<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
GLOBAL TELESYSTEMS GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
GLOBAL TELESYSTEMS GROUP, INC.
4121 WILSON BOULEVARD
8TH FLOOR
ARLINGTON, VIRGINIA 22203
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
ARLINGTON, VIRGINIA
April 4, 2000
To the Stockholders of
Global TeleSystems Group, Inc.
The 2000 annual meeting of stockholders of Global TeleSystems Group, Inc.
(the "Company" or "GTS") will be held at The Ritz-Carlton Hotel at Pentagon
City, 1250 S. Hayes Street, Arlington, Virginia 22202 on May 16, 2000 at 10:30
a.m. local time, to consider and act on the following matters:
1. The election of four directors to hold office for a term of three
years or until their successors are elected and qualified (Item No. 1).
2. Approval of an amendment to the Company's Certificate of
Incorporation to increase the authorized common stock from 270 million
shares to 540 million shares (Item No. 2).
3. Approval of an amendment to the Company's Certificate of
Incorporation to change the name of the Company to "Global TeleSystems,
Inc." (Item No. 3).
4. Approval of the 2000 Domestic U.S. Employee Stock Purchase Plan and
related 2000 International Employee Stock Purchase Plan (Item No. 4).
5. Ratification of the selection of the auditors of the Company for
fiscal year 2000 (Item No. 5).
6. The transaction of such other business as may properly come before
the meeting.
Eligible stockholders of record at the close of business on March 31, 2000
will be entitled to vote at the meeting. A list of stockholders entitled to vote
at the meeting may be examined at the executive offices of the Company at 4121
Wilson Boulevard, 8th Floor, Arlington, Virginia 22203.
By Order of the Board of Directors
GRIER C. RACLIN
Corporate Secretary
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
GLOBAL TELESYSTEMS GROUP, INC.
4121 WILSON BOULEVARD
8TH FLOOR
ARLINGTON, VIRGINIA 22203
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board of Directors") of Global TeleSystems Group,
Inc. (the "Company" or "GTS") of proxies to be voted at the annual meeting of
stockholders in Arlington, Virginia on May 16, 2000. Enclosed with this Proxy
Statement is notice of the meeting, together with a proxy for your signature if
you are unable to attend. Stockholders who execute proxies may revoke them at
any time before they are voted. Any proxy may be revoked by the person giving it
any time before it is voted by delivering to the Corporate Secretary of the
Company at 4121 Wilson Boulevard, 8th Floor, Arlington, Virginia 22203, on or
before the business day prior to the meeting or at the meeting itself, a
subsequent written notice of revocation or a subsequent proxy relating to the
same shares or by attending the meeting and voting in person. The approximate
date on which this Proxy Statement and the accompanying form of proxy will first
be sent to the Company's stockholders is April 4, 2000.
Shares of the Company's common stock, par value $0.10 per share ("Common
Stock"), represented by properly executed proxies received prior to or at the
meeting, unless such proxies have been revoked, will be voted in accordance with
the instructions indicated in the proxies. If no instructions are indicated on a
properly executed proxy of the Company, the shares will be voted in accordance
with the recommendations of the Board of Directors.
Common stockholders of record at the close of business on March 31, 2000
(the "Record Date") are entitled to vote at the meeting. On March 31, 2000, the
Company had outstanding [ ] shares of Common Stock (excluding treasury
stock). The number of outstanding shares and all other data in this Proxy
Statement regarding shares of Common Stock, including without limitation, stock
ownership, stock option, and per share pricing information, reflects a
two-for-one split of the Common Stock effective on July 21, 1999.
REQUIRED VOTES
The vote of the holders of a plurality of the votes cast by holders of
shares of Common Stock will elect candidates for director (Item 1 on your
proxy). Abstentions or broker non-votes as to the election of directors will not
affect the election of the candidates receiving the plurality of votes. The vote
of the holders of at least a majority of the issued and outstanding shares of
Common Stock, voting together as a single class, is required to approve the
amendments to the Certificate of Incorporation to change the Company's name and
increase the authorized common stock (Items 2 and 3 on your proxy). The vote of
the holders of at least a majority of the shares of Common Stock present in
person or represented by proxy at the meeting and entitled to vote, voting
together as a single class, is required to (A) approve the Domestic U.S.
Employee Stock Purchase Plan and related International Employee Stock Purchase
Plan (Item 4 on your proxy), and (B) ratify the Board of Directors' appointment
of Ernst & Young LLP as the Company's independent public accountants for 2000
(Item No. 5 on your proxy). Therefore, abstentions as to these particular
proposals (Item 2 through 5 on your proxy) will have the same effect as votes
against such proposals. Broker non-votes as to these particular proposals,
however, will be deemed shares of Common Stock not entitled to vote on such
proposals, will not be counted as votes for or against such proposals, and will
not be included in calculating the number of votes necessary for approval of
such proposals.
2
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information ownership of our common
stock and rights to acquire common stock by (i) GTS stockholders that manage or
own, either beneficially or of record, five percent or more of the common stock,
(ii) each of the directors and executive officers of GTS and (iii) the directors
and officers of GTS as a group as of December 31, 1999. For the purposes of this
table, a person or group of persons is deemed to have "beneficial ownership" of
any shares which such person or group has the right to acquire within 60 days
after such date, but such shares are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)(2) OWNED(1)
- ------------------------ ------------ ------------
<S> <C> <C>
AXA Assurances I.A.R.D. Mutuelle............................ 37,285,172(3) 20.21
9 Place Vendome
75001 Paris France
1290 Avenue of the Americas
New York, NY 10104
Putnam Investments.......................................... 14,542,789(4) 7.88
One Post Office Square
Boston, MA 02109
Soros Fund Management LLC................................... 11,998,094(5) 6.28
888 Seventh Avenue, 31st Floor
New York, NY 10106
David Dey................................................... 31,972 *
Roger W. Hale............................................... 34,490 *
Bernard McFadden............................................ 130,572 *
Stewart J. Paperin.......................................... 69,572 *
W. James Peet............................................... 33,572 *
Jean Salmona................................................ 59,572 *
Frank V. Sica............................................... 1,572 *
Alan B. Slifka.............................................. 4,548,699(6) 2.47
Adam Solomon................................................ 174,686 *
Gerald W. Thames............................................ 1,817,688(7) *
H. Brian Thompson........................................... 1,139,389(8) *
Gerard J. Caccappolo........................................ 496,500 *
Robert J. Amman............................................. 297,084(9) *
Robert A. Schriesheim....................................... 167,667(10) *
Hans Peter Kohlhammer....................................... 90,548 *
Other officers.............................................. 1,923,418 1.04
All Directors and Executive Officers as a group (27
persons).................................................. 11,017,001
Total of above.................................... 74,843,056
</TABLE>
- ---------------
* Less than 1%
(1) The percentage of ownership for each beneficial owner is based upon
184,472,884 shares of GTS common stock issued and outstanding at December
31, 1999 and the number of warrants and stock options to purchase common
stock held by such beneficial owner. Excluded from the calculation are:
33,210,047 shares of common stock issued under the GTS' option plans; and
8,772,626 shares of common stock pursuant to the exercise of stock option
warrants.
(2) Includes shares of common stock issuable upon the exercise of stock options
and stock warrants within 60 days of December 31, 1999.
(3) Ownership information, which represents holdings of several separately
managed funds, is based on a Schedule 13G filed in February 2000 with the
SEC. Number of shares as to which such holder has: sole
3
<PAGE> 5
voting power -- 12,472,532 shares; shared voting power -- 23,073,348
shares; sole dispositive power -- 37,189,669 shares; and shared dispositive
power -- 87,303 shares.
(4) Ownership information, which represents holdings of several separately
managed funds, is based on a Schedule 13G filed in February 2000 with the
SEC. Number of shares as to which such holder has: shared voting
power -- 187,971 shares; and shared dispositive power -- 14,542,789 shares.
This holder filed an amendment to its Schedule 13G in March 2000 that
indicated it had increased its holding to 20,137,488 shares. Number of
shares as to which such holder has shared voting power -- 190,171 shares;
and shared dispositive power -- 20,137,488 shares.
(5) Ownership information, which represents holdings of several group members,
is based on a Schedule 13G filed in February 2000 with the SEC. Number of
shares as to which such holder has: sole voting power -- 11,998,094 shares;
and sole dispositive power -- 11,998,094 shares. As indicated within the
Schedule 13G, Mr. George Soros may be deemed to have been the beneficial
owner of 11,998,094 common shares. The number consists of (a) 8,660,562
shares (including 6,666,666 shares subject to immediately exercisable
warrants) held for the account of Open Society Institute, (b) 1,948,398
shares held for the account of The Soros Foundation Hungary, (c) 1,313,698
shares held for the account of Soros Charitable Foundation, and (d) 75,436
shares held for the account of Soros Humanitarian Foundation.
(6) Includes 2,666,295 shares of common stock owned by Mr. Slifka, 1,139,876
shares of common stock held in various trusts, options to purchase 33,572
shares of common stock owned by Mr. Slifka, and 708,956 shares of common
stock held by various Halcyon partnerships which are managed by Halcyon/
Alan B. Slifka Management Company (over which Mr. Slifka disclaims
beneficial ownership).
(7) Includes 691,000 shares of common stock held in the "Thames Family
Foundation, Inc." and options to purchase 1,126,688 shares of common stock
owned by Mr. Thames.
(8) Of these shares, 50,000 were purchased in February 2000.
(9) Of these shares, 24,000 were purchased in February 2000.
(10) Of these shares, 1,000 were purchased in February 2000.
4
<PAGE> 6
ELECTION OF DIRECTORS
(ITEM NO. 1 ON YOUR PROXY)
The Company's Certificate of Incorporation, classifies the Board of
Directors into three classes, as nearly equal in number as possible. The members
of each class serve for terms of three years. The provision classifying the
Board of Directors was implemented in 1998, and, accordingly, the Board of
Directors has classified its members into three classes. The members of Class I
have terms expiring at the 2001 annual stockholders meeting; the members of
Class II have terms expiring at the 2002 annual stockholders meeting; and the
members of Class III have terms expiring at this annual meeting.
The terms of office of four of the present directors will expire at this
Annual Meeting.
The ages and business experience of directors set forth below are as of
March 31, 2000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" EACH OF THE FOUR NOMINEES LISTED BELOW
NOMINEES FOR DIRECTOR FOR TERMS EXPIRING IN 2003
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C> <C>
Robert J. Amman...................... 61 Mr. Amman was elected to GTS's Board of Directors in May
1998 and was appointed President of GTS in March 1999.
His term as a director expires at the 2000 annual
stockholders meetings. Mr. Amman was Chairman, President
and Chief Executive Officer of John H. Harland Company, a
printing firm, from 1995 to 1998. Previously, from 1994
to 1995, he served as Vice Chairman of First Financial
Management Corporation, where he was responsible for the
merchant services businesses consisting of Western Union,
NaBanco, Telecheck, Nationwide Credit and International
Banking Technologies. From 1988 to 1994, Mr. Amman served
as President and Chief Executive Officer of Western Union
Corporation, where he oversaw the transformation of the
firm from a telecommunications to a financial services
company. Mr. Amman is a member of the Executive Committee
of the Board of Directors.
Bernard McFadden..................... 66 Mr. McFadden has served as a director of GTS since
February 1994. His term expires at the 2000 annual
stockholders meeting. During 1999, Mr. McFadden served as
an independent consultant for GTS. Mr. McFadden's career
in international telecommunications includes 32 years
with ITT Corporation, where he served as President and
Chief Executive Officer of ITT's Telecom International
Group, and a four and one-half year assignment as
President and Chief Operating Officer of Alcatel Trade
International, S.A. Mr. McFadden is chairman of the
Compensation Committee of the Board of Directors.
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C> <C>
Stewart J. Paperin................... 52 Mr. Paperin has served as a director of GTS since March
1997. His term expires at the 2000 annual stockholders
meeting. Mr. Paperin serves as Chief Financial Officer of
the Soros Foundations. In addition, he has served as the
President of Capital Resource East since October 1993.
Prior to that, Mr. Paperin was President of Brooke Group
International from 1990 to 1993 where he was responsible
for investments in the former Soviet Union. Mr. Paperin
also served as Chief Financial Officer of Western Union
Corporation from 1989 to 1990. Mr. Paperin serves as a
director of Penn Octane Corporation, Golden Telecom, Inc.
and Svyazinvest as well as several Internet and
telecommunication companies. Mr. Paperin is Chairman of
the Audit and Budget Committee and is a member of the
Compensation, and Nominations and Governance Committees
of the Board of Directors.
Alan B. Slifka....................... 70 Mr. Slifka has served as a director of GTS since 1990,
and was Chairman until March 1999 when he was elected
Vice Chairman. His term expires at the 2000 annual
stockholders meeting. Mr. Slifka is a New York investment
banker and the Managing Principal of Halcyon/Alan B.
Slifka Management Company LLC, an equity asset management
firm specializing in nontraditional investments,
specifically corporate event investing. Previously, Mr.
Slifka was a partner of L.F. Rothschild, Unterberg,
Towbin from 1961 to 1982. He is a director of Pall
Corporation and is active in other business, civic and
philanthropic affairs as founder, director or officer of
numerous for-profit and not-for-profit corporations and
foundations. Mr. Slifka served as acting Chief Executive
Officer of GTS during most of 1993. Mr. Slifka is a
member of the Executive and Nominations and Governance
Committees of the Board of Directors.
</TABLE>
DIRECTORS WHOSE TERMS EXPIRE IN 2001
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C> <C>
David Dey............................ 62 Mr. Dey was elected to GTS's Board of Directors in May
1998. Since 1995, Mr. Dey has served as an independent
consultant, particularly to high technology start-up
companies in Europe. In that capacity, he serves as
Chairman of World Telecom and as Chairman of STARTECH
Scotland. From 1992 to 1995, Mr. Dey served as Chief
Executive Officer of Energis Communications, which grew
from a start-up company to become the United Kingdom's
third national telecommunications operation during his
tenure. Mr. Dey was employed by British Telecom plc from
1987 to 1991, most recently, as Managing Director of its
Business Communications Division, and he held various
management positions at IBM Corporation, where he was
employed from 1961 to 1985. Mr. Dey is a member of the
Audit and Budget, and Nominations and Governance
Committees of the Board of Directors. Mr. Dey is a
citizen of the United Kingdom.
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C> <C>
Roger W. Hale........................ 56 Mr. Hale was elected to GTS's Board of Directors in May
1998. Mr. Hale is Chairman, President and Chief Executive
Officer of LG&E Energy Corp., a diversified energy
services company with businesses in retail gas and
electric utility services, energy marketing and power
generation and project development. Mr. Hale has served
in that capacity since August 1990. Previously, Mr. Hale
served as Executive Vice President of Bell South Corp.
and Bell South Enterprises, Inc. from 1986 to 1989 and
with AT&T Corporation from 1966 to 1986, serving in
various management positions including Vice President of
Marketing, Southern Region. Mr. Hale is a Director of H&R
Block, Inc. Mr. Hale is Chairman of the Nominations and
Governance Committee and is a member of the Executive
Committee of the Board of Directors.
Jean Salmona......................... 64 Mr. Salmona has served as a director of GTS since March
1996. Between December 1989 and November 1998, Mr.
Salmona was Chairman and C.E.O. of CESIA Consulting
Group, of which he is now Honorary Chairman. He is
President and C.E.O. of J&P Partners, a consulting
concern for high-tech companies which invest in Europe,
India and China. Mr. Salmona is also Chairman and
Director General, Data for Development International
Association, a nongovernmental organization with
consultative status to the United Nations Economic and
Social Council, and is a member of the investment
committee of AXA FCPI, an affiliate of AXA Investment
Managers. Mr. Salmona is a graduate of Ecole
Polytechnique, Paris, Institut d'Etudes Politiques,
Paris, and Ecole Nationale de la Statistique et de
l'Administration Economique, Paris. Mr. Salmona is a
citizen of France.
