As filed with the Securities and Exchange Commission on February 5, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Global TeleSystems Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-3068423
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
----------
1751 Pinnacle Drive
North Tower--12th Floor
McLean, VA 22102
(703) 918-4500
(Address and telephone number of principal executive offices)
----------
AMENDED AND RESTATED 1992 STOCK OPTION PLAN OF GLOBAL
TELESYSTEMS GROUP, INC.
(Full title of the plan)
----------
William H. Seippel
1751 Pinnacle Drive
North Tower--12th Floor
McLean, VA 22102
(703) 918-4558
(Name, address and telephone number of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
======================================================================================================================
Title of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be to be Offering Price Per Aggregate Registration
Registered Registered Share(1) Offering Price(1) Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.10 ...... 6,275,391 $13.6423 $85,610,766.64 $47,230.40
3,724,609 20.00 74,492,180.00
- ----------------------------------------------------------------------------------------------------------------------
<FN>
(1) The proposed maximum offering price per share and proposed aggregate
offering price (a) with respect to 6,275,391 shares being offered pursuant
to options outstanding under the Amended and Restated 1992 Stock Option
Plan of Global TeleSystems Group, Inc., the Global TeleSystems Group (the
"Plan") is based on the weighted average exercise price of such options and
(b) with respect to 3,724,609 shares to be offered under the Plan is based
on the market value of the Common Stock as of the last practicable date
prior to this filing, in accordance with Rule 457(h) under the Securities
Act, and is being utilized solely for the purpose of calculating the
registration fee.
</FN>
</TABLE>
Exhibit Index Appears on Page 9
<PAGE>
Part I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.*
Item 2. Registrant Information and Employee Plan Annual Information.*
- --------------------
* Information required by Part I to be contained in the Section 10(a)
prospectus is omitted from this Registration Statement in accordance with
Rule 428 under the Securities Act, and the "Note" to Part I of Form S-8.
2
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference.
The following document listed below which has been filed by
GTS TeleSystems Group, Inc. (the "Registrant") with the Securities and Exchange
Commission (the "Commission") (or furnished by the Registrant to the Commission)
are incorporated by reference in this Registration Statement: The description
of the Registrant's Common Stock contained in the Registration Statement on Form
S-1 filed by the Registrant with the Commission on February 4, 1998 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
In addition, all documents subsequently filed or furnished by
the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act, prior to the filing of a post-effective amendment which indicates that all
Ordinary Shares offered hereby have been sold or which deregisters all Ordinary
Shares then remaining unsold, shall be deemed to be incorporated herein by
reference and to be a part hereof from the date of filing or furnishing of such
documents.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in summary, that directors and officers of
Delaware corporations such as the Registrant are entitled, under certain
circumstances, to be indemnified against all expenses and liabilities (including
attorneys' fees) incurred by them as a result of suits brought against them in
their capacity as a director or officer if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the Registrant,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, they are fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper. Any such indemnification may be made by the company only as authorized
in each specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
Section 102(b)(7) of the DGCL permits a corporation to include
in its certificate of incorporation a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or
3
<PAGE>
limit the liability of a director (i) for any breach of the director's duty or
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL (relating to unlawful payment of
dividends and unlawful stock purchase and redemption) or (iv) for any
transaction from which the director derived an improper personal benefit.
The Registrant's Certificate of Incorporation (the
"Certificate") provides that the Registrant's directors shall not be liable to
the Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that such exculpation from liabilities is
not permitted with respect to liability arising from items described in clauses
(i) through (iv) in the preceding paragraph. The Certificate and the
Registrant's by-laws further provide that the Registrant shall indemnify its
directors and officers to the fullest extent permitted by the DGCL.
The directors and officers of the Registrant are covered under
directors' and officers' liability insurance policies maintained by the
Registrant.
Item 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits.
See Index to Exhibits on page 9.
Item 9. Undertakings.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in aggregate, represent a fundamental change
in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such
information in the registration statement;
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<PAGE>
provided, however, that the undertakings set forth in paragraphs (1)(i)
and (1)(ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The Registrant hereby undertakes that, for purposes of
determining liability under the Securities Act, each filing of the Registrant's
annual report on Form 10-K pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and each filing of an employee benefit plan annual report pursuant
to Section 15(d) of the Exchange Act) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities
Act, the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-8, and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in McLean, Virginia, on this 5th day of February, 1998.
GLOBAL TELESYSTEMS GROUP, INC.
