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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Golden Telecom, Inc.
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(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):
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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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:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
1 Kozhevnichesky Proezd, 2nd Floor
Moscow, Russia 115114 [GOLDEN TELECOM LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERHOLDERS
May 20, 2004
Fornebu, Norway
April 13, 2004
Dear Shareholders:
The 2004 annual meeting of shareholders of Golden Telecom, Inc. (the
"Company" or "Golden Telecom") will be held in the Midnattsol Meeting Room,
Telenor Expo, Snaroyveien 30, 1331 Fornebu, Norway on May 20, 2004 at 12:30 p.m.
local time, to consider and act on the following matters:
1. The election of ten directors for a term of one year (Item No.
1); and
2. Ratification of the selection of the auditors of the Company
for fiscal year 2004 (Item No. 2).
Shareholders of record at the close of business on April 6, 2004 will
be entitled to vote at the meeting. If you will need special assistance at the
meeting because of a disability, please notify the office of the General Counsel
of the Company at the Representative Offices of Golden TeleServices, Inc., 1
Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia 115114 or Golden Telecom, Inc.,
4400 MacArthur Blvd., N.W., Suite 200, Washington, D.C., 20007 or through e-mail
at annualmeeting@gti.ru. A list of shareholders entitled to vote at the meeting
may be examined at the principal executive offices of the Company at the
Representative Offices of Golden TeleServices, Inc., 1 Kozhevnichesky Proezd,
2nd Floor, Moscow, Russia 115114.
By Order of the Board of Directors
/s/ JEFFREY A. RIDDELL
JEFFREY A. RIDDELL
Senior Vice President,
General Counsel and Secretary
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
TABLE OF CONTENTS
Introduction................................................................................................... 3
Proxies And Voting Procedures.................................................................................. 3
Proposals To Be Voted Upon..................................................................................... 4
Common Stock Ownership Of Certain Beneficial Owners And Management............................................. 15
Executive Officers............................................................................................. 17
Executive Compensation......................................................................................... 18
Report Of The Compensation Committee On Executive Compensation................................................. 20
Employment Contracts, Termination Of Employment And Change Of Control Arrangements............................. 23
Certain Relationships And Related Transactions................................................................. 24
Section 16(a) Beneficial Ownership Reporting Compliance........................................................ 26
Other Business Which May Properly Come Before The Meeting...................................................... 26
General Questions.............................................................................................. 27
Voting Procedures (For Shareholders Of Record)................................................................. 28
Voting Procedures (For Beneficial Shareholders)................................................................ 28
General Voting Questions....................................................................................... 29
Annex A Charter Of The Audit Committee......................................................................... 30
2
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
1 Kozhevnichesky Proezd, 2nd Floor
Moscow, Russia 115114 [GOLDEN TELECOM LOGO]
PROXY STATEMENT
April 13, 2004
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board of Directors" or the "Board") of Golden Telecom,
Inc. (the "Company" or "Golden Telecom") of proxies to be voted at the annual
meeting of shareholders of the Company to be held in the Midnattsol Meeting
Room, Telenor Expo, Snaroyveien 30, 1331 Fornebu, Norway on May 20, 2004
beginning at 12:30 p.m. local time (the "Annual Meeting"). Enclosed with this
Proxy Statement is a Notice of the Annual Meeting of Shareholders, together with
a Proxy Card for your signature if you are unable to attend. Shareholders of
record who execute Proxy Cards may revoke them at any time before they are
voted. Any Proxy Card may be revoked by the person giving it any time before it
is voted by delivering to the Corporate Secretary of the Company at the
principal executive offices of the Company at the Representative Offices of
Golden TeleServices, Inc., 1 Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia
115114, on or before the business day prior to the Annual Meeting or at the
Annual Meeting itself, a subsequent written notice of revocation or a subsequent
Proxy Card relating to the same shares or by attending the meeting and voting in
person. The approximate date on which this Proxy Statement and the accompanying
Proxy Card will be sent to the Company's shareholders is April 13, 2004.
PROXIES AND VOTING PROCEDURES
Shares of the Company's common stock, par value $0.01 per share ("Common
Stock"), represented by properly executed Proxy Cards received prior to or at
the meeting, unless such Proxy Cards have been revoked, will be voted in
accordance with the instructions indicated on the Proxy Card.
Shareholders of record (the "Shareholders") on April 6, 2004 (the "Record Date")
are entitled to vote at the Annual Meeting. On April 6, 2004, the Company had
outstanding approximately 36,231,156 shares of Common Stock, with each share
representing one vote.
If you return your signed Proxy Card to the Company before the Annual Meeting,
Golden Telecom will vote your shares as you direct. You can specify on your
Proxy Card whether your shares should be voted for all, some or none of the
nominees for director. You can also specify whether you approve, disapprove, or
abstain from the proposal to ratify the selection of our auditors. The proposals
will be presented at the Annual Meeting by management.
IF YOU RETURN THE PROXY CARD TO US AND DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU
WANT TO VOTE YOUR SHARES, WE WILL VOTE THEM "FOR" THE ELECTION OF ALL NOMINEES
FOR DIRECTOR AS SET FORTH UNDER "ELECTION OF DIRECTORS" BELOW; AND "FOR" THE
PROPOSAL TO RATIFY THE SELECTION OF OUR AUDITORS.
The affirmative vote of the holders of a plurality of the votes cast by
shareholders will elect candidates for director (Item No. 1 on your Proxy Card).
The affirmative vote of the holders of at least a majority of the shares of
Common Stock present in person or represented by proxy at the meeting and
entitled to vote is required to ratify the Board of Directors' appointment of
Ernst & Young (CIS) Limited ("Ernst & Young") as the Company's independent
auditors for 2004 (Item No. 2 on your Proxy Card). The required quorum is a
majority of the outstanding shares of voting stock of Golden Telecom. Golden
Telecom intends to count abstentions both for purposes of determining presence
or absence of a quorum and in the total number of shares represented and voting
with respect to a proposal. Accordingly, abstentions will have the same effect
as a vote against Item 2.
The nominees for director receiving the highest number of affirmative votes will
be elected. Unless authority to vote is withheld or another contrary instruction
is indicated, properly executed Proxy Cards received by Golden Telecom prior to
or at the Annual Meeting will be voted FOR the election of the nominees listed
on the following pages. Should any of the nominees be unavailable to serve at
the time the election occurs, the proxyholders named in the Proxy Card will vote
for substitute nominees at their discretion.
Broker non-votes occur when nominees have voted on some of the matters to be
acted on at a meeting, but fail to vote on certain other matters because they
are not permitted to vote on such matters in the absence of instructions from
the beneficial owners of shares. Broker non-votes, if any, with respect to a
proposal will not be counted for purposes of determining the presence or absence
of a quorum, and will not be counted as shares represented and voting with
respect to that proposal. A broker non-vote will have no effect on the outcome
of the election of directors.
* * * * * * * * * * * * * * * * * *
PROPOSALS TO BE VOTED UPON
ITEM NO. 1 ON YOUR PROXY CARD: ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS
The size of the Company's Board of Directors is set at ten directors.
At the Annual Meeting, ten directors will be elected. Each director will serve a
one year term and will serve until the next annual meeting of shareholders or
until the director is succeeded by another qualified director who has been
elected or until their earlier resignations. Each of the nominees is now a
member of the Board of Directors of the Company and each of the nominees has
indicated that he is willing and able to serve as a director if elected and has
consented to being named as a nominee in this Proxy Statement. The following
section sets forth the name and principal business occupation or employment of
each of these nominee directors.
Vladimir Androsik Mr. Androsik has extensive experience in Russian
Age 28 telecommunications and finance. He served as the
Deputy Finance Director of Peterstar, Inc. from 1997
to 2001, and since then has served as a member of the
Management Committee and as Deputy Director
General-Finance Director of OAO Rostelecom.
4
Mr. Androsik was elected to the Company's Board of
Directors in November 2002 and was re-elected for a
one-year term in May 2003.
Petr Aven Since October 1994, Mr. Aven has served as President
Age 49 of Alfa Bank. As President, his major
responsibilities include strategic planning as well
as business and government relations in Russia and in
the other countries where the bank operates. Mr. Aven
also currently serves as the Chairman of the Board of
STS Television. Prior to his employment with Alfa
Bank, Mr. Aven acted as a financial consultant
specializing in financial instruments of the Russian
Federation in a consultancy that he established. From
November 1991 until his resignation in December 1992,
Mr. Aven served as the Minister of Foreign Economic
Relations of the Russian Federation. Prior to his
appointment as Minister, Mr. Aven was employed as a
principal researcher at the International Institute
for Applied System Analysis (IIASA) in Laxenburg,
Austria where his major projects included the
methodology of socio-economic comparisons,
comparative economics, and economic reforms in
centrally planned economies. Prior to this period,
from 1981 to 1989, Mr. Aven served as a research
scholar at the Institute for Systems Studies of the
USSR Academy of Sciences where he advised the
administration of Mikhail Gorbachev. Among his other
activities, Mr. Aven has acted as a guest professor
and lecturer at numerous universities, including Yale
University, Bar-Elan University (Israel), and the
University of Glasgow and has published two books on
econometrics and on economic reform and numerous
articles in Russian and international journals,
including "Communist Economies and Economic
Transformation", "Economic Policy." Yale University
Press and the Kiel Institute of World Economics, and
other scientific and academic institutes have
published Mr. Aven's monographs.
Mr. Aven was originally elected to the Company's
Board of Directors in May 2001 and was re-elected to
one-year terms in June 2001, May 2002 and May 2003.
Mr. Aven has served as the Chairman of the Board
since his election to the Board in May 2001 and as
Chairman of the Board's Nominating and Corporate
Governance Committee since the formation of that
Committee in July 2002.
Michael Calvey Mr. Calvey is Co-Managing Partner of Baring Vostok
Age 37 Capital Partners and a Senior Partner of Baring
Private Equity Partners Limited. Mr. Calvey has been
working in Moscow on the First NIS Regional Fund
since its inception in 1994 as the co-head of the
investment team. In December 2000, he led the
creation of the Baring Vostok Private Equity Fund,
the first significant new direct investment fund
raised in Russia after the 1998 crisis. He is the
Chairman of the investment committee for both the NIS
Fund and the Baring Vostok Fund, and has been
directly or indirectly involved in most of the
investments of both funds since inception. Prior to
his involvement with the First NIS Regional Funds,
Mr. Calvey worked at the European Bank for
Reconstruction and Development ("EBRD"), where he was
responsible for several of EBRD's investments in the
oil and gas sector in Russia. Prior to his engagement
with EBRD, he worked at Salomon Brothers Inc. in New
York on a variety of corporate finance and mergers
and acquisitions assignments. Mr. Calvey is also a
director of Burren Energy, PLC.
5
Mr. Calvey was originally elected to the Company's
Board of Directors in May 2001 and was re-elected to
one-year terms in June 2001, May 2002 and May 2003.
Mr. Calvey has served on the Audit Committee of the
Board of Directors since June 2001 and on the
Executive Committee since May 2002. Mr. Calvey has
also served as a member of the Board's Nominating and
Corporate Governance Committee since July 2002.
Ashley Dunster Mr. Dunster is Vice President of Capital Research
Age 41 International, Inc., a subsidiary of The Capital
Group Companies, Inc. Mr. Dunster is responsible for
private equity investments in Eastern Europe and
Africa. Prior to joining Capital International
Research in 1997, Mr. Dunster spent four years at the
European Bank for Reconstruction and Development
where he was a principal banker in the Early Stage
Equity Team, with private equity responsibilities
covering Russia, Kazakhstan, Hungary and Slovenia.