Adam Solomon......................... 47 Mr. Solomon has served as a director of GTS since June
1995. Mr. Solomon is also Chairman of Shaker Investments,
Inc., a growth equity investment firm and Chairman of
Signature Properties International, L.P., a
venture/development firm whose initial focus is
redeveloping existing residential/golf communities, and a
member of the board of directors of MetaSolv Software,
Inc. Prior to that, Mr. Solomon spent eleven years with
E.M. Warburg, Pincus & Co., Inc., where he was Managing
Director from 1988 to 1992. While at E.M. Warburg, Pincus
& Co., Inc., Mr. Solomon served as a member of the board
of directors of LCI International, Inc., a regional long-
distance carrier. Mr. Solomon is a member of the
Executive and Compensation Committees of the Board of
Directors.
</TABLE>
7
<PAGE> 9
DIRECTORS WHOSE TERMS EXPIRE IN 2002
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C> <C>
W. James Peet........................ 45 Mr. Peet has served as a director of GTS since January
1996. Since July, 1999, Mr. Peet has been Managing
Director of Lehman Brothers Communications Fund. Mr. Peet
was affiliated with The Chatterjee Group, an investment
firm, from 1991 until February 1999. Prior to that, Mr.
Peet spent 6 years with McKinsey & Company. Mr. Peet was
a director of Hainan Airlines and of Phoenix Information
Systems Corporation. In addition, Mr. Peet served as
director of Viatel, Inc. from November 1995 until June
1998. Mr. Peet is a member of the Compensation Committee
of the Board of Directors.
Frank V. Sica........................ 49 Mr. Sica was elected as a director of GTS in March 1999.
Mr. Sica is a Managing Director of Soros Fund Management
LLC and head of Soros Fund Management's private equity
operations. Prior to joining Soros Fund Management, Mr.
Sica was a Managing Director at Morgan Stanley Dean
Witter & Co., the investment banking and brokerage firm.
He is also a director of CSG Systems International, Inc.,
Kohl's Corporation, Emmis Broadcasting, Outboard Marine
Corp., Banco Hipotecario, and JetBlue. Mr. Sica is a
member of the Audit and Budget and Compensation
Committees of the Board of Directors.
Gerald W. Thames..................... 53 Mr. Thames joined GTS as Chief Executive Officer in
February 1994, and has served as a director of GTS since
February 1994. He was elected Vice Chairman of the Board
of Directors in 1998 and Executive Vice Chairman in March
1999. From 1990 to 1994, Mr. Thames was President and
Chief Executive Officer for British Telecom North America
and Syncordia, a joint venture company focused on the
international outsourcing market. Mr. Thames has spent
over 18 years in senior positions with telecommunications
companies, where he was responsible for developing
start-up telecommunications companies, including 15 years
with AT&T, where he rose to the position of General
Manager of Network Services for the Northeast Region of
AT&T Communications. He is a director of Data for
Development International Association. Mr. Thames is a
member of the Executive Committee of the Board of
Directors.
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
NAME AGE
---- ---
<S> <C> <C>
H. Brian Thompson.................... 61 Mr. Thompson was elected Chairman of the Board and Chief
Executive Officer of GTS in March 1999. From 1991 until
June 1998, Mr. Thompson was Chairman and Chief Executive
Officer of LCI International, Inc., a provider of
telecommunications services in the United States and to
more than 230 international locations. In June 1998, LCI
was acquired by Qwest Communications International, Inc.
and Mr. Thompson became Vice Chairman of Qwest. He
resigned from the Board of Directors of Qwest in December
1998. He serves as a member of the board of directors of
Bell Canada International, Inc., Williams Communications
Group, Inc., DynCorp, and as a member of the management
committee of Paging Brazil Holding Co., LLC. He also
serves as Co-Chairman of the Global Information
Infrastructure Commission and as a member of the Irish
Prime Minister's Ireland-America Economic Advisory Board,
and was Chairman of the Advisory Committee for
Telecommunications for Ireland Department of Public
Enterprise. Mr. Thompson is chairman of the Executive
Committee of the Board of Directors.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held fourteen meetings in 1999. The
Board of Directors has the following standing committees: Audit and Budget
Committee, Executive Committee, Nominations and Governance Committee and
Compensation Committee. During 1999, the Audit and Budget Committee held nine
meetings, the Executive Committee held two meetings, the Nominations and
Governance Committee held six meetings, and the Compensation Committee held ten
meetings.
During 1999, the Audit and Budget Committee, in consultation with financial
officers of the Company and the independent public accountants, assisted in
establishing the scope of the annual audit. The Audit and Budget Committee
reviews and recommends to the Board of Directors corporate budget and capital
expenditure requests, reviews the financial integrity of the corporate books and
records, conducts special audits as may be recommended by the Board of
Directors, the Chief Executive Officer and the Chief Financial Officer of the
Company and reviews the policies of the Company regarding compliance with
applicable laws.
The Compensation Committee reviewed the salaries, incentive compensation,
stock option and restricted stock grants, retirement and other benefits which
accrued to officers of the Company and its subsidiaries, including the Chief
Executive Officer, administered the Fourth Amended and Restated 1992 Stock
Option Plan and the Equity Compensation Plan, and set compensation guidelines
for the Company and its subsidiaries.
During 1999, each of the incumbent directors, except for Mr. Sica, attended
75 percent or more of the meetings of the Board of Directors and of the
committees on which the directors served.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
(ITEMS NO. 2 AND 3 ON YOUR PROXY)
The Board of Directors has voted unanimously to approve certain amendments
to provisions of the Company's Certificate of Incorporation and to recommend
such amendments to the Stockholders. The proposed amendments, if authorized,
would: (i) increase the aggregate number of authorized shares of capital stock
(Item No. 2); and (ii) permit the Company to change its name (Item No. 3). If
authorized by the Stockholders, the proposed amendments to the Company's
Certificate of Incorporation will become effective upon the filing of one or
more Certificates of Amendment with the Secretary of State of the State of
Delaware, which will occur as soon as practicable after authorization.
9
<PAGE> 11
INCREASE IN AUTHORIZED COMMON STOCK
(ITEM NO. 2 ON YOUR PROXY)
The Company proposes to amend its Certificate of Incorporation to increase
the number of authorized shares of the Company's Common Stock from 270 million
to 540 million. The Board of Directors has unanimously approved, and unanimously
recommends a vote FOR, this amendment to the Certificate of Incorporation.
The Company believes the increase in the number of authorized shares of
Common Stock will provide flexibility in connection with financings,
acquisitions of other companies, other investment opportunities, stock dividends
or splits, and for other corporate purposes that the Board of Directors deems
advisable. For example, during the first quarter of 2000, the Company agreed to
issue approximately four million shares of Common Stock in connection with its
acquisition of Netcom Internet Limited, an Internet service provider operating
in the United Kingdom. The Company believes these acquisitions will help the
Company realize its goal of becoming the leading independent provider of
e-business services in Europe.
Of the 270 million shares of Common Stock currently authorized, as of March
31, 2000, [ ] shares of Common Stock were outstanding. As of the same
date, there were 6,500,000 shares of Common Stock reserved for issuance upon
conversion of the 8.75% senior subordinated bonds due 2000; 16,117,834 shares
reserved for issuance upon conversion of the 5.75% convertible senior
subordinated debentures due 2010; 8,772,626 shares reserved for issuance upon
exercise of warrants; 1,500,000 shares of common stock reserved for the Domestic
and International Stock purchase plans; and 29,160,823 shares reserved for
issuance upon exercise of stock options. In addition, in April 1999, the Company
issued 10 million Depositary Shares, each representing 1/100 of a share of 7.25%
cumulative convertible preferred stock. This preferred stock is convertible into
14,492,753 million shares of Common Stock. As a result, only approximately
8,456,000 million shares of Common Stock are authorized, unissued and unreserved
and available for future issuances.
If stockholders approve this proposal, the first paragraph of Article
Fourth of the Company's certificate of incorporation will be amended to read as
follows:
"The total number of shares of capital stock which the Corporation shall
have authority to issue is 550,000,000 (five-hundred and fifty million)
shares, of which there shall be 540,000,000 (five-hundred and forty
million) shares of common stock, par value $0.10 per share, and
10,000,000 (ten million) shares of preferred stock, par value $0.0001
per share."
Currently, the Company has no specific plans or proposals to issue shares
of its Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE INCREASE IN THE AUTHORIZED COMMON STOCK (ITEM 2 ON YOUR PROXY)
CHANGE OF COMPANY NAME
(ITEM NO. 3 ON YOUR PROXY)
The Company proposes to amend its Certificate of Incorporation to change
its name to "Global TeleSystems, Inc.". The Board of Directors has unanimously
approved, and unanimously recommends a vote FOR, the amendment to the
Certificate of Incorporation.
The Company believes that this change of name will better reflect the
growth and integration of the Company from a collection of companies acquired
over the past few years to a single, integrated entity with a single strategy
and uniform goals and ideals.
10
<PAGE> 12
If the stockholders approve this proposal, the first paragraph of the
Article First of the Company's certificate of incorporation will be amended to
read as follows:
"FIRST: The name of the Corporation is Global TeleSystems, Inc. (the
"Corporation")."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE NAME CHANGE OF THE COMPANY
(ITEM 3 ON YOUR PROXY)
APPROVAL OF 2000 DOMESTIC EMPLOYEE STOCK PURCHASE PLAN
AND RELATED 2000 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
(ITEM NO. 4 ON YOUR PROXY)
The 2000 Domestic U.S. Employee Stock Purchase Plan ("U.S. Purchase Plan")
and the 2000 International Employee Stock Purchase Plan ("International Purchase
Plan," together with the U.S. Purchase Plan, the "Purchase Plans"). A summary of
the Purchase Plans follows and is qualified in its entirety by reference to the
Purchase Plans which are appended hereto as Annex A. The Purchase Plans were
adopted by the Board of Directors in December 1999 to encourage employees of the
Company and its subsidiaries to acquire a proprietary interest in the Company by
purchasing Common Stock through voluntary payroll deductions. The U.S. Purchase
Plan is designed as an "employee stock purchase plan" within the meaning of
Section 423(b) of the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and in order to qualify thereunder must be approved by the
Company's stockholders. The International Purchase Plan for foreign employees of
the Company does not provide the same tax incentives due to differences in
applicable law. The Board of Directors believes this opportunity for employee
equity participation will enhance the Company's ability to attract, and to
promote the retention and motivation of, employees. An aggregate of 1,500,000
shares of the Company's Common Stock has been reserved for issuance under the
Purchase Plans. The Board of Directors has unanimously approved, and unanimously
recommends a vote FOR, the Purchase Plans.
ADMINISTRATION
The Board of Directors has appointed a committee (the "Committee") of
Company executives to serve as the plan administrators of the Purchase Plans.
All questions of interpretation or application of the Purchase Plans are
determined by the Committee, whose decisions are final, conclusive and binding
upon all participants.
ELIGIBILITY AND PARTICIPATION
Any person regularly employed by the Company or a subsidiary of the Company
designated by the Committee for at least 20 hours per week is eligible to
participate in the applicable Purchase Plan after 30 continuous days of
employment. No person who owns or holds options or rights to acquire, or as
result of participation in the U.S. Purchase Plan, would own or hold options or
rights to acquire, 5% or more of the Company's outstanding Common Stock may
participate in the Purchase Plans. As of March 31, 2000, approximately 130 U.S.
employees were eligible to participate in the U.S. Purchase Plan. The
International Stock Purchase Plan covers certain of the Company's non-U.S.
employees as determined from time to time by the Committee depending on the
number of employees in a particular jurisdiction and the requirements of
applicable local law.
OFFERING PERIODS
Each offering period is a calendar quarter, with the first offering period
under the U.S. Purchase Plan commencing during the first quarter of 2000.
Assuming approval by the stockholders at the Annual Meeting, the first date on
which Common Stock will be purchased is June 30, 2000 under both Purchase Plans.
11
<PAGE> 13
PURCHASE OF SHARES
Eligible U.S. employees who wish to participate in the U.S. Purchase Plan
allocate a portion of their after-tax payroll to the U.S. Purchase Plan, which
amount is deducted from the employee's paycheck by the Company and directed to
the accumulation account. At the end of each calendar quarter, the employee
funds in the accumulation account are used to purchase Common Stock from the
Company; provided, however, that the first purchase date will be at the end of
the second quarter of 2000. The Internal Revenue Code imposes a $25,000 market
value limit per employee per calendar year on the combined value of the Common
Stock purchased through the U.S. Purchase Plan as calculated at the beginning of
each quarterly purchase period. If an employee reaches this limit at any
quarterly purchase date, any remaining funds in the accumulation account will be
retained and applied to the next eligible quarterly purchase date.
Eligible non-U.S. employees who wish to participate in the International
Purchase Plan may do so through payroll deduction or through payments to their
employer or the Company as established under the International Purchase Plan
and/or requirements of applicable local law.
While the Company does not currently pay dividends, in the event that it
does in the future, the employee's stock account will be credited with any cash
dividends paid on his or her Common Stock in the account. Any dividends will be
automatically reinvested in additional Common Stock at no cost to the employee
as the Company will pay the transaction fees; the amount of such cash dividends,
however, are taxable to the employee. Any stock dividends are also automatically
added to the employee's stock account.
When an employee withdraws from participation in a Purchase Plan by giving
written notice to the Company of his or her election to withdraw, all
accumulated payroll deductions will be returned to the employee. Upon
withdrawal, future payroll deductions will cease. An employee's withdrawal from
the Purchase Plan prior to the end of a given offering period does not affect
his or her eligibility to participate in succeeding offering periods. Although
an employee may only withdraw and re-enroll once during any six month period.
PURCHASE PRICE, SHARES PURCHASED
Shares of Common Stock may be purchased under the U.S. Purchase Plan at a
price not less than 85% of the fair market value of the common stock on (i) the
employee's first day of participation in the U.S. Purchase Plan or (ii) the last
trading day of the offering period, whichever is less. Except as may be required
by local law or practice, shares of Common Stock may be purchased under the
International Purchase Plan at a price not less than 85% of the fair market
value of the common stock on (i) the first trading day of each calendar quarter
in which the International Purchase Plan is in effect or (ii) the last trading
day of each such calendar quarter, whichever is less.
On January 3, 2000, the day that the U.S. Purchase Plan was implemented,
the closing price per share of GTS Common Stock was $31.25. The number of whole
shares of GTS Common Stock a participant purchases in each offering period is
determined by dividing the total amount of payroll deductions withheld from the
participant's compensation during that offering period by the purchase price. At
the mid-point of each term of the U.S. Purchase Plan, the fixed purchase price
under the U.S. Purchase Plan can be reset, at the discretion of the Board of
Directors, to 85% of the then current fair market value, if such amount is
greater than the original fixed purchase price under the U.S. Purchase Plan.
PAYROLL DEDUCTIONS FOR EMPLOYEES
The funds for purchasing shares for employees are accumulated by payroll
deductions, the rate of which may be increased or decreased by the employee once
during each offering period. Payroll deductions do not accrue interest. An
employee's participation in the applicable Purchase Plan, including the rate of
payroll deductions, remains in effect for successive offering periods unless the
employee withdraws or amends such participation or such employee's employment is
terminated. An employee may discontinue his or her payroll deductions and
participation in the Purchase Plans at any time.
