UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed
by the Registrant |X| Filed by a Party
other than the Registrant |_|
Check
the appropriate box:
|_| Preliminary
Proxy Statement
|_| Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|x| Definitive Proxy
Statement
|_| Definitive
Additional Materials
|_| Soliciting
Material under Rule 14a-12
Freedom Holding Corp.
(Name
of Registrant as Specified in Its Charter)
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(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)(1) and
0-11
(1)
Title of each class
of securities to which transaction applies:
_____________________________________________________________
(2)
Aggregate number of
securities to which transaction applies:
_____________________________________________________________
(3)
Per unit price or
other underlying value of transaction computed pursuant to Exchange
Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
_____________________________________________________________
(4)
Proposed maximum
aggregate value of transaction:
_____________________________________________________________
_____________________________________________________________
|_| 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.:
_____________________________________________________________
_____________________________________________________________
(4)
Date Filed:
_____________________________________________________________
Freedom Holding Corp.
77/7, Al Farabi Ave., “Esentai Tower” BC
Floor 3, Almaty, 050040, Republic of Kazakhstan
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NOTICE OF THE 2018 ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholders:
You
are cordially invited to attend the 2018 annual meeting of
stockholders (the ‘‘2018 Annual Meeting’’)
of Freedom Holding Corp. (the ‘‘Company,’’
“FRHC,” “us,” “our,” or
“we”) which will be held at the Lotte Hotel Moscow, 8
bld. 2, Novinskiy Blvd., Moscow 121099, Russia on September 20,
2018 at 8:00 p.m. local time.
The
formal notice of the 2018 Annual Meeting is provided in the
enclosed proxy statement. At the 2018 Annual Meeting, stockholders
will vote on the following proposals:
(1)
Elect five
directors to the five-member Board of Directors of the Company as
follows: one Class II director for a three-year term, two Class I
directors each for a two-year term, and two Class III directors
each for a term of one-year, and in each case until their
respective successors have been duly elected and
qualified;
(2)
Approve the
Freedom Holding Corp. 2019 Equity Incentive Plan;
(3)
Advisory vote to
approve the compensation of our named executive
officers;
(4)
Advisory vote on
the frequency of the Company’s advisory vote on compensation
of our named executive officers;
(5)
Ratification of
the appointment of WSRP, LLC. as our independent registered public
accounting firm for the 2019 fiscal year; and
(6)
Transact such
other business as may properly come before the meeting or any
postponement or adjournment thereof.
The
enclosed proxy statement provides you with detailed information
regarding the business to be considered at the 2018 Annual Meeting.
Your vote is important. We urge you to please vote your shares now
whether or not you plan to attend the 2018 Annual Meeting. You may
revoke your proxy at any time before the proxy is voted by
following the procedures described in the enclosed proxy
statement.
Important Notice Regarding the
Availability of Proxy Materials for the 2018 Annual
Meeting. The rules of the
Securities and Exchange Commission allow us to furnish our proxy
materials over the internet. We are sending stockholders a notice
with instructions for accessing the materials and voting via the
internet, rather than mailing a full paper set of the materials.
The notice of availability contains instructions on how to access
our proxy materials on the internet, as well as instructions on
obtaining a paper copy of the proxy materials. All stockholders who
do not receive such a notice of availability will receive a full
set of paper proxy materials by U.S. mail. This process will reduce
our costs to print and distribute our proxy
materials.
Voting
by the internet or telephone is fast and convenient, and your vote
is immediately confirmed and tabulated. If you receive a paper copy
of the proxy materials, you may also vote by completing, signing,
dating and returning the accompanying proxy card in the enclosed
return envelope furnished for that purpose. By using the internet
or telephone, you help us reduce postage and proxy tabulation
costs.
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By order of the board of directors,
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/s/ Timur Turlov
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Timur Turlov
Chief Executive Officer and Chairman
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July 26, 2018
FREEDOM HOLDING CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 20, 2018
Time and Date:
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8:00
p.m. local time, on September 20, 2018
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Location:
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Lotte Hotel Moscow, 8 bld. 2, Novinskiy Blvd., Moscow 121099,
Russia
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Items of Business:
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(1)
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Elect
five directors to the five-member Board of Directors of the Company
as follows: one Class II director for a three-year term, two Class
I directors each for a two-year term, and two Class III directors
each for a term of one-year, and in each case until their
respective successors have been duly elected and
qualified.
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(2)
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Approve
the Freedom Holding Corp. 2019 Equity Incentive Plan.
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(3)
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Advisory
vote to approve the compensation of our named executive
officers.
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(4)
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Advisory
vote on the frequency of the Company's advisory vote on
compensation of named executive officers.
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(5)
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Ratification
of the appointment of WSRP, LLC. as our independent registered
public accounting firm for the 2019 fiscal year.
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(6)
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Transact
such other business as may properly come before the meeting or any
postponement or adjournment thereof
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Record Date:
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You can
vote if you were a stockholder of record at the close of business
on July 23, 2018.
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Internet Availability:
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We are
using the internet as our primary means of furnishing our proxy
materials to our stockholders. Rather than sending stockholders a
paper copy of our proxy materials, we are sending them a notice
with instructions for accessing the materials and voting via the
internet. We believe this method of distribution makes the proxy
distribution process more efficient and less costly and will limit
our impact on the environment. This notice of the 2018 Annual
Meeting, the proxy statement and our Annual Report on
Form 10-K, are available at
www.proxyvote.com.
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Proxy Voting:
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It is
important that your shares be present or represented and voted at
the 2018 Annual Meeting. You can vote your shares on the internet
at www.proxyvote.com, by telephone by
calling 1-800-690-6903, by completing and returning your
proxy card, or in person at the 2018 Annual Meeting. Voting
instructions are printed on your proxy card or included with your
proxy materials. You can revoke a proxy before its exercise at the
2018 Annual Meeting by following the instructions in the
accompanying proxy statement.
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By order of the board of directors,
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/s/ Timur Turlov
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Timur Turlov
Chief Executive Officer and Chairman
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July
26, 2018
TABLE
OF CONTENTS
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Page
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INFORMATION ABOUT
THE ANNUAL MEETING AND VOTING
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1
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PROPOSAL ONE
– ELECTION OF DIRECTORS
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6
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CORPORATE
GOVERNANCE
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10
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DIRECTOR
COMPENSATION
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15
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SECURITY
OWNERSHIP
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16
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EXECUTIVE
OFFICERS
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17
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PROPOSAL TWO
– APPROVE THE FREEDOM HOLDING CORP. 2019 EQUITY INCENTIVE
PLAN
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18
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PROPOSAL THREE --
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER
COMPENSATION
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24
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PROPOSAL FOUR –
ADVISORY VOTE ON THE FREQUENCY OF THE COMPANY’S ADVISORY VOTE
ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
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25
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EXECUTIVE
COMPENSATION
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26
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PROPOSAL
FIVE—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
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28
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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28
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CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
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29
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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31
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STOCKHOLDER
PROPOSALS FOR THE 2019 ANNUAL MEETING
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31
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2018
ANNUAL REPORT ON FORM 10-K
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32
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OTHER
MATTERS
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32
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INFORMATION
ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive these Proxy Materials?
We
are providing this notice of our annual meeting of stockholders,
proxy statement, voting instructions and Annual Report on Form 10-K
for the year ended March 31, 2018 (the “Proxy
Materials”) in connection with the solicitation by the board
of directors (the “Board”) of Freedom Holding Corp.
(the “Company,” “FRHC,” “we,”
“us” or “our”), a Nevada corporation, of
proxies to be voted at our 2018 annual meeting of stockholders and
at any adjournment or postponement thereof (the “2018 Annual
Meeting”).
We
anticipate that the notice of internet availability of Proxy
Materials will first be sent to stockholders on or about July 30,
2018. The proxy statement and the form of proxy relating to the
2018 Annual Meeting are first being made available to stockholders
on or about July 30, 2018.
You
are invited to attend the 2018 Annual Meeting on September 20,
2018, beginning at 8:00 p.m., local time. The 2018 Annual Meeting
will be held at the Lotte Hotel Moscow, 8 bld. 2, Novinskiy Blvd.,
Moscow 121099, Russia. Stockholders will be admitted to the 2018
Annual Meeting beginning at 7:30 p.m., local time. Seating will be
limited.
What is the difference between holding shares as a stockholder of
record and as a beneficial owner?
If
your shares are registered directly in your name with our transfer
agent, Pacific Stock Transfer Company, you are considered the
“stockholder of record” with respect to those shares.
If you are a stockholder of record, we are sending the Proxy
Materials directly to you at the address of record on account with
Pacific Stock Transfer Company.
If
your shares are held in a stock brokerage account or by a bank or
other holder of record, those shares are held in “street
name.” You are considered the “beneficial owner”
of shares held in street name. The Proxy Materials have been
forwarded to you by your broker, bank or other holder of record who
is considered, with respect to those shares, the stockholder of
record. As the beneficial owner, you have the right to direct your
broker, bank or other holder of record on how to vote your shares
by using the proxy or voting instructions included in the mailing
or by following their instructions for voting by telephone or on
the internet.
Why did I receive in the mail a Notice of Internet Availability of
Proxy Materials?
Under
rules adopted by the Securities and Exchange Commission (the
“SEC”), we are providing access to our Proxy Materials
over the internet. Accordingly, we are sending a Notice of Internet
Availability of Proxy Materials to many of our stockholders. If you
received a notice by mail, you will not receive a printed copy of
the Proxy Materials unless you request one. The notice tells you
how to access and review the Proxy Materials over the internet at
www.proxyvote.com. The notice also tells you how to access your
proxy card to vote on the internet. If you received a notice by
mail and would like to receive a printed or email copy of the Proxy
Materials, please follow the instructions included in the
notice.
What should I bring with me to attend the 2018 Annual
Meeting?
Stockholders
must present a form of personal identification to be admitted to
the 2018 Annual Meeting.
If
your shares are held beneficially in the name of a broker, bank or
other holder of record and you plan to attend the 2018 Annual
Meeting, you must also present proof of your ownership of Company
common stock, such as a brokerage or bank account statement, to be
admitted to the 2018 Annual Meeting.
No
cameras, recording equipment, electronic devices, large bags,
briefcases or packages will be permitted in the 2018 Annual
Meeting.
Who is entitled to vote at the 2018 Annual Meeting?
Stockholders
of record at the close of business on July 23, 2018, the record
date for the 2018 Annual Meeting, are entitled to receive notice of
and vote at the 2018 Annual Meeting. You are entitled to one vote
on each matter presented at the 2018 Annual Meeting for each share
of common stock you owned at that time. Stockholders have no right
to cumulative voting as to any matter, including the election of
directors. At the close of business on July 23, 2018, there were
58,033,212 shares of our common stock outstanding.
How do I vote?
You
may vote using any of the following methods:
By Mail
If
you received paper copies of the Proxy Materials, you may vote by
completing, signing and dating your proxy card and returning it in
the enclosed envelope.
By Internet
We
encourage you to vote and submit your proxy over the internet at
www.proxyvote.com.
By Telephone
You
may vote by telephone by calling 1-800-690-6903.
In person at the 2018 Annual Meeting
All
stockholders may vote in person at the 2018 Annual Meeting. You may
also be represented by another person at the 2018 Annual Meeting by
executing a proper proxy designating that person. If you are a
beneficial owner of shares, you must obtain a legal proxy from your
broker, bank or other holder of record and present it to the
inspector of election with your ballot to be able to vote at the
2018 Annual Meeting.
What can I do if I change my mind after I vote my
shares?
If
you are a stockholder of record, you can revoke your proxy before
it is exercised by:
●
written notice
of revocation to our Corporate Secretary at Freedom Holding Corp.,
1930 Village Center Cir. #3-6972, Las Vegas, Nevada
89134;
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timely
submission of a valid, later-dated proxy via mail, the internet or
the telephone; or
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voting by ballot
at the 2018 Annual Meeting.
If
you are a beneficial owner of shares, you may submit new voting
instructions by contacting your broker, bank or other holder of
record. You may also vote in person at the 2018 Annual Meeting if
you obtain a legal proxy as described in the answer to the previous
question.
Can I vote if my shares are held in “street
name”?
If
the shares you own are held in “street name” by a
brokerage firm, your brokerage firm, as the record holder of your
shares, is required to vote your shares according to your
instructions. To vote your shares, you will need to follow the
directions your brokerage firm provides you. Many brokers also
offer the option of voting over the internet or by telephone,
instructions for which would be provided by your brokerage firm on
your voting instruction form.
If
you do not give instructions to your brokerage firm, it will still
be able to vote your shares with respect to certain
“discretionary” items, but it will not be allowed to
vote your shares with respect to
certain “non-discretionary” items. The
ratification of WSRP, LLC as our independent registered public
accounting firm (Proposal Five) is considered to be a discretionary
item, and your brokerage firm will thus be able to vote on that
item even if it does not receive instructions from you, so long as
it holds your shares in its name. The election of directors
(Proposal One), the approval of the Freedom Holding Corp. 2019
Equity Incentive Plan (Proposal Two),
the “say-on-pay” proposal (Proposal Three),
and the “say-on-frequency” (Proposal Four)
are “non-discretionary” items; therefore if
you do not instruct your broker how to vote with respect to these
proposals, your broker is not permitted to vote with respect to
these proposals and those votes will thus be considered
“broker non-votes.” “Broker non-votes” are
shares that are held in “street name” by a bank or
brokerage firm that indicates on its proxy that it does not have or
did not exercise discretionary authority to vote on a particular
matter.
If
your shares are held in street name, you must bring an account
statement or letter from your bank or brokerage firm showing that
you are the beneficial owner of the shares as of the record date
(July 23, 2018) to be admitted to the 2018 Annual Meeting on
September 20, 2018. To be able to vote your shares held in street
name at the 2018 Annual Meeting, you will need to obtain a proxy
card from the holder of record.
How will votes be counted?
Each
share of common stock will be counted as one vote according to the
instructions contained on a proper proxy card, whether submitted by
mail, over the internet or by telephone, or on a ballot voted in
person at the 2018 Annual Meeting.
What constitutes a quorum?
For
business to be conducted at the 2018 Annual Meeting, a quorum must
be present in person or represented by valid proxies. For each of
the proposals to be presented at the 2018 Annual Meeting, a quorum
consists of the holders of a majority of the shares of common stock
issued and outstanding on July 23, 2018, the record date, or at
least 29,016,607 shares.
Shares
of common stock present in person or represented by proxy
(including “broker non-votes” and shares that
abstain or do not vote with respect to a particular proposal) will
be counted for purposes of determining whether a quorum exists at
the 2018 Annual Meeting.
If
a quorum is not present, the 2018 Annual Meeting will be adjourned
until a quorum is obtained.
What vote is required for each item and how does the Board
recommend that I vote?
Proposal One – Election
of Directors. Under our bylaws,
a nominee for director will be elected to the Board if the votes
cast “for” the nominee’s election exceed the
votes cast “against” the nominee’s election.
Abstentions and broker non-votes are not considered votes
cast for or against the nominee and will have no effect on the
proposal. If you do not instruct your broker how to vote with
respect to this proposal, your broker cannot vote your shares with
respect to the election of directors.
Our Articles of Incorporation provide that our
Board shall be divided into three classes. Each class shall
consist, as nearly as may be possible, of one-third of the total
number of directors. Generally, each director serves for a term of
three years and until his or her successor has been duly elected
and qualified. Consistent with our Bylaws and prior term periods,
Class II directors would stand for election this year, Class III
directors would stand for election next year, and Class I directors
would stand for election in two years. The Board and the Nominating
and Corporate Governance Committee (“nominating
committee”), however, would like you to have the opportunity
to vote for all five directorships this year, as the terms of all
our incumbent directors have expired. Therefore, the Board and the
nominating committee propose that you elect one Class II
director for a term of three years, two Class I directors for a
term of two years and two Class III directors for a term of one
year.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE FIVE
(5) NOMINEES NAMED IN THE ENCLOSED PROXY MATERIALS TO THE
BOARD
Proposal Two – Approval
of the Freedom Holding Corp. 2019 Equity Incentive
Plan. With respect to this
proposal, the affirmative vote of a majority of the total number of
votes cast at the meeting is needed to approve the Company’s
2019 Equity Incentive Plan. If the shares you own are held in
“street name” by a brokerage firm, your brokerage firm,
as the record holder of your shares, is required to vote your
shares according to your instructions. Abstentions count as votes
against the proposal. Because shares treated as
“broker non-votes” are not entitled to vote
on this proposal, they will have no effect on the vote on the
proposal. If you do not instruct your broker how to vote with
respect to this item, your broker may not vote with respect to this
proposal.
THE BOARD RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE FREEDOM HOLDING CORP
2019 EQUITY INCENTIVE PLAN
Proposal Three
– Say-on-Pay. We are
required to submit a proposal to you for a non-binding advisory
vote to approve the compensation of our named executive officers
pursuant to Section 14A of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”.) The shareholder vote on
executive compensation is an advisory vote only and is not binding
on the Company or the Board.
Although the vote
is non-binding, we value your opinion and intend to consider the
outcome of the vote when making future compensation decisions. This
proposal, commonly known as a “say-on-pay” proposal,
gives our stockholders an opportunity to express their views on the
compensation of our named executive officers as described in this
proxy statement under the heading “Executive
Compensation.”
The
affirmative vote of the holders of a majority of the total number
of votes of our common stock present in person or represented by
proxy and entitled to vote on the proposal is needed to approve
this proposal. Abstentions count as votes against the proposal.
Because shares treated as
“broker non-votes” are not entitled to vote
on the proposal, they will have no effect on the vote. If you do
not instruct your broker how to vote with respect to this proposal,
your broker cannot vote with respect to this proposal.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ADVISORY
AND NON-BINDING VOTE TO APPROVE NAMED EXECUTIVE OFFICER
COMPENSATION
Proposal Four –
Say-on-Frequency. Section 14A of the Exchange Act
also provides that our stockholders must be given the opportunity,
at least once every six years, to cast an advisory vote on how
frequently we should seek future advisory votes on the compensation
of our named executive officers.
Because
this vote is advisory, it will not be binding upon the Board.
However, we value your opinion and will take into consideration the
outcome of the vote when determining how frequently the advisory
vote on the compensation of our named executive officers should be
conducted in the future.
In
connection with the advisory vote on the frequency of the advisory
vote on executive compensation, the Board has determined that the
frequency which receives the highest number of votes cast by
stockholders will be viewed as representing the frequency which
stockholders believe should be chosen by the Board. Abstentions and broker non-votes are not
considered votes cast for or against any particular frequency and
will have no effect on the proposal. If you do not instruct your
broker how to vote with respect to this proposal, your broker
cannot vote your shares with respect to this
proposal.
THE BOARD RECOMMENDS THAT YOU VOTE FOR
EVERY “THREE YEARS”
Proposal Five –
Ratification of Independent Registered Public Accounting
Firm. Under our Bylaws, the
affirmative vote of the holders of a majority of the total number
of votes of our common stock present in person or represented by
proxy and entitled to vote on the proposal is needed to ratify the
selection of WSRP, LLC as our independent registered public
accounting firm. Abstentions count as votes against the proposal.
