GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
12 Trubnaya Street, 8th Floor [GOLDEN TELECOM LOGO]
Moscow, Russia 103045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 21, 2002
Amsterdam, The Netherlands
April 8, 2002
Dear Stockholders:
The 2002 annual meeting of stockholders of Golden Telecom, Inc. (the
"Company" or "Golden Telecom") will be held at the Grand Amsterdam Hotel,
Princess Suite, Oudezijds Voorburgwal 197 NL-1012 EX Amsterdam, The Netherlands
on May 21, 2002 at 3:00 p.m. local time, to consider and act on the following
matters:
1. The election of nine 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 2002 (Item No. 2).
Stockholders of record at the close of business on March 25, 2002 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., 12
Trubnaya Street, 8th Floor, Moscow, Russia 103045. A list of stockholders
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., 12 Trubnaya Street, 8th Floor, Moscow, Russia 103045.
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
General Questions....................................................................3
Voting Procedures (For Stockholders of Record)......................................4
Voting Procedures (For Beneficial Stockholders).....................................5
General Voting Questions.............................................................5
Proxies and Voting Procedures........................................................6
Proposals to be Voted Upon...........................................................7
Common Stock Ownership of Certain Beneficial Owners and Management..................13
Executive Officers..................................................................15
Executive Compensation..............................................................15
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......................................25
Section 16(a) Beneficial Ownership Reporting Compliance.............................26
Other Business Which May Properly Come Before the Meeting...........................26
2
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
12 Trubnaya Street, 8th Floor
Moscow, Russia 103045
PROXY STATEMENT
April 8, 2002
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 vote at the
annual meeting of stockholders of the Company at the Grand Amsterdam Hotel,
Princess Suite, Oudezijds Voorburgwal 197 NL-1012 EX Amsterdam, The Netherlands
on May 21, 2002 (the "Annual Meeting"). Enclosed with this Proxy Statement is
notice of the Annual Meeting, together with a Proxy Card for your signature if
you are unable to attend. Stockholders who execute proxies may revoke them at
any time before they are voted. Any Proxy 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., 12
Trubnaya Street, 8th Floor, Moscow, Russia 103045, 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 stockholders is April 8, 2002.
GENERAL QUESTIONS
Q.: When and where is the shareholder meeting?
A.: The 2002 Annual Meeting of stockholders of Golden Telecom will be held at
the Grand Amsterdam Hotel, Princess Suite, Oudezijds Voorburgwal 197 NL-1012 EX
Amsterdam, The Netherlands on May 21, 2002 at 3:00 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 stockholder, 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.: Stockholders of record at close of business on March 25, 2002 are entitled
to vote at the 2002 Annual Meeting. A list of the stockholders of record
entitled to vote at the Annual Meeting will be available for review by any
stockholder, 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., 12 Trubnaya Street, 8th Floor, Moscow 103045, Russia.
Q.: How many shares are entitled to vote?
A.: On March 25, 2002, Golden Telecom had outstanding approximately 22,582,870
shares of common stock, par value $0.01 per share, with each share representing
one vote.
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Q.: What is quorum?
A.: In order to hold the meeting, there must be present in person or by Proxy
Card holders of a majority in voting power of the outstanding shares of stock
entitled to vote at the meeting, which is approximately 11,291,436 shares.
Q.: When are stockholder proposals for the next annual meeting due?
A.: Stockholder proposals, in order to be timely submitted for inclusion in the
Company's proxy materials for the 2003 annual meeting of stockholders, must be
received at the Company's principal executive offices no later than December 11,
2002.
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 not to exceed $6,000 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.
Q.: Who can attend the Annual Meeting?
A.: Only stockholders are invited to attend the meeting. To gain admittance to
the meeting, you must bring proof of your ownership. If you are a stockholder of
record and received this Proxy Statement and your Proxy Card by mail, no
admissions ticket 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 2001 Annual Report of Golden Telecom on Form 10-K will be mailed
together with this Proxy Statement.
VOTING PROCEDURES (For Stockholders of Record)
You are a stockholder 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 each of
the proposals. The proposals will be presented at the Annual Meeting by
management.
Q.: What does discretionary authority mean for stockholders 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.
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Q.: How do I change my vote?
A.: Stockholders 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., 12 Trubnaya Street,
8th Floor, Moscow, Russia 103045, 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 Stockholders)
You are a beneficial stockholder 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.
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 stockholders
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 (as defined
below) present in person or represented by proxy at the meeting and entitled to
vote, voting together as a single class, is required to ratify the Board of
Directors' appointment of Ernst & Young (CIS) Limited as the Company's
independent public accountants for 2002 (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
stockholders 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 Card to the meeting.
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PROXIES AND VOTING PROCEDURES
Shares of the Company's Common Stock, par value $0.01 per share
("Common Stock"), represented by properly executed proxies received prior to or
at the meeting, unless such proxies have been revoked, will be voted in
accordance with the instructions indicated in the proxies.
Stockholders of record (the "Stockholders") on March 25, 2002 (the
"Record Date") are entitled to vote at the Annual Meeting. On March 25, 2002,
the Company had outstanding approximately 22,582,870 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 each of the proposals. The proposals will be presented at the
Annual Meeting by management.
If you 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" each of the Proposals.
The vote of the holders of a plurality of the votes cast by
stockholders 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,
voting together as a single class, is required to ratify the Board of Directors'
appointment of Ernst & Young (CIS) Limited as the Company's independent public
accountants for 2002 (Item No. 2 on your Proxy Card).
With respect to the proposals to ratify the Board of Directors'
appointment of Ernst & Young (CIS) Limited as the Company's independent public
accountants for 2002, the affirmative votes must constitute at least a majority
of the required quorum. 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 a proposal.
The nominees for director receiving the highest number of affirmative
votes will be elected. Therefore, votes against a nominee or votes withheld have
no legal effect. 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 at the time of the meeting to accept nomination or election as a
director, 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 the same effect as a
vote against any proposal other than the election of directors and will have no
effect on the outcome of the election of directors.
