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:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DELTATHREE, 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
As filed with the Securities and Exchange Commission on April 26, 2002
deltathree, Inc.
75 Broad Street
31st Floor
New York, New York 10004
April , 2002
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Meeting") of deltathree, Inc. (the "Company") to be held
at The Regent Wall Street, 55 Wall Street, New York, New York 10005, on
June 27, 2002, 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
describes the business to be transacted at the Meeting, which includes (i)
the election of all eight 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, as independent auditors for the year
ending December 31, 2002, (iii) the approval of the amended and restated
certificate of incorporation of the Company, which amends the authorized
capital stock of the Company to decrease the authorized number of shares of
Class A Common Stock from 200,000,000 to 75,000,000 and the authorized
number of shares of Class B Common Stock from 200,000,000 to 1,000, and
(iv) the transaction of any other business that may properly be brought
before the Meeting or any adjournment or postponement thereof.
Our 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 us
and our stockholders and unanimously recommends a vote "FOR" each of the
matters. Accordingly, we urge 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 April
29, 2002 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 our offices, 75 Broad Street, 31st
Floor, New York, New York 10004, at least ten days prior to the Meeting and
will also be available for inspection at the Meeting.
Our directors and officers will be present to help host the
Meeting and to respond to any questions that our 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/ Noam Bardin
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Noam Bardin
Chairman of the Board,
Chief Executive Officer and President
deltathree, Inc.
75 Broad Street
31st Floor
New York, New York 10004
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 27, 2002
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
(the "Meeting") of deltathree, Inc. (the "Company") will be held at The
Regent Wall Street, 55 Wall Street, New York, New York 10005, on June 27,
2002, 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 eight directors for a one-year term expiring at our
Annual Meeting of Stockholders in 2003;
2. The ratification of the appointment by the Board of Directors of
Brightman Almagor & Co., a member firm of Deloitte & Touche, as indepen-
dent auditors for the year ending December 31, 2002;
3. The approval of the amended and restated certificate of incorporation of
the Company, which amends the authorized capital stock of the Company to
decrease the authorized number of shares of Class A Common Stock from
200,000,000 to 75,000,000 and the authorized number of shares of Class B
Common Stock from 200,000,000 to 1,000; and
4. Such other matters as may properly come before the Meeting or any
adjournment or postponement thereof.
The close of business on April 29, 2002 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 our offices at 75 Broad Street, 31st Floor, New York,
New York 10004.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
A copy of our Annual Report for 2001, which includes our 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/ Paul C. White
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Paul C. White
Secretary
New York, New York
April , 2002
deltathree, Inc.
75 Broad Street
31st Floor
New York, New York 10004
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 27, 2002
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SOLICITATION AND VOTING OF PROXIES
This Proxy Statement and accompanying proxy materials are being
first mailed on or about May , 2002 to stockholders of deltathree, Inc.
(the "Company") at the direction of our Board of Directors (the "Board") to
solicit proxies in connection with the 2002 Annual Meeting of Stockholders
(the "Meeting"). The Meeting will be held at The Regent Wall Street, 55
Wall Street, New York, New York, 10005, on June 27, 2002, 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
eight persons named under "Proposal I-Election of Directors" as nominees
for election as our directors for a one-year term expiring at our annual
meeting of stockholders in 2003, (ii) FOR the ratification of the
appointment by the Board of the independent auditors named under "Proposal
II-Ratification of Appointment of Independent Auditors", (iii) FOR the
approval of the amended and restated certificate of incorporation as
described under "Proposal III-Approval of Amended and Restated Certificate
of Incorporation of the Company to Amend the Authorized Capital Stock of
the Company" and (iv) 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. The Board has
designated Paul C. White and Shimmy Zimels as proxies for the solicitation
on behalf of the Board of proxies of our stockholders to vote on all
matters as may properly come before the Meeting and any adjournment of the
Meeting.
A proxy may be revoked at any time by providing written notice of
such revocation to deltathree, Inc., 75 Broad Street, 31st Floor, New York,
New York 10004, 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 April 29, 2002 is the record date (the
"Record Date") for determining the stockholders entitled to vote at the
Meeting. At the close of business on April 29, 2002, we had issued and
outstanding approximately shares of our Class A Common Stock, par value
$0.001 (the "Common Stock"), held by approximately holders of record. No
shares of our Class B Common Stock remain outstanding. The Common Stock
constitutes the only outstanding class of voting securities 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 Common Stock entitles the holder thereof to one vote
with respect to each proposal to be voted on at the Meeting. Each proposal
scheduled to be voted on at the Meeting requires a majority of the
outstanding shares entitled to vote on such proposal to be voted in favor
of the proposal in order for the proposal to be passed.
On June 28, 2001, RSL Communications Ltd. ("RSL COM"), our former
majority stockholder and sole owner of our super-voting Class B Common
Stock, par value $0.001 (the "Class B Common Stock"), entered into a share
purchase agreement (the "RSL Purchase Agreement") with Atarey Hasharon
Chevra Lepituach Vehashkaot Benadlan (1991) Ltd., an Israeli company
("Atarey"). Under the RSL Purchase Agreement, among other things, Atarey
purchased, on June 29, 2001, the 19,569,459 shares of Class B Common Stock
owned by RSL COM at a purchase price of $0.80 per share. Pursuant to our
Amended and Restated Certificate of Incorporation, the shares of Class B
Common Stock were automatically converted into shares of our Common Stock
immediately upon transfer to Atarey thus leaving no shares of Class B
Common Stock outstanding. In connection with the RSL Purchase Agreement,
we, RSL COM and Atarey entered into a Novation and Amendment Agreement,
dated as of June 28, 2001 (the "RSL Novation Agreement"), pursuant to
which, among other things, RSL COM, with our consent, assigned its rights
under the Registration Rights Agreement, dated as of September 1, 1999,
between RSL COM and us, as amended by the RSL Novation Agreement, to
Atarey.
On July 3, 2001, CNET Investments, Inc., a Delaware corporation
("CNET"), entered into a share purchase agreement with Atarey (the "CNET
Purchase Agreement"). Under the CNET Purchase Agreement, among other
things, Atarey purchased, on July 6, 2001, the 1,085,943 shares of Class A
Common Stock owned by CNET on substantially the same terms as set forth in
the RSL Purchase Agreement. Also in connection with the CNET Purchase
Agreement, we, RSL COM, CNET and Atarey entered into a Novation and
Amendment Agreement, dated as of July 3, 2001 (the "CNET Novation
Agreement"), pursuant to which, among other things, CNET, with our and RSL
COM's consent, assigned its rights under the investor rights agreement,
dated as of October 20, 1999, by and among the Company, RSL COM and CNET,
as amended by the CNET Novation Agreement, to Atarey.
All funds used by Atarey to purchase the shares from RSL COM and
CNET were obtained from the working capital of Atarey and borrowed pursuant
to a general purpose credit line maintained by Atarey with Bank Hapoalim of
Israel. As a result of these transactions, Atarey beneficially owns
approximately 71% of our outstanding Common Stock. Therefore, Atarey will
control the outcome of any matter submitted to a vote of our stockholders,
including the election of the directors at the Meeting.
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 us on a proxy form in
accordance with industry practice or has otherwise advised us 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,
we intend to treat broker non-votes in the manner described below.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDER
The following table sets forth information with respect to the
beneficial ownership of shares of our Common Stock as of March 27, 2002 by:
o each person who we know owns beneficially more than 5% of our
Common Stock;
o each of our directors individually;
o each of our named executive officers individually; and
o all of our executive officers and directors as a group.
Unless otherwise indicated, to our 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 27, 2002 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 any other person listed.
Number Percentage(1)
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Shares of deltathree
Class A Common
Stock Beneficially Owned
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Principal Stockholder:
Atarey Hasharon Chevra Lepituach Vehashkaot
Benadlan (1991) Ltd.............................. 20,655,402 70.9%
7 Giborey Israel St., P.O. Box 8468.
South Netanya Industrial Zone 42504, Israel.
Executive Officers and Directors:
Noam Bardin(2)(3).................................. 757,421 2.6%
Shimmy Zimels(2)(4)................................ 473,407 1.6%
Paul C. White(2)(5)................................ 160,000 *
Lenny Roth (2)(5)(6)............................... 24,848 *
Ehud Erez (2)(5)(7)................................ 24,848 *
Amir Gera (2)(5)................................... 24,848 *
Issakhar Hacmun (2)(5)............................. 24,848 *
Elie Housman (2)(5)................................ 24,848 *
Joshua Maor (2)(8)................................. 40,999 *
Lior Samuelson (2)(5).............................. 24,848 *
All Directors and Executive Officers as a group
(10 persons)(9).................................. 1,556,067 5.4%
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* Less than 1%.