If you do not provide instructions to your brokerage firm regarding
how to vote your shares on this proposal, your broker may
(a) vote your shares on your behalf (because this proposal is
a “discretionary” item) or (b) leave your shares
unvoted. Our Bylaws do not require that stockholders ratify the
appointment of WSRP, LLC as our independent auditors. However, we
are submitting the appointment of WSRP, LLC to you for ratification
as a matter of good corporate governance. If our stockholders fail
to ratify the selection, we will consider that failure as a
direction to the Board and the Audit Committee of the Board (the
“audit committee”) to consider the selection of a
different firm. Even if the selection is ratified, the audit
committee in its discretion may select a different independent
registered public accounting firm, at any time during the year if
it determines that such a change would be in the best interests of
the Company and our stockholders.
THE BOARD RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF WSRP, LLC AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
Where can I find the voting results?
We
will report the voting results in a Current Report on
Form 8-K within four business days after the end of our
2018 Annual Meeting.
Could other matters be decided at the 2018 Annual
Meeting?
At
the date this proxy statement went to press, we did not know of any
matters to be raised at the 2018 Annual Meeting other than those
described in this proxy statement.
If
other matters are properly presented at the 2018 Annual Meeting for
consideration, the proxies appointed by the Board will have the
discretion to vote on those matters for you.
Who will pay for the cost of this proxy solicitation?
We
will pay for the cost of this proxy solicitation. We do not intend
to solicit proxies other than by use of the mail or website
posting, but certain of our directors, officers and other
employees, without additional compensation, may solicit proxies
personally or by telephone, facsimile or email on our
behalf.
Who will count the vote?
The
inspector of elections appointed for the 2018 Annual Meeting will
tabulate all votes.
What is “householding” and how does it affect
me?
We
have adopted a procedure approved by the SEC called
“householding.” Under this procedure, stockholders of
record who have the same address and last name will receive only
one copy of the Proxy Materials, unless one or more of these
stockholders notifies us that they wish to continue receiving
individual copies. This procedure will reduce our printing costs
and postage fees.
Stockholders
who participate in householding will continue to receive separate
proxy cards. Also, householding will not in any way affect dividend
check mailings, if any.
If you are eligible for householding, but you and
other stockholders of record with whom you share an address
currently receive multiple copies of the Proxy Materials, or if you
hold stock in more than one account, and in either case you wish to
receive only a single copy of each of these documents for your
household, please make a written request to the: Corporate
Secretary, Freedom Holding Corp., 1930 Village Center Cir.
#3-6972, Las Vegas, Nevada 89134 or
email usoffice@freedomholdingcorp.com If multiple
stockholders of record who have the same address received only one
copy of the Proxy Materials and would like to receive additional
copies, or if they would like to receive a copy for each
stockholder living at that address in the future, send a written
request to the address above. Upon such written request, we will
promptly deliver separate Proxy Materials to any stockholders who
receive one paper copy at a shared address.
Beneficial
owners can request information about householding from their
brokers, banks or other holders of record.
Other information
Our
Annual Report on Form 10-K for the fiscal year ended
March 31, 2018 (fiscal 2018), accompanies this proxy statement. No
material contained in the Annual Report on Form 10-K is to be
considered a part of the Proxy Materials. “Fiscal 2018”
refers to the 52-week fiscal year that ended on March 31,
2018. “Fiscal 2017” refers to
the 52-week fiscal year that ended on March 31,
2017. The contents of our corporate website or the corporate
website of any of our subsidiaries are not incorporated by
reference into this proxy statement.
PROPOSAL ONE—ELECTION OF DIRECTORS
As of the date of this proxy statement, the Board
consists of five members. Our Articles of Incorporation provide
that our Board shall be divided into three classes. Each class
shall consist, as nearly as may be possible, of one-third of the
total number of directors. Generally, each director serves for a
term of three years and until his or her successor has been duly
elected and qualified. Consistent with our Bylaws and prior term
periods, Class II directors are scheduled to stand for election
this year, Class III directors stand for election next year, and
Class I directors stand for election in two years. However, as it
has been more than three years since we last held an election of
directors, the Board and the nominating committee propose that all
directors stand for election this year. To conform to their
historical terms, the Board and the nominating committee propose
that you elect one Class II director for a term of three
years, two Class I directors each for a term of two years and two
Class III directors each for a term of one year and, in each case,
until their successors are duly
elected and qualified. Proxies cannot be voted for more than the
number of nominees proposed for election.
Each
of the nominees has consented to be named as a nominee. If any of
them should become unavailable to serve as a director (which is not
now expected), the Board may designate a substitute nominee. In
that case, the persons named as proxies will vote for the
substitute nominee designated by the Board.
The
Board believes that it is necessary for each of our directors to
possess many qualities and skills. When searching for new
candidates, the nominating committee considers the evolving needs
of the Board and searches for candidates that fill any current or
anticipated future gap. The nominating committee considers a
candidate’s business experience, issues of judgment,
background, stature, conflicts of interest, integrity, ethics and
commitment to the goal of maximizing stockholder value. The
nominating committee does not have a formal policy with respect to
Board diversity. The Board and the nominating committee believe
that it is desirable to have a variety of viewpoints on the Board,
which may be enhanced by a mix of different professional and
personal backgrounds and experience. In considering candidates for
the Board, the nominating committee considers the entirety of each
candidate’s credentials in the context of these standards.
With respect to the nomination of continuing directors
for re-election, the individual’s contributions to
the Board are also considered.
All
our directors bring to the Board extensive experience derived from
their service in a number of industries. The names of the
five nominees, along with their present positions, their
principal occupations, their ages, the month and year first elected
as a director, and the Board committees they serve on are provided
below. Mr. Turlov and Mr. Kerr, our Class III directors, are
standing for re-election for a term of one year. Mr. Rakhilkin and
Mr. Tashtitov, our Class II directors, are standing for re-election
for a term of two years. Mr. Stillman, our Class I director, is
standing for re-election for a term of three years.
No
directors, nominees for director or executive officers have any
family relationship to any other director, nominee for director or
executive officer. None of the nominees have held directorships
with other public corporations during the past five
years.
Timur Turlov
Age:
30
Class
III Director Since:
November
2015
Non-independent
Committee
Memberships:
Audit
Compensation
Nominating
and Corporate Governance
|
|
Mr.
Turlov graduated from Russia State Technic University (named after
Tsialkovskiy) in 2009 with a Bachelor of Science degree in
economics and management. Mr. Turlov has more than 10 years of
experience in various areas in the international securities
industry. From July 2013 to July 2017, Mr. Turlov served as the
Advisor to the Chairman of the Board of JSC Freedom Finance
(“Freedom KZ”). In that capacity, Mr. Turlov was
primarily responsible for strategic management, public and investor
relations events, investment strategy, sales strategy, and
government relations. In July 2017, Mr. Turlov became Chairman of
the Board of Directors of Freedom KZ. He has also served as the
General Director of LLC IC Freedom Finance (“Freedom
RU”), since August 2011. As the General Director, Mr. Turlov
is responsible for establishing Freedom RU’s strategic goals,
including acquisition and retention of large clients, sales
strategy and company development. From May 2012 through January
2013, Mr. Turlov served as the Chairman of the Board of Directors
of JSC Nomad Finance where he oversaw business set up and
acquisition of large clients. From July 2010 through August 2011,
Mr. Turlov was employed as the Vice Director of the International
Sales Department of Nettrade LLC. In this capacity, his major
responsibilities included consulting to set up access to foreign
markets, trading, back office, and internal accounting functions.
Mr. Turlov also owns interests in other businesses, including other
securities brokerage firms that are not subsidiaries of the
Company.
|
|
|
Skills and Qualifications: The
Board selected Mr. Turlov as a director nominee based on his in
depth knowledge of the business of the Company and capital markets,
his professional experience and his educational background in
economics and management.
|
|
|
|
Jason Kerr
Age:
46
Class
III Director Since:
May
2008
Independent
Committee
Memberships:
Audit
Compensation
|
|
Mr.
Kerr earned his Bachelor of Science degree in economics in 1995 and
a Juris Doctorate in 1998 from the University of Utah, where he was
named the William H. Leary Scholar. In 2011, Mr. Kerr founded the
law firm Price, Parkinson & Kerr, where he practices commercial
litigation. From 2006 to 2011, Mr. Kerr was the associate general
counsel of Basic Research, LLC, concentrating in intellectual
property litigation. Before joining Basic Research, Mr. Kerr was a
partner with the law firm of Plant, Christensen & Kanell in
Salt Lake City, Utah. Mr. Kerr was employed with Plant, Christensen
& Kanell from 1996 through 2001 and from 2004 to 2006. From
2001 through 2004, Mr. Kerr was employed as a commercial litigator
with the Las Vegas office of Lewis and Roca. Mr. Kerr became our
director in May 2008.
|
|
|
Skills and Qualifications: The Board selected Mr. Kerr as a
director nominee based on his educational background in economics,
his managerial and business management skills, and his extensive
professional experience as both in-house and outside legal
counsel.
|
|
|
|
Arkady Rakhilkin
Age:
49
Class I
Director Since:
November
2015
Independent
|
|
Mr.
Rakhilkin earned his undergraduate degree in 1992 and post graduate
degree in 1994 from Novosibirsk State Technical University both
with an emphasis in applied mathematics. Mr. Rakhilkin also
completed a course in effective management as part of an executive
MBA program from Open University London. Mr. Rakhilkin has over 20
years of experience in the finance and banking industry. From July
2017 until June 2018, Mr. Rakhilkin served as an Advisor to the
Chairman of the Management Board of Freedom KZ. From April 2008 to
July 2017, Mr. Rakhilkin served as the Chairman of the Board of
Directors of Freedom KZ, and its predecessor, JSC Seven Rivers
Capital. Prior to that, he served as the Chairman of the Management
Board of Seven Rivers Capital from November 2006 through April
2008. Mr. Rakhilkin’s principal responsibilities included
interaction with large clients, attraction of strategic partners,
management of corporate finance, introduction of new information
systems, and sales of financing and underwriting services.
|
|
|
Skills and Qualifications: The Board selected Mr. Rakhilkin as
a director nominee because of his extensive experience in in the
finance and banking industry, as well as his significant tenure and
experience with Freedom KZ.
|
|
|
|
Leonard Stillman
Age:
75
Class
II Director Since:
October
2006
Independent
Committee
Memberships:
Audit
Compensation
Nominating
and Corporate Governance
|
|
Mr.
Stillman earned his Bachelor of Science degree in mathematics from
Brigham Young University and Masters of Business Administration
from the University of Utah. He began his career in 1963 with
Sperry UNIVAC as a programmer developing trajectory analysis
software for the Sergeant Missile system. Mr. Stillman spent many
years as a designer and teacher of computer language classes at
Brigham Young University, where he developed applications for the
Administrative Department including the school’s first
automated teacher evaluation system. During that time, he was also
a vice-president of Research and Development for Automated
Industrial Data Systems, Inc. and the Owner of World Data Systems
Company, which provided computerized payroll services for companies
such as Boise Cascade. Mr. Stillman has over 45 years of extensive
business expertise, including strategic planning, venture capital
financing, budgeting, manufacturing planning, cost controls,
personnel management, quality planning and management, and the
development of standards, policies, and procedures. He has
extensive skills in the design and development of computer software
systems and computer evaluation. Mr. Stillman helped found Stillman
George, Inc. in 1993 and founded Business Plan Tools, LLC in 2004.
He was employed with Stillman George, Inc. until 2010, where his
primary responsibilities included managing information, technical
development, and financial analysis projects and development, as
well as general company management and consulting activities. He is
currently employed by Business Plan Tools, LLC, which provides
cloud-based SaaS business planning software and consolidates a
broad variety of skills from a growing group of business
professionals to provide needed support in finance, marketing,
management, sales, planning, product development, and more to
businesses worldwide.
|
|
|
Skills and Qualifications: The Board selected Mr. Stillman as a
director nominee because of his significant background in business
management, strategic planning, corporate finance, and information
management.
|
|
|
|
Askar Tashtitov
Age:
39
Class I
Director Since:
May
2008
Non-independent
|
|
Mr.
Tashtitov has served as a director of the Company since May 2008
and was employed with BMB Munai, Inc., the predecessor of the
Company, from 2004 through 2015, serving as the president from May
2006 to November 2015. Mr. Tashtitov earned a Bachelor of Arts
degree from Yale University majoring in economics and history in
2002. Mr. Tashtitov passed the AICPA Uniform CPA Examination in
2006.
|
Committee
Memberships:
Nominating
and Corporate Governance
|
|
Skills and Qualifications: The Board selected Mr. Tashtitov as
a director nominee because he has 14 years of experience in the
public company arena, with particular expertise in interfacing with
equity and debt financing professionals, as well as investment
banking and significant business management
experience.
|
|
|
THE
BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION
OF EACH OF THE DIRECTOR NOMINEES LISTED ABOVE
|
CORPORATE GOVERNANCE
Director Independence
The
Board relies upon the OTC Markets Group OTCQX Rules for U.S.
Companies and SEC’s director independence requirements to
provide guidelines to assist it in its determination of director
independence. The Company is a “Controlled Company” as
defined by the NYSE and NASDAQ. As such, we are not required to
have a majority of independent directors on our Board, nor are we
required to have independent directors on our nominating committee
or our compensation committee. While our Board is presently staffed
by a majority of independent directors that may not always be the
case. None of our Board committees are comprised solely of
independent directors. For so long as the Company remains a
Controlled Company, we anticipate we will take advantage of the
exemptions to the independence requirements available to Controlled
Companies.
The
nominating committee and the full Board review the independence of
all members of the Board for purposes of determining which Board
members are deemed independent. Based on the director independence
standards of the OTC Markets Group OTCQX Rules for U.S. Companies,
the nominating committee and the full Board affirmatively
determined that Mr. Kerr, Mr. Rakhilkin and Mr. Stillman, who
served on the Board during our 2018 fiscal year and will stand for
re-election at the Annual Meeting are independent. None of Mr.
Kerr, Mr. Rakhilkin, or Mr. Stillman has any material relationship
with us other than being a director, or any transaction or
arrangement that interferes with their independence.
Transactions with Related Persons
The
named executive officers and the Board are required to complete a
questionnaire on an annual basis that requires them to disclose any
related person transactions and potential conflicts of interest.
Our Chief Financial Officer reviews the responses to the
questionnaires and, if a related person transaction or potential
conflict of interest is reported by a director or named executive
officer, the questionnaire will be submitted to the audit committee
for review. If necessary, the audit committee will determine
whether the relationship is material and will have any effect on
the director’s independence. After making that determination,
the audit committee will approve or reject the
transaction.
Communication with the Board
The Board encourages communication from our
stockholders. Any interested parties who wish to communicate with
the non-management directors should send any such
communication to the Corporate Secretary at 1930 Village
Center Cir. #3-6972, Las Vegas, Nevada 89134. All such stockholder communication will be
reviewed by the Corporate Secretary who will determine the
appropriate response or course of action.
BOARD LEADERSHIP STRUCTURE
Board Leadership
The Chairman of the Board and Chief
Executive Officer of the Company is Timur Turlov, our controlling
shareholder. Mr. Turlov is
responsible for setting our strategic direction and
our day-to-day leadership and performance, while the
Board is responsible to hold management accountable for execution
of strategy once it is developed. The Board believes that it is
currently in the best interests of the Company and our stockholders
for Mr. Turlov to serve as Chief Executive Officer and Chairman of
the Board. Our directors bring different perspectives, experience,
oversight and expertise from outside the Company while Mr. Turlov
brings Company specific experience and expertise. The Board
believes that the combined role of Chairman and Chief Executive
Officer also facilitates flow of information between the Board and
management.
The
Board currently consists of five members; our Chief Executive
Officer, our President and three non-employee directors, all of
whom are independent. Members of the Board are kept informed of the
Company’s operations by reviewing materials provided to them,
speaking to the executives, employees and legal counsel of the
Company and by attending meetings of the Board. We do not currently
have a lead independent director.
BOARD COMMITTEES
In
June 2018, the Board adopted a charter for the audit committee, and
in July 2018, the Board adopted charters for the compensation
committee and the nominating committee. In July 2018, the Board
staffed these committees. Prior to July 2018, the full Board
fulfilled the functions which have now been assigned to the Board
committees. As noted above, as a Controlled Company we are exempt
from certain board and committee independence requirements of the
NYSE and NASDAQ. Our audit committee and our compensation committee
consist of two independent directors and one non-independent
director. Our nominating committee is staffed by two
non-independent directors and one independent
director.
The
memberships of each committee as of the date of this proxy
statement are listed below:
|
|
|
Nominating and Corporate Governance Committee
|
Leonard
Stillman
|
C
|
X
|
X
|
Jason
Kerr
|
X
|
X
|
|
Timur
Turlov*
|
X
|
C
|
X
|
Askar
Tashtitov*
|
|
|
C
|
An
“X” indicates membership on the committee.
A
“C” indicates that the director serves as the chairman
of the committee.
* Mr.
Turlov and Mr. Tashtitov do not meet the independence
qualifications.
Audit Committee
The
Audit Committee Charter provides that the audit committee is
primarily responsible for the integrity of our consolidated
financial statements, our compliance with legal and regulatory
requirements, the independence, qualifications and performance of
the our independent registered public accounting firm, and
performance of internal audit functions. Specifically, these duties
include: appointing, approving, compensating, retaining and
overseeing our independent registered public accounting firm;
reviewing the scope of the audit to be conducted by such firm, as
well as the results of its audit; overseeing our financial
reporting activities, including annual and quarterly reports and
the accounting standards and principles followed; approving audit
and non-audit services provided to us by the independent registered
public accounting firm; reviewing and approving related-party
transactions; overseeing legal and regulatory compliance;
overseeing disclosure and internal controls; and preparing the
report of the audit committee, as required by the rules and
regulations of the SEC, included in this proxy
statement.
Each
member of the audit committee is financially literate. Mr. Stillman
and Mr. Kerr meet the “Independent Director” definition
of the OTC Markets Group OTCQX Rules for U.S. Companies and the
SEC. Mr. Turlov does not meet the independent director definition.
The Board has determined that Mr. Stillman qualifies as an audit
committee financial expert as defined in Item 407(d)(5)(ii) of
Regulation S-K. During fiscal 2018, we had no standing audit
committee. The full Board served the functions of the audit
committee. During fiscal 2018, the Board met three times. The Audit
Committee Charter adopted in June 2018 provides that the audit
committee will meet at least four times annually.
Report of the Audit Committee
The
audit committee assists with oversight by the Board of the
integrity of our financial statements, the effectiveness of our
system of internal and disclosure controls, the qualifications,
independence and performance of our independent accountants, the
performance of our internal audit function, and our compliance with
legal and regulatory requirements.
The
audit committee reviewed and discussed with management and WSRP,
LLC, our independent registered public accounting firm, our audited
financial statements for the fiscal year ended March 31, 2018. The
audit committee discussed with WSRP, LLC the matters required to be
discussed by applicable requirements of the Public Company
Accounting Oversight Board (“PCAOB”). The audit
committee also received the written disclosures and the letter from
WSRP, LLC required by applicable requirements of the PCAOB
regarding auditor-audit committee communications about independence
and discussed with WSRP, LLC its independence from Freedom Holding
Corp. and its management.