Mr. Dunster was first elected to the Company's Board
of Directors in January 2000 and was re-elected to
one-year terms in June 2001, May 2002 and May 2003.
Mr. Dunster has served as a member of the Board's
Audit Committee and as Chair of the Compensation
Committee since being elected director. Mr. Dunster
has also served as a member of the Board's Nominating
and Corporate Governance Committee since July 2002.
David Herman Mr. Herman has served in senior executive positions
Age 58 throughout the world, including the Commonwealth of
Independent States. He is retired from the position
of Vice President of General Motors Corporation for
Russia and the Commonwealth of Independent States
after 29 years with General Motors and since 2002 has
been a consultant to Generals Motors. Mr. Herman was
instrumental in the establishment of a $340 million
car plant by General Motors, Avtovaz and the European
Bank for Reconstruction and Development. Prior to his
appointment with General Motors in the Commonwealth
of Independent States, Mr. Herman served as Chairman
of Adam Opel A.G., and served as President of SAAB
Automobile.
Mr. Herman was elected to the Board in November 2002
and was re-elected to a one-year term in May 2003.
Mr. Herman has served as the Chair of the Board's
Audit Committee and member of the Board's
Compensation Committee since December 2002.
Kjell Morten Johnsen Mr. Johnsen is Vice President of Telenor Networks, a
Age 36 business unit of the Norwegian incumbent operator
Telenor ASA. Mr. Johnsen is responsible for Telenor's
fixed line activities in Russia and the Commonwealth
of Independent States. Prior to joining Telenor in
2000, Mr. Johnsen worked or the Norwegian
conglomerate Norsk Hydro from 1996 to 2000 in various
executive positions, including country manager in
Ukraine and then manager at the Paris-based regional
headquarters for the Commonwealth of Independent
States, Africa and Latin America. Before joining
Norsk Hydro, Mr. Johnsen spent four years in work
connected with Russia as a trade manager in the
Swedish shipping and trading company Scandsea
International AB. Mr. Johnsen holds an MBA from the
Norwegian School of Economics and Business
Administration.
6
Mr. Johnsen was first elected to the Company's Board
of Directors in December 2003. He has served as Chair
of the Board's Executive Committee and member of the
Board's Compensation Committee and Nominating and
Corporate Governance Committee since February 2004.
Andrey Kosogov Mr. Kosogov is the First Deputy Chairman of the
Age 43 Executive Board of Alfa Bank since July 1998. In that
position he oversees the investment activities of
Alfa Bank, including the Equity Sales and Trading
Division, Fixed Income Division, Corporate Finance
Division, Financial Operations Division, Asset
Management Division and Merchant Banking Division.
Prior to his appointment as First Deputy Chairman at
the Bank, Mr. Kosogov acted as the Chairman of the
Board of Directors of Alfa Capital, a Moscow-based
fund management company established in 1992.
Mr. Kosogov was originally elected to the Company's
Board of Directors in May 2001 and was re-elected to
one-year terms in June 2001, May 2002 and May 2003.
Michael North Michael North has over 10 years of mergers and
Age 49 acquisition, corporate restructuring, capital market
transactions and privatization experience in Central
and Eastern Europe and the telecommunications
industry. Mr. North was Senior Vice President and
Head of the Central and Eastern Europe
Telecommunications Group at Commerzbank Securities
and acted as Project Director in a number of mergers
and acquisition transactions in Russia. Mr. North
currently serves as the Managing Director of
eurokapital Verwaltungs GmbH.
Mr. North was originally elected to the Board of
Directors in November 2002 and was re-elected to a
one-year terms in May 2002 and May 2003.
Jan Edvard Thygesen Mr Thygesen is the Executive Vice President of
Age 53 Telenor and CEO of Telenor Nordic Mobile. Mr.
Thygesen joined Telenor in 1979 and has held several
positions including Executive Vice President of
Telenor Mobile, CEO of Telenor Invest AS, Executive
Vice President of Telenor Bedrift AS and CEO of
Telenor Nett AS. He was head of Telenor Networks from
1998 through 2003. Mr. Thygesen graduated in
electronics and telecommunications from the Norwegian
Institute of Technology in Trondheim.
Mr. Thygesan was originally elected to the Company's
Board in December 2003.
Alexander Vinogradov Prior to joining the Company as President and Chief
Age 49 Executive Officer in 2001, Mr. Vinogradov worked at
LLC EDN Sovintel as General Director starting in
November 1995. Prior to his appointment as General
Director, Mr. Vinogradov worked at LLC EDN Sovintel
as Commercial Director, Head of Marketing and Sales
Department and Head of Marketing and Development
Department. Mr. Vinogradov began his career at the
Main Center for Management of Long-Distance
Communications of the USSR.
7
Mr. Vinogradov was originally elected to Golden
Telecom's Board of Directors and became President and
Chief Executive Officer of Golden Telecom in November
2001 and was re-elected to one year terms in May 2002
and May 2003. Mr. Vinogradov has served on the
Executive Committee of the Board of Directors since
his election as a Director.
In December 2003, Mr. Stan Abbeloos resigned from the Board.
In accordance with the terms and conditions of a shareholders agreement
("December 2003 Shareholders Agreement") entered by the Company, Alfa Telecom
Limited ("Alfa"), Nye Telenor East Invest AS ("Telenor"), OAO Rostelecom
("Rostelecom"), Capital International Global Emerging Markets Private Equity
Fund, L.P. ("Capital"), Cavendish Nominees Limited ("Cavendish") and First NIS
Regional Fund SICAV ("First NIS"), dated August 19, 2003 and which came into
effect on December 1, 2003, the parties agreed that three directors would be
designated for nomination by Alfa, two directors would be designated for
nomination by Telenor, two directors would be designated for nomination by
Rostelecom, one director would be designated for nomination by Capital, one
director would be designated for nomination by Cavendish and First NIS, and one
director would be designated by the Board of Directors. The December 2003
Shareholders Agreement supersedes a substantially similar agreement from
September 2002 to which Telenor was not a party.
The following table shows each of the nominees for director and which
shareholder designated them for nomination.
Shareholder Nominees
----------- --------
Alfa Mr. Petr Aven
Mr. Andrey Kosogov
Mr. Alexander Vinogradov
Telenor Mr. Kjell Morten Johnsen
Mr. Jan Edvard Thygesen
Rostelecom Mr. Vladimir Androsik
Mr. Michael North
Capital Mr. Ashley Dunster
Cavendish/First NIS Mr. Michael Calvey
The Board selected Mr. David Herman.
Each of the directors has been selected by the shareholder with the
exceptions of Messrs. Johnsen and Thygesen who were elected as directors by the
Board in December 2003.
The Board has determined that the following directors, comprising all
of the non-employee directors, should be deemed "independent" under the listing
standards of the Nasdaq National Market, as well as in the assessment of the
Board: Mr. Androsik, Mr. Aven, Mr. Calvey, Mr. Dunster, Mr. Herman, Mr. Morten
Johnsen, Mr. Kosogov, Mr. North and Mr. Thygesen.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION
OF THE NOMINEES (ITEM NO. 1 ON YOUR PROXY CARD)
8
COMPENSATION OF DIRECTORS
Each non-employee member of Golden Telecom's Board of Directors is
entitled to receive an annual retainer fee of $15,000. In addition, each
non-employee member of the Board of Directors is entitled to receive a fee of
$1,000 for each Board meeting attended in person and a fee of $500 for each
Board meeting attended by telephone. Non-employee members are entitled to
receive a fee of $750 for each Board committee meeting attended in person, a fee
of $500 for each Board committee meeting attended by telephone and a fee of $500
for each Unanimous Written Consent in Lieu of Meeting adopted by the Board.
However, Board committee fees are not paid if the meeting is held on the same
day as a Board meeting. In accordance with the Golden Telecom 1999 Equity
Participation Plan, non-employee directors are also entitled to receive 10,000
stock options upon their initial appointment and 2,500 stock options for each
subsequent year of service.
Each of the Directors waived his right to receive stock options in 2003
with the exception of Mr. North and Mr. Herman. Mr. Dunster also waived his
rights to all forms of Director compensation in 2003, which is in line with the
policy of his employer, Capital International Research, Inc.
All directors who are also Golden Telecom employees have waived their
rights to all forms of director compensation for 2003, including rights to stock
options, which is in line with Company policy.
BOARD AND COMMITTEES MATTERS
BOARD OF DIRECTORS. The Board of Directors met seven times and acted through
unanimous written consents four times during the year ended December 31, 2003.
An Independent Committee of the Board of Directors met four times during the
fiscal year ended December 31, 2003. During 2003, each of the then-incumbent
directors attended, in person or by telephone, 75 percent or more of the
meetings of the Board of Directors and 75 percent or more of the meeting of the
committees on which each director served.
The Board of Directors has four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee, and the Nominating
and Corporate Governance Committee.
EXECUTIVE COMMITTEE. During the fiscal year ended December 31, 2003, the
Executive Committee of the Board of Directors met seven times and acted through
unanimous written consent once. A principal responsibility of the Executive
Committee is to have and exercise all the powers of the Board of Directors when
the Board is not in session, so far as such may be delegated in accordance with
law, except that the Committee may not take any final action to: amend the
Certificate of Incorporation or Bylaws; elect directors to fill vacancies or
newly created directorships on the Board of Directors; fix the compensation of
directors for services in any capacity; fill vacancies on the Committee or
change its membership; declare dividends (unless authorized by resolution of the
Board of Directors); exchange, consolidate, sell, lease, pledge or exchange all
or substantially all of the Company's property and assets; recommend to the
shareholders a plan of dissolution of the Company or a revocation of a
dissolution; or adopt an agreement of merger or consolidation for the Company.
The Executive Committee also assumes an advisory role for the senior management
of the Company. In this capacity, the Executive Committee shall (i) provide
counsel in regard to significant matters affecting the Company, its operations
and financial performance; (ii) provide advice on proposed corporate structure,
9
financings and financial strategy; (iii) review and offer comment upon the
strategic direction of the Company; and (iv) undertake such other actions as may
be requested by the Board of Directors. The Board amended the Charter of the
Executive Committee in February 2004 to limit the authority of the Executive
Committee to review and approve any potential acquisition by the Company up to a
maximum transaction value of $25 million.
The current members of the Executive Committee are Mr. Johnsen (Chair),
Mr. Calvey, Mr. Kosogov and Mr. Vinogradov.
AUDIT COMMITTEE. During the fiscal year ended December 31, 2003, the Audit
Committee of the Board of Directors held ten meetings and acted through
unanimous written consent in lieu of meeting three times. The primary function
of the Audit Committee is to advise and assist the Board in fulfilling its
oversight responsibilities to the investment community, including current and
potential shareholders. The Audit Committee's purpose includes assisting Board
oversight of the integrity of the Company's financial statements, the Company's
compliance with legal and regulatory requirements, and the performance of the
Company's internal audit function and ethics and compliance function. The Audit
Committee also has sole responsibility for the appointment, compensation and
oversight of the Company's independent auditors. The Audit Committee's principal
responsibilities in serving these functions are described in the Audit Committee
charter that was adopted by the Company's Board of Directors.
Current copies of the Audit Committee charter and Company's Conduct
Guidelines, which apply to all of the Company's employees and directors and its
subsidiaries and both of which comply with the Sarbanes-Oxley Act and the NASDAQ
National Market corporate governance standards, are available at
www.goldentelecom.com. The Audit Committee charter is also attached as Annex A.
