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
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14(a)-12
GST TELECOMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of filing fee (check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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.
<PAGE>
/ / 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:
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<PAGE>
GST TELECOMMUNICATIONS, INC.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
NOTICE is hereby given that the Annual General Meeting of the
shareholders of GST Telecommunications, Inc. (the "Company") will be held in the
Terrace Room of the Waterfront Centre Hotel, 900 Canada Place Way, Vancouver,
British Columbia, on March 17, 1997 at 11:00 a.m. for the following purposes:
1. To receive and consider the Report of the Directors.
2. To receive and consider the audited financial statements of
the Company for the year ended September 30, 1996 together
with the auditors' report thereon.
3. To elect directors to hold office until the next Annual
General Meeting of the shareholders or until their successors
are duly elected or appointed.
4. To approve an amendment to the Company's 1996 Stock Option
Plan increasing the number of Common Shares that may be
subject to options granted under the Plan from 400,000 to
700,000 shares.
5. To approve the Company's Senior Executive Stock Option Plan
and to authorize the directors to make such changes to such
Plan as may be required by the securities regulatory
authorities or to comply with applicable legislation without
further shareholder approval.
6. To approve the Company's Senior Operating Officer Stock Option
Plan and to authorize the directors to make such changes to
such Plan as may be required by the securities regulatory
authorities or to comply with applicable legislation without
further shareholder approval.
7. To appoint KPMG Peat Marwick LLP, Certified Public
Accountants, to serve as auditors for the Company until the
next Annual General Meeting of the shareholders and to
authorize the directors to fix the remuneration to be paid to
the auditors.
8. To transact such other business as may properly come before
the meeting.
Shareholders unable to attend the Annual General Meeting in person are
requested to read the enclosed Proxy Circular and Proxy, and then complete and
deposit the Proxy together with the power of attorney or other authority, if
any, under which it was signed or a notarially certified copy thereof with the
Company's transfer agent, Montreal Trust Company of Canada, of 510 Burrard
Street, Vancouver, British Columbia, V6C 3B9, at least 48 hours (excluding
Saturdays, Sundays and statutory holidays) before the time of the meeting.
Unregistered shareholders who received the Proxy through an intermediary must
deliver the Proxy in accordance with the instructions given by such
intermediary.
<PAGE>
Only shareholders of record on the close of business on January 24,
1997 are entitled to notice of, and to vote at, the Annual General Meeting.
DATED at Vancouver, Washington, this 13th day of February, 1997.
ON BEHALF OF THE BOARD OF DIRECTORS
(signed) STEPHEN IRWIN
Vice-Chairman & Secretary
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL GENERAL
MEETING YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE THAT IS PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES OR CANADA.
-2-
<PAGE>
GST TELECOMMUNICATIONS, INC.
PROXY
FOR THE ANNUAL GENERAL MEETING
TO BE HELD MARCH 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, being a shareholder of GST Telecommunications, Inc.
(the "Company"), hereby appoints W. Gordon Blankstein, Chairman of the Company,
or failing him, Stephen Irwin, Vice-Chairman of the Company, or failing him,
Michael F. Provenzano, Assistant Secretary of the Company, or, alternatively,
__________________, as proxyholder, to attend the Annual General Meeting of the
Company to be held in the Terrace Room of the Waterfront Centre Hotel, 900
Canada Place Way, Vancouver, British Columbia on March 17, 1997, and at any
adjournment thereof and to vote all the shares in the capital of the Company
that the undersigned would otherwise be entitled to vote if personally present
at such Annual General Meeting or at any adjournment thereof with respect to the
matters set forth below as follows:
1. Setting the number of directors for election at nine.
VOTE FOR AGAINST
2. Election of the Board of Directors as follows:
JOHN WARTA VOTE FOR ________ WITHHOLD VOTE ________
W. GORDON BLANKSTEIN VOTE FOR ________ WITHHOLD VOTE ________
STEPHEN IRWIN VOTE FOR ________ WITHHOLD VOTE ________
ROBERT H. HANSON VOTE FOR ________ WITHHOLD VOTE ________
PETER E. LEGAULT VOTE FOR ________ WITHHOLD VOTE ________
IAN WATSON VOTE FOR ________ WITHHOLD VOTE ________
JACK G. ARMSTRONG VOTE FOR ________ WITHHOLD VOTE ________
TAKASHI YOSHIDA VOTE FOR ________ WITHHOLD VOTE ________
THOMAS E. SAWYER VOTE FOR ________ WITHHOLD VOTE ________
3. Approval of an amendment to the Company's 1996 Stock Option Plan
increasing the number of Common Shares that may be subject to
options granted under such Plan from 400,000 to 700,000 shares.
VOTE FOR _______________ AGAINST _______________
<PAGE>
4. Approval of the Company's Senior Executive Stock Option Plan and
authorization for the directors to make such changes to such Plan
as may be required by the securities regulatory authorities or to
comply with applicable legislation without further shareholder
approval.
VOTE FOR _______________ AGAINST _______________
5. Approval of the Company's Senior Operating Officer Stock Option
Plan and authorization for the directors to make such changes to
such Plan as may be required by the securities regulatory
authorities or to comply with applicable legislation without
further shareholder approval.
VOTE FOR _______________ AGAINST _______________
6. Appointment of KPMG Peat Marwick LLP, Certified Public Accountants,
to serve as auditors for the Company and authorization for the
directors to fix the remuneration to be paid to the auditors.
VOTE FOR _______________ AGAINST _______________
7. To vote with discretionary power with respect to the transaction of
such other business as may properly come before the Annual General
Meeting or any adjournment thereof.
The undersigned hereby acknowledges receipt of a copy of the Notice of Annual
General Meeting and Proxy Circular, both dated February 13, 1997, the Company's
Annual Report on Form 10-K for the fiscal year ended September 30, 1996 and the
Company's Form 10-KA dated January 28, 1997 amending such Annual Report on Form
10-K.
THE UNDERSIGNED HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN.
DATED this ________ day of ______________________, 1997.
- ------------------------ ---------------------------------
NAME (Please Print) SIGNATURE
NOTE: Please sign exactly as name
appears hereon. Joint owners should
each sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. When signing on behalf of a
corporation, you should be an
authorized officer of such
corporation, and please give your
title as such.
-2-
<PAGE>
NOTES
1. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED OR WITHHELD FROM
VOTING ON ANY POLL EITHER (I) REQUESTED BY A SHAREHOLDER OR PROXYHOLDER
(PROVIDED THE INSTRUCTIONS ARE CERTAIN) OR (II) REQUIRED BY VIRTUE OF 5% OR MORE
OF THE OUTSTANDING SHARES OF THE COMPANY BEING REPRESENTED AT THE ANNUAL GENERAL
MEETING (THE "MEETING") BY PROXIES THAT ARE TO BE VOTED AGAINST A MATTER. IF THE
SHAREHOLDER OR AN INTERMEDIARY HOLDING SHARES AND ACTING ON BEHALF OF AN
UNREGISTERED SHAREHOLDER HAS SPECIFIED A CHOICE WITH RESPECT TO ANY OF THE ITEMS
ABOVE BY MARKING AN "X" IN THE SPACE PROVIDED FOR THAT PURPOSE THE SHARES WILL
BE VOTED ON ANY POLL IN ACCORDANCE WITH THAT CHOICE. IF NO CHOICE IS SPECIFIED,
THE PROXYHOLDER, IF ONE PROPOSED BY THE BOARD OF DIRECTORS, INTENDS TO VOTE THE
SHARES REPRESENTED BY THE PROXY AS IF THE SHAREHOLDER HAD SPECIFIED AN
AFFIRMATIVE VOTE. IF ANY AMENDMENTS OR VARIATIONS TO MATTERS IDENTIFIED IN THE
NOTICE OF MEETING ARE PROPOSED AT THE MEETING OR IF ANY OTHER MATTERS PROPERLY
COME BEFORE THE MEETING, DISCRETIONARY AUTHORITY IS HEREBY CONFERRED WITH
RESPECT THERETO.
2. A SHAREHOLDER OR AN INTERMEDIARY HOLDING SHARES AND ACTING ON BEHALF
OF AN UNREGISTERED SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON OTHER THAN THE
PERSONS NAMED IN THE PROXY AS PROXYHOLDERS (WHICH PERSON NEED NOT BE A
SHAREHOLDER) TO ATTEND AND ACT ON HIS BEHALF AT THE MEETING. TO EXERCISE THIS
RIGHT, THE SHAREHOLDER OR INTERMEDIARY MUST STRIKE OUT THE NAMES OF THE PERSONS
NAMED IN THE PROXY AS PROXYHOLDERS AND INSERT THE NAME OF HIS NOMINEE IN THE
SPACE PROVIDED OR COMPLETE ANOTHER PROXY.
3. This Proxy will not be valid unless it is dated and signed by the
intermediary or by the shareholder or his attorney authorized in writing. In the
case of a corporation, this Proxy must be dated and executed under its corporate
seal or signed by a duly authorized officer or attorney for the corporation.
4. To be effective, the Proxy together with the power of attorney or
other authority, if any, under which it was signed or a notarially certified
copy thereof, must be deposited with the Company's transfer agent, Montreal
Trust Company of Canada, of 510 Burrard Street, Vancouver, British Columbia, V6C
3B9, at least 48 hours (excluding Saturdays, Sundays and statutory holidays)
before the time of the Meeting. Unregistered shareholders who received the Proxy
through an intermediary must deliver the Proxy in accordance with the
instructions given by such intermediary.
5. This Proxy is solicited on behalf of the Board of Directors of the
Company.
Your name and address are shown as registered - please notify Montreal
Trust Company of Canada of any change in your address.
-3-
<PAGE>
GST TELECOMMUNICATIONS, INC.
4317 N.E. THURSTON WAY
VANCOUVER, WASHINGTON 98662
PROXY CIRCULAR FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS
THIS PROXY CIRCULAR CONTAINS INFORMATION AS AT JANUARY 24, 1997
PERSONS MAKING THIS SOLICITATION OF PROXIES
THIS PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE BOARD OF DIRECTORS OF GST TELECOMMUNICATIONS, INC. (THE
"COMPANY") FOR USE AT THE ANNUAL GENERAL MEETING (THE "MEETING") OF THE
SHAREHOLDERS OF THE COMPANY TO BE HELD IN THE TERRACE ROOM OF THE WATERFRONT
CENTRE HOTEL, 900 CANADA PLACE WAY, VANCOUVER, BRITISH COLUMBIA, ON MARCH 17,
1997 AT 11:00 A.M. AND FOR THE PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF
MEETING, AND AT ANY ADJOURNMENT THEREOF. It is expected that the solicitation
will be primarily by mail. Proxies may also be solicited personally by employees
of the Company. The cost of solicitation will be borne by the Company.
The approximate date of mailing of this Proxy Circular and the
accompanying proxy to shareholders is February 13, 1997.
COMPLETION AND VOTING OF PROXIES
Two or more persons holding or representing a total of five percent or
more of the Company's outstanding common shares (the "Common Shares") is
required for a quorum at the Meeting. Voting at the Meeting will be by a show of
hands, each shareholder having one vote, unless a poll is requested or required
(if the number of shares represented by proxies that are to be voted against a
motion is greater than five percent of the votes that could be cast at the
Meeting), in which case each shareholder is entitled to one vote for each share
held. In order to approve a motion proposed at the Meeting a majority of greater
than 50% of the votes cast will be required (an "ordinary resolution") unless
the motion requires a special resolution in which case a majority of 66-2/3% of
the votes cast will be required.
The persons named in the accompanying Proxy as proxyholders are
directors or officers of the Company. A SHAREHOLDER OR AN INTERMEDIARY HOLDING
SHARES AND ACTING ON BEHALF OF AN UNREGISTERED SHAREHOLDER HAS THE RIGHT TO
APPOINT A PERSON OTHER THAN THE PERSONS NAMED IN THE PROXY AS PROXYHOLDERS
(WHICH PERSON NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT ON HIS BEHALF AT THE
MEETING. TO EXERCISE THIS RIGHT, THE SHAREHOLDER OR INTERMEDIARY MUST STRIKE OUT
THE NAMES OF THE PERSONS NAMED IN THE PROXY AS PROXYHOLDERS AND INSERT THE NAME
OF HIS NOMINEE IN THE SPACE PROVIDED OR COMPLETE ANOTHER PROXY.
A shareholder or intermediary acting on behalf of a shareholder may
indicate the manner in which the persons named in the enclosed Proxy are to vote
with respect to any matter by marking an "X" in the appropriate space. On any
poll required by virtue of either (i) shareholders who hold five percent or more
of the outstanding shares of the Company being represented at the Meeting by
proxies indicating that such shares are to be voted against a matter or (ii) a
shareholder or proxyholder requesting a poll, those persons will vote or
withhold from
<PAGE>
voting the shares in respect of which they are appointed in accordance with the
directions, if any, given in the Proxy provided such directions are certain.
If the shareholder or intermediary acting on behalf of a shareholder
wishes to confer discretionary authority with respect to any matter, then the
space should be left blank. IF NO CHOICE IS SPECIFIED, THE PROXYHOLDER, IF ONE
PROPOSED BY THE BOARD OF DIRECTORS, INTENDS TO VOTE THE SHARES REPRESENTED BY
THE PROXY IN FAVOR OF THE MOTION. The enclosed Proxy, when properly signed, also
confers discretionary authority with respect to amendments or variations to the
matters identified in the Notice of Meeting and with respect to other matters
which may be properly brought before the Meeting. At the time of printing this
Proxy Circular, the Board of Directors of the Company is not aware that any such
amendments, variations or other matters are to be presented for action at the
Meeting. If, however, other matters which are not now known to the Board of
Directors should properly come before the Meeting, the Proxies hereby solicited
will be exercised on such matters in accordance with the best judgment of the
nominees.
The Proxy must be dated and signed by the intermediary acting on behalf
of a shareholder or by the shareholder or his attorney authorized in writing. In
the case of a corporation, the Proxy must be dated and executed under its
corporate seal or signed by a duly authorized officer or attorney for the
corporation.
COMPLETED PROXIES TOGETHER WITH THE POWER OF ATTORNEY OR OTHER
AUTHORITY, IF ANY, UNDER WHICH IT WAS SIGNED OR A NOTARIALLY CERTIFIED COPY
THEREOF, MUST BE DEPOSITED WITH THE COMPANY'S TRANSFER AGENT, MONTREAL TRUST
COMPANY OF CANADA, OF 510 BURRARD STREET, VANCOUVER, BRITISH COLUMBIA, V6C 3B9,
AT LEAST 48 HOURS (EXCLUDING SATURDAYS, SUNDAYS AND STATUTORY HOLIDAYS) BEFORE
THE TIME OF THE MEETING. UNREGISTERED SHAREHOLDERS WHO RECEIVED THE PROXY
THROUGH AN INTERMEDIARY MUST DELIVER THE PROXY IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN BY SUCH INTERMEDIARY.