In
reliance on the reviews and discussions referred to above, the
audit committee recommended to the Board that our audited financial
statements be included in its Annual Report on Form 10-K for the
year ended March 31, 2018, which has been filed with the SEC. These
are the same financial statements that appear in our Annual Report
on Form 10-K.
Members of the Audit
Commitee:
Leonard
Stillman, Chair
Jason
Kerr
Timur
Turlov
Compensation Committee
The
compensation committee charter provides that the primary functions
of the compensation committee are: oversee our compensation
philosophy; ensure that compensation decisions represent sound
fiscal policy and enable us to attract and motivate qualified
personnel; advise the Board on and facilitate the Board’s
oversight of the compensation of the Board, our CEO and our other
executive officers. These duties include: reviewing and approving
corporate goals and objectives applicable to the compensation of
the chief executive officer (“CEO”) and evaluation of
the CEO’s performance to determine and approve CEO
compensation; reviewing and approving the compensation of all other
executive officers; reviewing, approving and, when appropriate,
recommending to the Board for approval, incentive compensation
plans and equity-based plans, and where appropriate or required,
recommending such plans for approval by our stockholders; reviewing
with management executive compensation disclosure to be included in
our annual reports on Form 10-K and/or proxy statements; reviewing,
approving and, when appropriate, recommending to the Board for
approval, any employment agreements and severance arrangements or
plans, including any benefits to be provided in connection with a
change in control, and any amendments or terminations thereto;
determining stock ownership guidelines for executive officers and
monitoring compliance with such guidelines; reviewing incentive
compensation arrangements and the relationship between risk
management policies and practices and compensation policies and
practices; reviewing all director compensation and benefits;
overseeing engagement with stockholder and proxy advisory firms on
matters of executive compensation.
The
Compensation Committee Charter provides that the compensation
committee will annually conduct an evaluation of its duties under
the charter and present the result to the Board. The Compensation
Committee Charter also authorizes the compensation committee to
access, at our expense, such internal and external resources,
including retaining, legal, financial and other advisors, such as
compensation consultants, as the compensation committee deems
necessary or appropriate to fulfill its responsibilities. The Board
did not retain the services of a compensation consultant during
fiscal 2018.
Mr.
Turlov is the Chairman of the compensation committee and Mr.
Stillman and Mr. Kerr are members of the committee. As our CEO and
controlling shareholder, Mr. Turlov does not qualify as an
independent director. Mr. Stillman and Mr. Kerr do qualify as
independent directors. To the extent securities laws or other laws,
rules or regulations require approval by the full Board, or by the
independent members of the Board, such matters will be submitted
for appropriate approval.
Nominating and Corporate Governance Committee
The
Nominating and Corporate Governance Committee Charter provides that
the nominating committee’s responsibilities include, among
other things: determining the qualifications, qualities, skills,
and other expertise required to be a director;identifying
individuals qualified to become Board members;recommending to the
Board nominees to stand for election or to fill any
vacancies;developing and recommending a set of corporate governance
guidelines;overseeing our corporate governance practices and
procedures;developing, subject to approval by the Board, a process
for an annual evaluation of the Board and its committees and
overseeing the conduct of the annual evaluation;reviewing the
Board’s committee structure and composition and making
recommendations to the Board regarding the appointment of directors
to serve as members of each committee;developing and recommending
to the Board for approval director standards for determining
whether a director has a material relationship with the Company
that would impair his or her independence; as necessary, amending
and updating our Code of Ethics, monitoring compliance with,
investigating any alleged breach or violation of, and enforcing the
provisions of our Code of Ethics; developing and recommending to
the Board for approval, in conjunction with the Compensation
Committee, an officer succession plan; and reviewing all tendered
director resignation letters and evaluating and recommending to the
Board whether such resignations should be accepted.
In
discharging its responsibilities to nominate candidates for
election to the Board neither the Board, nor the nominating
committee has, at this time, specified any minimum qualifications
for serving on the Board. We believe that our directors should have
the highest professional and personal ethics and values, consistent
with our values and standards. They should be committed to
enhancing stockholder value and should have sufficient time to
carry out their duties and to provide insight and practical wisdom
based on experience. Their service on other boards of public
companies should be limited to a number that permits them, given
their individual circumstances, to perform responsibly all director
duties for us. Each director must represent the interests of all
stockholders. When considering potential director candidates, the
nominating committee also considers the candidate’s
character, judgment, diversity, age and skills, including financial
literacy and experience in the context of our needs and the needs
of the Board.
The
Nominating and Corporate Governance Charter authorizes the
nominating committee to access, at our expense, such internal and
external resources, including retaining, legal, financial and other
advisors, such as the nominating committee deems necessary or
appropriate to fulfill its responsibilities.
Director Nomination Process
The nominating committee will consider director
candidates recommended by stockholders that have beneficially owned
at least 500,000 shares of our outstanding common stock
continuously for at least 12 months prior to the date of the
submission of the recommendation. Such recommendations must be
properly submitted to us. Such stockholders wishing to recommend
persons for consideration by the nominating committee as nominees
for election to the Board can do so by writing to the Chairman of
the Nominating and Corporate Governance Committee, c/o Corporate
Secretary at Freedom Holding Corp., 1930 Village Center Cir.
#3-6972, Las Vegas, Nevada 89134.
Recommendations must include the proposed nominee’s name,
detailed biographical data outlining the candidate’s relevant
background, professional and business experience and other
significant accomplishments, a statement outlining the reasons why
the candidate’s skills, experience and background would make
a valuable contribution to the Board, a minimum of two references
who have either worked with the candidate, served on a board of
directors or board of trustees with the candidate (or can otherwise
provide relevant perspective on the candidate’s capabilities
as a potential Board member), as well as a written statement from
the candidate consenting to be named and, if nominated and elected,
to serve as a director. Recommendations must also follow our
procedures for nomination of directors by stockholders as provided
in our Articles of Incorporation and Bylaws. The nominating
committee will consider the candidate and the candidate’s
qualifications in the same manner in which it evaluates nominees
identified by the nominating committee. The nominating committee
may contact the stockholder making the nomination to discuss the
qualifications of the candidate and the stockholder’s reasons
for making the nomination. The nominating committee may then
interview the candidate if it deems the candidate to be
appropriate. The nominating committee may use the services of a
third-party search firm to provide additional information about the
candidate before making a recommendation to the
Board.
Because
of the size of the Company and the limited need to seek additional
directors, there is no assurance that all shareholder proposed
candidates will be fully considered, that all candidates will be
considered equally, or that the proponent of any candidate or the
proposed candidate will be contacted by the Company or the Board,
and no undertaking to do so is implied by the willingness to
consider candidates proposed by stockholders.
The
nominating committee’s nomination process is designed to
ensure that the nominating committee fulfills its responsibility to
recommend candidates who are properly qualified to serve us for the
benefit of all of our stockholders, consistent with the standards
established by the nominating committee.
Corporate Governance Guidelines
The
Nominating and Corporate Governance Committee Charter provides that
the nominating committee will develop Corporate Governance
Guidelines, and once developed, assess and review those guidelines
at least annually. The Corporate Governance Guidelines are
anticipated to describe our corporate governance practices and
address corporate governance areas such as Board composition and
responsibilities, compensation of directors and executive
succession planning.
Executive Sessions
The
Board held no executive sessions with only the independent
directors in attendance during the 2018 fiscal year. We anticipate
the Corporate Governance Guidelines to be developed by the
nominating committee will provide guidelines for holding Executive
Sessions.
Meeting Attendance
The
Board met three times during fiscal 2018 and took written action by
unanimous consent of the board of directors three other times
during fiscal 2018. Each director attended all the meetings of the
Board. In addition to participation in Board meetings, our
directors discharged their responsibilities throughout the year
through personal meetings and other communications, including
telephone contact on any matters of interest and
concern.
We
do not have a formal policy requiring members of the Board to
attend the annual meeting, although all directors are encouraged to
attend if available. We did not hold an annual meeting during
fiscal 2017.
Risk Management
The
Board has an active role, in overseeing management of our risks. In
June 2018, the Board adopted a charter for the audit committee and
in July the Board adopted charters for the compensation committee
and the nominating committee. These committees were also staffed by
the Board in July 2018. Prior to that time, the full Board
fulfilled the functions which will now be assigned to those
committees. The audit committee oversees management of financial
risks. The compensation committee is responsible for overseeing the
management of risks relating to our executive compensation plans
and arrangements. The nominating committee manages risks associated
with the independence of the Board and potential conflicts of
interest. While each committee is responsible for evaluating
certain risks and overseeing the management of such risks, the
entire Board will be regularly informed about those risks. The
Board seeks to ensure that management has in place processes for
dealing appropriately with risk. It is the responsibility of our
senior management to develop and implement our short- and long-term
objectives and to identify, evaluate, manage and mitigate the risks
inherent in seeking to achieve those objectives. Management is
responsible for identifying risks and risk controls related to
significant business activities and Company objectives and
developing programs to determine the sufficiency of risk
identification, the balance of potential risk to potential reward
and the appropriate manner in which to control risk.
Indemnification
As
permitted by the Nevada Revised Statutes, our Articles of
Incorporation and Bylaws authorize and require us to indemnify our
officers and directors to the fullest extent permitted under Nevada
law.
Other Corporate Governance Resources
The
charters of each committee and the Code of Ethics are available on
the Investor Relations Section of our website,
www.freedomholdingcorp.us.
DIRECTOR COMPENSATION
We
had five directors on March 31, 2018, the last day of our 2018
fiscal year. During fiscal 2018, no members of our Board received
cash, equity or other compensation for their services on the
Board.
In
June 2018, based on the recommendation of management, the full
Board approved a proposal to begin paying an annual cash retainer
of $24,000 to each independent member of the Board, with
payment to commence from April 1, 2018 (the first day of our 2019
fiscal year). The annual cash retainer will continue to be paid
quarterly. Directors will not receive board meeting attendance
fees. In addition to the annual cash retainer, the Board agreed to
pay to non-employee directors additional annual cash retainers for
serving on Board committees as follows:
Committee Member Retainers
|
|
Audit
|
3,500
|
Compensation
|
2,500
|
Nominating and
Corporate Governance
|
0
|
In
addition to the above fees, directors may be compensated on an ad
hoc basis for special committee or subcommittee meetings held or
tasks performed by a committee or subcommittee designated by either
the full Board or by a standing committee of the full Board, with
such compensation determined upon completion of the tasks
performed.
The following table provides information
concerning the compensation of each director who served in fiscal
2018 other than Mr. Turlov whose compensation is described
under the heading “Executive
Compensation” elsewhere in this proxy statement and who did not
receive any compensation for his services on the
Board:
|
Fees Earned or Paid in Cash
($)
|
|
All Other Compensation
($)
|
|
Jason
Kerr
|
--
|
--
|
--
|
--
|
Arkady
Rakhilkin(1)
|
--
|
--
|
16,090
|
16,090
|
Leonard
Stillman
|
--
|
--
|
--
|
--
|
Askar
Tashtitov(2)
|
--
|
--
|
--
|
--
|
(1)
Mr. Rakhilkin
served as the Chairman of the Board of Directors of our subsidiary
Freedom KZ until June 2017 and from June 2017 to June 2018, he
served as an Advisor to the Chairman of the Management Board of
Freedom KZ. This amount reflects director fees paid to Mr.
Rakhilkin for serving as the Chairman of the Board of Directors and
as Advisor to the Chairman of the Management Board during fiscal
2018.
(2)
Subsequent to
the end of fiscal 2018, on June 6, 2018, Mr. Tashtitov was
appointed President of the Company.
As
of March 31, 2018, no member of our Board held any outstanding
stock options or other equity awards. We do not currently have a
fixed plan for the award of equity compensation to our directors.
With the staffing of a new compensation committee, moving forward
equity compensation will likely be recommended by management and
the compensation committee. Any equity grants to directors are to
be granted at a price equal to the fair market value of our common
stock on the date of the grant. We did not award any equity
compensation to our directors during the fiscal years ended March
31, 2018 or 2017.
SECURITY OWNERSHIP
As of
July 23, 2018, FRHC had 58,033,212 shares of common stock issued
and outstanding. The following table sets forth the outstanding
shares of common stock owned of record or beneficially by each
person that owned of record, or was known to us to own
beneficially, more than 5% of our issued and outstanding stock, and
the name and stock holdings of each director and nominee for
director, and the stock holdings of all of the executive officers
and directors as a group:
Name of Person or Group(1)
|
|
Nature of Ownership
|
|
|
Principal Stockholders:
|
|
|
|
|
Timur
Turlov
|
|
Common
Stock
|
42,405,112
|
73.1%
|
|
|
|
|
Directors:
|
|
|
|
|
Timur
Turlov
|
|
Common
Stock
|
42,405,112
|
73.1%
|
Jason
Kerr
|
|
Common
Stock
|
--
|
--
|
Arkady
Rakhilkin(3)
|
|
Common
Stock
|
348,333
|
*
|
Leonard
Stillman
|
|
Common
Stock
|
--
|
--
|
Askar
Tashtitov
|
|
Common
Stock
|
47,200
|
*
|
|
|
|
|
All Executive Officers and Directors as Group (6
persons(4))
|
|
Common
Stock
|
42,878,245
|
82.1%
|
(1)
Unless otherwise
indicated, the mailing address of each beneficial owner is c/o
Freedom Holding Corp., 77/7, Al Farabi Ave., “Esentai
Tower” BC, Floor 3, Almaty, 050040, Republic of Kazakhstan.
The information provided in the table is based on our records,
information filed with the SEC, and information provided to us,
except where otherwise noted.
(2)
The amounts and
percentages of shares beneficially owned are reported on the basis
of SEC regulations governing the determination of beneficial
ownership of securities. Under SEC rules, a person is deemed to be
a “beneficial” owner of a security if that person has
or shares voting power or investment power, which includes the
power to dispose of or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any securities
of which that person has a right to acquire beneficial ownership
within 60 days.
(3)
These shares are
held of record by Seven Rivers Capital Limited. Mr. Rakhilkin is
the sole shareholder and director of Seven Rivers Capital
Limited.
(4)
Includes 77,600
shares held by our Chief Financial Officer, Evgeniy Ler. Of these
shares, 70,000 were issued to Mr. Ler as a restricted stock grant,
and are subject to two-year vesting conditioned upon his continued
employment with us, except upon the occurrence of certain events,
such as death, disability, a change in control, or termination by
us not for cause. Assuming the vesting condition is satisfied,
35,000 shares will vest on October 6, 2018 and the other 35,000
will vest on October 6, 2019. Mr. Ler has the right to vote these
shares in any matter brought for a vote of our common
stockholders.
Equity Compensation Plan Information
The
following table sets forth, as of July 23, 2018, certain
information related to our equity compensation plans.
|
Number of Securities to Be Issued upon Exercise of Outstanding
Options, Warrants and Rights
(a)
|
Weighted-Average Exercise Price of Outstanding Options, Warrants
and Rights
(b)
|
Number of Securities Remaining Available for Future Issuance under
Equity Compensation Plans (Excluding Securities Reflected in
Column
(a))
|
Equity
compensation plans approved by security holders
|
360,000(1)
|
$1.98
|
740,000(2)
|
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
Total
|
360,000
|
1.98
|
740,000
|
(1)
Consists
solely of stock options awarded to two Company employees. These
options are subject to a three-year vesting period contingent upon
continued employment with the Company, with one-third of the option
grants vesting each year on the anniversary date of grant, which
was October 6, 2017. The options are nonqualified options and
expire on October 6, 2027. The exercise price of the options is
$1.98 per share.
(2)
As
noted elsewhere in this proxy statement, these shares will be
rolled into the Freedom Holding Corp., 2019 Equity Incentive Plan,
if approved by our stockholders, and will no longer be available
for issuance pursuant to our 2018 Equity Incentive
Plan.
EXECUTIVE OFFICERS
The
following table sets forth the name, age and principal position of
each of our executive officers as of the date of this proxy
statement:
Name
|
|
Age
|
|
Position
|
Timur
Turlov
|
|
30
|
|
Chief Executive
Officer
|
Askar
Tashtitov
|
|
39
|
|
President
|
Evgeniy
Ler
|
|
35
|
|
Chief Financial
Officer
|
Biographical
information for Mr. Turlov and Mr. Tashtitov appears under the
heading “Proposal One
– Election of Directors” elsewhere in this proxy
statement.
Evgeniy Ler. Mr. Ler
has served as the chief financial officer of the Company since
November 2015. Prior to that time, he served as chief financial
officer of BMB Munai, Inc., the predecessor of the Company from
April 2009 to November 2015. Mr. Ler joined BMB Munai in 2006 and
served in several capacities including finance manager and
reporting manager before being appointed chief financial officer.
From September 2011 to December 2012, Mr. Ler also served as a
Deputy Director for Emir Oil, LLP, a wholly-owned subsidiary of BMB
Munai. Before joining BMB Munai, from 2002 to 2006, Mr. Ler was
employed by Deloitte & Touche where he held the position of
senior auditor in the Financial Services & Industries Group,
Audit. In that position, he led large engagements for banks,
financial institutions, and oil and gas companies. In 2003, Mr. Ler
was awarded a Bachelor’s degree in financial management from
the Kazakh-American University located in Almaty, Kazakhstan. In
2008, Mr. Ler passed the AICPA Uniform CPA Examination and was
awarded licensure as a CPA in November 2013. Mr. Ler has also
completed trainings in London on financial reporting in accordance
with IFRS and US GAAP and internal Deloitte trainings on audit,
financial reporting, and due diligence.
PROPOSAL TWO -- APPROVAL OF THE FREEDOM HOLDING CORP. 2019 EQUITY
INCENTIVE PLAN
General Background
We
believe the Freedom Holding Corp. 2019 Equity Incentive Plan, (the
“2019 Plan”) is in the best interest of the Company and
its stockholders and will help us to (a) provide meaningful
long-term incentive award opportunities as part of a competitive
total compensation program that enables us to attract and retain
our employees, consultants and directors, (b) align the interests
of those employees, consultants and directors with those of the
Company and its stockholders and (c) motivate and reward long-term
commitment to the Company that results in profitable growth and
sustained shareholder value creation.
Description of the Freedom Holding Corp. 2019 Equity Incentive
Plan
A copy
of the full text of the 2019 Plan is attached to this proxy
statement as Appendix A. This summary of the 2019 Plan is not
intended to be a complete description of the 2019 Plan and is
qualified in its entirety by the actual text of the 2019 Plan to
which reference is made. The term of the 2019 Plan is ten
years.
The
2019 Plan is a new equity compensation plan that replaces the
Freedom Holding Corp. 2018 Equity Incentive Plan (the “2018
Plan”). No further awards will be made under the 2018 Plan if
the 2019 Plan is approved by our stockholders. Awards granted under
the 2018 Plan shall continue in effect in accordance with the terms
of the applicable award agreement and the terms of the 2018 Plan in
effect when the awards were granted.