In addition, the Audit Committee charter and the Company's Conduct Guidelines
may also be obtained by writing:
Corporate Secretary
Golden Telecom, Inc.
4400 MacArthur Blvd., N.W.
Suite 200
Washington, D.C.
20007
If the Company amends any provision of its Conduct Guidelines that is
required under the Nasdaq National Market corporate governance standards or the
Sarbanes-Oxley Act of 2002, or if a waiver of such provision is granted to a
director or an executive officer, the notice of such amendment, other than
technical, administrative, and other non-substantive amendments, or waiver will
be posted on the Company's website at www.goldentelecom.com. While the Board or
the Audit Committee may consider a waiver for an executive officer or director,
the Company does not expect to grant such waivers.
The Chairman of the Audit Committee is Mr. Herman. In 2003, the other
members were Mr. Dunster and Mr. Calvey.
A Report from the Audit Committee is contained herein in the section
following "Item No. 2 on Your Proxy Card: Ratification of Appointment of
Auditors".
INDEPENDENCE OF THE AUDIT COMMITTEE. The National Association of Securities
Dealers, as a condition for quotation on the Nasdaq National Market, requires
the Company to comply with the
10
Nasdaq's Marketplace Rules. One such rule requires the Company to certify that
it has and will continue to have an audit committee comprised of at least three
members, each of whom is independent, as defined by the Marketplace Rules and
Rule 10A-3 of the Securities Exchange Act of 1934. The Company believes that it
complies with this requirement.
AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Directors has determined that the
Audit Committee members are financially literate under the current listing
standards of the Nasdaq National Market and able to devote sufficient time to
serving on the Audit Committee. The Board has also determined that Mr. Michael
Calvey, who currently is the Managing Partner of Baring Vostok Capital Partners
Limited, is the Audit Committee financial expert as defined in Item 401 of
Regulation S-K under the Securities Exchange Act of 1934. The Board made a
qualitative assessment of Mr. Calvey's level of knowledge and experience based
on a number of factors, including his formal education and experience as
Managing Partner of Baring Vostok Capital Partners Limited and on audit
committees of other publicly traded companies.
COMPENSATION COMMITTEE. During the fiscal year ended December 31, 2003, the
Compensation Committee of the Board of Directors held three meetings and acted
through unanimous written consent in lieu of meeting once. The primary purpose
of the Compensation Committee is to ensure that the compensation practices and
policies of the Company are consistent with and serve the best interests of the
Company's shareholders. To this end, the Committee develops and approves the
compensation arrangements of the officers of the Company, makes recommendations
to the Board of Directors regarding option or restricted stock grants under the
Company's 1999 Equity Participation Plan, approves the compensation of, and
makes recommendations to the full Board of Directors regarding certain benefits
provided to, and compensation plans applicable to the Chief Executive Officer
and those individuals whose cash compensation might reasonably be expected to be
among the top four most highly paid individuals. In addition, the Committee acts
as the Stock Option Administrator as defined in and pursuant to the Company's
1999 Equity Participation Plan with regard to stock option grants. A Report from
the Compensation Committee is contained herein after the discussion of executive
compensation.
The current members of the Compensation Committee are Mr. Dunster
(Chair), Mr. Johnsen and Mr. Herman.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dunster and Mr. Herman served on the Compensation Committee during
2003. There were no Compensation Committee interlocks or insider participation
during 2003.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. During the fiscal year ended
December 31, 2003, the Nominating and Corporate Governance Committee of the
Board of Directors held two meetings and acted by unanimous written consent in
lieu of meeting three times. The primary purposes of the Nominating and
Corporate Governance Committee are to insure that the Board is appropriately
constituted to meet its fiduciary obligations to the Company's shareholders and
to the Company and to insure that the corporate governance practices of the
Company are appropriate and effective in enabling the Board to fulfill its
responsibilities independent of management and with a view to the best interests
of the Company and its shareholders generally. To accomplish these purposes, the
Committee develops and implements policies and processes regarding corporate
governance matters, assesses Board membership needs and assists the Board in
identifying, recruiting and nominating candidates for directorships.
11
In evaluating and determining whether to nominate a candidate for a
position on the Company's Board, the Committee will consider the criteria
outlined in the Committee's Charter, which include strength of character, mature
judgment, career specialization, relevant technical skills, diversity and the
extent to which the candidate would fill a present need on the Board.
The Committee will consider shareholder recommendations of candidates
when the recommendations are properly submitted in writing. Any shareholder
recommendations which are submitted should include the candidate's name and
qualifications for Board membership under the criteria summarized above and
should be addressed to:
Corporate Secretary
Golden Telecom, Inc.
4400 MacArthur Blvd., N.W.
Suite 200
Washington, D.C., 20007
For purposes of potential nominees to be considered at the 2005 annual
meeting of shareholders, the Corporate Secretary must receive this information
by not earlier than October 22, 2004 and not later than December 1, 2004. The
notice must set forth the candidate's name, age, business address, residence
address, principal occupation or employment, the number of shares beneficially
owned by the candidate, and information that would be required to be disclosed
regarding such candidate in connection with the solicitation of a proxy under
federal securities law. In addition, the notice must include the nominating
shareholder's name, address and the number of shares beneficially owned and the
period such shares have been held.
The Nominating and Corporate Governance Committee charter is available
on the Company's website at www.goldentelecom.com
The current members of the Nominating and Corporate Governance
Committee are Mr. Aven (Chair), Mr. Calvey, Mr. Dunster and Mr. Johnsen.
COMMUNICATION WITH THE BOARD. Shareholders may communicate with the Board of
Directors, including the non-management directors, by sending an e-mail to
boardofdirectors@goldentelecom.ru or by sending a letter to the Golden Telecom's
Board of Directors, c/o Corporate Secretary, Golden Telecom, Inc., 4400
MacArthur Blvd., N.W., Suite 200, Washington, D.C., 20007. The Corporate
Secretary has the authority to disregard any inappropriate communications or to
take other appropriate actions with respect to any such inappropriate
communications. If deemed an appropriate communication, the Corporate Secretary
will submit your correspondence to the Chairman of the Board or to any specific
director to whom the correspondence is directed.
ANNUAL MEETING OF SHAREHOLDERS. It has been a practice of the Company for all
directors to attend the Annual Meeting of Shareholders. All directors who were
elected to the Board at the last Annual Meeting were in attendance.
ITEM NO. 2 ON YOUR PROXY CARD: RATIFICATION OF APPOINTMENT OF AUDITORS
Golden Telecom's Audit Committee has voted to appoint Ernst & Young as
independent auditors to examine the consolidated financial statements of Golden
Telecom, Inc. and subsidiaries for the year ending December 31, 2004, and you
are asked to ratify that appointment
12
at the Annual Meeting. In keeping with good corporate governance practice, the
Audit Committee will periodically assess the suitability of its incumbent
independent auditors taking into account all relevant facts and circumstances,
including the possible consideration of the qualifications of other accounting
firms.
Ernst & Young's report on the Company's consolidated financial
statements as of December 31, 2003 and 2002 and for each of the two fiscal years
in the period ended December 31, 2003 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. During the fiscal years ended December
31, 2002 and 2003 and thereafter through the filing date of the Company's 2003
annual report on Form 10-K, there were no disagreements between the Company and
Ernst & Young on any matter of accounting principles or practices, financial
statements disclosures, or auditing scope or procedures, which, if not resolved
to the satisfaction of Ernst & Young, would have caused Ernst & Young to make
reference to the matter in their report. None of the "reportable events"
described in Item 304 (a)(1)(v) of Regulation S-K of the Securities Exchange Act
of 1934 have occurred during the fiscal years ended December 31, 2002 and 2003
or through the filing date of the Company's 2003 annual report on Form 10-K.
AUDIT FEES. For professional services rendered for the audit of the Company's
2003 and 2002 financial statements and the review of the financial statements
included in the Company's 2003 and 2002 Forms 10-Q, Ernst & Young billed the
Company a total of $542,000 in 2003 and $469,000 in 2002. These amounts also
include statutory audits of certain subsidiaries.
AUDIT-RELATED FEES. For professional audit-related services rendered, Ernst &
Young billed the Company a total of $250,000 in 2003 and $65,000 in 2002.
Audit-related services generally include due diligence on potential
acquisitions. The amount also include reviews of documents filed with the SEC
and accounting consultations.
TAX FEES. Ernst & Young's fees for the years 2003 and 2002 for tax consulting
and expatriate tax services were $78,000 and $290,000, respectively.
ALL OTHER FEES. None.
The Company's Audit Committee pre-approved all of the services described above
that were provided after the pre-approval requirements under the Sarbanes-Oxley
Act became effective on May 6, 2003.
The Audit Committee considered whether the non-audit services rendered
by Ernst & Young were compatible with maintaining Ernst & Young's independence
as auditors of the Company's financial statements and determined that they were.
During 2003, the Company adopted policies and procedures governing
pre-approval of services to be provided by the Company's independent auditors
consisting of the following key components:
- The Audit Committee is directly responsible for the appointment,
compensation, retention, and oversight of the Company's independent
auditors.
- The Audit Committee is responsible for the pre-approval of all
audit, audit-related, tax and non-audit services. Pre-approval may
be, but in the past has not been, delegated to one or more members
of the Audit Committee. The details of any services approved
13
under this delegation must be reported to the full Audit Committee
at its next regular meeting.
- Pre-approval of certain recurring audit, audit-related and tax
services may be accomplished through pre-approval of a detailed
budget or an updated forecast for such services.
- The Company's independent auditors are prohibited from providing
certain non-audit services. Any other permissible non-audit service
engagement must be specifically approved in advance by the Audit
Committee.
- Generally, the Audit Committee will not engage the Company's
independent auditors for services other than audit, audit-related,
and tax services.
- The Company provides regular reporting to the Audit Committee
regarding all audit, audit-related, tax and non-audit services
provided by the Company's independent auditors.
The Company's policy governing the provision of non-audit services by
the Company's independent auditors is more restrictive than is required by the
regulations implementing the Sarbanes-Oxley Act of 2002.
It is not expected that representatives of Ernst & Young will be
present at the Annual Meeting.
The Audit Committee of the Board of Directors has selected Ernst &
Young, independent public accountants, to audit the consolidated financial
statements of the Company for the fiscal year ending December 31, 2004 and
recommends that the shareholders ratify such selection.
The ratification of the appointment of Ernst & Young is not required by
law or by the By-laws of the Company. The Board of Directors is nevertheless
submitting it to the shareholders to ascertain their views. If the shareholders
do not ratify the appointment, the selection of other independent public
accountants will be considered by the Board of Directors. If Ernst & Young shall
decline to accept or become incapable of accepting its appointment, or if its
appointment is otherwise discontinued, the Board of Directors will appoint other
independent public accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF AUDITORS (ITEM NO. 2 ON YOUR PROXY CARD)
* * * * * * * * * * * * * * * * * *
REPORT OF THE AUDIT COMMITTEE. The Audit Committee of the Board, which is
composed of independent Directors and has the principal responsibilities
described on page 10 of this proxy statement, has furnished the following
report:
The Audit Committee has reviewed and discussed the Company's audited
consolidated financial statements with management. The Audit Committee has also
discussed with the Company's independent auditors the matters required to be
discussed by Statements on Auditing Standards No. 61 (SAS 61 - Communication
with Audit Committees), as amended, relating to the auditors' judgment about the
quality of the Company's accounting principles, judgments and estimates, as
applied in its financial reporting.