(1) Percentage of beneficial ownership is based on 29,143,206 shares of
Common Stock outstanding as of March 27, 2002.
(2) The address for the director or executive officer listed is
c/o the Company.
(3) Includes (a) 253,483 shares of Common Stock and (b) options to purchase
503,938 shares of Common Stock.
(4) Includes (a) 86,469 shares of Common Stock and (b) options to purchase
383,938 shares of Common Stock.
(5) Represents options to purchase shares of Common Stock.
(6) Effective April 1, 2002, Mr. Roth is no longer a director.
(7) Excludes the 20,655,402 shares of Common Stock owned by Atarey.
(8) Includes (a) 16,151 shares of Common Stock and (b) options to purchase
24,848 shares of Common Stock.
(9) Includes options to purchase 1,196,964 shares of Common Stock.
CHANGE IN CONTROL
Pursuant to the RSL Purchase Agreement, Atarey purchased all of
the shares of our Class B Common Stock owned by RSL COM, which represented
majority ownership of the Company, for $15,655,567. Pursuant to the CNET
Purchase Agreement, Atarey purchased 1,085,943 shares of our Common Stock
from CNET for $868,754. All funds used to purchase the shares from RSL COM
and CNET were obtained from the working capital of Atarey and borrowed
pursuant to a general purpose credit line maintained by Atarey with Bank
Hapoalim of Israel. As a result of these transactions, Atarey now
beneficially owns approximately 71% of our outstanding Common Stock.
LEGAL PROCEEDINGS
We are not aware of any legal proceedings in which any of our
directors or officers or any owner of record or beneficial owner of more
than five percent of any class of our voting securities, or any affiliate
of any such director or officer or any of our affiliates or security
holders, is a party adverse to us or has a material interest adverse to us.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Our amended and restated certificate of incorporation provides
that the number of members of our Board shall be not less than three and
not more than thirteen. There are currently eight directors on the Board.
At each annual meeting of stockholders, directors will be elected to hold
office for a term of one year and until their respective successors are
elected and qualified. All of the officers identified below under
"Executive Officers" serve at the discretion of our Board.
The Board had 11 regular and no special meetings during the fiscal
year ended December 31, 2001. During the fiscal year ended December 31,
2001, each member of the Board participated in at least 75% of all Board
and applicable committee meetings held during the period for which he or
she was a director. The Board has established an executive committee, a
compensation committee and an audit committee to devote attention to
specific subjects and to assist the Board in the discharge of its
responsibilities. The functions of these committees and their current
members are set forth below.
The Executive Committee is empowered to act on any matter except
those matters specifically reserved to the full Board by applicable law.
The Executive Committee had one meeting during 2001. From January 1, 2001
to April 26, 2001, Itzkhak Fisher, Nir Tarlovsky and Noam Bardin served as
the members of the Executive Committee. The Board expects to appoint new
members to the Executive Committee.
The Compensation Committee is responsible for evaluating our
compensation policies, determining our executive compensation policies and
guidelines and administering our stock option and compensation plans. The
Compensation Committee had two meetings during 2001. From January 1, 2001
to April 26, 2001, Jacob Z. Schuster and Yadin Kaufmann served as the
members of the Compensation Committee. Amir Gera and Joshua Maor are the
current members of the Compensation Committee.
In June 2000, the Board adopted a new charter for the Audit
Committee. The charter contains the Audit Committee's mandate, membership
requirements and duties and obligations. The Audit Committee reviewed the
charter in March 2001 to determine its adequacy and will review the charter
annually and, if appropriate, recommend revisions to the Board. Under the
charter, the Audit Committee recommends to the Board the appointment of the
firm selected to serve as our independent auditors and our subsidiaries and
monitors the performance of such firm; reviews and approves the scope of
the annual audit and evaluates with the independent auditors our annual
audit and annual financial statements; reviews with management the status
of internal accounting controls; evaluates issues having a potential
financial impact on us which may be brought to the Audit Committee's
attention by management, the independent auditors or the Board; evaluates
our public financial reporting documents; reviews the non-audit services to
be performed by the independent auditors, if any; and considers the effect
of such performance on the auditor's independence. During the year ended
December 31, 2001, the Board examined the composition of the Audit
Committee in light of the adoption by The Nasdaq National Market of new
rules governing audit committees. Based upon this examination, the Board
confirmed that all members of the Audit Committee during the year ended
December 31, 2001 were "independent" within the meaning of Nasdaq's new
rules. A copy of the Audit Committee's charter is included as Appendix B to
this Proxy Statement. The Audit Committee had five meetings during 2001.
From January 1, 2001 to April 26, 2001, Jacob Z. Schuster, Eric Zinterhofer
and Robert R. Grusky served as the members of the Audit Committee. From May
2, 2001 through June 29, 2001, Keith Maib, James McDermott and Hilary
Kramer served as members of the Audit Committee. Ehud Erez, Elie Housman
and Lior Samuelson are the current members of the Audit Committee.
Audit Committee Report
During 2001, the Audit Committee was comprised of three directors.
In fiscal 2000, the Board of Directors approved and adopted a written
charter which sets forth the Audit Committee's duties and responsibilities
and reflects new Securities and Exchange Commission regulations and Nasdaq
National Market rules.
During the past year, the Audit Committee has, among other
activities, reviewed and discussed our audited financial statements for the
fiscal year ended December 31, 2001 with management and with our
independent auditors, Brightman Almagor & Co., a member firm of Deloitte &
Touche. The Audit Committee has discussed with Brightman Almagor & Co. the
matters required to be discussed by American Institute of Certified Public
Accountants Auditing Standards Board Statement on Auditing Standards No. 61
("Communications with Audit Committees") relating to the conduct of the
audit. The Audit Committee has received written disclosures and a letter
from Brightman Almagor & Co. including disclosures required by the
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and has discussed with Brightman Almagor & Co. their
independence. The Audit Committee has considered the compatibility of the
provision of non-audit services with maintaining the auditor's
independence.
Based on the Audit Committee's review of the audited financial
statements and the review and discussions described in the foregoing
paragraph, the Audit Committee recommended to the Board of Directors that
the audited financial statements for the fiscal year ended December 31,
2001 be included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 for filing with the Securities and Exchange
Commission.
The Audit Committee
Ehud Erez
Elie Housman
Lior Samuelson
The Audit Committee Report in this Proxy Statement shall not be
deemed filed or incorporated by reference into any other filings by us
under the Securities Act of 1933 or the Securities Exchange Act of 1934
except to the extent that we specifically incorporate this information by
reference.
PROPOSAL I
ELECTION OF DIRECTORS
General
At the Meeting, eight directors will be elected to the Board to
serve until our next annual meeting of stockholders.
Our 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 is now serving as director on our
Board.
On April 26, 2001, RSL COM, as our majority stockholder, took
action by written consent to reduce the size of the Board to five members
and to appoint a new Board, including the following individuals: Noam
Bardin, Shimmy Zimels, Keith Maib, Hilary Kramer and James McDermott. The
new Board replaced a Board composed primarily of former RSL COM executives
and affiliates, including the following individuals: Noam Bardin, Paul
Domorski, Avery Fischer, Itzhak Fisher, Robert Grusky, Yadin Kaufmann,
Jacob Schuster, Nir Tarlovsky, Oakleigh Thorne and Eric Zinterhofer. On
June 26, 2001, by action of the Board, following the request of Atarey, the
number of persons comprising the Board was increased from five persons to
six persons. As a result of this action, and the resignation of Hilary
Kramer and James McDermott as directors on June 29, 2001, there then
existed three vacancies on the Board. Such vacancies were filled by Lyon
Lenny Roth, Joshua Maor and Amir Gera, representatives designated by Atarey
and appointed by the remaining members of the Board. In addition, also by
action of the Board, the number of persons comprising the Board was
decreased from six persons to five persons on July 16, 2001, ten days after
we mailed an Information Statement to all of our stockholders in compliance
with Section 14(f) of the Securities Exchange Act of 1934and Rule 14f-1
thereunder. At that time, the resignation of Keith Maib become effective,
and the Board consisted of Noam Bardin, Shimmy Zimels, Lyon Lenny Roth,
Joshua Maor and Amir Gera.