If this
Proposal Two is approved by our stockholders at the Annual Meeting,
subject to adjustments as described in the 2019 Plan, the maximum
aggregate number of shares of our common stock that may be issued
under the 2019 Plan will be 3,740,00, which is equal to the sum of
(i) 3,000,000 shares of our common stock, plus
(ii) 740,000 shares, which is the number of shares of our
common stock reserved for issuance under the 2018 Plan that
remained available for issuance as of July 23, 2018. The number of
shares of common stock subject to outstanding awards under the 2018
Plan that terminate, expire, or are cancelled, forfeited,
exchanged, or surrendered without having been exercised, vested, or
paid in shares under the 2018 Plan after the effective date of the
2019 Plan will no longer be available for issuance under the 2018
Plan or the 2019 Plan. The number in clause (ii) above will be
reduced by any awards granted under the 2018 Plan between July 23,
2018 and the effective date of the 2019
Plan.
In determining
the number of shares to be authorized for issuance under the 2019
Plan, the Board considered a number of factors, including the
number of shares available under the 2018 Plan, our past share
usage (burn rate), the number of shares needed for anticipated
future awards, a dilution analysis, and the current and future
accounting expenses associated with our equity award
practices.
No
awards or grants have been awarded or granted under the 2019 Plan
and the compensation committee and the Board are not currently
considering any awards or grants under the 2019 Plan. Shares shall
be deemed to have been issued under the 2019 Plan only to the
extent actually issued and delivered pursuant to an award or grant.
To the extent an award or grant lapses or the rights of its holder
or grantee terminate, any shares of common stock subject to such
award or grant shall again be available for the grant of an award
or making of a grant. The aggregate number of shares which may be
issued under the 2019 Plan shall be subject to adjustment, as
provided in the 2019 Plan.
Options. An
incentive stock option (“ISOs”) award made pursuant to
the 2019 Plan may be granted only to an individual who, at the time
of grant, is an employee of the Company, a parent corporation or a
subsidiary. An award of an option which is not an incentive stock
option (a “Non-qualified Stock Option” or
“NQSOs”) may be made to an individual or entity who, at
the time of award or grant, is an employee, consultant or director
of the Company, a parent corporation or a subsidiary, or to an
individual or entity who has been identified by the compensation
committee or the Board to receive an award or grant due to their
contribution or service to the Company.
The
term of each option granted under the 2019 Plan shall be specified
at the time of grant, but in no event shall any option granted
under the 2019 Plan be exercisable more than one hundred and twenty
(120) months from the date it is granted. The 2019 Plan provides
certain guidelines for the granting of ISOs under the provisions
and subject to the limitations of Section 422 of the Internal
Revenue Code. ISOs and other options must be awarded at a price
equal to one hundred percent (100%) of the fair market value of the
common stock on the date that the option is granted. Further, no
ISO may be granted to an employee owning common stock having more
than 10% of the voting power of the Company unless the option price
for such employee's option is at least 110% of the fair market
value of the common stock subject to the option at the time the
option is granted and the option is not exercisable after the
expiration of five years from the date of granting.
Stock
Appreciation Rights. A stock appreciation right
(“SAR”) is an award that allows the recipient, upon
exercise, to receive in cash or shares an amount equal to the
appreciation in our common stock over a specified period of time
established by the compensation committee or the Board,
provided however, that no
SAR will be exercisable after the tenth anniversary of the date of
grant. The Plan provides that SARs may be granted alone or in
tandem with an option. The exercise price, exercise and payment
terms, vesting, and similar matters of each SAR award will be
determined by the compensation committee or the Board at the time
of grant.
Restricted
Awards. A
restricted award is an award of actual shares of common stock or of
hypothetical common stock units (“RSUs”) having a value
equal to the fair market value of an identical number of shares of
common stock. No shares of common stock will be issued at the time
an RSU is granted. At the time of grant of each restricted award,
the compensation committee or the Board will determine the
applicable restriction terms and conditions. During the restricted
period, we generally will hold the restricted award until the
restrictions have been satisfied. Unless otherwise determined by
the compensation committee or the Board at the time of grant,
during the restricted period the holder will not have the right to
sell, assign, transfer or otherwise dispose of, pledge or
hypothecate as collateral for a loan or as security for the
performance of an obligation, the common stock underlying the
award. Unless otherwise determined by the compensation committee or
the Board at the time of grant, during the restricted period, the
holder will generally have the rights and privileges of a
shareholder of common stock to vote and to receive dividends,
provided however, that such
dividends will be withheld by us for the holder’s account
until all restrictions have been satisfied. Unless otherwise
determined by the compensation committee or the Board, recipients
of restricted awards generally are not entitled to possession of
the common stock underlying the restricted award until such time as
the applicable restrictions have been satisfied. Upon satisfaction
of the applicable restrictions, we will deliver to the holder of a
restricted stock award the common stock underlying such award,
along with any dividends awarded on such common stock during the
restricted periods, without charge, provided however, that if explicitly
provided in the RSU award agreement, the compensation committee or
the Board may, in its sole discretion, elect to pay cash or part
cash and part common stock in lieu of delivering only shares of
common stock.
Cash
Awards. The
compensation committee or the Board may also grant Cash Awards,
which shall be evidenced in such form as the compensation committee
or the Board may determine.
Administration of the 2019 Plan
The
2019 Plan shall be administered by the Board or the compensation
committee in compliance with Exchange Act Rule 16b-3. The 2019 Plan
is administered under the direction of the Board and/or the
compensation committee of our Board with the assistance of certain
designated officers as determined by our Board or compensation
committee. Members of the Board shall abstain from participating in
and deciding matters which directly affect their individual
ownership interests under the 2019 Plan.
Subject
to the provisions of the 2019 Plan, the Board or compensation
committee will determine the recipients who will receive awards
under the 2019 Plan. The amount, terms, rules and procedures
associated with any award shall be determined by the Board or
compensation committee as it deems proper. The Board and the
compensation committee are authorized in their sole discretion,
exercised in a nondiscriminatory manner, to construe and interpret
the 2019 Plan and the respective agreements executed thereunder, to
prescribe such rules and regulations relating to the 2019 Plan as
they may deem advisable to carry out the 2019 Plan, and to
determine the terms, restrictions and provisions of each award or
grant, including such terms, restrictions and provisions as shall
be requisite in the judgment of the Board or the compensation
committee.
Any
shares of common stock subject to an award that expires, or its
canceled, forfeited or terminated without issuance of the full
number of shares of common stock to which the award related will
again be available for issuance under the Plan, except for (a)
shares tendered in payment of an option, (b) shares delivered or
withheld by the Company to satisfy tax withholding obligations, or
(c) shares covered by stock-settled awards that were not issued
upon settlement of the award. The aggregate number of shares which
may be issued under the Plan shall be subject to adjustment, as
provided in the Plan.
Award Limits
To the
extent that the aggregate fair market value (determined at the time
of grant) of common stock with respect to which ISOs are
exercisable for the first time by any option holder during any
calendar year exceeds $100,000, the ISOs or portions thereof which
exceed such limit shall treated as NQSOs.
Acceleration in the Event of a Change of Control
Unless
otherwise provided in the award agreement, in the event of a change
in control of the Company all outstanding options and SARs will
become immediately exercisable with respect to 100% of the common
stock underlying such options or SARs, and or the restricted period
associated with any restricted award will expire immediately with
respect to 100% of the shares of common stock underlying the
restricted award. In the event of a change in control, the
compensation committee or the Board may, in its discretion and upon
10 days advance notice to the affected persons, cancel any
outstanding awards and pay the holder thereof, in cash or common
stock, or any combination thereof, the value of such award based on
the price per share of common stock received or to be received by
other stockholders of the Company in the change of control event.
In the case of options or SARs with an exercise price that equals
or exceeds the price paid for a share of common stock in connection
with a change in control, the compensation committee or the Board
may cancel the option or SAR without the payment of consideration
therefor.
Clawback
All
awards granted under the 2019 Plan may be recouped by the Company
subject to any right that the we may have regarding the clawback of
“incentive-based compensation” under Section 10D
of the Exchange Act or in accordance with any recoupment policy or
other agreement or arrangement we may have with the award
recipient.
Non-transferability
Awards
granted generally are not transferable except by will or the laws
of descent and distribution and are only exercisable during the
lifetime of the recipient of the award or the recipient’s
guardian or legal representative. The Board or compensation
committee can permit transfers of certain awards for estate
planning purposes, but transfers to third parties for value are not
permitted.
U.S. Federal Income Tax Consequences
The
following is a brief description of the U.S. federal income tax
treatment that will generally apply to awards granted under the
2019 Plan, based on U.S. federal income tax laws in effect on the
date hereof. The exact U.S. federal income tax treatment of awards
will depend on the specific nature of the award. Such an award may,
depending on the conditions applicable to the award, be taxable as
an option, as restricted or unrestricted stock, as a cash payment,
or otherwise. Recipients of options or other awards should not rely
on this discussion for individual tax advice, as each
recipient’s situation and the tax consequences of any
particular award will vary depending on the specific facts,
circumstances and taxing jurisdiction involved. Each recipient is
advised to consult his or her own tax advisor for particular
federal, as well as state and local, income and any other tax
advice.
ISOs.
There generally are no federal ordinary income tax consequences to
the recipient by reason of the grant or exercise of an ISO.
However, the exercise of an ISO may increase the
participant’s alternative minimum tax liability, if any. The
excess, if any, of the fair market value of the ISO shares on the
date of exercise over the exercise price is an adjustment to income
for purposes of alternative minimum tax. Alternative minimum
taxable income is determined by adjusting regular taxable income
for certain items, increasing that income by certain tax preference
items and reducing this amount by the applicable exemption
amount.
The
recipient will recognize long-term capital gain or loss on the sale
of the common stock acquired on the exercise of the ISO if the sale
occurs at least two years after the grant date and more than one
year after the exercise date and the holder has been an employee at
all times beginning with the grant date and ending three months
before the exercise date. If the sale occurs earlier than the
expiration of these holding periods, then the recipient will
recognize ordinary income equal to the lesser of the difference
between the exercise price of the option and the fair market value
of the shares of common stock on the exercise date or the
difference between the sales price and the exercise price. Any
additional gain on the sale will be capital gain. We can deduct the
amount, if any, that the participant recognizes as ordinary
income.
NQSOs and
SARs. There is no tax consequence to the participant at the
time of grant of an NQSO or an SAR. Upon exercise, the excess of
the fair market value of the shares of common stock over the
exercise price will be treated as ordinary income. Any gain or loss
realized on the sale of the shares of common stock will be treated
as a capital gain or loss. We may deduct the amount that the
recipient recognizes as ordinary income.
Restricted
Stock. No taxes are due on the grant of restricted stock.
The fair market value of the shares of common stock subject to the
award is taxable as ordinary income when no longer subject to a
“substantial risk of forfeiture” (i.e., when the shares
become vested or transferable). Unless an election pursuant to Code
Section 83(b) is made (subjecting the value of the shares on the
award date to current income tax), income tax is paid by the
participant on the value of the shares of common stock at ordinary
rates when the restrictions lapse and we will be entitled to a
corresponding deduction at that time. Any gain or loss realized on
the sale of the shares of common stock will be treated as a capital
gain or loss.
RSUs.
No taxes are due upon the grant of the award. The fair market value
of the shares of common stock subject to the award is taxable to
the participant as ordinary income when the common stock is
distributed to the recipient. We can deduct the amount that the
recipient recognizes as ordinary income.
Cash-Based
Awards. The
taxation of an individual who receives a cash-based awards will
depend on the form and terms and conditions of the award. We
normally will be entitled to a deduction at the time when, and in
the amount that, the recipient recognizes ordinary income, subject
in certain cases to a $1 million annual deduction limitation
under Section 162(m) with respect to certain
officers.
Section
280G. Under certain circumstances, accelerated vesting,
exercise or payment of awards under the 2019 Plan in connection
with a “change of control” may be deemed an
“excess parachute payment” for purposes of the golden
parachute payment provisions of Code Section 280G. To the extent it
is so considered, the holder would be subject to an excise tax
equal to 20% of the amount of the excess parachute payment, and we
would be denied a tax deduction for the excess parachute
payment.
Section
409A. RSU awards, the receipt of which may be deferred
beyond the vesting dates, are subject to Code Section 409A. If
Section 409A is violated, deferred amounts will be subject to
income tax immediately and to penalties equal to (i) 20% of the
amount deferred and (ii) interest at a specified rate on the
underpayment of tax that would have occurred if the amount had been
taxed in the year it was first deferred.
Section
83(b). If a Section 83(b) election is filed by the recipient
with the Internal Revenue Service within 30 days after the date of
grant of a restricted stock award, then the recipient will
recognize ordinary income and the holding period will commence as
of the date of grant. The amount of ordinary income recognized by
the recipient will equal the excess of the fair market value of the
shares of common stock underlying the restricted stock award as of
the date of grant over the amount paid by the recipient for the
restricted stock award. We will be entitled to a deduction in a
like amount. If such election is made and the recipient thereafter
forfeits the restricted stock award, the recipient may be entitled
to a capital loss.
Deductibility
of Awards. Section 162(m) places an annual
$1 million per person limit on the deductibility of
compensation paid by us to certain executives. Under the Tax Cuts
and Jobs Act, signed into law on December 22, 2017 (“Tax
Act”), covered companies will no longer receive a deduction
for “qualified performance-based compensation” in
excess of the $1 million annual deduction limitation under
Section 162(m); provided, that such change will not apply to
compensation paid pursuant to a written contract in effect on
November 2, 2017. The Tax Act also provides that principal
financial officers of covered companies, or the Chief Financial
Officer in our case, will be subject to the deduction limitations
set forth in Section 162(m).
Certain
Other Tax Issues. In
addition to the matters described above, (i) any entitlement
to a tax deduction on our part is subject to applicable federal tax
rules, (ii) the exercise of an incentive stock option may have
implications in the computation of alternative minimum taxable
income, and (iii) if the exercisability or vesting of an award
is accelerated because of a change in control, such award (or a
portion thereof), either alone or together with certain other
payments, may constitute parachute payments under Section 280G
of the Code, which excess amounts may be subject to excise taxes.
Officers and directors of the Company subject to Section 16(b)
of the Exchange Act, may be subject to special tax rules regarding
the income tax consequences concerning their awards. The 2019 Plan
is not, nor is it intended to be, qualified under
Section 401(a) of the Code, and is not subject to any of the
requirements of the Employee Retirement Income Security Act of
1974, as amended.
Withholding
Taxes. No withholding
taxes are payable in connection with the grant of any stock option
or the exercise of an ISO. However, withholding taxes must be paid
at the time of exercise of any NQSO. In respect of all other
awards, withholding taxes must be paid whenever the participant
recognizes income for tax purposes.
Miscellaneous
Rules. Special rules will apply in cases
where a recipient of an award pays the exercise or purchase price
of the award or any applicable withholding tax obligations under
the 2019 Plan by delivering previously owned shares of common stock
or by reducing the number of shares common stock otherwise issuable
pursuant to the award. The surrender or withholding of such shares
of common stock will in certain circumstances result in the
recognition of income with respect to such shares or a carry-over
basis in the shares acquired, and may constitute a disqualifying
disposition with respect to ISO shares.
Changes in Plan
The
2019 Plan may be amended or terminated at any time by the Board.
However, except for adjustments in the event of changes in our
outstanding common stock or capital structure, or to provide
maximum benefits under Section 409A of the Code, no material
amendments shall be effective unless approved by our stockholders
to the extent shareholder approval is necessary. No amendment,
termination, suspension or modification of the 2019 Plan shall
adversely affect any right previously acquired by the grantee or
other beneficiary under the 2019 Plan.
Dilution Analysis
As of
July 23, 2018, our capital structure consisted of 58,033,212 shares
of common stock outstanding this includes 3,900,000 shares subject
to restricted stock grants and options to purchase 360,000 shares.
Of the 3,900,000 shares awarded
pursuant to restricted stock grant awards, 1,200,000 shares are
subject to two-year vesting conditions and 2,700,000 shares are
subject to three-year vesting conditions. All of the options are
subject to three-year vesting conditions. Vesting of the
outstanding awards is contingent on continuous employment with the
Company, including its subsidiaries. The above discussed awards
were made on October 6, 2017. As of
the date of this proxy statement 100% of these awards remain
outstanding and subject to vesting conditions. We have no
other equity incentives plans.
As
described above, 740,000 shares remained available for grant of
awards under the 2018 Plan as of July 23, 2018.
The
proposed share authorization is a request for 3,000,000 new shares
to be available for awards under the 2019 Plan. The table below
shows our potential dilution (referred to as
“overhang”) levels based on our fully diluted shares of
common stock and our request for 3,740,000 shares to be available
for awards under the 2019 Plan. The 3,740,000 shares represent
6% of the fully diluted shares of our common stock, including all
shares that will be authorized under the 2019 Plan, as described in
the table below. The Board believes that this number of shares of
common stock under the 2019 Plan represents a reasonable amount of
potential equity dilution, which will allow the Company to continue
awarding equity awards, and that equity awards are an important
component of the Company’s equity compensation
program.
Potential Overhang with 3,740,000 Additional
Shares
Stock Options
Outstanding as of July 23, 2018
|
360,000
|
Weighted Average
Exercise Price of Stock Options Outstanding as of July 23,
2018
|
$1.98
|
Weighted Average
Remaining Term of Stock Options Outstanding as of July 23,
2018
|
|
Total Equity Awards
Outstanding as of July 23, 2018(1)
|
4,260,000
|
Shares Available
for Grant under the 2018 Plan as of July 23, 2018 (to be added to
the 2019 Plan share reserve)
|
740,000
|
New Shares
Requested under the 2019 Plan
|
3,000,000
|
Total Shares
Requested under the 2019 Plan(2)
|
3,740,000
|
Total Potential
Overhang under the 2019 Plan (and all predecessor and other equity
compensation plans or agreements)
|
4,100,000
|
Shares of Common
Stock Outstanding as of July 23, 2018
|
58,033,212
|
Fully Diluted
Shares of Common Stock
|
62,133,212
|
Potential Dilution
of 3,740,000 shares as a Percentage of Fully Diluted Shares of
Common Stock
|
6%
|
(1)
Represents the
total outstanding equity awards under the 2018 Plan, which included
options to purchase 360,000 shares of our common stock and
restricted stock grant awards of 3,900,000 shares of our common
stock. All of the restricted stock grant awards are currently
issued and outstanding and included within the 58,033,212 shares of
our outstanding common stock. During the vesting period, employees
holding restricted stock grants are entitled to vote and receive
dividends on the shares underlying the restricted stock grant,
provided, however, that dividend payments on unvested shares shall
be held in custody by us and subject to the same restrictions that
apply to the unvested shares. The shares underlying the restricted
stock grants will not be delivered to the employee until they vest.
If the employee does not satisfy the vesting conditions, any
unvested shares will be canceled. No additional awards will be made
under the 2018 Plan if the 2019 Plan is approved by the
stockholders. Any shares subject to outstanding awards under the
2018 Plan that do not vest will not become available for issuance
under the 2019 Plan.
(2)
Total shares will
be reduced by any award granted under the 2018
Plan after July 23,
2018, and prior to the effective date of the 2019
Plan.
The
fully diluted shares of common stock in the foregoing table consist
of the shares of common stock outstanding as of July 23, 2018, plus
the total potential overhang under the 2019 Plan (and all
predecessor and other equity compensation plans or
agreements).