The Audit Committee has received written disclosures and the letter
from the independent auditors required by Independence Standards Board No. 1
(Independence
14
Discussions with Audit Committees) that relates to the auditors' independence
from the Company and subsidiaries, and has discussed with the independent
auditors their independence.
The Audit Committee met with management periodically during fiscal 2003
to consider the adequacy of the Company's internal controls and discussed these
matters with the Company's independent auditors and with appropriate Company
financial personnel. The Audit Committee also discussed with senior management
and the independent auditors the Company's disclosure controls and procedures
and the certifications by the Company's Chief Executive Officer and Chief
Financial Officer, which are required by the SEC for certain of the Company's
filings with the SEC. The Audit Committee met privately with the independent
auditors, the internal auditor and other members of management, each of whom has
unrestricted access to the Audit Committee.
Based on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2003, for filing with the SEC.
David Herman, Chairman
Michael Calvey
Ashley Dunster
* * * * * * * * * * * * * * * * * * *
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Common Stock and rights to acquire Common Stock by shareholders
that own five percent or more of the Common Stock, by each of the Company's
directors and executive officers, and all the Company's directors and executive
officers as a group. For the purposes of this table, a person or a group of
persons is deemed to have "beneficial ownership" of any shares as of a date when
such person or group has the right to acquire or vote such shares within 60 days
after such date, but such shares are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. Percentages
of shares owned are based on the 36,231,156 shares of Common Stock issued and
outstanding at April 6, 2004. These shareholding numbers are based in part on
the public filings of several of the shareholders listed below.
NUMBERS OF SHARES PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
------------------------------------ ------------------ ------------------
Alfa Telecom Limited (1) 10,731,707 29.6
PO Box 3339 Geneva Place
333 Waterford Drive
Road Town, Tortola
British Virgin Islands
Nye Telenor East Invest AS 7,369,972 20.3
Snaroyveien 30
N-1331
Fornebu
Norway
OAO Rostelecom 4,024,067 11.1
1st Tverskaya-Yamskaya 14
Moscow, Russia, 125,047
15
European Bank of Reconstruction and Development 3,003,564 8.3
One Exchange Square
London EC2A 2JN
Capital International Global Emerging Markets Private Equity Fund L.P. 2,166,405 6.0
c/o Capital International, Inc.
11100 Santa Monica Boulevard Suite 1500
Los Angeles, California 90025
First NIS Regional Fund SICAV (2)(3)(4) 706,463 2.0
c/o Bank of Bermuda (Luxemburg ) S.A.
13 rue Goethe
B.P. 413
L-2014 Luxemburg
Cavendish Nominees Limited (2)(3)(4) 1,803,212 5.0
c/o International Private Equity Services
13-15 Victoria Road, P.O. Box 431
St. Peter Port
Guernsey, Channel Islands, GY1 3ZD
Stan Abbeloos (7) 4,673 -
Vladimir Androsik (7) - -
Petr Aven (7) - -
Michael Calvey (4)(7) - -
Michal Cupa (7) - -
Ashley Dunster (7) - -
David Herman (5)(7) 12,500 -
Kjell Morten Johnsen (7) - -
Andrey Kosogov (7) - -
Michael North (5)(7) 12,500 -
Jeffrey Riddell (5)(7) 41,459 -
David Stewart (5)(7) 2,653 -
Jan Edvard Thygesen (7) - -
Alexander Vinogradov (6)(7) 26,887 -
All Directors and Executive Officers as a Group (14 persons)(5)(8) 100,672 -
1. Based on information provided in Amendment No. 8 to Schedule
13D filed with the SEC on December 23, 2003, we understand
that Alfa Telecom Limited is a wholly-owned subsidiary of Alfa
Finance Holdings S.A. ("Alfa Finance"). As a result of CTF
Holding Limited's majority ownership interests in three
shareholders of Alfa Finance, who collectively own a majority
of the shares in Alfa Finance, CTF Holdings Limited may be
deemed to have the power to direct the voting of a majority of
the shares of Alfa Finance. CTF Holdings Limited is a
wholly-owned subsidiary of Crown Finance Foundation. As a
result of these relationships, each of Alfa Finance, CTF
Holdings Limited and Crown Finance Foundation may be deemed to
beneficially own the shares held for the account of Alfa
Telecom Limited.
2. Shares beneficially owned by The Barings Vostok Private Equity
Fund L.P. and The NIS Restructuring Facility (together, the
"Barings Funds") are held in the name of Cavendish Nominees
Limited, as nominee. Of the 1,803,212 shares held of record by
Cavendish Nominees
16
Limited, 1,457,200 shares are beneficially owned by The
Barings Vostok Private Equity Fund L.P. and 346,012 shares are
beneficially owned by The NIS Restructuring Facility.
3. First NIS Regional Fund SICAV and the Barings Funds holdings
shares through Cavendish Nominees Limited may be deemed to be
members of a group pursuant to Rule 13(d)(5) under the
Securities Exchange Act of 1934, as amended. However, such
persons disclaim group status.
4. First NIS Regional Fund SICAV and the Barings Funds holdings
shares through Cavendish Nominees Limited are advised by
Barings Vostok Capital Partners Limited, as investment
adviser. Mr. Michael Calvey is the Managing Partner of Barings
Vostok Capital Partners Limited. Mr. Calvey disclaims
beneficial ownership of the shares held by First NIS Regional
Fund SICAV and the Barings Funds holdings shares held by
Cavendish Nominees Limited.
5. Included in these figures is the number of shares of our
Common Stock which the holder has the right to acquire
beneficial ownership of pursuant to the exercise on or before
June 5, 2004 of options we granted, as follows: Mr. David
Herman, 12,500, Mr. Michael North, 12,500, Mr. Jeff Riddell,
41,459; and Mr. David Stewart, 13,505.
6. Golden Telecom has adopted the 1999 Equity Participation Plan,
as amended, whereby certain employees of Golden Telecom and
its affiliates are granted Golden Telecom stock options. Owing
to ambiguities and inconsistencies in the legislation of the
countries in which some of our employees live, the
Compensation Committee of the Board of Directors of Golden
Telecom decided not to issue stock options to its Russian
employees, including Mr. Vinogradov. Instead, as part of its
key employee incentive and retention policy, Golden Telecom
established the Golden Telecom Incentive Bonus Program,
whereby Golden Telecom issues stock options to a trust in
numbers corresponding to the level of financial incentive
Golden Telecom wishes to award its eligible employees. When
eligible employees, including Mr. Vinogradov, desire and are
eligible to receive the economic benefit of the options, they
inform Golden Telecom and the Company, in turn, advises the
trustee, who exercises an appropriate number of options for
contribution to the trust. Upon request of the Company and the
employee, the funds available in the trust may be disbursed to
eligible employees in the form of incentive bonuses. The
economic value of Mr. Vinogradov's participation in the Bonus
Program at December 31, 2003 is approximately equivalent to
152,800 options granted in 2001, 200 options granted in 2000
and 7,000 options granted in 1999.
7. Each of the individuals indicated by this footnote owns less
than one percent of our outstanding Common Stock.
8. All directors and executive officers as a group own/control
less than 1% of our Common Stock outstanding.
* * * * * * * * * * * * * * * * * *
EXECUTIVE OFFICERS
Alexander Vinogradov. Age 49. Mr. Vinogradov's biography may be found
under "Board of Directors".
Michal Cupa. Age 43. Mr. Cupa joined Golden Telecom as the Company's
Chief Operating Officer in March 2004. Prior to joining Golden Telecom, Mr. Cupa
served with Contactel Ltd. in the Czech Republic from 1999 to February 2003 as
Chief Executive Officer. Prior to working with Contactel Ltd., Mr. Cupa worked
for Czech Telecom from 1992 to 1999 in various senior executive positions,
including Executive Vice President for Networks and Value Added Services and
Chief Operations Officer.
17
Jeffrey A. Riddell. Age 43. Mr. Riddell joined Golden Telecom as Senior
Vice President, General Counsel and Secretary in June 1999. Prior to that, Mr.
Riddell served with Global TeleSystems, Inc. ("GTS") as Legal Director- GTS-CIS
from August 1998 until June 1999, and Deputy Director of the Legal Department-
GTS-CIS from July 1997 to August 1998. Prior to joining GTS, Mr. Riddell was in
private practice with Salans, Hertzfeld & Heilbronn.
David A. Stewart. Age 37. Mr. Stewart was appointed as the Company's
Chief Financial Officer in October 2001. Prior to becoming the Chief Financial
Officer, Mr. Stewart served as the Finance Director of TeleRoss since 1996.
Prior to joining TeleRoss, Mr. Stewart worked in the Audit Department of Ernst &
Young offices in Australia and Russia. David Stewart graduated from Melbourne
University of Commerce in 1987 and is a member of the Institute of Chartered
Accountants in Australia since 1989. Mr. Stewart has given his notice of
resignation effective as of June 30, 2004.
* * * * * * * * * * * * * * * * * *
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or awarded to the
Company's Chief Executive Officer and the four other most highly compensated
executive officers in 2003 serving the operations of Golden Telecom in 2001 and
2002 and 2003. Bonuses listed for the years 2001, 2002 and 2003 represent cash
payments for the services rendered in the first three quarters of those years
and the fourth quarter of the previous year. In addition, personal subjective
bonuses for 2002 and 2003 were paid in 2003 and 2004, respectively.
The column entitled "Securities Underlying Options" in 2001, 2002 and
2003 refers to shares of the Company's Common Stock that could be issued upon
the exercise of stock options awarded to the listed employee under the Golden
Telecom 1999 Equity Participation Plan or the Golden Telecom Incentive Bonus
Program.
In accordance with the Golden Telecom 1999 Equity Participation Plan,
not more than 4,320,000 shares of Common Stock (subject to antidilution and
other adjustment provisions) are authorized for issuance upon exercise of
options or upon vesting of restricted or deferred stock awards. As of December
31, 2003, 831,808 shares of Common Stock remained available for grant.
LONG-TERM
COMPENSATION
Annual Compensation AWARDS
-------------------------------------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY (1) BONUS COMPENSATION (1) OPTIONS/SAR COMPENSATION (2)
---- ---------- ------ ---------------- ----------- ----------------
$ $ $ # $
-
NAME AND PRINCIPAL POSITION
Alexander Vinogradov (3) 2003 290,000 149,400 - - -
President and Chief 2002 247,683 147,274 - - -
Executive Officer 2001 180,871 104,121 - 300,000(4) -
Stan M. Abbeloos (5) 2003 291,925 157,748 41,925 - 555
Senior Vice President 2002 220,000 163,932 158,850 - 1,050
and Chief Operating Officer 2001 205,000 83,371 142,850 - 439
18
Jeffrey A. Riddell 2003 246,750 148,620 65,103 - 12,245
Senior Vice President and 2002 170,000 108,978 123,312 - 18,265
General Counsel 2001 170,000 92,721 154,155 - 3,084
David A. Stewart (6) 2003 209,457 105,681 44,457 - 161
Senior Vice President and 2002 148,333 74,423 146,145 125,000 1,050
Chief Financial Officer and 2001 130,000 34,401 131,188 - 202
Treasurer
Kenneth M. Griffin 2003 228,625 65,183 97,650 - 12,245
Managing Director of 2002 145,000 55,258 222,920 - 18,055
Wholesale and International 2001 145,000 49,546 273,819 - 2,666
Operations Business Unit
(1) Amounts disclosed represent compensation and reimbursements,
provided in addition to Salary and Bonus, for contracted
expatriated executives, which includes an overseas living and
traveling allowance, rents for Moscow residences, tax
equalization payments and dependent tuition, as applicable.