By: /s/ Gerald W. Thames
-----------------------------
Name: Gerald W. Thames
Title: President and Chief
Executive Officer
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<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Gerald W. Thames, William H.
Seippel and Grier Raclin, and each of them severally, his true and lawful
attorney or attorneys with power of substitution and resubstitution to sign in
his name, place and stead in any and all such capacities the Registration
Statement and any and all amendments thereto (including post-effective
amendments) and any documents in connection therewith, and to file the same with
the Securities and Exchange Commission, each of said attorneys to have power to
act with or without the other, and to have full power and authority to do and
perform, in the name and on behalf of each such officer and director of the
Registrant who shall have executed such a power of attorney, every act
whatsoever which such attorneys, or any one of them, may deem necessary or
desirable to be done in connection therewith as fully and to all intents and
purposes as such officer or director of the Registrant might or could do in
person.
Pursuant to the requirements of the Securities Act, this
registration statement has been signed below on February 5, 1998 by
the following persons in the capacities indicated.
Name and Signature Title
- ------------------ -----
/s/ Gerald W. Thames
- --------------------------- President, Chief Executive
Gerald W. Thames Officer and Director
/s/ William H. Seippel Executive Vice President of Finance
- --------------------------- and Chief Financial Officer
William H. Seippel
/s/ Alan B. Slifka Chairman of the Board
- --------------------------- of Directors
Alan B. Slifka
/s/ Gary Gladstein
- --------------------------- Director
Gary Gladstein
- --------------------------- Director
Michael A. Greeley
/s/ Bernard McFadden
- --------------------------- Director
Bernard McFadden
- --------------------------- Director
Stewart J. Paperin
7
<PAGE>
Name and Signature Title
- ------------------ -----
- --------------------------- Director
W. James Peet
/s/ W. James Peet
- --------------------------- Director
Jean Salmona
/s/ Morris A. Sandler
- --------------------------- Director
Morris A. Sandler
/s/ Joel Schatz
- --------------------------- Director
Joel Schatz
/s/ Adam Solomon
- --------------------------- Director
Adam Solomon
8
<PAGE>
Exhibit Index
Exhibit No. Description of Document
4 The Amended and Restated 1992 Stock Option Plan of Global
TeleSystems Group, Inc. (as amended as of January 16, 1997)
5 Opinion of Shearman & Sterling, counsel to the Registrant as
to the legality of the securities registered hereby.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Shearman & Sterling (included in Exhibit 5).
24 Powers of Attorney (included on signature page).
9
Exhibit 4.1
The Amended and Restated 1992
Stock Option Plan of Global
TeleSystems Group, Inc.
<PAGE>
AMENDED AND RESTATED
1992 STOCK OPTION PLAN OF GLOBAL TELESYSTEMS GROUP, INC.
(as of January 16, 1997)
1. Purposes of the Plan. The purposes of the Amended and
Restated 1992 Stock Option Plan of Global TeleSystems Group, Inc. are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentives to Employees of the Company and
its Parent or Subsidiaries, and to promote the success of the business of the
Company and its Parent or Subsidiaries. At the discretion of the Committee,
Options granted hereunder may be either Incentive Stock Options or Nonstatutory
Stock Options.
2. Definitions. As used herein, and in any Option granted
hereunder, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company,
par value $.01 per share.
(d) "Committee" shall mean the Compensation Committee
appointed by the Board in accordance with Section 4 of the Plan. If the
Board does not appoint or ceases to maintain a Committee, the term
"Committee" shall refer to the Board.
(e) "Company" shall mean Global TeleSystems Group, Inc., a
Delaware corporation, including any wholly owned subsidiary or
affiliate, and except as provided in Section 11 below, its successors
in interest.
(f) "Continuous Employment" shall mean the absence of any
interruption or termination of service as an Employee by the Company,
its Parent or any Subsidiary. For purposes of the preceding sentence,
service shall not be considered interrupted during any period of
vacation, sick leave, military leave or any other absence approved by
the Board and shall not be considered terminated as a result of a
transfer between locations within the Company or its Parent or any
Subsidiary or among the Company, its Parent and any Subsidiary.
(g) "Employee" shall mean any person, including any officer
(whether or not he or she is a director of the Company, its Parent or a
Subsidiary), employed by the Company, its Parent or any Subsidiary.
<PAGE>
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(i) "Incentive Stock Option" shall mean any option granted
under this Plan and any other option granted to an Employee in
accordance with the provisions of Section 422 of the Code and the
regulations promulgated thereunder.