Based
on our historic and projected future usage patterns, the Board
estimates that these shares will be sufficient to provide awards
under the 2019 Plan for approximately one to two years, although
the number of awards granted for any year could vary as the
compensation committee or our Board deem appropriate. This is only
an estimate, and circumstances could cause the share reserve to be
used more quickly or more slowly. These circumstances include, but
are not limited to, the future price of our common stock, the mix
of cash, options and full value awards provided as long-term
incentive compensation, award amounts provided by our competitors,
hiring activity, and promotions during the next few
years.
Burn Rate
The
following table sets forth information regarding time-vested equity
awards granted over each of the last three fiscal
years:
|
|
|
|
Stock Options
Granted
|
0
|
0
|
360,000
|
Time-Vested
Restricted Stock Grants
|
0
|
0
|
3,900,000
|
Weighted-Average
Basic Common Shares Outstanding
|
9,768,590
|
11,213,926
|
33,249,013
|
All
amounts in the foregoing table have been adjusted to reflect the
one-share-for-twenty-five-shares (1:25) reverse split of the
Company’s common stock that became effective on September 6,
2017.
|
|
THE
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE
APPROVAL OF THE FREEDOM HOLDING CORP. 2019 EQUITY INCENTIVE
PLAN.
|
PROPOSAL THREE—ADVISORY AND NON-BINDING VOTE TO
APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
General
The
Company is required to submit a proposal to its stockholders for a
non-binding advisory vote to approve the compensation of its named
executive officers pursuant to Section 14A of the Exchange Act. The
shareholder vote on executive compensation is an advisory vote only
and is not binding on the Company or the Board.
Although the vote
is non-binding, the compensation committee and the Board value the
opinions of our stockholders and intend to consider the outcome of
the vote when making future compensation decisions. This proposal,
commonly known as a “say-on-pay” proposal, gives our
stockholders an opportunity to express their views on the
compensation of the Company’s named executive officers as
described in this proxy statement under the heading
“Executive Compensation.”
Accordingly, the
following resolution is submitted for shareholder vote at the
Annual Meeting:
“RESOLVED,
that the Company’s stockholders approve, on an advisory
basis, the compensation paid to the Company’s named executive
officers, as disclosed pursuant to the compensation disclosure
rules of the SEC, including the compensation tables and narrative
discussion.”
Required Vote
The
approval, on an advisory basis, of the Company’s executive
compensation requires the affirmative vote of a majority of the
Company’s outstanding shares present in person or by proxy
and entitled to vote, provided a quorum is present at the Annual
Meeting. Abstentions will be counted for the purpose of meeting the
quorum requirements and will have the same effect as a vote against
the approval of this proposal. Broker non-votes will be counted for
the purpose of meeting the quorum requirements but will have no
effect on the outcome of the proposal.
|
|
THE
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION AS
DESCRIBED IN THIS PROXY STATEMENT.
|
PROPOSAL FOUR—ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY
VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Section
14A of the Exchange Act also provides that our stockholders must be
given the opportunity, at least once every six years, to cast an
advisory vote on how frequently we should seek future advisory
votes on the compensation of our named executive
officers.
Under
this Proposal 4, stockholders may vote to have the say-on-pay vote
every year, every other year or every three years. Stockholders
also may, if they wish, abstain from voting on this
proposal.
Because
this vote is advisory, it will not be binding upon the Board.
However, the Board values the opinions expressed by stockholders in
these votes and will take into account the outcome of the vote when
determining how frequently the advisory vote on the Company’s
executive compensation should be conducted in the
future.
After
careful consideration, the Board has determined that an advisory
vote on executive compensation every three years is the best
approach for the Company, and therefore the Board recommends that
stockholders vote every “three years” to approve, on an
advisory basis, our executive compensation. The Board believes that
a vote on executive compensation once every three years will
provide us with more time to meaningfully respond to shareholder
vote results and implement any changes to our executive
compensation policies and procedures that the compensation
committee and Board may feel are necessary or appropriate in light
of the results of the most recent shareholder vote. In addition,
the Board feels that a triennial vote will provide investors with
sufficient time to evaluate the effectiveness of our executive
compensation program as it relates to the business outcomes of the
Company.
It is
important to note that stockholders are not voting to approve or
disapprove the recommendation of the Board. The proxy card provides
stockholders with four choices (every one, two or three years, or
abstain). Proxies submitted without direction pursuant to this
solicitation will be voted for the approval of holding the advisory
vote on executive compensation once every “three
years.”
|
|
THE
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EVERY
“THREE YEARS.”
|
EXECUTIVE COMPENSATION
The
table below summarizes compensation paid to or earned by our named
executive officers (“NEOs”) for the years ended March
31, 2018 and 2017. No named executive officer of the Company
had total compensation of $100,000 or more during the fiscal year
ended March 31, 2017.
Summary Compensation Table
Name
and
Principal
Position
|
|
|
|
Stock Awards
($)
|
|
All Other Compensation ($)(2)
|
|
Timur
Turlov
|
|
2018
|
95,440
|
--
|
--
|
19,213
|
114,653
|
CEO
and Chairman
|
|
2017(3)
|
--
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
|
Evgeniy
Ler
|
|
2018
|
20,825
|
147,000(4)
|
--
|
4,769
|
172,594
|
CFO
|
|
2017(5)
|
--
|
--
|
--
|
--
|
--
|
(1)
Annual salary is
net of all salary-related taxes and dues required under the laws of
the Russian Federation and the Republic of Kazakhstan, which are
legally the responsibility of the Company.
(2)
Includes
salary-related taxes and dues of $16,927 and a car allowance of
$2,286 for Mr.Turlov and salary-related taxes and dues of $4,769
for Mr. Ler.
(3)
We did not complete
the acquisition of Freedom RU and its subsidiaries until June 29,
2017, which was subsequent to the end of our 2017 fiscal year.
During fiscal 2017, Mr. Turlov received no salary or other
compensation from FRHC. He did, however, receive compensation from
Freedom RU and its subsidiaries in the amount of $81,182, which was
comprised of salary of $66,578, salary-related taxes and dues of
$11,796 and a car allowance of $2,808.
(4)
Consists of a
restricted stock award of 70,000 shares made on October 6, 2017
valued at $2.10 per share which vest as described in the notes to
the table under “Outstanding
Equity Awards at Fiscal Year-End” below.
(5)
We did not complete
the acquisition of Freedom RU and its subsidiaries until June 29,
2017, which was subsequent to the end of our 2017 fiscal year.
During fiscal 2017, Mr. Ler received no salary or other
compensation from FRHC. He did, however, receive compensation from
Freedom RU and its subsidiaries in the amount of $23,939, which was
comprised of salary of $19,474, salary-related taxes and dues of
$4,465.
Outstanding Equity Awards at Fiscal Year-End
Mr.
Turlov held no outstanding equity awards from the Company as of the
fiscal years March 31, 2018 and 2017. Mr. Ler did not hold any
outstanding stock options during the fiscal years ended March 31,
2018 and 2017, but did hold an outstanding restricted stock award
during the fiscal year ended March 31, 2018, as described in more
detail in the following table:
|
|
Name
|
|
Number of Shares or Units of Stock That Have Not
Vested
(#)
|
Market Value of Shares or Units of Stock that Have Not
Vested
($)(1)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested
(#)
|
Equity Incentive Plan Awards: Market of Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested
($)
|
Timur
Turlov
|
|
--
|
--
|
--
|
--
|
|
|
|
|
|
|
Evgeniy
Ler
|
|
70,000(2)
|
479,500
|
--
|
--
|
(1)
Valued
at the closing market price of our common stock on March 29, 2018 -
$6.85.
(2)
An initial 35,000
shares vest to Mr. Ler on October 6, 2018, subject to his continued
employment with us through that date. The remaining 35,000 shares
vest to Mr. Ler on October 6, 2019, subject to his continued
employment with us through October 6, 2019.
Option Exercises and Stock Vested
Neither
Mr. Turlov nor Mr. Ler exercised stock options and no stock vested
to Mr. Turlov or Mr. Ler during fiscal 2018 or 2017.
Nonqualified Deferred Compensation
We
do not have a deferred compensation program for our employees,
officers or directors.
Pension Benefits
We
do not offer a company-sponsored pension program for our employees,
officers or directors. Several of the countries in which we operate
have nationally-sponsored pension programs to which we are required
to make contributions.
Employment Agreements
At
this time we do not have a written or unwritten employment
agreement with Mr. Turlov. The employment agreement we have with
Mr. Ler is the standard statutorily required employment agreement
for all employees in the Republic of Kazakhstan. This standard
employment agreement is limited in its terms and primarily provides
for statutory requirements relating to the rights of employees,
base salary, and payment of salary-related taxes and dues,
including pension fund obligations. Both Mr. Turlov and Mr. Ler
provide services to the Company on an at-will basis.
Potential Payments upon Termination or Change in
Control
We do
not currently have any contract, agreement, plan or arrangement
with Mr. Turlov or Mr. Ler that would result in any potential
payment upon termination of employment with the Company or as a
result of a change in control of the Company.
PROPOSAL FIVE—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The
Board, upon the recommendation of its audit committee, has
appointed WSRP, LLC to serve as our independent registered public
accounting firm for fiscal year 2019.
Representatives
of WSRP, LLC are expected to be present telephonically at the 2018
Annual Meeting and are expected to be available to respond to
appropriate questions. They also will have the opportunity to make
a statement if they desire to do so.
We
are asking our stockholders to ratify the selection of WSRP, LLC as
our independent registered public accounting firm. Although
ratification is not required by our bylaws or otherwise, the Board
is submitting the selection of WSRP, LLC to our stockholders for
ratification as our audit committee has recommended because we
value our stockholders’ views on our independent registered
public accounting firm and as a matter of good corporate practice.
If our stockholders fail to ratify the selection, we will consider
that failure as a direction to the Board and the audit committee to
consider the selection of a different firm. Even if the selection
is ratified, the audit committee in its discretion may select a
different independent registered public accounting firm, at any
time during the year if it determines that such a change would be
in the best interests of the Company and our
stockholders.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Pre-Approval of Services
In
June 2018 our Board adopted an Audit Committee Charter and staffed
the audit committee in July 2018. Prior to staffing the audit
committee, the procedures that will now be performed by the audit
committee were performed by our full Board.
The
audit committee will annually engage our independent registered
public accounting firm and pre-approve, for the following
fiscal year, their services related to the annual audit and interim
quarterly reviews of our financial statements and all
reasonably-related assurance services.
All non-audit services will be considered
for pre-approval by the audit committee as our management
requests.
Audit
committee pre-approval of audit
and non-audit services will not be required if the
engagement for the services is entered into pursuant
to pre-approval policies and procedures established by
the audit committee regarding our engagement of the independent
registered public accounting firm, provided the policies and
procedures are detailed as to the particular service, the audit
committee is informed of each service provided and those policies
and procedures do not include delegation of the audit
committee’s responsibilities under the Exchange Act to our
management.
Audit Fees
The
firm of WSRP, LLC has served as our independent registered public
accounting firm for the fiscal years ended March 31, 2018 and 2017.
Principal accounting fees for professional services provided to us
by WSRP, LLC for the fiscal years ended March 31, 2018 and 2017,
are summarized as follows:
Fee Type
|
For the year ended
March 31, 2018($)
|
For the year ended
March 31, 2017($)
|
Audit
fees
|
90,612
|
30,000
|
Audit-related
fees
|
259,505
|
169,718
|
Tax
fees
|
16,302
|
8,146
|
All other
fees
|
—
|
—
|
|
|
|
Total
|
366,419
|
207,864
|
Audit Fees. Audit fees were for
professional services rendered in connection with the audit of the
financial statements included in our annual report on Form 10-K and
review of the financial statements included in our quarterly
reports of Form 10-Q and for services normally provided by our
independent registered public accounting firm in connection with
statutory and regulatory filings or engagements and fees for
Sarbanes-Oxley 404 audit work.
Audit Related Fees. Fees billed for
professional services related to the acquisitions of Freedom RU and
its subsidiaries and FFINEU Investment Limited.
Tax Fees. Fees billed for professional
services rendered for tax compliance, tax advice and tax planning
within the United States for the fiscal years ended March 31, 2018
and 2017.
The
audit committee has determined that the provision of services by
our independent registered accounting firm described above is
compatible with maintaining WSPR, LLC’s
independence.
|
|
THE
BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE
RATIFICATION OF WSRP, LLC AS OUR INDEPENDENT REGISTERED ACCOUNTING
FIRM FOR THE 2019 FISAL YEAR.
|
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
In addition to the compensation arrangements
discussed above under “Executive
Compensation” elsewhere
in this proxy statement, the following is a description of
transactions since April 1, 2016, to which we have been a
participant, in which the amount involved in the transaction
exceeds or will exceed the lesser of (i) $120,000 or
(ii) 1% of the average of our total assets at year end
for the last two completed fiscal years, and in which any of
our directors, executive officers or holders of more than 5% of our
capital stock, or any immediate family member of, or person sharing
the household with, any of these individuals, had or will have a
direct or indirect material interest or such other persons as may
be required to be disclosed pursuant to Item 404 of
Regulation S-K, which we refer collectively refer to as
related parties.
From
time to time in the ordinary course of business, we, through our
subsidiaries, engage in transactions with other corporations or
entities whose owners, executive officers or directors also are
directors or executive officers of FRHC or have an affiliation with
our directors or executive officers. Such transactions are
conducted on an arm’s-length basis. In addition, from time to
time our executive officers and directors and their affiliates may
engage in transactions in the ordinary course of business involving
services provided by our subsidiaries, such as brokerage, banking
and investment banking services. Such transactions are made on
substantially the same terms and conditions as other
similarly-situated clients who are neither directors nor
employees.
Our
subsidiaries may extend credit in the ordinary course of business
to certain of our directors and executive officers and persons or
entities affiliated with them. These extensions of credit may be in
connection with margin loans or other extensions of credit by our
subsidiaries in the ordinary course of business, on substantially
the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with persons not
related to the lender and do not involve more than the normal risk
of collectability or present other unfavorable
features.
In
November 2015, the Company entered into a Share Exchange and
Acquisition Agreement with Timur Turlov (the “Acquisition
Agreement”) the owner of a number of securities brokerage and
financial services companies with the intent to build an
international, broadly based brokerage and financial services firm
to meet the growing demand from an increasing number of investors
in Central Asia. Pursuant to the Acquisition Agreement, we agreed
to issue Mr. Turlov shares representing approximately 95% of the
total issued and outstanding shares of common stock of the Company
after giving effect to the transactions contemplated in the
Acquisition Agreement. In accordance with the Acquisition
Agreement, on June 29, 2017, we closed the acquisition of Freedom
RU and its subsidiaries and the securities brokerage and financial
services business conducted by them in Russia and Kazakhstan. We
acquired Freedom RU from Mr. Turlov in exchange for 20,665,023
shares of our common stock. In November 2017 we acquired FFINEU
Investments Limited and the securities brokerage and financial
services business conducted by it in Cyprus, from Mr. Turlov in
exchange for 12,758,011 shares of our common stock. In November
2015, in connection with the execution of the Acquisition
Agreement, Mr. Turlov became our chief executive officer, chairman
of our Board, and our majority shareholder.
In
December 2016, our subsidiary Freedom RU entered into a derivative
instrument agreement which included a call option feature with an
entity in which Mr. Turlov held an ownership interest. In June
2017, the derivative instrument expired unexercised and Freedom RU
recognized a gain on the derivative instrument of
$482,000.
In December 2017, we completed a private placement
to accredited investors of 3,681,667 shares of our restricted
common stock at a price of $3.00 per share for aggregate offering
proceeds of $11,045,001. Arkady Rakhilkin, a Company director,
purchased 348,333 shares in the private placement for $1,044,999
through Seven Rivers Capital Limited. Mr. Rakhilkin is the
sole shareholder and director of Seven Rivers Capital
Limited.
In
December 2017, our subsidiary FFINEU Investments Limited received a
loan for $94,368 from D-FINANCE, Inc., an entity in which Mr.
Turlov is a shareholder. The loan matures in December 2018, and
bears interest at a rate of 1% per annum. The full principal amount
and accrued interest is payable at the end of the loan term. The
amount of interest accrued on the loan as of June 30, 2018 was
$447. As a result of fluctuations between the USD and Euro (the
originating currency of the loan) the outstanding balance of the
loan as of June 30, 2018, was $93,744.
From
January 2018 to March 2018, our subsidiary Freedom KZ agreed to
sell certain apartments it owned to Turlov Property Management LLC,
for $929,779. The purchase price was equal to the fair value of the
apartments. Mr. Turlov is a member of Turlov Property Management
LLC.
In
March 2018, we completed a private placement to accredited
investors of 5,426,612 shares of our restricted common stock at a
price of $5.50 per share in exchange for aggregate offering
proceeds of $29,846,366 (the “March 2018 Private
Placement.”) In connection with the March 2018 Private
Placement, we paid placement agent fees of $447,695 to FFIN
Brokerage Services Inc, (“FFIN Brokerage”) a securities
broker-dealer. Mr. Turlov is a director and sole owner of FFIN
Brokerage. Askar Tashtitov, a Company director, purchased 28,000
shares for $154,000 in the March 2018 Private
Placement.
During
the fiscal years ended March 31, 2018 and 2017, Mr. Turlov made
capital contributions of $8,594,000 and $320,000, respectively, to
the Company.
In
March 2018, we loaned $1,747,887 to FFIN Brokerage to advance our
business purposes. The loan was made in the ordinary course of our
business operations and at arm’s length. The loan bears
interest at a rate of 4% per annum. As of June 30, 2018, the loan
had been fully repaid by FFIN Brokerage.
In
April 2018, Freedom KZ completed the acquisition and merger of JSC
Asyl Invest (“Asyl”) and the securities brokerage
business conducted by it in Kazakhstan. At the time of the
acquisition, Asyl was 100% controlled by Mr. Turlov. The
consideration for closing the Asyl acquisition was $2,250,000,
which was equal to the fair value of the net assets received by
Freedom KZ, and paid to Mr. Turlov.
In
May 2018, our subsidiary Freedom RU completed the acquisition and
merger of LLC Nettrader (“Nettrader”) and the
securities brokerage business conducted by it in Russia. At the
time of the acquisition, Nettrader was 100% controlled by Mr.
Turlov. The consideration for closing the Nettrader acquisition was
$3,815,523, which was equal to the fair value of the net assets
received by Freedom RU, and paid to Mr. Turlov.
As
noted elsewhere in this proxy statement, under U.S. exchange and
market rules, we are deemed a “Controlled Company”
because Mr. Turlov owns 73.1% of our total outstanding common
stock. The Audit Committee Charter adopted in June 2018 provides
that the audit committee will review all relationships and
transactions with related parties. Based on all the relevant facts
and circumstances, the audit committee will decide whether a
related-person transaction is appropriate and will approve only
those transactions that are in our best interests and that conform
with SEC rules prohibiting personal loans to executive officers and
directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section
16(a) of the Exchange Act requires our directors and executive
officers, and any persons who own more than 10% of the common stock
of the Company to file with the SEC reports of beneficial ownership
and changes in beneficial ownership of our common stock. Officers
and directors are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file. Based solely on review
of the copies of such reports furnished to us or written
representations, we believe that during fiscal 2018 all filing
requirements applicable to our executive officers, directors and
greater than 10% shareholders were met on a timely basis, except
for one Form 4 for Mr. Turlov. On September 8, 2017, in connection
with the Company’s acquisition of Freedom RU and completion
of the reverse split of the Company’s common stock, Mr.