The salary structure of expatriate executive was amended
effective July 1, 2003 such that housing, living, traveling
and other benefits are now included as a portion of salary.
(2) Amounts disclosed represent the sum of premiums paid by the
Company for up to $325,000 term life insurance for each named
executive officer, except Mr. Vinogradov, and contributions
made by the Company under the Golden Telecom 401(k) Plan to
Mr. Riddell and Mr. Griffin who participate in the Company's
401(k) Plan as they are United States citizens. The Golden
Telecom 401(k) Plan was established in November 2001.
(3) Mr. Vinogradov became President and Chief Executive Officer of
Golden Telecom on November 6, 2001. Prior to that Mr.
Vinogradov worked as General Director of LLC EDN Sovintel.
Amounts shown for 2001 include compensation earned for
services rendered to Golden Telecom and LLC EDN Sovintel.
(4) Golden Telecom has adopted the 1999 Equity Participation Plan,
as amended, whereby certain employees of Golden Telecom and
its affiliates are granted Golden Telecom stock options. Owing
to ambiguities and inconsistencies in the legislation of the
countries in which some of our employees live, the
Compensation Committee of the Board of Directors of Golden
Telecom decided not to issue stock options to its Russian
employees, including Mr. Vinogradov. Instead, as part of its
key employee incentive and retention policy, Golden Telecom
established the Golden Telecom Incentive Bonus Program,
whereby Golden Telecom issues stock options to a trust in
numbers corresponding to the level of financial incentive
Golden Telecom wishes to award its eligible employees. When
eligible employees, including Mr. Vinogradov, desire and are
eligible to receive the economic benefit of the options, they
inform Golden Telecom and the Company, in turn, requests that
the trustee exercise an appropriate number of options and sell
the shares with the proceeds being held in trust. Upon request
of the Company and the employee and upon decision adopted by
the Trustee, the funds available in the trust may be disbursed
to eligible employees in the form of incentive bonuses. The
economic value of Mr. Vinogradov's participation in the Bonus
Program at December 31, 2003 was approximately equivalent to
152,800 options granted in 2001, 200 options granted in 2000
and 7,000 options granted in 1999.
(5) Mr. Abbeloos resigned effective as of February 16, 2004.
(6) Mr. Stewart has given his notice of resignation effective as
of June 30, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR
VALUES
The following table provides information on the number and value of the
Company's stock options exercised by the Chief Executive Officer and the four
other most highly compensated officers during 2003, the number of options
granted under the Golden Telecom 1999 Equity Participation Plan and the Golden
Telecom Incentive Bonus Program held by such
19
persons at December 31, 2003, and the value of all unexercised options held by
such persons as of that date. The closing price of the Company's stock on
December 31, 2003 was $27.69 per share on the Nasdaq National Market.
NUMBER OF SECURITIES UNDERLYING
SHARES UNEXERCISED OPTIONS AT FISCAL VALUE OF UNEXERCISED IN-THE -
ACQUIRED ON VALUE YEAR-END MONEY OPTIONS AT FISCAL YEAR-END
EXERCISE REALIZED EXERCISEABLE/UNEXERCISEABLE EXERCISEABLE/UNEXERCISEABLE
-------- -------- --------------------------- ---------------------------
# $ # $
- - - -
Alexander
Vinogradov 150,000 2,771,367 68,333 91,667 1,071,420 1,438,255
Stan M.
Abbeloos 320,000 5,894,201 5,000 - 78,450 -
Jeffrey A.
Riddell 149,000 2,615,996 176,000 - 2,754,190 -
David A.
Stewart 136,665 2,433,695 14,723 48,612 227,981 767,722
Kenneth M.
Griffin 89,166 1,697,493 834 - 10,062 -
The following table provides information on securities that were authorized for
issuance under the Company's 1999 Equity Participation Plan as of December 31,
2003.
(a) (b) (c)
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE COMPENSATION PLANS (EXCLUDING
OUTSTANDING OPTIONS, PRICE OF OUTSTANDING SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS OPTIONS, WARRANTS AND RIGHTS COLUMN (a))
------------- ------------------- ---------------------------- -----------
Equity compensation plan 904,272 $13.49 831,808
approved by security holders
* * * * * * * * * * * * * * * * * *
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERVIEW. The role of the Compensation Committee is to oversee and direct the
development of executive compensation policies and programs that are consistent
with, explicitly linked to, and supportive of the strategic objectives of
growing the Company's businesses in order to maximize shareholder value. The
Committee's specific responsibilities consist of determining the appropriate
levels of compensation, including salaries, quarterly or annual incentives,
long-term incentives and employee benefits for members of the Company's senior
management, including executive officers. The Committee believes that a strong
link should exist between executive compensation and the financial results of
the Company's operations. The Committee seeks to realize this goal by developing
incentive compensation programs that provide competitive compensation and
reflect Company performance.
20
COMPENSATION PHILOSOPHY. The three fundamental principles to which the Committee
adheres in discharging its responsibilities are as follows. First, most annual
and long-term incentive compensation for the Company's executive officers should
be at risk, with actual compensation levels correlating with the Company's
performance in certain key areas determined by the Committee. Second, incentive
compensation of the Company's executive officers should focus more heavily on
long-term rather than short-term accomplishments and results. Third, the overall
executive compensation program should be competitive, equitable and structured
so as to ensure the Company's ability to attract, retain, motivate and reward
the executives and senior management who are essential to the Company's
continuing success in the difficult markets in which the Company operates. Total
compensation, rather than distinct compensation elements, is the focus of the
Company's goal to provide competitive compensation opportunities.
COMPENSATION ELEMENTS. The Company's compensation program for executives and
senior management consists of four principal elements, each of which is vitally
important in meeting the Company's need to attract, retain, motivate and reward
highly-qualified executives and senior management in the markets where the
Company operates. The four principal elements are described below and include
base salaries, periodic performance incentives, long-term incentives and
benefits.
BASE SALARIES. Base salaries for executive officers and senior management are
generally set at levels that reflect the competitive marketplace for companies
that are of comparable size and complexity and that would be considered
competitors of the Company in attracting and retaining qualified executives. The
salaries of the executive officers are reviewed and approved by the Compensation
Committee based on its assessment of each executive's experience and performance
and a comparison of salaries of peers in other companies.
PERIODIC PERFORMANCE INCENTIVES. Incentive awards are made on a quarterly or
annual basis to executive officers and senior management on the basis of Company
and business unit performance relative to budget in such areas as revenue, net
income, and EBITDA, which is a common performance measure in the
telecommunications industry and means earnings before interest, tax,
depreciation and amortization. The Company adopted a revised executive officer
and senior management executive bonus program in 2001, whereby an additional
criterion, personal performance objectives, was added and executives and senior
management are eligible for an annual incentive payment based on the fulfillment
of these personal objectives. The bonus program was revised in 2003 such that
all bonus components will be paid annually. The Company intends to continue
providing incentives in concert with other compensation elements in order to
maintain a competitive total compensation program for its executive officers.
The Committee reviews and approves all performance measures and goals
established under the annual and long-term incentive plans.
LONG-TERM INCENTIVES. At the time leading up to the Company's initial public
offering in 1999, the Company relied on stock options as the principal means of
providing long-term incentive compensation. Stock options were granted to
executive officers and senior management under the 1999 Equity Participation
Plan. The Committee discontinued the policy of periodic option grants and is in
the process of developing a long term incentive bonus plan. It is expected that
senior level executives and top management will be eligible for participation in
the long term incentive bonus plan, which the Company intends to implement in
2004.
BENEFITS. Benefits offered to executive officers serve a different purpose than
do other elements of the total compensation program. In general, they act as a
safety net against problems that can
21
arise from illness, disability or death. Benefits offered to executive officers
are basically those offered to other employees of the Company.
GOLDEN TELECOM, INC. 401(k) PLAN. The Company offers a 401(k) retirement savings
plan (the "401(k) Plan") to its employees. The 401(k) Plan is a defined
contribution retirement benefit, the prototype of which has been submitted by
the Company's 401(k) Plan administrators to the Internal Revenue Service for
favorable tax treatment under Section 401 of the Internal Revenue Service Code.
All employees of Golden Telecom, subject to certain regulatory qualifications,
who are U.S. citizens and at least 21 years of age and have completed the
minimum service requirement are eligible to participate in the 401(k) Plan. The
401(k) Plan participants are able to defer pre-tax income by contributing to the
plan up to the maximum amount permitted by law. After-tax contributions are also
permitted under the 401(k) Plan. Golden Telecom matches 50% of each
participant's pre-tax contribution to the 401(k) Plan, up to 5% of the
participant's total compensation. In addition, Golden Telecom may, in its sole
discretion and in a nondiscriminatory manner, contribute additional amounts as
profit sharing to each participant's account. The Company did not contribute
additional amounts as profit sharing for the year 2003. The amounts deposited
into each participant's account will be invested among various investment
options according to the instructions of the participant. Each participant's
pre-tax and after-tax contributions will be immediately vested and
non-forfeitable. The Company's matching contribution and profit sharing
allocations to each participant's account will not vest until the participant
has completed three years of service with Golden Telecom at which time the
matching contribution and profit sharing allocations become 100% vested.
EVALUATION PROCEDURES. In determining matters regarding executive officer
compensation (other than the Chief Executive Officer), the Committee, with the
Chairman of the Board and Chief Executive Officer, reviews the performance of
key executives including the executive officers, the respective areas of
authority and responsibility of the various executive officers, and the
contribution of each to the efforts of the Company in meeting its financial and
strategic goals. The Committee has confirmed that the compensation paid in 2003
to the named executive officers is consistent with the Company's compensation
philosophy and objectives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. On November 6, 2001 Mr. Alexander
Vinogradov was appointed as President and Chief Executive Officer of the Company
and entered into an employment agreement with Golden TeleServices, Inc. During
2003, Mr. Vinogradov's base salary was set at $290,000 and he was eligible for
periodic bonuses throughout the year targeted, in the aggregate, to be 50% of
his base salary. During 2003, Mr. Vinogradov received $290,000 as his base
salary and $149,400 in bonus payments. In evaluating Mr. Vinogradov's
compensation, the Committee compared the Company's compensation practices and
levels to those of other companies involved in similar businesses, including but
not limited to, the companies included in the indices indicated in the
Performance Graph. Based on this review, the Committee determined Mr.
Vinogradov's compensation to be appropriate.
DEDUCTIBILITY OF CERTAIN EXECUTIVE COMPENSATION. Beginning in 1994, the Omnibus
Reconciliation Act of 1993 limits to $1 million the amount that may be deducted
by a publicly-held company for compensation paid to each of its named executive
officers in a taxable year, unless the compensation in excess of $1 million is
"qualified performance-based compensation." The Committee and the Company design
short-term and long-term compensation plans to qualify for the exemption from
the deduction limitations of Section 162(m) of the Internal Revenue Code and to
be consistent with providing appropriate compensation to executives. Shareholder
approval of incentive compensation plans and various provisions thereunder
covering the executive officers has been sought and obtained and will be sought
in the future to continue to qualify
22
performance-based compensation for the exemption. Although it is the Company's
intent to qualify compensation for the exemption from the deduction limitations,
the Company's compensation practices have been, and will continue to be,
designed to serve the best interests of the shareholders regardless of whether
specific compensation qualifies for the exemption.
Submitted by the Compensation Committee of the Board of Directors:
Mr. Ashley Dunster (Chair)
Mr. David Herman
Kjell Morten Johnsen
* * * * * * * * * * * * * * * * * *
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
EMPLOYMENT AGREEMENT OF THE CHIEF EXECUTIVE OFFICER. On November 6, 2001 Mr.
