SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant ( X )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
( X ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FILING BY:
DELTATHREE.COM, 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 Registrant)
Payment of Filing Fee (Check the appropriate box):
( X ) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of its
filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
MAY 18, 2000
deltathree.com, Inc.
430 Park Avenue
Suite 500
New York, New York 10022
May 18, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Meeting") of deltathree.com, Inc. (the "Company") to be
held at The Peninsula Hotel, 700 Fifth Avenue, New York, New York 10019, on
June 13, 2000, commencing at 10:00 a.m., local time. I urge you to be
present in person or represented by proxy at the Meeting.
The enclosed Notice of Annual Meeting and Proxy Statement fully
describe the business to be transacted at the Meeting, which includes (i)
the election of all nine directors of the Company, (ii) the ratification of
the appointment by the Board of Directors of Brightman Almagor & Co., a
member firm of Deloitte & Touche Tohmatsu, as independent auditors for the
year ending December 31, 2000 and (iii) the transaction of any other
business that may properly be brought before the Meeting or any adjournment
or postponement thereof.
The Company's Board of Directors believes that a favorable vote on
each of the matters to be considered at the Meeting is in the best
interests of the Company and its stockholders and unanimously recommends a
vote "FOR" each of the matters. Accordingly, the Company urges you to
review the accompanying material carefully and to return the enclosed proxy
promptly.
The Board of Directors has fixed the close of business on May 25,
2000 as the record date for the determination of the stockholders entitled
to notice of and to vote at the Meeting. Accordingly, only stockholders of
record at the close of business on that date will be entitled to vote at
the Meeting. A list of the stockholders entitled to vote at the Meeting
will be located at the Company's offices, 430 Park Avenue, Suite 500, New
York, New York 10022, at least ten days prior to the Meeting and will also
be available for inspection at the Meeting.
Directors and officers of the Company will be present to help host
the Meeting and to respond to any questions that the Company's stockholders
may have. I hope you will be able to attend. Even if you expect to attend
the Meeting, please sign, date and return the enclosed proxy card without
delay. If you attend the Meeting, you may vote in person even if you have
previously mailed a proxy.
Sincerely,
/s/ Elie C. Wurtman
---------------------------------
Elie C. Wurtman
Chairman of the Board
Deltathree.com, Inc.
430 Park Avenue
Suite 500
New York, New York 10022
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS To Be Held
on June 13, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of deltathree.com, Inc. (the "Company") will be held at The
Peninsula Hotel, 700 Fifth Avenue, New York, New York 10019, on June 13,
2000, commencing at 10:00 a.m., local time. A proxy card and a Proxy
Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of all nine directors for a one-year term expiring at
the Company's Annual Meeting of Stockholders in 2001;
2. The ratification of the appointment by the Board of Directors of
Brightman Almagor & Co., a member firm of Deloitte & Touche Tohmatsu,
as independent auditors for the year ending December 31, 2000; and
3. Such other matters as may properly come before the Meeting or any
adjournment or postponement thereof.
The close of business on May 25, 2000 has been fixed as the record
date for determining stockholders entitled to notice of and to vote at the
Meeting or any adjournment or postponement thereof. For a period of at
least 10 days prior to the Meeting, a complete list of stockholders
entitled to vote at the Meeting shall be open to examination by any
stockholder during ordinary business hours at the offices of the Company at
430 Park Avenue, Suite 500, New York, New York 10022.
Information concerning the matters to be acted upon at the Meeting is
set forth in the accompanying Proxy Statement.
A copy of the Company's Annual Report for 1999, which includes the
Company's audited financial statements, is being mailed together with this
proxy material.
YOUR VOTE IS IMPORTANT. STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT
AT THE MEETING IN PERSON ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
/s/ Marc M. Tobin
-----------------------------------
Marc M. Tobin
Secretary
New York, New York
May 18, 2000
Deltathree.com, Inc.
430 Park Avenue
Suite 500
New York, New York 10022
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 13, 2000
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SOLICITATION AND VOTING OF PROXIES
This Proxy Statement and accompanying proxy materials are being first
mailed on or about May 26, 2000 to stockholders of deltathree.com, Inc.
(the "Company") at the direction of the Board of Directors of the Company
(the "Board") to solicit proxies in connection with the 2000 Annual Meeting
of Stockholders (the "Meeting"). The Meeting will be held at The Peninsula
Hotel, 700 Fifth Avenue, New York, New York 10019, on June 13, 2000,
commencing at 10:00 a.m., local time, or at such other time and place to
which the Meeting may be adjourned or postponed.
All shares represented by valid proxies at the Meeting, unless the
stockholder otherwise specifies, will be voted (i) FOR the election of the
nine persons named under "Proposal I--Election of Directors" as nominees
for election as the directors of the Company for a one-year term expiring
at the Company's Annual Meeting of Stockholders in 2001, (ii) FOR the
ratification of the appointment by the Board of the independent auditors
named under "Proposal II-Ratification of Appointment of Independent
Auditors" and (iii) at the discretion of the proxy holders, with regard to
any matter not known to the Board on the date of mailing this Proxy
Statement that may properly come before the Meeting or any adjournment or
postponement thereof. Where a stockholder has appropriately specified how a
proxy is to be voted, it will be voted accordingly.
A proxy may be revoked at any time by providing written notice of
such revocation to deltathree.com, Inc.,430 Park Avenue, Suite 500, New
York, New York 10022, which notice must be received prior to the Meeting.
If notice of revocation is not received prior to the Meeting, a stockholder
may nevertheless revoke a proxy if he or she attends the Meeting and votes
in person.
RECORD DATE AND VOTING SECURITIES
The close of business on May 25, 2000 is the record date (the "Record
Date") for determining the stockholders entitled to vote at the Meeting. At
the close of business on April 28, 2000, the Company had issued and
outstanding approximately 9,145,902 shares of Class A Common Stock and
approximately 19,569,459 shares of Class B Common Stock (together, the
"Common Stock") held by approximately 64 holders of record. The Common
Stock constitutes the only outstanding classes of voting securities of the
Company entitled to be voted at the Meeting.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy relating to any
matter, of the holders of a majority of the outstanding shares of Common
Stock is necessary to constitute a quorum. For purposes of the quorum and
the discussion below regarding the vote necessary to take stockholder
action, stockholders of record who are present at the Meeting in person or
by proxy and who abstain, including brokers holding customers' shares of
record who cause abstentions to be recorded at the Meeting, are considered
stockholders who are present and entitled to vote at the Meeting, and thus,
shares of Common Stock held by such stockholders will count toward the
attainment of a quorum. If a quorum should not be present, the Meeting may
be adjourned from time to time until a quorum is obtained.
Each share of Class A Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to ten votes with respect to each
proposal to be voted on at the Meeting. RSL Communications, Ltd. ("RSL
COM") owns all of the outstanding shares of the Company's Class B Common
Stock, which represents approximately 95.5% of the combined voting power of
all classes of the Company's capital stock. Therefore, RSL COM will control
the outcome of any matter submitted to a vote of the Company's
stockholders, including the election of the directors at the Meeting.
Cumulative voting is not permitted with respect to the election of
directors.
The accompanying proxy card is designed to permit each holder of
Common Stock as of the close of business on the Record Date to vote on each
of the matters to be considered at the Meeting. A stockholder is permitted
to vote in favor of, or to withhold authority to vote for, any or all
nominees for election to the Board and to vote in favor of or against or to
abstain from voting with respect to the proposal to ratify the appointment
by the Board of the independent auditors.