In July and August 2001, the Board took action to increase the
size of the Board and appointed Issakhar Hacmun, Elie Housman and Lior
Samuelson to fill the vacancies on the Board. In February 2002, also by
action of the Board, the number of persons comprising the Board was
increased to nine persons, and Ehud Erez was appointed to fill the vacancy.
On April 1, 2002, Mr. Roth resigned from the Board, and the Board appointed
Mr. Bardin to replace Mr. Roth as Chairman of the Board.
Under our 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 eight 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 recommends a vote in favor of the election of the eight nominees to
the Board.
Nominees for Director
Set forth below is certain information regarding each nominee as
of April , 2002, including such individual's age and principal occupation,
a brief account of such individual's business experience during at least
the last five years and other directorships currently held.
Noam Bardin, 32 - Chairman of the Board, Chief Executive Officer
and President. Mr. Bardin co-founded deltathree and has served as Chief
Executive Officer and President since 2000. Mr Bardin has served as
Chairman of the Board since April 2001. Mr. Bardin served as Vice President
of Technology and Chief Technology Officer of deltathree since June 1997
before being named President and Chief Executive Officer in April 2000. Mr.
Bardin served as Global Network Director from November 1996 to May 1997.
Prior to founding deltathree, Mr. Bardin worked with Ambient Corporation.
Mr. Bardin graduated from Hebrew University with a degree in Economics.
Ehud Erez, 46 - Director. Mr. Erez has served as a director of
deltathree since February 2002. Mr. Erez has served as the Chief Executive
Officer of Atarey and President and Chief Financial Officer of El-Ad Group
(Canada) since July 2001. Prior to July 2001, Mr. Erez was Auditor,
Accountant and Partner of several accounting firms, including KPMG and
Arthur Andersen. Prior to January 1985 Mr. Erez was a Revenue
Inspector/Auditor for the Treasury Department in Jerusalem. Mr. Erez was an
active member of the Auditing Standards Board of the Institute of Certified
Public Accountants. He is a graduate of Hebrew University with a BA in
Economics and Accounting and holds a CPA.
Amir Gera, 41 - Director. Mr. Gera has served as a director of
deltathree since June 2001. Since January 2002, Mr. Gera has served as the
Chief Executive Officer of Green Venture Capital Ltd., an investment
holding company which engages primarily in acquiring holdings in venture
capital funds. In addition, Mr. Gera has served as the Chief Executive
Officer of Commutech Holding & Investments Ltd since March 2001. From 1993
through 2000, Mr. Gera was the Assistant Director General of Emet Neveh
Savion Ltd., which owns and manages real estate assets.
Issakhar (Issy) Hacmun, 33 - Director. Mr. Hacmun has served as a
director of deltathree since July 2001. Since, January 2000 Mr. Hacmun has
been an independent real estate investor and developer. From 1999 to 2000,
Mr. Hacmun served as an Associate at Weksler, Berman LLP, specializing in the
negotiation of large real estate acquisitions for a variety of clientele in
Israel. From 1995 to 1999, Mr. Hacmun served in various capacities, including
General Counsel and Director of several different Tshuva Group subsidiaries.
Elie Housman, 65 - Director. Mr. Housman has served as a director of
deltathree since August 2001. Since March 2001, Mr. Housman has served as the
Chairman of InkSure, Inc. Prior to March 2001, Mr. Housman served as a
Principal and Consultant to Charterhouse Group International, Inc., a private
equity firm that manages approximately $2 billion in assets. Prior to 1996,
Mr. Housman was also the Chairman of Novo PLC, a media supply company in
London, and President of Pioneer Commercial Funding Corporation. Prior to
1988, he founded UM Shipping Corporation, was Co-Chairman of AP Parts Company,
Chief Executive Officer of Rail Finance, Inc. and Founder of Maritime Fruit
Carriers Ltd., one of the world's largest diversified shipping companies.
Mr. Housman is a graduate of the New School for Social Research with BA
and MA degrees in Economics.
Joshua Maor, 66 - Director. Since January 2002, Mr. Maor has served as
the Chairman of Green Venture Capital Ltd., an investment holding company which
engages primarily in acquiring holdings in venture capital funds, and the
Chairman of Commutech Holding & Investments Ltd., an investment holding company
which engages primarily in investments in high tech companies. Mr. Maor served
as both the Chairman and Chief Executive Officer Green Venture Capital Ltd from
1997 to January 2002. From 1996 through 1997, Mr. Maor was the Chairman of
I.B.M. Israel Ltd., which distributes and provides services for I.B.M.
products, and I.B.M. Science and Technology Ltd., a research and development
company. Mr. Maor served as a member of our Advisory Board from 1997
through 1998.
Lior Samuelson, 53 - Director. Mr. Samuelson has served as a
director of deltathree since August 2001. Since August 1999, Mr. Samuelson
has served as a Co-Founder and Principal of Mercator Capital. His
experience includes advising clients in the Technology, Communications and
Consumer sectors on mergers, acquisitions and private placements. From
March 1997 to August 1999, Mr. Samuelson was the President and CEO of
PricewaterhouseCoopers Securities. Prior to that, he was the President and
CEO of The Barents Group, a merchant bank specializing in advising and
investing in companies in emerging markets. Mr. Samuelson was also the
Co-Chairman of Peloton Holdings, a Private Equity management company.
Before that, he was a managing partner with KPMG and a senior consultant at
Booz, Allen & Hamilton. Mr. Samuelson earned B.S. and M.S. degrees in
Economics from Virginia Polytechnic University.
Shimmy Zimels, 36 - Chief Operating Officer and Director. Mr.
Zimels joined deltathree in July 1997. Mr. Zimels is responsible for
overseeing all operations, including network operations and customer
accounts. Prior to joining deltathree, Mr. Zimels was the Controller and
Vice President of Finance at Net Media Ltd., a leading Israel-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. Mr. Zimels graduated with distinction from Hebrew
University with a degree in Economics and Accounting and holds a Masters in
Economics from Hebrew University.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by our stockholders, on the recommendation
of the Audit Committee, the Board has reappointed Brightman Almagor & Co.,
a member firm of Deloitte & Touche, as independent auditors to audit our
financial statements for the fiscal year ending December 31, 2002.
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
our independent auditors for the fiscal year ending December 31, 2002 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 our stockholders and us and unanimously recommends
a vote "FOR" such proposal.
Audit Fees
The aggregate fees billed or expected to be billed to us by our
independent auditors, Brightman Almagor & Co., a member firm of Deloitte &
Touche, for professional services rendered for the audit of our annual
financial statements for the fiscal year ended December 31, 2001 and for
the reviews of the financial statements included in our Quarterly Reports
on Form 10-Q for that year were $54,000.
Financial Information Systems Design and Implementations Fees
There were no fees billed by Brightman Almagor & Co. for
professional services rendered for information technology services relating
to financial information systems design and implementation for the fiscal
year ended December 31, 2001.
All Other Fees
There were $4,000 in other fees billed by Brightman Almagor & Co.
for services rendered to us for the fiscal year ended December 31, 2001.
Executive Officers
Set forth below is a brief description of the present and past
business experience of each of the persons who serve as our executive
officers or key employees who are not also serving as directors.
Paul C. White, 39 - Chief Financial Officer and Secretary. Mr.
White has served as our Chief Financial Officer since September 2000 and is
responsible for corporate finance and all financial aspects of our
operations, including accounting, tax, treasury, financial analysis,
billing, internal audit, investor relations, real estate and procurement
functions. Mr. White brings a vast array of experience in both the
telecommunications and Internet industries having served as President and
Chief Executive Officer of TelecomRFQ, Inc., a business-to-business
start-up designed to facilitate telecommunications procurement between
business buyers and major suppliers. Mr. White cultivated his expertise in
both telecommunications and the Internet with senior level positions at
Buyersedge.com, where he served as Vice President of Operations & Finance,
and at Southern New England Telecommunications (SNET), the SBC
Communications, Inc. subsidiary, where he served as Director of IT Strategy
& Finance, Director of Corporate Development and Director of Finance &
Business Development between 1995 and 1999. Mr. White has also worked in
senior level positions at Ernst & Young, LLP and Arthur Andersen, LLP. Mr.
White has a BBA and an MBA from Hofstra University, as well as a CPA.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth certain summary information
concerning the compensation paid or awarded for services rendered during
each of our last three fiscal years to our chief executive officer and each
of our three other most highly compensated executive officers in 1999, 2000
and 2001 whose total salary and bonus exceeded $100,000. These four
executive officers are referred to in this Proxy Statement as "named
executive officers".