Vinogradov was appointed as President and Chief Executive Officer of the Company
and entered into an employment agreement with Golden TeleServices, Inc., a
wholly-owned subsidiary of the Company. Mr. Vinogradov continued his employment
as General Director of LLC EDN Sovintel, a fully owned subsidiary of the
Company, until November 12, 2002. During 2003, Mr. Vinogradov's overall annual
base salary was set at $290,000 and he was eligible for periodic bonuses
throughout the year targeted, in the aggregate, to be 50% of his base salary. As
of January 1, 2004, Mr. Vinogradov's annual base salary is set at $350,000 and
he is eligible for periodic bonuses throughout the year targeted, in the
aggregate, to be 29% of his base salary. If Mr. Vinogradov is terminated without
cause he is entitled to an amount equal to his salary at its then current rate
for a period of 6 months and any amount to be paid to him as a cash payout of
salary due for the notice period if the employer elects to make a payment in
lieu of notice, and to the cost of continuing all medical and dental plans or
retirement benefits for such periods.
Mr. Vinogradov's agreement contains provisions relating to the
protection of the employer's confidential information, non-competition during
the term of the agreement and for a six-month period thereafter,
non-solicitation of employer employees for twelve months following termination
of employment, and compliance with the Foreign Corrupt Practices Act of 1977.
Mr. Vinogradov may be terminated for cause if he fails to follow an order of the
Board, if he is engaged in fraud, embezzlement or any other similar illegal act
in connection with his duties as an employee, upon conviction of a felony or
crime involving moral turpitude which may cause substantial economic injury to
the Company, or upon the wilful or grossly negligent commission of any other act
which may cause substantial economic injury to the Company. In addition, Golden
Teleservices, Inc. may terminate Mr. Vinogradov if he suffers total disability.
Mr. Vinogradov may terminate the agreement by giving Golden TeleServices, Inc.
ninety days prior written notice.
EMPLOYMENT AGREEMENTS OF OTHER EXECUTIVE OFFICERS. The employment contracts of
the other executive officers contain substantially the same terms, other than
compensation amounts, as that of Mr. Vinogradov's agreement.
23
[PERFORMANCE GRAPH]
GOLDEN TELECOM INC
Cumulative Total Return
-------------------------------------------------------------------------------------
9/99 10/99 11/99 12/99 1/00 2/00 3/00 4/00
-------- -------- -------- -------- -------- -------- -------- --------
GOLDEN TELECOM, INC. 100.00 106.57 132.85 373.72 224.82 490.51 531.39 357.66
NASDAQ STOCK MARKET (U.S. & FOREIGN) 100.00 108.16 121.75 148.67 143.85 172.08 167.33 140.83
NASDAQ TELECOMMUNICATIONS 100.00 118.45 126.46 146.65 146.22 160.46 155.81 126.92
Cumulative Total Return
--------------------------------------------------------------------------
5/00 6/00 7/00 8/00 9/00 10/00 11/00
-------- -------- -------- -------- -------- -------- --------
GOLDEN TELECOM, INC. 348.91 347.45 353.28 359.12 202.92 181.02 129.20
NASDAQ STOCK MARKET (U.S. & FOREIGN) 123.82 144.99 137.45 153.60 134.12 122.83 94.50
NASDAQ TELECOMMUNICATIONS 106.16 122.96 109.36 111.17 98.08 85.67 62.32
GOLDEN TELECOM INC
Cumulative Total Return
-------------------------------------------------------------------------------------
12/00 1/01 2/01 3/01 4/01 5/01 6/01 7/01
-------- -------- -------- -------- -------- -------- -------- --------
GOLDEN TELECOM, INC. 59.85 128.47 105.11 115.33 107.56 109.78 163.50 148.91
NASDAQ STOCK MARKET (U.S. & FOREIGN) 89.84 100.83 78.05 66.82 76.90 76.73 78.59 73.66
NASDAQ TELECOMMUNICATIONS 62.46 78.40 62.48 55.03 57.20 53.80 52.15 47.29
Cumulative Total Return
-------------------------------------------------------------------------------------
8/01 9/01 10/01 11/01 12/01 1/02 2/02 3/02
-------- -------- -------- -------- -------- -------- -------- --------
GOLDEN TELECOM, INC. 117.96 91.09 140.61 143.07 136.29 153.58 143.07 180.79
NASDAQ STOCK MARKET (U.S. & FOREIGN) 65.59 54.39 61.40 70.16 70.89 70.30 62.96 67.20
NASDAQ TELECOMMUNICATIONS 41.86 37.99 37.05 40.95 41.83 35.17 30.23 29.81
GOLDEN TELECOM INC
Cumulative Total Return
-------------------------------------------------------------------------------------
4/02 5/02 6/02 7/02 8/02 9/02 10/02 11/02
-------- -------- -------- -------- -------- -------- -------- --------
GOLDEN TELECOM, INC. 204.37 186.28 205.55 167.01 157.66 140.73 172.73 184.29
NASDAQ STOCK MARKET (U.S. & FOREIGN) 61.46 58.79 53.32 48.44 47.94 42.74 48.54 54.02
NASDAQ TELECOMMUNICATIONS 23.72 22.59 17.98 17.26 18.08 16.49 19.32 20.60
Cumulative Total Return
-------------------------------------------------------------------------------------
12/02 1/03 2/03 3/03 4/03 5/03 6/03 7/03
-------- -------- -------- -------- -------- -------- -------- --------
GOLDEN TELECOM, INC. 147.74 158.01 155.33 174.01 197.96 286.13 257.75 323.15
NASDAQ STOCK MARKET (U.S. & FOREIGN) 48.78 48.26 48.89 49.06 53.58 58.42 59.43 63.56
NASDAQ TELECOMMUNICATIONS 19.26 20.72 22.12 22.04 24.64 25.94 27.21 27.79
GOLDEN TELECOM INC
Cumulative Total Return
---------------------------------------------------------
8/03 9/03 10/03 11/03 12/03
--------- --------- --------- --------- ---------
GOLDEN TELECOM, INC. 379.09 319.30 302.13 325.84 325.26
NASDAQ STOCK MARKET (U.S. & FOREIGN) 66.41 65.58 70.93 72.07 73.58
NASDAQ TELECOMMUNICATIONS 27.53 27.59 31.13 30.35 32.02
Begin: 9/30/1999
Period End: 12/31/2003
GOLDEN TELECOM INC End: 12/31/2003
Beginning
Transaction Closing No. Of Dividend Dividend Shares Ending Cum. Tot.
Date* Type Price** Shares*** per Share Paid Reinvested Shares Return
--------- ----------- -------- --------- --------- -------- ---------- ------ ---------
30-Sep-99 Begin 8.563 11.68 11.679 100.00
31-Oct-99 MonthEnd 9.125 11.68 11.679 106.57
30-Nov-99 MonthEnd 11.375 11.68 11.679 132.85
31-Dec-99 MonthEnd 32.000 11.68 11.679 373.72
31-Jan-00 MonthEnd 19.250 11.68 11.679 224.82
29-Feb-00 MonthEnd 42.000 11.68 11.679 490.51
31-Mar-00 MonthEnd 45.500 11.68 11.679 531.39
30-Apr-00 MonthEnd 30.625 11.68 11.679 357.66
31-May-00 MonthEnd 29.875 11.68 11.679 348.91
30-Jun-00 MonthEnd 29.750 11.68 11.679 347.45
31-Jul-00 MonthEnd 30.250 11.68 11.679 353.28
31-Aug-00 MonthEnd 30.750 11.68 11.679 359.12
30-Sep-00 MonthEnd 17.375 11.68 11.679 202.92
31-Oct-00 MonthEnd 15.500 11.68 11.679 181.02
30-Nov-00 MonthEnd 11.063 11.68 11.679 129.20
31-Dec-00 MonthEnd 5.125 11.68 11.679 59.85
31-Jan-01 MonthEnd 11.000 11.68 11.679 128.47
28-Feb-01 MonthEnd 9.000 11.68 11.679 105.11
31-Mar-01 MonthEnd 9.875 11.68 11.679 115.33
30-Apr-01 MonthEnd 9.210 11.68 11.679 107.56
31-May-01 MonthEnd 9.400 11.68 11.679 109.78
30-Jun-01 MonthEnd 14.000 11.68 11.679 163.50
31-Jul-01 MonthEnd 12.750 11.68 11.679 148.91
31-Aug-01 MonthEnd 10.100 11.68 11.679 117.96
30-Sep-01 MonthEnd 7.800 11.68 11.679 91.09
31-Oct-01 MonthEnd 12.040 11.68 11.679 140.61
30-Nov-01 MonthEnd 12.250 11.68 11.679 143.07
31-Dec-01 MonthEnd 11.670 11.68 11.679 136.29
31-Jan-02 MonthEnd 13.150 11.68 11.679 153.58
28-Feb-02 MonthEnd 12.250 11.68 11.679 143.07
31-Mar-02 MonthEnd 15.480 11.68 11.679 180.79
30-Apr-02 MonthEnd 17.499 11.68 11.679 204.37
31-May-02 MonthEnd 15.950 11.68 11.679 186.28
30-Jun-02 MonthEnd 17.600 11.68 11.679 205.55
31-Jul-02 MonthEnd 14.300 11.68 11.679 167.01
31-Aug-02 MonthEnd 13.500 11.68 11.679 157.66
30-Sep-02 MonthEnd 12.050 11.68 11.679 140.73
31-Oct-02 MonthEnd 14.790 11.68 11.679 172.73
30-Nov-02 MonthEnd 15.780 11.68 11.679 184.29
31-Dec-02 MonthEnd 12.650 11.68 11.679 147.74
31-Jan-03 MonthEnd 13.530 11.68 11.679 158.01
28-Feb-03 MonthEnd 13.300 11.68 11.679 155.33
31-Mar-03 MonthEnd 14.900 11.68 11.679 174.01
30-Apr-03 MonthEnd 16.950 11.68 11.679 197.96
31-May-03 MonthEnd 24.500 11.68 11.679 286.13
30-Jun-03 MonthEnd 22.070 11.68 11.679 257.75
31-Jul-03 MonthEnd 27.670 11.68 11.679 323.15
31-Aug-03 MonthEnd 32.460 11.68 11.679 379.09
30-Sep-03 MonthEnd 27.340 11.68 11.679 319.30
31-Oct-03 MonthEnd 25.870 11.68 11.679 302.13
30-Nov-03 MonthEnd 27.900 11.68 11.679 325.84
31-Dec-03 End 27.850 11.68 11.679 325.26
* Specified ending dates or ex-dividends dates.
** All Closing Prices and Dividends are adjusted for stock splits and stock
dividends.
*** 'Begin Shares' based on $100 investment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS AND STANDSTILL AGREEMENTS. On December 1, 2003, subsidiaries of the
Company completed the purchase of OAO Comincom from Nye Telenor East Invest. As
a result of the transaction, Telenor acquired 19.5% of the Company's then issued
and outstanding shares. Also as a result of the transaction, the Company and
certain major shareholders of the Company entered into a shareholders agreement
and a standstill agreement. The shareholders agreement and standstill agreement,
which came into effect on December 1, 2003, were entered into by the Company,
Alfa, Telenor, Rostelecom, Capital, Cavendish and First NIS. An Independent
Committee of the Board of Directors authorized both agreements and granted its
approval of the acquisition pursuant to Section 203(a)(1) of the Delaware
General Corporate Law.