Brokers holding shares of record for customers generally are not
entitled to vote on certain matters unless they receive voting instructions
from their customers. As used herein, "uninstructed shares" means shares
held by a broker who has not received instructions from its customers on
such matters, if the broker has so notified the Company on a proxy form in
accordance with industry practice or has otherwise advised the Company that
it lacks voting authority. As used herein, "broker non-votes" means the
votes that could have been cast on the matter in question by brokers with
respect to uninstructed shares if the brokers had received their customers'
instructions. Although there are no controlling precedents under Delaware
law regarding the treatment of broker non-votes in certain circumstances,
the Company intends to treat broker non-votes in the manner described
below.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of shares of the Company's Class A Common Stock and
the Company's Class B Common Stock as of March 1, 2000 and the beneficial
ownership of shares of the capital stock of RSL COM as of March 1, 2000 by:
(a) each person who the Company knows owns beneficially more than
5% of the Company's Common Stock
(b) each of the Company's directors individually
(c) each of the Company's named executive officers individually
(d) all of the Company's executive officers and directors as a group
Unless otherwise indicated, to the Company's knowledge, all persons listed
below have sole voting and investment power with respect to their shares of
Common Stock. Each person listed below disclaims beneficial ownership of
their shares, except to the extent of their pecuniary interests therein.
Shares of Common Stock that an individual or group has the right to acquire
within 60 days of March 1, 2000 pursuant to the exercise of options are
deemed to be outstanding for the purpose of computing the percentage
ownership of such person or group, but are not deemed outstanding for the
purpose of calculating the percentage owned by an other person listed.
SHARES OF
DELTATHREE.COM
CAPITAL STOCK SHARES OF RSL COM
BENEFICIALLY CAPITAL STOCK
OWNED BENEFICIALLY OWNED
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NUMBER PERCENTAGE(1) NUMBER PERCENTAGE(2)
------ ---------- ------ ----------
PRINCIPAL STOCKHOLDERS:
RSL Communications, Ltd. .......... 19,569,459 68.1% -- __%
767 Fifth Avenue
Suite 4300,
New York, New York 10153
Ronald S. Lauder................... 19,574,459 68.1 15,947,636(17) 29.1
c/o RSL Communications, Ltd (3)
CNET Investments, Inc. ............ 1,551,971(4) 5.4 -- --
150 Chestnut Street
San Francisco, California 94111
DIRECTORS AND EXECUTIVE OFFICERS:
Ithak Fisher(5)(6)................. 24,848 * 3,310,481(18) 6.0
Nir Tarlovsky(5)(6)................ 34,848 * 863,199(19) 1.6
Donald R. Shassain(5)(6)........... 29,848 * 101,333(20) *
Jacob Z. Schuster(5)(7)............ 34,848 * 1,689,404(21) 3.1
Yadin Kaufmann(6)(8)............... 24,848 * 1,000(22) *
Robert R. Grusky (9)(10)........... 27,848 * 3,500(23) *
Avery S. Fischer(5)(6)............. 31,848 * 14,375(24) *
Oakleigh Thorne(6)(11)............. 25,298 * -- --
Elie C. Wurtman(12)(13)............ 165,656 * -- --
Shimmy Zimels(12)(14).............. 263,407 * -- --
Noam Bardin(12) (14)............... 427,421 1.5 -- --
Mark J. Hirschhorn(12)(14)......... 183,938 * -- --
Amos Sela(12)(15).................. 278,332 * -- --
All Directors and Executive
Officers as a group
(fifteen persons)(16)............ 1,725,143 5.8 5,995,772 10.9
* Less than 1%.
(1) Percentage of beneficial ownership is based on (a) 19,569,459 shares of
Class B Common Stock issued to RSL COM and (b) 9,147,575 shares of Class A
Common Stock (excluding a warrant issued to CNET to purchase 466,028 shares
of common stock) outstanding as of March 1, 2000.
(2) Percentage of beneficial ownership is based on RSL COM's outstanding
share capital consists of 24,267,283 shares of Class B common stock and
30,591,975 shares of Class A common stock as of March 1, 2000. Shares of
Class B common stock of RSL COM are convertible at any time into shares of
Class A common stock of RSL COM for no additional consideration on a
share-for-share basis. Shares of Class A common stock of RSL COM are
entitled to one vote for each share and shares of Class B common stock of
RSL COM are entitled to 10 votes for each share.
(3) Ronald S. Lauder, together with a number of entities, including
entities formed for the benefit of charities and members of his family, own
shares of RSL COM's capital stock that enable him to vote more than 50% of
RSL COM's capital stock. As a result, he may be deemed to be the beneficial
owner of the Company's capital stock owned by RSL COM. Mr. Lauder disclaims
beneficial ownership of these shares.
(4) Includes a warrant to purchase 466,028 shares of Class A Common Stock.
(5) The address for the director listed is c/o RSL Communications, Ltd.
(6) Includes options to purchase 24,848 shares of Class A Common Stock.
(7) Consists of (a) 10,000 shares of Class A Common Stock owned by Schuster
Family Partners, of which Mr. Schuster is the sole general partner and the
limited partners are some of his children and (b) options to purchase
24,848 shares of Class A Common Stock. Mr. Schuster disclaims beneficial
ownership of the shares owned by Schuster Family Partners.
(8) The address for Mr. Kaufman is 91 Medinat Hayehudim St., Herzlia
Pituach 46120, Israel.
(9) The address for Mr. Grusky is c/o New Mountain Capital LLC, 712 Fifth
Avenue, 23rd Floor, New York, NY 10019.
(10) Consists of (a) 2,000 shares of Class A Common Stock owned by Mr.
Grusky, (b) 1,000 shares of Class A Common Stock owned by Mr. Grusky's wife
and (c) options to purchase 24,848 Shares of Class A Common Stock.
(11) The address for Mr. Thorne is P.O. Box 871, Lake Forest, IL 60045.
(12) The address for director or executive officer listed is c/o the Company.
(13) Includes options to purchase 165,656 shares of Class A Common Stock.
(14) Includes options to purchase 173,938 shares of Class A Common Stock.
(15) Includes options to purchase 273,332 shares of Class A Common Stock.
(16) Includes options to purchase 1,279,545 shares of Class A Common Stock.
(17) Consists of (a) 2,336 shares of Class A common stock of RSL COM, (b)
15,481,527 shares of Class B common stock of RSL COM, (c) 3,873 shares of
Class A common stock of RSL COM issuable upon exercise of an equal number
of currently exercisable options granted to Mr. Lauder under RSL COM's 1997
Directors' Compensation Plan and (d) 459,900 shares issuable upon exercise
of a warrant issued to Mr. Lauder. The shares of Class B common stock of
RSL COM consist of: (a) 9,496,295 shares owned by RSL Investments
Corporation, a corporation wholly owned by Mr. Lauder, (b) 1,814,579 shares
owned by EL/RSLG Media, of which The 1995 Estee Lauder RSL Trust, of which
Mr. Lauder is a trustee and the beneficiary is a 50% shareholder, (c)
907,290 shares owned by RAJ Family Partners, of which Mr. Lauder is a
limited partner and a shareholder of the general partner, and (d) 3,263,363
shares owned directly by Mr. Lauder.
(18) Consists of (a) 177,839 shares of Class A common stock of RSL COM and
(b) 3,132,642 shares of Class B common stock of RSL COM owned by Fisher
Investment Partners, L.P., of which Mr. Fisher is the sole general partner
and the Fisher 1997 Family Trust is the sole limited partner. Mr. Fisher
disclaims beneficial ownership of these shares.
(19) Consists of (a) 718,915 shares of Class A common stock of RSL COM
owned by Tarlovsky Investment Partners, of which Mr. Tarlovsky is the sole
general partner and the Tarlovsky 1997 Family Trust is the sole limited
partner and (b) 144,284 shares of Class A common stock of RSL COM issuable
upon exercise of an equal number of currently exercisable options granted
to Mr. Tarlovsky under RSL COM's 1997 Stock Incentive Plan.
(20) Consists of (a) 18,000 shares of Class A common stock of RSL COM and
(b) options to purchase 83,333 shares of Class A common stock of RSL COM.
(21) Consists of (a) 1,189 shares of Class A common stock of RSL COM owned
directly by Mr. Schuster, (b) 41,656 shares of Class A common stock of RSL
COM owned by Schuster Family Partners, of which Mr. Schuster is the sole
general partner and the limited partners are some of his children, and (c)
1,646,559 shares of Class B common stock of RSL COM owned by Schuster
Family Partners. Mr. Schuster disclaims beneficial ownership of the shares
owned by Schuster Family Partners.
(22) Represents 1,000 shares of Class A common stock of RSL COM.
