EMPLOYMENT
AGREEMENT
THIS AGREEMENT is made and
entered into as of the 19th day of July, 2005, by and between
Golden Telecom, Inc. (“GTI”), a Delaware corporation,
and Jean-Pierre Vandromme, an adult citizen of Belgium (the
“Employee”).
WHEREAS , the Employee is
appointed Chief Executive Officer of GTI, such appointment to be
effective September 1, 2005;
WHEREAS , GTI desires to
employ the Employee and the Employee desires to be employed by GTI,
subject to the terms and provisions of this employment agreement
(the “Agreement”);
NOW THEREFORE , GTI and the
Employee mutually agree as follows:
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(a)
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GTI hereby employs the Employee, and the
Employee hereby accepts employment, on the terms and conditions set
forth herein.
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(b)
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The Employee shall be employed as
September 1, 2005 in the position of Chief Executive Officer
of GTI, and, as necessary and appropriate, seconded to one or more
of GTI’s affiliates, based in Moscow, Russia, but may from
time to time be given such additional titles or be requested to
perform such duties and exercise such power and authority
commensurate with the Employee’s position as may be delegated
to the Employee by the Board of Directors of GTI.
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(c)
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The Employee shall devote all necessary
business time and attention, and employ the Employee’s best
efforts, toward the fulfillment and execution of all assigned
duties, and the satisfaction of defined annual and/or longer-term
performance criteria.
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(d)
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Employee will have full authority in forming
and directing the management of, creating and revising the
organizational structure of, and appointing and dismissing the
top-level management of, GTI and its subsidiaries and business
units.
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(a)
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This Agreement is effective as of the date
first set forth above, and shall continue unless terminated in
accordance with Section 11 herein.
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(b)
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GTI reserves the right to require the Employee
not to be present on the premises of GTI and its subsidiaries and
business units or to provide the Employee with alternative work of
a broadly similar nature to the work the Employee normally
performs, during any period of suspension or while the Employee is
under notice of termination (served either by GTI or the Employee),
provided that the Employee continues to be paid the salary and
benefits to which the Employee is entitled under this Agreement and
further provided that the period of any such requirement does not
exceed six (6) months.
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(a)
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For the purposes of this Agreement,
“Salary” shall mean all payments by GTI to the Employee
pursuant to this Section 3.
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(b)
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Commencing on September 1, 2005 and
continuing thereafter unless adjusted as set forth herein, the
Employee shall be paid an annual Salary of five hundred thousand
dollars (USD 500,000) payable in accordance with GTI’s
customary payroll practices for Employees, but no less frequently
than monthly and prorated for any partial year of employment.
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(c)
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As soon as practicable following the last day
of each fiscal year of GTI, the Compensation Committee of
GTI’s Board of Directors (“Compensation
Committee”) shall review the Salary of the Employee and the
bonus structure for the Employee and shall consider, based upon the
Employee’s performance and GTI’s financial position,
potential increases, but not decreases, to the Employee’s
Salary and bonus structure as the Compensation Committee shall, in
its sole and absolute discretion, deem appropriate. Any such
increased Salary shall be the “Salary” for all purposes
under this Agreement.
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GTI shall pay to the Employee a one
time signing bonus in the amount of two hundred and fifty thousand
dollars (USD 250,000) during August 2005.
Subject to the terms and conditions
of the incentive bonus plan for senior managers (“Bonus
Plan”) generally applicable for senior managers, GTI shall
pay to the Employee an annual performance-based, incentive
compensation payment (“Target Bonus”), which, in the
first year of the term hereof, shall be in an amount up to three
hundred seventy five thousand dollars (USD 375,000).
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6.
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Grant of Stock Appreciation Rights.
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(a)
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On or as soon as practicable following
September 1, 2005, the Employee shall be issued stock
appreciation rights with respect to 200,000 shares of GTI common
stock (the “Award”), at a share price which shall be
the closing price of GTI common stock on the Nasdaq National Market
beginning on July 19, 2005 (“Granting Share
Price”), one-third of which shall be and become vested and
nonforfeitable on each of the first three anniversary dates from
September 1, 2005, provided the Employee remains continuously
employed by GTI or one of its subsidiaries or business units until
each such relevant date. If, prior to August 31, 2008 and
during the Employee’s period of employment with GTI or one of
its subsidiaries or business units, the average closing stock price
of one share of GTI common stock on the Nasdaq Stock Market (or any
such other exchange on which the GTI common stock may than be
traded) exceeds fifty dollars (USD 50.00) during any thirty
(30) day consecutive period, the Employee will be granted
stock appreciation rights for an additional 200,000 shares of GTI
common stock at the Granting Share Price, which stock appreciation
rights shall be fully vested upon issuance.