The shareholders agreement provides that the parties to the agreement
will vote their shareholding such that the nominees to the Board designated by
the parties pursuant to the agreement will be elected to the Golden Telecom
Board of Directors. The following table shows each of the nominees for director
and which shareholder designated them for nomination.
24
Shareholder Nominees
----------- --------
Alfa Mr. Petr Aven
Mr. Andrey Kosogov
Mr. Alexander Vinogradov
Telenor Mr. Kjell Morten Johnsen
Mr. Jan Edvard Thygesen
Rostelecom Mr. Vladimir Androsik
Mr. Michael North
Capital Mr. Ashley Dunster
Cavendish/First NIS Mr. Michael Calvey
Pursuant to the shareholders agreement, the directors select the final
nomination for director. The Board selected Mr. David Herman.
If the shareholdings of any party to the standstill agreement reach,
exceed or fall below certain thresholds then the right to designate directors to
the Company's Board of that particular shareholder shall be adjusted.
Accordingly, such shareholder has the right to designate one director for each
10% of the Company's outstanding stock owned up to 30% after which point the
number of directors such shareholder may designate is capped at three, except
that if a shareholder owns more than 40% of the Company's outstanding stock,
that shareholder may also appoint, in addition to the three directors mentioned
above, an independent director who shall be an audit committee financial expert
and qualified and willing to serve on the Audit Committee. The shareholders
agreement terminates on the earlier of (i) the date on which all parties to the
agreement agree in writing and (ii) the date on which any person owns more than
50% of the Company's issued and outstanding shares.
Generally, the standstill agreement provides that Alfa may not acquire
over 49.99%, Telenor may not acquire over 40.00% and Rostelecom may not acquire
over 35.00% of the Company's outstanding stock on a fully diluted basis. Similar
"standstill" provisions are applicable to Capital and Barings whereby neither of
these entities' shareholdings may exceed 20% of the Company's outstanding stock.
The standstill agreement expires on the earlier of (i) the date on which all
parties to the agreement agree in writing, (ii) June 1, 2005, (iii) the date on
which any person owns more than 50% of the Company's issued and outstanding
shares, or (iv) the date on which the Company files for bankruptcy.
AGREEMENTS WITH AFFILIATES OF ALFA, TELENOR, AND WITH ROSTELECOM. In the past,
companies affiliated with Alfa Telecom Limited have provided investment banking
and corporate finance services to the Company. We expect that this relationship
will continue. In particular, the Company incurred approximately $0.3 million in
consulting costs with an affiliate of Alfa in relation to the acquisition of OOO
Sibchallenge Telecom in 2003. In addition, the Company incurred approximately
$0.1 million in consulting costs with an affiliate of Alfa related to a
potential acquisition that was subsequently withdrawn from the market. The
Company has also entered into a consulting services agreement with Alfa Bank.
This consulting services agreement became effective on April 1, 2003 and will
terminate on December 31, 2004, unless terminated earlier pursuant to the
agreement. The agreement provides for compensation for services, the total
amount of which shall not exceed $1 million for the provision of services from
April 1, 2003 to December 31, 2003 and an amount which shall not exceed $1
million for the provision of services from January 1, 2004 to December 31, 2004.
In September 2002, several Russian subsidiaries of the Company entered into a
one year agreement with OOO Alfa Insurance, an affiliate of Alfa, to provide the
Company's Russian employees with medical and dental insurance
25
services. The amount payable under this agreement is approximately $0.3 million
per year. In December 2003, the Company entered into a one year agreement with
OOO Alfa Insurance to provide the Company with property and equipment liability
insurance. The amount payable under this agreement is approximately $0.2 million
per year. OAO Alfa Insurance provides medical insurance to employees of some of
the Company's wholly owned subsidiaries and payments to OAO Alfa Insurance for
medical insurance were approximately $0.3 million. We have also entered into
commercial arrangements in the ordinary course of business with affiliates of
Alfa, Telenor, and with Rostelecom. In the regular course of business, we enter
into infrastructure, settlement and other operational contracts with Rostelecom.
In 2003, payments to Rostelecom under such contracts were approximately $16.9
million. We believe that our arrangements with these companies have been
conducted on commercially reasonable terms.
REGISTRATION RIGHTS AGREEMENTS. Golden Telecom entered into a registration
rights agreement with Alfa, Telenor, Rostelecom, Capital and Cavendish and First
NIS on August 19, 2003 which became effective on the closing of the Comincom
transaction on December 1, 2003. The agreement provides that upon the written
request of any of Alfa, Telenor, or Rostelecom, the Company will use all
reasonable efforts to register under the applicable federal and state securities
laws the resale of any of the shares of the Company's Common Stock owned by
Alfa, Telenor or Rostelecom, respectively. Each of Alfa, Telenor, and Rostelecom
may make such requests twice. The agreement also provides that upon the written
request of either Capital or Barings, the Company will use all reasonable
efforts to register under the applicable federal and state securities laws the
resale of any of the shares of the Company's Common Stock owned by Capital or
Barings, respectively. Each of Capital or Barings may make such request once.
Alfa, Telenor, Rostelecom, Capital and Barings each have the right to include
their respective shares of the Company's Common stock in future registrations
initiated by the Company on its own behalf or on behalf of other shareholders.
This right is subject to certain limitations as to whether and to what extent
each of Alfa, Telenor, Rostelecom, Capital and Barings may include their shares
in any such registration. The Company has agreed to pay any registration
expenses. The registration rights agreement contains customary indemnification
and contribution provisions between the Company, Alfa, Telenor, Rostelecom,
Capital, Cavendish and First NIS.
* * * * * * * * * * * * * * * * * *
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 2003 all reports for the Company's
executive officers and directors that were required to be filed under Section
16(a) of the Securities Exchange Act of 1934 and related regulations were filed
on a timely basis, except that one report was filed late by Mr. Jeffrey Riddell,
Senior Vice President, General Counsel and Corporate Secretary, due to incorrect
information received from Mr. Riddell's broker relating to an exercise of an
employee stock option in September 2003.
* * * * * * * * * * * * * * * * * *
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING
Although we know of no items of business that will be presented at
the Annual Meeting other than those described herein, proxies in the
accompanying form will confer discretionary authority on us with respect to any
other matters that may come before the meeting to the extent permitted by
applicable rules of the SEC. In this regard consistent with the provisions of
Rule 14a-14(c)(1), this proxy will grant us discretionary authority to vote on
any shareholder proposals
26
presented at the meeting of which we have not received notice at least 45 days
before the anniversary of the date on which we first mailed our proxy materials
for last year's Annual Meeting.
* * * * * * * * * * * * * * * * * *
GENERAL QUESTIONS
Q.: WHEN AND WHERE IS THE SHAREHOLDER MEETING?
A.: The 2004 Annual Meeting of shareholders of Golden Telecom will be held in
the Midnattsol Meeting Room, Telenor Expo, Snaroyveien 30, 1331 Fornebu, Norway
on May 20, 2004 at 12:30 p.m. local time.
Q.: WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
A.: You are receiving this Proxy Statement and Proxy Card from us because you
owned shares in Golden Telecom on the record date. This Proxy Statement
describes issues on which we would like you, as a shareholder, to vote. It also
provides you information on these issues so that you can make an informed
decision. The Proxy Card is used for voting.
Q.: WHO CAN VOTE?
A.: Shareholders of record at close of business on April 6, 2004 are entitled to
vote at the 2004 Annual Meeting. A list of the shareholders of record entitled
to vote at the Annual Meeting will be available for review by any shareholder,
for any purpose relating to the meeting between 9:00 a.m. and 5:00 p.m. at the
executive offices of the Company at the Representative Offices of Golden
TeleServices, Inc., 1 Kozhevnichesky Proezd, 2nd Floor, Moscow, Russia 115114.
Q.: HOW MANY SHARES ARE ENTITLED TO VOTE?
A.: On April 6, 2004 Golden Telecom had outstanding approximately 36,231,156
shares of Common Stock, par value $0.01 per share, with each share representing
one vote.
Q.: WHAT IS A QUORUM?
A.: In order to hold the meeting, there must be present in person or by Proxy
Card holders of a majority of voting power of the outstanding shares of stock
entitled to vote at the meeting, which is approximately 18,115,579 shares.
Q.: WHEN ARE SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING DUE?
A.: Shareholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 2005 annual meeting of shareholders, must be
received at the Company's principal executive offices no later than December 1,
2004.
Q.: WHO PAYS THE COST OF SOLICITATION?
A.: Golden Telecom pays the cost of soliciting your proxy and reimburses
brokerage firms and others for forwarding this Proxy Statement and Proxy Card to
you. In addition, Mellon Investor Services has been retained by Golden Telecom
to assist in soliciting proxies from brokerage firms, bank nominees and other
institutional holders to assure a timely vote by the beneficial owners of stock
held of record by such firms, banks and institutions. This firm will receive a
fee of approximately $5,500, plus reasonable expenses, for its services. In
addition to solicitation by mail, proxies may be solicited in person, or by
telephone, facsimile transmission or other means of electronic communication, by
directors, officers and other employees of Golden Telecom. If you plan to
attend, please advise the Corporation's Corporate Secretary by e-mail at
annualmeeting@gti.ru or by written correspondence.
27
Q.: WHO CAN ATTEND THE ANNUAL MEETING?
A.: Only shareholders are invited to attend the meeting. To gain admittance to
the meeting, you must bring proof of your ownership. If you are a shareholder of
record and received this Proxy Statement and your Proxy Card by mail, no
brokerage or other statement is needed for you to attend the Annual Meeting. If
a broker or other nominee holds your shares, and you plan to attend the Annual
Meeting, you should bring a recent brokerage statement showing your ownership of
the shares. In all cases you must also bring a form of personal identification.
Q.: HOW CAN I RECEIVE A COPY OF THE ANNUAL REPORT?
A.: The 2003 Annual Report of Golden Telecom will be mailed together with this
Proxy Statement.
* * * * * * * * * * * * * * * * * *
VOTING PROCEDURES (FOR SHAREHOLDERS OF RECORD)
You are a shareholder of record if you have an account directly with our
transfer agent, Mellon Investor Services.
Q.: HOW DO I VOTE?
A.: You may vote by signing and mailing your Proxy Card. If you return your
signed Proxy Card to Golden Telecom before the Annual Meeting, Golden Telecom
will vote your shares as you direct. You can specify on your Proxy Card whether
your shares should be voted for all, some or none of the nominees for director.
You can also specify whether you approve, disapprove, or abstain from the
proposal to ratify the selection of our auditors. The proposals will be
presented at the Annual Meeting by management.
Q.: WHAT DOES DISCRETIONARY AUTHORITY MEAN FOR SHAREHOLDERS OF RECORD?
A.: If you return your Proxy Card to the Company, but do not specify on your
Proxy Card how you want to vote your shares, we will vote them "FOR" the
election of all nominees for director as set forth under "Election of Directors"
below, and "FOR" Item No. 2 on your Proxy Card.
Q.: HOW DO I CHANGE MY VOTE?
A.: Shareholders of record who execute proxies may revoke them at any time
before they are voted. Any Proxy Card may be revoked by the person giving it any
time before it is voted by delivering to the Corporate Secretary of the Company
at the Representative Offices of Golden TeleServices, Inc., 1 Kozhevnichesky
Proezd, 2nd Floor, Moscow, Russia 115114 or Golden Telecom, Inc., 4400 MacArthur
Blvd., N.W., Suite 200, Washington, D.C., 20007 on or before the business day
prior to the Annual Meeting or at the Annual Meeting itself, a subsequent
written notice of revocation or a subsequent Proxy Card relating to the same
shares or by attending the meeting and voting in person.