12
<PAGE> 14
TERMINATION OF PARTICIPATION
An employee's participation in the Purchase Plans is terminated when the
employee either voluntarily elects to withdraw his or her entire account, or his
or her employment is terminated. Once an employee's participation is terminated,
the employee is not entitled to again participate in the Purchase Plans until
the first day of the next offering period; provided, however, that an employee
may only withdraw and re-enroll once during any six month period. Upon
termination of participation, the employee is entitled to receive the shares and
any funds in his or her individual account. Upon termination of an employee's
employment, amounts in that employee's accumulation account will be paid to the
employee and his or her participation in the Purchase Plan will cease.
CAPITAL CHANGES
In the event any change is made in the Company's capitalization during an
offering period, such as a stock split, reverse stock split or stock dividend,
which results in an increase or decrease in the number of shares of Common Stock
outstanding without receipt of consideration by the Company, appropriate
adjustment will be made in the purchase price and in the number of shares
purchasable under the Purchase Plans.
The Purchase Plans will terminate automatically in the event of a
dissolution or liquidation of the Company and any funds in the Purchase Plan
account will be refunded to employees without interest.
AMENDMENT AND TERMINATION OF THE PURCHASE PLANS
The Board of Directors may amend the Purchase Plans at any time from time
to time or may terminate the Purchase Plan without approval of the Stockholders.
However, no such action by the Board of Directors may alter or impair any shares
purchased or rights previously granted under the Purchase Plans without the
consent of the affected employees.
U.S. FEDERAL INCOME TAX INFORMATION
No income will be taxable to an employee participating in the U.S. Purchase
Plan at the time of purchase of the shares of Common Stock at the formula
discount from fair market value. Upon disposition of such shares, the employee
will generally be subject to tax. If the shares have been held by the employee
for more than two years after the date of the commencement of the offering
period and more than one year after the purchase date of the shares, the lesser
of (i) the excess of the fair market value of the shares at the time of such
disposition over the purchase price, or (ii) 15% of the fair market value of the
shares on the first day of the offering period will be taxable as ordinary
income, and any additional gain will be treated as long-term capital gain. If
the shares are disposed of before the expiration of the holding periods
described above, the excess of the fair market value of the shares on the
purchase date over the purchase price will be treated as ordinary income, and
further gain or loss on such disposition will be capital gain or loss. Different
rules may apply with respect to participating employees subject to Section 16 of
the Securities Exchange Act of 1934. The Company is not entitled to a deduction
for amounts taxable to an employee, except to the extent of the ordinary income
taxable to an employee upon disposition of shares prior to the expiration of the
holding periods described above.
This is only a summary of the U.S. federal income tax consequences of the
Purchase Plan to employees and the Company and this summary does not purport to
be complete. Reference should be made to applicable provisions of the Internal
Revenue Code. In addition, the summary does not discuss the tax consequences of
an employee's death or the income tax laws of any municipality, state or foreign
country in which the employee may reside.
13
<PAGE> 15
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT A VOTE "FOR"
THE APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLANS
(ITEM 4 ON YOUR PROXY).
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM NO. 5 ON YOUR PROXY)
The Board of Directors has selected Ernst & Young LLP ("Ernst & Young"),
independent public accountants, to audit the consolidated financial statements
of the Company for the fiscal year ending December 31, 2000 and recommends that
the stockholders ratify such selection.
The submission of the appointment of Ernst & Young is not required by law
or by the By-laws of the Company. The Board of Directors is nevertheless
submitting it to the stockholders to ascertain their views. If the stockholders
do not ratify the appointment, the selection of other independent public
accountants will be considered by the Board of Directors. If Ernst & Young shall
decline to accept or become incapable of accepting its appointment, or if its
appointment is otherwise discontinued, the Board of Directors will appoint other
independent public accountants.
A representative of Ernst & Young is expected to be present at the Annual
Meeting, will have the opportunity to make a statement, and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF AUDITORS (ITEM 5 ON YOUR PROXY)
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
During 1999, each Director of GTS, except Messrs. Thompson, Amman, and
Thames, received an annual directors' cash fee of $15,000 applicable to the one
year period commencing June 1, 1999. In addition, the fee paid to each Director,
except for Messrs. Thompson, Amman, and Thames, for attending any meeting of the
Board of Directors is $1,500 per meeting, except for telephonic Board of
Directors meetings of two hours or less, where the fee is $750 for each such
meeting. Each Director, except Messrs. Thompson, Amman, and Thames, who attends
a committee meeting is entitled to a fee of $1,000 per meeting, except for
telephonic committee meetings of a duration of two hours or less, for which a
fee of $500 is paid.
GTS maintains the Global TeleSystems Group, Inc. Second Amended and
Restated Non-Employee Directors' Stock Option Plan and Restricted Stock Plan
that permits directors to share in the growth of the value of GTS through the
grant and exercise of nonqualified stock options and restricted stock. See
"-- Global TeleSystems Group, Inc. Second Amended and Restated Non-Employee
Directors' Stock Option and Restricted Stock Plan."
GLOBAL TELESYSTEMS GROUP, INC. SECOND AMENDED AND RESTATED NON-EMPLOYEE
DIRECTORS' STOCK OPTION AND RESTRICTED STOCK PLAN
The purpose of the Global TeleSystems Group, Inc. non-employee directors'
stock option and restricted stock plan, which we refer to as the Directors'
Plan, is to permit eligible non-employee directors of GTS to share in the growth
of the value of GTS through the grant and exercise of nonqualified stock options
and restricted stock.
The total number of shares of GTS common stock presently reserved and
available for delivery under the Directors' Plan is 2,550,000. The Directors'
Plan is administered by the Board of Directors. Only directors of GTS who are
not employees of GTS or any subsidiary of GTS on the date on which an option or
restricted stock is to be granted are eligible to participate in the Directors'
Plan on such date.
On the date of each annual shareholders meeting, pursuant to the Directors'
Plan, each Director (except for Messrs. Thompson, Amman, and Thames) receives an
option to purchase a certain number of shares, determined by a formula where the
numerator is $60,000 and the denominator is equal to the fair market value of
GTS common stock on that date. This option vests and is exercisable immediately.
Additionally, pursuant
14
<PAGE> 16
to the Directors' Plan, each Director (except for Messrs. Thompson, Amman, and
Thames) receives a grant of restricted stock for each committee of the Board of
Directors on which he serves: each chairman of a committee receives a grant of
restricted shares of common stock equal to $5,000 divided by the fair market
value of the common stock on the date of the annual shareholders meeting; and
each member of each committee receives a grant of restricted shares of common
stock equal to $2,500 divided by the fair market value of the common stock on
the date of the annual shareholders meeting. Such restricted stock becomes free
of restrictions upon the first to occur of the following events: (a) the
Director's death or total disability; (b) one year from the grant date; or (c) a
change of control transaction following which the Director is not continued as
on the Board of Directors of GTS or the survivor company.
An option to purchase shares of GTS common stock was granted to each
non-employee director on the effective date of the Directors' Plan and a
director's option is granted to each new non-employee director when he or she is
first elected or appointed to serve as a director of GTS, and we refer to these
as "Initial Grants." A director's Initial Grant option represents 22,500 shares
of GTS common stock. The entire amount of Initial Grant options vests on the
first to occur of (a) the Director's death or total disability; (b) one year
from the grant date; or (c) a change of control transaction following which the
Director is not continued as a member of the Board of Directors of GTS or the
survivor company.
On the date of each annual meeting of GTS's shareholders after the Initial
Grant has been issued, an additional directors' option to purchase 9,000 shares
will be granted to the individuals who will serve as elected non-employee
directors of GTS during the next year, and we refer to these as "Subsequent
Grants." The entire amount of Subsequent Grant options vests on the first to
occur of (a) the Director's death or total disability; (b) one year from the
grant date; or (c) a change of control transaction following which the Director
is not continued as a member of the Board of Directors of GTS or the survivor
company.
Directors' options are nonqualified stock options which are subject to
certain terms and conditions including those summarized below. The exercise
price per share of GTS common stock purchasable under a director's option will
be equal to 100% of the fair market value of GTS common stock on the date of
grant. Each directors' option will expire upon the earliest of (a) the tenth
anniversary of the date of grant, (b) one year after the non-employee director
ceases to serve as a director of GTS due to death or disability (except that, in
the case of disability, if the non-employee director dies within that one-year
period, the directors' options are exercisable for a period of one year from the
date of death), (c) three months after the non-employee director ceases to serve
as a director of GTS for any reason other than death or disability (except that,
if the non-employee director dies within that three-month period, the directors'
options are exercisable for a period of one year from the date of such death),
and (d) three months after the non-employee director ceases to be employed by
GTS if such non-employee director had become an employee of GTS (except that, if
the non-employee director dies within that three-month period, the directors'
options are exercisable for a period of one year from the date of such death).
Each directors' option may be exercised in whole or in part by giving written
notice of exercise to GTS specifying the directors' option to be exercised and
the number of shares to be purchased. Such notice must be accompanied by payment
in full of the exercise price in cash or by surrender of shares of GTS common
stock or a combination thereof. Directors' options granted under the Directors'
Plan may not be sold, pledged, assigned or otherwise disposed of in any manner
other than by will or by the laws of descent and distribution.
Directors' restricted stock are subject to certain terms and conditions
including those summarized below. The directors may vote their shares of
restricted stock on matters presented to shareholders of GTS common stock, but
may not sell, transfer, pledge or assign the restricted stock. The restricted
stock become free of restrictions on the first to occur of (a) the Director's
death or total disability; (b) one year from the grant date; or (c) a change of
control transaction following which the Director is not continued as a member of
the Board of Directors of GTS or the survivor company. Any stock dividends on
restricted stock are granted in the form of restricted stock. Prior to the
restricted stock becoming free of restrictions, a director would forfeit the
restricted stock upon termination of service from the chairmanship or membership
of the relevant committee, or termination of service from the Board of
Directors.
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<PAGE> 17
At the time of grant, the Board of Directors may provide in connection with
any grant made under the Directors' Plan that the shares of GTS common stock
received as a result of such grant are subject to a right of first refusal by
GTS.
The Board of Directors may amend, alter, suspend, discontinue or terminate
the Directors' Plan at any time, except that any such action will be subject to
the approval of GTS shareholders at the next annual meeting following such Board
of Directors' action if such shareholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated
quotation system on which GTS common stock may then be listed or quoted, or if
the Board of Directors determines in its discretion to seek such shareholder
approval.
SUMMARY COMPENSATION TABLE
The following table sets forth each component of compensation paid or
awarded to, or earned by, the Chief Executive Officer and the four other most
highly compensated executive officers serving as of December 31, 1999, for the
years indicated.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------
---------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SAR COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)(10)
- --------------------------- ---- -------- -------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Brian Thompson............ 1999 $468,461 $449,000 $51,040(3) 0 3,300,000(8) $6,466
Chairman and
Chief Executive Officer(1)
Robert Amman................. 1999 $312,307 $213,552 (4) 0 1,050,000(8) $5,532
President and Chief
Operating
Officer(1)
Robert Schriesheim........... 1999 $319,711 $168,100 (4) $1,647,600(7) 700,000(8) $ 936
Executive Vice President,
Corporate Development and
Chief Financial Officer(1)
Hans Peter Kohlhammer(2)..... 1999 $306,963 $169,474 $81,307(5) 0 43,302(8) 0
President of Business
Services
Gerard J. Caccappolo......... 1999 $232,542 $367,424 $52,681(6) 0 200,000(8) $4,000
President of Carrier 1998 191,042 57,750 83,125(6) 0 61,000(8) 4,000
Services
1997 173,750 52,500 32,043(6) 0 1,714(9) 4,000
</TABLE>
- ---------------
(1) Messrs. Thompson and Amman were elected to their positions in March 1999.
Mr. Schriesheim was elected Executive Vice President, Corporate Development
in February 1999, and was elected to the additional position of Chief
Financial Officer in September 1999.
(2) Mr. Kohlhammer joined the Company in March 1999 as a result of the
Company's acquisition of GTS (Europe) Ltd., formerly Esprit Telecom Group
plc.
(3) The amount disclosed includes $24,127 related to spousal travel with the
remaining attributable to gross-up payments for certain tax liabilities.
(4) Perquisites and other personal benefits paid to the named executive officer
were less than the lesser of $50,000 and 10% of the total of salary and
bonus report for the named executive officer.
(5) The amount disclosed includes transportation and travel allowance of
$29,268, social security and medical payment of $21,988 and pension
arrangements of $28,684.
(6) Mr. Caccappolo received a cost of living allowance of $4,833, $13,373 and
$12,163 in 1999, 1998 and 1997, respectively, and resides in a company
apartment for which the company paid the equivalent of $15,466, $16,595 and
$16,109 per year in rent in 1999, 1998 and 1997, respectively. In 1999 and
1998, respectively, Mr. Caccappolo also received tax equalization payments
of $24,428 and $42,278 and a gross-up payment for certain tax liabilities
of $660 and $1,011. In 1998, Mr. Caccappolo received paid
16
<PAGE> 18
home leave of $3,660. In addition, we provided Mr. Caccappolo with the use of a
company car in 1999, 1998 and 1997.
(7) The dollar amount represents 60,000 shares of restricted stock granted on
April 5, 1999 when the closing price of the Company's common stock on the
Nasdaq National Market was $27.56. The restriction on 20,000 of the shares
will lapse on April 5, 2002; the restriction on the remaining 40,000 shares
will lapse on April 5, 2002 if certain performance levels are met,
otherwise the restriction on the remaining 40,000 shares will lapse on
April 5, 2004.
(8) Shares of common stock underlying stock options awarded under the Stock
Option Plan.
(9) Stock options awarded under The Key Employee Stock Option Plan of Global
TeleSystems Europe B.V. which we refer to as the GTS Europe B.V. Stock
Option Plan.
(10) Amounts disclosed hereunder represent the sum of premiums paid by GTS for
$1 million in group term life insurance for each named executive officer
and contributions by GTS under the 401(k) Plan, as defined below, to each
named executive officer's account, except Messrs. Thompson , Schriesheim
and Kohlhammer who did not participate in the 401(k) Plan. In each case in
which GTS paid 401(k) Plan contributions, $4,000 was paid in each of 1999,
1998 and 1997 to the named executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on stock option grants to the five
most highly compensated officers in 1999 under the Stock Option Plan.
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR GRANT DATE
OPTIONS IN BASE EXPIRATION PRESENT
NAME GRANTED(#) FISCAL YEAR PRICE($/SH.) DATE VALUE($)(5)
- ---- ---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
H. Brian Thompson............... 3,000,000 23.40% $27.21 03/26/09(1) $18,360,000
300,000 2.34% 29.13 12/10/09(2) 3,735,690
Robert Amman.................... 700,000 5.46% 27.21 03/26/09(3) 4,284,000
50,000 0.39% 23.19 09/15/09(2) 292,195
300,000 2.34% 29.13 12/10/09(2) 3,735,690
Robert Schriesheim.............. 500,000 3.90% 27.50 02/22/09(3) 3,014,700
200,000 1.56% 29.13 12/10/09(2) 2,490,460
Hans Peter Kohlhammer........... 496 0.00% 29.31 03/18/05(4) 984
150,000 1.17% 27.73 03/18/09(3) 1,553,310
50,000 0.39% 38.08 06/17/09(2) 517,575
100,000 0.78% 29.13 12/10/09(2) 1,245,230
Gerard J. Caccappolo............ 100,000 0.80% 38.08 06/17/09(2) 1,082,030
100,000 0.80% 29.13 12/10/09(2) 1,245,230
</TABLE>
- ---------------
(1) One million of these options vest in February 2005, when financial results
for 2004 are expected to be publicly announced. If certain performance
targets are met or exceeded, these options could be fully exercisable in
February 2002, when financial results for 2001 are expected to be publicly
announced. An additional one million of these options vest on the first day
on or prior to September 22, 2002, if any, which is the tenth consecutive
trading day on each of which days the closing price of the Company's common
stock has been at least $56. The final million options vest on the first day
on or prior to September 22, 2004, if any, which is the tenth consecutive
trading day on each of which days the closing price of the Company's closing
price has been at least $100. If these closing prices are not achieved by
such dates, the two million options will vest in any event on September 25,
2005.