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PROPOSALS TO BE VOTED UPON
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Item No. 1 on Your Proxy Card: Election of Directors
--------------------------------------------------------------------------------
The Board of Directors
The size of the Company's Board of Directors is currently set at nine
directors. There is currently one vacancy on the Board. At the Annual Meeting,
nine directors will be elected. Each director will serve until the next annual
meeting of the stockholders or until the director is succeeded by another
qualified director who has been elected. Each of the nominees, except for David
Stewart, 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.
Stan M. Abbeloos Stan M. Abbeloos was appointed Golden Telecom's
Age 49 Chief Operating Officer in June 1999. Prior to this
appointment, Mr. Abbeloos served in various operating
divisions of the Company's subsidiaries and joint
ventures: as General Director of Sovam Teleport
(GTS-CIS) from October 1997, as Deputy General
Director of TeleRoss from October 1998 until January
2000 and as Commercial Director of Sovintel from July
1996 until October 1997. From 1991 through July 1996,
Mr. Abbeloos worked for Alcatel as General Director of
LenBell, a joint venture between Alcatel and Krasnaya
Zaria, which produces and sells Alcatel's switching
and transmission equipment in Russia.
Tigran Agadzhanov Tigran Agadzhanov was elected to the Company's Board
Age 37 of Directors in May 2001. Mr. Agadzhanov currently
serves on the Executive Committee of the Board of
Directors. Currently, Mr. Agadzhanov serves as the
Head of Asset Management Division and Senior
Vice-President of Alfa Bank. As the Head of Asset
Management Division, Mr. Agadzhanov is responsible
for the day-to-day interaction with, and management
of, investments made by Alfa Bank in a number of
consumer goods and industrial companies. Prior to
joining Alfa Bank in 1999, from June 1994 until July
1998, Mr. Agadzhanov served as Chief Operating
Officer of Kommersant Holding, a major publishing
company based in Moscow.
Petr Aven Petr Aven was elected to the Company's Board of
Age 47 Directors as Chairman in May 2001. Since October 1994,
Mr. Aven has served as President 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
7
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.
Michael Calvey Michael Calvey was elected to the Golden Telecom
Age 35 Board in May 2001 and has served on the Audit
Committee of the Board of Directors since that time.
Mr. Calvey is Managing Partner of Baring Vostok
Capital Partners and a Senior Partner and member of
the Executive Committee 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 since 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 in
the Oil & Gas team on a variety of corporate finance
and mergers and acquisitions assignments.
Ashley Dunster Ashley Dunster was first elected to the Company's
Age 39 Board of Directors in January 2000. Mr. Dunster has
served as a member of the Board's Audit Committee and
as Chair of the Compensation Committee since being
elected a Director. Mr. Dunster is Vice President of
Capital Research 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 ("EBRD") where he was a principal banker
in the Early Stage Equity Team, with private equity
responsibilities covering Russia, Kazakhstan, Hungary
and Slovenia.
Izzet Guney Izzet Guney was elected to Golden Telecom's Board of
Age 43 Directors in January 2000 and to the Board's
Compensation Committee in May 2001. Mr. Guney has
served as Chair of the Board's Audit Committee since
his initial election as a Director. Mr. Guney is the
Director of the European Bank for Reconstruction and
Development ("EBRD") Telecoms, Informatics, Media
(TIM) Sector and has worked for the EBRD since 1997.
Mr. Guney is
8
responsible for the overall supervision of
origination, structuring and execution of deals in
EBRD's Region for the TIM sector. Prior to joining
EBRD, Mr. Guney served as Vice President of Corporate
Development of Paging Network (PageNet) International
and Executive Director of SBC Communications from 1995
to 1996, as Director from 1994 to 1995.
Andrey Kosogov Andrey Kosogov was elected to the Company's Board of
Age 41 Directors in May 2001. Mr. Kosogov is the First Deputy
Chairman of the Executive Board of Alfa Bank in Moscow
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.
David Stewart David Stewart was appointed as interim Chief Financial
Age 35 Officer of Golden Telecom in October 2001 and was
confirmed as Chief Financial Officer in February 2002.
Mr. Stewart joined Golden Telecom as the Finance
Director of TeleRoss, a subsidiary of Golden Telecom,
in June 1999. Prior to that, Mr. Stewart was appointed
in the same capacity within GTS-CIS, since joining
Global TeleSystems, Inc. ("GTS") in June 1996. Prior
to this, Mr. Stewart worked for Ernst & Young in their
Moscow, London and Melbourne offices in the Audit and
Corporate Services Department.
Alexander Vinogradov Alexander Vinogradov was elected to Golden Telecom's
Age 48 Board of Directors and became President and Chief
Executive Officer of Golden Telecom in November 2001.
Mr. Vinogradov serves on the Executive Committee of
the Board of Directors since his initial election as a
Director. Prior to joining the Company as President
and Chief Executive Officer, Mr. Vinogradov worked at
LLC EDN Sovintel as General Director starting from
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.
In March 2001, Alexander Knaster resigned from the Board of Directors.
In accordance with the terms and conditions of a shareholders agreement
entered into by the Company, Global TeleSystems Europe Holdings B.V. (as
assignee of Global TeleSystems, Inc.), Alfa Telecom Limited (as assignee of Alfa
Bank Holdings Limited), Capital International Global Emerging Markets Private
Equity Fund, L.P., Cavendish Nominees Limited and First NIS Regional Fund SICAV,
in May 2001, Alfa Telecom Limited designated three persons to be elected to the
Board and the Board duly elected Mr. Petr Aven, Mr. Andrey Kosogov, and Mr.
Tigran Agadzhanov as directors of the Company. At that time, Mr. Michael Calvey,
Managing Partner of Baring Vostok Capital Partners was also appointed to the
Board. To make room on the Board, Mr. Grier C. Raclin, Mr. Stewart J. Paperin,
Mr. Robert A. Schriesheim, and Mr. Jeffrey H. Von Deylen resigned.