It is not intended to use the proxies for the purpose of voting on the
Company's audited financial statements for the most recently completed fiscal
year, the directors' reports or the auditors' report.
REVOCATION OF PROXIES
A shareholder or an intermediary acting on behalf of a shareholder who
has given a Proxy has the power to revoke it. Revocation can be effected by an
instrument in writing signed by the intermediary or shareholder or his attorney
authorized in writing, and, in the case of a corporation, executed under its
corporate seal or signed by a duly authorized officer or attorney for the
corporation and either delivered to the registered office of the Company at 12th
Floor, 1190 Hornby Street, Vancouver, British Columbia, V6Z 2L3, at any time up
to and including the last business day preceding the day of the Meeting, or any
adjournment thereof, or deposited with the Chairman of the Meeting on the day of
the Meeting, prior to the hour of commencement.
-2-
<PAGE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of the directors or senior officers of the Company, nor any person
who has held such a position since the beginning of the last completed fiscal
year of the Company, nor any proposed nominee for election as a director of the
Company, nor any associate or affiliate of the foregoing persons, has any
substantial or material interest, direct or indirect, by way of beneficial
ownership of securities or otherwise, in any matter to be acted on at the
Meeting other than the election of directors or the approval of the amendment to
the Company's 1996 Stock Option Plan (the "1996 Plan"), the approval of the 1996
Senior Operating Officer Stock Option Plan (the "Operating Officer Plan") and,
with respect to John Warta, W. Gordon Blankstein and Stephen Irwin, the 1996
Senior Executive Officer Stock Option Plan (the "Executive Plan") insofar as
they have been or may be granted options to purchase Common Shares pursuant to
such plans.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The Company has only one class of shares entitled to be voted at the
Meeting, namely, Common Shares. All issued shares are entitled to be voted at
the Meeting and the holder of each is entitled to one non-cumulative vote. There
were 23,658,331 Common Shares issued and outstanding as of January 24, 1997.
Only those common shareholders of record on January 24, 1997 will be
entitled to vote at the Meeting or any adjournment thereof.
The following table sets forth certain information as of January 24,
1997 with respect to the beneficial ownership of the Common Shares by (i) each
person known to the Company to be the beneficial owner of five percent or more
thereof, (ii) each director of the Company, (iii) the Chief Executive Officer
and each of the six most highly compensated executive officers of the Company
other than the Chief Executive Officer and (iv) all executive officers and
directors as a group. Each of the named persons has sole voting and investment
power with respect to all Common Shares owned by him. All persons identified
below as holding options are deemed to be beneficial owners of the Common Shares
subject to such options by reason of their right to acquire such shares within
60 days after January 24, 1997, through the exercise of such options.
AMOUNT AND
NATURE OF
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP PERCENTAGE
- ------------------------------------ --------- ----------
John Warta ................................. 1,672,468(2) 7.0%
Tomen Corporation and affiliates ........... 1,620,220(3) 6.8%
1285 Avenue of the Americas
New York, New York 10019
W. Gordon Blankstein........................ 399,300(4) 1.7%
Stephen Irwin............................... 276,345(5) 1.2%
Ian Watson.................................. 460,100(6) 1.9%
Thomas E. Sawyer............................ 374,004(7) 1.6%
Clifford V. Sander.......................... 419,100(8) 1.8%
Robert H. Hanson............................ 167,214(9) *
Peter E. Legault............................ 126,056(10) *
Jack G. Armstrong........................... 50,000(11) *
(TABLE CONTINUED ON FOLLOWING PAGE)
-3-
<PAGE>
Takashi Yoshida............................ 0(12) --
Directors and Executive Officers of the
Company as a Group (10 persons)............ 3,944,587(13) 16.1%
- ----------------------
* Less than 1%.
(1) Unless otherwise indicated, the address for each person or entity
listed below is the Company's principal executive offices.
(2) Includes 125,000 Common Shares issuable upon the exercise of options.
Does not include 200,000 Common Shares issuable upon the exercise of
options that are not exercisable until the market price of the Common
Shares on the American Stock Exchange ("AMEX") reaches certain levels
for certain prescribed periods. See "Proposal IV -- Approving the
Company's Senior Executive Stock Option Plan."
(3) Includes 296,155 Common Shares issuable upon the exercise of warrants
held by Tomen Corporation, Tomen America, Inc. ("Tomen America"), TM
Communications LLC and their affiliates (collectively, "Tomen").
(4) Includes (i) 177,500 Common Shares issuable upon the exercise of
options and (ii) 200,000 Common Shares held in escrow pursuant to
policies of the Vancouver Stock Exchange ("VSE"). Does not include
200,000 Common Shares issuable upon the exercise of options that are
not exercisable until the market price of the Common Shares on the AMEX
reaches certain levels for certain prescribed periods.
(5) Includes (i) 115,000 Common Shares issuable upon exercise of options
and (ii) 100,000 Common Shares issuable upon exercise of an outstanding
warrant. Does not include (i) 200,000 Common Shares issuable upon the
exercise of an outstanding warrant that is not exercisable within 60
days after January 24, 1997 and (ii) 200,000 Common Shares issuable
upon the exercise of options that are not exercisable until the trading
price of the Common Shares on the AMEX reaches certain levels for
certain prescribed periods.
(6) Includes (i) 92,500 Common Shares issuable upon the exercise of options
and (ii) 362,500 Common Shares held in escrow pursuant to policies of
the VSE.
(7) Includes 155,000 Common Shares issuable upon the exercise of options.
Does not include Common Shares issuable upon the exercise of other
options that are not exercisable within 60 days after January 24, 1997.
(8) Includes 55,000 Common Shares issuable upon the exercise of options.
Does not include Common Shares issuable upon the exercise of other
options that are not exercisable within 60 days after January 24, 1997.
(9) Includes 100,000 Common Shares issuable upon the exercise of options.
Does not include Common Shares issuable upon the exercise of other
options that are not exercisable within 60 days after January 24, 1997.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
-4-
<PAGE>
(10) Includes 40,000 Common Shares issuable upon the exercise of options.
Does not include Common Shares issuable upon the exercise of other
options that are not exercisable within 60 days after January 24, 1997.
(11) Includes 30,000 Common Shares issuable upon the exercise of options.
Does not include Common Shares issuable upon the exercise of other
options that are not exercisable within 60 days after January 24, 1997.
(12) Mr. Yoshida is an officer of Tomen America. Does not include (i)
1,620,220 Common Shares beneficially owned by Tomen as to which Mr.
Yoshida disclaims any beneficial ownership interest or (ii) Common
Shares issuable upon the exercise of options that are not exercisable
within 60 days after January 24, 1997.
(13) Includes an aggregate of 890,000 Common Shares issuable upon the
exercise of options, 100,000 Common Shares issuable upon the exercise
of warrants and 562,500 Common Shares held in escrow. Does not include
(i) 600,000 Common Shares issuable upon the exercise of options that
are not exercisable until the market price of the Common Shares on the
AMEX reaches certain levels for certain prescribed periods or (ii)
Common Shares issuable upon the exercise of other options and warrants
that are not exercisable within 60 days after January 24, 1997.
PROPOSAL I - SETTING THE NUMBER OF DIRECTORS FOR ELECTION AT NINE
It is proposed to elect nine directors at the Meeting. This requires
the number of directors to be set at nine (subject to the Board's power to
increase the number of directors between annual general meetings by one-third of
the number of directors elected at the previous annual general meeting) which
requires the approval of the shareholders of the Company by an ordinary
resolution, which approval will be sought at the Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE IN FAVOR OF
SETTING THE NUMBER OF DIRECTORS FOR ELECTION AT NINE.
PROPOSAL II - ELECTION OF DIRECTORS
The Board of Directors proposes to nominate the persons named in the
following table for election as directors of the Company. Each director elected
will hold office until the next annual general meeting or until his successor is
duly elected or appointed, unless his office is earlier vacated in accordance
with the By-Laws of the Company or he becomes disqualified to act as a director.
The following information concerning the proposed nominees has been
furnished by each of them.
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<PAGE>
<TABLE>
<CAPTION>
Shares Owned and
Name and Present Which Can Be
Present Position Principal Director Voted at the
WITH THE COMPANY AGE (1) OCCUPATION(2) SINCE MEETING (3)
- ---------------- --- ---------- -------- -----------
<S> <C> <C> <C> <C>
JOHN WARTA(4) 49 President and Chief March 30, 1995 1,547,468
President, Chief Executive Officer of
Executive Officer the Company
and Director
W. GORDON 46 Chairman of the January 11, 1994; 221,800
BLANKSTEIN(4)(5) Board of the also November 27,
Chairman of the Board Company, GST 1992 to January
USA, Inc., a 29, 1993
subsidiary of the
Company ("GST
USA"); and GST
Global
Telecommuni-
cations, Inc.
("Global)
STEPHEN IRWIN(4)(5) 55 Vice-Chairman of September 21, 61,345
Vice-Chairman, the Board of the 1995
Secretary and Director Company;
Attorney, Olshan
Grundman Frome &
Rosenzweig LLP
ROBERT H. HANSON(5) 55 Senior Vice- February 22, 1993 67,214
Senior Vice-President, President, Corporate
Corporate Development, Development and
Chief Financial Chief Financial
Officer and Director Officer of the
Company
THOMAS E. SAWYER(4) 64 Chief Technology July 22, 1995 219,004
Chief Technology Officer of the
Officer and Director Company; Chairman
of the Board
Emeritus, NACT
Telecommunications,
Inc., a subsidiary of
the Company
("NACT")
</TABLE>
(CONTINUED ON FOLLOWING PAGE)
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IAN WATSON(5)(6)(7) 54 Vice-President, GST January 27, 1993 367,600
Director USA
PETER E. LEGAULT(6)(7) 52 Director and Vice- April 21, 1993 86,056
Director President, Thomson
Kernaghan & Co.
Ltd. (Toronto
brokerage
firm)("Thomson
Kernaghan")
JACK G. 62 Chartered July 11, 1994 20,000
ARMSTRONG(6)(7) Accountant;
Director President, J.G.
Armstrong
Consulting Inc.
(private financial
consulting company)
TAKASHI YOSHIDA(8) 47 Vice-President and February 14, 1995 0
Director General Manager -
Electronics and
Telecommunications
Department, Tomen
America
</TABLE>
- ----------
(1) As of December 31, 1996.
(2) Includes occupations for preceding five years unless the director was
elected at the previous Annual General Meeting and was shown as a
nominee for election as a director in the Proxy Circular for that
meeting. For more information concerning each of the directors, see
"Directors and Executive Officers."
(3) The approximate number of shares of the Company carrying the right to
vote in all circumstances beneficially owned, directly or indirectly,
or over which control or direction is exercised by each proposed
nominee as of January 24, 1997. Does not include shares that may be
acquired upon the exercise of stock options and warrants as follows:
John Warta - 325,000 shares (of which only 125,000 shares may be
presently acquired as the remainder are subject to vesting), W. Gordon
Blankstein - 377,500 shares (of which only 177,500 shares may be
presently acquired as the remainder are subject to vesting), Stephen
Irwin - 615,000 shares (of which only 215,000 shares may be presently
acquired as the remainder are subject to vesting), Robert H. Hanson -
115,000 shares (of which only 100,000 shares may be presently acquired
as the remainder are subject to vesting), Thomas E. Sawyer - 160,000
shares (of which only 155,000 shares may be presently acquired as the
remainder are subject to vesting), Ian Watson - 92,500 shares, Peter E.
Legault -55,000 shares (of which only 40,000 shares may be presently
acquired as the remainder
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
-7-
<PAGE>
are subject to vesting), Jack G. Armstrong - 40,000 shares (of which
only 30,000 shares may be presently acquired as the remainder are
subject to vesting) and Takashi Yoshida - 10,000 shares (of which no
shares may be presently acquired as all are subject to vesting).
(4) Member of Executive Committee.
(5) Member of Finance Committee.
(6) Member of Audit Committee.
(7) Member of Compensation Committee.
(8) Pursuant to a master financing agreement by and among the Company, GST
Telecom Inc., a subsidiary of the Company ("GST Telecom"), Pacwest
Network, L.L.C. ("Pacwest") and Tomen (the "Tomen Master Agreement")
the Company agreed to nominate a representative of Tomen for election
to the Company's Board of Directors. Takashi Yoshida is Tomen's
representative. See "Interest of Management and Insiders in Material
Transactions".
The Board of Directors met eight times in the year ended September 30,
1996 ("Fiscal 1996"). Pursuant to the provisions of the CANADA BUSINESS
CORPORATIONS ACT the Company is required to have an Audit Committee. The Audit
Committee, whose members are indicated above, met two times in Fiscal 1996. The
Audit Committee is charged with reviewing the Company's consolidated annual
fiscal statements and accounting policies, resolving potential conflicts of
interest, receiving and reviewing the recommendations of the Company's
independent auditors, and conferring with the Company's independent auditors
with respect to the training and supervision of internal accounting personnel
and the adequacy of internal accounting controls. The Company has a Compensation
Committee, whose members are indicated above, and which met two times in Fiscal
1996. The Compensation Committee establishes the compensation policies of the
Company and recommends to the Board of Directors the compensation (including
stock options) for the Company's executive officers. See also "Directors and
Executive Officers--Report on Executive Compensation." In addition, the Company
has an Executive Committee and a Finance Committee. The Company does not have a
nominating committee.
Of the above persons, W. Gordon Blankstein, Peter E. Legault, and Jack
G. Armstrong are ordinarily resident in Canada while John Warta, Stephen Irwin,
Thomas E. Sawyer, Ian Watson, Robert H. Hanson and Takashi Yoshida are
ordinarily resident in the United States.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES.
DIRECTORS AND EXECUTIVE OFFICERS
The following information concerning the directors and executive
officers of the Company has been furnished by each of them.
JOHN WARTA has been President, Chief Executive Officer and a director
of the Company since March 1995. Mr. Warta is also a director of Global. From
June 1994 to April 1995, he was the President
-8-
<PAGE>
and Chief Executive Officer of GST Telecom. Mr. Warta cofounded Electric
Lightwave, Inc., a fiber optic competitive access provider ("ELI"), in 1988,
which operates fiber optic competitive access networks in Portland, Oregon, Salt
Lake City, Utah, Sacramento, California, Phoenix, Arizona and Seattle,
Washington and served as its President and Chief Executive Officer from June
1989 to June 1993. From June 1993 to June 1994, Mr. Warta was developing the
competitive access networks of Pacwest.