(23) Represents 3,500 shares of Class A common stock of RSL COM.
(24) Consists of (a) 5,980 shares of Class A common stock of RSL COM and
(b) options to purchase 8,395 shares of Class A common stock of RSL COM.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), requires the Company's directors and executive officers, and persons
who own more than 10% of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of changes in
ownership of Common Stock with the Securities and Exchange Commission (the
"SEC"). Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on its review of the copies
of such reports furnished to the Company, the Company believes that all of
the Company's directors, officers and greater than 10% stockholders have
complied with the applicable Section 16(a) reporting requirements, except
for the Statements of Beneficial Ownership on Form 3 relating to the
beneficial ownership of shares of common stock by Shimmy Zimels, Jacob A.
Davidson, Marc Tobin, Elie C. Wurtman, Noam Bardin, Amos Sela, Mark J.
Hirschhorn, Yadin Kaufmann, Oakleigh Thorne, Avery S. Fischer, Itzhak
Fisher, Robert R. Grusky, Jacob Z. Schuster, Donald R. Shassian, Nir
Tarlovsky, RSL Communications Ltd. and CNET Investments Inc., which were
not filed on a timely basis.
PROPOSAL I
ELECTION OF DIRECTORS
At the Meeting, nine directors will be elected to the Board of
Directors to serve until the Company's next annual meeting of stockholders.
The Company's Amended and Restated Certificate of Incorporation
provides that a director shall hold office until the annual meeting for the
year in which his or her term expires except in the case of elections to
fill vacancies or newly created directorships. Each director is elected for
a one year term. Each of the nominees are now serving as directors of the
Company and were previously elected by the stockholders of the Company.
Under the Company's Amended and Restated By-laws, directors are
elected by a majority of the outstanding shares of Common Stock present in
person or represented by proxy at the Meeting, and thus, the nine nominees
for election as directors who receive the most votes cast will be elected.
Instructions withholding authority and broker non-votes will not be taken
into account in determining the outcome of the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF
THE NINE NOMINEES TO THE BOARD OF DIRECTORS.
NOMINEES FOR DIRECTOR
Elie C. Wurtman, age 30, co-founded the Company and has been the chairman
of the Board of Directors since April 1999. Mr. Wurtman was co-chairman of
the Company from October 1999 to April 2000, president and chief executive
officer of the Company from November 1996 to March 1999 and acting vice
president of sales and marketing for the Company from August 1998 to March
1999. Mr. Wurtman has served as vice president of emerging technologies for
RSL COM from April 1998 to May 1999. In November 1995, Mr. Wurtman
co-founded Ambient Corporation, Inc., a company which develops smartcard
technology, and was a director of Ambient until September 1999. Mr. Wurtman
co-founded Pioneer Management Corporation, a holding company involved in
several high-tech ventures, and was a director from January 1992 to June
1996.
Avery S. Fischer, age 32, has been a director of the Company since
September 1999 and was the secretary of the Company from July 1997 until
September 1999. Mr. Fischer has served as vice president of legal affairs
and general counsel of RSL COM since January 1999 and legal counsel of RSL
COM since January 1997. From 1994 to 1997, he was an associate with the law
firm of Rosenman & Colin LLP, New York, New York with a practice
concentrating in mergers and acquisitions, securities and general corporate
counseling. From 1993 to 1994, Mr. Fischer was an associate with the law
firm of Shea & Gould, New York, New York, with a practice concentrating in
commercial and securities litigation.
Itzhak Fisher, age 43, has been a director of the Company since July 1997.
Mr. Fisher was a co-founder of RSL COM and has been a director, president
and chief executive officer of RSL COM since its inception in 1994. From
1992 to 1994, Mr. Fisher served as general manager of Clalcom Inc., a
telecommunications company. From 1990 to 1992, Mr. Fisher served as the
special consultant to the president of BEZEQ, the Israel Telecommunication
Corp., Israel's national telecommunications company. Mr. Fisher co-founded,
and was a director, president and chief executive officer of Medic Media,
Inc., a company engaged in the business of renting telephone and television
systems in hospitals throughout Israel.
Robert R. Grusky, age 42, has been a director of the Company since the
closing of the Company's initial public offering. Mr. Grusky has been
President of RSL Investments Corporation since April 1998. Mr. Grusky has
been a senior managing member of Hope Capital Partners, L.P., a public
equities investment partnership, and a co-founder and principal of New
Mountain Capital LLC, a private equity fund, since January 2000. From April
1997 to January 2000, Mr. Grusky was Senior Advisor to Ronald S. Lauder.
From 1985 to 1997, Mr. Grusky was at Goldman, Sachs & Co. as a member of
its mergers and acquisitions department and later in its principal
investment area. In 1990, Mr. Grusky took a one-year leave of absence
during which he was appointed a White House Fellow by President Bush and
served as Assistant to the then Secretary of Defense Dick Cheney. He is a
director of Central European Media Enterprises, Ltd., ITI Holdings, S.A.
and an advisory director of Tinicum Capital Partners, L.P. He is also a
member of the Board of Trustees of the Hackley School and The Multiple
Myeloma Foundation.
Yadin Kaufmann, age 40, has been a director of the Company since the
closing of the Company's initial public offering. Mr. Kaufmann is a
co-founder of MainXchange Ltd. and has served as its chairman from February
1997 until the present and as its chief executive officer from February
1997 until January 1999. In 1990, Mr. Kaufmann co-founded Veritas Venture
Capital Management Ltd., a venture fund that invests primarily in
early-stage technology companies in Israel, and has since 1990 been its
co-managing director. From 1987 until 1995, he was involved in the
management of Athena Venture Partners, and from 1986 until 1987 he was an
associate at the law firm Herzog, Fox & Ne'eman. Mr. Kaufmann currently
serves on the Board of Directors of Carmel Biosensors Ltd.
Jacob Z. Schuster, age 50, has been a director of the Company since May
1999. He has been a director, executive vice president and assistant
secretary of RSL COM since 1994. Mr. Schuster served as treasurer of RSL
COM from 1994 through 1998, and was chief financial officer from February
1997 until December 1998. Mr. Schuster has been president and treasurer of
RSL Management Corporation since November 1995 and executive vice president
of RSL Investments Corporation since March 1994. From 1986 to 1992, Mr.
Schuster was a general partner and treasurer of Goldman Sachs.
Donald R. Shassian, age 44, has been a director of the Company since May
1999. Mr. Shassian has served as chief operating officer of RSL COM since
August 1999, and he has served as executive vice president, chief financial
officer and treasurer of RSL COM since January 1999. From 1993 through
1998, Mr. Shassian served as senior vice president and chief financial
officer of Southern New England Telecommunications. From 1988 through 1993,
Mr. Shassian served as a partner of Arthur Andersen LLP, providing audit
and business advisory services to companies in the telecommunications
industry. In 1992, Mr. Shassian was named the partner-in-charge of Arthur
Andersen's telecommunications industry practice group for North America.
Nir Tarlovsky, age 33, has been a director of the Company since July 1997.
Mr. Tarlovsky has served as the vice president of business development of
RSL COM since April 1995, and was a director of RSL COM from April 1995
until March 1997. Mr. Tarlovsky is also vice president of RSL COM North
America, Inc., a subsidiary of RSL COM. From 1992 to March 1995, Mr.
Tarlovsky served as senior economist of Clalcom. While at Clalcom, he was
responsible for the development of new international telecommunications
ventures. Mr. Tarlovsky is also a director of Telegate, a German operator
services company.
Oakleigh Thorne, age 42, has been a director of the Company since the
closing of the Company's initial public offering. Since October 1996, Mr.
Thorne has served as the chairman and chief executive officer of TBG
Information Investors, LLC, a private equity partnership, and as the
co-president of Blumenstein/Thorne Information Partners I, L.P., a private
equity partnership. He was president and chief executive officer of
Commerce Clearing House, a provider of tax and business law information,
software and services from April 1995 to August 1996, and the executive
vice president of Commerce Clearing House from January 1991 to April 1995.
Since March 1998, Mr. Thorne has been a director of Medscape, a web-based
healthcare company. He also serves as the chairman of the board of SCP
Communications.