9
On September 10, 2001 Mr. Robert J. Amman resigned from the Board of
Directors of the Company. On November 6, 2001 Mr. Stewart P. Reich resigned as
President and Chief Executive Officer of the Company and as director of the
Company and Mr. Alexander Vinogradov was appointed as President and Chief
Executive Officer of the Company and elected as a director of the Company.
In accordance with terms and conditions of a shareholders agreement
that is expected to be executed by certain of the Company's shareholders prior
to closing of the acquisition of LLC EDN Sovintel by the Company, OAO Rostelecom
will have a right to nominate two directors to the Board of Directors of the
Company. It is expected that OAO Rostelecom will nominate one independent
director and one director representing OAO Rostelecom. David Stewart has agreed
that he will resign from the Board of Directors of the Company upon closing of
the above transaction to make room for an independent director on the Board of
Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEES (ITEM NO. 1 ON YOUR PROXY CARD)
* * * * * * * * * * * * * * * * * * *
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 and a
fee of $500 for each Board committee meeting attended by telephone. However,
Board committee fees will not be 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 stock-option grants.
All directors elected at last year's annual shareholders' meeting, who
are not Golden Telecom employees, agreed to waive all forms of director
compensation, including stock option grants, for the period from June 27, 2001
until May 21, 2002, the expiry of their current term. Directors who are also
Golden Telecom employees are required to waive their rights to all forms of
director compensation in accordance with Golden Telecom corporate policy.
Meetings and Committees of the Board of Directors
Board of Directors. The Board of Directors met ten times and acted through
unanimous written consents three times during the year ended December 31, 2001.
An Independent Committee of the Board of Director met once during fiscal year
ended December 31, 2001. During 2001, 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 three standing committees: the Executive
Committee, the Audit Committee and the Compensation Committee. The Board of
Directors does not have a Nominating Committee.
10
Executive Committee. During the fiscal year ended December 31, 2001, the
Executive Committee of the Board of Directors did not meet owing to the
frequency of regularly scheduled Board meetings. The 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 stockholders a plan of dissolution of the Company or a
revocation of a dissolution; and adopt an agreement of merger or consolidation
for the Company.
The current members of the Executive Committee are Mr. Vinogradov and
Mr. Agadzhanov.
Audit Committee. During the fiscal year ended December 31, 2001, the Audit
Committee of the Board of Directors held six meetings and did not take any
actions by written consent. The Audit Committee's primary function is to assist
the Board in fulfilling its oversight responsibilities by reviewing (1) proposed
financial plans; (2) the financial information provided to shareholders and
others; (3) systems of internal controls that management and the Board of
Directors have established; and (4) the audit process, including both internal
and external audits. The Audit Committee interacts with the independent auditor
to ensure the independent auditor's ultimate accountability to the Board and the
Audit Committee, as representatives of the shareholders. The Audit Committee
exercises, as appropriate, the authority and responsibility of the Board to
select, evaluate, and where appropriate, replace the independent auditor or to
nominate an independent auditor for shareholder ratification in any proxy
statement. 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.
The current members of the Audit Committee are Mr. Guney (Chair), Mr.
Calvey and Mr. Dunster.
Independence of the Audit Committee. The National Association of Securities
Dealers, as a condition for quotation on the Nasdaq, requires the Company to
comply with the 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.
Compensation Committee. During the fiscal year ended December 31, 2001, the
Compensation Committee of the Board of Directors held four meetings and acted by
written consent in lieu of a meeting on four occasions. 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, grants options under
the Company's 1999 Equity
11
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 CEO 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) and Mr. Guney.
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Item No. 2 on Your Proxy Card: Ratification of Appointment of Auditors
--------------------------------------------------------------------------------
The Board of Directors has selected Ernst & Young (CIS) Limited ("Ernst
& Young"), independent public accountants, to audit the consolidated financial
statements of the Company for the fiscal year ending December 31, 2002 and
recommends that the stockholders ratify such election.
The submission of the appointment of Ernst & Young is not required by
law or by the By-laws of the Company. The Board of Directors is nevertheless
submitting it to the stockholders to ascertain their views. If the stockholders
do not ratify the appointment, the selection of other independent public
accountants will be considered by the Board of Directors. If Ernst & Young shall
decline to accept or become incapable of accepting its appointment, or if its
appointment is otherwise discontinued, the Board of Directors will appoint other
independent public accountants.
A representative of Ernst & Young is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF AUDITORS (ITEM NO. 2 ON YOUR PROXY CARD)
* * * * * * * * * * * * * * * * * *
Report of the Audit Committee
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling the Board's
responsibility for overseeing the quality and integrity of the accounting,
auditing and financial reporting practices and processes of the Company. The
Audit Committee recommends to the Board of Directors the selection of the
Company's independent accountants who are responsible for expressing an opinion
on the conformity of the Company's audited financial statements with United
States generally accepted accounting principles, communicating its judgments as
to the quality, not just the acceptability, of the Company's accounting
principles and reporting such other matters as required to be discussed with the
Audit Committee under generally accepted auditing standards. In this context the
Audit Committee has met and held discussions with management and the Company's
independent auditors.
Management, which has primary responsibility for the financial
statements and reporting process, has represented to the Audit Committee that
the Company's consolidated financial statements were prepared in accordance with
United States generally accepted accounting principles. The Audit Committee has
reviewed and discussed the consolidated financial statements with management and
the Company's independent auditors, including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
12
significant judgments and the clarity of disclosures in the financial
statements. The Audit Committee reviewed and discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as amended. The Company's
independent auditors also provided to the Audit Committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). The Audit Committee discussed
with the independent auditors their independence and considered the
compatibility of non-audit services with the accountants' independence. An
outline of the fees billed by Ernst & Young for the fiscal year ended December
31, 2001 is contained below. Based upon the Audit Committee's discussion with
management and the independent auditors and the Audit Committee's review of the
representations of management and the report of the independent accountants to
the Audit Committee, the Audit Committee recommended that the Board of Directors
include the Company's audited consolidated financial statements in the Company's
Annual Report on Form 10-K for the year ended December 31, 2001 filed with the
Securities and Exchange Commission.