W. GORDON BLANKSTEIN has been Chairman of the Board of the Company
since February 1995 and is a director of NACT and Global. He is a founder, past
President and Chairman of the Board and former director of ICG Communications,
Inc. Mr. Blankstein was the founder and a director of the Company from November
1992 to January 1993 and has been a director since January 1994. He was elected
Vice Chairman of the Board in February 1994.
STEPHEN IRWIN has been Vice Chairman of the Board and a director of the
Company since September 1995, has been the Secretary of the Company since
November 1992 and is a director of NACT. Mr. Irwin is an attorney specializing
in corporate matters, including finance, securities regulation, international
business and mergers and acquisitions, and has been of counsel to the New York
law firm of Olshan Grundman Frome & Rosenzweig LLP since 1990.
ROBERT H. HANSON has been a director of the Company since February 1993
and was appointed Senior Vice President, Corporate Development in October 1993
and Chief Financial Officer of the Company in July 1994. From August 1991 until
September 1993, he was Vice President and Branch Manager of the Cody, Wyoming
office of D.A. Davidson & Co., a regional securities firm with headquarters in
Great Falls, Montana.
CLIFFORD V. SANDER (age 60) has been Senior Vice President and
Treasurer of the Company since March 1995 and is a director of NACT. He has also
been the Executive Vice President and Chief Financial Officer of GST Telecom
since June 1994. Mr. Sander is a member of the Finance Committee of the
Company's Board of Directors. From 1962 to 1994, Mr. Sander, who is a Certified
Public Accountant, was in private accounting practice in Portland, Oregon. He
was acting Chief Financial Officer of ELI during its formation in 1988 and
continued to provide accounting and financial consulting services to ELI through
1993.
THOMAS E. SAWYER has been the Chief Technology Officer of the Company
since December 1993 and a director of the Company since July 1995. Dr. Sawyer
has been the Chairman of the Board Emeritus of NACT since November 1996, was a
director of NACT from 1982 to November 1996, the Chairman of the Board of NACT
from October 1985 to November 1996 and was the Chief Executive Officer of NACT
from October 1988 to March 1996. Dr. Sawyer is also Vice President of GST USA.
IAN WATSON has been a director of the Company since January 1993, was
appointed Chairman of the Board of the Company in January 1993 and President and
Chief Executive Officer in July 1993. In March 1995, he resigned as President
and Chief Executive Officer but retained the position of Chairman of the Board.
In September 1995, he resigned as Chairman of the Board, but remained a Vice
President of GST USA. Mr. Watson has been the Chairman of the Board and Chief
Executive Officer of Combined Metals Reduction Company since April 1996. From
1985 until January 1993, Mr. Watson was engaged as a private investor in various
activities. Mr. Watson is also a director of Global.
-9-
<PAGE>
PETER E. LEGAULT has been a director of the Company since April 1993.
Mr. Legault has been a director and Vice President of Thomson Kernaghan, a
member firm of The Toronto Stock Exchange and The Montreal Exchange, since
October 19, 1987. Mr. Legault is also a director of Global.
JACK G. ARMSTRONG has been a director of the Company since July 1994.
Mr. Armstrong, who is a Chartered Accountant, has served as a principal of J.G.
Armstrong Consulting, Inc., a consulting firm offering corporate and financial
consulting services to corporations, municipalities and university related
agencies since 1987.
TAKASHI YOSHIDA has been a director of the Company since February 1995
and a director of GST Pacific Lightwave, Inc., formerly known as Pacific
Lightwave, Inc. ("GST Pacific"), a subsidiary of the Company, since October
1994. He has been principally employed as a Vice President and General Manager
- -- Electronics and Telecommunications Department of Tomen America since February
1994. From April 1991 through January 1994, Mr. Yoshida was the Tokyo Manager of
Tomen.
REMUNERATION OF MANAGEMENT AND EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table discloses the compensation paid by the Company and
its subsidiaries during the previous three fiscal years to the Company's Chief
Executive Officer and the six next highest paid executive officers.
-10-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------ ------------------------------------
Awards Payouts
----------------------------- ----------------
Restricted Securities
Shares or Underlying All Other
Name and Other Annual Restricted Options/ LTIP Compen-
Principal Salary Bonus Compensation Share Units SARs Granted Payouts sation
Position Year (US$) (US$) (US$)(1) (US$) (#) (US$) (US$)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John M. 1996 200,000 156,000(2) 200,000 105,417(3)
Warta, Chief 1995 126,667 200,304(4) 85,000 --
Executive 1994 30,000 -- 40,000 --
Officer
W. Gordon 1996 190,000 -- 200,000 105,417(3)
Blankstein, 1995 125,833 20,000(5) 85,000 --
Chairman 1994 20,000 -- 92,500 --
Stephen
Irwin, 1996 280,000 500,000 105,417(3)
Vice 1995 -- -- 100,000 --
Chairman 1994 -- -- 15,000 --
Clifford V.
Sander, 5,104(6)
Senior V.P. 1996 120,000 39,000(2) 28,000 --
and 1995 101,667 65,076(7) 35,000 --
Treasurer 1994 25,000 -- 20,000 --
Thomas E.
Sawyer,
Chief 1996 222,556 2,066 5,608(8) 5,000 5,403(9)
Technology 1995 136,000 2,200 172,037(10) 120,000 4,366(11)
Officer 1994 131,505 6,723 12,915(8) 35,000 3,455(11)
Robert
Hanson,
Senior V.P.
and Chief 1996 120,000 -- 15,000 --
Financial 1995 101,667 20,000(5) 50,000 2,734(6)
Officer 1994 87,333 -- 50,000 --
Ian Watson,
Vice 1996 120,000 -- --
President of 1995 120,000 20,000(5) --
GST USA 1994 120,000 -- 92,500
</TABLE>
(1) Excludes certain perquisites that do not exceed the lesser of US$50,000
or 10% of the named individual's aggregate salary and bonus.
(2) Represents a fee for money borrowed and equity purchased under the
Tomen Master Agreement (the "Pacwest Fee"). See "Interest of Management
and Insiders in Material Transactions."
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
-11-
<PAGE>
(3) Represents an accrual of compensation cost for options vesting based on
share price performance. See "Proposal IV -- Approving the Company's
Senior Executive Stock Option Plan."
(4) Includes (i) 5,000 Common Shares valued at US$4.00 per share issued as
consideration for such officers' guarantee of certain indebtedness of
the Company, which indebtedness was subsequently repaid (the "Guaranty
Shares") and (ii) US$180,304 in payments on account of the Pacwest Fee.
(5) Represents Guaranty Shares.
(6) Represents an accrual of compensation cost for options granted at below
the market price of the Company's Common Shares on the date of grant.
(7) Includes the Guaranty Shares and US$45,076 in payments on account of
the Pacwest Fee.
(8) Represents payments made pursuant to NACT's profit sharing plan.
(9) Represents (i) US$4,492 in matching contributions by NACT to its 401(k)
Plan (the "NACT 401(k) Plan") and (ii) US$911 in accrued compensation
cost for options granted at below the market price of the Company's
Common Shares on the date of grant.
(10) Represents (i) US$151,365 accrued in respect of an annuity purchased
for Dr. Sawyer, which is based upon compensation due to Dr. Sawyer in
prior years and deferred by him at the Company's request and (ii)
US$20,672 in payments made pursuant to NACT's profit sharing plan.
(11) Represents matching contributions by NACT to the NACT 401(k) Plan.
EMPLOYMENT AND OTHER AGREEMENTS
John Warta is employed by GST Telecom pursuant to an employment
agreement dated as of March 1, 1994 and amended effective September 1, 1995, for
a term ending on February 28, 1999. The agreement provides for an initial base
salary of US$120,000 annually (which was increased to US$200,000 annually
effective September 1, 1995) and incentive compensation as awarded by the Board
of Directors of the Company from time to time. In the event of Mr. Warta's death
while employed by the Company, the agreement provides for a payment of one and a
half times his then current base annual salary, over a period of one and half
years, to his designated beneficiary. In the event of his disability, Mr. Warta
is to receive the full amount of his base salary for six months. If such six
month period ends prior to February 28, 1999, he is to receive salary at a rate
of one-half his then current base salary for a further period ending on the
earlier of one year thereafter or February 28, 1999. The agreement contains
covenants restricting Mr. Warta's ability to engage in activities competitive
with those of the Company for a period ending on the earlier of two years after
his termination or February 28, 2000. Upon a change of control of the Company
that results in Mr. Warta's removal from the Company's Board of Directors, a
significant change in the conditions of his employment or other breach of the
agreement, he is to receive liquidated damages equal to 2.99 times the "base
amount," as defined in the United States Internal Revenue Code of 1986, as
amended (the "Code"), of his compensation.
The Company has entered into a consulting agreement with Sunwest
Ventures Ltd. ("Sunwest"), a private company of which W. Gordon Blankstein, the
Chairman of the Board of the Company, is a principal, pursuant to which Sunwest
(through Mr. Blankstein) is to provide consulting services to the Company, on
terms substantially the same as those contained in John Warta's employment
agreement. Effective September 1, 1995, the Board of Directors increased the
annual payment to Sunwest from US$120,000 to US$190,000.
GST USA has entered into a personal services agreement with Stephen
Irwin, Vice-Chairman of the Board and Secretary of the Company and Secretary of
GST USA, for the term commencing on October 1, 1995 and ending on February 28,
1999, providing, among other things, that (i) Mr. Irwin shall devote
approximately one-half of his working time rendering services to the Company,
(ii) in consideration
-12-
<PAGE>
for such services and in lieu of billing legal services directly or through a
law firm, Mr. Irwin shall receive a retainer of US$280,000 per annum or such
greater amount as may be determined by the Board of Directors of the Company,
payable in equal semi-monthly installments and (iii) Mr. Irwin is entitled to
such benefits as are available to senior executive officers of the Company and
GST USA and to a payment upon a change of control and subsequent breach by the
Company of the agreement in accordance with the formula described above for John
Warta. In connection therewith, the Company issued to Mr. Irwin a five year
warrant to purchase 300,000 common shares of the Company at a price of US$6.75
per share, such warrant to become exercisable in three equal annual installments
on October 1, 1996, 1997 and 1998.
Effective as of March 1, 1994, GST Telecom entered into an employment
agreement with Clifford V. Sander on terms substantially similar to those of
John Warta's employment agreement. Mr. Sander's agreement provides for his
employment by GST Telecom as its Chief Financial Officer at an initial base
salary of US$100,000 annually, which was increased to US$120,000 effective
September 1, 1995.
Robert H. Hanson is employed by GST USA pursuant to an employment
agreement effective as of August 1, 1994, on terms substantially similar to
those contained in John Warta's employment agreement. Mr. Hanson's agreement
provides for an initial base salary of US$100,000 annually, which was increased
to US$120,000 effective September 1, 1995.
Ian Watson is employed by GST USA as a Vice-President pursuant to an
employment agreement effective as of October 1, 1995 for a term ending on
September 30, 1998. The agreement provides for a salary of US$120,000 for the
first year of the agreement, US$50,000 for the second year of the agreement and
US$10,000 for the third year of the agreement. The agreement contains covenants
restricting Mr. Watson's ability to engage in activities competitive with those
of the Company during the term of his employment and for two years thereafter if
he is terminated for "cause" or he voluntarily terminates his employment for any
reason other than a breach by GST USA of the agreement.
GST USA and GST Telecom have entered into a consulting agreement dated
April 1, 1996 with Infotec Consulting, Inc. ("Infotec") under which Thomas E.
Sawyer is to provide personal services to the Company at the rate of US$125 per
hour for hours invoiced monthly until June 30, 1997. Such consulting agreement
also contains covenants restricting Dr. Sawyer's ability to engage in activities
competitive with those of the Company and its subsidiaries. The agreement also
provides for a payment of one and one half times the amount paid to Infotec
during the six months preceding Dr. Sawyer's death in the event of Dr. Sawyer's
death during the term of the agreement. Previously, Dr. Sawyer was employed by
NACT pursuant to an employment agreement effective September 1, 1993, for a term
that ended on March 31, 1996. The agreement provided for an annual salary of
US$168,000 and contains covenants restricting Dr. Sawyer's ability to engage in
activities competitive with those of the Company for a period ending three years
from his termination. In addition, pursuant to the agreement, an annuity has
been purchased for US$144,000 for the benefit of Dr. Sawyer. On November 26,
1996, NACT granted Dr. Sawyer an option to purchase 60,000 shares of the Common
Stock of NACT at an exercise price of US$9.35 per share.
PENSION PLANS
During the year ended September 30, 1995, GST USA adopted a defined
contribution 401 (k) plan (the "GST USA 401(k) Plan") in accordance with the
Code. Employees are eligible to participate in the GUS USA 401(k) Plan upon
commencement of service provided they are over 21 years of age. Participants may
defer up to 20% of eligible compensation. Currently, the Company does not
provide matching contributions under the GUS USA 401(k) Plan.
-13-
<PAGE>
NACT maintains the NACT 401(k) Plan, which is available to all
employees of NACT who have attained the age of 21. Such eligible employees may
elect to defer any percentage of their current salary subject to a maximum of
15% or the statutory maximum (US$9,500 in 1996), whichever is the lesser. The
maximum salary that can be considered for compensation purposes is US$150,000
per year. NACT matches the deferrals of its employees to the extent of 50% of
such deferrals, up to a maximum of 7.5% of the annual compensation of such
employees. During Fiscal 1996, NACT contributed US$59,881 to the NACT 401(k)
Plan.
Through September 30, 1996, NACT provided a discretionary profit
sharing program for full time employees who had completed one full year of
employment. Under the plan, 10% of the increase in profits based on NACT's
previous highest retained earnings balance were allocated among employees with
reference to length of employment and salary level, at the discretion of NACT's
Board of Directors. NACT contributed approximately US$132,000 to the program in
Fiscal 1996. The program was terminated on September 30, 1996.
COMPENSATION OF DIRECTORS
Except as described above, the Company does not have any arrangements
pursuant to which directors are remunerated by the Company or its subsidiaries
for their services in their capacities as directors, consultants or experts
other than stock options to purchase shares of the Company which are granted to
the Company's directors from time to time.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Company currently has three insurance policies insuring the
directors and officers of the Company and its subsidiaries against any liability
incurred by them in the course of acting as a director or officer. The first
policy is for a maximum amount of US$5 million and has a US$250,000 deductible.
The second policy is also for a maximum amount of US$5 million which becomes
payable only if the first policy has been fully utilized. The third policy is
also for a maximum amount of US$5 million which becomes payable only if the
first two policies have been fully utilized. The annual premium for these three
policies is US$474,625. The insurance does not cover a director or officer in
instances in which liability relates to such director's or officer's failure to
act honestly and in good faith with a view to the best interests of the Company.
Before the three current policies were in force, the Company maintained
two directors and officers liability insurance policies in the aggregate amount
of US$5 million for an annual premium of approximately US$305,070.