(2) Represents options that vest over a three year period, 33% after one year
and one thirty-sixth every month thereafter.
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<PAGE> 19
(3) These options vest in February 2005, when financial results for 2004 are
expected to be publicly announced. If certain performance targets are met or
exceeded, these options could be fully exercisable in February 2002, when
financial results for 2001 are expected to be publicly announced.
(4) These options vest on the first anniversary of their grant.
(5) The present value of each grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: dividend yield 0%, expected volatility of 0.75, risk-free
interest rates between 4.95% and 6.03% and expected life of five years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table provides information on the number and value of GTS
stock options exercised by the five most highly compensated officers during
1999, the number of options under the Stock Option Plan held by such persons at
December 31, 1999, and the value of all unexercised options held by such persons
as of that date.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
H. Brian Thompson........... -- -- -0-/3,300,000 -0-/24,306,000
Robert Amman................ -- -- 33,750/1,061,250 532,913/7,719,638
Robert Schriesheim.......... -- -- -0-/700,000 -0-/4,749,000
Hans Peter Kohlhammer....... -- -- 40,052/389,494 1,008,910/3,693,058
Gerard J. Caccappolo........ -- -- 12,500/309,500 142,250/2,564,110
</TABLE>
- ---------------
(1) Based on the closing price of $34.75 on the New York Stock Exchange of the
Common Stock on December 31, 1999.
THE GTS 401(k) PLAN
The GTS 401(k) Plan is a defined contribution retirement benefit plan that
is qualified for favorable tax treatment under Section 401 of the Code. All
employees of GTS, subject to certain regulatory qualifications, including the
five most highly compensated officers, who are at least 21 years of age and have
completed the minimum service requirement are eligible to participate in the
401(k) Plan. The 401(k) Plan participants may defer pre-tax income by
contributing to the plan up to the maximum amount permitted by law. After-tax
contributions are also permitted under the 401(k) Plan. GTS matches 50% of each
participant's pre-tax contribution to the 401(k) Plan up to 5% of the
participant's total compensation. In addition, GTS may, in its sole discretion
and in a nondiscriminatory manner, contribute additional amounts as profit
sharing to each participant's account. The amounts that are deposited into each
participant's account are invested among various investment options according to
the direction of the participant. Each participant's pre-tax and after-tax
contributions are immediately vested and nonforfeitable. GTS's matching
contribution and profit sharing allocations to each participant's account do not
vest until the participant has completed three years of service with GTS, at
which time the matching contribution and profit sharing allocations become 100%
vested. Each participant is eligible to begin receiving benefits under the
401(k) Plan on the first day of the month coincident with or following the
attainment of normal retirement age. There is no provision for early retirement
benefits under the 401(k) Plan.
THE GLOBAL TELESYSTEMS GROUP, INC. EQUITY COMPENSATION PLAN
The purpose of the Global TeleSystems Group, Inc. Equity Compensation Plan
is to attract, retain and motivate key employees, officers and eligible
independent contractors of GTS and to enable such individuals to own shares of
GTS common stock and to have a mutuality of interest with other shareholders of
GTS through the grant of restricted stock and other equity-based awards.
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The total number of shares of common stock that may be issued or
transferred under the Equity Compensation Plan is four percent of the total
number of shares of common stock outstanding at the beginning of the calendar
year, subject to certain adjustments, which are described below. This threshold
number may be increased by the number of shares (a) that were issued under the
Equity Compensation Plan with respect to which no dividends were paid and (b)
that were subsequently forfeited, in accordance with the terms of the Equity
Compensation Plan.
The Equity Compensation Plan is administered by the Committee. The chief
executive officer of GTS has the authority to recommend the individuals to whom
awards will be granted, subject to approval by the Committee. The Committee has
full and binding authority to determine the fair market value of the GTS common
stock and the number of shares included in any awards, to establish terms and
conditions of any award, to interpret the Equity Compensation Plan, to prescribe
rules relating to the Equity Compensation Plan and to make all other
determinations necessary to administer the Equity Compensation Plan. The
Committee may condition the vesting of restricted stock upon the attainment of
specified performance goals or such other factors as the Committee may determine
in its sole discretion. In the event that the Committee determines, in its sole
discretion, that an award of restricted stock would not be appropriate with
respect to any individual who has been recommended for an award by the chief
executive officer, the Committee has the authority to grant to any such
individual any other variety of equity-based compensation award, including, but
not limited to, phantom stock, phantom units, stock appreciation rights,
performance shares and performance units. The Committee does not, however, have
the authority to grant stock options pursuant to the Equity Compensation Plan.
Grants under the Equity Compensation Plan are determined by the Committee
in its sole discretion. For this reason, it is not possible to determine the
benefits or amounts that will be received by any individual employee or group of
employees in the future. The Equity Compensation Plan will remain effective
until November 14, 2002, unless earlier terminated by GTS. No restricted stock
may be granted under the Equity Compensation Plan on or after November 14, 2002.
During a specified period set by the Committee commencing with the date of
any restricted stock award, the participant is not permitted to sell, transfer,
pledge or otherwise encumber shares of restricted stock. Within these limits,
the Committee, in its sole discretion, may provide for the lapse of such
restrictions or may accelerate or waive such restrictions in whole or in part,
based on service, performance and such other factors. Unless the Committee
specifically determines otherwise, a restricted stock award granted under the
Equity Compensation Plan vests one-third on the second anniversary of the date
of grant, one-third on the third anniversary of the date of grant and one-third
on the fourth anniversary of the date of grant.
The Committee may impose such other restrictions on shares of Common Stock
issued under the Equity Compensation Plan, including a right of first refusal by
GTS that requires the participant to offer GTS any shares that the participant
wishes to sell.
The Equity Compensation Plan provides that, in the event of a change to the
GTS common stock (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination or exchange of
shares, or other change in the capital structure made without receipt of
consideration), the Board of Directors will preserve the value of outstanding
awards by making certain equitable adjustments in its discretion.
The Board of Directors may amend, alter, suspend, discontinue or terminate
the Equity Compensation Plan at any time, except that any such action will be
subject to the approval of GTS shareholders at the first annual meeting
following such action if such shareholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated
quotation system on which Common Stock may then be listed or quoted, or if the
Board of Directors determines in its discretion to seek such shareholder
approval.
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THE FOURTH AMENDED AND RESTATED 1992 STOCK OPTION PLAN OF GLOBAL TELESYSTEMS
GROUP, INC.
The Fourth Amended and Restated 1992 Stock Option Plan of the Company (the
"Fourth and Amended and Restated Plan") provides for the grant of options to
employees, non-employee directors, and independent contractors of GTS and any
subsidiary or affiliate of GTS. Up to 18.5% of the outstanding shares of Common
Stock, from time to time, are authorized to be granted as options under the
Fourth Amended and Restated Plan. A total of approximately 34.1 million shares
of common stock were reserved for issuance to employees, non-employee directors
and independent contractors under the Fourth Amended and Restated Plan
representing 18.5% of the outstanding shares of Common Stock on December 31,
1999. A total of 1 million shares of Common Stock may be issued pursuant to
options qualifying for tax purposes as incentive options under the Fourth
Amended and Restated Plan.
The Fourth Amended and Restated Plan is administered by the Compensation
Committee (or a sub-committee thereof), which consists of not less than two
directors appointed by the Board of Directors. The Compensation Committee (or a
sub-committee) selects the employees, independent contractors and directors of
GTS and its subsidiaries and affiliates to whom options will be granted. Options
covering not more than three million shares of Common Stock may be granted to
any employee during any calendar year.
The option exercise price under the Fourth Amended and Restated Plan may
not be less than the exercise price determined by the Compensation Committee (or
a sub-committee) (or 110% of the fair market value of the Common Stock on the
date of grant of the option in the case of an incentive option granted to an
optionee beneficially owning more than 10% of the outstanding Common Stock). The
maximum option term is 10 years and one day (or five years in the case of an
incentive option granted to an optionee beneficially owning more than 10% of the
outstanding Common Stock). Options become vested and exercisable at the time and
to the extent provided in the option agreement related to such option. The
Compensation Committee (or a sub-committee) has the discretion to accelerate the
vesting and exercisability of options.
There is a $100,000 limit on the value of stock (determined at the time of
grant) covered by incentive options that first become exercisable by an optionee
in any calendar year. No option may be granted more than 10 years after the
effective date of the Fourth Amended and Restated Plan. Generally, during an
optionee's lifetime, only the optionee (or a guardian or committee if the
optionee is incapacitated) may exercise an option except that, upon approval by
the Compensation Committee (or a sub-committee), nonqualified options may be
transferred to the spouse of the optionee and certain nonqualified options may
be granted or transferred to the GTS Employee Stock Option Plan Trust for the
benefit of one or more designated foreign employees, independent contractors or
directors. Incentive stock options are non-transferable except at death.
Payment for shares purchased under options granted pursuant to the Fourth
Amended and Restated Plan may be made either in cash or by exchanging shares of
Common Stock (which shares have been held by the optionee for at least six
months) with a fair market value of up to the total option exercise price and
cash for any difference. Options may be exercised by directing that certificates
for the shares purchased be delivered to a licensed broker-dealer as agent for
the optionee, provided that the broker-dealer tenders to GTS cash or cash
equivalents equal to the option exercise price plus the amount of any taxes that
GTS may be required to withhold in connection with the exercise of the option.
If an optionee's employment or service with GTS or a subsidiary or
affiliate terminates by reason of death, retirement or permanent and total
disability, his or her vested options may be exercised within one year after
such death, retirement or disability, unless otherwise provided with respect to
a particular option (but not later than the date the option would otherwise
expire). If the optionee's employment or service with GTS or a subsidiary or
affiliate terminates for any reason other than death, retirement or disability,
options held by such optionee terminate 90 days after such termination, unless
otherwise provided with respect to a particular option (but not later than the
date the options would otherwise expire), except that options terminate
immediately upon termination of an employee or independent contractor for
"cause" (as defined), unless the Compensation Committee (or a
sub-committee)determines otherwise. Each option would be exercisable to the
extent it had become vested before the termination of employment or service
(unless otherwise provided in the option agreement).
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<PAGE> 22
If the outstanding shares of Common Stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or securities
of GTS, by reason of merger, consolidation, reorganization, recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend, spin-off or other distribution payable in capital stock, or
other increase or decrease in such shares without receipt of consideration by
GTS, an appropriate and proportionate adjustment will be made in the number and
kinds of shares subject to the Fourth Amended and Restated Plan, and in the
number, kinds and per share exercise price of shares subject to the unexercised
portion of options granted prior to any such change, in order to preserve the
value of any granted options. Any such adjustment in an outstanding option,
however, will be made without a change in the total price applicable to the
unexercised portion of the option, but with a corresponding adjustment in the
per share option price.
Upon any dissolution or liquidation of GTS, or upon a reorganization,
merger or consolidation in which GTS is not the surviving corporation, or upon
the sale of substantially all of the assets of GTS to another corporation, or
upon any transaction (including, without limitation, a merger or reorganization
in which GTS is the surviving corporation) approved by the board of directors
which results in any person or entity owning 80% or more of the total combined
voting power of all classes of stock of GTS, the Fourth Amended and Restated
Plan and the options issued thereunder will terminate, unless provision is made
in connection with such transaction for the continuation of the Fourth Amended
and Restated Plan, the assumption of such options or for the substitution for
such options of new options covering the stock of a successor corporation or a
parent or subsidiary thereof, with appropriate adjustments as to the number and
kinds of shares and the per share exercise price. In the event of such
termination, all outstanding options shall be exercisable in full during such
period immediately prior to the occurrence of such termination as the Board of
Directors in its discretion shall determine.
The board of directors may further amend the Fourth Amended and Restated
Plan with respect to shares of the Common Stock as to which options have not
been granted. However, GTS's stockholders must approve any amendment that would
(1) change the requirements as to eligibility to receive incentive options; or
(2) increase the maximum number of shares in the aggregate for which incentive
options may be granted (except for adjustments upon changes in capitalization);
or (3) otherwise to the extent required by applicable law, rule or regulation.
The board of directors at any time may terminate or suspend the Fourth
Amended and Restated Plan. Unless previously terminated, the Fourth Amended and
Restated Plan will terminate automatically on April 9, 2008. No termination,
suspension or amendment of the Fourth Amended and Restated Plan may, without the
consent of the person to whom an option has been granted, adversely affect the
rights of the holder of the option.
EMPLOYMENT AGREEMENTS
GTS has employment agreements with each of the five most highly compensated
executive officers during 1999. Mr. Thompson's agreement provides that he will
serve in his position for an initial term commencing on March 22, 1999 and
ending on December 31, 2001. This initial term shall be extended for an
additional period expiring on March 31, 2005, unless either Mr. Thompson or the
Company gives notice of non-extension by September 1, 2001. Mr. Caccappolo's
agreement provides that he will serve in his position for an initial term
commencing on January 3, 1995 and ending on January 2, 1997. Since then, his
agreement has been extended for successive one-year periods, and is renewable
automatically for one-year terms, unless either the Company or Mr. Caccappolo
gives three months' notice of non-extension prior to the expiration of such
one-year extensions. Mr. Kohlhammer's agreement provides that he will serve in
his position for a term commencing on March 4, 1999 and ending on September 30,
2001. Messrs. Amman's and Schriesheim's agreements provide that they will serve
in their positions from March 22, 1999 and February 22, 1999, respectively,
until terminated under their agreements. The salary and bonus potential of each
of the five most highly compensated officers is provided for in each agreement
and may be increased at the discretion of the Compensation Committee of the
Board of Directors. In addition to salary and bonus, each of the five most
highly compensated officers is eligible to participate in the employee stock
option plan, to receive standard health and insurance benefits that are provided
to employees of GTS, to receive certain other fringe benefits
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<PAGE> 23
and to be reimbursed for all reasonable expenditures incurred in the execution
of each named executive officer's respective duties.
The employment agreements provide for severance payments in the event of
(a) termination without cause, as defined, or (b) resignation for good reason,
as defined. Severance arrangements for the five most highly compensated
executive officers are for a period of up to twenty-four months of base salary
and an imputed bonus. If the named executive officer is terminated for cause of
if he voluntarily terminates his employment other than for good reason, he shall
not be entitled to any salary, bonus or severance payments (other than accrued
salary).
Each employment agreement includes noncompetition and nonsolicitation
clauses that are effective during the term of employment and for a period of up
to two years thereafter. In addition, the employment agreements include
covenants of confidentiality and nondisclosure. Any dispute arising under an
employment agreement, except with respect to Mr. Kohlhammer's agreement, must be
resolved through arbitration, except that each agreement also provides for
specific performance and for a court injunction in the event of a breach by the
named executive officer of the covenants described above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Bernard McFadden, a Director and Chairman of the Compensation Committee,
was paid $100,000 in consulting fees in 1999.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The role of the Compensation Committee is to oversee and direct the
development of executive compensation policies and programs that are consistent
with, explicitly linked to, and supportive of the strategic objectives of
growing the Company's businesses and maximizing shareholder value. The
Committee's specific responsibilities include determining the appropriate levels
of compensation, including salaries, annual incentives, long-term incentives and
employee benefits, for members of the Company's senior management, including
executive officers. The Company believes that a strong link should exist between
executive compensation and management's ability to maximize shareholder value.