Long-Term
Annual Compensation Compensation
----------------------------------------------------------
Securities
Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation
- ------------------------------------------------------------------------------------------------------
Noam Bardin 2001 264,267 -- -- --
President and Chief Executive 2000 229,167 142,000 250,000 --
Officer............................. 1999 170,000 136,000 173,938 --
2001 214,395 -- -- --
Shimmy Zimels 2000 187,500 112,000 130,000 --
Chief Operating Officer........... 1999 170,000 136,000 173,938 --
2001 201,391 -- -- --
Paul C. White 2000 59,500 21,000 160,000 --
Chief Financial Officer........... 1999 -- -- -- --
Mark Gazit (1) 2001 175,000 -- -- --
Former Executive Vice President, 2000 83,333 54,000 303,938 --
Technology ....................... 1999 -- -- -- --
(1) In 2001, we paid Mark Gazit $60,000 upon his termination as our Executive Vice President, Technology.
Option Grants During 2001
During fiscal year ended December 31, 2001, we did not grant any
options to purchase shares of our Common Stock to any of our named
executive officers.
Option Exercises in Fiscal 2001 and Year-End Option Values
The following table sets forth information for the named executive
officers with respect to option exercises during 2001 and the value as of
December 31, 2001 of unexercised in-the-money options held by each of the
named executive officers.
Number of
Securities Value of
underlying Unexercised
Unexercised In-The-Money
Options at Options at
Shares Year End (#) Year-End ($)
Acquired Value Exercisable Exercisable
Name On Exercise (#) Realized ($) /Unexercisable /Unexercisable
- ---------------------------------------------------- -------------------- ---------------------- -------------------
Noam Bardin ........... -- -- 503,938/0 --
Shimmy Zimels.......... -- -- 383,938/0 --
Paul C. White.......... -- -- 160,000/0 --
Mark Gazit............. -- -- 303,938/0 --
Compensation Committee Interlocks and Insider Participation
Executive compensation decisions in 2001 were made by the
Compensation Committee. During 2001, no interlocking relationship existed
between our Board and the board of directors or compensation committee of
any other company.
Director Compensation
Prior to 2001, we have generally not paid our directors cash
compensation. In May 2001, we paid to each of Keith Maib, Hillary Kramer
and James McDermott, former directors, a fee of $10,000 in compensation for
their services as directors, and such directors also received options to
purchase 10,000 shares of Common Stock in addition to the options to
purchase 24,848 shares of Common Stock granted pursuant to our 1999
Directors' Plan. In addition, we paid a fee of $53,333 to Lenny Roth,
former Chairman of the Board, also as compensation for his services as a
director. During 2002, we plan to pay $10,000 to each of Lior Samuelson and
Elie Housman for their services as directors.
Directors are reimbursed for the expenses they incur in attending
meetings of the Board or Board committees. Under our 1999 Directors' Plan,
each director who is not our employee receives options to purchase 24,848
shares of Common Stock on the date such director is elected to the Board.
In addition, under our 1999 Directors' Plan, each non-employee director
will be eligible to receive on an annual basis options to purchase 10,000
shares of 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 us to
attract, maintain and motivate qualified directors and to enhance a
long-term mutuality of interest between our directors and stockholders of
our Common Stock by granting our directors options to purchase our shares.
Under the Directors' Plan, on the first business day following
each annual meeting of our stockholders during the term of the Directors'
Plan, each director who is not our employee will be granted options to
acquire 10,000 shares of our Common Stock with an exercise price per share
equal to the fair market value of a share of our 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 our employee on the date of the completion of our
initial public offering was granted options to acquire 24,848 shares of our
Common Stock with an exercise price per share equal to the initial public
offering price. Each individual who becomes a director will be granted
options to acquire 24,848 shares of our 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.
The maximum number of shares that may be issued under the Directors' Plan
is 600,000 shares of Common Stock. The plan will terminate December 31,
2009, unless sooner terminated by our stockholders.
Employment Agreements
We currently have employment agreements in place with Messrs.
Bardin, White and Zimels, each with the following principal terms:
o The agreement is effective for a period of three years from
the effective date, and can be extended by mutual agreement.
o 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.
o The employee shall be granted options to purchase shares of
our Common Stock as set forth below, under our 1999 Stock
Incentive Plan. The employee's options are exercisable in
installments, as long as the employee is employed by us 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 cause, following such date,
all options will expire. The options are exercisable in
three equal installments on each of the first, second and
third anniversary of the effective date.
o 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.
o If employee's employment is terminated by us 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.
o If 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.
On March 31, 2002, the employment agreements for each of Mr.
Bardin and Mr. Zimels expired pursuant to the terms of the original
employment agreements. Both Messrs. Bardin's and Zimels' employment
agreements were extended until September 30, 2002 on the same terms as
their original employment agreements. At the same time Messrs. Bardin,
White and Zimels took a voluntary pay reduction from their then current
salaries of $266,513, $213,210, and $213,210, respectively, to $180,000
each.
The following table sets forth the position, base salary and
number of shares of Common Stock represented by the options granted for
each of Messrs. Bardin, White and Zimels pursuant to their respective
employment agreements:
Options to
Purchase
Base Salary per Shares of
Name Position Contract Common Stock
- ------------------------------------------------------------------------------------------------------------------
Noam Bardin...................... Chairman of the Board, Chief Executive
Officer and President $250,000 250,000
Paul C. White ................... Chief Financial Officer $170,000 160,000
Shimmy Zimels.................... Chief Operating Officer $200,000 130,000
As a result of the change in control described in this Proxy
Statement, the options granted to Messrs. Bardin, Zimels and White became
immediately exercisable in full.
1999 Stock Incentive Plan
We have a stock incentive plan. The purpose of the plan is to
foster and promote our long-term financial success and materially increase
stockholder value by (a) motivating superior performance by means of
performance-related incentives, (b) encouraging and providing for the
acquisition of an ownership interest in us by executive officers, other
employees and consultants and (c) enabling us to attract and retain the
services of an outstanding management team upon whose judgment, interest
and effort the successful conduct of our operations is largely dependent.
General. The plan provides for the grant of (i) incentive stock
options and non-incentive stock options to purchase our 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. We have reserved 4,000,000 shares of our
Common Stock for issuance upon exercise of awards to be granted under the
plan.
Administration. Our compensation committee or such other committee
as designated by our Board administers the plan. This committee is made up
of at least two directors who are not our employees and whose membership on
the committee (i) does not adversely impact our ability to deduct
compensation payments made under the plan and (ii) permits recipients of
awards to avail themselves of exemptions under federal securities laws.
Eligibility and Extent of Participation. The plan provides for
discretionary grants of awards to our officers within the meaning of Rule
16a-1(f) of the Exchange Act and to other employees and consultants of
ours. Directors who are non-employees are prohibited from participating in
the plan. 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 of the shares of Common Stock available under the plan.
Stock Options. Under the plan, the committee may grant both
incentive and non-incentive stock options for our Common Stock. The options
generally will have a term of seven years and will become exercisable in
three equal installments commencing on the first anniversary of the date of
grant. The purchase price per share payable upon exercise of an option will
be established by the committee; provided, however, that such option
exercise price may be no less than the fair market value of a share of our
Common Stock on the date of grant (or 110% of the fair market value, in the
case of incentive stock option grants to persons holding more than 10% of
voting power of all classes of our capital stock). The option exercise
price is payable by one of the following methods or a combination of
methods to the extent permitted by the committee: (i) in cash or its
equivalent, or (ii) subject to the approval of the committee, in shares of
Common Stock owned by the participant for at least six months prior to the
date of exercise. The committee may provide that a participant who delivers
shares of Common Stock to exercise an option when the market value of the
Common Stock exceeds the exercise price of the option will be automatically
granted reload options for the number of shares delivered to exercise the
option. Reload options will be subject to the same terms and conditions as
the related option except that the exercise price will be the fair market
value on the date the reload option is granted and such reload option will
not be exercisable for six months.
Stock Appreciation Rights. The committee may grant stock
appreciation rights in tandem with or independently of a stock option.
Stock appreciation rights entitle the participant to receive the excess of
the fair market value of a stated number of shares of Common Stock on the
date of exercise over the base price of the stock appreciation right. The
base price may not be less than 100% of the fair market value of the Common
Stock on the date the stock appreciation right is granted. The committee
will determine when a stock appreciation right is exercisable, the method
of exercise, and whether settlement of the stock appreciation right is to
be made in cash, shares of Common Stock or a combination of cash and
shares.