STOCK OPTION PLANS
In January 1995, the Board of Directors of the Company established an
incentive stock option plan (the "1995 Plan" and collectively with the 1996
Plan, the Executive Plan and the Operating Officer Plan, the "Option Plans"). In
September 1995, the Board of Directors increased the number of Common Shares
reserved for issuance under the 1995 Plan from 750,000 to 1,750,000 shares. In
January 1996, the Board of Directors established the 1996 Plan, whose terms are
substantially similar to those of the 1995 Plan, except that the number of
Common Shares reserved for issuance pursuant to options granted under the 1996
Plan is 400,000 shares. In January 1997, the Board of Directors increased,
subject to shareholder approval, the number of Common Shares reserved for
issuance under the 1996 Plan from 400,000 to 700,000 shares. See "Proposal III -
Amending the Company's 1996 Stock Option Plan." At September
-14-
<PAGE>
30, 1996, options to purchase an aggregate of 1,360,044 Common Shares were
outstanding under the 1995 Plan and the 1996 Plan.
On May 8, 1996, the Compensation Committee of the Board of Directors
adopted, subject to shareholder approval, two additional stock option plans, the
Executive Plan and the Operating Officer Plan. See "Proposal IV - Approving the
Company's Senior Executive Stock Option Plan" and "Proposal V - Approving the
Company's Senior Operating Officer Stock Option Plan."
In October 1995, the Board of Directors of the Company established, and
on February 15, 1996, the Company's shareholders approved, the 1996 Employee
Stock Purchase Plan (the "Purchase Plan" and collectively with the Option Plans,
the "Plans"), pursuant to which an eligible employee may arrange to have
withheld up to 10% of his wages over a six month period (to a maximum of
US$12,500) to purchase Common Shares.
The purpose of the Plans is to attract and motivate the directors,
officers and employees of the Company and its subsidiaries (collectively the
"Optionees") and thereby advance the Company's interests by affording such
persons with an opportunity to acquire an equity interest in the Company through
the stock options.
The Option Plans authorize the Board of Directors to grant stock
options to the Optionees on the following terms (subject to certain exceptions
set out in the Executive Plan and Operating Plan):
1. The number of shares subject to each option is determined by
the Board of Directors provided that, at the time the options
are granted, no Optionee may hold options to purchase more
than five percent of the issued shares of the Company. The
aggregate fair market value, determined as of the date of
grant, of Common Shares for which incentive stock options
(within the meaning of Section 422 of the Code) are
exercisable for the first time by any Optionee during any
calendar year under the Plans (and/or any other stock options
plans of the Company or any of its subsidiaries) shall not
exceed US$100,000.
2. The exercise price of the options cannot be set at less than
the minimum price permitted under the policies of the AMEX and
the VSE and, for incentive stock options, the exercise price
must be at least equal to 100% of the fair market value of
such shares on the date of grant while for all other options
the exercise price must be at least equal to 80% of the fair
market value of such shares on the date of grant; provided,
however, that an Optionee who is a Canadian taxpayer may
require that any nonqualified option granted to him provide
for the purchase of Common Shares upon exercise thereof at a
price equal to the fair market value per share on the date of
grant. For any Optionee who owns more than 10% of the
Company's outstanding shares, the exercise price of an
incentive stock option must not be less than 110% of the fair
market value on the date such option is granted.
3. The options may be exercisable for a period of up to five
years.
4. Optionees may hold more than one option.
5. The option can only be exercised by the Optionee and only so
long as the Optionee is a director, officer or employee of the
Company or its subsidiary or within a period of not more than
30 days after ceasing to be a director, officer or employee
or, if the Optionee dies, within one year from the date of the
Optionee's death.
-15-
<PAGE>
Thomas Sawyer has been granted options to purchase 60,000 shares of the
Common Stock of NACT. See "--Employment and Other Agreements."
The following table discloses the particulars of options to purchase
Common Shares or stock appreciation rights ("SARs") granted by the Company
during Fiscal 1996 to the Company's Chief Executive Officer and the six next
highest paid executive officers:
OPTION/SAR GRANTS DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed
Annual Rates of Stock Price
Individual Grants Appreciation for Option Term(US$)(1)
- ------------------------------------------------------------------------------------- ------------------------------------------
Market Value of
Securities
% of Total Underlying
Options/SARs Options/SARs
Securities Under Granted to Exercise or on the Date of
Options/SARs Employees in Base Price Grant Expira-
Name Granted (#) Fiscal Year (US$/Security) (US$/Security) tion Date 5% 10% 0%(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John Warta, 200,000(3)/-- 10.7%/-- 10.00 11.75 5/7/02 1,149,225 2,163,168 350,000
Chief
Executive
Officer
W. Gordon 200,000(3)/-- 10.7%/-- 10.00 11.75 5/7/02 1,149,225 2,163,168 350,000
Blankstein,
Chairman
Stephen Irwin, 200,000(3)/-- 10.7%/-- 10.00 11.75 5/7/02 1,149,225 2,163,168 350,000
Vice Chairman 300,000(4)/-- 16.1%/-- 6.75 6.75 9/30/00 559,470 1,236,283 --
Clifford V. 28,000(5)/-- 1.5%/-- 10.00 11.75 5/7/02 160,891 302,844 49,000
Sander, Sr.
V.P.
Thomas E. 5,000(5)/-- 0.3%/-- 10.00 11.75 5/7/02 28,731 54,079 8,750
Sawyer, Chief
Technology
Officer
Robert Hanson, 15,000(5)/-- 0.8%/-- 10.00 11.75 5/7/02 86,192 162,238 26,250
Senior V.P. and
Chief Financial
Officer
Ian Watson, --/-- --/-- -- -- -- -- -- --
Vice President
of GST USA
</TABLE>
(1) The potential realizable portion of the foregoing table illustrates
value that might be realized upon exercise of options immediately prior
to the expiration of their term, assuming (for illustrative purposes
only) the specified compounded rates of appreciation of the Common
Shares over the
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
-16-
<PAGE>
term of the option. These numbers do not take into account provisions
providing for the termination of the option following termination of
employment, nontransferability or difference in vesting terms.
(2) Value at grant date market price.
(3) Options vest in one-third increments at such time as the market value
of the Company's Common Shares trades above US$13.75, US$16.50 and
US$20.00 per share, respectively, for 20 consecutive trading days. See
"Proposal IV -- Approving the Company's Senior Executive Stock Option
Plan."
(4) Represents a warrant to purchase shares that becomes exercisable in
three equal installments on October 1, 1996, 1997 and 1998. See
"--Employment and Other Agreements."
(5) Options vest over four years.
The following table discloses the particulars of stock options
exercised during Fiscal 1996 by the Company's Chief Executive Officer and the
six next highest paid executive officers and of stock options held by such
persons at the end of Fiscal 1996.
AGGREGATED OPTION/SAR EXERCISES
DURING THE MOST RECENTLY COMPLETED
FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Name Securities Aggregate Value No. of Common Value(1) of
Acquired on Realized (US$) Shares Unexercised in the
Exercise (#) Underlying Money
Unexercised Options/SARs at
Options/SARs at FY-End (US$)
FY-End (#)
Exercisable/ Exercisable/
Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
John Warta, -- -- 125,000/200,000 648,125/275,000
Chief Executive
Officer
W. Gordon -- -- 177,500/200,000 1,052,188/275,000
Blankstein,
Chairman
Stephen Irwin -- -- 115,000/500,000 569,375/1,662,500
Vice Chairman
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
-17-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Clifford V. -- -- 55,000/28,000 289,375/38,500
Sander, Sr. V.P.
Thomas E. -- -- 155,000/5,000 921,875/6,875
Sawyer, Chief
Technology
Officer
Robert Hanson, -- -- 100,000/15,000 587,500/20,625
Sr. V.P. and
Chief Financial
Officer
Ian Watson, Vice -- -- 92,500/0 659,063/0
President of GST
USA
</TABLE>
(1) Represents the total gain that would be realized if all-in-the-money
options held at September 30, 1996 were exercised, determined by
multiplying the number of shares underlying the options by the
difference between the per share option exercise price and the fair
market value of US$11.38 per share at September 30, 1996. An option is
in-the-money if the fair market value of the underlying shares exceeds
the exercise price of the option.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
None of the current or former directors, executive officers or senior
officers of the Company or persons who were directors, executive officers or
senior officers of the Company at any time during Fiscal 1996, none of the
proposed nominees for election as directors of the Company and none of the
affiliates and associates (including members of the immediate families of such
persons) are or have been indebted to the Company or its subsidiaries at any
time since the beginning of Fiscal 1996. Furthermore, none of such persons were
indebted to a third party during such period where their indebtedness was the
subject of a guarantee, support agreement, letter of credit or other similar
arrangement or understanding provided by the Company or its subsidiaries.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal 1996 the compensation of the Company's senior management
was determined by a Compensation Committee consisting of Ian Watson, Peter E.
Legault and Jack G. Armstrong.
Of the Company's Compensation Committee, Ian Watson was an executive
officer of the Company until 1995 and was and continues to be an executive
officer of its subsidiary, GST USA. Neither Mr. Armstrong nor Mr. Legault is an
executive officer of the Company. However, Thomas Kernaghan, a firm of which Mr.
Legault is a director and Vice President, was engaged by the Company during
Fiscal 1996. See "Interest of Management and Insiders in Material Transactions."
REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Compensation Committee is responsible for developing and making
recommendations to the Board of Directors with respect to the Company's
executive compensation and stock option policies and
-18-
<PAGE>
practices. In addition, the Compensation Committee determines the compensation
to be paid to the Chief Executive Officer and each of the other executive
officers of the Company.
The Company's executive compensation programs are designed to enhance
the value of the Company to its shareholders. This is accomplished through
policies and practices that facilitate the achievement of the Company's
performance objectives, provide compensation that will attract and retain the
superior talent required by the Company's aggressive goals and align the
executive officers' interests with the interests of the Company's shareholders.
The Company's approach to executive compensation, as implemented by the
Compensation Committee, has been designed to provide a competitive compensation
program that will enable the Company to attract, motivate, reward and retain
individuals who possess the skills, experience and talents necessary to advance
the growth and financial performance of the Company. The Company's compensation
policies are based on the principle that each executive's financial rewards
should be aligned with the financial interests of the shareholders of the
Company. The Compensation Committee also believes that the potential for equity
ownership by management is beneficial in aligning management's and shareholders'
interest in the enhancement of shareholder value. The Company's executive
compensation has two key elements: (i) a long-term component consisting of stock
options and participation in the Purchase Plan and (ii) an annual component,
i.e., base salary, with more emphasis being placed on the long-term component
than on the annual component. The Company has not established a policy with
regard to Section 162(m) of the Code, because the Company has not to date paid
compensation in excess of $1 million per annum to any employee.
Salaries
Base salaries for the Company's executive officers are determined
initially by evaluating the responsibilities associated with the position held
and the experience of the individual, and by reference to the competitive
marketplace for management talent, including a comparison of base salaries for
comparable positions at comparable companies within the Company's industry.
Adjustments in salary are determined by evaluating the competitive marketplace,
the performance of the Company, the performance of the executive officer,
particularly with respect to the ability to manage growth of the Company, and
any increased responsibilities assumed by the executive officer. As long term
compensation such as stock options is the more important component of the
compensation package, much consideration is given to the stock options held by
such executive officers in determining their cash remuneration. The Company
believes that its executive officers' salaries are generally less than those of
its competitors. The Company has employment agreements with each of Messrs
Warta, Sander, Hanson and Watson, consulting agreements with Mr. Blankstein and
Dr. Sawyer and a personal services agreement with Mr. Irwin, which initially set
the base salaries/retainer for such individuals.
Bonuses
The Company has not paid cash bonuses and has no present intention of
paying significant and regular cash bonuses to its executive officers. At such
time in the future as the Company were to determine to pay cash bonuses and
incentive compensation to its executive officers, the Compensation Committee
would consider the extent of achievement by the Company of its strategic and
operating goals, the level of personal achievement by the executive officer
(such as the level of cost savings achieved by such executive officer), the
executive officer's ability to manage and motivate employees and the achievement
of projects for which the executive officer is responsible. The Compensation
Committee would also take into consideration the extent of the Company's cash
reserves available for such payments.
-19-
<PAGE>
Compensation of Chief Executive Officer
In addition, with respect to the determination of the Chief Executive
Officer's compensation, the Compensation Committee made comparisons to other
companies in the telecommunications industry carrying on businesses similar to
those of the Company, in particular the business of competitive local exchange
carriers. The consideration accounted for approximately 50% of the determination
of the Chief Executive Officer's salary. The other 50% was based on the
Compensation Committee's determination of what level of remuneration was
necessary to attract and retain people having the experience and ability of the
Company's Chief Executive Officer.
Stock Option Plans
The Option Plans contribute to the Company's ability to attract and
retain the best available personnel. It is the philosophy of the Compensation
Committee to tie a significant portion of an executive's total opportunity for
financial gain to increases in the value of the Common Shares. In the belief
that employees who have a proprietary interest in the Company will focus on its
long term success and on building shareholder wealth, the Compensation Committee
uses Option Plans as a basis to create a foundation for the long term growth of
the Company and increased shareholder value by providing executive officers and
key employees with an opportunity to obtain and build a meaningful stake in the
Company's future. In adherence to this philosophy, the Compensation Committee
has recommended to the Board of Directors that the number of shares available
for the grant of options under the 1996 Plan be amended and that the Executive
and Operating Officer Plans be approved.
All employees, including executive officers and part-time employees,
consultants, advisors and directors of the Company and its subsidiaries are
eligible for grants of stock options pursuant to one or more of the Option
Plans. During each fiscal year, the Compensation Committee grants stock options
to employees, including executive officers, who are recommended by management as
being in a position to continue to contribute to the Company's growth and
profitability. The number of options granted to a particular employee is based
on management's assessment of his performance and contribution. Options have
been granted to key employees at all levels of the Company's management. The
ultimate value of the options, if any, depends on the extent to which Common
Shares appreciate in market value.
The Compensation Committee granted options to the Chief Executive
Officer and each of the six most highly compensated executive officers of the
Company in May 1996. The size of these awards to each of such officers was based
generally on the factors described in the "Salaries" paragraph above. In
addition, the Compensation Committee considered the extensive nature and the
significant services rendered by such executive officers, their seasoned
managerial skills and the fact that the executive officers' base salaries are
generally less than executive officers with similar positions in comparable
companies.
DATED this 28th day of January, 1997.