OTHER EXECUTIVE OFFICERS AND KEY EMPLOYEES
Set forth below is a brief description of the present and past business
experience of each of the persons who serve as executive officers or key
employees of the Company who are not also serving as directors.
Mark J. Hirschhorn, age 35, has been vice president and chief financial
officer of the Company since April 1999. Prior to joining the Company, Mr.
Hirschhorn served in various positions at RSL COM, including vice
president-finance from August 1997 to May 1999, global controller from
January 1996 to May 1999 and assistant secretary from September 1996 to May
1999. From October 1987 to December 1995, Mr. Hirschhorn was employed at
Deloitte & Touche LLP, most recently as senior manager.
Noam Bardin, age 28, co-founded the Company and has been vice president of
technology and chief technology officer since June 1997. Mr. Bardin has
served as president and interim chief executive officer of the Company
since April 1, 2000. Prior to serving as vice president, Mr. Bardin served
as the Company's global network director from November 1996 to May 1997.
From November 1995 to October 1996, Mr. Bardin served as director of
operations for Ambient Corporation. From January 1995 to October 1995, Mr.
Bardin worked for several Israeli high-tech companies in helping to secure
government grants and assistance. Prior to 1995, Mr. Bardin attended Hebrew
University.
Shimmy Zimels, age 34, has been the Company's vice president of operations
since July 1997. Prior to joining the Company, Mr. Zimels was the
controller and vice president of finance of Net Media Ltd., a leading
Israeli-based Internet service provider, from June 1995 to June 1997. From
April 1991 to May 1995, Mr. Zimels was a senior tax auditor for the Income
Tax Bureau of the State of Israel.
Dr. Baruch D. Sterman, age 38, has been the Company's vice president of
research and development and product integration since May 1998. Prior to
joining the Company, Dr. Sterman worked as a consultant for Israeli
businesses in database design, billing systems, and automated data flow
from August 1996 to May 1998. After receiving a doctorate in Physics in
June 1993, Dr. Sterman founded a start-up company, Gal-Or Lasers, that
developed a compact laser (of his own design) for industrial and medical
use.
Marc M. Tobin, age 33, has been the Company's general counsel since August
1998 and the Company's corporate secretary since September 1999. Prior to
joining the Company, Mr. Tobin served as corporate counsel to Slim Fast
Foods Company from October 1991 to July 1998 and assistant corporate
secretary from March 1995 to July 1998.
Jacob A. Davidson, co-founder of the Company, resigned as co-chairman of
the Company effective April 1, 2000.
BOARD OF DIRECTORS AND COMMITTEES
General. The business of the Company is managed under the direction
of the Board. The Board meets on a regularly scheduled basis during the
Company's fiscal year to review significant developments affecting the
Company and to act on matters requiring Board approval. It also holds
special meetings when an important matter requires Board action between
scheduled meetings. The Board had four regular and no special meetings in
fiscal 1999. During fiscal 1999, each member of the Board participated in
at least 75% of all Board and applicable committee meetings held during the
period for which he was a director.
The Board has established Executive, Audit and Compensation
Committees to devote attention to specific subjects and to assist the Board
in the discharge of its responsibilities. The functions of those committees
and their current members are set forth below.
Executive Committee. The Executive Committee is empowered to act on
any matter except those matters specifically reserved to the full Board by
applicable law. Itzhak Fisher, Donald R. Shassian, Nir Tarlovsky and Elie
C. Wurtman are the current members of the Executive Committee.
Audit Committee. The Audit Committee recommends to the Board the
appointment of the firm selected to serve as the independent auditors for
the Company and its subsidiaries and monitors the performance of such firm;
reviews and approves the scope of the annual audit and evaluates with the
independent auditors the Company's annual audit and annual financial
statements; reviews with management the status of internal accounting
controls; evaluates issues having a potential financial impact on the
Company which may be brought to the Audit Committee's attention by
management, the independent auditors or the Board; and evaluates public
financial reporting documents of the Company. Jacob Z. Schuster, Donald R.
Shassian and Robert R. Grusky are the current members of the Audit
Committee.
Compensation Committee. The Compensation Committee is responsible for
evaluating the Company's compensation policies, administering the Company's
stock award and incentive plans and establishing the compensation for the
executive officers. Yadin Kaufmann, Jacob Z. Schuster and Oakleigh Thorne
are the current members of the Compensation Committee.
Other. The Company does not have a nominating committee. The
functions customarily attributable to a nominating committee are performed
by the Board as a whole.
See "Certain Transactions" for a discussion of certain agreements
between the Company and certain directors of the Company.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, on the recommendation of
the Audit Committee, the Board has reappointed Brightman Almagor & Co., a
member firm of Deloitte & Touche Tohmatsu, as independent auditors to audit
the financial statements of the Company for the year ending December 31,
2000.
Representatives of Brightman Almagor & Co. are expected to be present
at the Meeting and will have an opportunity to make a statement if they so
desire and will be available to respond to appropriate questions.
The ratification of the selection of Brightman Almagor & Co. as the
Company's independent auditors for 2000 will require the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock
present at the Meeting, in person or represented by proxy, and entitled to
vote. In determining whether the proposal has received the requisite number
of affirmative votes, abstentions will be counted and will have the same
effective as a vote against the proposal; broker non-votes will be
disregarded and will have no effect on the outcome of the vote.
The Board believes that a vote for the proposal to ratify the
appointment by the Board of the independent auditors as described above is
in the best interests of the Company and its stockholders and unanimously
recommends a vote "FOR" such proposal.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid or accrued for services rendered during each of the
Company's last two fiscal years to the Company's Chief Executive Officer
and each of the other four most highly compensated executive officers of
the Company (collectively, the "Named Executive Officers") based on salary
and bonus earned during fiscal 1998 and 1999.
---------------------------------------------
ANNUAL COMPENSATION
---------------------------------------------
OTHER
NAME AND ANNUAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION
- ------------------------------ ---- --------- -------- -------------
Elie C. Wurtman
Co-Chairman of the Company 1998 153,000 162,500 --
& Chairman of the Board of 1999 180,000 90,000 --
Directors (1)(2)
Amos Sela 1998 -- -- --
Chief Executive Officer & 1999 230,000 115,000 --
President(3)
Noam Bardin 1998 120,000 10,000 --
Interim Chief Executive 1999 170,000 136,000 --
Officer, President & Chief
Technology Officer
Shimmy Zimels 1998 -- -- --
Vice President of Operations 1999 170,000 136,000 --
Mark J. Hirschhorn 1998 -- -- --
Chief Financial Officer 1999 200,000 160,000 --
- --------------------
(1) Mr. Wurtman was paid by RSL COM in 1998.
(2) Mr. Wurtman resigned from the position of co-chairman of the Company
effective April 1, 2000.
(3) Mr. Sela resigned as Chief Executive Officer and President of the
Company effective April 1, 2000.
OPTION GRANTS IN FISCAL 1999
The following table provides information on grants of options to
purchase Class A Common Stock granted during 1999 to the named executive
officers.
INDIVIDUAL GRANTS
------------------------------------------
SHARES OF FAIR
COMMON % OF TOTAL MARKET
STOCK OPTIONS EXERCISE VALUE POTENTIAL REALIZABLE VALUE AT
OPTIONS GRANTED TO PRICE ON ASSUMED RATES OF STOCK PRICE
UNDERLYING EMPLOYEES PER GRANT EXPI- APPRECIATION FOR OPTION TERM
OPTIONS IN FISCAL SHARE DATE RATION ---------------------------------
NAME GRANTED (#) YEAR ($/SH) ($/SH) DATE 0% 5% 10%
- ---- ---------- ----------- ----- ----- ------ --------- --------- ---------
Amos Sela (1).......... 273,332 21.4 5.11 15.00 4/1/06 2,703,253 4,372,357 6,592,975
Mark J. Hirschhorn.... 173,938 13.6 5.11 15.00 4/1/06 1,720,246 2,782,401 4,195,517
Noam Bardin ........... 173,938 13.6 5.11 15.00 4/1/06 1,720,246 2,782,401 4,195,517
Shimmy Zimels.......... 173,938 13.6 5.11 15.00 4/1/06 1,720,246 2,782,401 4,195,517
Elie Wurtman........... 165,656 13.0 5.11 15.00 4/1/06 1,638,338 2,649,918 3,995,749
- ------------
(1) In connection with Mr. Sela's resignation as Chief Executive Officer and President effective April 1, 2000,
options to purchase 136,666 shares granted to him vested.
OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for the named executive
offices with respect to option exercises during 1999 and the value as of
December 31, 1999 of unexercised in-the-money options held by each of the
named executive officers.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES YEAR END (#) YEAR-END
ACQUIRED VALUE EXERCISABLE ($)EXERCISABLE
NAME ON EXERCISE(#) REALIZABLE /UNEXERCISABLE /UNEXERCISABLE
- ---- -------------- ------------- -------------- ------------
Amos Sela (1)........... 0 0 0/273,332 0/5,641,572
Mark J. Hirschhorn..... 0 0 0/173,938 0/3,590,080
Noam Bardin............. 248,483 6,397,443 0/173,938 0/3,590,080
Shimmy Zimels........... 86,969 2,239,104 0/173,938 0/3,590,080
Elie Wurtman............ 0 0 0/165,656 0/3,419,140
- ------------
(1) In connection with Mr. Sela's resignation as Chief Executive Officer
and President effective April 1, 2000, options to purchase 136,666 shares
granted to him vested.
DIRECTOR COMPENSATION
The Company does not pay its directors cash compensation. Directors
are reimbursed for the expenses they incur in attending meetings of the
Board or Board committees. Each director who is not an employee of the
Company received options to purchase 24,848 shares of Class A Common Stock
at the completion of the Company's initial public offering on November 22,
1999, with an exercise price equal to fifteen dollars per share. Under the
Company's 1999 Directors' Plan, each non-employee director will be eligible
to receive on an annual basis options to purchase 10,000 shares of Class A
Common Stock with an exercise price equal to the fair market value on the
date of grant.
1999 DIRECTORS' PLAN
The purposes of the 1999 Directors' Plan are to enable the Company to
attract, maintain and motivate qualified directors and to enhance a
long-term mutuality of interest between the Company's directors and
stockholders of the Company's common stock by granting the Company's
directors options to purchase the Company's shares.
Under the Directors' Plan, on the first business day following each
annual meeting of the Company's stockholders during the term of the
Directors' Plan, each director who is not an employee of the Company will
be granted options to acquire 10,000 shares of the Company's Class A Common
Stock with an exercise price per share equal to the fair market value of a
share of the Company's Class A Common Stock on the date of grant. These
options will have a seven-year term and will become exercisable on the
first anniversary of the date of grant. In addition, each director who was
not an employee of the Company on the date of the completion of the
Company's initial public offering was granted options to acquire 24,848
shares of the Company's Class A Common Stock with an exercise price per
share equal to the initial public offering price. Each individual who
becomes a director and was not an employee of the Company following
completion of the initial public offering will be granted options to
acquire 24,848 shares of the Company's Class A Common Stock with an
exercise price per share equal to the fair market value on the date of
grant. These options will have a seven-year term and will be immediately
exercisable, but if exercised, subject to the 180-day lock-up to be imposed
on the Company's officers and directors. The maximum number of shares that
may be issued under the Directors' Plan is 600,000 shares of Class A Common
Stock. The plan will terminate December 31, 2009, unless sooner terminated
by the Company's stockholders.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs.
Hirschhorn, Wurtman, Bardin and Zimels, each with the following principal
terms:
Under the agreement, which is effective as of April 1, 1999 and will
terminate on March 31, 2002, the employee is entitled to receive a base
salary as stated below, increased on each January 1, commencing January 1,
2001, by an amount equal to his base salary then in effect, multiplied by
the applicable cost of living index during the prior year. The employee's
base salary, as adjusted for cost of living increases, may be further
increased at the option and in the discretion of the board of directors.
The employee shall be granted options to purchase shares of the
Company's Class A Common Stock as set forth below, under the Company's 1999
Stock Incentive Plan, at an exercise price of $5.11 per share. The
employee's options are exercisable in installments, as long as the employee
is employed by the Company on the applicable vesting date, and after an
option is exercisable, that option remains exercisable until the expiration
of seven years from the date of the agreement. If the employee is
terminated for any reason prior to September 30, 2000, following such date,
any unvested options will expire. If the employee is terminated for cause,
following such date, all options will expire. In the case of Messrs.
Hirschhorn, Bardin and Zimels, the options are exercisable in three equal
installments on each of April 1, 2000, 2001 and 2002. In the case of Mr.
Wurtman, 50% of the options are exercisable on April 1, 2000 and the
remaining options are exercisable in two equal installments on each of
April 1, 2001 and April 1, 2002.
The employee's options are immediately exercisable in full upon a
change of control. The employee's options, following any termination of the
employee's employment, other than for cause, remain exercisable for the
lesser of two years and the remaining term of his options. If the
employee's employment is terminated by the Company without cause
or by the employee for good reason, the employee is entitled to receive
previously earned but unpaid salary, vested benefits and a payment equal to
his base salary as in effect immediately prior to the termination date. If
the employee dies or is unable to perform his duties, he or his
representative or estate or beneficiary will be paid, in addition to any
previously earned but unpaid salary and vested benefits, 12 months' total
base salary reduced, in the case of disability, by any disability benefits
he receives.
The following table sets forth the position, base salary and number
of shares of Class A Common Stock represented by the options granted for
each of Messrs. Wurtman, Hirschhorn, Bardin and Zimels, pursuant to their
respective employment agreements:
OPTIONS TO
PURCHASE
SHARES OF CLASS A
POSITION BASE SALARY COMMON STOCK
Co-Chairman of the Company and
Elie C. Wurtman........ Chairman of the Board of Directors $ 180,000(1) 165,656
Vice President and Chief Financial
Mark J. Hirschhorn..... Officer 200,000 173,938
Interim Chief Executive Officer,
President, Vice President of
Technology and Chief
Noam Bardin............. Technology Officer 170,000 170,000
Shimmy Zimels........... Vice President of Operations $ 173,938 173,938
(1) Beginning on April 1, 2000, Mr. Wurtman's base salary was reduced to $90,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Executive compensation decisions in 1999 were made by RSL COM's
compensation committee, in the case of Mr. Wurtman and Mr. Davidson, and by
Mr. Wurtman and Mr. Davidson, with the Company's Board's approval, in the
case of Mr. Bardin. Since the closing of the Company's initial public
offering, the Company's compensation committee makes all compensation
decisions regarding the executive officers of the Company. The members of
the Compensation Committee for the fiscal year ended December 31, 1999 were
Yadin Kaufmann, Jacob Z. Schuster and Oakleigh Thorne. In 1999, no
interlocking relationship existed between the Company's Board of Directors
and the Board of Directors or compensation committee of any other company,
except that Messrs. Wurtman and Davidson were directors of Ambient, the
board of which makes all compensation decisions for Ambient. Mr. Davidson
was also Ambient's chief executive officer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for recommending to the
Board of Directors the overall executive compensation strategy of the
Company and for the ongoing monitoring of the compensation strategy's
implementation. In addition to recommending and reviewing the compensation
of the executive officers, it is the responsibility of the Compensation
Committee to recommend new incentive compensation plans and to implement
changes and improvements to existing compensation plans, including the 1999
Stock Incentive Plan, the 1999 Performance Incentive Plan, the 1999
Employee Stock Purchase Plan and the 1999 Directors' Plan. The Compensation
Committee makes its compensation determinations based upon its own analysis
of information it compiles and the business experience of its members.