(j) "Non-Employee Director" shall mean a "non-employee
director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
(k) "Nonstatutory Stock Option" shall mean any Option granted
under the Plan that is not an Incentive Stock Option.
(l) "Option" shall mean a stock option granted pursuant to the
Plan.
(m) "Option Agreement" shall mean a written agreement between
the Company and the Optionee regarding the grant and exercise of
Options to purchase Shares and the terms and conditions thereof as
determined by the Committee pursuant to the Plan.
(n) "Optioned Shares" shall mean the Common Stock subject to
an Option.
(o) "Optionee" shall mean an Employee who receives an Option
under the Plan.
(p) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(q) "Plan" shall mean this Amended and Restated 1992 Stock
Option Plan of Global TeleSystems Group, Inc.
(r) "Registration Date" shall mean the effective date of the
first registration statement filed by the Company, pursuant to Section
12(g) of the Exchange Act, with respect to any class of the Company's
equity securities.
(s) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(t) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(u) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the
Code.
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<PAGE>
3. Stock Subject to the Plan. Without limiting the application
of Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 18.5% of the total number of Shares of
outstanding at the beginning of each calendar year. The Shares may include
authorized but unissued or reacquired Common Stock. If an Option is surrendered
for cash or other consideration or expires or becomes unexercisable for any
reason without having been exercised in full, the Shares which were subject to
the Option but as to which the Option was not exercised shall become available
for future Option grants under the Plan, unless the Plan shall have been
terminated. Shares subject to an Option that is forfeited or settled in cash or
otherwise terminated without a delivery of Shares to the Optionee, including
Shares withheld in payment of taxes relating to awards and the number of Shares
equal to the number of Shares surrendered in payment of the exercise price of
Options (or any other awards in the nature of purchase rights) or taxes relating
to awards, will again be available for awards under the Plan.
The Committee may adopt reasonable counting procedures to
ensure appropriate counting, avoid double counting and make adjustments if the
number of Shares actually delivered differs from the number of Shares previously
counted in connection with an award.
The Company intends that as long as it is not subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act and is not an
investment company registered or required to be registered under the Investment
Company Act of 1940, all offers and sales of Options and Common Stock issuable
upon exercise of any Option shall be exempt from registration under the
provisions of Section 5 of the Securities Act, and the Plan shall be
administered in such a manner so as to preserve such exemption. The Company
intends that the Plan shall constitute a written compensatory benefit plan
within the meaning of Rule 701(b) of 17 CFR Section 230.701 promulgated by the
Securities and Exchange Commission pursuant to such Act. The Committee shall
designate which Options granted under the Plan by the Company are intended to be
granted in reliance on Rule 701.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the Board.
The Board may appoint a Compensation Committee consisting of not less than two
(2) members of the Board to administer the Plan, subject to the direction of the
Board and such terms and conditions as the Board may prescribe. Once appointed,
the Committee shall continue to serve until otherwise directed by the Board.
From time to time, the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and, thereafter,
directly administer the Plan. Members of the Board or Committee who are either
eligible for Options or have been granted Options may vote on any matters
affecting the administration of the Plan or the grant of Options pursuant to the
Plan, except that no such member shall act upon the granting of an Option to
himself or herself, but any such
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<PAGE>
member may be counted in determining the existence of a quorum at any meeting of
the Board or the Committee during which action is taken with respect to the
granting of an Option to him or her.
The Committee shall meet at such times and places and upon
such notice as the Chairperson determines. A majority of the Committee shall
constitute a quorum. Any acts by the Committee may be taken at any meeting at
which a quorum is present and shall be by majority vote of those members
entitled to vote. Additionally, any acts reduced to writing or approved in
writing by all of the members of the Committee shall be valid acts of the
Committee.
(b) Procedure After Registration Date. Notwithstanding
subsection (a) above, after the Registration Date, the Plan shall be
administered either by: (i) the full Board; or (ii) a Committee of two (2) or
more directors, each of whom is a Non-Employee Director. After the Registration
Date, the Board shall take all action necessary to administer the Plan in
accordance with the then effective provisions of Rule 16b-3 promulgated under
the Exchange Act, provided that any amendment to the Plan required for
compliance with such provisions shall be made in accordance with Section 13 of
the Plan.