Audit Fees. Ernst & Young's fees for the fiscal year ended December 31, 2001 for
professional services rendered in connection with the audit of the Company's
annual financial statements were $390,000.
Audit Related Fees. Ernst & Young's fees for the fiscal year ended December 31,
2001 for other professional services related to the audit of the Company's
annual financial statements and registration statements filed by the Company
during the fiscal year were $82,000.
Financial Information Systems Design and Implementation Fees. Ernst & Young did
not deliver any professional services for financial information systems design
or implementation to the Company in the fiscal year ended December 31, 2001.
All Other Fees. Ernst & Young fees for the fiscal year ended December 31, 2001
for services rendered by the principal accountant not including the services
described under the captions Audit Fees, Audit Related Fees, and Financial
Information Systems Design and Implementation Fees, as set forth above, were
$777,000. These fees are attributable principally to tax services.
Submitted by the Audit Committee of the Board of Directors
Mr. Izzet Guney (Chair)
Mr. Ashley Dunster
Mr. Michael Calvey
* * * * * * * * * * * * * * * * * * *
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 stockholders
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 22,562,370 shares of common stock issued and
outstanding at March 7, 2002.
13
Numbers of Shares Percentage
Name of Beneficial Owner Beneficially Owned Beneficially Owned
------------------------ ------------------ ------------------
Alfa Telecom Limited (1) 10,731,707(2) 47.56%
PO Box 3339 Geneva Place
333 Waterford Drive
Road Town, Tortola
British Virgin Islands
European Bank of Reconstruction and Development 3,003,564 13.31
One Exchange Square
London EC2A 2JN
Capital International Global Emerging Markets Private Equity 2,166,405 9.60
Fund L.P.
c/o Capital International, Inc.
11100 Santa Monica Boulevard Suite 1500
Los Angeles, California 90025
First NIS Regional Fund SICAV 723,907 3.21
c/o Bank of Bermuda (Luxemburg ) S.A.
13 rue Goethe
B.P. 413
L-2014 Luxemburg (3)(4)(5)
Cavendish Nominees Limited 1,844,469 8.17
c/o International Private Equity Services
13-15 Victoria Road, P.O. Box 431
St. Peter Port
Guernsey, Channel Islands, GY1 3ZD (3)(4)(5)
Stan Abbeloos (6) 290,505 1.29
Tigran Agadzhanov - -
Petr Aven - -
Michael Calvey (5) - -
Ashley Dunster - -
Izzet Guney - -
Jeffrey Howley (6) 105,305 -
Andrey Kosogov - -
Stewart Reich (6) 437,954 1.94
Jeffrey Riddell (6) 271,020 1.20
David Stewart (6) 69,126 -
Alexander Vinogradov (7) 7,707 -
David Wisher (6) 245,230 1.09
All Directors and Executive Officers as a Group (14 persons) 1,497,382 6.64
1. Based on information provided in Amendment No. 3 to Schedule 13D filed
with the Securities and Exchange Commission on February 28, 2002, we
understand the following. Alfa Telecom Limited is a wholly-owned
subsidiary of Alfa Finance Holdings S.A. ("Alfa Finance"). As a result
of an agreement among the majority shareholders of Alfa Finance, CTF
Holdings Limited has been granted a power of attorney to take certain
actions with respect to such majority shareholders' interest in 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
14
Crown Finance Foundation may be deemed to beneficially own securities
held for the account of Alfa Telecom Limited.
2. This number does not include 108,940 shares owned by a British Virgin
Islands company, which is a wholly-owned subsidiary of Alfa Finance.
3. 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
1,844,469 shares held of record by Cavendish Nominees Limited,
1,490,185 shares are beneficially owned by The Barings Vostok Private
Equity Fund L.P. and 354,284 shares are beneficially owned by The NIS
Restructuring Facility.
4. 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.
5. 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 through
Cavendish Nominees Limited.
6. These figures include the number of shares of our common stock which
employees may acquire pursuant to the exercise of options on or before
May 6, 2002, as follows: Stan Abbeloos, 270,832; Jeff Howley, 104,721;
Stewart Reich, 405,554; Jeff Riddell, 270,832; David Stewart, 59,165;
and David Wisher, 234,721.
7. Golden Telecom has adopted the 1999 Equity Participation Plan (the
"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 of
which some of our employees are citizens, the Compensation Committee of
the Board of Directors of Golden Telecom decided not to issue stock
options directly to its Russian employees. Instead, as part of its key
employee incentive and retention policy, Golden Telecom issues stock
options to a trust that participates in the Plan. This figure
represents Alexander Vinogradov's participation in the key employee
incentive and retention program.
EXECUTIVE OFFICERS
Alexander Vinogradov. Mr. Vinogradov's biography may be found under
"Board of Directors".
Stan M. Abbeloos. Mr. Abbeloos' biography may be found under "Board of
Directors".
Jeffrey A. 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 from May 1996 until July 1997 with Salans, Hertzfeld & Heilbronn. Prior
to that, he worked at the Pacific Law Center in Vladivostok and Khabarovsk from
May 1994 until June 1996.
David A. Stewart. Mr. Stewart's biography may be found under "Board of
Directors".
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid or awarded to, or
earned by, the Company's Chief Executive Officer, the former Chief Executive
Officer, the former Chief Financial Officer and the four other most highly
compensated executive officers serving the operations of Golden Telecom, Inc. in
1999, 2000 and 2001. The bonuses listed below for the
15
year 2001 represent cash payments for the services rendered in the first three
quarters of 2001 and the fourth quarter of 2000. Bonuses listed for the year
2000 represent cash payments for the services rendered in the first three
quarters of 2000 and the fourth quarter of 1999. Bonuses listed for 1999
represent cash payments for services rendered in 1998 and the first three
quarters of 1999.