* * * * * * * * * * * * * * * * * *
VOTING PROCEDURES (FOR BENEFICIAL SHAREHOLDERS)
You are a beneficial shareholder if a brokerage firm, bank, trustee or other
agent (the "nominee") holds your stock. This form of ownership is often called
ownership in "street name" since your name does not appear anywhere on our
records.
28
Q.: HOW DO I VOTE?
A.: You must vote in the manner described by the nominee in the materials
delivered by the nominee with this Proxy Statement. Detailed instructions are
also included in this Proxy Statement.
Q.: HOW DO I CHANGE MY VOTE?
A.: To change your vote, follow the nominee's instructions on revoking or
changing your Proxy Card.
* * * * * * * * * * * * * * * * * *
GENERAL VOTING QUESTIONS
Q.: HOW MANY VOTES ARE NEEDED FOR A PROPOSAL TO PASS?
A.: The vote of the holders of a plurality of the votes cast by shareholders
will elect candidates for director (Item No. 1 on your Proxy Card). The vote of
the holders of at least a majority of the shares of Common Stock present in
person or represented by proxy at the meeting and entitled to vote is required
to ratify the Board of Directors' appointment of Ernst & Young as the Company's
independent public accountants for 2004 (Item No. 2 on your Proxy Card).
Q.: WHAT SHARES ARE REFLECTED ON MY PROXY CARD?
A.: The Proxy Card we delivered to you reflects all shares owned by you at the
close of business on the record day. If you hold shares "in street name" you
will receive a voting instruction card from your nominee.
Q.: IF I PLAN TO ATTEND THE MEETING SHOULD I STILL VOTE BY PROXY CARD?
A.: Yes. Casting your vote in advance does not affect your right to attend the
meeting. Written ballots will be available at the Annual Meeting for
shareholders of record. If you send in your Proxy Card and also attend the
meeting, you do not need to vote again at the meeting unless you want to change
your vote. Beneficial owners who wish to attend the meeting and vote in person
must request a proxy from the nominee and bring that proxy to the meeting.
A COPY OF THE ANNUAL REPORT TO SHAREHOLDERS OF GOLDEN TELECOM, INC., WHICH
INCLUDES FINANCIAL STATEMENTS, WILL BE MAILED TO YOU WITH THIS PROXY STATEMENT.
YOU MAY RECEIVE AN ADDITIONAL COPY OF THE ANNUAL REPORT TO SHAREHOLDERS AT NO
CHARGE UPON WRITTEN REQUEST DIRECTED TO SHAREHOLDER RELATIONS, REPRESENTATIVE
OFFICES OF GOLDEN TELESERVICES, INC., 1 KOZHEVNICHESKY PROEZD, 2ND FLOOR,
MOSCOW, RUSSIA, 115114, FAX NUMBER 7-095-797-9306 OR FROM SHAREHOLDER RELATIONS,
GOLDEN TELECOM, INC., 4400 MACARTHUR BLVD., N.W., SUITE 200, WASHINGTON, D.C.,
20007, FAX NUMBER 1-202-332-4877 OR E-MAIL TO ANNUALMEETING@GTI.RU
29
ANNEX A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF GOLDEN TELECOM, INC.
AS AMENDED ON SEPTEMBER 10, 2002
Mission Statement
The Audit Committee (the "Committee") is a committee of the Board of
Directors of Golden Telecom, Inc. ("GTI" or the "Company"). Its primary function
is to assist the Board in fulfilling its oversight responsibilities by reviewing
(i) proposed financial plans; (ii) the financial information provided to
shareholders and others; (iii) systems of internal controls which management and
the Board of Directors have established; and (iv) the audit process, including
both internal and external audits. The Audit Committee interacts directly with
the independent auditor to ensure the independent auditor's ultimate
accountability to the Board and the Committee, as representatives of the
shareholders, and is directly responsible for the appointment, compensation and
oversight of the independent auditor.
Members
The Committee will be composed of three members of the Board of
Directors who shall serve at the pleasure of the Board and who will be appointed
to the Committee in accordance with NASD and SEC rules and regulations. Each
member shall be:
1. In the opinion of the Board of Directors and as defined by NASD and SEC
rules and regulations, free from any relationship that would interfere
with the exercise of independent judgment; and
2. Financially literate and capable of understanding fundamental financial
statements.
At least one member of the Committee must be a financial expert. This
person should have, through education and experience as an auditor or a
principal financial officer, comptroller or principal accounting officer of a
company, an understanding of generally accepted accounting procedures,
experience with internal accounting controls and an understanding of audit
committee functions, or as otherwise determined by Nasdaq or SEC rules and
regulations.
Audit Committee members will be appointed by the Board of Directors at
the recommendation of the Chairman of the Board or the Executive Committee. One
of the members will be designated by the Committee as its Chairman. The Chairman
will preside over the Committee meetings and report Committee actions to the
Board of Directors.
Meetings
The Committee will meet on a regular basis at least four times annually
and will call special meetings as circumstances require. It will meet privately
with the Company's Compliance Officer, the Chief Financial Officer, and the
Company's independent auditor in separate executive sessions to discuss any
matters that the Committee, Compliance Officer, the Chief Financial Officer or
the independent auditor believe should be discussed privately. The
30
Committee may ask members of management or others to attend the meetings and
provide pertinent information, as necessary. A quorum for the transaction of
business at meetings of the Audit Committee shall consist of at least two
members of the Committee.
Responsibilities
The Committee shall have the following responsibilities, such list of
responsibilities being indicative only and representing corporate best practices
for audit committee:
1. Provide an open avenue of communication between the independent auditor
and the Board of Directors.
2. Preapprove all auditing and non-auditing services provided by the
auditor to the Company.
3. Choose on an annual basis the independent auditor; determine the
compensation of the independent auditor; and review and approve the
discharge of the independent auditor.
4. Review and concur in the appointment, replacement, reassignment or
dismissal of the Chief Financial Officer.
5. Confirm and take any necessary action to assure the independence of the
internal auditors and the independent auditor.
6. Actively engage in a dialogue with the independent auditor with respect
to any disclosed relationships and services that may impact the
objectivity and the independence of the independent auditor.
7. Consider reports to the Committee required to be provided by the
independent auditor on the Company's critical accounting policies and
practices, alternative treatments of financial information permitted
within generally accepted accounting principles, the ramifications of
the use of such treatments and the treatment preferred by the auditor,
and all other material written communications with management.
8. Ensure the receipt by the Committee from the independent auditor of a
formal written statement delineating all relationships between the
auditor and the Company, consistent with ISBS No.1.
9. Inquire of management, the Chief Financial Officer, the Compliance
Officer, the General Counsel and the independent auditor about
significant risks or exposures to the Company and assess the steps
management has taken to minimize such risk to the Company.
10. Establish and maintain appropriate procedures for the receipt,
retention and treatment of complaints and concerns received by the
Company regarding accounting, internal accounting controls, or auditing
matters, and the confidential, anonymous submissions by employees of
concerns regarding questionable accounting or auditing matters.
11. Consider and approve the annual plan of the internal auditing function,
and the independent auditor's proposed audit plan, including
coordination with the internal audit plan.
31
12. Consider and concur in any special audit of systems or procedures
suggested by the Compliance Officer, the Chief Financial Officer, the
General Counsel or the independent auditors.
13. Review with the Chief Financial Officer and the independent auditor the
coordination of audit effort to assure completeness of coverage,
reduction of redundant efforts and the effective use of audit
resources.
14. Consider with management and the independent auditor the rationale for
employing audit or compliance audit firms other than the principal
independent auditor, and preapprove any employment of such firms.
15. Consider and review with the independent auditor, Chief Financial
Officer and General Counsel, as appropriate:
a. The adequacy of the Company's internal controls, including
computerized information system controls and security and
training programs; and
b. Any related significant issues identified by the independent
auditor and internal auditing, together with management's
responses thereto.
16. Review with management and the independent auditor at the completion of
the annual audit:
a. The Company's annual financial statements and related
footnotes;
b. The independent auditor's audit of the financial statements
and the report thereon;
c. Any significant changes required in the independent auditor's
audit plan and scope;
d. Any serious difficulties or disputes with management
encountered during the course of the audit; and
e. Other matters related to the conduct of the audit which are to
be communicated to the Committee under generally accepted
auditing standards.
17. Consider and review with management and the Chief Financial Officer:
a. Any difficulties encountered in the course of their audits,
including any restrictions on the scope of their work or
access to required information;
b. Any significant changes required in their audit plan.
18. Review with the Compliance Officer and General Counsel the results of
the management questionnaires regarding compliance issues.
19. Review legal and regulatory matters that may have a material impact on
the financial statements, related Company compliance policies and
programs and reports received from regulators.
32
20. Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
21. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities, and retain independent counsel,
accountants or others, when needed, to assist it in the course of any
investigation, with funding for engaging such outside advisors to be
provided by the Company.
22. Review and recommend to the Board of Directors the annual corporate
budget and corporate budget and capital or other significant
expenditure requests.
23. Assume such other duties and considerations as may be delegated to the
Committee by the Board of Directors, or required of the Committee upon
the request of the Board of Directors from time to time pursuant to a
duly adopted resolution of the Board of Directors.
In fulfilling these responsibilities, the Committee shall have full
authority to investigate any aspect of the Company's affairs, at its discretion.
The Committee shall have full and unrestricted access to all of the Company's
records and personnel.
33
Please
Mark Here |_|
for Address
Change or
Comments
SEE REVERSE SIDE
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary) except those circled
|_| |_|
Nominees: 01 Vladimir Androsik, 02 Petr Aven
03 Michael Calvey, 04 Ashley Dunster
05 David Herman, 06 Kjell Morten Johnsen
07 Andrey Kosogov, 08 Michael North
09 Jan Edvard Thygesen and 10 Alexander Vinogradov
For, except vote withheld from the following nominee(s)
________________________________________________________________
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG (CIS) LIMITED AS
INDEPENDENT PUBLIC AUDITORS OF THE COMPANY
FOR AGAINST ABSTAIN
|_| |_| |_|
CHECK HERE IF YOU PLAN TO ATTEND THE
STOCKHOLDERS MEETING ON MAY 20, 2004 |_|
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINATED DIRECTORS AND RATIFICATION OF THE SELECTION OF ERNST & YOUNG (CIS)
LIMITED AS INDEPENDENT PUBLIC AUDITORS OF THE COMPANY FOR 2004.
Signature _______________________ Signature _______________________ Date _______
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[LOGO]
Golden
Telecom (TM)
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 2004
PROXY
COMMON STOCK
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
1 Kozhevnichesky Proezd, 2nd Floor, Moscow, 115114, Russia
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints David Stewart and Jeff
Riddell, or either of him, as proxies with full power of substitution to each,
and hereby authorizes each of him to represent and to vote, as designated
hereon, all shares of Common Stock of GOLDEN TELECOM, INC. (the "Company") which
the undersigned is entitled to vote on all matters that come before the Annual
Meeting of Stockholders to be held on May 20, 2004, and any adjournments
thereof.
Item 1 and Item 2 were proposed by Golden Telecom, Inc.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR (1) THE ELECTION OF THE NOMINATED DIRECTORS AND (II) RATIFICATION
OF THE SELECTION OF ERNST & YOUNG (CIS) LIMITED AS INDEPENDENT PUBLIC AUDITORS
OF THE COMPANY FOR 2004.
(Continued and to be signed on reverse side)
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
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^ FOLD AND DETACH HERE ^