(signed) Jack G. Armstrong (signed) Ian Watson (signed) Peter Legault
Committee Chairman Director Director
-20-
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return on the Common Shares (being the percentage
increase (or decrease) in the trading price of the Common Shares on a yearly
basis based on an investment in the Common Shares on September 22, 1992 (the
last date on which the Common Shares traded prior to entering into the
telecommunications business)) with the cumulative total shareholder return of
the American Stock Exchange Market Value Index and with a telephone (other than
radio telephone) communication industry index (which is shown on the graph as
the SIC Code Index). The Common Shares did not trade on the AMEX until March 11,
1994 and before that time were traded only on the VSE -- initially in Canadian
dollars and on and after March 9, 1995 in U.S. dollars. For comparison purposes
it is assumed that US$100 had been invested in the Common Shares and in the
securities contained in such indices on September 22, 1992. For the purposes of
this graph, Canadian dollars have been converted into U.S. dollars on the basis
of Cdn. $1.00 = US$0.75.
xx
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG GST TELECOMMUNICATIONS, INC.,
AMEX MARKET INDEX AND SIC CODE INDEX
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
----------------------------------------------------------------------
COMPANY 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
GST TELECOMMU 100.00 611.11 712.59 962.96 1685.93
INDUSTRY INDEX 100.00 132.61 131.51 150.45 150.36
BROAD MARKET 100.00 117.39 119.64 144.16 150.03
</TABLE>
-21-
<PAGE>
PROPOSAL III - AMENDING THE COMPANY'S 1996 STOCK OPTION PLAN BY
INCREASING THE NUMBER OF COMMON SHARES THAT MAY BE SUBJECT TO
OPTIONS GRANTED UNDER THE PLAN FROM 400,000 TO 700,000 SHARES.
On February 15, 1996, the shareholders of the Company approved the 1996
Plan. The purpose of the 1996 Plan is to retain in the employ of or as
consultants and advisors to the Company and its subsidiaries persons of
training, experience and ability, to attract new employees, directors, advisors
and consultants whose services are considered valuable, to encourage the sense
of proprietorship and to stimulate the active interest of such persons in the
development and financial success of the Company and its subsidiaries. The 1996
Plan provides for the grant of incentive stock options and nonqualified stock
options within the meaning of Section 422 of the Code.
The 1996 Plan, which is administered by the Compensation Committee of
the Board of Directors (but can also be administered by the Board of Directors),
currently authorizes the issuance of a maximum of 400,000 Common Shares, which
may be newly issued shares or previously issued shares held by any subsidiary of
the Company. If any award under the 1996 Plan terminates, expires unexercised,
or is cancelled, the Common Shares that would otherwise have been issuable
pursuant thereto will be available for issuance pursuant to the grant of new
awards.
The purchase price of each Common Share purchasable under an incentive
option granted under the 1996 Plan is to be determined by the Compensation
Committee at the time of grant, but is to not be less than 100% of the fair
market value of a Common Share on the date the option is granted; PROVIDED,
HOWEVER, that with respect to an optionee who, at the time such incentive option
is granted, owns more than 10% of the total combined voting power of all classes
of stock of the Company or of any of its subsidiaries, the purchase price per
share is to be at least 110% of the fair market value per share on the date of
grant. The purchase price of each Common Share purchasable under a nonqualified
option granted under the 1996 Plan is not to be less than 80% of the fair market
value of such Common Share on the date the option is granted; PROVIDED, HOWEVER,
that an optionee who is a Canadian taxpayer may require that any nonqualified
option granted to him provide for the purchase of Common Shares upon exercise
thereof at a price equal to the fair market value per share on the date of
grant. The term of each option is to be fixed by the Compensation Committee, but
no option is to be exercisable more than five years after the date such option
is granted.
The aggregate fair market value, determined as of the date the
incentive option is granted, of Common Shares for which incentive options are
exercisable for the first time by any optionee during any calendar year under
the 1996 Plan (and/or any other stock options plans of the Company or any of its
subsidiaries) shall not exceed US$100,000. The aggregate number of Common Shares
subject to options granted under the 1996 Plan held by any one person is not to
exceed that number of shares as equals five percent of the outstanding shares of
the Company.
The Board of Directors may amend, suspend, or terminate the 1996 Plan,
except that no amendment may be adopted that would impair the rights of any
optionee without his consent. Further, no amendment may be adopted which,
without the approval of the shareholders of the Company, would (i) materially
increase the number of shares issuable under the 1996 Plan, except as provided
in itself, (ii) materially increase the benefits accruing to optionees under the
1996 Plan, (iii) materially modify the eligibility requirements for
participation in the 1996 Plan, (iv) decrease the exercise price of an incentive
option to less than 100% of the fair market value per Common Share on the date
of grant or the exercise price of a nonqualified option to less than 80% of the
fair market value per Common Share on the date of grant, or (v) extend the term
of any option beyond that provided for in the 1996 Plan.
-22-
<PAGE>
The Compensation Committee may amend the terms of any option previously
granted, prospectively or retroactively, but no such amendment may impair the
rights of any optionee without his consent. The Compensation Committee may also
substitute new options for previously granted options, including options granted
under other plans applicable to the participant and previously granted options
having higher option prices, upon such terms as it may deem appropriate.
The number of Common Shares available under the 1996 Plan and the terms
of any option or other award granted thereunder are subject to adjustment in the
event of a merger, reorganization, consolidation, recapitalization, stock
dividend, or other change in corporate structure affecting the Common Shares, if
the Compensation Committee determines that such event equitably requires such an
adjustment.
The amendment to the 1996 Plan would increase the number of Common
Shares reserved for issuance under the 1996 Plan from 400,000 to 700,000 shares.
Since the enactment of the 1996 Plan, no options to purchase Common
Shares have been granted pursuant to such Plan to any of the directors or
executive officers of the Company. Options to purchase 199,373 Common Shares
have been granted to employees of the Company pursuant to the 1996 Plan, of
which options to purchase 2,568 Common Shares have been exercised and options to
purchase 16,455 Common Shares have been cancelled as a result of termination of
employment. As a result, options to purchase an aggregate of 180,350 Common
Shares remain outstanding under the 1996 Plan, and after giving effect to the
proposed amendments to the 1996 Plan, 517,082 shares would be available for the
grant of options under such Plan. All of such options were granted on January 5,
1996 at an exercise price of US$6.75 per share and such options become
exercisable to the extent of one-third of the Common Shares covered thereby on
each of the first, second and third anniversaries of the date of grant.
Pursuant to applicable policies of the VSE, shareholder approval is
required for any stock option plan of the Company that, together with all of the
other previously established stock option plans of the Company or grants by the
Company, could result at any time in (i) the number of Common Shares reserved
for issuance pursuant to stock options exceeding 10% of the issued and
outstanding Common Shares or (ii) the issuance within a one year period of
Common Shares exceeding 10% of the issued and outstanding Common Shares.
Approval by shareholders of the proposed amendment of the 1996 Plan by
shareholders shall also constitute approval by shareholders of the grant of any
option under the 1996 Stock Option Plan that, together with all of the other
previously established stock option plans of the Company and grants by the
Company, could result at any time in (a) the number Common Shares reserved for
issuance pursuant to the Company's stock option plans exceeding 10% of the
issued and outstanding Common Shares or (b) the issuance within a one year
period of Common Shares exceeding 10% of the issued and outstanding Common
Shares.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE IN FAVOR OF
AMENDING THE COMPANY'S 1996 STOCK OPTION PLAN TO INCREASE THE NUMBER OF COMMON
SHARES THAT MAY BE SUBJECT TO OPTIONS GRANTED THEREUNDER FROM 400,000 TO 700,000
SHARES.
-23-
<PAGE>
PROPOSAL IV - APPROVING THE COMPANY'S SENIOR EXECUTIVE STOCK OPTION
PLAN.
The Board of Directors has unanimously approved for submission to a
vote of shareholders a proposal to approve the Executive Plan in the form set
forth in Appendix A to this proxy statement. THE FOLLOWING DISCUSSION OF THE
EXECUTIVE PLAN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX A.
The purpose of the Executive Plan is to provide additional incentive to
retain in the employ of the Company and its subsidiaries, as senior executive
officers, persons of training, experience and ability, to attract new senior
executive officers whose services are considered valuable, to encourage the
sense of proprietorship and to stimulate the active interest of such persons in
the development and financial success of the Company and its subsidiaries. The
Executive Plan provides for the grant of incentive stock options and
nonqualified stock options within the meaning of Section 422 of the Code.
The Executive Plan is substantially similar to the 1996 Plan which is
described above (see "Proposal III -- Amending the Company's 1996 Stock Option
Plan") except that the Executive Plan authorizes the issuance of a maximum of
600,000 Common Shares and no option is to be exercisable more than six years
after the date such option is granted.
As of January 24, 1997, there were options outstanding under the
Executive Plan with respect to an aggregate of 600,000 shares of Common Shares.
Six-year options to purchase 200,000 Common Shares have been granted under the
Executive Plan to each of Messrs. Warta, Blankstein and Irwin at an exercise
price of US$10.00 per share. Each of the options may be exercised as to
one-third of the shares covered thereby following a period of 20 consecutive
trading days during which the closing sale price of the Common Shares on the
AMEX has been at least US$13.75, as to a further one-third of such shares
following a period of 20 consecutive trading days during which the closing sale
price of the Common Shares on the AMEX has been at least US$16.50, and as to the
remaining one-third of such shares following a period of 20 consecutive trading
days during which the closing sale price of the Common Shares on the AMEX has
been at least US$20.00. See "Additional Information Regarding the Stock Option
Plans--New Plan Benefits."
Pursuant to applicable policies of the VSE, shareholder approval is
required for any stock option plan of the Company that, together with all of the
other previously established stock option plans of the Company or grants by the
Company, could result at any time in (i) the number of Common Shares reserved
for issuance pursuant to stock options exceeding 10% of the issued and
outstanding Common Shares or (ii) the issuance within a one year period of
Common Shares exceeding 10% of the issued and outstanding Common Shares.
Approval by shareholders of the Executive Plan by shareholders shall also
constitute approval by shareholders of the grant of any option under the
Executive Plan that, together with all of the other previously established stock
option plans of the Company and grants by the Company, could result at any time
in (a) the number Common Shares reserved for issuance pursuant to the Company's
stock option plans exceeding 10% of the issued and outstanding Common Shares or
(b) the issuance within a one year period of Common Shares exceeding 10% of the
issued and outstanding Common Shares.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE IN FAVOR OF
APPROVING THE COMPANY'S SENIOR EXECUTIVE STOCK OPTION PLAN
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<PAGE>
PROPOSAL V - APPROVING THE COMPANY'S SENIOR OPERATING OFFICER STOCK
OPTION PLAN.
The Board of Directors has unanimously approved for submission to a
vote of shareholders a proposal to approve the Operating Officer Plan set forth
in Appendix B to this proxy statement. THE FOLLOWING DISCUSSION OF THE OPERATING
OFFICER PLAN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX B.
The purpose of the Operating Officer Plan is to provide additional
incentive to retain in the employ of the Company and its subsidiaries, as
directors, senior executive officers, senior operating officers, operating
officers, other officers and employees, persons of training, experience and
ability, to attract new directors, senior executive officers, senior operating
officers, operating officers, other officers and employees whose services are
considered valuable, to encourage the sense of proprietorship and to stimulate
the active interest of such persons in the development and financial success of
the Company and its subsidiaries. The Operating Officer Plan provides for the
grant of incentive stock options and nonqualified stock options within the
meaning of Section 422 of the Code.
The Operating Officer Plan is substantially similar to the 1996 Plan
which is described above (see "Proposal III - Amending the Company's 1996 Stock
Option Plan") except that the Operating Officer Plan authorizes the issuance of
a maximum of 900,000 Common Shares and no option is to be exercisable more than
six years after the date such option is granted.
The Company has granted options to purchase 714,000 Common Shares under
the Operating Officer Plan, of which options to purchase 13,000 Common Shares
have been cancelled as a result of termination of employment. As a result,
options to purchase 701,000 Common Shares remain outstanding, and 199,000 shares
remain available for the grant of options under the Operating Officer Plan. All
of such options were granted on May 8, 1996 at an exercise price of US$10.00 per
share. Options become exercisable to the extent of one-quarter of the shares
covered thereby on each of June 1, 1997, 1998, 1999 and 2000. See "Additional
Information Regarding the Stock Option Plans--New Plan Benefits."
Pursuant to applicable policies of the VSE, shareholder approval is
required for any stock option plan of the Company that, together with all of the
other previously established stock option plans of the Company or grants by the
Company, could result at any time in (i) the number of Common Shares reserved
for issuance pursuant to stock options exceeding 10% of the issued and
outstanding Common Shares or (ii) the issuance within a one year period of
Common Shares exceeding 10% of the issued and outstanding Common Shares.
Approval by shareholders of the Operating Officer Plan by shareholders shall
also constitute approval by shareholders of the grant of any option under the
Operating Officer Plan that, together with all of the other previously
established stock option plans of the Company and grants by the Company, could
result at any time in (a) the number Common Shares reserved for issuance
pursuant to the Company's stock option plans exceeding 10% of the issued and
outstanding Common Shares or (b) the issuance within a one year period of Common
Shares exceeding 10% of the issued and outstanding Common Shares.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE IN FAVOR OF
APPROVING THE COMPANY'S SENIOR OPERATING OFFICER STOCK OPTION PLAN
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<PAGE>
ADDITIONAL INFORMATION REGARDING THE STOCK OPTION PLANS
NEW PLAN BENEFITS
The following table discloses options granted pursuant to the Executive
Plan and the Operating Officer Plan to the Company's Chief Executive Officer,
the six next highest paid executive officers, all current executive officers,
all directors who are not current executive officers and all employees (except
executive officers). The 1996 Plan is not included in the following New Plan
Benefits Table. For information regarding options granted pursuant to the 1996
Plan, see "Proposal III-Amending the Company's 1996 Stock Option Plan"
<TABLE>
<CAPTION>
Executive Plan(1),(2) Operating Officer Plan(1),(3)
NAME AND POSITION DOLLAR VALUE NUMBER OF UNITS DOLLAR VALUE NUMBER OF UNITS
- ----------------- ------------ --------------- ------------ ---------------
US($) US($)
<S> <C> <C> <C> <C>
John Warta, Chief N/D 200,000 0 0
Executive Officer
W. Gordon N/D 200,000 0 0
Blankstein,
Chairman
Stephen Irwin, Vice N/D 200,000 0 0
Chairman
Clifford V. Sander, 0 0 N/D 28,000
Sr. V.P.
Thomas E. Sawyer, 0 0 N/D 5,000
Chief Technology
Officer
Robert Hanson, Sr. 0 0 N/D 15,000
V.P. and Chief
Financial Officer
Ian Watson, Vice 0 0 0 0
President of GST
USA
Executive Group(4) N/D 600,000 N/A N/A
Non-Executive N/A N/A N/D 35,000
Director Group(5)
Non-Executive N/A N/A N/D 618,000(7)
Officer Group(6)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
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<PAGE>
(1) For all plans, Number of Units represents options to purchase Common
Shares. N/A means that the individual or group is not eligible to
participate in the plan. N/D means that the amount is not determinable.