The amounts listed in the column "Restricted Stock Awards" represent
the value of the restricted stock granted to the listed employee on the date of
the Company's initial public offering except as otherwise indicated in the
footnotes. These awards reflect an arrangement whereby the Company granted
awards of restricted stock and options to acquire the Company's common stock to
the named employees and the named employees surrendered unvested stock options
previously granted to the employees by Global TeleSystems Inc., the Company's
sole shareholder prior to its initial public offering in September 1999. The
column entitled "Number of Securities Underlying Options" in 1999, 2000 and 2001
refers to shares of the Company's common stock that would be issued upon the
exercise of stock options awarded to the listed employee under the Golden
Telecom 1999 Equity Participation Plan.
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, 2001, 893,033 shares of Common Stock remained available for distribution to
employees.
Long-Term Compensation
Annual Compensation Awards
----------------------------------------------------------------------
Restricted Securities
Other Annual Stock Underlying All Other
Year Salary Bonus (1) Compensation(2) Awards (3) Options/SAR Compensation (4)
---- ------ --------- --------------- ---------- ----------- ----------------
Name and Principal Position $ $ $ $ # $
Alexander Vinogradov 2001 37,272 -- -- -- 300,000(6) --
President and Chief 2000 -- -- -- -- 2,500(6) --
Executive Officer (5) 1999 -- -- -- -- 7,500(6) --
Stewart P. Reich 2001 310,008 176,216 242,913 -- -- 1,058
Former President and Chief 2000 283,750 200,580 285,457 -- 40,000 5,307
Executive Officer (7) 1999 268,750 213,006 1,349,915 795,054 500,000 5,451
Stan M. Abbeloos 2001 220,000 83,371 142,850 -- -- 439
Senior Vice President 2000 205,000 97,250 122,264 -- 25,000 360
And Chief Operating Officer 1999 182,000 102,450 794,340 236,076 300,000 360
David J. Wisher 2001 180,000 98,174 252,586 -- -- 369
Former Senior Vice President, 2000 176,250 85,367 212,452 -- 25,000 4,616
Chief Financial Officer (8) 1999 158,500 55,658 455,294 174,108 300,000 4,332
Jeffrey A. Riddell 2001 170,000 92,721 154,155 -- -- 3,084
Senior Vice President and 2000 155,000 74,110 131,583 -- 25,000 4,466
General Counsel 1999 135,000 56,749 89,842 2,256 300,000 4,240
-------------------------------------------------------------------------------------------------------------------------
16
Jeffrey L. Howley 2001 145,000 35,601 158,429 -- -- 650
Chief Operating Officer 2000 141,250 36,567 149,503 -- 20,000 4,495
Golden Telecom Ukraine 1999 140,000 73,339 288,835 81,408 110,000 4,245
David A. Stewart 2001 130,000 34,401 131,188 -- -- 202
Senior Vice President and 2000 127,333 35,525 141,830 -- 15,000 197
Chief Financial Officer (9) 1999 114,833 35,715 306,153 119,532 60,000 177
-------------------------------------------------------------------------------------------------------------------------
(1) The amount disclosed for Mr. Reich for 1999 does not include the
restricted stock awarded to Mr. Reich in 1999 as a portion of his bonus
for 1998. The value of that restricted stock is listed in the Column
"Restricted Stock Awards".
(2) 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 and Kiev residences, tax equalization payments and dependent
tuition, as applicable. Year 1999 figures also include stock option
income of $1,208,500 for Mr. Reich, $699,440 for Mr. Abbeloos, $283,400
for Mr. Wisher, $18,423 for Mr. Riddell, $144,233 for Mr. Howley and
$250,462 for Mr. Stewart.
(3) The Company did not award any restricted stock in the year 2000 and
2001, thus the value of the aggregate restricted stock holdings of each
listed employee for the year 2000 and 2001 is the same as listed in
1999. The aggregate number of shares of restricted stock held at the
end of the year 2001 by Mr. Reich was 32,400, by Mr. Abbeloos - 19,673,
by Mr. Wisher - 10,509, by Mr. Riddell - 188, by Mr. Howley - 584, and
by Mr. Stewart - 9,961. The restrictions applicable to the restricted
stock lapsed and ownership of the restricted stock vested with the
listed employees on September 30, 2001 and in the event that the
Company pays dividends, holders of the stock would be entitled to
receive dividends. The amount included for Mr. Reich for 1999 includes
$145,926 for restricted stock awarded by Global TeleSystems, Inc., our
former corporate parent, as a portion of his bonus for 1998 and
$649,128 for restricted stock awarded by the Company.
(4) Amounts disclosed represent the sum of premia paid by the Company for
up to $325,000 term life insurance for each named executive officer,
except Mr. Vinogradov and Mr. Reich, and contributions made by the
Company under the Golden Telecom 401(k) Plan to Mr. Reich, Mr. Wisher,
Mr. Howley and Mr. Riddell, 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. Amounts disclosed for Mr. Reich
include the sum of premia paid by Global TeleSystems, Inc., our former
corporate parent, for $1 million in term life insurance in 1999 and
2000 and the premium paid by the Company for $325,000 in term life
insurance in 2001.
(5) Mr. Vinogradov became President and Chief Executive Officer of Golden
Telecom, Inc. on November 6, 2001.
(6) These figures represent Mr. Vinogradov's participation in the Golden
Telecom key employee incentive and retention program. Mr. Vinogradov's
participation is approximately equivalent to the number of options
granted to a trust, as specified in the table, during 2001 when Mr.
Vinogradov became President and Chief Executive Officer of Golden
Telecom and during 2000 and 1999 when Mr. Vinogradov worked as General
Director of LLC EDN Sovintel, our non-controlled affiliate.
(7) Mr. Reich resigned as President and Chief Executive Officer on November
6, 2001 and remained with the Company until February 6, 2002.
(8) Mr. Wisher resigned as Senior Vice-President, Chief Financial Officer
and Treasurer on October 1, 2001 and remained with the Company until
December 31, 2001.
17
(9) Mr. Stewart became interim Chief Financial Officer on October 1, 2002
and was confirmed as Chief Financial Officer on February 6, 2002. Prior
to that Mr. Stewart worked as Finance Director of TeleRoss, a
subsidiary of Golden Telecom, Inc. All amounts shown include
compensation earned for services rendered to Golden Telecom, Inc. and
TeleRoss.