(c) Powers of the Committee. Subject to the provisions of the
Plan, the Committee shall have discretionary authority: (i) to determine, upon
review of relevant information, the fair market value of the Common Stock; (ii)
to determine the exercise price of Options to be granted, the persons to whom
and the time or times at which Options shall be granted, and the number of
Shares to be represented by each Option; (iii) to interpret the Plan; (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan; (v) to
establish the terms and conditions of each Option granted under the Plan (which
terms and conditions need not be identical in any two Options) and, with the
consent of the holder thereof, to modify or amend any Option; (vi) to authorize
any person to execute on behalf of the Company any instruments required to
effect the grant of an Option awarded by the Committee; (vii) to accelerate or
(with the consent of an Optionee) to defer an exercise date of any Option
subject to the provisions of Section 9(a) of the Plan; (viii) to determine
whether Options granted under the Plan will be Incentive Stock Options or
Nonstatutory Stock Options; and (ix) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(d) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all potential or actual Optionees, any other holder of an Option or other
equity security of the Company and all other persons. In any controversy
regarding the administration of the Plan, any arbitrator or court reviewing any
decision, determination or interpretation by the Committee shall not set aside
or modify such decision, determination or interpretation unless it is arbitrary,
capricious or clearly contrary to the terms of the Plan.
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<PAGE>
5. Eligibility.
(a) Persons Eligible to Participate. Options under the Plan
may be granted only to Employees whom the Committee may designate from time to
time. Incentive Stock Options may be granted only to Employees. An Optionee who
has been granted an Option may receive an additional Option or Options, if he or
she is otherwise eligible for such grant. However, the aggregate fair market
value (determined in accordance with the provisions of Section 8(a) of the Plan)
of the Shares subject to one or more Incentive Stock Options that are
exercisable for the first time by an Optionee during any calendar year (under
all stock option plans of the Company and its Parent and Subsidiaries) shall
not exceed $100,000 (determined as of the grant date).
(b) No Right to Continuing Employment. Neither the
establishment nor operation of the Plan shall confer upon any Optionee or any
other person any right with respect to continuation of employment or other
service with the Company, its Parent or any Subsidiary, nor shall the Plan
interfere in any way with the right of the Optionee or other person or the right
of the Company, its Parent or Subsidiaries to terminate such employment or
service at any time.
6. Term of Plan. The Plan shall become effective upon its
adoption by the Board or its approval by vote of the holders of the outstanding
Shares of the Company Common Stock entitled to vote on the adoption of the Plan
(in accordance with the provisions of Section 18 hereof), whichever is earlier.
The Plan shall continue until November 14, 2004 unless sooner terminated under
Section 13 of the Plan.
7. Term of Plan. Unless the Committee determines otherwise, at
the time of the grant of an Option, the term of each Nonstatutory Stock Option
granted under the Plan shall be ten (10) years and one (1) day from the date of
grant, and the term of each Incentive Stock Option shall be ten (10) years from
the date of grant. No Option shall be exercisable after the expiration of its
term. In all cases the terms of an Option shall be set forth in the Option
Agreement.
8. Option Price, Consideration and Restrictions.
(a) Option Price. Except as provided in subsection (b), the
option price for the Shares to be issued pursuant to any Option shall be such
price as is determined by the Committee which in the case of Incentive Stock
Options, shall in no event be less than the fair market value of such Shares on
the date the Option is granted. Fair market value of the Common Stock shall be
determined by the Committee using such criteria as it deems relevant; provided,
however, that where there is a public market for the Common Stock, the fair
market value per Share shall be the average of the last reported bid and asked
prices of the Common Stock on the date of grant, as reported in The Wall Street
Journal (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System; or, in
the event the Common Stock is listed on a national securities exchange, within
the meaning
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<PAGE>
of Section 6 of the Exchange Act, the fair market value per Share shall be the
closing price on such exchange on the date of grant of the Option, as reported
in The Wall Street Journal.
(b) Ten Percent Shareholders. No Incentive Stock Option shall
granted to any Employee who, at the date such Option is granted, owns (within
the meaning of Section 424(d) of the Code) more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company, its Parent
or any Subsidiary, unless the option price for the Shares to be issued pursuant
to such Incentive Stock Option is equal to at least 110 percent (110%) of the
fair market value of such Shares on the grant date as determined by the
Committee in the manner set forth in subsection (a) above.
(c) Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option shall be payment in cash or by check or
with Shares of the Company's Common Stock. The Committee may also, in its
discretion, authorize at the time of the grant of the Option payment in some
other consideration or method (such as by promissory note) for the issuance of
Shares as may be permitted under Sections 408 and 409 of the California General
Corporation Law. Any cash or other property received by the Company from the
sale of Common Stock pursuant to the Plan shall constitute part of the general
assets of the Company.