(2) As benefits are not determinable pursuant to Instruction 3 of Item 10
of Reg. Sec. 240.14a-101 of the Securities Exchange Act of 1934,
amended (the "Exchange Act"), benefits stated are the number of shares
covered by options granted to each of the groups of employees under the
Executive Plan in Fiscal 1996. The future value, if any, is not
determinable. Six-year options to purchase 200,000 Common Shares have
been granted under the Executive Plan to each of Messrs. Warta,
Blankstein and Irwin at an exercise price of US$10.00 per share. Each
of the options may be exercised as to one-third of the shares covered
thereby following a period of 20 consecutive trading days during which
the closing sale price of the Common Shares on the AMEX has been at
least US$13.75, as to a further one-third of such shares following a
period of 20 consecutive trading days during which the closing sale
price of the Common Shares on the AMEX has been at least US$16.50, and
as to the remaining one-third of such shares following a period of 20
consecutive trading days during which the closing sale price of the
Common Shares on the AMEX has been at least US$20.00.
(3) As benefits are not determinable pursuant to Instruction 3 of Item 10
of Reg. Sec. 240.14a-101 of the Exchange Act, benefits stated are the
number of shares covered by options granted to each of the groups of
employees under the Operating Officer Plan in Fiscal 1996. The future
value, if any, is not determinable. All of such options were granted on
May 8, 1996 at an exercise price of US$10.00 per share. Options become
exercisable to the extent of one-quarter of the shares covered thereby
on each of June 1, 1997, 1998, 1999 and 2000.
(4) Includes all current executive officers, seven people.
(5) Includes all current directors who are not executive officers, three
people. (6) Includes all employees, including all current officers, who
are not executive officers. (7) Does not include options to purchase
13,000 Common Shares that were cancelled as a result of the termination
of the employment of the employees to whom such options were granted.
MARKET VALUE OF THE COMMON SHARES
On January 24, 1997, the closing price on the AMEX for the Common
Shares was US$ 10 1/8 per share.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. Incentive stock options granted under the 1996
Plan, the Executive Plan and the Operating Officer Plan are intended to be
"incentive stock options" within the meaning of Section 422 of the Code. Under
present law, the grantee of an incentive stock option will not realize taxable
income upon the grant or the exercise of the incentive stock option and the
Company will not receive an income tax deduction at either such time. If the
optionee does not sell the Common Shares acquired upon exercise of an incentive
stock option within either (i) two years after the grant of the incentive stock
option or (ii) one year after the date of exercise of the incentive stock
option, the gain upon a subsequent sale of the Common Shares will be taxed as
long-term capital gain. If the optionee, within either of the above periods,
disposes of the Common Shares acquired upon exercise of the incentive stock
option, the optionee will recognize as ordinary income an amount equal to the
lesser of (i) the gain realized by the optionee upon such disposition or (ii)
the difference between the exercise price and the fair market value of the
shares on the date of exercise. In such event, the Company would be entitled to
a corresponding income tax deduction equal to the amount recognized as ordinary
income by the optionee. The gain in excess of such amount recognized by the
optionee as ordinary income would be taxed as long-term capital
-27-
<PAGE>
gain or short-term capital gain (subject to the holding period requirements for
long-term or short-term capital gain treatment).
The exercise of an incentive stock option will generally result in the
excess of the Common Shares' fair market value on the date of exercise over the
exercise price being included in the optionee's alternative minimum taxable
income ("AMTI"). If the Common Shares are subject to a risk of forfeiture and
are nontransferable, the excess described above will be included in AMTI when
the risk of forfeiture lapses or the shares become transferable, whichever
occurs sooner. Liability for the alternative minimum tax is a complex
determination and depends upon an individual's overall tax situation. Before
exercising an incentive stock option, an optionee should discuss the possible
application of the alternative minimum tax with his tax advisor.
NON-QUALIFIED STOCK OPTIONS. Upon exercise of a non-qualified stock
option granted under the 1996 Plan, the Executive Plan or the Operating Officer
Plan, the optionee will recognize ordinary income in an amount equal to the
excess of the fair market value of the Common Shares received over the exercise
price of such Common Shares. That amount will increase the optionee's basis in
the Common Shares acquired pursuant to the exercise of the option. Upon a
subsequent sale of the Common Shares, the optionee will recognize short term or
long term gain or loss depending upon his holding period for the Common Shares
and upon the subsequent appreciation or depreciation in the market value of the
Common Shares. The Company will be allowed a federal income tax deduction for
the amount recognized as ordinary income by the optionee upon the optionee's
exercise of the option.
INTEREST OF MANAGEMENT AND INSIDERS IN MATERIAL TRANSACTIONS
None of the directors or officers of the Company, nor any proposed
nominee for election as a director of the Company, nor any person who
beneficially owns, directly or indirectly, shares carrying more than 10% of the
voting rights attached to all outstanding shares of the Company, nor any
associate or affiliate of the foregoing persons has any material interest,
direct or indirect, in any transaction since the commencement of Fiscal 1996 or
in any proposed transaction which, in either case has or will materially affect
the Company except as follows or as disclosed herein.
On June 23, 1994, the Company entered into agreements (the "GST Telecom
Agreements") with Pacwest (an entity controlled by John Warta, now the President
and Chief Executive Officer of each of the Company and GST USA), pursuant to
which the Company and Pacwest formed a new corporation, GST Telecom, for the
purpose of developing telecommunications networks. Under the terms of the
agreements, Pacwest contributed the stock of GST Pacific, GST Tucson Lightwave,
Inc. and Pacwest Telecommunications, Inc. (now GST Pacwest Telecom Hawaii, Inc.)
and the Company made certain funding commitments (all of which were subsequently
satisfied), for which the Company received 60% and Pacwest received 40% of the
capital stock of GST Telecom. Effective June 1, 1995, the Company acquired an
additional 20% ownership interest in GST Telecom from Pacwest in exchange for
1,000,000 Common Shares. Effective October 20, 1995, the Company acquired
Pacwest's remaining 20% interest in GST Telecom for which Pacwest was eligible
to receive up to a maximum of 1,000,000 Common Shares (valued at US$10.00 per
Common Share) based upon the fair market value of a 20% interest in GST Telecom,
as determined by independent appraisal. The Company engaged Dillon Read & Co.,
Inc. to provide such appraisal, which appraisal valued such 20% interest at not
less than US$10 million. In November 1996, 1,000,000 Common Shares, which had
been held in escrow since October 20, 1995, were distributed to the designees of
Pacwest, principally Messrs. Warta and Sander.
Prior to his employment with the Company, Mr. Warta served, and
continues to serve, as a consultant to Tomen for which he is paid a fee.
Simultaneously with the execution of the GST Telecom
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Agreements, Pacwest contracted with the Company to receive a fee equal to 1% of
the aggregate debt and equity financing provided by Tomen to the Company. Mr.
Sander, Senior Vice President and Treasurer of the Company, is a member of
Pacwest and participates in such fees. Through September 30, 1996, the Company
has paid US$420,380 of such fees to Pacwest.
The Company, GST Telecom and Pacwest are parties to the Tomen Master
Agreement dated October 24, 1994 and amended May 24, 1996 with Tomen pursuant to
which Tomen agreed, in its sole discretion on a project-by-project basis, to
make available up to a total of US$100 million of financing for
telecommunications network projects developed and constructed by the Company.
Under the terms of the Tomen Master Agreement, Tomen has the exclusive right to
review the Company's proposed network projects for purposes of determining
whether to provide financing for such projects until Tomen has extended US$100
million in debt financing or has refused three projects that the Company
subsequently finances. Upon approval of a project by Tomen, Tomen is to enter
into a credit agreement (a "Project Credit Agreement") with the subsidiary of
the Company developing the project (a "Development Company") to provide
financing for 75% of the project's costs (a "Project Loan"). The first 25% of
such costs is to be contributed as equity by the Company prior to or at the same
time as the receipt of the debt financing. Tomen has the right to act as
procurement agent for each network project it finances.
Until amended in May 1996, the Tomen Master Agreement had provided that
Tomen could purchase up to 10% (on a fully diluted basis) of the capital stock
of a Development Company to which it agreed to provide financing and Tomen had
purchased 10% of the equity of GST Pacific for the sum of US$615,000. In May
1996, the Company entered into a series of transactions pursuant to which (i)
GST Telecom purchased the shares of GST Pacific held by Tomen for $1,250,000,
(ii) the parties amended the Tomen Master Agreement to eliminate Tomen's right
to purchase 10% of the shares in Development Companies to which it provides a
Project Loan, (iii) the Company granted to Tomen in connection with each Project
Loan the right to purchase a number of Common Shares the aggregate value of
which based on their market price would equal 10% of the total equity
contribution by the Company to the Development Company and (iv) the parties
agreed that in connection with certain Project Loans, Tomen's purchase of Common
Shares would include, for no additional consideration, a specified number of
warrants to purchase additional Common Shares.
The Tomen Master Agreement provides that each Project Loan is to bear
interest at LIBOR plus 3% and is to be amortized in 24 quarterly installments
beginning after the project's construction period (which may not exceed three
years). An upfront fee of 1.50% of the aggregate principal amount of each
Project Loan and a commitment fee of 0.50% per annum on the unused portion of
each Project Loan is payable to Tomen. In addition, Pacwest, an entity
controlled by John Warta, President and Chief Executive Officer of each of the
Company and GST USA, is entitled to receive a fee (the "Pacwest Fee") equal to
1% of the total debt and equity financing received by the Company under the
Tomen Master Agreement.
Pursuant to a stock purchase agreement (the "Tomen Stock Purchase
Agreement") entered into in connection with the Tomen Master Agreement, Tomen
purchased (i) for an aggregate purchase price of US$2.3 million, 500,000 Common
Shares and warrants to purchase 250,000 Common Shares which have been exercised
(ii) for an aggregate of US$1.2 million, 250,000 Common Shares and warrants to
purchase 125,000 Common Share exercisable until April 26, 1997 at an exercise
price of US$5.62 per share, and (iii) for an aggregate of US$2,700,000, 250,000
Common Shares and warrants to purchase 125,000 Common Shares exercisable until
May 23, 1998 at an exercise price of US$12.96 per share and (iv) pursuant to an
amendment to the Tomen Master Agreement and the Tomen Stock Purchase Agreement
for an aggregate of US$800,000, 74,074 Common Shares and 46,155 Warrants to
purchase Common Shares at an exercise price of US$12.96 per share.
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The first projects financed under the Tomen Master Agreement were the
San Bernardino, Ontario, Tucson and Albuquerque networks, for which Tomen
provided, pursuant to Project Credit Agreements, approximately US$34.5 million
of financing in the aggregate.
Tomen has recently agreed in principle to provide the Company with
US$41.0 million of debt financing for the upgrade of its Hawaiian network and
the construction of the Hawaiian inter-island network. The Company expects that
GST Telecom Hawaii, Inc., a subsidiary of the Company, will enter into a credit
agreement with Tomen containing substantially similar terms as the Project
Credit Agreements and in connection with such financing will purchase additional
Common Shares and warrants to purchase 75,000 additional Common Shares.
The operations of the Company's Hawaiian microwave network require
radio licenses from the Federal Communications Commission (the "FCC"). Pacwest
Network, Inc. ("PNI"), an entity controlled by John Warta, President and Chief
Executive Officer of each of the Company and GST USA, holds the Hawaii microwave
licenses. Under agreements between the Company and PNI, (i) the Company pays a
monthly fee to PNI to utilize the licensed facilities for communications traffic
and (ii) PNI pays an equal monthly fee to the Company for the right to utilize
the facilities for other communications traffic using up to 10% of PNI's license
capacity.
Magnacom Wireless, LLC ("Magnacom"), a company controlled by John
Warta, the Chief Executive Officer of the Company, has applied for various
Personal Communication Services ("PCS") licenses. Magnacom has been granted
30mhz (C Block) PCS licenses from the FCC for 5 cities and Guam/Saipan. Magnacom
also has submitted bids in the FCC's 10mhz (D, E and F block) PCS license
auctions for 14 additional cities.
Magnacom and the Company have entered into an agreement pursuant to
which the Company has made payments to the FCC on behalf of Magnacom. The
Company paid US$5,997,000 and US$2,970,000 during the third and fourth quarters
of Fiscal 1996 and made an additional payment of US$5,426,000 after the end of
Fiscal 1996. In return, Magnacom agreed to allow the Company to provide switched
local and long distance services and manage Magnacom's networks in markets where
the Company has operational CLEC networks. The Company agreed to purchase a
designated amount of minutes from Magnacom at the most favorable rates offered
to Magnacom customers and the three payments that the Company has made will be
applied as advances against such purchase. In addition, the Company acquired an
option to purchase for nominal consideration a 24% interest (to be increased to
a 99% interest) in Magnacom. The exercise of such option as to such increased
interest is contingent upon, among other things, FCC approval.
Magnacom has acquired licenses and bid for additional licenses in
cities located on or near the Company's existing and planned networks.
Management of the Company believes the capability of the Company to provide a
wireless telecommunications service is consistent with and enhances the
Company's strategy of providing a full array of services to its customers. The
Magnacom agreement will increase product capability with wireless local loop and
wireless Internet access. The Company further believes the agreement with
Magnacom will allow the Company to provide wireless telecommunication services
to its customers at competitive prices.
Stephen Irwin, Vice-Chairman of the Board and Secretary of the Company,
is of counsel to the law firm of Olshan Grundman Frome & Rosenzweig LLP, counsel
to the Company. In connection with such services, such firm received fees of
approximately $1,820,000 for Fiscal 1996 and will receive fees for Fiscal 1997.
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Peter E. Legault, a director of the Company, is a director and Vice
President of Thomson Kernaghan, which was engaged by the Company during Fiscal
1996 to solicit sources of financing for the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "Commission").
Officers, directors and greater than ten percent shareholders are required by
the Commission's regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of copies of such forms furnished to the
Company, or written representations that no Form 5s were required, the Company
believes that during the year ended September 30, 1996, except as described
below, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with.
Two Form 4s for Peter E. Legault, a director of the Company, were filed
late with the Commission in Fiscal 1996.
PROPOSAL VI - APPOINTMENT OF AUDITORS
The persons named in the enclosed Proxy will vote for the appointment
of KPMG Peat Marwick LLP, Certified Public Accountants, of Suite 2000, 1211
South West Fifth Avenue, Portland, Oregon, as auditors for the Company to hold
office until the next Annual General Meeting of the shareholders, at a
remuneration to be fixed by the directors. KPMG Peat Marwick LLP were auditors
of the Company for Fiscal 1996. A representative of the auditors is expected to
be present at the Meeting to make such statements as such representative desires
and to respond to appropriate questions from shareholders of the Company.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS TO
HOLD OFFICE UNTIL THE NEXT ANNUAL GENERAL MEETING.