Turlov was issued 12,278,602 shares of common stock. As a result of
a miscommunication with the Company’s Edgar filing service,
the Form 4 inadvertently was not filed until September 29,
2017.
STOCKHOLDER PROPOSALS
FOR THE 2019 ANNUAL MEETING
Requirements for Stockholder Proposals to Be Considered for
Inclusion in the 2019 Proxy Materials
If you
wish to include a proposal in the proxy statement for the next
annual meeting of stockholders, your written proposal must be
received by the Company no later than May 15, 2019. The proposal
should be mailed by certified mail, return receipt requested, and
must comply in all respects with Rule 14a-8 under the Exchange
Act, the laws of the state of Nevada and our Bylaws.
Stockholder proposals may be delivered to Chairman of the Nominating and Corporate
Governance Committee c/o Corporate Secretary, Freedom
Holding Corp, 1930 Village Center Cir. #3-6972, Las Vegas, Nevada
89134.
For
each matter that you wish to bring before the meeting, provide the
following information:
●
a
brief description of the business and the reason for bringing it to
the meeting;
●
your
name and record address;
●
the
number of shares of Company stock which you own; and
●
any
material interest (such as financial or personal interest) that you
have in the matter.
Requirements for Stockholder Proposals to Be Brought Before the
2019 Annual Meeting of Stockholders and Director
Nominations
Notice of any proposal that a stockholder intends
to present at the 2019 Annual Meeting of stockholders, but does not
intend to have included in the proxy statement and form of proxy
relating to the 2019 Annual Meeting of stockholders, as well as any
director nominations, must be delivered to the Chairman of the
Nominating and Corporate Governance Committee c/o Corporate
Secretary at Freedom Holding Corp., 1930 Village Center Cir.
#3-6972, Las Vegas, Nevada 89134, not
earlier than April 15, 2019 and not later than May 15, 2019,
except that if the 2019 Annual Meeting of our stockholders is not
within 30 days before or after the anniversary date, we must
receive notice by the stockholder not later than the close of
business on the 10th day following the date on which the notice of
the date of the annual meeting was mailed or the public
announcement was made. In addition, the notice must provide the
information required by our bylaws with respect to each director
nomination or other proposal that the stockholder intends to
present at the 2019 Annual Meeting of
stockholders.
We
have established an advance notice procedures with regard to
certain matters, (excluding director nominations by stockholders)
including stockholder proposals not included in our proxy
statement, to be brought before an annual meeting of
stockholders.
A
stockholder’s notice with respect to a proposed item of
business must include:
(a) a
brief description of the substance of, and the reasons for
conducting, such business at the annual meeting;
(b) the
name and address of the stockholder proposing such
business;
(c) the
number of our shares which are beneficially owned by the
stockholder, any person controlling, directly or indirectly, or
acting in concert with, such stockholder and any person
controlling, controlled by or under common control with such
stockholder; and
(d) any
material interest of the stockholder in such business.
With respect to the procedures for director
nomination’s by stockholders, please see
“Director Nomination
Process” elsewhere in
this proxy statement.
2018 ANNUAL REPORT ON FORM 10-K
Included with these Proxy Materials is a copy of
our 2018 Annual Report on Form 10-K without exhibits, as
filed with the SEC. We will furnish to each person whose proxy is
solicited, on the written request of that person, a copy of the
exhibits to that Annual Report for a charge of ten cents per page.
We will also mail to you without charge, upon request, a copy of
any document specifically referenced or incorporated by reference
in this proxy statement. Please direct your request to Corporate
Secretary at Freedom Holding Corp, 1930 Village Center Cir.
#3-6972, Las Vegas, Nevada 89134.
OTHER MATTERS
We
know of no other matters to be submitted to our stockholders at the
2018 Annual Meeting. If any other matters are properly brought
before the 2018 Annual Meeting, it is the intention of the persons
named in the accompanying proxy to vote on such matters in
accordance with their best judgment.
Appendix A
FREEDOM HOLDING CORP.
2019 EQUITY INCENTIVE PLAN
1. Purpose;
Eligibility.
1.1 General
Purpose. The name of this plan
is the Freedom Holding Corp. 2019 Equity Incentive Plan (the
“Plan”). The purposes of the Plan are to (a)
enable Freedom Holding Corp., a Nevada corporation (the
“Company”), and any Affiliate to attract and retain
the types of Employees, Consultants and Directors who will
contribute to the Company’s long range success; (b) provide
incentives that align the interests of Employees, Consultants and
Directors with those of the shareholders of the Company; and (c)
promote the success of the Company’s
business.
1.2 Eligible
Award Recipients. The persons
eligible to receive Awards are the Employees, Consultants and
Directors of the Company and its Affiliates and such other
individuals designated by the Committee who are reasonably expected
to become Employees, Consultants or Directors after the receipt of
Awards.
1.3 Available
Awards. Awards that may be
granted under the Plan include: (a) Incentive Stock Options, (b)
Non-qualified Stock Options, (c) Stock Appreciation Rights, (d)
Restricted Awards and (e) Other Equity-Based
Awards.
2. Definitions.
“Affiliate” means a corporation or other entity that,
directly or through one or more intermediaries, controls, is
controlled by or is under common control with, the
Company.
“Applicable
Laws” means the
requirements related to or implicated by the administration of the
Plan under applicable state corporate law, United States federal
and state securities laws, the Code, any stock exchange or
quotation system on which the shares of Common Stock are listed or
quoted, state and United States tax law, and the applicable laws of
any foreign country or jurisdiction where Awards are granted under
the Plan.
“Award” means any right granted under the Plan,
including an Incentive Stock Option, a Non-qualified Stock Option,
a Stock Appreciation Right, a Restricted Award or an Other
Equity-Based Award.
“Award
Agreement” means a
written agreement, contract, certificate or other instrument or
document evidencing the terms and conditions of an individual Award
granted under the Plan which may, in the discretion of the Company,
be transmitted electronically to any Participant. Each Award
Agreement shall be subject to the terms and conditions of the
Plan.
“Beneficial
Owner” has the meaning
assigned to such term in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except that in calculating the beneficial ownership
of any particular Person, such Person shall be deemed to have
beneficial ownership of all securities that such Person has the
right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable only
after the passage of time. The terms “Beneficially
Owns” and “Beneficially Owned” have a
corresponding meaning.
“Board” means the Board of Directors of the
Company, as constituted at any time.
“Cash Award”
means an Award denominated in cash
that is granted under Section 7.3 of the Plan.
“Cause” means:
With respect to any Participant, unless the applicable Award
Agreement states otherwise:
(a) If the Participant is a party to an employment or service
agreement with the Company or its Affiliates and such agreement
provides for a definition of Cause, the definition contained
therein; or
(b) If no such agreement exists, or if such agreement does not
define Cause: (i) the commission of, or plea of guilty or no
contest to, a felony or a crime involving moral turpitude or the
commission of any other act involving willful malfeasance or
material fiduciary breach with respect to the Company or an
Affiliate; (ii) conduct that results in or is reasonably likely to
result in harm to the reputation or business of the Company or any
of its Affiliates; (iii) gross negligence or willful misconduct
with respect to the Company or an Affiliate; or (iv) material
violation of state or federal securities laws.
The
Committee, in its absolute discretion, shall determine the effect
of all matters and questions relating to whether a Participant has
been discharged for Cause.
“Change in
Control”
(a) The direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all of
the properties or assets of the Company and its subsidiaries, taken
as a whole, to any Person that is not a subsidiary of the
Company;
(b) The date which is 10 business days prior to the consummation of
a complete liquidation or dissolution of the Company;
(c) The acquisition, after the Effective
Date of this Plan, by any Person of Beneficial Ownership of 50% or
more (on a fully diluted basis) of either (i) the then outstanding
shares of Common Stock of the Company, taking into account as
outstanding for this purpose such Common Stock issuable upon the
exercise of options or warrants, the conversion of convertible
stock or debt, and the exercise of any similar right to acquire
such Common Stock (the “Outstanding Company
Common Stock”) or
(ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company
Voting Securities”); provided,
however, that for
purposes of this Plan, the following acquisitions shall not
constitute a Change in Control: (A) any acquisition by the Company
or any Affiliate, (B) any acquisition by any employee benefit plan
sponsored or maintained by the Company or any subsidiary, (C) any
acquisition which complies with clauses, (i), (ii) and (iii) of
subsection (d) of this definition or (D) in respect of an Award
held by a particular Participant, any acquisition by the
Participant or any group of persons including the Participant (or
any entity controlled by the Participant or any group of persons
including the Participant); or
(d) The consummation of a reorganization,
merger, consolidation, statutory share exchange or similar form of
corporate transaction involving the Company that requires the
approval of the Company’s shareholders, whether for such
transaction or the issuance of securities in the transaction (a
“Business
Combination”),
unless immediately following such Business Combination: (i) more
than 50% of the total voting power of (A) the entity resulting from
such Business Combination (the “Surviving
Company”), or (B)
if applicable, the ultimate parent entity that directly or
indirectly has beneficial ownership of sufficient voting securities
eligible to elect a majority of the members of the board of
directors (or the analogous governing body) of the Surviving
Company (the “Parent
Company”), is
represented by the Outstanding Company Voting Securities that were
outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which the Outstanding
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the
Outstanding Company Voting Securities among the holders thereof
immediately prior to the Business Combination; (ii) no Person
(other than any employee benefit plan sponsored or maintained by
the Surviving Company or the Parent Company) is or becomes the
Beneficial Owner, directly or indirectly, of 50% or more of the
total voting power of the outstanding voting securities eligible to
elect members of the board of directors of the Parent Company (or
the analogous governing body) (or, if there is no Parent Company,
the Surviving Company); and (iii) at least a majority of the
members of the board of directors (or the analogous governing body)
of the Parent Company (or, if there is no Parent Company, the
Surviving Company) following the consummation of the Business
Combination were Board members at the time of the Board’s
approval of the execution of the initial agreement providing for
such Business Combination.
“Code” means the Internal Revenue Code of 1986,
as it may be amended from time to time. Any reference to a section
of the Code shall be deemed to include a reference to any
regulations promulgated thereunder.
“Committee” means a committee of one or more members
of the Board appointed by the Board to administer the
Plan.
“Common Stock” means the common stock, $0.001 par value
per share, of the Company, or such other securities of the Company
as may be designated by the Committee from time to time in
substitution thereof.
“Company” means Freedom Holding Corp., a Nevada
corporation, and any successor thereto.
“Consultant” means any individual or entity which
performs bona fide services to the Company or an Affiliate, other
than as an Employee or Director, and who may be offered securities
registerable pursuant to a registration statement on Form S-8 under
the Securities Act.
“Continuous
Service” means that the
Participant’s service with the Company or an Affiliate,
whether as an Employee, Consultant or Director, is not interrupted
or terminated. The Participant’s Continuous Service shall not
be deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Participant renders such service,
provided
that there is no interruption
or termination of the Participant’s Continuous
Service; provided further that
if any Award is subject to Section
409A of the Code, this sentence shall only be given effect to the
extent consistent with Section 409A of the Code. For example, a
change in status from an Employee of the Company to a Director of
an Affiliate will not constitute an interruption of Continuous
Service. The Committee or its delegate, in its sole discretion, may
determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal
or family leave of absence. The Committee or its delegate, in its
sole discretion, may determine whether a Company transaction, such
as a sale or spin-off of a division or subsidiary that employs a
Participant, shall be deemed to result in a termination of
Continuous Service for purposes of affected Awards, and such
decision shall be final, conclusive and
binding.
“Deferred Stock Units
(DSUs)” has the meaning
set forth in Section 7.2 hereof.
“Director” means a member of the
Board.
“Disability” means, unless the applicable Award
Agreement says otherwise, that the Participant is unable to engage
in any substantial gainful activity by reason of any medically
determinable physical or mental impairment;provided, however,
for purposes of determining the term
of an Incentive Stock Option pursuant to Section 6.10 hereof, the
term Disability shall have the meaning ascribed to it under Section
22(e)(3) of the Code. The determination of whether an individual
has a Disability shall be determined under procedures established
by the Committee. Except in situations where the Committee is
determining Disability for purposes of the term of an Incentive
Stock Option pursuant to Section 6.10 hereof within the meaning of
Section 22(e)(3) of the Code, the Committee may rely on any
determination that a Participant is disabled for purposes of
benefits under any long-term disability plan maintained by the
Company or any Affiliate in which a Participant
participates.
“Disqualifying
Disposition” has the
meaning set forth in Section 14.12.
“Effective
Date” shall mean
September __, 2018.
“Employee” means any person, including an Officer or
Director, employed by the Company or an Affiliate;
provided,
that, for purposes of
determining eligibility to receive Incentive Stock Options, an
Employee shall mean an employee of the Company or a parent or
subsidiary corporation within the meaning of Section 424 of the
Code. Mere service as a Director or payment of a director’s
fee by the Company or an Affiliate shall not be sufficient to
constitute “employment” by the Company or an
Affiliate.
“Exchange Act” means the Securities Exchange Act of 1934,
as amended.
“Fair Market
Value” means, as of any
date, the value of the Common Stock as determined below. If the
Common Stock is listed on any established stock exchange or a
national market system, including without limitation, the New York
Stock Exchange or the NASDAQ Stock Market, the Fair Market Value
shall be the closing price of a share of Common Stock (or if no
sales were reported the closing price on the date immediately
preceding such date) as quoted on such exchange or system on the
day of determination, as reported on Google
Finance. If the Common Stock is
not then listed on any nationally recognized securities exchange
but is traded over the counter at the time determination of its
Fair Market Value is required to be made hereunder, its Fair Market
Value shall be deemed to be equal to the average between the
reported high and low sales prices of Common Stock on the most
recent date on which Common Stock was publicly traded, as reported
by the OTC Markets Group. In the absence of an established market
for the Common Stock, the Fair Market Value shall be determined in
good faith by the Committee and such determination shall be
conclusive and binding on all persons.
“Fiscal
Year” means the
Company’s fiscal year.
“Free Standing
Rights” has the meaning
set forth in Section 7.1(a).
“Good Reason” means, unless the applicable Award
Agreement states otherwise:
(a) If an Employee or Consultant is a party to an employment or
service agreement with the Company or its Affiliates and such
agreement provides for a definition of Good Reason, the definition
contained therein; or
(b) If no such agreement exists or if such agreement does not
define Good Reason, the occurrence of one or more of the following
without the Participant’s express written consent, which
circumstances are not remedied by the Company within thirty (30)
days of its receipt of a written notice from the Participant
describing the applicable circumstances (which notice must be
provided by the Participant within ninety (90) days of the
Participant’s knowledge of the applicable circumstances): (i)
any material, adverse change in the Participant’s duties,
responsibilities, authority, title, status or reporting structure;
(ii) a material reduction in the Participant’s base salary or
bonus opportunity; or (iii) a geographical relocation of the
Participant’s principal office location by more than fifty
(50) miles.
“Grant Date” means the date on which the Committee
adopts a resolution, or takes other appropriate action, expressly
granting an Award to a Participant that specifies the key terms and
conditions of the Award or, if a later date is set forth in such
resolution, then such date as is set forth in such
resolution.
“Incentive Stock
Option” means an Option
that is designated by the Committee as an incentive stock option
within the meaning of Section 422 of the Code and that meets the
requirements set out in the Plan.
“Non-Employee
Director” means a
Director who is a “non-employee director” within the
meaning of Rule 16b-3.
“Non-qualified Stock
Option” means an Option
that by its terms does not qualify or is not intended to qualify as
an Incentive Stock Option.
“Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated
thereunder.
“Option” means an Incentive Stock Option or a
Non-qualified Stock Option granted pursuant to the
Plan.
“Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person
who holds an outstanding Option.
“Option Exercise
Price” means the price at
which a share of Common Stock may be purchased upon the exercise of
an Option.
“Other Equity-Based
Award” means an Award
that is not an Option, Stock Appreciation Right, Restricted Stock
or Restricted Stock Unit that is payable by delivery of Common
Stock and/or which is measured by reference to the value of Common
Stock.
“Participant” means an eligible person to whom an Award
is granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Award.
“Permitted
Transferee” means: (a) a
member of the Optionholder’s immediate family (child,
stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships), any person
sharing the Optionholder’s household (other than a tenant or
employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the
Optionholder) control the management of assets, and any other
entity in which these persons (or the Optionholder) own more than
50% of the voting interests; (b) third parties designated by the
Committee in connection with a program established and approved by
the Committee pursuant to which Participants may receive a cash
payment or other consideration in consideration for the transfer of
a Non-qualified Stock Option; and (c) such other transferees as may
be permitted by the Committee in its sole
discretion.
“Person”
means a person as defined in Section
13(d)(3) of the Exchange Act.
“Plan” means this Freedom Holding Corp. 2019
Equity Incentive Plan, as amended and/or amended and restated from
time to time.
“Related
Rights” has the meaning
set forth in Section 7.1(a).
“Restricted
Award” means any Award
granted pursuant to Section 7.2(a).
“Restricted
Period” has the meaning
set forth in Section 7.2(a).
“Rule 16b-3” means Rule 16b-3 promulgated under the
Exchange Act or any successor to Rule 16b-3, as in effect from time
to time.
“Securities
Act” means the Securities
Act of 1933, as amended.
“Stock Appreciation
Right” means the right
pursuant to an Award granted under Section 7.1 to receive, upon
exercise, an amount payable in cash or shares equal to the number
of shares subject to the Stock Appreciation Right that is being
exercised multiplied by the excess of (a) the Fair Market Value of
a share of Common Stock on the date the Award is exercised, over
(b) the exercise price specified in the Stock Appreciation Right
Award Agreement.
“Stock for Stock
Exchange” has the meaning
set forth in Section 6.4.
“Substitute
Award” has the meaning
set forth in Section 4.5.
“Ten Percent
Shareholder” means a
person who owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any of
its Affiliates.
“Total Share
Reserve” has the meaning
set forth in Section 4.1.
3. Administration.
3.1 Authority
of Committee. The Plan shall be
administered by the Committee or, in the Board’s sole
discretion, by the Board. Subject to the terms of the Plan, the
Committee’s charter and Applicable Laws, and in addition to
other express powers and authorization conferred by the Plan, the
Committee shall have the authority:
(a) to
construe and interpret the Plan and apply its
provisions;
(b) to
promulgate, amend, and rescind rules and regulations relating to
the administration of the Plan;
(c) to
authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the
Plan;
(d) to
delegate its authority to one or more Officers of the Company with
respect to Awards that do not involve “insiders” within
the meaning of Section 16 of the Exchange Act;
(e) to
determine when Awards are to be granted under the Plan and the
applicable Grant Date;
(f) from
time to time to select, subject to the limitations set forth in
this Plan, those Participants to whom Awards shall be
granted;
(g) to
determine the number of shares of Common Stock to be made subject
to each Award;
(h) to
determine whether each Option is to be an Incentive Stock Option or
a Non-qualified Stock Option;
(i)
to prescribe the terms
and conditions of each Award, including, without limitation, the
exercise price and medium of payment and vesting provisions, and to
specify the provisions of the Award Agreement relating to such
grant;
(j)
to amend any
outstanding Awards, including for the purpose of modifying the time
or manner of vesting, or the term of any outstanding Award;
provided,
however, that if any such
amendment impairs a Participant’s rights or increases a
Participant’s obligations under his or her Award or creates
or increases a Participant’s federal income tax liability
with respect to an Award, such amendment shall also be subject to
the Participant’s consent;
(k) to
determine the duration and purpose of leaves of absences which may
be granted to a Participant without constituting termination of
their employment for purposes of the Plan, which periods shall be
no shorter than the periods generally applicable to Employees under
the Company’s employment policies;
(l)
to make
decisions with respect to outstanding Awards that may become
necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments;
(m)
to interpret, administer, reconcile
any inconsistency in, correct any defect in and/or supply any
omission in the Plan and any instrument or agreement relating to,
or Award granted under, the Plan; and
(n) to
exercise discretion to make any and all other determinations which
it determines to be necessary or advisable for the administration
of the Plan.