Option/SAR Grants in Last Fiscal Year
The following table provides information on stock option grants of Golden
Telecom common stock to the Chief Executive Officer, the former Chief Executive
Officer, the former Chief Financial Officer and the four other most highly
compensated officers in 2001 under the Golden Telecom 1999 Equity Participation
Plan and the Golden Telecom Incentive Bonus Program. The exercise price for all
of the Golden Telecom stock options awarded approximated the fair market value
of Golden Telecom common stock on the date of grant. One-third of the options
noted in the column "Securities Underlying Options Granted" vest one year after
the date of the grant. Thereafter, the options granted to each person vest in
equal monthly installments for a period of 24 months. The present value of each
grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions: dividend yield 0%,
expected volatility of 1.25, risk-free interest rate of 4.84% and expected life
of 3 years.
% of Total
Securities Options
Underlying Granted to
Options Golden Exercise or
Granted Telecom Base Price
# Employees in (Per Share) Expiration Grant Date Value
Fiscal Year $ Date $
-------------------------------------------------------------------------
Alexander Vinogradov (1) 300,000 93.46% $12.00 11/21/2011 2,667,000
Stewart P. Reich - - - - -
Stan M. Abbeloos - - - - -
David J. Wisher - - - - -
Jeffrey A. Riddell - - - - -
Jeffrey L. Howley - - - - -
David A. Stewart - - - - -
(1) These figures represent Mr. Vinogradov's participation in the Golden
Telecom key employee incentive and retention program in 2001. Mr.
Vinogradov's participation is approximately equivalent to the number of
options granted to a trust, as specified in the table, during 2001,
when Mr. Vinogradov became President and Chief Executive Officer of
Golden Telecom.
18
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, the former
Chief Executive Officer, the former Chief Financial Officer and the four other
most highly compensated officers during 2001, the number of options under the
Golden Telecom 1999 Equity Participation Plan and the Golden Telecom Incentive
Bonus Program held by such persons at December 31, 2001, and the value of all
unexercised options held by such persons as of that date. Based on the closing
price of $11.67 per share for the Company on the Nasdaq National Stock Market on
December 31, 2001 none of the options listed were in-the-money as of that date.
The following table does not provide information on Global TeleSystems, Inc.'s
stock options due to the bankruptcy and pending liquidation of Global
TeleSystems, Inc. Global TeleSystems, Inc. was our former corporate parent.
None of the listed executives exercised any options during 2001.
19
Number of Securities Value of Unexercised In-The-
Shares Underlying Unexercised Options Money Options at Fiscal
Acquired Value at Fiscal Year-End Year-End
on Exercise Realized Exerciseable/Unexerciseable Exerciseable/Unexerciseable
----------- -------- --------------------------- ---------------------------
# $ # $
Alexander
Vinogradov 0 - 6,596 303,404 - -
Stewart P. Reich 0 - 376,666 163,334 - -
Stan M.
Abbeloos 0 - 234,721 90,279 - -
David J. Wisher 0 - 234,721 90,279 - -
Jeffrey A.
Riddell 0 - 234,721 90,279 - -
Jeffrey L. Howley 0 - 90,276 39,724 - -
David A. Stewart 0 - 50,832 24,168 - -
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 in determining the appropriate
levels of compensation, including salaries, quarterly 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 management's ability to
maximize shareholder value. The Committee seeks to realize this goal by
developing incentive compensation programs that provide competitive compensation
and reflect Company performance.
Compensation Philosophy. The four fundamental principles to which the Committee
adheres in discharging its responsibilities are as follows. First, most
quarterly 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,
equity-based compensation should be used to provide executive officers with
clear and direct links to the shareholders' interests. Fourth, the overall
executive compensation program should be competitive, equitable and structured
so as to ensure the Company's ability to attract, retain, motivate and reward
the talented executives who are essential to the Company's continuing success in
the difficult markets in which the Company operates and the executives reside.
Total compensation, rather than distinct compensation elements, is the focus of
the Company's goal to provide competitive compensation opportunities.
20
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 assessments 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 basis
to executive officers and senior management on the basis of Company and business
unit performance relative to budget in such areas as revenue, SG&A expenses, 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 and 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 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. The Company relies on stock options as the principal means
of providing long-term incentive compensation. Stock options have been, and will
continue to be, granted to executive officers and senior management and key
employees under the 1999 Equity Participation Plan. In considering the size and
amount of option grants, the Committee considers, among other things, previous
grants made to the executive officers, the amount of options currently available
for issuance under the guidelines established in the 1999 Equity Participation
Plan, and the desirability of retaining an executive officer for the vesting
period of the stock option.
Benefits. Benefits offered to executive officers serve a different purpose than
do other elements of the total compensation program. In general, they provide
for retirement income and act as a safety net against problems that can arise
from illness, disability or death. Benefits offered to executive officers are
basically those offered to other employees of the Company.
Golden Telecom, Inc. 401(k) Plan. The Company's Board of Directors has approved
a 401(k) retirement savings plan (the "401(k) Plan"). 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 will be eligible to participate in the
401(k) Plan. The 401(k) Plan participants will be able to defer pre-tax income
by contributing to the plan up to the maximum amount permitted by law. After-tax
contributions will also be permitted under the 401(k) Plan. Golden Telecom
intends to match 50% of each participant's pre-tax contribution to the 401(k)
21
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 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 2001
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. Stewart
Reich resigned as President and Chief Executive Officer of the Company. Under
the terms of Mr. Reich's separation agreement, he remained with the Company
until February 6, 2002. Prior to his separation, Mr. Reich's annual base salary
was set at $310,008 and he was eligible for periodic bonuses throughout the year
targeted, in the aggregate, to be 75% of his base salary. During 2001, Mr. Reich
received $310,008 as his base salary and $176,216 in bonus payments. These bonus
payments reflect the Company's performance in revenues, strategic development
and execution, and EBITDA.