OTHER MATTERS
The Board of Directors does not know of any other matters to come
before the Meeting other than those referred to in the Notice of Meeting. Should
any other matters properly come before the Meeting, the shares represented by
the Proxy solicited hereby will be voted on such matters in accordance with the
best judgment of the persons voting the Proxy.
ANNUAL REPORT
The Company's Annual Report on Form 10-K, including financial
statements (without exhibits), for the fiscal year ended September 30, 1996 and
the Company's Form 10-KA dated January 28, 1997 amending such Annual Report on
Form 10-K (as filed with the Securities and Exchange Commission), are being
provided herewith. If, for any reason, you did not receive your copy of the
Annual Report on Form 10-K and the Form 10-KA, please advise the Company and
another will be sent to you. The
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Company will undertake to furnish, without charge, a copy of the Annual Report
(without exhibits) and the Form 10K-A to shareholders of record as of January
24, 1997 who make requests to Robert Blankstein, 1030-999 West Hastings Street,
Vancouver, British Columbia V6C 2W2. Oral requests shall be directed to such
individual (telephone number (604) 688-0553).
SHAREHOLDER PROPOSALS
Shareholder proposals in respect of matters to be acted upon at the
Company's 1998 Annual General Meeting of Shareholders should be received by the
Company on or before October 16, 1997 in order that they may be considered for
inclusion in the Company's proxy materials.
CERTIFICATION
The undersigned hereby certifies that the contents and the sending of
this Board of Directors' proxy circular have been approved and authorized by the
directors of the Company.
DATED at Vancouver, Washington, this 13th day of February, 1997.
ON BEHALF OF THE BOARD OF DIRECTORS
(signed) STEPHEN IRWIN
Vice-Chairman and Secretary
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Exhibit A
GST TELECOMMUNICATIONS, INC.
SENIOR EXECUTIVE OFFICER STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This Senior Executive Officer Stock Option Plan (the "Plan") is
intended as an incentive, to retain in the employ of GST TELECOMMUNICATIONS,
INC., a federally chartered Canadian corporation with its principal office at
4317 N.E. Thurston Way, Vancouver, Washington 98662 (the "Company") and any
Subsidiary of the Company, within the meaning of Section 424(f) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), as senior
executive officers, persons of training, experience and ability, to attract new
senior executive officers whose services are considered valuable, to encourage
the sense of proprietorship and to stimulate the active interest of such persons
in the development and financial success of the Company and its Subsidiaries.
It is further intended that certain options granted pursuant to the
Plan shall constitute incentive stock options within the meaning of Section 422
of the Code (the "Incentive Options"), while certain other options granted
pursuant to the Plan shall be nonqualified stock options (the "Nonqualified
Options"). Incentive Options and Nonqualified Options are hereinafter referred
to collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
<PAGE>
2. ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company (the "Board") shall appoint and
maintain as administrator of the Plan a Committee (the "Committee") consisting
of two or more Non-Employee Directors (as such term is defined in Rule 16b-3),
which shall serve at the pleasure of the Board. The Committee, subject to
Sections 3 and 5 hereof, shall have full power and authority to designate
recipients of Options, to determine the terms and conditions of respective
Option agreements (which need not be identical) and to interpret the provisions
and supervise the administration of the Plan. The Committee shall have the
authority, without limitation, to designate which Options granted under the Plan
shall be Incentive Options and which shall be Nonqualified Options. To the
extent any Option does not qualify as an Incentive Option, it shall constitute a
separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret
the Plan and all Options granted under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defects or supply any omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry into effect the Plan or any
Options. The act or determination of a majority of the Committee shall be the
act or determination of the Committee and any decision reduced to writing and
signed by all of the members of the Committee shall be fully effective as if it
had been made by a majority at a meeting duly held. Subject to the provisions of
the Plan, any action taken or determination made by the Committee pursuant to
this and the other Sections of the Plan shall be conclusive on all parties.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan of Options or Stock does not consist of two or more Non-Employee Directors,
then any such grant, award or other acquisition may be approved or ratified in
any other manner contemplated by subparagraph (d) of Rule 16b-3.
3. DESIGNATION OF OPTIONEES.
The persons eligible for participation in the Plan as recipients of
Options (the "Optionees") shall comprise senior executive officers of the
Company or any Subsidiary; provided that Incentive Options may only be granted
to senior executive officers who are employees of the Company and the
Subsidiaries. In selecting Optionees, and in determining the number of shares to
be covered by each Option granted to Optionees, the Committee may consider the
office or position held by the Optionee or the Optionee's relationship to the
Company, the Optionee's degree of
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responsibility for and contribution to the growth and success of the Company or
any Subsidiary, the Optionee's length of service, age, promotions, potential and
any other factors that the Committee may consider relevant. An Optionee who has
been granted an Option hereunder may be granted an additional Option or Options,
if the Committee shall so determine.
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 7 hereof, a total of
600,000 of the Company's Common Shares (the "Stock") shall be subject to the
Plan. The shares of Stock subject to the Plan shall consist of unissued shares
or previously issued shares held by any Subsidiary of the Company, and such
amount of shares of Stock shall be and is hereby reserved for such purpose. Any
of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to its
exercise in full or should the number of shares of Stock to be delivered upon
the exercise in full of an Option be reduced for any reason, the shares of Stock
theretofore subject to such Option may be subject to future Options under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The purchase price of each share of Stock purchasable
under an Incentive Option shall be determined by the Committee at the time of
grant, but shall not be less than 100% of the Fair Market Value (as defined
below) of such share of Stock on the date the Option is granted; PROVIDED,
HOWEVER, that with respect to an Optionee who, at the time such Incentive Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
of any Subsidiary, the purchase price per share of Stock shall be at least 110%
of the Fair Market Value per share of Stock on the date of grant. The purchase
price of each share of Stock purchasable under a Nonqualified Option shall not
be less than 80% of the Fair Market Value of such share of Stock on the date the
Option is granted; PROVIDED, HOWEVER, that an Optionee who is a Canadian
taxpayer may require that any Nonqualified Option granted to him provide for the
purchase of shares of Stock upon exercise thereof at a price equal to the Fair
Market Value per share of Stock on the date of grant. The exercise price for
each Option shall be subject to adjustment as provided in Section 7
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below. Fair Market Value means the closing price of publicly traded shares of
Stock on the principal United States securities exchange on which shares of
Stock are listed (if the shares of Stock are so listed), or on the NASDAQ Stock
Market (if the shares of Stock are regularly quoted on the NASDAQ Stock Market),
or, if not so listed or regularly quoted, the mean between the closing bid and
asked prices of publicly traded shares of Stock in the over-the-counter market,
or, if such bid and asked prices shall not be available, as reported by any
nationally recognized quotation service selected by the Company, or as
determined by the Committee in a manner consistent with the provisions of the
Code. Anything in this Section 5(a) to the contrary notwithstanding, in no event
shall the purchase price of a share of Stock be less than the minimum price
permitted under rules and policies of the American Stock Exchange and the
Vancouver Stock Exchange.
(b) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than six years after the date
such Option is granted.
(c) EXERCISABILITY. Subject to Section 5(j) hereof, Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant. No option may be
exercised to the extent that such exercise will cause the Company to issue, upon
exercise of options to purchase shares of Stock granted by the Company without
shareholder approval, that number of shares of Stock as equals or exceeds (i) 5%
of the number of outstanding shares of Stock in any 12-month period, or (ii) 10%
of the number of outstanding shares of Stock in any five-year period.
(d) METHOD OF EXERCISE. Options to the extent then exercisable may be
exercised in whole or in part at any time during the option period, by giving
written notice to the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase price, in cash, by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may also be made in the form of Stock owned by the Optionee
(based on the Fair Market Value of the Stock on the trading day before the
Option is exercised). An Optionee shall have the right to dividends and other
rights of a stockholder with respect to shares of Stock purchased upon exercise
of an Option after (i) the Optionee has given written notice of exercise and has
paid in full for such shares and (ii) becomes a stockholder of record with
respect thereto.
(e) NON-TRANSFERABILITY OF OPTIONS. Options are not transferable and
may be exercised solely by the Optionee during his lifetime or after his death
by the person or persons entitled thereto under his will or the laws of descent
and distribution.
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Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject
to execution, attachment or similar process, any Option contrary to the
provisions hereof shall be void and ineffective and shall give no right to the
purported transferee.
(f) TERMINATION BY DEATH. Unless otherwise determined by the Committee
at grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee under the will of the Optionee, for a
period of one year after the date of such death or until the expiration of the
stated term of such Option as provided under the Plan, whichever period is
shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of total and permanent
disability, any Option held by such Optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to Disability (or on
such accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable to the extent to which it was exercisable at the time
of death for a period of one year after the date of such death or for the stated
term of such Option, whichever period is shorter.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of Normal or Early Retirement (as
such terms are defined below), any Option held by such Optionee may thereafter
be exercised to the extent it was exercisable at the time of such Retirement (or
on such accelerated basis as the Committee shall determine at or after grant),
but may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable, to the extent to which it was exercisable at the time
of death, for a period of one year after the date of such death or for the
stated term of such Option, whichever period is shorter.
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For purposes of this paragraph (h), Normal Retirement shall mean
retirement from active employment with the Company or any Subsidiary on or after
the normal retirement date specified in the applicable Company or Subsidiary
pension plan or if no such pension plan, age 65. Early Retirement shall mean
retirement from active employment with the Company or any Subsidiary pursuant to
the early retirement provisions of the applicable Company or Subsidiary pension
plan or if no such pension plan, age 55.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee at
grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates for any reason other than death, Disability or Normal or
Early Retirement, the Option shall thereupon terminate, except that the portion
of any Option that was exercisable on the date of such termination of employment
may be exercised for the lesser of 30 days after the date of termination or the
balance of such Option's term if the Optionee's employment or service with the
Company or any Subsidiary is terminated by the Company or such Subsidiary
without cause (the determination as to whether termination was for cause to be
made by the Committee). The transfer of an Optionee from the employ of the
Company to a Subsidiary, or vice versa, or from one Subsidiary to another, shall
not be deemed to constitute a termination of employment for purposes of the
Plan.
(j) LIMIT ON VALUE OF INCENTIVE OPTIONS. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.
(k) TRANSFER OF INCENTIVE OPTION SHARES. The stock option agreement
evidencing any Incentive Options granted under this Plan shall provide that if
the Optionee makes a disposition, within the meaning of Section 424(c) of the
Code and regulations promulgated thereunder, of any share or shares of Stock
issued to him upon exercise of an Incentive Option granted under the Plan within
the two-year period commencing on the day after the date of the grant of such
Incentive Option or within a one-year period commencing on the day after the
date of transfer of the share or shares to him pursuant to the exercise of such
Incentive Option, he shall, within 10 days after such disposition, notify the
Company thereof and immediately deliver to the Company any amount of United
States federal income tax withholding required by law.
(l) LIMITATION ON OPTIONS HELD BY ONE PERSON. The aggregate number of
shares of Stock subject to options held by any one person shall not exceed that
number of shares as equals 5% of the outstanding shares of the Company.
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6. TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after May 21,
2006, but Options theretofore granted may extend beyond that date.
7. CAPITAL CHANGE OF THE COMPANY.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained as immediately before the occurrence
of such event.
8. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been registered
under the United States Securities Act of 1933, as amended (the "Securities
Act"), or the Company has determined that such registration is unnecessary, each
person exercising an Option under the Plan may be required by the Company to
give a representation in writing that he is acquiring the shares for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof.
9. TAXES.
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted under the
Plan with respect to the withholding of any United States or Canadian taxes or
any other tax matters.
10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on May 22, 1996.
11. AMENDMENT AND TERMINATION.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Optionee under any
Option theretofore granted without his consent, and except that no amendment
shall be made which, without the approval of the shareholders of the Company
would:
(a) materially increase the number of shares that may be issued under
the Plan, except as is provided in Section 7;
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(b) materially increase the benefits accruing to the Optionees under
the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the exercise price of an Incentive Option to less than
100% of the Fair Market Value per share of Stock on the date of grant thereof or
the exercise price of a Nonqualified Option to less than 80% of the Fair Market
Value per share of Stock on the date of grant thereof; or
(e) extend the term of any Option beyond that provided for in Section
5(b).
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without his consent. The Committee may also substitute new Options
for previously granted Options, including options granted under other plans
applicable to the participant and previously granted Options having higher
option prices, upon such terms as the Committee may deem appropriate.
12. GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges (including the
American Stock Exchange and Vancouver Stock Exchange) as may be required.
13. GENERAL PROVISIONS.
(a) CERTIFICATES. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, or other securities
commission having jurisdiction, any applicable Federal, provincial or state
securities law, any stock exchange upon which the Stock is then listed and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
(b) EMPLOYMENT MATTERS. The adoption of the Plan shall not confer upon
any Optionee of the Company or any Subsidiary, any right to continued employment
or, in the case of an Optionee who is a director, continued service as a
director, with the Company or a Subsidiary, as the case may be, nor shall it
interfere in any way with the right of the Company or any
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Subsidiary to terminate the employment of any of its employees, the service of
any of its directors or the retention of any of its consultants or advisors at
any time.
(c) LIMITATION OF LIABILITY. No member of the Board or the Committee,
or any officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(d) REGISTRATION OF STOCK. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be issued upon
the exercise thereof has been registered under the Securities Act and applicable
state securities laws, or are, in the opinion of counsel to the Company, exempt
from such registration in the United States or exempt from the prospectus and
registration requirements under applicable provincial legislation. The Company
shall not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder, or to comply with an appropriate exemption from registration under
such laws or the laws of any province in order to permit the exercise of an
Option and the issuance and sale of the Stock subject to such Option however,
the Company may in its sole discretion register such Stock at such time as the
Company shall determine. If the Company chooses to comply with such an exemption
from registration, the Stock issued under the Plan may, at the direction of the
Committee, bear an appropriate restrictive legend restricting the transfer or
pledge of the Stock represented thereby, and the Committee may also give
appropriate stop transfer instructions to the Company's transfer agents.
GST TELECOMMUNICATIONS, INC.
May 22, 1996
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EXHIBIT B
GST TELECOMMUNICATIONS, INC.
SENIOR OPERATING OFFICER STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This Senior Operating Officer Stock Option Plan (the "Plan") is
intended as an incentive, to retain in the employ of GST TELECOMMUNICATIONS,
INC., a federally chartered Canadian corporation with its principal office at
4317 N.E. Thurston Way, Vancouver, Washington 98662 (the "Company") and any
Subsidiary of the Company, within the meaning of Section 424(f) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), as senior
operating officers, operating officers, senior executive officers, other
officers, employees and directors, persons of training, experience and ability,
to attract new senior operating officers, operating officers, senior executive
officers, other officers, employees and directors whose services are considered
valuable, to encourage the sense of proprietorship and to stimulate the active
interest of such persons in the development and financial success of the Company
and its Subsidiaries.