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(b)
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All stock appreciation rights shall be
canceled, and GTI shall make a cash payment to the Employee on the
thirtieth (30th) day (or the next business day) following the
Employee’s termination of employment for any reason, with
such payment to be in an amount equal to the value of the stock
appreciation rights on the twenty-first (21st) day (or the next
business day) following the Employee’s termination of
employment. No vesting of stock appreciation rights shall occur on
or after the date that an Employee’s employment with GTI or
any of its subsidiaries or business units terminates for any reason
other than his death or Total Disability (as defined in Section
11(b) hereof) or in the event of a Change of Control (as defined in
Section 13(a)(1) hereof). In determining the number of shares
of GTI common stock with respect to which any stock appreciation
rights grant(s) is vested and/or exercisable, fractional shares
will be rounded up to the nearest whole number if the fraction is
0.5 or higher, and down if it is less.
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(c)
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In the event the Employee dies while in the
employ of GTI or any of its subsidiaries or terminates employment
with GTI or any of its subsidiaries or business units as a result
of Total Disability, any portion of the stock appreciation rights
grant(s) not yet vested on such date shall become 100% vested as of
such date and be exercisable either by the Employee or the
Employee’s representative.
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(d)
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Contemporaneous with the occurrence of a
Change of Control, with the exception of a Change of Control
described in Section 13(a)(2) hereof, the Employee shall
automatically become 100% vested in any portion of any stock
appreciation rights grant(s) which was not previously vested.
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(a)
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During the term of this Agreement, the
Employee shall be entitled to receive such benefits and to
participate in such employee group pension and welfare benefit
plans, property, life, and disability insurance, and worldwide
medical insurance and health benefits for the Employee and his
family with a reputable international insurance agency, initially
Aetna Global Benefits, and dental and medical coverage policies as
are generally provided by GTI to its employees of comparable level
and responsibility in accordance with the plans, practices and
programs of GTI (“Benefits”). The Employee’s life
insurance policy shall carry a value of $500,000 and his disability
insurance policy shall carry a value of $10,000 per month. .
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(b)
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Upon termination of this Agreement under any
of the eventualities described in paragraphs (b)-(e) of
Section 11 hereof, GTI shall provide the Employee with
reimbursement (i) for the cost of a one-way business class
airline ticket for the Employee and his spouse (or if he is not
married, his significant other) and his children from Moscow to
their place of relocation if other than Moscow; and (ii) for
the costs of moving the Employee’s and his spouse’s (or
if he is not married, his significant other’s) and
children’s household goods, including pets, vehicles and
other personal property from Moscow to their place of relocation or
to any storage facility designated by the Employee.
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In conjunction with the foregoing,
in the event of the Employee’s voluntary resignation under
Subsection 11(d) hereof, the benefits provided under this
Subsection 7(b) shall be payable only if (i) the effective
date of the Employee’s voluntary resignation is on or after
September 1, 2006, and (ii) the Employee and his spouse
(or if he is not married, his significant other) and his children
incur the foregoing travel and relocation expenses within one
(1) year of the effective date of the termination of his
employment.
Furthermore, in the event of the
Employee’s death or termination of employment due to Total
Disability under Subsections 11(b) and (c) hereof,
respectively, the foregoing travel and relocation expense shall
include the cost, as appropriate, of shipping the Employee’s
body to a place designated by him or his spouse (or if he is not
married, his significant other) or alternatively, if appropriate
due to the Employee’s Total Disability, shall include the
cost of providing the Employee with an appropriate medical
evacuation mode of travel.