9. Exercise of Option.
(a) Vesting Period. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the
Committee and as shall be permissible under the terms of the Plan, which times
and conditions shall be specified in the Option Agreement evidencing the grant
of the Option. Unless the Committee specifically determines otherwise in the
Option Agreement, each Option shall vest and become exercisable, cumulatively,
by an Optionee, to the extent of (i) one-third (1/3) of the Optioned Shares as
of the first anniversary of the date on which the Option is granted, (ii)
two-thirds (2/3) of the Optioned Shares as of the second anniversary of the date
on which the Option is granted, and (iii) all of the Optioned Shares as of the
third anniversary of the date on which the Option is granted, subject to the
Optionee's Continuous Employment; provided, however, that the Optionee must
complete twelve (12) months of employment to exercise an Incentive Stock Option.
An Option may not be exercised for fractional Shares or for less than ten (10)
Shares.
(b) Exercise Procedures. An Option shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. As soon as administratively
practicable following the exercise of an Option in the manner set forth above,
the Company shall issue or cause its transfer agent to issue stock certificates
representing the Shares purchased. Until the issuance of such stock certificates
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Optioned
Shares notwithstanding the exercise of the Option. Except as provided in Section
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<PAGE>
11 below, no adjustment will be made for a dividend or other rights for which
the record date occurs prior to the date the stock certificates are issued.
(c) Exercise of Option with Stock or Net of Exercise Price.
The Committee, in its discretion, may permit an Optionee to exercise an Option
in whole or in part by (i) delivering whole Shares of the Company's Common Stock
previously owned by such Optionee (whether or not acquired through the prior
exercise of a stock option) having a fair market value equal to the option
price; or (ii) directing the Company to withhold from the Shares that would
otherwise be issued upon exercise of the Option that number of whole Shares
having a fair market value equal to the Option price. Shares of the Company's
Common Stock so delivered or withheld shall be valued at their fair market value
at the close of the last business day immediately preceding the date of exercise
of the Option, as determined by the Committee. Any balance of the Option price
shall be paid in cash. Any Shares delivered or withheld in accordance with this
provision shall again become available for purposes of the Plan and for Options
subsequently granted thereunder.
(d) Termination of Status as Employee. If an Optionee shall
cease to be an Employee for any reason other than permanent and total disability
(within the meaning of Section 22(e)(3) of the Code as determined in the sole
discretion of the Committee), retirement or death, such individual's Option
shall automatically terminate thirty (30) days following the date he or she
ceases to be an Employee, unless the Committee, in its discretion, determines to
permit a longer post-employment exercise period (which shall in no event extend
beyond the term of the relevant Option). Prior to such termination of the
Option, the Optionee may exercise his or her Option to the extent that he or she
was entitled to exercise on the exercise date, subject to the condition that no
Option shall be exercised after the expiration of the Option period.
(e) Disability of Optionee. In the event of the permanent and
total disability (within the meaning of Section 22(e)(3) of the Code as
determined in the sole discretion of the Committee) during the Option period of
an Optionee who is at the time of such disability, or was within the 90-day
period prior thereto, an Employee and who was in Continuous Employment as such
from the date of the grant of the Option until the date of disability or
termination, the Option may be exercised at any time within one (1) year
following the date of disability (or such longer period as may be established by
the Committee, in its discretion), but only to the extent that the Optionee was
entitled to exercise the Option at the time of the termination or disability,
whichever comes first, subject to the condition that no Option shall be
exercised after the expiration of the Option period.
(f) Retirement of Optionee. In the event of the retirement
during the Option period of an Optionee who is at the time of such retirement,
or was within the 90-day period prior thereto, an Employee and who was in
Continuous Employment as such from the date of the grant of the Option until the
date of the retirement, the Option may be exercised by the Optionee at any time
within ninety (90) days following the retirement date (or such longer period as
may be established by the Committee, in its discretion), but only to the extent
that the Optionee was entitled to exercise the Option at the time of his or her
retirement, subject to the condition that no
7
<PAGE>
Option shall be exercised after the expiration of the Option period. For
purposes of this Section 9, the term "retirement" shall mean voluntary
termination of employment by an Employee who is at least age fifty-five (55) and
who has completed five (5) years of employment with the Company.