Restricted Stock and Restricted Units. The committee may grant
awards in the form of restricted stock and restricted units. For purposes
of the plan, restricted stock is an award of Common Stock and a restricted
unit is a contractual right to receive Common Stock (or cash based on the
fair market value of Common Stock). Such awards are subject to such terms
and conditions, if any, as the committee deems appropriate. Unless
otherwise determined by the committee, participants are entitled to receive
either currently or at a future date, dividends or other distributions paid
with respect to restricted stock and, if and to the extent determined by
the committee, either to be credited with or receive currently an amount
equal to dividends paid with respect to the corresponding number of shares
covered by restricted units. Restricted stock and restricted units become
vested and non-forfeitable and the restricted period shall lapse upon the
third anniversary of the date of grant unless the committee determines
otherwise.
Incentive Stock and Incentive Units. The plan allows for the grant
of awards in the form of incentive stock and incentive units. For purposes
of the plan, incentive stock is an award of Common Stock and an incentive
unit is a contractual right to receive Common Stock. Such awards will be
contingent upon the attainment, in whole or in part, of certain performance
objectives over a period to be determined by the committee. With regard to
a particular performance period, the committee has the discretion, subject
to the plan's terms, to determine the terms and conditions of such awards,
including the performance objectives to be achieved during such period and
the determination of whether and to what degree such objectives have been
attained. Unless otherwise determined by the committee, participants are
entitled to receive, either currently or at a future date, all dividends
and other distributions paid with respect to the incentive stock and, if
and to the extent determined by the committee, either to be credited with
or receive currently an amount equal to dividends paid with respect to the
corresponding number of shares covered by the incentive units.
Elective Units. On such date or dates established by the committee
and subject to such terms and conditions as the committee will determine, a
participant may be permitted to defer receipt of all or a portion of his
annual compensation and/or annual incentive bonus ("deferred annual
amount") and receive the equivalent amount in elective stock units based on
the fair market value of the Common Stock on the date of grant. To the
extent determined by the committee, a participant may also receive
supplemental stock units for a percentage of the deferred annual amount. On
the date of a participant's termination of employment, the participant will
receive a number of shares of Common Stock equal to the number of elective
units and supplemental units held on that date. Elective units carry no
voting rights until the shares have been issued. The committee will
determine whether any dividend equivalents attributable to elective units
are paid currently or credited to the participant's account and deemed
reinvested in Common Stock. Elective units and dividend equivalents with
respect to the elective units are fully vested at all times. Unless the
committee provides otherwise, supplemental units and dividend equivalents
with respect to the supplemental units will become fully vested on the
third anniversary of the date the corresponding deferred amount would have
been paid.
Stock in Lieu of Cash. The plan authorizes the committee to grant
awards of Common Stock to executive officers in lieu of all or a portion of
an award otherwise payable in cash pursuant to any bonus or incentive
compensation plan of ours, based on the fair market value of the Common
Stock.
Amendment and Termination. No awards may be granted under the plan
after the expiration of ten years from the date of the plan's adoption. The
Board or the committee may amend, suspend or terminate the plan or any
portion of it at any time. However, no amendment may be made to the plan
without stockholder approval if such amendment would (1) increase the
number of shares of Common Stock subject to the plan, (2) change the price
at which options may be granted or (3) remove the administration of the
plan from the committee.
1999 Performance Incentive Plan
We have a performance incentive plan. The purpose of the plan is
to assist us in attracting, retaining, motivating and rewarding the best
qualified executive officers and key employees by providing them with the
opportunity to earn competitive compensation directly linked to our
performance.
General. Under the plan, bonuses are payable if we meet any one or
more of several performance criteria, which are to be set annually by the
committee, after receipt of the proposed annual budget for the coming year
from management. It is expected that proposed performance criteria for the
coming year will be presented by management in the fourth quarter of the
current year and approved not later than March 31 of the next year. It is
expected that the period over which performance is to be measured will be
one year.
The committee shall determine whether bonuses payable under the
plan will be paid in cash, shares of Common Stock or in any combination
thereof, provided that not less than 50% of any bonus shall be in cash. No
more than 400,000 shares of Common Stock may be issued under the plan.
Administration. Our compensation committee or such other committee
as designated by our Board administers the plan. This committee is made up
of directors who are not our employees and whose membership on the
committee (i) does not adversely impact our ability to deduct compensation
payments made under the plan and (ii) permits recipients of awards to avail
themselves of exemptions under federal securities laws. The committee
establishes the performance targets and certifies whether such performance
targets have been achieved.
Bonus. 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 35% of their base salary for such
year. If 80% of such targets are achieved, the bonus potentially payable to
participants will generally equal 25% of their base salary for such year
and, if less than 80% of such targets are achieved, the bonus potentially
payable to participants will generally equal 0% of their base salary for
such year. To the extent our results exceed 80% of the targets but is less
than 100% 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.
Once eligibility has been determined, a bonus, if applicable, 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 committee. In addition, the plan permits the committee to grant
discretionary bonuses to participants, notwithstanding that a bonus would
not otherwise be payable under the plan, to recognize extraordinary
individual performance.
Eligibility. Each of our executive officers and each key employee
who is recommended by the chief executive officer and selected by the
committee and approved by the board of directors is eligible to receive a
bonus under the plan.
Other Terms. No plan participant may receive a bonus with respect
to any plan year in excess of $1,000,000. The committee may impose
conditions with respect to an award of Common Stock, including conditioning
the vesting of shares on the performance of additional service. The
committee may permit a participant to receive all or a portion of his bonus
payable in Common Stock. If a participant's employment terminates prior to
the completion of performance period, the committee shall determine whether
a prorated bonus may be paid to such a participant. In addition, the plan
permits a participant to elect to defer payment of his or her bonus on
terms and conditions established by the committee.
Amendment and Termination. Either the board of directors or the
committee may amend, suspend, discontinue or terminate the plan, provided
that, unless the board determines otherwise, any amendment or termination
of the plan that requires stockholder approval will not be effective until
stockholder approval is obtained.
1999 Employee Stock Purchase Plan
We have an employee stock purchase plan. The purpose of the
employee stock purchase plan is to align employee and stockholder long-term
interests by facilitating the purchase of Common Stock by employees and to
enable employees to develop and maintain significant ownership of Common
Stock.
General. The employee stock purchase plan is intended to comply
with the requirements of Section 423 of the Internal Revenue Code, and to
assure the participants of the tax advantages provided thereby. The number
of shares of our Common Stock available for issuance under the employee
stock purchase plan is limited to 1,350,000 shares of Common Stock.
Administration. A committee established by the Board administers
the employee stock purchase plan. The committee may make such rules and
regulations and establish such procedures for the administration of the
employee stock purchase plan as it deems appropriate.
Eligibility. All of our employees who have at least one year of
service and work more than 20 hours per week and five months in a calendar
year are eligible to participate in the employee stock purchase plan,
except that employees who are "highly compensated" within the meaning of
Section 414(q) of the Code and employees who are five percent or more
stockholders of us will not be eligible to participate.
Grants. Pursuant to the employee stock purchase plan, each
eligible employee will be permitted to purchase shares of Common Stock up
to two times per calendar year through regular payroll deductions in an
aggregate amount equal to 1% to 10% of the employee's base pay, as elected
by the employee, for each payroll period. Under the employee stock purchase
plan, a participant's right to purchase shares of Common Stock may not
accrue at a rate that exceeds $25,000 of fair market value of Common Stock
during any calendar year.
Offering Period; Purchase Period. The initial offering period
commenced on the first trading day on or after the effective date of the
employee stock purchase plan and end on the last trading day on or prior to
the second anniversary of the commencement date. Each subsequent offering
period will have a duration of approximately one year, commencing on the
first trading day and ending on the last trading day of each calendar year
(commencing with calendar year 2001). Each "purchase period" will have a
duration of approximately six months.
Exercise Price. As of the last day of each "purchase period"
ending within an "offering period," participating employees will be able to
purchase shares of Common Stock with payroll deductions for a purchase
price equal to the lesser of:
o 85% of the fair market value of Common Stock on the date the
offering period begins and
o 85% of the fair market value of Common Stock on the last day
of the purchase period.
A right to purchase shares which is granted to a participant under
the employee stock purchase plan is not transferable otherwise than by will
or the laws of descent and distribution.
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 1999 Performance Incentive Plan described
below, because the 1999 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.
Annual Incentive Bonuses
The Board of Directors approved the 1999 Performance Incentive
Plan established by 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 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 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.