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(c)
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During the term of this Agreement and for the
tax reporting year twelve months after the termination of this
Agreement, GTI shall pay the cost of services by Ernst & Young,
or some other reputable international accounting/tax firm as
determined by GTI, to prepare the Employee’s and his
spouse’s (or if he is not married, his significant
other’s) tax declarations in Russia and in the
Employee’s and his spouse’s (or if he is not married,
his significant other’s) country of citizenship, to the
extent required and requested by the Employee. In addition, it is
the intent of the parties hereto that GTI shall equalize the
Employee’s income tax obligation as if the Employee’s
compensation and other benefits provided under this Agreement were
earned in his country of citizenship and subject only to income tax
in that country. As such, the parties hereto expressly acknowledge
and agree that (i) GTI or its subsidiaries or business units
shall pay all of the Employee’s Russian tax obligations
associated with the Employee’s compensation and other
benefits provided under this Agreement, other than income resulting
from the SARs granted to the Employee, in such amounts and at such
times as required by applicable Russian tax law (whether directly
to the Russian taxing authority, or through reimbursement to the
Employee), plus pay to the Employee such additional amounts as are
required to gross up the Employee’s compensation and benefits
provided under this Agreement for any Russian and country of
citizenship income taxes associated with the payments and
reimbursements required by this Section 7(c) and (ii), , other than
income resulting from the SARs granted to the Employee,
notwithstanding any change in the tax law of his country of
citizenship after the date hereof.
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(d)
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During the term of this Agreement, GTI shall
provide necessary visa support for the Employee and his family.
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(e)
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During the term of this Agreement, GTI shall
make available, at its sole expense, foreign language training for
the Employee, his spouse (or if not married, his significant other)
and children.
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(f)
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During the term of this Agreement, GTI shall
provide Employee with blanket accident insurance, which insures
against accidental loss of life or bodily injury.
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(g)
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During the term of this Agreement, GTI shall
make available to Employee personal property insurance coverage
against physical loss to items of Employee’s personal
property which are lost, damaged or destroyed.
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8.
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Expense Reimbursement.
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During the term of employment, GTI
shall reimburse the Employee for all reasonable and necessary
expenses incurred by the Employee in connection with the
performance of Employee’s duties as an employee of GTI. Such
reimbursement is subject to the submission to GTI by the Employee
of appropriate documentation and/or vouchers in accordance with the
customary procedures of GTI for expense reimbursement, as such
procedures may be revised by GTI from time to time hereafter.
During each of GTI’s fiscal
years during the term of employment, the Employee shall be entitled
to no less than four (4) weeks vacation, or such greater
number of days as provided by any policy of GTI. Unused vacation
days will not carry-over or accumulate from year to year without
the prior written consent of the Director, Human Resources.
Notwithstanding Section 7(c) of this
Agreement, to the extent that the Golden Telecom Group, Inc.
Expatriate Taxation Policy attached hereto as Annex A, as amended
from time to time (“Policy”), provides more favorable
treatment to the Employee, the Policy will control.
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(a)
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GTI shall have “Cause” to
terminate the Employee’s employment hereunder upon the
Employee’s:
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(i) failure to follow a legal
order of the Board of Directors of GTI, other than any such failure
resulting from the Employee’s physical or mental disability,
sickness or other periods of excused absence after notice and
reasonable opportunity for cure;
(ii) fraud, embezzlement, or
any other similar illegal act committed by the Employee in
connection with the Employee’s duties as an employee of GTI
or any direct or indirect subsidiary or business unit of GTI;
(iii) conviction of any felony
involving moral turpitude which causes or may reasonably be
expected to cause substantial economic injury to or substantial
injury to the reputation of GTI or any direct or indirect
subsidiary or business unit of GTI; or
(iv) willful commission of an
act or willful omission of an act which is intended to cause or may
reasonably be expected (as of the time of such occurrence) to cause
substantial economic injury to or substantial injury to the
reputation of GTI or any direct or indirect subsidiary or business
unit of GTI, including, without limitation, any material violation
of the Foreign Corrupt Practices Act, as described herein
below.
Action or
inaction by the Employee shall not be considered
“willful” unless done or omitted by the Employee
intentionally and without the Employee’s reasonable belief
that the Employee’s action or inaction was in the best
interests of GTI, and shall not include failure to act by reason of
total or partial incapacity due to physical or mental illness. The
cessation of employment of the Employee shall not be deemed to be
for Cause unless prior to such termination there shall have been
delivered to the Employee a copy of a resolution duly adopted by
the affirmative vote of not less than a majority of the
disinterested membership of the Board of Directors of GTI at a
meeting of such Board of Directors called and held for such purpose
(after reasonable notice is provided to the Employee and the
Employee is given an opportunity, together with counsel, to be
heard before such Board of Directors), finding, that, in the good
faith opinion of the Board of Directors, the Employee is guilty of
the conduct described in clause (i), (ii) (iii) or
(iv) above, and specifying the particulars thereof in
detail.