(g) Death of Optionee. In the event of the death during the
Option period of an Optionee who is at the time of his or her death or was
within the 90-day period immediately prior thereto, an Employee and who was in
Continuous Employment as such from the date of the grant of the Option until the
date of death, the Option may be exercised for a period up to one (1) year
following the date of death (or such longer period as may be established by the
Committee, in its discretion), at any time prior to the expiration of the Option
period, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest, inheritance or otherwise as a result of the
Optionee's death, but only to the extent that the Optionee was entitled to
exercise the Option at the time of the death, subject to the condition that no
Option shall be exercised after the expiration of the Option period.
(h) Tax Withholding. When an Optionee is required to pay to
the Company an amount with respect to income or employment tax withholding
obligations in connection with the exercise of an Option granted under the Plan,
the Optionee may elect, prior to the date the amount of such withholding is
determined (the "Tax Date") to make such payment, or such increased payment as
the Optionee elects to make up to the maximum federal, state and local marginal
tax rates (including any related obligation under the Federal Insurance
Contribution Act) applicable to the Optionee and the particular transaction, by
(i) delivering cash; (ii) delivering part or all of the payment in previously
owned stock (whether or not acquired through the prior exercise of a stock
option); or (iii) subject to the consent of the Committee, irrevocably directing
the Company to withhold from the Shares that would otherwise be issued upon
exercise of the Option that number of whole Shares having a fair market value
equal to the amount of tax required or elected to be withheld (a "Withholding
Election"). If an Optionee's Tax Date is deferred beyond the date of exercise
and the Optionee makes a Withholding Election, the Optionee will receive the
full amount of Shares otherwise issuable upon exercise of the Option minus the
number of Shares necessary to satisfy his or her minimum withholding
requirements measured on the date the Option is exercised (or such higher
payment as he or she may have elected to make) with adjustments to be made in
cash after the Tax Date.
Any adverse consequences incurred by an Optionee with respect
to his or her participation in the Plan, the use of Shares to pay any part of
the Option price or income or employment tax arising in connection with the
exercise of an Option (including without limitation any adverse tax consequences
arising as result of disqualifying disposition within the meaning of Section 422
of the Code) shall be the sole responsibility of the Optionee. The Company does
not warrant or represent to the Optionee any tax consequence of any transaction
under this Plan, including the initial and continuing satisfaction of the
conditions for an Incentive Stock Option under Section 422 of the Code.
8
<PAGE>
10. Non-Transferability of Options and Shares of Common
Stock.
(a) Options. An Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution and may be exercised, during the lifetime
of the Optionee, only by the Optionee. Notwithstanding the preceding sentence,
the Option may be transferred to a spouse of the Optionee only upon approval of
the Committee, provided all the conditions of exercisability and vesting have
been met. If the Option Agreement permits, the Optionee may designate a
beneficiary who may (i) exercise an Option under Section 9(g) above, or (ii)
receive Shares issued pursuant to the exercise of an Option where the death of
an Optionee occurs between the date on which the Optionee exercises the Option
and the date the Company issues the Shares.
(b) Shares of Common Stock. The Committee may impose such
other restrictions on Shares issued under this Plan as it deems advisable.
Except as otherwise provided by the Committee, Optioned Shares acquired under an
Option may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution
(provided the assigns or successors in interests to such Optioned Shares
remained subject to the terms and conditions of this Plan including the
Company's right of first refusal to repurchase the Optioned Shares) without the
Optionee first offering to the Company the right to purchase the Optioned Shares
at the fair market value of the Shares on the date such offer is received by the
Secretary of the Company. If the Company fails to accept the offer to purchase
such Shares within seven (7) days after receipt of such offer, the Optionee
shall be free to sell or transfer such Shares at the same fair market value at
which they were offered to the Company. If the Optionee does not sell or
transfer such Shares within ninety (90) days, then the restrictions of this
Section 10 shall remain in effect. The certificates representing the Optioned
Shares shall bear a legend which shall give notice of such restrictions on the
transferability of the Optioned Shares.
11. Adjustments upon Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of Shares of
Common Stock covered by each outstanding Option and the per share price thereof
in each such Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, combination, reclassification, the payment of a
stock dividend on the Common Stock or any other increase or decrease in the
number of such Shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall affect
(and no adjustment by reason thereof shall be made with respect to) the number
or price of Shares subject to an Option.