The Committee also may modify the purchase price
or the exercise price of any outstanding Award, provided that
if the modification effects a
repricing, shareholder approval shall be required before the
repricing is effective.
3.2 Committee
Decisions Final. All decisions
made by the Committee pursuant to the provisions of the Plan shall
be final and binding on the Company and the Participants, unless
such decisions are determined by a court having jurisdiction to be
arbitrary and capricious.
3.3 Delegation.
The Committee or, if no Committee has been appointed, the Board may
delegate administration of the Plan to a committee or committees of
one or more members of the Board, and the term
“Committee” shall apply to any person or persons to
whom such authority has been delegated. The Committee shall have
the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in
this Plan to the Board or the Committee shall thereafter be to the
committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
The members of the Committee shall be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or
decrease the size of the Committee, add additional members to,
remove members (with or without cause) from, appoint new members in
substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the
majority of its members or, in the case of a Committee comprised of
only two members, the unanimous consent of its members, whether
present or not, or by the written consent of the majority of its
members and minutes shall be kept of all of its meetings and copies
thereof shall be provided to the Board. Subject to the limitations
prescribed by the Plan and the Board, the Committee may establish
and follow such rules and regulations for the conduct of its
business as it may determine to be advisable.
3.4 Committee
Composition. Except as
otherwise determined by the Board, the Committee shall consist
solely of two or more Non-Employee Directors. The Board shall have
discretion to determine whether or not it intends to comply with
the exemption requirements of Rule 16b-3. However, if the Board
intends to satisfy such exemption requirements, with respect to any
insider subject to Section 16 of the Exchange Act, the Committee
shall be the full Board or a compensation committee of the Board
that at all times consists solely of two or more Non-Employee
Directors. Within the scope of such authority, the Board or the
Committee may delegate to a committee of one or more members of the
Board who are not Non-Employee Directors the authority to grant
Awards to eligible persons who are not then subject to Section 16
of the Exchange Act. Nothing herein shall create an inference that
an Award is not validly granted under the Plan in the event Awards
are granted under the Plan by a compensation committee of the Board
that does not at all times consist solely of two or more
Non-Employee Directors.
3.5 Indemnification.
In addition to such other rights of indemnification as they may
have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by
the Company against the reasonable expenses, including
attorney’s fees, actually incurred in connection with any
action, suit or proceeding or in connection with any appeal
therein, to which the Committee may be party by reason of any
action taken or failure to act under or in connection with the Plan
or any Award granted under the Plan, and against all amounts paid
by the Committee in settlement thereof (provided,
however, that the settlement
has been approved by the Company, which approval shall not be
unreasonably withheld) or paid by the Committee in satisfaction of
a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee did not act in good
faith and in a manner which such person reasonably believed to be
in the best interests of the Company, or in the case of a criminal
proceeding, had no reason to believe that the conduct complained of
was unlawful; provided,
however, that within 60 days
after the institution of any such action, suit or proceeding, such
Committee shall, in writing, offer the Company the opportunity at
its own expense to handle and defend such action, suit or
proceeding.
4. Shares
Subject to the Plan.
4.1 Subject
to adjustment in accordance with Section 11, no more than 3,740,000
shares of Common Stock shall be available for the grant of Awards
under the Plan (the “Total Share
Reserve”). Any shares of
Common Stock granted in connection with Options and Stock
Appreciation Rights shall be counted against this limit as one (1)
share for every one (1) Option or Stock Appreciation Right awarded.
During the terms of the Awards, the Company shall keep available at
all times the number of shares of Common Stock required to satisfy
such Awards.
4.2 Shares
of Common Stock available for distribution under the Plan may
consist, in whole or in part, of authorized and unissued shares,
treasury shares or shares reacquired by the Company in any
manner.
4.3 Subject
to adjustment in accordance with Section 11, all of the shares of
Common Stock may be issued in the aggregate pursuant to the
exercise of Incentive Stock Options (the “ISO
Limit”).
4.4 Any
shares of Common Stock subject to an Award that expire or are
canceled, forfeited, or terminated without issuance of the full
number of shares of Common Stock to which the Award related will
again be available for issuance under the Plan. Notwithstanding
anything to the contrary contained herein: shares subject to an
Award under the Plan shall not again be made available for issuance
or delivery under the Plan if such shares are (a) shares tendered
in payment of an Option, (b) shares delivered or withheld by the
Company to satisfy any tax withholding obligation, or (c) shares
covered by a stock-settled Stock Appreciation Right or other Awards
that were not issued upon the settlement of the
Award.
4.5 Awards
may, in the sole discretion of the Committee, be granted under the
Plan in assumption of, or in substitution for, outstanding awards
previously granted by an entity acquired by the Company or with
which the Company combines (“Substitute
Awards”). Substitute
Awards shall not be counted against the Total Share Reserve;
provided, that, Substitute Awards issued in connection with the
assumption of, or in substitution for, outstanding options intended
to qualify as Incentive Stock Options shall be counted against the
ISO limit. Subject to applicable stock exchange requirements,
available shares under a shareholder-approved plan of an entity
directly or indirectly acquired by the Company or with which the
Company combines (as appropriately adjusted to reflect such
acquisition or transaction) may be used for Awards under the Plan
and shall not count toward the Total Share
Limit.
5. Eligibility.
5.1 Eligibility
for Specific Awards. Incentive
Stock Options may be granted only to Employees. Awards other than
Incentive Stock Options may be granted to Employees, Consultants
and Directors and those individuals whom the Committee determines
are reasonably expected to become Employees, Consultants or
Directors following the Grant Date.
5.2 Ten
Percent Shareholders. A Ten
Percent Shareholder shall not be granted an Incentive Stock Option
unless the Option Exercise Price is at least 110% of the Fair
Market Value of the Common Stock at the Grant Date and the Option
is not exercisable after the expiration of five years from the
Grant Date.
6. Option
Provisions. Each Option granted
under the Plan shall be evidenced by an Award Agreement. Each
Option so granted shall be subject to the conditions set forth in
this Section 6, and to such other conditions not inconsistent with
the Plan as may be reflected in the applicable Award Agreement. All
Options shall be separately designated Incentive Stock Options or
Non-qualified Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of
each type of Option. Notwithstanding the foregoing, the Company
shall have no liability to any Participant or any other person if
an Option designated as an Incentive Stock Option fails to qualify
as such at any time or if an Option is determined to constitute
“nonqualified deferred compensation” within the meaning
of Section 409A of the Code and the terms of such Option do not
satisfy the requirements of Section 409A of the Code. The
provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the
following provisions:
6.1 Term.
Subject to the provisions of Section 5.2 regarding Ten Percent
Shareholders, no Incentive Stock Option shall be exercisable after
the expiration of 10 years from the Grant Date. The term of a
Non-qualified Stock Option granted under the Plan shall be
determined by the Committee;provided,
however, no Non-qualified Stock
Option shall be exercisable after the expiration of 10 years from
the Grant Date.
6.2 Exercise
Price of an Incentive Stock Option. Subject to the provisions of Section 5.2
regarding Ten Percent Shareholders, the Option Exercise Price of
each Incentive Stock Option shall be not less than 100% of the Fair
Market Value of the Common Stock subject to the Option on the Grant
Date. Notwithstanding the foregoing, an Incentive Stock Option may
be granted with an Option Exercise Price lower than that set forth
in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the
Code.
6.3 Exercise
Price of a Non-qualified Stock Option. The Option Exercise Price of each Non-qualified
Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, a Non-qualified Stock Option may be
granted with an Option Exercise Price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 409A of the
Code.
6.4 Consideration.
The Option Exercise Price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (a) in cash or by certified or
bank check at the time the Option is exercised or (b) in the
discretion of the Committee, upon such terms as the Committee shall
approve, the Option Exercise Price may be paid: (i) by delivery to
the Company of other Common Stock, duly endorsed for transfer to
the Company, with a Fair Market Value on the date of delivery equal
to the Option Exercise Price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby
the Participant identifies for delivery specific shares of Common
Stock that have an aggregate Fair Market Value on the date of
attestation equal to the Option Exercise Price (or portion thereof)
and receives a number of shares of Common Stock equal to the
difference between the number of shares thereby purchased and the
number of identified attestation shares of Common Stock (a
“Stock
for Stock Exchange”);
(ii) a “cashless” exercise program established with a
broker; (iii) by reduction in the number of shares of Common Stock
otherwise deliverable upon exercise of such Option with a Fair
Market Value equal to the aggregate Option Exercise Price at the
time of exercise; (iv) by any combination of the foregoing methods;
or (v) in any other form of legal consideration that may be
acceptable to the Committee. Unless otherwise specifically provided
in the Option, the exercise price of Common Stock acquired pursuant
to an Option that is paid by delivery (or attestation) to the
Company of other Common Stock acquired, directly or indirectly from
the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). Notwithstanding the
foregoing, during any period for which the Common Stock is publicly
traded (i.e., the Common Stock is listed on any established stock
exchange or a national market system) an exercise by an Officer
that involves or may involve a direct or indirect extension of
credit or arrangement of an extension of credit by the Company,
directly or indirectly, in violation of Section 402(a) of the
Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any
Award under this Plan.
6.5 Transferability
of an Incentive Stock Option.
An Incentive Stock Option shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.6 Transferability
of a Non-qualified Stock Option. A Non-qualified Stock Option may, in the sole
discretion of the Committee, be transferable to a Permitted
Transferee, upon written approval by the Committee to the extent
provided in the Award Agreement. If the Non-qualified Stock Option
does not provide for transferability, then the Non-qualified Stock
Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.7 Vesting
of Options. Each Option may,
but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. The vesting
provisions of individual Options may vary. No Option may be
exercised for a fraction of a share of Common Stock. The Committee
may, but shall not be required to, provide for an acceleration of
vesting and exercisability in the terms of any Award Agreement upon
the occurrence of a specified event.
6.8 Termination
of Continuous Service. Unless
otherwise provided in an Award Agreement or in an employment
agreement the terms of which have been approved by the Committee,
in the event an Optionholder’s Continuous Service terminates
(other than upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the
earlier of (a) the date three months following the termination of
the Optionholder’s Continuous Service or (b) the expiration
of the term of the Option as set forth in the Award
Agreement; provided
that, if the termination of
Continuous Service is by the Company for Cause, all outstanding
Options (whether or not vested) shall immediately terminate and
cease to be exercisable. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in
the Award Agreement, the Option shall
terminate.
6.9 Extension
of Termination Date. An
Optionholder’s Award Agreement may also provide that if the
exercise of the Option following the termination of the
Optionholder’s Continuous Service for any reason would be
prohibited at any time because the issuance of shares of Common
Stock would violate the registration requirements under the
Securities Act or any other state or federal securities law or the
rules of any securities exchange or interdealer quotation system,
then the Option shall terminate on the earlier of (a) the
expiration of the term of the Option in accordance with Section 6.1
or (b) the expiration of a period after termination of the
Participant’s Continuous Service that is three months after
the end of the period during which the exercise of the Option would
be in violation of such registration or other securities law
requirements.
6.10 Disability
of Optionholder. Unless
otherwise provided in an Award Agreement, in the event that an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s Disability, the Optionholder may exercise
his or her Option (to the extent that the Optionholder was entitled
to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (a) the date 12
months following such termination or (b) the expiration of the term
of the Option as set forth in the Award Agreement. If, after
termination, the Optionholder does not exercise his or her Option
within the time specified herein or in the Award Agreement, the
Option shall terminate.
6.11 Death
of Optionholder. Unless
otherwise provided in an Award Agreement, in the event an
Optionholder’s Continuous Service terminates as a result of
the Optionholder’s death, then the Option may be exercised
(to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate,
by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder’s death, but only within the
period ending on the earlier of (a) the date 12 months following
the date of death or (b) the expiration of the term of such Option
as set forth in the Award Agreement. If, after the
Optionholder’s death, the Option is not exercised within the
time specified herein or in the Award Agreement, the Option shall
terminate.
6.12 Incentive
Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds $100,000, the
Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as
Non-qualified Stock Options.
7. Provisions
of Awards Other Than Options.
7.1 Stock
Appreciation Rights.
Each Stock Appreciation Right granted under the
Plan shall be evidenced by an Award Agreement. Each Stock
Appreciation Right so granted shall be subject to the conditions
set forth in this Section 7.1, and to such other conditions not
inconsistent with the Plan as may be reflected in the applicable
Award Agreement. Stock Appreciation Rights may be granted alone
(“Free
Standing Rights”) or in
tandem with an Option granted under the Plan
(“Related
Rights”).
(b) Grant
Requirements
Any
Related Right that relates to a Non-qualified Stock Option may be
granted at the same time the Option is granted or at any time
thereafter but before the exercise or expiration of the Option. Any
Related Right that relates to an Incentive Stock Option must be
granted at the same time the Incentive Stock Option is
granted.
(c) Term
of Stock Appreciation Rights
The term of a Stock Appreciation Right granted
under the Plan shall be determined by the Committee;
provided,
however, no Stock Appreciation
Right shall be exercisable later than the tenth anniversary of the
Grant Date.
(d) Vesting
of Stock Appreciation Rights
Each
Stock Appreciation Right may, but need not, vest and therefore
become exercisable in periodic installments that may, but need not,
be equal. The Stock Appreciation Right may be subject to such other
terms and conditions on the time or times when it may be exercised
as the Committee may deem appropriate. The vesting provisions of
individual Stock Appreciation Rights may vary. No Stock
Appreciation Right may be exercised for a fraction of a share of
Common Stock. The Committee may, but shall not be required to,
provide for an acceleration of vesting and exercisability in the
terms of any Stock Appreciation Right upon the occurrence of a
specified event.
(e) Exercise
and Payment
Upon
exercise of a Stock Appreciation Right, the holder shall be
entitled to receive from the Company an amount equal to the number
of shares of Common Stock subject to the Stock Appreciation Right
that is being exercised multiplied by the excess of (i) the Fair
Market Value of a share of Common Stock on the date the Award is
exercised, over (ii) the exercise price specified in the Stock
Appreciation Right or related Option. Payment with respect to the
exercise of a Stock Appreciation Right shall be made on the date of
exercise. Payment shall be made in the form of shares of Common
Stock (with or without restrictions as to substantial risk of
forfeiture and transferability, as determined by the Committee in
its sole discretion), cash or a combination thereof, as determined
by the Committee.
(f) Exercise
Price
The exercise price of a Free Standing Right shall
be determined by the Committee, but shall not be less than 100% of
the Fair Market Value of one share of Common Stock on the Grant
Date of such Stock Appreciation Right. A Related Right granted
simultaneously with or subsequent to the grant of an Option and in
conjunction therewith or in the alternative thereto shall have the
same exercise price as the related Option, shall be transferable
only upon the same terms and conditions as the related Option, and
shall be exercisable only to the same extent as the related
Option; provided,
however, that a Stock
Appreciation Right, by its terms, shall be exercisable only when
the Fair Market Value per share of Common Stock subject to the
Stock Appreciation Right and related Option exceeds the exercise
price per share thereof and no Stock Appreciation Rights may be
granted in tandem with an Option unless the Committee determines
that the requirements of Section 7.1(b) are
satisfied.
(g) Reduction
in the Underlying Option Shares
Upon
any exercise of a Related Right, the number of shares of Common
Stock for which any related Option shall be exercisable shall be
reduced by the number of shares for which the Stock Appreciation
Right has been exercised. The number of shares of Common Stock for
which a Related Right shall be exercisable shall be reduced upon
any exercise of any related Option by the number of shares of
Common Stock for which such Option has been exercised.
A Restricted Award is an Award of actual shares of
Common Stock (“Restricted
Stock”) or hypothetical
Common Stock units (“Restricted Stock
Units”) having a value
equal to the Fair Market Value of an identical number of shares of
Common Stock, which may, but need not, provide that such Restricted
Award may not be sold, assigned, transferred or otherwise disposed
of, pledged or hypothecated as collateral for a loan or as security
for the performance of any obligation or for any other purpose for
such period (the “Restricted
Period”) as the Committee
shall determine. Each Restricted Award granted under the Plan shall
be evidenced by an Award Agreement. Each Restricted Award so
granted shall be subject to the conditions set forth in this
Section 7.2, and to such other conditions not inconsistent with the
Plan as may be reflected in the applicable Award
Agreement.
(b) Restricted
Stock and Restricted Stock Units
(i) Each
Participant granted Restricted Stock shall execute and deliver to
the Company an Award Agreement with respect to the Restricted Stock
setting forth the restrictions and other terms and conditions
applicable to such Restricted Stock. Restricted Stock shall be held
by the Company rather than delivered to the Participant pending the
release of the applicable restrictions. As the Committee deems
appropriate, it may require the Participant to additionally execute
and deliver to the Company an appropriate blank stock power with
respect to the Restricted Stock covered by such agreement. If a
Participant fails to execute an agreement evidencing an Award of
Restricted Stock and, if applicable, a stock power, the Award shall
be null and void. Subject to the restrictions set forth in the
Award, the Participant generally shall have the rights and
privileges of a shareholder as to such Restricted Stock, including
the right to vote such Restricted Stock and the right to receive
dividends; provided
that, any cash dividends and
stock dividends with respect to the Restricted Stock shall be
withheld by the Company for the Participant’s account, and
interest may be credited on the amount of the cash dividends
withheld at a rate and subject to such terms as determined by the
Committee. The cash dividends or stock dividends so withheld by the
Committee and attributable to any particular share of Restricted
Stock (and earnings thereon, if applicable) shall be distributed to
the Participant in cash or, at the discretion of the Committee, in
shares of Common Stock having a Fair Market Value equal to the
amount of such dividends, if applicable, upon the release of
restrictions on such share and, if such share is forfeited, the
Participant shall have no right to such
dividends.