Overall Policy
The Compensation Committee believes that the stability of the
Company's management team, as well as the Company's ability to continue to
incentivize management and to attract and retain highly qualified
executives for its expanding operations, will be a contributing factor to
the Company's continued growth and success. In order to promote
stability, growth and performance, and to attract new executives, the
Company's strategy is to compensate its executives with an overall package
that the Company believes is competitive with those offered by similarly
situated companies and which consists of (i) a stable base salary set at a
sufficiently high level to retain and motivate these officers but generally
targeted to be in the lower half of its peer group comparables, (ii) an
annual bonus linked to the Company's overall performance each year and to
the individual executive's performance each year and (iii) equity-related
compensation which aligns the financial interests of the Company's
executive officers with those of the Company's stockholders by promoting
stock ownership and stock performance through the grant of stock options
and stock appreciation rights, restricted stock and other equity and
equity-based interests under the Company's various plans.
Executive officers are also entitled to customary benefits generally
available to all employees of the Company, including group medical and life
insurance. Base salary, bonuses and benefits are paid by the Company and
its subsidiaries.
Federal Income Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the amount of compensation a publicly held
corporation may deduct as a business expense for Federal income tax
purposes. The limit, which applies to a company's chief executive officer
and the four other most highly compensated executive officers, is $1
million (the "Deductibility Limit"), subject to certain
exceptions. The exceptions include the general exclusion of
performance-based compensation from the calculation of an executive
officer's compensation for purposes of determining whether his or her
compensation exceeds the Deductibility Limit. The Compensation Committee
has determined that compensation payable to the executive officers should
generally meet the conditions required for full deductibility under section
162(m) of the Code. While the Company does not expect to pay its executive
officers compensation in excess of the Deductibility Limit, the
Compensation Committee also recognizes that in certain instances it may be
in the best interest of the Company to provide compensation that is not
fully deductible.
With respect to the Performance Incentive Plan described below,
because the Performance Incentive Plan was in existence prior to the
completion of the Company's initial public offering, the Deductibility
Limit generally will not apply to payments under such plan until the
Company's annual general meeting of stockholders to be held in 2001, the
first meeting of the Company's stockholders at which directors will be
elected after the close of the third calendar year following the calendar
year in which the initial public offering was closed.
Base Salary
The base salaries for the Named Executive Officers are based upon
employment agreements between the Company and such officers. See
"--Employment Agreements."
Annual Incentive Bonuses
Prior to the Company's initial public offering in November 1999, the
Board of Directors approved the 1999 Performance Incentive Plan established
by RSL Communications, Ltd. ("RSL COM"). The Company established the
Performance Incentive Plan to enable the Company and its subsidiaries to
attract, retain, motivate and reward the best qualified executive officers
and key employees by providing them with the opportunity to earn
competitive compensation directly linked to the Company's performance. The
Performance Incentive Plan is effective through and including the year
2002, unless extended or earlier terminated by the Board of Directors. As
part of the Performance Incentive Plan, the Compensation Committee may
determine that any bonus payable under the Performance Incentive Plan be
paid in cash, in shares of Class A Common Stock or in any combination
thereof, provided that at least 50% of such bonus is required to be paid in
cash. In addition, the Performance Incentive Plan permits a participant to
elect to defer payment of his or her bonus on terms and conditions
established by the Compensation Committee. No more than 400,000 shares of
Class A Common Stock may be issued under the Performance Incentive Plan.
Under the 1999 Performance Incentive Plan, bonuses may be payable if
the Company meets any one or more of the following performance criteria,
which are set annually by the Compensation Committee: (i) revenues; (ii)
operating income; (iii) gross profit margin; (iv) net income; (v) earnings
per share; (vi) maximum capital or marketing expenditures; (vii) targeted
levels of customers. For 1999, such performance criteria were set by RSL
COM.
Under the 1999 Performance Incentive Plan, RSL COM established that
bonus amounts are determined as follows: if 100% of the pre-established
targets are achieved, participants will generally be eligible to receive a
bonus equal to their base salary for such year. If 120% of such targets are
achieved, the bonus potentially payable to participants will generally
equal twice their base salary for such year and, if 80% of such targets are
achieved, the bonus potentially payable to participants will generally
equal 25% of their base salary for such year. To the extent the Company's
results exceed 80% of the targets but is less that 120% of the targets, the
amount of the bonus payable to participants will be adjusted
proportionately based on where such results fall within the ranges set
forth above. Any such bonus will consist of two components. Fifty percent
of the amount determined pursuant to the formula described above will be
payable if the targets are achieved. Up to an additional 50% of such amount
will be payable in the discretion of the Compensation Committee. In
addition, the Performance Incentive Plan permits the Compensation Committee
to grant discretionary bonuses to participants, notwithstanding that a
bonus would not otherwise be payable under the Performance Incentive Plan,
to recognize extraordinary individual performance.
With respect to 1999, the Company achieved 80% of the pre-established
targets set by RSL COM and, under the Performance Plan, $90,000 was awarded
to Mr. Elie Wurtman, $90,000 was awarded to Mr. Jacob Davidson, $115,000
was awarded to Mr. Amos Sela, $160,000 was awarded to Mr. Mark Hirschhorn,
$136,000 was awarded to Mr. Noam Bardin and $136,000 was awarded to Mr.
Shimmy Zimels. Pursuant to the terms of the Performance Incentive Plan, the
awards were paid in the current year, promptly following the completion of
the audit of the Company's 1999 financial statements. The Compensation
Committee determined that all such bonuses for 1999 were to be paid in
cash.
The Compensation Committee has engaged the services of a consultant
to review industry standards with respect to compensation packages and
criteria for bonus payments for the executive officers of the Company. Upon
completion of such review, an amended performance incentive plan will be
submitted to the Board of Directors for approval.
Long-Term Incentive Compensation
The Company reinforces the importance of producing satisfactory
returns to stockholders over the long term through the operation of the
1999 Stock Incentive Plan and the 1999 Directors' Plan. For a discussion
relating to the Directors' Plan, refer to page 15 of this Proxy Statement.
Grants of stock, stock options, stock unit awards and stock appreciation
rights under such plans provide executives with the opportunity to acquire
an equity interest in the Company and align the executive's interest with
that of the stockholders to create stockholder value as reflected in growth
in the market price of the Class A Common Stock.
1999 Stock Incentive Plan
The Board of Directors adopted the 1999 Stock Incentive Plan in
conjunction with the Company's initial public offering. The purposes of the
1999 Stock Incentive Plan are to foster and promote the long-term financial
success of the Company and materially increase stockholder value by (i)
motivating superior performance by means of performance-related incentives,
(ii) encouraging and providing for the acquisition of an ownership interest
in the Company by executive officers and other key employees and (iii)
enabling the Company to attract and retain the services of an outstanding
management team upon whose judgment, interest and special effort the
successful conduct of its operations is largely dependent.
Under the 1999 Stock Incentive Plan, the Compensation Committee is
authorized to grant options for up to 4,000,000 shares of Class A Common
Stock. This represented, upon completion of the initial public offering,
approximately 15% of the outstanding shares of the Company, on a fully
diluted basis. Options granted under the Stock Incentive Plan are to be
granted to certain officers of the Company and to other employees and
consultants of the Company. Directors who are non-employees of the Company
are prohibited from participating in the Stock Incentive Plan.
The 1999 Stock Incentive Plan is administered by the Compensation
Committee and provides for the grant of (i) incentive and non-incentive
stock options to purchase Class A Common Stock; (ii) stock appreciation
rights, which may be granted in tandem with or independently of stock
options; (iii) restricted stock and restricted units; (iv) incentive stock
and incentive units; (v) deferred stock units; and (vi) stock in lieu of
cash. The maximum number of shares for which options or stock appreciation
rights may be granted to any one participant in a calendar year is 600,000.
As of December 31, 1999, the Company has granted options to acquire an
aggregate of 2,591,205 shares of Class A Common Stock.
Chief Executive Officer's Fiscal 1999 Compensation
Mr. Amos Sela, the Company's chief executive officer through April 1,
2000, led the Company to a successful year in 1999. The Company completed
several significant alliances with strategic partners and completed a
successful initial public offering of its Class A Common Stock. Under the
terms of his employment agreement with the Company, which was terminated as
of April 1, 2000, Mr. Sela received an aggregate annual base salary of
$230,000, and his participation in the Performance Incentive Plan resulted
in bonus compensation for 1999 in the amount of $115,000.