It is further intended that certain options granted pursuant to the
Plan shall constitute incentive stock options within the meaning of Section 422
of the Code (the "Incentive Options"), while certain other options granted
pursuant to the Plan shall be nonqualified stock options (the "Nonqualified
Options"). Incentive Options and Nonqualified Options are hereinafter referred
to collectively as "Options."
The Company intends that the Plan meet the requirements of Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and that transactions of the type specified in
subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of
the Company pursuant to the Plan will be exempt from the operation of Section
16(b) of the Exchange Act. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
<PAGE>
2. ADMINISTRATION OF THE PLAN.
The Board of Directors of the Company (the "Board") shall appoint and
maintain as administrator of the Plan a Committee (the "Committee") consisting
of two or more Non-Employee Directors (as such term is defined in Rule 16b-3),
which shall serve at the pleasure of the Board. The Committee, subject to
Sections 3 and 5 hereof, shall have full power and authority to designate
recipients of Options, to determine the terms and conditions of respective
Option agreements (which need not be identical) and to interpret the provisions
and supervise the administration of the Plan. The Committee shall have the
authority, without limitation, to designate which Options granted under the Plan
shall be Incentive Options and which shall be Nonqualified Options. To the
extent any Option does not qualify as an Incentive Option, it shall constitute a
separate Nonqualified Option.
Subject to the provisions of the Plan, the Committee shall interpret
the Plan and all Options granted under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defects or supply any omission or reconcile any inconsistency
in the Plan or in any Options granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry into effect the Plan or any
Options. The act or determination of a majority of the Committee shall be the
act or determination of the Committee and any decision reduced to writing and
signed by all of the members of the Committee shall be fully effective as if it
had been made by a majority at a meeting duly held. Subject to the provisions of
the Plan, any action taken or determination made by the Committee pursuant to
this and the other Sections of the Plan shall be conclusive on all parties.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan of Options or Stock does not consist of two or more Non-Employee Directors,
then any such grant, award or other acquisition may be approved or ratified in
any other manner contemplated by subparagraph (d) of Rule 16b-3.
3. DESIGNATION OF OPTIONEES.
The persons eligible for participation in the Plan as recipients of
Options (the "Optionees") shall comprise senior operating officers, operating
officers, senior executive officers, other officers, employees and directors of
the Company or any Subsidiary; provided that Incentive Options may only be
granted to senior operating officers, operating officers, senior executive
officers, other officers, employees and directors who are employees of the
Company and the Subsidiaries. In selecting Optionees, and in determining the
number of shares to be covered by each Option
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granted to Optionees, the Committee may consider the office or position held by
the Optionee or the Optionee's relationship to the Company, the Optionee's
degree of responsibility for and contribution to the growth and success of the
Company or any Subsidiary, the Optionee's length of service, age, promotions,
potential and any other factors that the Committee may consider relevant. An
Optionee who has been granted an Option hereunder may be granted an additional
Option or Options, if the Committee shall so determine.
4. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in Section 7 hereof, a total of
900,000 of the Company's Common Shares (the "Stock") shall be subject to the
Plan. The shares of Stock subject to the Plan shall consist of unissued shares
or previously issued shares held by any Subsidiary of the Company, and such
amount of shares of Stock shall be and is hereby reserved for such purpose. Any
of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option expire or be cancelled prior to its
exercise in full or should the number of shares of Stock to be delivered upon
the exercise in full of an Option be reduced for any reason, the shares of Stock
theretofore subject to such Option may be subject to future Options under the
Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan shall be subject to the following
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The purchase price of each share of Stock purchasable
under an Incentive Option shall be determined by the Committee at the time of
grant, but shall not be less than 100% of the Fair Market Value (as defined
below) of such share of Stock on the date the Option is granted; PROVIDED,
HOWEVER, that with respect to an Optionee who, at the time such Incentive Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
of any Subsidiary, the purchase price per share of Stock shall be at least 110%
of the Fair Market Value per share of Stock on the date of grant. The purchase
price of each share of Stock purchasable under a Nonqualified Option shall not
be less than 80% of the Fair Market Value of such share of Stock on the date the
Option is granted; PROVIDED, HOWEVER, that an Optionee who is a Canadian
taxpayer may require that any Nonqualified Option granted to him provide for the
purchase of shares of Stock upon
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exercise thereof at a price equal to the Fair Market Value per share of Stock on
the date of grant. The exercise price for each Option shall be subject to
adjustment as provided in Section 7 below. Fair Market Value means the closing
price of publicly traded shares of Stock on the principal United States
securities exchange on which shares of Stock are listed (if the shares of Stock
are so listed), or on the NASDAQ Stock Market (if the shares of Stock are
regularly quoted on the NASDAQ Stock Market), or, if not so listed or regularly
quoted, the mean between the closing bid and asked prices of publicly traded
shares of Stock in the over-the-counter market, or, if such bid and asked prices
shall not be available, as reported by any nationally recognized quotation
service selected by the Company, or as determined by the Committee in a manner
consistent with the provisions of the Code. Anything in this Section 5(a) to the
contrary notwithstanding, in no event shall the purchase price of a share of
Stock be less than the minimum price permitted under rules and policies of the
American Stock Exchange and the Vancouver Stock Exchange.
(b) OPTION TERM. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than six years after the date
such Option is granted.
(c) EXERCISABILITY. Subject to Section 5(j) hereof, Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee at the time of grant. No option may be
exercised to the extent that such exercise will cause the Company to issue, upon
exercise of options to purchase shares of Stock granted by the Company without
shareholder approval, that number of shares of Stock as equals or exceeds (i) 5%
of the number of outstanding shares of Stock in any 12-month period, or (ii) 10%
of the number of outstanding shares of Stock in any five-year period.
(d) METHOD OF EXERCISE. Options to the extent then exercisable may be
exercised in whole or in part at any time during the option period, by giving
written notice to the Company specifying the number of shares of Stock to be
purchased, accompanied by payment in full of the purchase price, in cash, by
check or such other instrument as may be acceptable to the Committee. As
determined by the Committee, in its sole discretion, at or after grant, payment
in full or in part may also be made in the form of Stock owned by the Optionee
(based on the Fair Market Value of the Stock on the trading day before the
Option is exercised). An Optionee shall have the right to dividends and other
rights of a stockholder with respect to shares of Stock purchased upon exercise
of an Option after (i) the Optionee has given written notice of exercise and has
paid in full for such shares and (ii) becomes a stockholder of record with
respect thereto.
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(e) NON-TRANSFERABILITY OF OPTIONS. Options are not transferable and
may be exercised solely by the Optionee during his lifetime or after his death
by the person or persons entitled thereto under his will or the laws of descent
and distribution. Any attempt to transfer, assign, pledge or otherwise dispose
of, or to subject to execution, attachment or similar process, any Option
contrary to the provisions hereof shall be void and ineffective and shall give
no right to the purported transferee.
(f) TERMINATION BY DEATH. Unless otherwise determined by the Committee
at grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates by reason of death, the Option may thereafter be
exercised, to the extent then exercisable (or on such accelerated basis as the
Committee shall determine at or after grant), by the legal representative of the
estate or by the legatee of the Optionee under the will of the Optionee, for a
period of one year after the date of such death or until the expiration of the
stated term of such Option as provided under the Plan, whichever period is
shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of total and permanent
disability, any Option held by such Optionee may thereafter be exercised, to the
extent it was exercisable at the time of termination due to Disability (or on
such accelerated basis as the Committee shall determine at or after grant), but
may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable to the extent to which it was exercisable at the time
of death for a period of one year after the date of such death or for the stated
term of such Option, whichever period is shorter.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined by
the Committee at grant, if any Optionee's employment with or service to the
Company or any Subsidiary terminates by reason of Normal or Early Retirement (as
such terms are defined below), any Option held by such Optionee may thereafter
be exercised to the extent it was exercisable at the time of such Retirement (or
on such accelerated basis as the Committee shall determine at or after grant),
but may not be exercised after 30 days after the date of such termination of
employment or service or the expiration of the stated term of such Option,
whichever period is shorter; provided, however, that, if the Optionee dies
within such 30 day period, any unexercised Option held by such Optionee shall
thereafter be exercisable, to the extent to which it was exercisable at the time
of death, for a period of one year after
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the date of such death or for the stated term of such Option, whichever period
is shorter.
For purposes of this paragraph (h), Normal Retirement shall mean
retirement from active employment with the Company or any Subsidiary on or after
the normal retirement date specified in the applicable Company or Subsidiary
pension plan or if no such pension plan, age 65. Early Retirement shall mean
retirement from active employment with the Company or any Subsidiary pursuant to
the early retirement provisions of the applicable Company or Subsidiary pension
plan or if no such pension plan, age 55.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee at
grant, if any Optionee's employment with or service to the Company or any
Subsidiary terminates for any reason other than death, Disability or Normal or
Early Retirement, the Option shall thereupon terminate, except that the portion
of any Option that was exercisable on the date of such termination of employment
may be exercised for the lesser of 30 days after the date of termination or the
balance of such Option's term if the Optionee's employment or service with the
Company or any Subsidiary is terminated by the Company or such Subsidiary
without cause (the determination as to whether termination was for cause to be
made by the Committee). The transfer of an Optionee from the employ of the
Company to a Subsidiary, or vice versa, or from one Subsidiary to another, shall
not be deemed to constitute a termination of employment for purposes of the
Plan.
(j) LIMIT ON VALUE OF INCENTIVE OPTIONS. The aggregate Fair Market
Value, determined as of the date the Incentive Option is granted, of Stock for
which Incentive Options are exercisable for the first time by any Optionee
during any calendar year under the Plan (and/or any other stock option plans of
the Company or any Subsidiary) shall not exceed $100,000.
(k) TRANSFER OF INCENTIVE OPTION SHARES. The stock option agreement
evidencing any Incentive Options granted under this Plan shall provide that if
the Optionee makes a disposition, within the meaning of Section 424(c) of the
Code and regulations promulgated thereunder, of any share or shares of Stock
issued to him upon exercise of an Incentive Option granted under the Plan within
the two-year period commencing on the day after the date of the grant of such
Incentive Option or within a one-year period commencing on the day after the
date of transfer of the share or shares to him pursuant to the exercise of such
Incentive Option, he shall, within 10 days after such disposition, notify the
Company thereof and immediately deliver to the Company any amount of United
States federal income tax withholding required by law.
(l) LIMITATION ON OPTIONS HELD BY ONE PERSON. The aggregate number of
shares of Stock subject to options held by any
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one person shall not exceed that number of shares as equals 5% of the
outstanding shares of the Company.
6. TERM OF PLAN.
No Option shall be granted pursuant to the Plan on or after May 21,
2006, but Options theretofore granted may extend beyond that date.
7. CAPITAL CHANGE OF THE COMPANY.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares reserved for issuance under the Plan
and in the number and option price of shares subject to outstanding Options
granted under the Plan, to the end that after such event each Optionee's
proportionate interest shall be maintained as immediately before the occurrence
of such event.
8. PURCHASE FOR INVESTMENT.
Unless the Options and shares covered by the Plan have been registered
under the United States Securities Act of 1933, as amended (the "Securities
Act"), or the Company has determined that such registration is unnecessary, each
person exercising an Option under the Plan may be required by the Company to
give a representation in writing that he is acquiring the shares for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof.
9. TAXES.
The Company may make such provisions as it may deem appropriate,
consistent with applicable law, in connection with any Options granted under the
Plan with respect to the withholding of any United States or Canadian taxes or
any other tax matters.
10. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on May 22, 1996.
11. AMENDMENT AND TERMINATION.
The Board may amend, suspend, or terminate the Plan, except that no
amendment shall be made that would impair the rights of any Optionee under any
Option theretofore granted without his consent, and except that no amendment
shall be made which, without the approval of the shareholders of the Company
would:
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(a) materially increase the number of shares that may be issued
under the Plan, except as is provided in Section 7;
(b) materially increase the benefits accruing to the Optionees
under the Plan;
(c) materially modify the requirements as to eligibility for
participation in the Plan;
(d) decrease the exercise price of an Incentive Option to less
than 100% of the Fair Market Value per share of Stock on the date of
grant thereof or the exercise price of a Nonqualified Option to less
than 80% of the Fair Market Value per share of Stock on the date of
grant thereof; or
(e) extend the term of any Option beyond that provided for in
Section 5(b).
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Optionee without his consent. The Committee may also substitute new Options
for previously granted Options, including options granted under other plans
applicable to the participant and previously granted Options having higher
option prices, upon such terms as the Committee may deem appropriate.
12. GOVERNMENT REGULATIONS.
The Plan, and the grant and exercise of Options hereunder, and the
obligation of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges (including the
American Stock Exchange and Vancouver Stock Exchange) as may be required.
13. GENERAL PROVISIONS.
(a) CERTIFICATES. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, or other securities
commission having jurisdiction, any applicable Federal, provincial or state
securities law, any stock exchange upon which the Stock is then listed and the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
(b) EMPLOYMENT MATTERS. The adoption of the Plan shall not confer upon
any Optionee of the Company or any
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Subsidiary, any right to continued employment or, in the case of an Optionee who
is a director, continued service as a director, with the Company or a
Subsidiary, as the case may be, nor shall it interfere in any way with the right
of the Company or any Subsidiary to terminate the employment of any of its
employees, the service of any of its directors or the retention of any of its
consultants or advisors at any time.
(c) LIMITATION OF LIABILITY. No member of the Board or the Committee,
or any officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(d) REGISTRATION OF STOCK. Notwithstanding any other provision in the
Plan, no Option may be exercised unless and until the Stock to be issued upon
the exercise thereof has been registered under the Securities Act and applicable
state securities laws, or are, in the opinion of counsel to the Company, exempt
from such registration in the United States or exempt from the prospectus and
registration requirements under applicable provincial legislation. The Company
shall not be under any obligation to register under applicable federal or state
securities laws any Stock to be issued upon the exercise of an Option granted
hereunder, or to comply with an appropriate exemption from registration under
such laws or the laws of any province in order to permit the exercise of an
Option and the issuance and sale of the Stock subject to such Option however,
the Company may in its sole discretion register such Stock at such time as the
Company shall determine. If the Company chooses to comply with such an exemption
from registration, the Stock issued under the Plan may, at the direction of the
Committee, bear an appropriate restrictive legend restricting the transfer or
pledge of the Stock represented thereby, and the Committee may also give
appropriate stop transfer instructions to the Company's transfer agents.
GST TELECOMMUNICATIONS, INC.
May 22, 1996
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