This belief is adhered to by developing both short- and long-term incentive
compensation programs that provide competitive compensation and reflect Company
performance.
Compensation Philosophy
The four fundamental principles to which the Committee adheres in
discharging its responsibilities are as follows. First, the majority of annual
and long-term compensation for the Company's executive officers should be at
risk, with actual compensation levels correlating with the Company's actual
performance in certain key areas determined by the Committee. Second, over time,
incentive compensation of the Company's executive officers should focus more
heavily on long-term rather than short-term accomplishments and results. Third,
equity-based compensation should be used on an increasing basis so as to provide
executive officers with clear and direct links to the shareholders' interests.
Fourth, the overall executive compensation program should be competitive,
equitable and structured so as to ensure the Company's ability to attract,
retain, motivate and reward the talented executives who are essential to the
Company's continuing success. Total compensation, rather than individual
compensation elements, is the focus of the Company's intent to provide
competitive compensation opportunities.
The Committee believes that continued revenue growth as well as continued
improvement in other key financial and operating measures should be recognized
in considering compensation levels along with improvements in overall
effectiveness, productivity, return on investment and success of strategic
alliances and business acquisitions and combinations.
The Committee periodically meets with an outside compensation consultant to
evaluate how well the Company's executive compensation program adheres to this
philosophy and to evaluate the level and mix of salary, annual bonuses and
long-term incentives.
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Compensation Elements
The Company's compensation program for executives consists of four
principal elements, each of which is vitally important in meeting the Company's
need to attract, retain, motivate and reward highly-qualified executives.
The four principal elements are:
Base Salaries
Base salaries for executive officers are generally set at levels that
reflect the competitive marketplace for companies that are of comparable size
and complexity and would be considered competitors of the Company in attracting
and retaining qualified executives. The salaries of the executive officers are
reviewed and approved by the Compensation Committee based on its assessments of
each executive's experience and performance and a comparison of salaries of
peers in other companies.
Annual Performance Incentives
Incentive awards have been made on a periodic basis to executive officers
on the basis of Company, business unit and individual performance relative to
budget in such areas as revenue, cash flow, operating income, operating margin
and the like. The Company intends to continue providing incentives in concert
with other compensation elements in order to maintain a competitive total
compensation program for its executive officers. The Committee reviews and
approves all performance measures and goals established under the annual and
long-term incentive plans. The Committee also approves all incentive payments to
executive officers.
Long-Term Incentives
The Company relies on stock options as the principal means of providing
long-term incentive compensation. Stock options have been, and will continue to
be, granted to executive officers under the Fourth Amended and Restated 1992
Stock Option Plan.
Benefits
Benefits offered to executive officers serve a different purpose than do
other elements of the total compensation program. In general, they provide for
retirement income and serve as a safety net against problems that can arise from
illness, disability or death. Benefits offered to executive officers are
basically those offered to other employees of the Company.
Evaluation Procedures
In determining matters regarding executive officer compensation (other than
the Chief Executive Officer), the Committee with the Chairman and Chief
Executive Officer reviews the President and Chief Operating Officer and the
other key executives including the executive officers, the respective areas of
authority and responsibility of the various executive officers, and the
performance and contribution of each to the efforts of the Company in meeting
its goals.
The Committee has confirmed that the compensation paid in 1999 to the named
executive officers is consistent with the Company's compensation philosophy and
objectives.
Compensation of the Chief Executive Officer
Decisions regarding the compensation of the Chairman and Chief Executive
Officer, H. Brian Thompson, were the responsibility of the Committee. Upon his
employment as Chairman and Chief Executive Officer, the Company entered into an
employment agreement with Mr. Thompson that established his initial annual base
salary at $600,000 and his annual target bonus at 140 percent of salary paid.
For the portion of 1999 during which Mr. Thompson served as Chairman and Chief
Executive Officer, salary payments to
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Mr. Thompson totaled $468,461. Mr. Thompson was awarded bonuses totaling
$449,000 for the performance year 1999, which was less than his target bonus.
This bonus reflected the Company's performance in revenues, earnings and
strategy development and execution. In evaluating Mr. Thompson's compensation,
the Committee and its compensation consultant compared the Company's
compensation practices and levels to those of other companies involved in
similar businesses, including but not limited to, the companies included in the
Performance Graph. Based on this review, the Committee determined Mr. Thompson's
compensation to be appropriate.
Deductibility of Certain Executive Compensation
Beginning in 1994, the Omnibus Reconciliation Act of 1993 (the Act) limits
to $1 million the amount that may be deducted by a publicly-held corporation for
compensation paid to each of its named executive officers in a taxable year,
unless the compensation in excess of $1 million is "qualified performance-based
compensation." The Committee and the Company have determined that the Company's
practice is to design its short-term and long-term compensation plans to qualify
for the exemption from the deduction limitations of Section 162(m) of the
Internal Revenue Code and to be consistent with providing appropriate
compensation to executives. Shareholder approval of incentive compensation plans
and various provisions thereunder covering the executive officers has been
sought and obtained and will be sought in the future to continue to qualify
performance-based compensation for the exemption. Although it is the Company's
intent to qualify compensation for the exemption from the deduction limitations,
the Company's compensation practices have been and, will continue to be,
designed to serve the best interests of the shareholders regardless of the
whether specific compensation qualifies for the exemption.
Compensation Committee Members during 1999:
Bernard McFadden, Chairman
James W. Peet
Frank V. Sica
Adam Solomon
David Dey (no longer on the Committee as of July 1999)
Michael Greeley (resigned from Board in March 1999)
Stewart J. Paperin (no longer on the Committee as of July 1999)
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PERFORMANCE GRAPH
The following performance graph compares the percentage change in the
Company's cumulative total shareholder return on our common stock from February
5, 1998 (the date on which the common stock began trading on the Nasdaq National
Market) and ending on December 31, 1999 with the cumulative total return,
assuming reinvestment of dividends of the Standard & Poor's 500 Stock Index and
the Nasdaq Telecom Index.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
2/5/98 3/98 6/98 9/98 12/98 3/99 6/99 9/99 12/99
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Global TeleSystems Group, Inc. $100.00 $171.16 $178.49 $123.57 $204.12 $204.80 $296.56 $144.39 $254.46
S & P 500 100.00 112.70 116.42 104.84 127.17 133.51 142.92 133.99 153.93
NASDAQ Telecommunications 100.00 119.34 126.21 111.70 154.37 191.82 203.93 189.02 268.82
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a subscription agreement (the "Subscription
Agreement") dated as of April 6, 1999 with H. Brian Thompson, its Chairman and
Chief Executive Officer, in connection with Mr. Thompson's employment agreement
with the Company. The Subscription Agreement provides that Mr. Thompson purchase
$20 million of the Company's common stock valued at $27.17 per share, or a total
of 736,056 shares. The Subscription Agreement provides further that Mr. Thompson
pay for 368,028 of these shares for $10 million in cash and for 368,028 of these
shares using the proceeds of a loan in the principal amount of $10 million from
the Company. These arrangements were consummated in June 1999. In connection
with the loan, Mr. Thompson has delivered a secured promissory note to the
Company which bears interest at the Federal Mid-Term Rate and has a maturity of
six years.
The Company has entered into an employment agreement with Mr. Thames,
Executive Vice Chairman of the Board of Directors. The agreement provides that
he will hold this position until at least the 2000 annual shareholders meeting
and that he will perform such other reasonable duties and exercise such other
power and
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<PAGE> 27
authority as may be reasonably delegated by the Board of Directors. The
agreement commenced March 21, 1999 and expires on October 31, 2001, unless
extended. The agreement provides that Mr. Thames will receive an annual salary
of $400,000 and a bonus for the fiscal years 1999 and 2000, or pro rated portion
thereof, in an amount not less than fifty percent of his salary for such year.
In addition to salary and bonus, Mr. Thames is also eligible to participate in
the employee stock option plan, to receive standard health and insurance
benefits that are provided to employees of GTS, to receive certain other fringe
benefits and to be reimbursed for all reasonable expenditures incurred in the
execution of his duties. If the Board of Directors were to appoint Mr. Thames to
another position, he would continue to receive his salary and bonus and benefits
for the remaining term of the agreement. If Mr. Thames were terminated without
cause, as defined in the agreement, or resigned for good reason, as defined in
the agreement, during the twenty-four month period following a change of
control, as defined in the agreement, he would receive severance in an amount of
up to thirty-six months of his then-current salary, continuation of certain
benefits and accelerated vesting of all stock options that would have otherwise
vested prior to October 31, 2001. Mr. Thames' agreement includes noncompetition
and nonsolicitation clauses that are effective during the term of his agreement
and for a period of up to one year thereafter. In addition, the employment
agreement includes covenants of confidentiality and nondisclosure. Any dispute
arising under Mr. Thames' employment agreement must be resolved through
arbitration.
Alan B. Slifka, the Vice Chairman of the board of directors, was paid
$66,666 in consulting fees in 1999. Bernard McFadden, a director of GTS, was
paid $100,000 in consulting fees in 1999.
Halcyon/Alan B. Slifka Management Company LLC (formerly Alan B. Slifka and
Company), a company principally owned by Mr. Slifka, holds 287,756 stock options
to purchase shares Common Stock that were granted in 1991 pursuant to a stock
option agreement that is not subject to any stock option plan. The options have
an exercise price of $0.267 per share and are fully vested. Any of the stock
options that remain unexercised after November 30, 2001 shall lapse and become
void. Generally, in the event that Mr. Slifka ceases to be an employee or
nonemployee director of GTS, any of such unexercised stock options shall lapse
thirty days after such termination. The shares of Common Stock underlying such
options have been registered under a registration statement that has been
declared effective by the SEC.
The Soros associates purchased $40 million of notes from us in 1996, which
notes bore interest at 10% per annum, in partial consideration of which (1) the
Soros associates received the right to designate, from time to time, one person
for nomination to the Board of Directors and (2) the affiliates received
warrants to purchase 8,888,886 shares of our common stock. Together with their
prior equity interests in GTS, these affiliates currently hold, on a fully
diluted basis (excluding shares underlying stock options), approximately 6.28%
of Common Stock. In accordance with the terms of the warrant agreement, the
exercise price of the warrants was reduced from $5.14 per share to $4.67 per
share as the outstanding debt had not been repaid prior to December 31, 1996. In
February 1998, we repaid the $40 million of notes, plus accrued interest, using
part of the proceeds of an offering of senior notes and the initial public
offering completed at that time. In addition, these affiliates collect a
monitoring fee of $40,000 per month. In 1999, the Soros associates exercised
warrants and 116,260 common shares were issued. Under certain agreements, these
affiliates have the right to co-invest with us in all of our new ventures
throughout Asia, excluding countries in the former Soviet Union, and pursuant to
this right, one of these affiliates holds a 25% interest in GTS China
Investments LLC.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons or entities who own more then 10% of the
Company's Common Shares, to file with the SEC and Nasdaq Stock Market or the New
York Stock Exchange, as the case may be, initial reports of beneficial ownership
and changes in beneficial ownership of the company's equity securities. Such
persons are also required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To Company's knowledge, based on a review
of the copies of such reports furnished to the Company as to transactions for
which reports are required, all Section 16(a) filing requirements applicable to
such individuals or entities were complied with during 1999, except with respect
to Messrs. James Newman, James Reynolds, Gerard Caccappolo, Hans-Peter
Kohlhammer and Gerald Thames. The Company determined on February 1, 1999, June
18, 1999,
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June 18, 1999 and June 18, 1999 that Messrs. Newman, Reynolds, Caccappolo and
Kohlhammer, respectively, were executive officers of the Company. Messrs.
Newman, Reynolds, Caccappolo and Kohlhammer filed their "Initial Statements of
Beneficial Ownership of Securities" on Form 3 on April 9, 1999, August 4, 1999,
July 29, 1999 and August 3, 1999, respectively. Mr. Newman left the employ of
the Company during 1999. Mr. Thames sold 150,000 shares of the Company's common
stock on November 17, 1999, and transferred 19,000 shares of the Company's
common stock to a family foundation on November 22, 1999. Mr. Thames disclosed
these dispositions in his "Annual Statement of Changes in Beneficial Ownership"
on Form 5, which was filed with the SEC on February 14, 2000, instead of in a
"Statement of Changes in Beneficial Ownership" on Form 4.
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which may come before the
meeting except that indicated above. However, if other business is brought
before the meeting, the persons acting under the enclosed form of proxy may vote
thereunder in accordance with their best judgment.
COST AND METHOD OF PROXY SOLICITATION
Proxies will be solicited by mail. The expenses of such solicitation will
be borne by the Company. Directors, officers, or regular employees of the
company may solicit proxies by telephone or in person. The cost of such
solicitation will be nominal. In addition, Georgeson & Company has been retained
by the Company to assist in soliciting proxies from brokerage firms, bank
nominees and other institutional holders to assure a timely vote by the
beneficial owners of stock held of records by such firms, banks and
institutions. This firm will receive a fee not to exceed $10,000 for its
services.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 2001 annual meeting of stockholders, must be
received at the Company's principal executive offices by January 10, 2001.
* * *
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM THIS PROXY
STATEMENT IS DELIVERED, UPON WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999.
REQUESTS SHOULD BE ADDRESSED TO VICE PRESIDENT -- INVESTOR RELATIONS AND
CORPORATE COMMUNICATIONS, GLOBAL TELESYSTEMS GROUP, INC. 4121 WILSON BOULEVARD,
8TH FLOOR, ARLINGTON, VIRGINIA, 22203.
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ANNEX A
GLOBAL TELESYSTEMS GROUP, INC.
YEAR 2000
DOMESTIC U.S. EMPLOYEE STOCK PURCHASE PLAN
Effective January 4, 2000
(Subject to Shareholder Approval)
1. PURPOSE OF PLAN.
The purpose of the Global TeleSystems Group, Inc. year 2000 Domestic U.S.
Employee Stock Purchase Plan (the "Plan") is to provide eligible employees who
wish to become stockholders of Global TeleSystems Group, Inc. (the "Company"),
or who wish to increase their stockholdings in the Company, with an opportunity
to purchase shares of the Company's common stock, par value $0.10 per share
("Common Stock"), on a basis that is more convenient and more favorable than
would otherwise be available. It is believed that employee participation in
ownership of the Company on this basis will be to the mutual benefit of both the
employees and the Company. It is intended that the Plan constitute an "employee
stock purchase plan" (a "Stock Purchase Plan") within the meaning of Section 423
of the United States Internal Revenue Code of 1986, as amended (the "Code").
2. EMPLOYEES ELIGIBLE TO PARTICIPATE.
(a) Subject to the limitations on eligibility in paragraph (b) of this
Section 2, any employee of the Company or any "parent corporation" of the
Company within the meaning of Section 424(e) of the Code (a "Parent"), or
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code (a "Subsidiary") which adopts the Plan with the consent of the Company
(an "Employing Corporation") shall be eligible to participate in the Plan. The
term "employee" shall have the meaning applicable under Treasury Regulation
Section 1.421-7(h) and such employees shall be "eligible employees" under the
Plan. Employees hired by the Company or an Employing Corporation during an
Offering Period (as such term is defined in Section 4(a) of the Plan) shall
become eligible employees immediately following 30 days or more of continuous
employment with the Company or an Employing Corporation.