Under the 1999 Performance Incentive Plan, bonus amounts are
determined as follows: if 100% of such targets are achieved, the bonus
potentially payable to participants will generally equal 35% of their base
salary for such year, if 80% of such targets are achieved, the bonus
potentially payable to participants will generally equal 25% of their base
salary for such year, and if less than 80% of such targets are achieved,
the participants will generally not be entitled to receive any bonus for
such year. To the extent the Company's results exceed 80% of the targets
but is less that 100% 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 1999 Performance Incentive Plan
permits the Compensation Committee to grant discretionary bonuses to
participants, notwithstanding that a bonus would not otherwise be payable
under the 1999 Performance Incentive Plan, to recognize extraordinary
individual performance.
With respect to 2001, there were no bonuses awarded to any
executive officer. Pursuant to the terms of the 1999 Performance Incentive
Plan, any awards would have been paid in the current year, promptly
following the completion of the audit of the Company's 2001 financial
statements.
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 1999 Directors' Plan, refer to the section entitled "1999
Directors' Plan" in 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
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 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 1999 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 1999 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 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, 2001, the Company has granted options to acquire an aggregate
of 2,591,205 shares of Common Stock.
Chief Executive Officer's Fiscal 2001 Compensation
Mr. Noam Bardin was the Company's chief executive officer for all
of 2001. Under the terms of his employment agreement with the Company, Mr.
Bardin received an aggregate annual base salary of $264,267 and his
participation in the 1999 Performance Incentive Plan resulted in no bonus
compensation for 2001.
Submitted by:
The Compensation Committee
Amir Gera
Joshua Maor
PROPOSAL III
APPROVAL OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF THE COMPANY TO AMEND THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
The Board has adopted a resolution approving the amended and
restated certificate of incorporation of the Company substantially in the
form attached to this Proxy Statement as Appendix A and recommends to the
stockholders that they approve the amended and restated certificate of
incorporation in order to implement amendments to the authorized capital
stock of the Company. If approved, the amended and restated certificate of
incorporation will decrease the authorized number of shares of Class A
Common Stock from 200,000,000 shares to 75,000,000 shares and the
authorized number of shares of Class B Common Stock from 200,000,000 shares
to 1,000 shares.
This proposal will be implemented by executing the amended and
restated certificate of incorporation and will become effective at the
close of business upon the filing of the amended and restated certificate
of incorporation with the Secretary of State of the State of Delaware.
The approval of the amended and restated certificate of
incorporation 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 effect 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 approve the
amended and restated certificate of incorporation of the Company, which
amends the authorized capital stock of the Company to decrease the
authorized number of shares of Class A Common Stock from 200,000,000 to
75,000,000 and the authorized number of shares of Class B Common Stock from
200,000,000 to 1,000, as described above is in the best interests of our
stockholders and us and unanimously recommends a vote "FOR" such proposal.
STOCK PERFORMANCE CHART
The following chart compares the cumulative total stockholder
return on our Common Stock from the date of our initial public offering
(November 22, 1999) through December 31, 2001 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 our Common Stock and each index was $100 on
November 22, 1999.
COMPARISON OF 26 MONTH CUMULATIVE TOTAL RETURN*
AMONG DELTATHREE, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TELECOMMUNICATIONS INDEX
GRAPHIC OMITTED
* $100 Invested on 11/23/99 in stock or index - including reinvestment of
dividends. Fiscal year ending December 31.
Cumulative Total Return
---------------------------------------------------------------------------------
11/23/99 11/99 12/99 1/00 2/00 3/00 4/00 5/00 6/00
--------- -------- -------- -------- ------- -------- -------- -------- --------
deltathree, Inc. $100.00 $195.42 $171.67 $293.33 $279.17 $139.59 74.17 44.59 97.09
Nasdaq Stock Market (U.S.) 100.00 99.66 121.58 117.09 139.37 136.49 114.80 100.95 118.68
Nasdaq Telecommunications 100.00 97.71 113.25 112.91 123.91 120.23 97.96 81.89 94.90
Market
---------------------------------------------------------------------------------
7/00 8/00 9/00 10/00 11/00 12/00 1/01 2/01 3/01
--------- -------- -------- -------- ------- -------- -------- -----------------
deltathree, Inc. 57.50 42.50 24.17 20.00 11.25 7.92 17.50 11.25 8.33
Nasdaq Stock Market (U.S.) 112.25 125.52 109.21 100.24 77.23 73.13 82.00 63.48 54.59
Nasdaq Telecommunications 84.46 85.86 75.76 66.17 48.13 48.24 60.55 48.25 42.50
Market
---------------------------------------------------------------------------------
4/01 5/01 6/01 7/01 8/01 9/01 10/01 11/01 12/01
--------- -------- -------- -------- ---------------- -------- -------- --------
deltathree, Inc. 7.00 6.33 4.93 3.93 2.40 5.33 5.13 4.93 6.00
Nasdaq Stock Market (U.S.) 62.73 62.66 64.34 60.25 53.68 44.64 50.36 57.53 58.03
Nasdaq Telecommunications 44.17 41.53 40.24 36.49 32.29 29.31 28.60 31.62 32.29
Market
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We believe that all of the transactions described below were made
on an arms-length basis. All future transactions between us and our
officers, directors, principal stockholders and affiliates must be
approved, in good faith, by a majority of the Board, including a majority
of the disinterested directors, unless they are on terms no less favorable
to us than could be obtained from unaffiliated third parties.
RSL COM
Prior to June 28, 2001, we had various inter-company contracts and
agreements with RSL COM, our then majority stockholder. On June 28, 2001,
RSL COM, the sole owner of our Class B Common Stock, entered into a share
purchase agreement with Atarey, to sell to Atarey all of our Class B Common
Stock owned by RSL COM. On June 29, 2001, the sale was consummated, and all
of RSL COM's shares of Class B Common Stock, which carried ten votes per
share, were automatically converted into shares of Class A Common Stock,
which carry one vote per share. As a result of the sales transaction,
Atarey became the majority stockholder, owning approximately 71% of our
outstanding Common Stock. No shares of Class B Common Stock remain
outstanding.
Simultaneously with the completion of the transaction on June 29,
2001, all of the contracts and inter-company agreements between us and RSL
COM (and all of its subsidiaries) were terminated. At the same time, we
severed our reliance on RSL COM as our primary pan-European wholesale
telecommunications carrier, and shifted to other service providers.
Atarey
We have no inter-company contracts or agreements with Atarey.
CNET
On October 20, 1999, we issued to CNET Investments, Inc., for
approximately $11 million, 1,085,943 shares of the our Common Stock and
warrants to purchase 466,028 shares of our Common Stock at an exercise
price of $19.31 per share exercisable for the term of our promotion
agreement with CNET. CNET was entitled to request that we register their
shares under the Securities Act of 1933 and to include their shares in our
future registered equity offerings. On July 6, 2001, CNET entered into a
share purchase agreement with Atarey. Under this agreement, Atarey
purchased 1,085,943 shares of our Common Stock owned by CNET in accordance
with the "tag-along" rights granted to CNET pursuant to the Investor Rights
Agreement, dated as of October 20, 1999, by and among us, RSL COM and CNET.
Simultaneously with its equity investment in us, in October 1999,
we entered into a marketing and promotion agreement with CNET. Under this
agreement, merchants on CNET's shopping sites were able to integrate our
PC-to-phone software to enable users to make a PC-to-phone call directly to
such merchant from the CNET shopping site using the our Click IT service.
In addition, CNET had agreed to display banners and other promotions on its
Web sites that will link to our Web site. The initial term of the contract
was two years. This contract was mutually terminated on May 24, 2001.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than 10% of a
registered class of our equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
beneficial ownership of Common Stock and other equity securities of us.
Directors, officers and greater than 10% stockholders are required by SEC
regulations to furnish us with all Section 16(a) forms they file.
To our knowledge, based solely upon our review of the copies of
such reports furnished to us, we believe that all of our 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 Ehud Erez, Issakhar Hacmun, Elie Housman and Lior
Samuelson, which were not filed on a timely basis.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for
stockholder action at our subsequent annual meetings consistent with Rule
14a-8 promulgated under the Securities Exchange Act of 1934, which in
certain circumstances may require the inclusion of qualifying proposals in
our Proxy Statement. For such proposals to be considered for inclusion in
the Proxy Statement and proxy relating to our 2003 Annual Meeting of
Stockholders, all applicable requirements of Rule 14a-8 must be satisfied
and such proposals must be received by us no later than December 31, 2002.
