant. The Committee shall determine
whether cash, other awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
21. Headings
Section headings are for reference only. In the event of a
conflict between a title and the content of a Section, the content of the
Section shall control.
21. Effective Date of the Amended and Restated Plan. The Plan,
as amended and restated herein, shall become effective on the date that it is
approved by the Company's shareholders.
22. Notices
(a) Any payment, notice, statement, certificate or other
instrument required or permitted to be given to a Grantee or any person claiming
or deriving any rights through such Grantee shall be given by (i) delivering it
personally to such Grantee or the person claiming or deriving rights through
such Grantee, as the case may be, or (ii) mailing it postage paid (provided that
the postal service is then in operation) or delivering it to the address which
is maintained for the Grantee in the Company's records.
(b) Any payment, notice, statement, certificate or other
instrument required or permitted to be given to the Company shall be given by
mailing it postage paid (provided that the postal service is then in operation)
or delivering it to the Company at the following address:
PLD Telekom Inc.
1270 Avenue of the Americas
Suite 2218
New York, New York 10020
Attention: Benefits Administrator
(c) Any payment, notice, statement, certificate or other
instrument referred to in Section 22(a) or Section 22(b), if delivered, shall be
deemed to have been given or delivered on the date on which it was delivered or,
if mailed (provided that the postal service is then in operation), shall be
deemed to have been given or delivered on the second business day following the
date on which it was mailed.
23. Miscellaneous
(a) Grants in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Grants to
employees thereof who become Employees of the Company, or for other proper
corporate purposes, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another corporation
who becomes an Employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation involving the
Company or any of its subsidiaries in substitution for a stock option or
restricted stock grant made by such corporation. The terms and conditions of the
substitute grants may vary from the terms and conditions required by the Plan
and from those of the substituted stock incentives. The Committee shall
prescribe the provisions of the substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and
SARs and the obligations of the Company to issue or transfer shares of Company
Stock under Grants shall be subject to all applicable laws and to approvals by
any governmental or regulatory agency as may be required. With respect to
persons subject to section 16 of the Exchange Act, it is the intent of the
Company that the Plan and all transactions under the Plan comply with all
Sch. A-12
<PAGE> 40
applicable provisions of Rule 16b-3 or its successors under the Exchange Act.
The Committee may revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government regulation. The
Committee may also adopt rules regarding the withholding of taxes on payments to
Grantees. The Committee may, in its sole discretion, agree to limit its
authority under this Section.
(c) Governing Law. The validity, construction, interpretation
and effect of the Plan and Grant Instruments issued under the Plan shall
exclusively be governed by and determined in accordance with the law of the
State of New York.
Sch.A-13
<PAGE> 41
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PLD TELEKOM INC.
The undersigned hereby appoints James R.S. Hatt, Simon Edwards
and E. Clive Anderson, and each of them acting singly, proxies of the
undersigned stockholder with full power of substitution to each of them, to vote
all shares of Common Stock of PLD Telekom Inc. (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Inter-Continental
Hotel, 111 East 48th Street, New York, New York 10017, on Thursday, June 12,
1997, at 10:00 a.m. (local time) and any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER AND IN THE DISCRETION OF THE
HOLDERS OF THIS PROXY UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF. WITH RESPECT TO THE ELECTION OF
DIRECTORS, WHERE A BOX IS NOT COMPLETED, THIS PROXY WILL BE VOTED "FOR ALL
NOMINEES." WITH RESPECT TO THE PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT
OF THE PLD TELEKOM STOCK OPTION PLAN, WHERE A BOX IS NOT COMPLETED, THIS PROXY
WILL BE VOTED FOR THE PROPOSAL.
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
ANNUAL MEETING OF STOCKHOLDERS
OF
PLD TELEKOM INC.
THURSDAY, JUNE 12, 1997; 10:00 A.M.
THE INTER-CONTINENTAL HOTEL
111 EAST 48TH STREET
NEW YORK, NEW YORK
<PAGE> 42
ELECTION OF THE FOLLOWING NOMINEES AS DIRECTORS: Boris Antoniuk, Edward Charles
Dilley, Simon Edwards, James R.S. Hatt, David L. Heavenridge, Gennadi
Kudreatsev, Vladimir Kvint, Timothy P. Lowry, Robert Smith and David M. Stovel.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES."
FOR ALL NOMINEES / / AUTHORITY WITHHELD FOR ALL NOMINEES / /
Authority withheld for the
following only:
(write the name(s) of the nominee(s)
on the line below)
- ------------------------------------
PROPOSAL TO APPROVE THE AMENDMENT AND RESTATEMENT OF THE PLD STOCK OPTION PLAN
AND ITS RENAMING AS THE "PLD TELEKOM INC. EQUITY COMPENSATION PLAN"
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
FOR / / AGAINST / / ABSTAIN / /
Signature(s):________________________________________ Date:___________________
(Please mark your vote, date and sign as your name appears above and return this
Proxy in the enclosed envelope. If acting as executor, administrator, trustee,
guardian, etc., you should so indicate when signing. If the signer is a
corporation, please sign the full corporate name, and indicate title as duly
authorized officer.)
- --------------------------------------------------------------------------------
-FOLD AND DETACH HERE-