(b) The term "eligible employee" as used herein shall not:
(i) include any employee whose customary employment with the Company
or an Employing Corporation is for twenty (20) hours or less per week or
for not more than five (5) months in any calendar year;
(ii) include a member of the Board of Directors of the Company (the
"Board") or of an Employing Corporation who is not also an employee of the
Company or of an Employing Corporation;
(iii) include leased employees within the meaning of Section 414(n) of
the Code; and
(iv) include any individual
(A) who provides services to the Company, any Employing Corporation
or any division thereof under an agreement, contract, or any other
arrangement pursuant to which the individual is initially classified as
an independent contractor, or
(B) whose remuneration for services has not been treated initially
as subject to the withholding of federal income tax pursuant to Section
3401 of the Code, unless the individual is subsequently reclassified as
a common law employee as a result of a final decree of a court of
competent jurisdiction or the settlement of an administrative or
judicial proceeding.
To the extent permitted by Section 423 of the Code and any rules or regulations
promulgated thereunder, an individual who is reclassified as a common law
employee as a result of a final decree of a court of competent
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
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jurisdiction or the settlement of an administrative or judicial proceeding shall
become eligible to participate, if otherwise eligible under this Section 2,
after two years of employment (including any period of service recharacterized
as common law employment).
3. ELIGIBLE COMPENSATION.
Compensation eligible for payroll deductions ("Compensation") shall be base
salary, overtime pay and, to the extent permitted by the Stock Purchase Plan
Committee ("the Committee"), any commissions and/or bonuses paid in each payroll
period. Compensation shall not include severance pay, incentive pay, shift
premium differentials, pay in lieu of vacation, imputed income for income tax
purposes, patent and award fees, awards and prizes, back pay awards,
reimbursement of expenses and living allowances, educational allowances, expense
allowances and reimbursements, expatriate benefits and expense allowances,
disability benefits under any insurance program, fringe benefits, deferred
compensation, compensation under the Company's stock plans, amounts paid for
services as an independent contractor, or any other compensation excluded by the
Committee in its discretion, applied in a uniform manner. The preceding sentence
notwithstanding, Compensation shall be determined before giving effect to any
salary reduction agreement pursuant to a qualified cash or deferred arrangement
(within the meaning of Section 401(k) of the Code) or to any similar salary
reduction agreement pursuant to any cafeteria plan (within the meaning of
Section 125 of the Code).
4. TERMS OF THE PLAN.
(a) Effective Date and Term.
The Plan shall commence on January 4, 2000 (the "Effective Date") and
shall, unless earlier terminated pursuant to Section 17 of the Plan, have four
consecutive twenty-seven (27) month terms, with: (i) the first twenty-seven (27)
month term commencing on the Effective Date and ending on the Purchase Date (as
such term is defined in this Section 4(a)) in March, 2002; (ii) the second
twenty-seven (27) month term commencing on the first Trading Day (as such term
is defined in Section 5(g)) of April, 2002 and ending on the Purchase Date in
June, 2004; (iii) the third twenty-seven (27) month term commencing on the first
Trading Day of July, 2004 and ending on the Purchase Date in September, 2006;
and (iv) the forth twenty-seven (27) month term commencing on the first Trading
Day of October, 2006 and ending on the Purchase Date in December, 2008. The Plan
shall terminate on the Purchase Date in December, 2008. During the four
consecutive twenty-seven (27) month the terms of the Plan there shall be
quarterly offering periods (the "Offering Periods" or, an "Offering") wherein
the option price at which shares may be purchased by participants, shall be set
according to Section 7 of the Plan. The date on which shares shall be purchased
under the Plan (the "Purchase Date") for each Offering Period shall be the last
Trading Day of the Offering Period; provided, however, that the first Purchase
Date shall be the last Trading Day of June, 2000. The Effective Date and full
implementation of the Plan shall be subject to shareholder approval of the Plan
at the annual meeting of the Company to be held in 2000 (the "Annual Meeting").
In the event that the Plan is not approved at the Annual Meeting, the Plan shall
be automatically terminated and each participant shall be refunded all monies
deducted from their compensation in pursuant to Section 4(b), without interest.
(b) Elections to Participate.
In order to participate in an Offering, an eligible employee must execute
and return an enrollment/payroll deduction authorization form or complete such
other procedures as the plan administrator (the "Plan Administrator") may
require or permit (an "enrollment agreement"), at least twenty-one (21) days
prior to the date on which such eligible employee shall be permitted to commence
participation in the Plan. The Plan Administrator shall be the person, or group
of persons, whom the Committee designates as such. By executing and returning an
enrollment agreement, eligible employees shall be authorizing the Plan
Administrator to make regular payroll deductions in either (i) a specified whole
dollar amount for each payroll period or (ii) any full percentage of
Compensation. Neither the specified whole dollar amount, nor the designated
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
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percentage deduction shall exceed fifteen percent (15%) of any eligible
employee's compensation during any payroll period. The requirement that each
eligible employee return an enrollment agreement at least twenty-one days prior
to their eligibility date shall not apply to the enrollment period for the
initial Offering Period. The enrollment period for the initial Offering Period
shall be set by the Committee pursuant to its authority under Section 10. EACH
ELIGIBLE EMPLOYEE WHO ELECTS TO PARTICIPATE IN THE PLAN ASSUMES THE RISK OF ANY
MARKET FLUCTUATIONS IN THE PRICE OF THE COMMON STOCK.
If a participant authorizes payroll deductions pursuant to clause (ii) in
the foregoing paragraph, the amount of Compensation to be deducted shall be
determined for each payroll period on a basis of the percentage of Compensation
authorized for deduction by the participant, which amount shall be increased or
decreased (as applicable) on a prospective basis to reflect changes in such
Compensation during the term of the Plan.
5. PARTICIPATION.
(a) In General.
On the first Trading Day of each Offering Period, each then eligible
employee, who has completed an enrollment agreement in the manner required by
Section 4(b) of the Plan, shall be granted an option to purchase the number of
shares of Common Stock determined by the employee's payroll deduction elections
made in accordance with such eligible employees enrollment agreement; provided,
however, that in no event shall such number of shares of Common Stock exceed the
amount permitted in Section 6(d) of the Plan or the maximum dollar amount of
Section 6(b) of the Plan.
(b) Newly Eligible Employees.
Each new employee of the Company or an Employing Corporation who becomes an
eligible employee pursuant to the terms of Section 2 of the Plan, must complete
an enrollment agreement pursuant to Section 4(b) of the Plan in order to
participate in the Plan during the next Offering Period in which such newly
eligible employee shall be permitted to participate in the Plan. Each newly
eligible employee shall be subject to the purchase limits of Sections 6(b) and
6(d) of the Plan and such newly eligible employee's option price shall be set
according to Section 7(a)(ii) of the Plan.
(c) Enrollment During an Offering Period.
Any eligible employee who elects not to participate in the Plan for the
initial Offering Period may subsequently elect to participate in the Plan,
subject to the recommencement terms and conditions of Section 11 of the Plan.
(d) Changes in Payroll Deduction Authorization.
Participants are permitted to increase or decrease their rate of payroll
deduction, subject to the terms and limitations of the Plan without affecting
the Base Option Price (or the Alternative Option Price, if applicable);
provided, however, that a participant shall not be permitted to make more than
one such change per calendar quarter with respect to any Offer. (Such calendar
quarters end on March 31st, June 30th, September 30th and December 31st of each
year.) Any such change shall be effective for a given payroll period provided
that the employee's signed enrollment/payroll deduction authorization form has
been submitted to the Plan Administrator, or such other procedure as may be
required or permitted by the Plan Administrator has been completed prior to the
applicable payroll cutoff date. A reduction of the payroll deduction percentage
to zero shall constitute a withdrawal from the Plan in accordance with Section
11 of the Plan.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
3
<PAGE> 32
(e) Notice of Dispositions.
As part of the enrollment agreement, each participant in an Offering shall
agree to notify the Company of any disposition of shares of Common Stock
purchased pursuant to the Plan prior to either (i) two (2) years after first
Trading Day of the first Offering Period in which such employee participates in
the Plan or (ii) one year from the Purchase Date of such shares of Common Stock,
whichever period is longer.
(f) Equivalent Rights.
All employees granted options under the Plan shall have the same rights and
privileges under the Plan except that the number of shares each participant may
purchase shall bear a uniform relationship to the employee's eligible
Compensation and shall depend upon the payroll deduction the employee
authorizes.
(g) Trading Day.
For purposes of the Plan, a "Trading Day" is a day on which shares of
Common Stock are traded on the New York Stock Exchange, the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading, the NASDAQ National Market System or other market on which the Common
Stock is traded on such date.
6. PARTICIPATION LIMITATIONS.
(a) Five Percent Owners.
Notwithstanding anything herein to the contrary, no employee shall be
granted an option to purchase any shares of Common Stock under the Plan if the
employee, immediately after the option is granted, owns or would own shares,
either directly or indirectly, (including all shares which may be purchased
under outstanding options under the Plan) in excess of five percent (5%) or more
of the total combined voting power or value of all classes of shares of capital
stock of the company, the Employing Corporation, or any Parent or Subsidiary.
For purposes of the foregoing limitation, the rules of Section 424(d) of the
Code (relating to attribution of stock ownership) shall apply in determining
share ownership, and Common Stock which the employee may purchase under
outstanding options shall be treated as stock owned by such employee.
(b) $25,000 Value Limitation.
If pursuant to the terms of the Plan, an employee would be granted one or
more options that would cause a violation of Section 423(b)(8) of the Code, such
options shall not be granted and the employee shall instead be granted options
to purchase shares in an amount that, when combined with the employee's right to
purchase shares under all Stock Purchase Plans of the Company, the Employing
Corporation and its Parents and Subsidiaries, will not cause the employee's
right to purchase shares of stock to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of the Fair Market Value of such shares (determined
at the time such options were granted) for each calendar year in which such
options are outstanding at any time. In determining this limitation, the rules
of Section 423(b)(8) of the Code and the regulations thereunder shall apply.
(c) Fair Market Value.
Unless otherwise defined by the Committee at the beginning of an Offering
Period, the "Fair Market Value" of the Common Stock on any date shall mean the
closing price of the Common Stock on that date on the New York Stock Exchange,
the principal stock exchange or other market on which the Common Stock is
traded, or if such day is not a Trading Day, on the immediately preceding
Trading Day, as reported in the Wall Street Journal on the next business day. If
the price of the Common Stock is not reported on any securities exchange or
national market system, the Fair Market Value of the Common Stock on a
particular date shall be as determined by the Committee.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
4
<PAGE> 33
(d) Maximum Number of Shares.
The maximum number of shares of Common Stock which an employee shall be
permitted to purchase pursuant to the Plan shall be 5,000 shares; provided,
however, that the maximum number of shares purchased by any participant shall
not exceed the limitations of Sections 4(b) or 6(b) of the Plan. When any of the
foregoing participation limitations are reached, payroll deductions shall cease,
and any amount of excess funds as of the date that a participation limitation
has been reached shall be returned to the employee.
7. OPTION PRICE.
(a) In General.
Subject to the adjustments described in Sections 7(b)(i) and 15 of the
Plan, the option price at which shares of Common Stock may be purchased during
any Offering Period shall be determined as follows:
(i) Eligible employees who elect to participate in the Plan during the
initial Offering Period and do not withdraw from the Plan at any time
during the first twenty-seven (27) month term of the Plan, shall have a
maximum option price, subject to adjustment pursuant to paragraph (b) of
this Section, (such fixed option price hereinafter referred to as, the
"Base Option Price") during the first twenty-seven (27) month term of the
Plan that shall be fixed at eighty-five percent (85%) of the Fair Market
Value of a share of Common Stock on the Effective Date. If, on any Purchase
Date after such participant's Base Option Price has been fixed, eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock is less
than the Base Option Price for such participant, then the option price for
such participant on such Purchase Date shall be eighty-five percent (85%)
of the Fair Market Value of a share of Common Stock (the "Alternative
Option Price").
(ii) Eligible employees who elect to participate in the Plan at a date
later than the initial Offering Period, which includes newly eligible
employees and employees who have elected not to participate during the
initial Offering Period, and do not withdraw from the Plan at any time
prior to the Purchase Date in March, 2002, shall have a Base Option Price
that shall be fixed from the first Trading Day of the Offering Period in
which such employee elects to participate in the Plan until the Purchase
Date in March, 2002, at the greater of (A) the same Base Option Price as
participants described in Section 7(a)(i) or (B) eighty-five percent (85%)
of the Fair Market Value of a share of Common Stock on the first Trading
Day of the Offering Period in which such new participant elects to
participate in the Plan. If, on any Purchase Date after such new
participant's Base Option Price has been fixed, eighty-five percent (85%)
of the Fair Market Value of a share of Common Stock is less than the Base
Option Price for such new participant, then the option price for such new
participant on such Purchase Date shall be the Alternative Option Price.
(iii) Participants in the Plan who, during any of the four consecutive
twenty-seven (27) month terms of the Plan, elect to withdraw from, and
subsequently elect to recommence participation in the Plan pursuant to
Section 11 of the Plan shall, upon recommencement, have their Base Option
Price calculated as the greater of: (A) the Base Option Price applicable to
such participant, had he/she not withdrawn from the Plan during that
particular twenty-seven (27) month term or (B) eighty-five percent (85%) of
the Fair Market Value of a share of Common Stock on such recommencing
participant's recommencement date, with such recommencement date being the
first Trading Day of the next Offering Period.
(b) Adjustments.
(i) Mandatory Adjustments. All participants with Base Option Prices
described in Section 7(a)(i), (ii) or (iii) shall have their Base Option
Price reset to the same Base Option Price on the following dates (each at
"Reset Date"): (A) on the first Trading Day of the second twenty-seven (27)
month term described in Section 4(a); (B) on the first Trading Day of the
third twenty-seven
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
5
<PAGE> 34
(27) month term described in Section 4(a); and (C) on the first Trading Day
of the forth twenty-seven (27) month term described in Section 4(a). The
Base Option Price for all participants on each Reset Date shall be fixed
for that particular twenty-seven (27) month term at eighty-five percent
(85%) of the Fair Market Value of a share of Common Stock on the first
Trading Day of that particular twenty-seven (27) month term. Each
participant shall continue to have the benefit of the Alternative Option
Price for each Purchase Date during any twenty-seven (27) month term of the
Plan. The Base Option Price may also be adjusted pursuant to Section 15 of
the Plan.
(ii) Optional Adjustments. At the midpoint of any twenty-seven (27)
month term of the Plan (the "Revaluation Date"), the Base Option Price may
be subject to adjustment. This adjustment may be made at the discretion of
the Committee. If the Committee elects to adjust the Base Option Price on
the Revaluation Date, the Base Option Price after the Revaluation Date
shall be eighty-five percent (85%) of the average of the Fair Market Value
of a share of Common Stock during the period of twenty (20) Trading Days
ending one (1) month prior to the Revaluation Date; provided, however, that
if such adjustment would result in the adjusted Base Option Price being
lower than the initial Base Option Price for any participant, then the
initial Base Option Price shall remain unchanged.
8. EXERCISE OPTIONS.
(a) Purchase of Common Stock.
At the end of each payroll period, each participant shall have deducted
from his pay the amount authorized pursuant to Section 4(b) of the Plan. This
deducted amount shall be held by the Company in a general escrow account
together with all funds deducted from all participants' pay pursuant to each
enrollment agreement, such escrow account shall not accrue any interest on
behalf of any participant. On the Purchase Date, a participant shall be deemed
to have exercised the option to purchase at the lesser of the then applicable
Base Option Price or the Alternative Option Price, that number of whole and
fractional shares of Common Stock which may be purchased with the amount
deducted from the participant's Compensation during that Offering Period and
excess funds from the preceding Offering Period, if any.
(b) Plan Custodian.