(ii) The
terms and conditions of a grant of Restricted Stock Units shall be
reflected in an Award Agreement. No shares of Common Stock shall be
issued at the time a Restricted Stock Unit is granted, and the
Company will not be required to set aside funds for the payment of
any such Award. A Participant shall have no voting rights with
respect to any Restricted Stock Units granted hereunder. The
Committee may also grant Restricted Stock Units with a deferral
feature, whereby settlement is deferred beyond the vesting date
until the occurrence of a future payment date or event set forth in
an Award Agreement (“Deferred Stock
Units”). At the
discretion of the Committee, each Restricted Stock Unit or Deferred
Stock Unit (representing one share of Common Stock) may be credited
with cash and stock dividends paid by the Company in respect of one
share of Common Stock (“Dividend
Equivalents”). Dividend
Equivalents shall be paid currently (and in no case later than the
end of the calendar year in which the dividend is paid to the
holders of the Common Stock or, if later, the 15th day of the third
month following the date the dividend is paid to holders of the
Common Stock). Dividend Equivalents shall be withheld by the
Company and credited to the Participant’s account, and
interest may be credited on the amount of cash Dividend Equivalents
credited to the Participant’s account at a rate and subject
to such terms as determined by the Committee. Dividend Equivalents
credited to a Participant’s account and attributable to any
particular Restricted Stock Unit or Deferred Stock Unit (and
earnings thereon, if applicable) shall be distributed in cash or,
at the discretion of the Committee, in shares of Common Stock
having a Fair Market Value equal to the amount of such Dividend
Equivalents and earnings, if applicable, to the Participant upon
settlement of such Restricted Stock Unit or Deferred Stock Unit
and, if such Restricted Stock Unit or Deferred Stock Unit is
forfeited, the Participant shall have no right to such Dividend
Equivalents. Dividend Equivalents will be deemed re-invested in
additional Restricted Stock Units or Deferred Stock Units based on
the Fair Market Value of a share of Common Stock on the applicable
dividend payment date and rounded down to the nearest whole
share.
(i) Restricted
Stock awarded to a Participant shall be subject to the following
restrictions until the expiration of the Restricted Period, and to
such other terms and conditions as may be set forth in the
applicable Award Agreement: (A) the Participant shall not be
entitled to delivery of the stock certificate; (B) the shares shall
be subject to the restrictions on transferability set forth in the
Award Agreement; (C) the shares shall be subject to forfeiture to
the extent provided in the applicable Award Agreement; and (D) to
the extent such shares are forfeited, the stock certificates shall
be returned to the Company, and all rights of the Participant to
such shares and as a shareholder with respect to such shares shall
terminate without further obligation on the part of the
Company.
(ii) Restricted
Stock Units and Deferred Stock Units awarded to any Participant
shall be subject to (A) forfeiture until the expiration of the
Restricted Period, and satisfaction of any applicable performance
goals during such period, to the extent provided in the applicable
Award Agreement, and to the extent such Restricted Stock Units or
Deferred Stock Units are forfeited, all rights of the Participant
to such Restricted Stock Units or Deferred Stock Units shall
terminate without further obligation on the part of the Company and
(B) such other terms and conditions as may be set forth in the
applicable Award Agreement.
(iii) The
Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock, Restricted Stock Units and
Deferred Stock Units whenever it may determine that, by reason of
changes in Applicable Laws or other changes in circumstances
arising after the date the Restricted Stock or Restricted Stock
Units or Deferred Stock Units are granted, such action is
appropriate.
(d) Restricted
Period
With
respect to Restricted Awards, the Restricted Period shall commence
on the Grant Date and end at the time or times set forth on a
schedule established by the Committee in the applicable Award
Agreement.
No
Restricted Award may be granted or settled for a fraction of a
share of Common Stock. The Committee may, but shall not be required
to, provide for an acceleration of vesting in the terms of any
Award Agreement upon the occurrence of a specified
event.
(e) Delivery
of Restricted Stock and Settlement of Restricted Stock
Units
Upon the expiration of the Restricted Period with
respect to any shares of Restricted Stock, the restrictions set
forth in Section 7.2(c) and the applicable Award Agreement shall be
of no further force or effect with respect to such shares, except
as set forth in the applicable Award Agreement. Upon such
expiration, the Company shall deliver to the Participant, or his or
her beneficiary, without charge, the stock certificate evidencing
the shares of Restricted Stock which have not then been forfeited
and with respect to which the Restricted Period has expired (to the
nearest full share) and any cash dividends or stock dividends
credited to the Participant’s account with respect to such
Restricted Stock and the interest thereon, if any. Upon the
expiration of the Restricted Period with respect to any outstanding
Restricted Stock Units, or at the expiration of the deferral period
with respect to any outstanding Deferred Stock Units, the Company
shall deliver to the Participant, or his or her beneficiary,
without charge, one share of Common Stock for each such outstanding
vested Restricted Stock Unit or Deferred Stock Unit
(“Vested Unit”) and cash equal to any Dividend
Equivalents credited with respect to each such Vested Unit in
accordance with Section 7.2(b)(ii) hereof and the interest thereon
or, at the discretion of the Committee, in shares of Common Stock
having a Fair Market Value equal to such Dividend Equivalents and
the interest thereon, if any;provided,
however, that, if explicitly
provided in the applicable Award Agreement, the Committee may, in
its sole discretion, elect to pay cash or part cash and part Common
Stock in lieu of delivering only shares of Common Stock for Vested
Units. If a cash payment is madein lieu of delivering shares of
Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the
Restricted Period lapsed in the case of Restricted Stock Units, or
the delivery date in the case of Deferred Stock Units, with respect
to each Vested Unit.
(f) Stock
Restrictions
Each
certificate representing Restricted Stock awarded under the Plan
shall bear a legend in such form as the Company deems
appropriate.
7.3 Other
Equity-Based and Cash Awards. The Committee may grant Other
Equity-Based Awards, either alone or in tandem with other Awards,
in such amounts and subject to such conditions as the Committee
shall determine in its sole discretion. Each Equity-Based Award
shall be evidenced by an Award Agreement and shall be subject to
such conditions, not inconsistent with the Plan, as may be
reflected in the applicable Award Agreement. The Committee may also
grant Cash Awards. Cash Awards shall be evidenced in such form as
the Committee may determine.
8. Securities
Law Compliance. Each Award
Agreement shall provide that no shares of Common Stock shall be
purchased or sold thereunder unless and until (a) any then
applicable requirements of state or federal laws and regulatory
agencies have been fully complied with to the satisfaction of the
Company and its counsel and (b) if required to do so by the
Company, the Participant has executed and delivered to the Company
a letter of investment intent in such form and containing such
provisions as the Committee may require. The Company shall use
reasonable efforts to seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to grant Awards and to issue and sell
shares of Common Stock upon exercise of the Awards;
provided,
however, that this undertaking
shall not require the Company to register under the Securities Act
the Plan, any Award or any Common Stock issued or issuable pursuant
to any such Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Awards unless and until
such authority is obtained.
9. Use
of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Awards, or upon
exercise thereof, shall constitute general funds of the
Company.
10. Miscellaneous.
10.1 Acceleration
of Exercisability and Vesting.
The Committee shall have the power to accelerate the time at which
an Award may first be exercised or the time during which an Award
or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at
which it may first be exercised or the time during which it will
vest.
10.2 Shareholder
Rights. Except as provided in
the Plan or an Award Agreement, no Participant shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Award unless
and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and noadjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for
which the record date is prior to the date such Common Stock
certificate is issued, except as provided in Section 11
hereof.
10.3 No
Employment or Other Service Rights. Nothing in the Plan or any instrument executed
or Award granted pursuant thereto shall confer upon any Participant
any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall
affect the right of the Company or an Affiliate to terminate the
employment of an Employee with or without notice and with or
without Cause.
10.4 Transfer;
Approved Leave of Absence. For
purposes of the Plan, no termination of employment by an Employee
shall be deemed to result from either (a) a transfer of employment
to the Company from an Affiliate or from the Company to an
Affiliate, or from one Affiliate to another, or (b) an approved
leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Employee’s right to
reemployment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted
or if the Committee otherwise so provides in writing, in either
case, except to the extent inconsistent with Section 409A of the
Code if the applicable Award is subject
thereto.
10.5 Withholding
Obligations. To the extent
provided by the terms of an Award Agreement and subject to the
discretion of the Committee, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (a) tendering a cash
payment; (b) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common
Stock under the Award, provided,
however, that no shares of
Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law; or (c) delivering to the
Company previously owned and unencumbered shares of Common Stock of
the Company.
11. Adjustments
Upon Changes in Stock. In the
event of changes in the outstanding Common Stock or in the capital
structure of the Company by reason of any stock or extraordinary
cash dividend, stock split, reverse stock split, an extraordinary
corporate transaction such as any recapitalization, reorganization,
merger, consolidation, combination, exchange, or other relevant
change in capitalization occurring after the Grant Date of any
Award, Awards granted under the Plan and any Award Agreements, the
exercise price of Options and Stock Appreciation Rights, the
maximum number of shares of Common Stock subject to all Awards
stated in Section 4 and the maximum number of shares of Common
Stock with respect to which any one person may be granted Awards
during any period stated in Section 4 and Section 7.5(d)(vi) will
be equitably adjusted or substituted, as to the number, price or
kind of a share of Common Stock or other consideration subject to
such Awards to the extent necessary to preserve the economic intent
of such Award. In the case of adjustmentsmade pursuant to this
Section 11, unless the Committee specifically determines that such
adjustment is in the best interests of the Company or its
Affiliates, the Committee shall, in the case of Incentive Stock
Options, ensure that any adjustments under this Section 11 will not
constitute a modification, extension or renewal of the Incentive
Stock Options within the meaning of Section 424(h)(3) of the Code
and in the case of Non-qualified Stock Options, ensure that any
adjustments under this Section 11 will not constitute a
modification of such Non-qualified Stock Options within the meaning
of Section 409A of the Code. Any adjustments made under this
Section 11 shall be made in a manner which does not adversely
affect the exemption provided pursuant to Rule 16b-3 under the
Exchange Act. The Company shall give each Participant notice of an
adjustment hereunder and, upon notice, such adjustment shall be
conclusive and binding for all purposes.
12. Effect
of Change in Control.
12.1 Unless
otherwise provided in an Award Agreement, notwithstanding any
provision of the Plan to the contrary, in the event of a Change in Control, all
outstanding Options and Stock Appreciation Rights shall become
immediately exercisable with respect to 100% of the shares subject
to such Options or Stock Appreciation Rights, and/or the Restricted
Period shall expire immediately with respect to 100% of the
outstanding shares of Restricted Stock or Restricted Stock
Units.
To
the extent practicable, any actions taken by the Committee under
the immediately preceding clause shall occur in a manner and at a
time which allows affected Participants the ability to participate
in the Change in Control with respect to the shares of Common Stock
subject to their Awards.
12.2 In
addition, in the event of a Change in Control, the Committee may in
its discretion and upon at least 10 days’ advance notice to
the affected persons, cancel any outstanding Awards and pay to the
holders thereof, in cash or stock, or any combination thereof, the
value of such Awards based upon the price per share of Common Stock
received or to be received by other shareholders of the Company in
the event. In the case of any Option or Stock Appreciation Right
with an exercise price (or SAR Exercise Price in the case of a
Stock Appreciation Right) that equals or exceeds the price paid for
a share of Common Stock in connection with the Change in Control,
the Committee may cancel the Option or Stock Appreciation Right
without the payment of consideration therefor.
12.3 The
obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to all or
substantially all of the assets and business of the Company and its
Affiliates, taken as a whole.
13. Amendment
of the Plan and Awards.
13.1 Amendment
of Plan. The Board at any time,
and from time to time, may amend or terminate the Plan. However,
except as provided in Section 11 relating to adjustments upon
changes in Common Stock and Section 13.3, no amendment shall be
effective unless approved by the shareholders of the Company to the
extent shareholder approval is necessary to satisfy any Applicable
Laws. At the time of such amendment, the Board shall determine,
upon advice from counsel, whether such amendment will be contingent
on shareholder approval.
13.2 Shareholder
Approval. The Board may, in its
sole discretion, submit any other amendment to the Plan for
shareholder approval.
13.3 Contemplated
Amendments. It is expressly
contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees,
Consultants and Directors with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to
the nonqualified deferred compensation provisions of Section 409A
of the Code and/or to bring the Plan and/or Awards granted under it
into compliance therewith.
13.4 No
Impairment of Rights. Rights
under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
13.5 Amendment
of Awards. The Committee at any
time, and from time to time, may amend the terms of any one or more
Awards; provided,
however, that the Committee may
not affect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
14. General
Provisions.
14.1 Forfeiture
Events. The Committee may
specify in an Award Agreement that the Participant’s rights,
payments and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain events, in addition to applicable vesting
conditions of an Award. Such events may include, without
limitation, breach of non-competition, non-solicitation,
confidentiality, or other restrictive covenants that are contained
in the Award Agreement or otherwise applicable to the Participant,
a termination of the Participant’s Continuous Service for
Cause, or other conduct by the Participant that is detrimental to
the business or reputation of the Company and/or its
Affiliates.
14.2 Clawback.
Notwithstanding any other provisions in this Plan, the Company may
cancel any Award, require reimbursement of any Award by a
Participant, and effect any other right of recoupment of equity or
other compensation provided under the Plan in accordance with any
Company policies that may be adopted and/or modified from time to
time (“Clawback
Policy”). In addition, a
Participant may be required to repay to the Company previously paid
compensation, whether provided pursuant to the Plan or an Award
Agreement, in accordance with the Clawback Policy. By accepting an
Award, the Participant is agreeing to be bound by the Clawback
Policy, as in effect or as may be adopted and/or modified from time
to time by the Company in its discretion (including, without
limitation, to comply with applicable law or stock exchange listing
requirements).
14.3 Other
Compensation Arrangements.
Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only
in specific cases.
14.4 Sub-plans.
The Committee may from time to time establish sub-plans under the
Plan for purposes of satisfying blue sky, securities, tax or other
laws of various jurisdictions in which the Company intends to grant
Awards. Any sub-plans shall contain such limitations and other
terms and conditions as the Committee determines are necessary or
desirable. All sub-plans shall be deemed a part of the Plan, but
each sub-plan shall apply only to the Participants in the
jurisdiction for which the sub-plan was
designed.
14.5 Deferral
of Awards. The Committee may
establish one or more programs under the Plan to permit selected
Participants the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would
entitle the Participant to payment or receipt of shares of Common
Stock or other consideration under an Award. The Committee may
establish the election procedures, the timing of such elections,
the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, shares or other consideration so
deferred, and such other terms, conditions, rules and procedures
that the Committee deems advisable for the administration of any
such deferral program.
14.6 Unfunded
Plan. The Plan shall be
unfunded. None of the Company, the Board or the Committee shall be
required to establish any special or separate fund or to segregate
any assets to assure the performance of its obligations under the
Plan.
14.7 Recapitalizations.
Each Award Agreement shall contain provisions required to reflect
the provisions of Section 11.
14.8 Delivery.
Upon exercise of a right granted under this Plan, the Company shall
issue Common Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory or regulatory
obligations the Company may otherwise have, for purposes of this
Plan, 30 days shall be considered a reasonable period of
time.
14.9 No
Fractional Shares. No
fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash,
additional Awards or other securities or property shall be issued
or paid in lieu of fractional shares of Common Stock or whether any
fractional shares should be rounded, forfeited or otherwise
eliminated.
14.10 Other
Provisions. The Award
Agreements authorized under the Plan may contain such other
provisions not inconsistent with this Plan, including, without
limitation, restrictions upon the exercise of the Awards, as the
Committee may deem advisable.
14.11 Section
409A. The Plan is intended to
comply with Section 409A of the Code to the extent subject thereto,
and, accordingly, to the maximum extent permitted, the Plan shall
be interpreted and administered to be in compliance therewith. Any
payments described in the Plan that are due within the
“short-term deferral period” as defined in Section 409A
of the Code shall not be treated as deferred compensation unless
Applicable Laws require otherwise. Notwithstanding anything to the
contrary in the Plan, to the extent required to avoid accelerated
taxation and tax penalties under Section 409A of the Code, amounts
that would otherwise be payable and benefits that would otherwise
be provided pursuant to the Plan during the six (6) month period
immediately following the Participant’s termination of
Continuous Service shall instead be paid on the first payroll date
after the six-month anniversary of the Participant’s
separation from service (or the Participant’s death, if
earlier). Notwithstanding the foregoing, neither the Company nor
the Committee shall have any obligation to take any action to
prevent the assessment of any excise tax or penalty on any
Participant under Section 409A of the Code and neither the Company
nor the Committee will have any liability to any Participant for
such tax or penalty.
14.12 Disqualifying
Dispositions. Any Participant
who shall make a “disposition” (as defined in Section
424 of the Code) of all or any portion of shares of Common Stock
acquired upon exercise of an Incentive Stock Option within two
years from the Grant Date of such Incentive Stock Option or within
one year after the issuance of the shares of Common Stock acquired
upon exercise of such Incentive Stock Option (a
“Disqualifying
Disposition”) shall be
required to immediately advise the Company in writing as to the
occurrence of the sale and the price realized upon the sale of such
shares of Common Stock.
14.13 Section
16. It is the intent of the
Company that the Plan satisfy, and be interpreted in a manner that
satisfies, the applicable requirements of Rule 16b-3 as promulgated
under Section 16 of the Exchange Act so that Participants will be
entitled to the benefit of Rule 16b-3, or any other rule
promulgated under Section 16 of the Exchange Act, and will not be
subject to short-swing liability under Section 16 of the Exchange
Act. Accordingly, if the operation of any provision of the Plan
would conflict with the intent expressed in this Section 14.13,
such provision to the extent possible shall be interpreted and/or
deemed amended so as to avoid such conflict.
14.14 Beneficiary
Designation. Each Participant
under the Plan may from time to time name any beneficiary or
beneficiaries by whom any right under the Plan is to be exercised
in case of such Participant’s death. Each designation will
revoke all prior designations by the same Participant, shall be in
a form reasonably prescribed by the Committee and shall be
effective only when filed by the Participant in writing with the
Company during the Participant’s
lifetime.
14.15 Expenses.
The costs of administering the Plan shall be paid by the
Company.
14.16 Severability.
If any of the provisions of the Plan or any Award Agreement is held
to be invalid, illegal or unenforceable, whether in whole or in
part, such provision shall be deemed modified to the extent, but
only to the extent, of such invalidity, illegality or
unenforceability and the remaining provisions shall not be affected
thereby.
14.17 Plan
Headings. The headings in the
Plan are for purposes of convenience only and are not intended to
define or limit the construction of the provisions
hereof.
14.18 Non-Uniform
Treatment. The
Committee’s determinations under the Plan need not be uniform
and may be made by it selectively among persons who are eligible to
receive, or actually receive, Awards. Without limiting the
generality of the foregoing, the Committee shall be entitled to
make non-uniform and selective determinations, amendments and
adjustments, and to enter into non-uniform and selective Award
Agreements.
15. Effective
Date of Plan. The Plan shall
become effective as of the Effective Date.
16. Termination
or Suspension of the Plan. The
Plan shall terminate automatically on the tenth anniversary of the
Effective Date. No Award shall be granted pursuant to the Plan
after such date, but Awards theretofore granted may extend beyond
that date. The Board may suspend or terminate the Plan at any
earlier date pursuant to Section 13.1 hereof. No Awards may be
granted under the Plan while the Plan is suspended or after it is
terminated.
17. Choice
of Law. The law of the State of
Nevada shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such
state’s conflict of law rules.
As
adopted by the Board of Directors of Freedom Holding Corp. on July
25, 2018.
As
approved by the shareholders of Freedom Holding Corp. on September
__, 2018.