9
<PAGE>
The Committee may, if it so determines in the exercise of its
sole discretion, also make provision for adjusting the number or class of
securities covered by any Option, as well as the price to be paid therefor, in
the event of the Company's effecting one or more reorganizations,
recapitalizations, rights offerings, or other increases or reductions off the
number of Shares of its outstanding Common Stock, or in the event of the
Company's being consolidated with or merged into any other corporation.
Unless otherwise determined by the Board, upon the dissolution
or liquidation of the Company or upon any merger or consolidation, if the
Company is not the surviving corporation, the Options granted hereby shall
terminate and thereupon become null and void; provided, however, that the
Optionee shall be given not less than ten (10) days' notice of such event and
the exercisability of each outstanding Option shall be accelerated so that the
Optionee may within such period exercise up to the entire unexercised portion of
his or her Option. Upon the occurrence of any such event, any Option not
exercised pursuant thereto shall terminate.
12. Time of Granting Options. Unless otherwise specified by
the Committee or as may be required by applicable law, regulation or rule
(including rules of stock exchanges or other self-regulatory organizations), the
date of grant of an Option under the Plan shall be the date on which the
Committee makes the determination to grant such Option or, if later, the date on
which are satisfied any conditions precedent to such grant. As soon as feasible
after the Committee makes its determination regarding the grant of an Option,
the Committee shall notify the individual or class of persons who are the
recipients of the grant.
13. Amendment and Termination of the Plan. The Board may amend
or terminate the Plan from time to time in such respects as the Board may deem
advisable, except that amendments or modifications to the Plan shall be subject
to shareholder approval (a) if such amendment or modification increases the
Shares available for issuance under the Plan or (b) to the extent required by
applicable law, regulation or rule (including rules of stock exchanges or other
self-regulatory organizations). Any amendment or termination of the Plan shall
not adversely affect any Option already granted without the relevant Optionees
consent, and if no such consent is secured such Option shall remain in full
force and effect as if the Plan had not been amended or terminated.
14. Conditions upon Issuance of Shares. Shares shall not be
issued with respect to an Option granted under the Plan unless the exercise of
such Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant, at the time of any such exercise, that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
10
<PAGE>
15. Reservation of Shares. During the term of this Plan, the
Company will at all times reserve and keep available the number of Shares as
shall be sufficient to satisfy the requirements of the Plan. Inability of the
Company to obtain from any regulatory body having jurisdiction and authority
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder shall relieve the Company of any liability in respect to
the nonissuance or sale of such Shares as to which such requisite authority
shall not have been obtained.
16. Information to Optionee. During the term of any Option
granted under the Plan, the Company shall provide or otherwise make available to
each Optionee a copy of its annual report to shareholders and financial
information which is provided to its shareholders in accordance with the
provisions of the Company's Bylaws and applicable law.
17. Option Agreement. All Options granted under Plan shall be
evidenced by Option Agreements.
18. Shareholder Approval. This amendment and restatement of
the Plan shall be subject to approval by the affirmative vote of the holders of
a majority of the securities of the Company present, or represented, and
entitled to vote at a meeting duly held, within twelve (12) months before or
after the adoption, in accordance with the applicable laws of the State of
Delaware.
19. Best Payments. If the gross amount of any payment or
benefit under the Plan, either separately or in combination with any other
payment or benefit payable by the Company, its Parent or any Subsidiary or
pursuant to a plan of the Company, its Parent or any Subsidiary would constitute
a parachute payment within the meaning of Code Section 280G, then the total
payments and benefits accrued and payable under this Plan shall not exceed the
amount necessary to maximize the amount received by the Optionee after payment
of all employment, income and excise taxes imposed on the Optionee with respect
to such payments and benefits. The Optionee may elect, by written notice to the
Board, which items of compensation, if any, shall be reduced so as to meet the
requirements of the preceding sentence. If there is a dispute between the
Company and the Optionee regarding (i) the extent, if any, to which any payments
or benefits to the Optionee are parachute payments or excess parachute payments,
under Code Section 280G, (ii) the base amount of such Optionee's compensation,
under Code Section 280G, or (iii) the status of such Optionee as a disqualified
individual, under Code Section 280G, such dispute shall be resolved as provided
in Section 20 below. Within 30 days of the Optionee's receiving notice of (a) a
change of control of the Company within the meaning of Code Section 28OG or (b)
the Optionee's termination of service with the Company, its Parent or Subsidiary
or the Company's receiving notice of such termination, either the Optionee or
the Company may request, in accordance with Section 20 below, (a) a
determination of the amount of any parachute payment, excess parachute payment,
or base amount of compensation, or (b) a determination of the reduction
necessary to maximize the amount receivable by the Optionee as described above.