The Committee shall designate an appropriate financial services or
brokerage firm as the plan custodian (the "Plan Custodian"). On each Purchase
Date, the Plan Custodian shall receive from the Company, at the applicable
Option Price, as many whole shares of Common Stock as can be purchased with the
funds received from each participant during the Offering Period and excess funds
from the preceding Offering Period, if any. Upon receipt of the Common Stock so
purchased, the Plan Custodian shall allocate to each participant, the number of
whole shares of Common Stock, and the amount of any fractional shares, to which
each participant is entitled. Subject to any limitations imposed by the
Committee from time to time, a certificate representing the number of shares of
Common Stock to which a participant is entitled shall be issued to the
participant, at the participant's expense, upon written request. Unless
otherwise requested by the participant, Common Stock purchased under the Plan
shall be held by and in the name of, or in the name of a nominee of, the Plan
Custodian for the benefit of each participant, who shall thereafter be a
beneficial stockholder of the Company.
(c) Rights as a Stockholder.
A participant's rights as a stockholder of record of the Company shall vest
on the initial Purchase Date. Shares of Common Stock issued to participants
shall be transferable in accordance with applicable securities laws.
9. NUMBER OF SHARES TO BE OFFERED.
The maximum number of shares of Common Stock that may be purchased under
the Plan is 500,000. Such shares may be treasury shares, or authorized and
unissued shares, as the Board may determine in its sole
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
6
<PAGE> 35
discretion. In the event that, during any Offering Period, it is determined that
the number of shares of Common Stock authorized by this Section 9 shall be
insufficient to cover the number of shares of Common Stock that must be
transmitted by the Company to the Plan Custodian pursuant to Section 8(b) of the
Plan, the Committee is hereby authorized to increase the number of authorized
shares of Common Stock under the Plan in order to cover such shortfalls for the
remaining term of the Plan.
10. ADMINISTRATION AND INTERPRETATION OF THE PLAN.
The Plan shall be administered by the Plan Administrator(s) designated by
the Committee. The members of the Committee shall be designated by the Board.
Except as expressly provided herein, the Committee shall have the exclusive
right to interpret the provisions of the Plan and to determine any questions
arising hereunder or in connection with the administration of the Plan,
including the remedying of any omission, inconsistency, or ambiguity, and the
determination of benefits, eligibility and interpretation of Plan provisions.
The Committee's decisions, determinations, interpretations or other actions in
respect thereof shall be conclusive and binding upon all participants, former
participants, beneficiaries, heirs, executors, assigns, and all other parties.
11. WITHDRAWAL FROM THE PLAN.
A participant may, at any time and for any reason, by giving notice to the
Plan Administrator, elect to withdraw from any further participation in the
Plan. The withdrawing participant shall, as soon as practicable, receive a
certificate representing the number of whole shares of Common Stock credited to
the participant's account as of the date of withdrawal and a check in payment
for any fractional shares credited to the participant's account and for any
funds not applied toward the purchase of shares as of that date. Payment for
such fractional shares shall be based on the Fair Market Value of a share of
Common Stock on the last Trading Day of the Offering Period immediately
preceding the participant's withdrawal. An eligible employee who has withdrawn
from participation may elect to recommence participation in the Plan by
executing and delivering to the Plan Administrator a new enrollment agreement in
the same manner required by Section 4(b). The Base Option Price applicable to a
recommencing participant shall be calculated according to Section 7(b)(iii) of
the Plan. A participant may withdraw from the Plan and recommence participation
as provided in this Section 11 only once during any six (6) month period.
12. RIGHTS NOT TRANSFERABLE.
No eligible employee who is participating in the Plan may sell, assign,
transfer, pledge, or otherwise dispose of or encumber either the payroll
deductions authorized by the enrollment agreement or any rights with regard to
the exercise of an option or to receive shares under the Plan other than by will
or the laws of descent and distribution, and such right and interest shall not
be liable for, or subject to, the debts, contracts, or liabilities of the
participant. If any such action is taken by the participant, or any claim is
asserted by any other party in respect of such right and interest whether by
garnishment, levy, attachment or otherwise, such action or claim will be treated
as an election to withdraw from the Plan in accordance with Section 11.
Participation in the Plan can only be exercised by the eligible employee to whom
the option to participate has been granted.
13. TERMINATION OF EMPLOYMENT.
In the event of a participant's retirement, death, or other termination of
employment, no payroll deductions shall be made from any Compensation then due
and owing to such employee at such time, and a certificate representing the
number of whole shares of Common Stock then credited to the participant's
account and a check in payment for any fractional shares credited to the
participant's account and for any funds not applied toward the purchase of
shares as of that date shall be issued and delivered to the participant or the
participant's representative. Payment for such fractional shares shall be based
on the Fair Market Value
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
7
<PAGE> 36
of a share of Common Stock on the last Trading Day of the Offering Period
immediately preceding the participant's termination of employment.
14. PERIODS OF INACTIVE EMPLOYMENT.
A participant may elect to continue to make payroll deductions under the
Plan for the first ninety (90) days of any period of inactive employment due to
disability or approved leave of absence if the participant continues to receive
Compensation from the Company as defined in Section 3 of the Plan. If a
participant does not receive Compensation from the Company during a period of
inactive employment, the participant's payroll deductions shall immediately
cease; however, such deductions shall resume automatically if the participant
returns to active employment within ninety (90) days. If a participant elects to
discontinue the payroll deduction, such election shall be treated as a
withdrawal from participation in the Plan in accordance with Section 11 of the
Plan. In any event, a participant shall be treated as having withdrawn from the
Plan in accordance with Section 11 of the Plan on the ninety-first (91st) day of
any period of inactive employment. As soon as is practicable after the
ninety-first (91st) day of any period of inactive employment, a certificate
representing the number of whole shares of Common Stock then credited to the
participant's account and a check for any amount of excess funds and fractional
shares credited to such account as of that date (calculated in accordance with
Section 13) will be issued and delivered to the participant.
15. REORGANIZATION.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, offering of rights, or
any other change in the structure of Common Stock, the Committee may make such
adjustments, if any, as it may deem appropriate in the number, and kind of
shares available for purchase under the Plan, and in the minimum and maximum
number of shares which a participant is entitled to purchase. The Base Option
Price for each participant shall be proportionately adjusted and reset in the
event of any reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, offering of rights, or any other
change in the structure of Common Stock, that has the direct effect of impacting
the Fair Market Value of a share of Common Stock.
16. AMENDMENTS.
The Board may review and modify the operation and administration of the
Plan quarterly and may amend the terms of the Plan at any time without obtaining
the approval of the stockholders of the company unless stockholder approval is
required by Section 423 of the Code or by any other applicable law, regulation
or rule. The Board may not amend the Plan in any manner which would materially
and adversely affect an option previously granted to a participant without the
consent of such participant; provided, however, that the Board may at any time
make such amendments as it may deem necessary to cause the Plan to comply with
the requirements of Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended.
17. TERMINATION OF PLAN.
The Plan and all rights of the participants shall terminate on the earlier
to occur of: (i) a termination pursuant to Section 4(a); or (ii) the date as of
which the Committee or the Board terminates the Plan. Upon termination, all
payroll deductions shall cease and all amounts credited to participants'
accounts shall be equitably applied to the purchase of the shares of Common
Stock then available under the Plan, and all funds accumulated under the Plan
not utilized to purchase shares shall be refunded without interest.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
8
<PAGE> 37
18. REQUIRED GOVERNMENTAL APPROVALS.
The Plan, all options granted under the Plan and all other rights inherent
in the Plan are subject to receipt by the Company of all necessary approvals or
consents of governmental agencies which the Company, in its sole discretion,
shall deem necessary or advisable. Notwithstanding any other provision of the
Plan, all options granted under the Plan and all other rights inherent in the
Plan are subject to such termination and/or modification as may be required or
advisable in order to obtain any such approval or consent, or which, as a result
of consequences attaching to any such approval or consent, may be required or
advisable in the judgment of the Committee in order to avoid adverse impact on
the Company's overall wage and salary policy.
19. NO EMPLOYMENT RIGHTS.
The Plan does not, directly or indirectly, create in any employee or class
of employees any right with respect to continuation of employment by the Company
or any Employing Corporation, and it shall not be deemed to interfere in any way
with the Company's or any Employing Corporation's right to terminate, or
otherwise modify, an employee's employment at anytime with or without cause.
20. GENDER.
Pronouns shall be deemed to include both the masculine and feminine gender,
and words used in the singular shall be deemed to include both the singular and
the plural, unless the context indicates otherwise.
21. EXPENSES.
Expenses of administering the Plan, including any expenses incurred in
connection with the purchase by the Company of shares for sale to participating
employees, shall be paid by the Employing Corporations. Participants shall be
responsible for all expenses associated with certificating and selling shares
purchased by the participant under the Plan.
22. GOVERNING LAW.
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflict of laws.
Adopted by the Board of Directors, December 9, 1999
Approved by the Shareholders: , 2000
9
<PAGE> 38
GLOBAL TELESYSTEMS GROUP, INC.
YEAR 2000
INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN
Effective April 1, 2000
(Subject to Shareholder Approval)
1. PURPOSE OF PLAN.
The purpose of the Global TeleSystems Group, Inc. Year 2000 International
Employee Stock Purchase Plan (the "International Plan") is to provide eligible
employees who wish to become stockholders of Global TeleSystems Group, Inc. (the
"Company"), or who wish to increase their stockholdings in the Company, with an
opportunity to purchase shares of the Company's common stock, par value $0.10
per share ("Common Stock"), on a basis that is more convenient and more
favorable than would otherwise be available. It is believed that employee
participation in ownership of the Company on this basis will be to the mutual
benefit of both the employees and the Company. The Company adopts this
International Plan as a companion and supplement with flexibility required under
local law for non-U.S. employees to its 1999 Employee Stock Purchase Plan.
2. EMPLOYEES ELIGIBLE TO PARTICIPATE.
(a) Any employee who is employed by the Company or any "parent corporation"
of the Company (a "Parent"), or "subsidiary corporation" of the Company (a
"Subsidiary") which adopts the International Plan with the consent of the
Company (an "Employing Corporation") at the beginning of any Offering Period
occurring after the Effective Date of the International Plan in the jurisdiction
where the employee is employed, shall be eligible to participate in the
International Plan for that Offering Period, except as otherwise required by
local law.
(b) Officers of Employing Corporations are eligible to participate in the
Plan under the International Plan.
(c) For purposes of this International Plan, an eligible employee shall not
include any individual who performs services for the Company or a Subsidiary
solely as an independent contractor, consultant or employee of a third party
employment or leasing agency.
(d) For the purposes of determining who is an eligible employee under the
International Plan, an employee's eligibility shall be denied if, as a result of
such denial of eligibility, there would occur an infraction of a law, rule or
regulation of the local jurisdiction in which such employee is employed.
3. ELIGIBLE COMPENSATION.
Compensation eligible for payroll deductions ("Compensation") shall be base
salary and, to the extent permitted by the Stock Purchase Plan Committee ("the
Committee"), any commissions and/or bonuses paid in each payroll period.
Compensation does not include overtime pay, severance pay, incentive pay, shift
premium differentials, pay in lieu of vacation, imputed income for income tax
purposes, patent and award fees, awards and prizes, back pay awards,
reimbursement of expenses and living allowances, educational allowances, expense
allowances and reimbursements, expatriate benefits and expense allowances,
disability benefits under any insurance program, fringe benefits, deferred
compensation, compensation under the Company's stock plans, amounts paid for
services as an independent contractor, or any other compensation excluded by the
Committee in its discretion, applied in a uniform manner.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
1
<PAGE> 39
4. TERMS OF OFFERS.
(a) Effective Date and Term.
The term of the International Plan shall begin on when implemented in a
country during 2000 (the "Effective Date") and shall continue until terminated
pursuant to Section 17. During the term of the International Plan there shall be
quarterly offering periods (the "Offering Periods" or, an "Offering"). The
Effective Date and full implementation of the International Plan shall be
subject to shareholder approval of the International Plan at the annual meeting
of the Company to be held in 2000 (the "Annual Meeting"). In the event that the
International Plan is not approved at the Annual Meeting, the International Plan
shall automatically be terminated and each participant shall be refunded all
monies deducted from their compensation in pursuant to Section 4(b), without
interest.
(b) Elections to Participate.
In order to participate in the International Plan, an eligible employee
must execute and return an enrollment/payroll deduction authorization form or
complete such other procedures as the plan administrator (the "Plan
Administrator") may require or permit (an "enrollment agreement"), at least
twenty-one (21) days prior to the date on which such eligible employee shall be
permitted to commence participation in the International Plan. The Plan
Administrator shall be the person, or group of persons, whom the Committee
designates as such. By executing and returning and enrollment agreement,
eligible employees shall be authorizing the Plan Administrator to make regular
payroll deductions in either (i) a specified whole dollar amount for each
payroll period or (ii) any full percentage of Compensation. Neither the
specified whole dollar amount, nor the designated percentage deduction shall
exceed fifteen percent (15%) of any eligible employee's compensation during any
payroll period. The requirement that each eligible employee return an enrollment
agreement at least twenty-one days prior to their eligibility date shall not
apply to the enrollment period for the initial Offering Period. The enrollment
period for the initial Offering Period shall be set by the Committee pursuant to
its authority under Section 10. EACH ELIGIBLE EMPLOYEE WHO ELECTS TO PARTICIPATE
IN THE INTERNATIONAL PLAN ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE
PRICE OF THE COMMON STOCK.
If a participant authorizes payroll deductions pursuant to clause (ii) in
the foregoing paragraph, the amount of Compensation to be deducted shall be
determined for each payroll period on a basis of the percentage of Compensation
authorized for deduction by the participant, which amount shall be increased or
decreased (as applicable) on a prospective basis to reflect changes in such
Compensation during the term of the International Plan.
5. PARTICIPATION.
(a) In General.
On the first day of each Offering Period subsequent to the initial Offering
Period, each then eligible employee, who has completed an enrollment agreement
in the manner required by Section 4(b), shall be granted an option to purchase
the number of shares of Common Stock determined by the employee's payroll
deduction elections made in accordance with such eligible employees enrollment
agreement; provided, however, that in no event shall such number of shares of
Common Stock exceed the amount permitted in Section 6(d) or the maximum dollar
amount of Section 6(b).
(b) Newly Eligible Employees.
Each new employee of the Company or an Employing Corporation who becomes an
eligible employee pursuant to the terms of Section 2, must complete an
enrollment agreement pursuant to Section 4(b) in order to participate in the
International Plan during the next Offering Period in which such newly eligible
employee shall be permitted to participate in the International Plan. Each newly
eligible employee shall be subject to the
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
2
<PAGE> 40
purchase limits of Sections 6(b) and 6(d) and such newly eligible employee's
option price shall be set according to Section 7(a)(ii).
(c) Enrollment During an Offer.
Any eligible employee who elects not to participate in the International
Plan within the initial Offering Period may subsequently elect to participate,
subject to the recommencement terms and conditions of Section 11.
(d) Changes in Payroll Deduction Authorization.
Participants are permitted to increase or decrease their rate of payroll
deduction, subject to the terms and limitations of the International Plan
without affecting the Option Price (or the Alternative Option Price, if
applicable); provided, however, that a participant shall not be permitted to
make more than one such change per calendar quarter. (Such calendar quarters end
on March 31st, June 30th, September 30th and December 31st of each year.) Any
such change shall be effective for a given payroll period provided that the
employee's revised enrollment agreement submitted to the Plan Administrator
prior to the applicable payroll cutoff date. A reduction of the payroll
deduction percentage to zero shall constitute a withdrawal from the
International Plan in accordance with Section 11.
(e) Notice of Dispositions.