Such proposals should be directed to us at 75 Broad Street, 31st Floor, New
York, New York 10004.
Except in the case of proposals made in accordance with Rule
14a-8, our Amended and Restated By-laws require that stockholders desiring
to bring any business before our 2003 Annual Meeting of Stockholders
deliver written notice thereof to us 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 our 2003 Annual
Meeting is called for a date that is not within 30 days before or after the
date of the 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
We will bear all costs incurred in the solicitation of proxies. In
addition to the solicitation by mail, our officers and employees may
solicit proxies by mail, facsimile, telephone or in person, without
additional compensation. We 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 we may reimburse such brokerage houses and
other custodians, nominees and fiduciaries for their out-of-pocket expenses
incurred in connection therewith.
ADDITIONAL COPIES OF OUR 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, INC.,
75 BROAD STREET, 31ST FLOOR, NEW YORK, NEW YORK 10004.
By Order of the Board of Directors,
/s/ Paul C. White
-------------------------
Paul C. White
Secretary
New York, New York
April , 2002
APPENIDX A
FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Pursuant to Sections 242 and 245 of the
Delaware General Corporation Law
deltathree, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"GCL"), does hereby certify as follows:
(1) The name of the Corporation is deltathree, Inc. The
Corporation was previously incorporated under the name deltathree.com, Inc.
and was originally incorporated under the name RSL Acquisition Corp. The
original certificate of incorporation of the Corporation was filed with the
office of the Secretary of State of the State of Delaware on January 27,
1998. Such certificate of incorporation was amended on May 17, 1999. The
certificate of incorporation was amended and restated on September 24, 1999
and such Amended and Restated Certificate of Incorporation was then further
amended on November 11, 1999 and then again on December 12, 2000.
(2) This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors of the Corporation (the "Board of
Directors") and by the stockholders of the Corporation in accordance with
Sections 228, 242 and 245 of the GCL.
(3) This Amended and Restated Certificate of Incorporation
restates and integrates and further amends the certificate of incorporation
of the Corporation, as heretofore amended, restated or supplemented.
(4) The text of the Certificate of Incorporation is amended and
restated in its entirety as follows:
FIRST: The name of the Corporation is deltathree, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, State of Delaware 19801. The name of its registered
agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
FOURTH: (a) Authorized Capital Stock. The total number of shares
of stock which the Corporation shall have authority to issue is 100,001,000
shares of capital stock, consisting of (i) 75,000,000 shares of Class A
common stock, par value $0.001 per share (the "Class A Common Stock"), (ii)
1,000 shares of Class B common stock, par value $0.001 per share (the
"Class B Common Stock") and (iii) 25,000,000 shares of preferred stock, par
value $0.001 per share (the "Preferred Stock"). The Class A Common Stock
and the Class B Common Stock are hereinafter referred to collectively as
the "Common Stock."
(b) Common Stock. The powers, preferences and rights, and
the qualifications, limitations and restrictions, of each class of the
Common Stock are as follows:
(1) Voting Rights. Subject to the rights of the
holders of Preferred Stock, and subject to any other provisions of this
Amended and Restated Certificate of Incorporation, as it may be amended
from time to time, the shares of Common Stock shall have the following
voting rights: (i) each share of Class A Common Stock shall entitle the
holder thereof to one (1) vote upon all matters upon which stockholders
shall have the right to vote; and (ii) each share of Class B Common Stock
shall entitle the holder thereof to ten (10) votes upon all matters which
stockholders shall have the right to vote. The holders of Common Stock are
not entitled to cumulative voting rights.
(2) Dividends; Stock Splits. Subject to the
rights of the holders of Preferred Stock, and subject to any other
provisions of this Amended and Restated Certificate of Incorporation, as it
may be amended from time to time, holders of shares of Common Stock shall
be entitled to receive such dividends and other distributions in cash,
stock or property of the Corporation when, as and if declared thereon by
the Board of Directors from time to time out of assets or funds of the
Corporation legally available therefore. Holders of Class A Common Stock
and Class B Common Stock will share equally on a per share basis in any
dividend declared by the Board of Directors, subject to any preferential
rights of any outstanding Preferred Stock. No dividend or other
distribution may be declared or paid on any share of Class A Common Stock
unless a like dividend or other distribution is simultaneously declared or
paid, as the case may be, on each share of Class B Common Stock, nor shall
any dividend or other distribution be declared or paid on any share of
Class B Common Stock unless a like dividend or other distribution is
simultaneously declared or paid, as the case may be, on each share of Class
A Common Stock, in each case without preference or priority of any kind;
provided, however, that all dividends and distributions on the Class A
Common Stock and Class B Common Stock payable in shares of Common Stock of
the Corporation shall be made in shares of Class A Common Stock and Class B
Common Stock, respectively. In no event will shares of either class of
Common Stock be split, divided or combined unless the outstanding shares of
the other class of Common Stock shall be proportionately split, divided or
combined.
(3) Liquidation, Dissolution, etc. In the event
of any liquidation, dissolution or winding up (either voluntary or
involuntary) of the Corporation, the holders of shares of Class A and Class
B Common Stock shall be entitled to receive the remaining assets and funds
of the Corporation available for distribution after payments to creditors
and to the holders of any Preferred Stock of the Corporation that may at
the time be outstanding, ratably in proportion to the number of shares of
Common Stock held by them, respectively. In any such distribution, shares
of Class A Common Stock and Class B Common Stock shall be treated equally
on a per share basis.
(4) Merger, etc. In the event of a merger or
consolidation of the Corporation with or into another entity (whether or
not the Corporation is the surviving entity), the holders of each share of
Class A Common Stock and Class B Common Stock shall be entitled to receive
the same per share consideration as the per share consideration, if any,
received by the holders of each share of the other class of Common Stock,
except that if the consideration includes voting securities (or the right
to acquire voting securities, or securities exchangeable for, or
convertible into, voting securities), holders of Class B Common Stock shall
receive consideration entitling them to ten times the number of votes per
share as the consideration being received by holders of the Class A Common
Stock.
(5) Conversion of Class B Common Stock.
(i) Voluntary Conversion. Each share of
Class B Common Stock shall be convertible, at the option of its record
holder, into one validly issued, fully paid and non-assessable share of
Class A Common Stock at any time.
(ii) Automatic Conversion. In the event of
any transfer of any share of Class B Common Stock to a person or entity
that (i) is not a permitted transferee or (ii) is a permitted transferee
but ceases to be a permitted transferee subsequent to such transfer, such
share of Class B Common Stock shall automatically, without any further
action, convert into one validly issued, fully paid and non-assessable
share of Class A Common Stock. Permitted transferees shall include (A) RSL
Communications, Ltd. ("RSL COM"), (B) a majority-owned subsidiary of RSL
COM, (C) a successor of RSL COM following a merger, consolidation or
reorganization of RSL COM whereby RSL COM is not the surviving entity or
(D) Ronald S. Lauder or members of his family or a trust established by
Ronald S. Lauder for his family members, or entities controlled by or under
common control with Ronald S. Lauder. Majority-owned subsidiary for these
purposes shall mean an entity, more than 50% of the voting shares of which
are owned either directly or indirectly through one or more intermediaries,
by RSL COM.
(6) No Preemptive or Subscription Rights. No
holder of shares of Common Stock shall be entitled to preemptive or
subscription rights.
(7) Power to Sell and Purchase Shares. Subject
to the requirements of applicable law, the Corporation shall have the power
to issue and sell all or any part of any shares of any class of stock
herein or hereafter authorized to such persons, and for such consideration,
as the Board of Directors shall from time to time, in its discretion,
determine, whether or not greater consideration could be received upon the
issue or sale of the same number of shares of another class, and as
otherwise permitted by law. Subject to the requirements of applicable law,
the Corporation shall have the power to purchase any shares of any class of
stock herein or hereafter authorized from such persons, and for such
consideration, as the Board of Directors shall from time to time, in its
discretion, determine, whether or not less consideration could be paid upon
the purchase of the same number of shares of another class, and as
otherwise permitted by law.
(c) Preferred Stock. The Board of Directors is hereby
expressly authorized to provide for the issuance of all or any shares of
the Preferred Stock in one or more classes or series, and to fix for each
such class or series such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors providing for the issuance of
such class or series and as may be permitted by the GCL, including, without
limitation, the authority to provide that any such class or series may be
(i) subject to redemption at such time or times and at such price or
prices; (ii) entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on
any other class or classes or any other series; (iii) entitled to such
rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; or (iv) convertible into, or exchangeable for, shares of
any other class or classes of stock, or of any other series of the same or
any other class or classes of stock, of the Corporation at such price or
prices or at such rates of exchange and with such adjustments; all as may
be stated in such resolution or resolutions.