Submitted By:
Yadin Kaufmann
Jacob Schuster
Oakleigh Thorne
STOCK PERFORMANCE CHART
The following chart compares the cumulative total stockholder return
on the Company's Class A Common Stock from the date of the Company's
initial public offering (November 22, 1999) through March 31, 2000 with the
cumulative total return on The Nasdaq Stock Market (U.S.) Index and the
Nasdaq Telecommunications Index. For purposes of the chart, it is assumed
that the value of the investment in the Company's Class A Common Stock and
each index was $100 on November 22, 1999.
COMPARISON OF 4 MONTH CUMULATIVE TOTAL RETURN AMONG DELTATHREE.COM, INC.,
[GRAPHIC OMITTED]
The Nasdaq Stock Market (U.S.) Index and The Nasdaq Telecommunications Index
CUMULATIVE TOTAL RETURN
------------------------------------------------------
11/22/99 11/99 12/99 1/00 2/00 3/00
------------------------------------------------------
deltathree.com, Inc. $100.00 $195.42 $171.67 $293.33 $279.17 $139.59
Nasdaq Stock Market (U.S.) 100.00 98.35 119.96 116.16 134.94 134.79
Nasdaq Telecommunications Market 100.00 94.92 117.49 114.25 129.64 127.56
deltathree.com, Inc. Closing Sale Price 15.00 29.31 25.75 44.00 41.88 20.94
- ------------------------
*As quoted on The Nasdaq National Market System for the last trading day of
the period.
CERTAIN TRANSACTIONS
RSL COM
Since RSL COM's acquisition of a controlling interest in the Company,
RSL COM has funded the Company's cash requirements through inter-company
loans bearing interest at the rate of 14% per annum. As of December 31,
1999, the Company owed approximately $14.8 million (principal and accrued
interest) to RSL COM. The inter-company loans are due on demand after
October 1, 2000. Prior to the closing of the Company's initial public
offering, RSL COM made available to the Company a $10 million line of
credit (in addition to the existing $14.8 million), bearing interest at the
rate of 14% per annum, due on demand after November 1, 2000. To date, the
Company has not drawn on the RSL COM line of credit. The Company has agreed
with RSL COM that it will not incur any debt other than inter-company debt
without RSL COM's written consent so long as the Company is a restricted
subsidiary.
Since the Company's initial public offering, RSL COM has been
the controlling stockholder of the Company and owns 100% of the outstanding
Class B common stock, which represents approximately 95.5% of the combined
voting power of all of the Company's outstanding capital stock and
approximately 68.1% of the economic interest in the Company.
For so long as RSL COM continues to beneficially own shares of
capital stock representing more than 50% of the combined voting power of
the Company's outstanding capital stock, it will be able to approve any
matter submitted to a vote of the Company's stockholders, including, among
other things, the election of all members of the board of directors. In
addition, the non-competition provision in the services agreement with RSL
COM terminates on September 3, 2001. See "--Services Agreement." Therefore,
various conflicts of interest could arise between the Company and RSL COM.
INTERCOMPANY COMPLIANCE AGREEMENT
The Company has entered into an agreement with RSL COM under which
the Company has agreed not to take any action which would cause RSL COM to
default under its indentures. In order to help RSL COM comply with its
indentures, the Company has also agreed to obtain RSL COM's written consent
before incurring any debt and to provide RSL COM with information that it
requires for its reporting obligation under its indentures and under the
securities laws.
SERVICES AGREEMENT
The Company entered into a services agreement with RSL COM on July
23, 1997, which was subsequently amended and restated as of September 3,
1999. As amended and restated, the agreement extends to September 2, 2004,
and is automatically extended for additional one-year terms unless
terminated by RSL COM or the Company. The services agreement may be
terminated by the Company or RSL COM for cause, by the non-bankrupt party
in the event of bankruptcy of the other party or by RSL COM should RSL COM
and/or its affiliates hold less than 50% of the voting control of the
Company's outstanding Common Stock.
Services and Facilities
Under the agreement, if the Company requires equipment space or
limited office space at any location where RSL COM maintains an office or
equipment, RSL COM is required to use its reasonable best efforts to
provide the Company such space. However, RSL COM is not obligated to
provide the Company with office space for more than that required by two
full-time employees, and RSL COM is entitled to vacate space without it
being deemed a breach of the agreement. The Company is required to pay RSL
COM its proportionate share of all lease payments associated with such
office or equipment space. In addition, RSL COM is required to make
reasonable efforts to assist the Company in obtaining Internet, frame relay
and dedicated lines from third parties in countries where RSL COM has
communication switches colocated with the Company's network servers at the
same price that RSL COM pays such third parties. As of September 30, 1999,
the Company colocated offices in five locations and equipment in five
locations. RSL COM is also required to use its reasonable efforts to
purchase dedicated bandwidth connectivity on the Company's behalf from
third party bandwidth suppliers at the same price as RSL COM pays such
third party suppliers. As a result, the Company realizes certain bulk
pricing benefits received by RSL COM.
Under the services agreement, RSL COM is also required to provide the
Company with the following services:
o domestic inbound traffic termination--RSL COM is required to
terminate the Company's domestic inbound traffic through RSL
COM's switches in countries where the Company's servers and RSL
COM's switches are co-located. This termination service is
provided to the Company at the then prevailing fair market
rates for such service.
o international outbound termination--RSL COM is required to
terminate the Company's international outbound telephone
traffic in each country where the Company's servers and RSL
COM's switches are co-located and RSL COM has contracted to
receive such services in the ordinary course. This termination
service is provided to the Company at the then prevailing fair
market rates for such service.
o traffic origination--RSL COM is required to use its best
efforts to assist the Company in obtaining services, including
toll-free services, from local third parties which will provide
the Company's users with the ability to access the Company's
network at the same rates offered by such third parties to RSL
COM in countries where the Company's servers and RSL COM's
switches are colocated.
o use of RSL COM switches--RSL COM is required to provide the
Company with use of RSL's switches to connect the Company's
carrier customers in each location where the Company's servers
and RSL COM's switches are colocated. The termination rate is
$0.01 per minute. The Company is charged for a minimum usage of
100,000 minutes per month per switch per connection, whether or
not such minutes are used. In addition, RSL COM provides the
Company's carrier customers billing and other similar
customer-related services at a charge of $0.01 per minute of
carrier traffic usage. Based on switches currently used, RSL
COM charges the Company a minimum of $7,000 per month.
o use of prepaid calling platform--RSL COM is required to
provide the Company with access to, and use of, RSL COM's
prepaid calling platform in each location where the Company's
servers and RSL COM's switches are co-located. If the Company
elects to use RSL COM's prepaid calling platform, the Company
will be charged for a minimum of 100,000 minutes per month. The
fee for using RSL COM's prepaid calling platform is $0.01 per
minute of traffic usage. In addition, RSL COM is required to
provide the Company with additional customer-related services
for the Company's prepaid calling services at a rate of $0.015
per minute of traffic usage. To date, the Company has not
elected to purchase such services.
In the event any of RSL COM's current or future strategic partner
objects to RSL COM providing the Company with any of the foregoing
services, RSL COM can cease providing the service to the Company. A
strategic partner is a minority shareholder in RSL COM or any RSL COM
subsidiary owning more than 10% of the common stock of such entity.
However, RSL COM is required to use reasonable efforts to encourage its
strategic partners not to object. To date, no strategic partner has
objected to RSL COM providing the Company with these services.
Under the services agreement, the Company is required to provide
Internet telephony services and facilities to RSL COM necessary to route
RSL COM's international telecommunications traffic between all originations
and destinations the Company services. The agreement provides that the
Company is required to use, at RSL COM's request, up to 50% of the
Company's network capacity to route RSL COM's international
telecommunications traffic between the Company's origination and
termination points. For a period of two years from the date of the closing
of the Company's initial public offering, RSL COM has committed to purchase
a minimum of 50 million minutes per annum of voice and fax transmission
services from the Company. If RSL COM fails in this commitment RSL COM will
be required to pay the Company a shortfall charge of 10% of the average
daily weighted coverage price per minute charged by the Company to RSL COM
in the last three months of each annual period. If the Company is no longer
a subsidiary of RSL COM, RSL COM's minimum purchase obligation will cease.