As part of the enrollment agreement, each participant in an Offering shall
agree to notify the Company of any disposition of shares of Common Stock
purchased pursuant to the International Plan prior to either (i) two (2) years
after the first Trading Day of the first Offering Period in which such employee
participates in the International Plan or (ii) one year from the Purchase Date
of such shares of Common Stock, whichever period is longer.
(f) Equivalent Rights.
All employees granted options under the International Plan shall have the
same rights and privileges under the International Plan except that the number
of shares each participant may purchase shall bear a uniform relationship to the
employee's eligible Compensation and shall depend upon the payroll deduction the
employee authorizes.
(g) Trading Day.
For purposes of the International Plan, a "Trading Day" is a day on which
shares of Common Stock are traded on the New York Stock Exchange, the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading, the NASDAQ National Market System or other market on which
the Common Stock is traded on such date.
6. PARTICIPATION LIMITATIONS.
(a) Five Percent Owners.
Notwithstanding anything herein to the contrary, no employee shall be
granted an option to purchase any shares of Common Stock under the International
Plan if the employee, immediately after the option is granted, owns or would own
shares, either directly or indirectly, (including all shares which may be
purchased under outstanding options under the International Plan) in excess of
five percent (5%) or more of the total combined voting power or value of all
classes of shares of capital stock of the company, the Employing Corporation, or
any Parent or Subsidiary.
(b) $25,000 Value Limitation.
If pursuant to the terms the International Plan, an employee would be
granted one or more options that would cause such an employee to accrue shares
of Common Stock under the International Plan at a rate
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
3
<PAGE> 41
which exceeds twenty-five thousand dollars ($25,000) of the Fair Market Value of
such shares (determined at the time such options were granted) for each calendar
year in which such options are outstanding at any time, then such options shall
not be granted and the employee shall instead be granted options to purchase
shares in an amount that, when combined with the employee's right to purchase
shares under all Stock Purchase Plans of the Company, the Employing Corporation
and its Parents and Subsidiaries, will not cause the employee's right to
purchase shares of stock to accrue at such a rate which exceeds such an amount
for each calendar year in which such options are outstanding at any time.
(c) Fair Market Value.
Unless otherwise defined by the Committee at the beginning of an Offering
Period, the "Fair Market Value" of the Common Stock on any date shall mean the
closing price of a share of Common Stock on that date, on the New York Stock
Exchange, the principal stock exchange or other market on which the Common Stock
is traded or if such day is not a Trading Day, on the immediately preceding
Trading Day, as reported in the Wall Street Journal on the next business day. If
the price of the Common Stock is not reported on any securities exchange or
national market system, the Fair Market Value of the Common Stock on a
particular date shall be as determined by the Committee.
(d) Maximum Number of Shares.
The maximum number of shares of Common Stock which an employee shall be
permitted to purchase pursuant to the International Plan shall be the greater of
5,000 shares or the maximum number of shares of Common Stock that can be
purchased under the limitations of Sections 4(b) and 6(b). When the foregoing
participation limitation is reached, payroll deductions shall cease, and any
amount of excess funds as of the date that the participation limitation has been
reached shall be returned to the employee.
7. OPTION PRICE.
The option price (the "Option Price") at which shares of Common Stock may
be purchased during any Offering Period shall be the lesser of (i) eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the first
Trading Day of each calendar quarter; or (ii) eighty-five percent (85%) of the
Fair Market Value of a share of Common Stock on the Purchase Date of each
calendar quarter during the term of the International Plan.
8. EXERCISE OPTIONS.
(a) Purchase of Common Stock.
At the end of each payroll period, each participant shall have deducted
from his pay the amount authorized pursuant to Sections 4(b). This amount shall
be held for the credit of the participant by the Company as part of its general
funds and shall not accrue any interest. On the last Trading Day of each
Offering Period (the "Purchase Date"), a participant shall be deemed to have
exercised the option to purchase at the lesser of the then applicable Base
Option Price or the Alternative Option Price, that number of whole and
fractional shares of Common Stock which may be purchased with the amount
deducted from the participant's Compensation during that Offering Period and
excess funds from the preceding Offering Period, if any.
(b) Plan Custodian.
The Committee shall designate an appropriate financial services or
brokerage firm as the plan custodian (the "Plan Custodian"). On each Purchase
Date, the Plan Custodian shall receive from the Company, at the applicable
Option Price, as many whole shares of Common Stock as can be purchased with the
funds received from each participant during the Offering Period and excess funds
from the preceding Offering Period, if any. Upon receipt of the Common Stock so
purchased, the Plan Custodian shall allocate to each participant, the number of
whole shares of Common Stock, and the amount of any fractional shares, to which
each participant
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
4
<PAGE> 42
is entitled. Subject to any limitations imposed by the Committee from time to
time, a certificate representing the number of shares of Common Stock to which a
participant is entitled shall be issued to the participant, at the participant's
expense, upon written request. Unless otherwise requested by the participant,
Common Stock purchased under the International Plan shall be held by, and in the
name of, or in the name of a nominee of, the Plan Custodian for the benefit of
each participant, who shall thereafter be a beneficial stockholder of the
Company.
(c) Rights as a Stockholder.
A participant's rights as a stockholder of record of the Company shall vest
on the initial Purchase Date. Shares of Common Stock issued to participants
shall be transferable in accordance with applicable securities laws.
9. NUMBER OF SHARES TO BE OFFERED.
The maximum number of shares of Common Stock that may be purchased under
the International Plan is 1,000,000. Such shares may be treasury shares, or
authorized and unissued shares, as the Board may determine in its sole
discretion. In the event that, during any Offering Period, it is determined that
the number of shares of Common Stock authorized by this Section 9 shall be
insufficient to cover the number of shares of Common Stock that must be
transmitted by the Company to the Plan Custodian pursuant to Section 8(b), the
Committee is hereby authorized to increase the number of authorized shares of
Common Stock under the International Plan in order to cover such shortfalls for
the remaining term of the International Plan.
10. ADMINISTRATION AND INTERPRETATION OF THE INTERNATIONAL PLAN.
The International Plan shall be administered by the Plan Administrator
designated by the Committee. The members of the Committee shall be designated by
the Board. Except as expressly provided herein, the Committee shall have the
exclusive right to interpret the provisions of the International Plan and to
determine any questions arising hereunder or in connection with the
administration of the International Plan, including the remedying of any
omission, inconsistency, or ambiguity, and the determination of benefits,
eligibility and interpretation of any provisions of the International Plan. The
Committee's decisions, determinations, interpretations or other actions in
respect thereof shall be conclusive and binding upon all participants, former
participants, beneficiaries, heirs, executors, assigns, and all other parties.
The Committee shall have the authority to amend or alter the International Plan
in order for the International Plan to conform with any applicable laws, rules
and regulations of those jurisdictions outside the United States where the
Company has eligible employees.
11. WITHDRAWAL FROM THE INTERNATIONAL PLAN.
A participant may, at any time and for any reason, by giving notice to the
Plan Administrator, elect to withdraw from any further participation in the
International Plan. The withdrawing participant shall, as soon as practicable,
receive a certificate representing the number of whole shares of Common Stock
credited to the participant's account as of the date of withdrawal and a check
in payment for any fractional shares credited to the participant's account and
for any funds not applied toward the purchase of shares as of that date. Payment
for such fractional shares shall be based on the Fair Market Value of a share of
Common Stock on the last Trading Day of the Offering Period immediately
preceding the participant's withdrawal. An eligible employee who has withdrawn
from participation may elect to recommence participation in the International
Plan by executing and delivering to the Plan Administrator a new enrollment
agreement in the same manner required by Section 4(b). The Base Option Price
applicable to a recommencing participant shall be calculated according to
Section 7(b)(iii). A participant may withdraw from the International Plan and
recommence participation as provided in this Section 11 only once during any six
(6) month period.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
5
<PAGE> 43
12. RIGHTS NOT TRANSFERABLE.
No eligible employee who is participating in the International Plan may
sell, assign, transfer, pledge, or otherwise dispose of or encumber either the
payroll deductions authorized by the enrollment agreement or any rights with
regard to the exercise of an option or to receive shares under the International
Plan other than by will or the laws of descent and distribution, and such right
and interest shall not be liable for, or subject to, the debts, contracts, or
liabilities of the participant. If any such action is taken by the participant,
or any claim is asserted by any other party in respect of such right and
interest whether by garnishment, levy, attachment or otherwise, such action or
claim shall be treated as an election to withdraw from the International Plan in
accordance with Section 11. Participation in the International Plan can only be
exercised by the eligible employee to whom the option to participate has been
granted.
13. TERMINATION OF EMPLOYMENT.
A participant's participation in the International Plan shall cancel
immediately and automatically in the participant's employment is terminated for
any reason, and no payroll deductions shall be made from any Compensation then
due and owing to such employee at such time, and a certificate representing the
number of whole shares of Common Stock then credited to the participant's
account and a check in payment for any fractional shares credited to the
participant's account and for any funds not applied toward the purchase of
shares as of that date shall be issued and delivered to the participant or the
participant's representative. Payment for such fractional shares shall be based
on the Fair Market Value of a share of Common Stock on the last Trading Day of
the Offering Period immediately preceding the participant's termination of
employment.
14. PERIODS OF INACTIVE EMPLOYMENT.
To the extent permitted under the applicable laws and regulations of each
country where this International Plan is in effect, a participant may elect to
continue to make payroll deductions under the International Plan for the first
ninety (90) days of any period of inactive employment due to disability or
approved leave of absence if the participant continues to receive Compensation
from the Company as defined in Section 3. If a participant does not receive
Compensation from the Company during a period of inactive employment, the
participant's payroll deductions shall immediately cease; however, such
deductions shall resume automatically if the participant returns to active
employment within ninety (90) days. If a participant elects to discontinue the
payroll deduction, such election shall be treated as a withdrawal from
participation in the International Plan in accordance with Section 11. In any
event, a participant shall be treated as having withdrawn from the International
Plan in accordance with Section 11 on the ninety-first (91st) day of any period
of inactive employment. As soon as is practicable after the ninety-first (91st)
day of any period of inactive employment, a certificate representing the number
of whole shares of Common Stock then credited to the participant's account and a
check for any amount of excess funds and fractional shares credited to such
account as of that date (calculated in accordance with Section 13) shall be
issued and delivered to the participant.
15. REORGANIZATION.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, offering of rights, or
any other change in the structure of Common Stock, the Committee may make such
adjustments, if any, as it may deem appropriate in the number, kind, and price
of shares available for purchase under the International Plan, and in the
minimum and maximum number of shares which a participant is entitled to
purchase.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
6
<PAGE> 44
16. AMENDMENTS.
The Board may review and modify the operation and administration of the
International Plan quarterly and may amend the terms of the International Plan
at any time without obtaining the approval of the stockholders of the company
unless stockholder approval is required by applicable law, regulation or rule.
The Board may not amend the International Plan in any manner which would
materially and adversely affect an option previously granted to a participant
without the consent of such participant; provided, however, that the Board may
at any time make such amendments as it may deem necessary to cause the
International Plan to comply with the requirements of Rule 16b-3 promulgated by
the United States Securities and Exchange Commission under the securities
Exchange Act of 1934, as amended.
17. TERMINATION OF PLAN.
The International Plan and all rights of the participants shall terminate
on the earlier to occur of: (i) a termination pursuant to Section 4(a); (ii)
March 31, 2002 or (iii) the date as of which the Committee or the Board
terminates the International Plan. Upon termination, all payroll deductions
shall cease and all amounts credited to participants' accounts shall be
equitably applied to the purchase of the shares of Common Stock then available
under the International Plan, and all funds accumulated under the International
Plan not utilized to purchase shares shall be refunded, without interest.
18. REQUIRED GOVERNMENTAL APPROVALS.
The International Plan, all options granted under the International Plan
and all other rights inherent in the International Plan are subject to receipt
by the Company of all necessary approvals or consents of governmental agencies
which the Company, in its sole discretion, shall deem necessary or advisable.
Notwithstanding any other provision of the International Plan, all options
granted under the International Plan and all other rights inherent in the
International Plan are subject to such termination and/or modification as may be
required or advisable in order to obtain any such approval or consent, or which,
as a result of consequences attaching to any such approval or consent, may be
required or advisable in the judgment of the Committee in order to avoid adverse
impact on the Company's overall wage and salary policy.
19. NO EMPLOYMENT RIGHTS.
The International Plan does not, directly or indirectly, create in any
employee or class of employees any right with respect to continuation of
employment by the Company or any Employing Corporation, and it shall not be
deemed to interfere in any way with the Company's or any Employing Corporation's
right to terminate, or otherwise modify, an employee's employment at anytime
with or without cause. The option granted to employees to purchase shares of
Common Stock in the Company does not entitle any employees to any benefit other
than that granted under the International Plan. The options granted under the
International Plan are not part of any employee's ordinary compensation or
remuneration and shall not be considered as part of such compensation or
remuneration in the event of severance, redundancy or resignation. Each employee
understands and accepts that the options granted under the International Plan
are entirely at the grace and discretion of the Company and the Employing
Corporation of such employee and that the Company and the Employing Corporation
retains the right to amend or terminate the International Plan at any time, at
their sole discretion and without notice.
20. GENDER.
Pronouns shall be deemed to include both the masculine and feminine gender,
and words used in the singular shall be deemed to include both the singular and
the plural, unless the context indicates otherwise.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
7
<PAGE> 45
21. EXPENSES.
Expenses of administering the International Plan, including any expenses
incurred in connection with the purchase by the Company of shares for sale to
participating employees, shall be paid by the Employing Corporations.
Participants shall be responsible for all expenses associated with certificating
and selling shares purchased by the participant under the International Plan.
Adopted by the Board of Directors, December 9, 1999
Approved by the Shareholders: , 2000
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.
8
<PAGE> 46
[Form of Proxy]
[Front of Proxy]
GLOBAL TELESYSTEMS GROUP, INC.
4121 WILSON BOULEVARD
8TH FLOOR
ARLINGTON, VIRGINIA 22203
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby makes, constitutes and appoints H. Brian
Thompson, Robert A. Schriesheim and Grier C. Raclin and each of them, lawful
attorney and proxies of the undersigned, with full power of substitution, for
and in the name, place and stead of the undersigned to attend the Annual Meeting
of Stockholders of Global TeleSystems Group, Inc. at the Ritz Carlton Hotel at
Pentagon City, Arlington, Virginia on Tuesday, May 16, 2000, at 10:30 a.m.,
local time, and at any adjournment(s) thereof, with all powers the undersigned
would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ITEMS 1, 2, 3, 4 AND 5 (Continued, and to be signed and dated, on
reverse side.)
[Reverse of Proxy]
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all [ ] WITHHOLD AUTHORITY to vote [ ] EXCEPTIONS [ ]
nominees for all nominees listed
listed below below
Nominees: Robert J. Amman, Bernard J. McFadden, Stewart J. Paperin and Alan B. Slifka
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE MARK THE "EXCEPTIONS"
BOX AND WRITE THAT NOMINEE'S NAME IN SPACE PROVIDED BELOW.)
*Exceptions______________________________________________________________________________________
2. Approval of change in the Company's name 3. Approval of the increase in authorized
common stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval of Employee Stock Purchase Plans 5. Proposal to ratify the appointment of
Ernst & Young LLP as the Company's
auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
I/we will [ ] Address [ ]
attend meeting. Change Mark
Here
Please sign exactly as name appears. When shares are held by
joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give
full title as such.
Dated:____________________________, 2000
----------------------------------------
Signature
----------------------------------------
Signature if held jointly
Votes MUST be indicated [ ]
(x) in Black or Blue Ink.
</TABLE>
PLEASE SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