On November 6, 2001 Alexander Vinogradov was appointed as President and
Chief Executive Officer of the Company. Mr. Vinogradov receives a base salary
and he is eligible for periodic bonuses throughout the year targeted, in the
aggregate, to be 50% of his base salary. During 2001, Mr. Vinogradov received
$37,272 as his base salary. 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 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.
22
Submitted by the Compensation Committee of the Board of Directors:
Mr. Ashley Dunster (Chair)
Mr. Izzet Guney
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Employment Agreement of the Chief Executive Officer. Prior to November 6, 2001
Mr. Reich served as President and Chief Executive Officer of Golden Telecom
pursuant to an employment agreement dated January 12, 2000 entered into by Mr.
Reich and Golden Telecom Group, Inc., a wholly owned subsidiary of the Company.
On November 6, 2001 Mr. Reich resigned from the position of President and Chief
Executive Officer of the Company and entered into a separation agreement with
Golden Telecom Group, Inc. whereby the parties agreed that Mr. Reich's
employment would end on February 6, 2002. According to the terms of this
separation agreement, Mr. Reich is entitled to receive compensation equal to 6
months of his then current base salary in one payment within ten days following
his separation date. In accordance with the terms of the separation agreement
Mr. Reich has received an additional payment of $100,000 within ten days
following his separation date and is entitled to receive an additional payment
of $125,000 within ten days after March 31, 2002 provided that the Company
achieves certain business targets. Mr. Reich is also entitled to reimbursement
for relocation expenses. In accordance with the terms and conditions of the
Golden Telecom 1999 Equity Participation Plan, the stock options granted to Mr.
Reich and vested as of February 6, 2002, will expire 18 months thereafter.
On October 1, 2001 David Wisher resigned from his position as Senior
Vice President, Chief Financial Officer and Treasurer of the Company and entered
into a separation agreement with Golden Telecom Group, Inc. whereby the parties
agreed that Mr. Wisher's employment would end on December 31, 2001. According to
the terms of this separation agreement, Mr. Wisher was entitled to receive
compensation equal to 9 months of his then current base salary in one payment
prior to January 31, 2002. Mr. Wisher is also entitled to reimbursement for
relocation expenses. In accordance with the terms and conditions of the Golden
Telecom 1999 Equity Participation Plan, the stock options granted to Mr. Wisher
and vested as of December 31, 2001 will expire 18 months thereafter.
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 continues his employment as General Director of LLC EDN Sovintel, an
affiliate of the Company. Mr. Vinogradov receives a base salary and he is
eligible for periodic bonuses throughout the year targeted, in the aggregate, to
be 50% 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 continued
payment throughout the notice period, 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
23
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 the Company may terminate Mr.
Vinogradov if he suffers total disability. Mr. Vinogradov may terminate the
agreement by giving the Company 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.
COMPARISON OF 27 MONTH CUMULATIVE TOTAL RETURN*
AMONG GOLDEN TELECOM, INC.,
THE NASDAQ STOCK MARKET (U.S. & FOREIGN) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
[THE FOLLOWING INFORMATION WAS REPRESENTED AS A LINE CHART IN THE PRINTED
MATERIAL]
9/99 10/99 11/99 12/99 1/00 2/00 3/00 4/00 5/00 6/00 7/00
---- ----- ----- ----- ---- ---- ---- ---- ---- ---- ----
GOLDEN TELECOM, INC 100.00 106.57 132.85 373.72 224.82 490.51 531.39 357.66 348.91 347.45 353.28
NASDAQ STOCK MARKET (U.S. & FOREIGN) 100.00 108.18 121.71 148.61 143.79 171.96 167.23 140.74 123.78 144.96 137.15
NASDAQ TELECOMMUNICATIONS 100.00 118.47 126.41 146.52 146.07 160.31 155.54 126.73 105.94 122.77 109.26
8/00 9/00 10/00 11/00 12/00 1/01 2/01 3/01 4/01 5/01 6/01
---- ---- ----- ----- ----- ---- ---- ---- ---- ---- ----
GOLDEN TELECOM, INC 359.12 202.92 181.02 129.20 59.85 128.47 105.11 115.33 107.56 109.78 163.50
NASDAQ STOCK MARKET (U.S. & FOREIGN) 153.31 133.87 122.63 94.34 89.67 100.62 77.90 66.67 76.71 76.54 78.38
NASDAQ TELECOMMUNICATIONS 111.08 98.01 85.60 62.26 62.40 78.34 62.42 54.98 57.15 53.73 52.06
7/01 8/01 9/01 10/01 11/01 12/01
---- ---- ---- ----- ----- -----
GOLDEN TELECOM, INC 148.91 117.96 91.09 140.61 143.07 136.2
NASDAQ STOCK MARKET (U.S. & FOREIGN) 73.46 65.40 54.26 61.25 69.97 70.7
NASDAQ TELECOMMUNICATIONS 47.21 41.78 37.91 37.01 40.90 41.7
* $100 Invested on 9/30/99 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Shareholders and Standstill Agreements. On May 11, 2001, Global TeleSystems,
Inc. ("Global TeleSystems") completed the sale of approximately 12.2 million
shares of Golden Telecom's common stock to a group of investors led by Alfa
Group, a leading Russia-based financial and industrial concern, and two of the
Company's previously existing major shareholders, Capital International Global
Emerging Markets Private Equity Fund L.P. ("Capital") and investment funds
managed by Barings Vostok Capital Partners ("Barings Vostok"). On May 11, 2001,
Alfa, Capital, Barings Vostok and the Company entered into a shareholders'
agreement and a standstill agreement. The Independence Committee of the Board of
Directors authorized both agreements and granted its approval pursuant to
Section 203(a)(1) of the Delaware General Corporate Law.
The shareholders' agreement provides that the shareholders will vote
their shareholding such that no less than three but no more than four of Alfa's
nominees will be elected directors to the Golden Telecom Board of Directors, the
shareholders also agreed to vote their shares such that a candidate nominated by
Barings Vostok and a candidate nominated by Capital International will be
elected to the Board of Directors. Alfa, Capital and Barings Vostok further
agreed to collectively nominate and elect an additional director. The
shareholders' agreement further provides that "interested transactions" between
Golden Telecom and its affiliates, on the one hand, and the signatory
shareholders or any of their affiliates, on the other hand, requires the
approval of a majority of the Company's independent directors, unless the
transaction has been described in a business plan or a budget that had already
been separately approved by the Company's independent directors. The
shareholders agreement terminates on the later of (i) May 11, 2003 and (ii) the
date of the annual meeting of shareholders of the Company held in calendar year
2003.