These services are provided to RSL COM at the then prevailing fair market
rates. However, the services agreement does not specify procedures for
establishing such rates.
Marketing
Under the services agreement, the Company and RSL COM will engage in
joint marketing. Each of the Company and RSL COM is required to place, in a
prominent location, a link on its home page Web site to the other's home
page Web site. The Company and RSL COM will also cross-sell each other's
products and services, including through promotional materials and customer
service representatives and other additional promotional efforts. However,
neither the Company nor RSL COM are required to market or promote a product
or service of the other if such product or service competes with the other
party's product or service.
Non-Competition
Under the services agreement between the Company and RSL COM, RSL COM
is prohibited from competing with the Company in providing Internet
telephony services as described in the services agreement, provided that
the Company provides RSL COM with any requested Internet telephony services
promptly and with quality assurance. However, this non-competition
provision terminates on September 3, 2001 and the scope of such provision
is subject to the following limitations:
o RSL COM and its subsidiaries may acquire up to 20% in an entity
providing Internet telephony services;
o RSL COM and its subsidiaries may be stockholders in entities
providing Internet telephony services, provided that Internet
telephony services are ancillary to the business of that entity;
o the non-competition provision does not apply to RSL COM's
subsidiaries that become publicly traded companies; and
o Internet telephony services under the non-competition provision are
limited to (1) phone to phone services marketed as IP to the
general public, including both individuals and businesses and (2)
the following Web-based enhanced communication services:
PC-to-phone, D3 box, Click IT, Global Roaming, IP-initiated
conference calls, Phone-to-PC, D3 Fax, information services and
white boarding.
CARRIER TRANSMISSION SERVICES
RSL COM purchases carrier transmission services from the Company. RSL
COM accounted for 37.6%, 69.1% and 67.2% of the Company's revenues in the
years 1997, 1998 and 1999, respectively. Rates are established based on
market rates. The balance of the Company's revenues in these periods were
derived from services provided to non-affiliates.
MANAGEMENT AGREEMENT
The Company has entered into an agreement with RSL COM pursuant to
which RSL COM has agreed from the time the Company completed its initial
public offering until such time as the Company is no longer a subsidiary of
RSL COM, RSL COM will provide to the Company the following services:
o international legal services
o financial services, including assistance in accounting,
financial reporting, budgeting, business controls, tax and
treasury related matters
o corporate finance and mergers and acquisition advisory services
o assistance with network planning
o product development
o assistance with strategic planning
o availability of RSL COM management
The Company has agreed to pay to RSL COM $20,000 per month for these
services, subject to adjustments for inflation.
RELEASE AND INDEMNIFICATION AGREEMENT
The Company has entered into an agreement with RSL COM, pursuant to
which the Company and RSL COM have agreed to release each other from any
claims existing or arising from acts or events occurring or failing to
occur prior to the date of the agreement, other than those arising from
this agreement, the services agreement, the registration rights agreement,
the management agreement, the intercompany credit agreement, the compliance
agreement and other commercial transactions between the Company and RSL
COM. Further, the Company and RSL COM have agreed to indemnify each other
for breaches of the existing agreements described above.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for
stockholder action at subsequent annual meetings of the Company consistent
with Rule 14a-8 promulgated under the Exchange Act, which in certain
circumstances may require the inclusion of qualifying proposals in the
Company's Proxy Statement. For such proposals to be considered for
inclusion in the Proxy Statement and proxy relating to the Company's 2001
Annual Meeting of Stockholders, all applicable requirements of Rule 14a-8
must be satisfied and such proposals must be received by the Company no
later than December 29, 2000. Such proposals should be directed to the
Company at 430 Park Avenue, Suite 500, New York, New York 10022.
Except in the case of proposals made in accordance with Rule 14a-8,
the Company's By-laws require that stockholders desiring to bring any
business before the Company's 2001 Annual Meeting of Stockholders deliver
written notice thereof to the Company not less than 90 days nor more than
120 days prior to such meeting and comply with all other applicable
requirements of the By-laws. However, in the event that the Company's 2001
Annual Meeting is called for a date that is not within 30 days before or
after the date of this year's annual meeting, the notice must be received
by the close of business on the 10th day following the public disclosure of
the date of the annual meeting or the mailing of notice of the annual
meeting.
OTHER MATTERS
The Board knows of no matters other than those described herein that
will be presented for consideration at the Meeting and does not intend to
bring any other matters before the Meeting. However, should any other
matters properly come before the Meeting or any adjournment or postponement
thereof, it is the intention of the persons named in the accompanying proxy
card to vote in accordance with their best judgment in the interests of the
Company.
MISCELLANEOUS
All costs incurred in the solicitation of proxies will be borne by
the Company. In addition to the solicitation by mail, officers and
employees of the Company may solicit proxies by mail, facsimile, telephone
or in person, without additional compensation. The Company may also make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of Common Stock held of record by such persons, and the Company may
reimburse such brokerage houses and other custodians, nominees and
fiduciaries for their out-of-pocket expenses incurred in connection
therewith.
ADDITIONAL COPIES OF THE COMPANY'S ANNUAL REPORT WILL BE FURNISHED AT
NO CHARGE TO EACH PERSON TO WHOM A PROXY STATEMENT IS DELIVERED UPON
RECEIPT OF A WRITTEN OR ORAL REQUEST OF SUCH PERSON ADDRESSED TO
DELTATHREE.COM, INC 430 PARK AVENUE, SUITE 500,NEW YORK, NEW YORK 10022
By Order of the Board of Directors,
/s/ Marc M. Tobin
Marc M. Tobin
Secretary
New York, New York
May 18, 2000
PROXY
DELTATHREE.COM, INC.
430 PARK AVENUE, SUITE 500, NEW YORK, NEW YORK 10022
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING ON
JUNE 13, 2000
The undersigned hereby appoints Mark J. Hirschhorn and Marc Tobin,
each of them with full power of substitution and resubstitution, as proxies
to represent the undersigned at the Annual Meeting of Stockholders of
deltathree.com, Inc. (the "Company") to be held on Tuesday, June 13, 2000
at 10:00 a.m., local time, at The Peninsula Hotel, located at 700 Fifth
Avenue, New York, New York 10019, and at any adjournment or postponement
thereof and thereat to vote all of the shares of the common stock which the
undersigned would be entitled to vote, with all the powers the undersigned
would possess if personally present. The Board of Directors recommends that
you vote FOR the following proposals.
You are encouraged to specify your choice by marking the appropriate
box but you need not mark any box if you wish to vote in accordance with
the Board of Directors' recommendations. The proxies cannot vote your
shares unless you sign and return this card.
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no specification is given, this
Proxy will be voted (i) FOR the election of each of the nominees for
director; (ii) FOR the ratification of the appointment by the Board of
Directors of the independent auditors; and (iii) at the discretion of the
proxy holders with regard to any other matter that may properly come before
the Meeting or any adjournment or postponement thereof.
1. Election of Directors
Nominees: Elie C. Wurtman
Avery S. Fischer
Itzhak Fisher
Robert R. Grusky
Yadin Kaufmann
Jacob Z. Schuster
Donald R. Shassian
Nir Tarlovsky
Oakleigh Thorne
[ ] FOR ALL NOMINEES
[ ] WITHHELD FROM ALL NOMINEES
[ ] --------------------------------------
For all nominees except as noted above
(Please date and sign on reverse side and return promptly.)
2. To ratify the appointment of Brightman Almagor & Co., a member firm
of Deloitte & Touche Tohmatsu, as the independent auditors of the
Company for the fiscal year ending December 31, 2000.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
(Please date and sign on reverse side and return promptly.)
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign name(s) exactly as appearing hereon. When signing as attorney,
executor, administrator or other fiduciary, please give your full title as
such. Joint owners should each sign personally. If a corporation, please
sign in full corporate name by an authorized officer. If a partnership,
please sign in partnership name by an authorized person.
SIGNATURE: ___________________DATE: _____________________
SIGNATURE: ___________________DATE: _____________________