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(b)
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Termination by Reason of Total Disability.
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Notwithstanding anything to the
contrary in this Agreement, GTI shall at all times have the right
to terminate this Agreement and the employment of the Employee
immediately by delivering written notice to the Employee if the
Employee experiences a Total Disability. For the purpose of this
Agreement, the term “Total Disability” means any mental
or physical illness, condition, disability or incapacity that:
(i) prevents the Employee from
discharging essential job responsibilities and employment
duties;
(ii) shall be attested to in
writing by a physician or a group of physicians acceptable to GTI;
and
(iii) continues for period of
six (6) consecutive months.
A Total Disability shall be deemed
to have occurred on the last day of such applicable six
(6) month period, and shall be determined in accordance with
applicable law relating to disability.
(c) Termination by Reason of Death.
This Agreement shall terminate
immediately upon the death of the Employee.
(d) Voluntary Resignation.
The Employee may terminate the
Agreement at any time by giving ninety (90) days prior written
notice to GTI (the “Employee’s Notice Period”).
Upon receipt of such notice to GTI, GTI, in its sole and absolute
discretion, may either continue to employ the Employee during all
or part of the Employee’s Notice Period, or may continue to
pay the Employee’s Salary and continue Benefits during the
Employee’s Notice Period in lieu of continued employment.
(e) Termination Without Cause.
GTI may terminate the
Employee’s employment at any time, for any reason, by
providing the Employee with ninety (90) days prior written
notice (the “Employer’s Notice Period”) of
pending termination. Upon providing such notice to the Employee,
GTI, in its sole and absolute discretion, may either continue to
employ the Employee during all or part of the Employer’s
Notice Period, or may continue to pay the Employee’s Salary
and continue Benefits during the Employer’s Notice Period in
lieu of continued employment.
(f) Notice of Termination.
Any termination by GTI shall be
communicated by Notice of Termination to the Employee given in
accordance with Section 20. For purposes of this Agreement, a
“Notice of Termination” means a written notice given
within ten (10) business days of the GTI’s having actual
knowledge of the events giving rise to such termination, which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Employee’s employment under the provision
so indicated, and (iii) if the termination date is other than
the date of receipt of such notice, specifies the termination date
of this Agreement (which date shall be not more than fifteen (15)
days after the giving of such notice).
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12.
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Payments Upon Termination.
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(a) Payment.
Except as specifically set forth
herein, all payments to be made under the terms of this section may
be made, in GTI’s sole and absolute discretion, in one lump
sum payment paid as soon as reasonably practical following the date
of Employee’s termination or in installments over the term of
the period covered by the payments, paid in accordance with
GTI’s customary payroll practices.
(b) Termination For Cause.
In the event that the
Employee’s employment under this Agreement is terminated for
Cause, GTI shall have no obligation to pay the Salary or provide
any other compensation or Benefits provided under this Agreement
to, or for the benefit of, the Employee for any period after the
date of such termination, or to pay any Bonus for the fiscal year
in which such termination occurs; provided, however , that
GTI shall promptly pay (i) all Salary earned by the Employee
prior to the date of such termination, (ii) any Benefits under
any plans of GTI in which the Employee is a participant to the full
extent of the Employee’s rights under such plans prior to
termination, and (iii) reimbursement of any appropriate business
and/or entertainment expenses incurred by the Employee prior to
termination and properly submitted to GTI.
(c) Termination by Reason of Total Disability.
In the event that the
Employee’s employment under this Agreement is terminated by
reason of Total Disability, GTI shall have no obligation to pay the
Salary provided under this Agreement to or for the benefit of the
Employee for any period after the date of such termination;
provided, however , that GTI shall promptly pay to the
Employee (i) all Salary earned by the Employee prior to the
date of such termination, (ii) the pro rata share of any Bonus
for the fiscal year in which the total disability occurred (which
payment shall be made based on the assumption that GTI had met the
requirement for the payment of the Target Bonus) (iii) any
Benefits under any plans of GTI in which the Employee is a
participant