Generally, the standstill agreement provides that for a period of two
years after May 11, 2001, Alfa may not acquire over 49% of the Company's
outstanding stock on a fully diluted basis. Similar "standstill" provisions are
applicable to Capital and Barings Vostok whereby neither of these entities
shareholdings may exceed 20% of the Company's outstanding stock. The standstill
agreement grants the signatory shareholders pro-rata pre-emptive rights in the
event of any issuance of equity by the Company. Specifically, the Company
granted to these shareholders the right to purchase any new equity securities
that the Company may issue so that they may maintain their relative percentage
ownership in Golden Telecom. This agreement also sets the total number of
directors of the company at nine. The standstill agreement expires on May 11,
2003.
Agreements with affiliates of Alfa Telecom Limited. In the past, companies
affiliated with Alfa Group have provided investment banking and corporate
finance services to the Company. We expect that this relationship will continue.
In particular, we engaged Alfa Bank's Corporate Finance Group to provide
investment-banking services to the Company in connection with the acquisition by
the Company of ZAO Cityline and its subsidiaries and paid investment banking
fees of $690,000 to Alfa Bank in connection with this acquisition. Prior to the
time when companies affiliated with Alfa Telecom Limited became stockholders in
the Company, we engaged Alfa Bank's Corporate Finance Group to provide
investment banking services in connection with the planned acquisition by the
Company of 50% stake in LLC EDN Sovintel that the Company does not already own.
We have also entered into commercial arrangements in the ordinary course of
business with affiliates of Alfa Telecom Limited. We believe that our
arrangements with these affiliates, including arrangement with Alfa Bank's
Corporate Finance Group, have been conducted on commercially reasonable terms.
25
Registration Rights Agreements. Golden Telecom entered into a registration
rights agreement with Global TeleSystems in September 1999. In May 2001, Global
TeleSystems assigned this agreement to Alfa Telecom Limited ("Alfa"), when Alfa
acquired 47% of the Company from Global TeleSystems. The agreement provides that
on Alfa's written request to a maximum of three times, Golden Telecom will use
its reasonable best efforts to register under the applicable federal and state
securities laws the resale of any of Alfa's shares of the Company's Common
Stock. Alfa also has the right to include its 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 Alfa may request registration. Alfa will pay the
out-of-pocket costs for registrations, which it initiates. The Company agreed to
pay all of its out-of-pocket costs and expenses, other than underwriting
discounts and commissions pertaining to shares resold by Alfa, in connection
with registrations in which Alfa participates but does not initiate. In addition
to the above rights, when Alfa owns less than 25% of the Company's outstanding
shares of capital stock, it may request that the Company register such remaining
shares in a shelf registration statement, at Alfa's expense. The registration
rights agreement contains customary indemnification and contribution provisions
between the Company and Alfa. The Company has substantially similar registration
rights agreements with its other significant shareholders, including Capital
International Global Emerging Markets Private Equity Fund L.P. and investment
funds managed by Barings Vostok Capital Partners.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and related
regulations require the Company's directors, executive officers, and anyone
holding more than 10% of the Company's common stock to report their initial
ownership of the Company's common stock and any changes in that ownership to the
Securities and Exchange Commission and securities exchanges. The Company is
required to disclose in this Proxy Statement whether any reporting person did
not file these reports when due. Based on its review of the copies of Section
16(a) reports received by it or written representations from certain reporting
persons that no reports on Form 5 were required, except as described below, the
Company believes that all reporting persons of the Company satisfied these
filing requirements except as follows: Alfa Finance Holdings S.A., Crown Finance
Foundation and CTF Holdings Limited were late in filing Forms 4 related to eight
transactions in Company stock in June 2001, one transaction in Company stock in
each of July, August and September 2001 and three transactions in Company stock
in October 2001.
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 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.
26
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., 12 Trubnaya Street, 8th Floor, Moscow
103045, Russia, Fax Number 7-095-797-9306.
27
Please Mark [X]
your votes as
indicated in
this example
1. Election of Directors
FOR all nominees WITHHOLD
listed below AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed below
[ ] [ ]
Nominees: 01 Stan M. Abbeloos, 02 Tigran Agadzhanov, 03 Petr Aven, 04 Michael
Calvey, 05 Ashley Dunster, 06 Izzet Guney, 07 Andrey Kosogov, 08 David A.
Stewart and 09 Alexander Vinogradov.
For, except vote withheld from the following nominee(s):
--------------------------------------------------------------------------------
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG FOR AGAINST ABSTAIN
(CIS) LIMITED AS INDEPENDENT PUBLIC [ ] [ ] [ ]
ACCOUNTANTS OF THE COMPANY
CHECK HERE IF YOU PLAN TO ATTEND THE STOCKHOLDERS [ ]
MEETING ON MAY 21, 2002
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 president or authorized person. If a partnership, please
sign in full partnership name by 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 ACCOUNTANTS OF THE COMPANY FOR 2002.
Signature Signature Date
------------------------------ ------------------- --------
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[Golden Telecom(TM) Logo]
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 2002
COMMON STOCK
GOLDEN TELECOM, INC.
Representative Offices of Golden TeleServices, Inc.
12 Trubnaya Street, 8th Floor, Moscow 103045, Russia
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints David Stewart and Jeff Riddell
as proxies with full power of substitution to each, and hereby authorizes them
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 21, 2002, and any adjournments thereof.
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 (I) THE ELECTION OF THE NOMINATED DIRECTORS AND (II) RATIFICATION
OF THE SELECTION OF ERNST & YOUNG (CIS) LIMITED AS INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR 2002.
(Continued and to be signed on the reverse side)
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