11
<PAGE>
Any fees, costs or expenses incurred by the Optionee in connection with such
determinations shall be paid by the Optionee.
20. Mandatory Arbitration. Any dispute arising out of or
relating to this Plan or any Option Agreement shall be resolved solely by
arbitration before one arbitrator in accordance with the Employee Benefit Plan
Claim Rules of the American Arbitration Association. The location of the
arbitration proceeding shall be in Washington, D.C. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction. Each
party to any dispute regarding the Plan or an Option Agreement shall pay the
costs and fees (including attorneys' fees) of presenting his, her or its case in
arbitration. All other costs of arbitration, including the costs of any
transcript of the proceedings, administrative fees and the arbitrator's fees,
shall be borne equally by the parties. All statutes of limitation which would
otherwise be applicable shall apply to any arbitration proceeding. The
provisions of this Section 20 are exclusive for all purposes and applicable to
any and all disputes arising out of or relating to the Plan or any Option
Agreement. The arbitrator who hears and decides any dispute shall have
jurisdiction and authority to award only compensatory damages to make whole a
person or entity sustaining foreseeable economic loss, and shall not have
jurisdiction or authority to make any other award of any type, including,
without limitation, punitive damages, unforeseeable economic damages, adverse
tax consequences, damages for pain, suffering or emotional distress, or any
other kind or form of damages. The remedy, if any, awarded by the arbitrator
shall be the sole and exclusive remedy for any dispute which is subject to
arbitration under this Plan.
21. Governing Law. The validity, construction and effect of
the Plan and any agreement hereunder shall be determined in accordance with the
laws of the State of Delaware and applicable federal law.
22. Compliance with Rule 16b-3. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of Rule
16b-3 under the Exchange Act in connection with any grant of Options.
Accordingly, if any provision of this Plan or any agreement hereunder does not
comply with the requirements of Rule 16b-3 as then applicable to any such
Optionee, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such Optionee. In
addition, the Board shall have no authority to make any amendment, alteration,
suspension, discontinuation, or termination of the Plan or any agreement
hereunder to take other action if and to the extent such authority would cause
an Optionee's transactions under the Plan not to be exempt under Rule 16b-3 of
the Exchange Act.
12
Exhibit 5
Opinion of Shearman & Sterling
<PAGE>
[Shearman & Sterling Letterhead]
February 5, 1998
Global TeleSystems Group, Inc.
1751 Pinnacle Drive
North Tower--12th Floor
McLean, Virginia 22102
Ladies and Gentlemen:
We have acted as counsel for Global Telesystems Group, Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-8 (the "Registration Statement") of the Company filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to 10,000,000 shares (the "Shares")
of common stock, par value $.01 per share, of the Company (the "Common Stock"),
to be issued from time to time pursuant to the Amended and Restated 1992 Stock
Option Plan of Global TeleSystems Group, Inc. (the "Plan").
In so acting, we have examined the Registration Statement and
we have also examined and relied as to factual matters upon the representations
and warranties contained in originals, or copies certified or otherwise
identified to our satisfaction, of such documents, records, certificates and
other instruments as in our judgment are necessary or appropriate to enable us
to render the opinion expressed below. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents, certificates
and instruments submitted to us as originals and the conformity with originals
of all documents submitted to us as copies.
The opinion expressed below is limited to the General
Corporation Law of Delaware, and we do not express any opinion herein concerning
any other law.
Based upon the foregoing and having regard for such legal
considerations as we have deemed relevant, we are of the opinion that the Shares
have been duly authorized by the
<PAGE>
Company and, when (a) issued and delivered by the Company in accordance with the
terms of the Plan and (b) paid for in full in accordance with the terms of the
Plan, the Shares will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement.
Very truly yours,
/s/ Shearman & Sterling
2
Exhibit 23.1
Consent of Ernst & Young LLP
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8), pertaining to the Amended and Restated 1992 Stock
Option Plan of Global TeleSystems Group, Inc., of our reports dated
December 16, 1997 (Global TeleSystems Group, Inc.), February 21, 1997
(EDN Sovintel), and December 23, 1997 (Hermes Europe Railtel B.V.),
included in the Registration Statement on Form S-1 (No. 333-36555) of
Global TeleSystems Group, Inc., filed with the Securities and Exchange
Commission.
/s/Ernst & Young LLP
Vienna, Virginia
February 4, 1998