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(b) The number of directors of the Corporation shall be as
from time to time fixed by the Board of Directors, and such number shall
never be less than three nor more than thirteen. Election of directors need
not be by written ballot unless the By-Laws so provide.
(c) A director shall hold office until the annual meeting
for the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office.
(d) Any director may be elected by a majority of the Board
of Directors to fill a vacancy. If the vacancy results from an increase in
the number of directors, such director shall hold office for a term that
shall coincide with the remaining term of directors then in office. Any
director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as that of his
predecessor. Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time, with or without cause
by the affirmative vote of the holders of at least a majority of the voting
power of the Corporation's then outstanding capital stock entitled to vote
generally in the election of directors. Notwithstanding the foregoing,
whenever the holders of any one or more classes or series of Preferred
Stock issued by the Corporation shall have the right, voting separately by
class or series, to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of this
Amended and Restated Certificate of Incorporation applicable thereto.
(e) In addition to the powers and authority hereinbefore
or by statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation, subject, nevertheless, to the
provisions of the GCL, this Amended and Restated Certificate of
Incorporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have been valid if
such By-Laws had not been adopted.
SIXTH: No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the GCL as the same exists or may
hereafter be amended. If the GCL is amended hereafter to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited
to the fullest extent authorized by the GCL, as so amended. Any repeal or
modification of this Article SIXTH by the stockholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or
modification.
SEVENTH: The Corporation shall indemnify its directors and
officers to the fullest extent authorized or permitted by law, as now or
hereafter in effect, and such right to indemnification shall continue as to
a person who has ceased to be a director or officer of the Corporation and
shall inure to the benefit of his or her heirs, executors and personal and
legal representatives; provided, however, that, except for proceedings to
enforce rights to indemnification, the Corporation shall not be obligated
to indemnify any director or officer (or his or her heirs, executors or
personal or legal representatives) in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof)
was authorized or consented to by the Board of Directors. The right to
indemnification conferred by this Article SEVENTH shall include the right
to be paid by the Corporation the expenses incurred in defending or
otherwise participating in any proceeding in advance of its final
disposition.
The Corporation may, to the extent authorized from time to time by
the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar
to those conferred in this Article SEVENTH to directors and officers of the
Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Amended and
Restated Certificate of Incorporation, the By-Laws of the Corporation, any
statute, agreement, vote of stockholders or disinterested directors or
otherwise.
Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer
of the Corporation existing at the time of such repeal or modification with
respect to any acts or omissions occurring prior to such repeal or
modification.
EIGHTH: The Corporation hereby elects not to be governed by
Section 203 of the GCL pursuant to Section 203(b)(3) therein.
NINTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the GCL) outside the
State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
TENTH: In furtherance and not in limitation of the powers
conferred upon it by the laws of the State of Delaware, the Board of
Directors or the stockholders shall have the power to adopt, amend, alter
or repeal the Corporation's By-Laws. The affirmative vote of at least a
majority of the entire Board of Directors or a majority of the voting power
of the Corporation's then outstanding capital stock entitled to vote shall
be required to adopt, amend, alter or repeal the Corporation's By-Laws.
ELEVENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation in the manner now or hereafter prescribed in
this Amended and Restated Certificate of Incorporation, the Corporation's
By-Laws or the GCL, and all rights herein conferred upon stockholders are
granted subject to such reservation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be executed on its behalf this
day of , 2002.
deltathree, Inc.
By:________________________
Name:
Title:
APPENIDX B
deltathree, Inc.
Charter of the Audit Committee of the Board of Directors
The Audit Committee (the "Committee") of the Board of Directors
(the "Board") of deltathree.com, Inc. (the "Corporation") is appointed by
the Board and is composed of directors who are independent of management of
the Corporation and are free of any relationship that in the opinion of the
Board would interfere with their exercise of independent judgment as a
committee member.
The Committee shall be comprised of three or more directors as
determined from time to time by resolution of the Board. Consistent with
the appointment of other Board committees, the members of the Committee
shall be elected by the Board at the annual organizational meeting of the
Board or at such other time as may be determined by the Board. The Chairman
of the Committee shall be designated by the Board, provided that if the
Board does not designate a Chairman, the members of the Committee, by
majority vote, may designate a Chairman. The presence in person or by
telephone of a majority of the Committee's members shall constitute a
quorum for any meeting of the Committee. All actions of the Committee will
require the vote of a majority of its members present at a meeting of the
Committee at which a quorum is present.
The purpose of the Committee is to assist the Board in fulfilling
its legal and fiduciary responsibilities to shareholders and regulating
authorities relating to the quality and integrity of the Corporations'
financial reporting standards and practices and, the adequacy of its
internal controls.
In fulfilling these responsibilities, the Committee will
communicate directly with the external auditors, general counsel, and
management of the Corporation. The Committee shall formally report to the
Board as to its deliberations and findings and maintain communication
between the Board and the Corporation's external auditors.
So long as the Corporation is listed on Nasdaq, each member of the
Committee shall be an "independent" director within the meaning of the
Nasdaq rules. Notwithstanding the foregoing, as permitted by the rules of
the Nasdaq, under exceptional and limited circumstances, one director who
does not meet certain of the criteria for "independence" may be appointed
to the Committee if the Board determines in its business judgment that
membership on the Committee by such person is required by the best
interests of the Corporation and its shareholders and the Corporation
discloses in the annual proxy statement the nature of such person's
relationship and the reasons for the Board's determination. All members of
the Committee shall be financially literate at the time of their election
to the Committee or shall become financially literate within a reasonable
period of time after his or her appointment to the Committee. "Financial
literacy" shall be determined by the Board in the exercise of its business
judgment, and shall include a working familiarity with basic finance and
accounting practices and an ability to read and understand fundamental
financial statements. At least one member of the Committee shall have
accounting or related financial management expertise, as such qualification
may be determined in the business judgment of the Board.
Upon any changes in the composition of the Committee and otherwise
approximately once each year, the Committee shall ensure that the
Corporation promptly provide Nasdaq with written confirmation regarding:
(a) Any determination that the Board has made regarding the
independence of the Committee members;
(b) The financial literacy of the Committee members;
(c) The determination that at least one of the Committee
members has accounting or related financial management
expertise; and
(d) The annual review and reassessment of the adequacy of the
Committee's charter.
The Committee shall:
1. Review the year-end audit of the Corporation with the management,
the external auditors, and general counsel prior to release to
determine that all are satisfied with the accounting policies and
planned disclosure of the financial information. Specific
inquiries shall be made into the appropriateness of accounting
principles and financial disclosure practices used or proposed,
particularly regarding the degree of aggressiveness or
conservatism of the accounting principles and underlying
estimates.
2. Ensure that the Corporation's interim financial statements
included in Quarterly Reports on Form 10-Q have been reviewed by
the external auditors using appropriate professional standards and
procedures.
3. Prepare a report to be included in each annual proxy statement (or
other proxy statement or consent statement relating to the
election of directors) of the Corporation commencing after
December 15, 2000 which states, among other things, whether:
(a) the Committee has reviewed and discussed with management
the audited financial statements to be included in the
Corporation's Annual Report on Form 10-K for the year
then ended;
(b) the Committee has discussed with the Corporation's
external auditors the matters required to be discussed by
Statements on Auditing Standard No. 61, as may be
modified or supplemented;
(c) the Committee has received the written disclosures and
the letter from the Corporation's external auditors
required by Independence Standards Board Standard No. 1,
as may be modified or supplemented, and has discussed
with the external auditors their independence; and
(d) based on the review described in subsections (a), (b) and
(c) above, the Committee has recommended to the Board
that the audited financial statements be included in the
Corporation's Annual Report on Form 10-K for the last
fiscal year.
4. Review with general counsel pending litigation, claims and other
actions involving the Corporation, which may have a material
effect on the Corporation and determine that adequate reserves
have been established.
5. Review with the external auditors and management the adequacy and
effectiveness of the Corporation's internal controls, and elicit
any recommendations that they may have for the improvement of such
internal control procedures.
6. Review with the controller the external auditor's management
letter and management's response and plans for corrective action.
7. Review contemplated changes in accounting policies, financial
reporting and auditing proposals promulgated by regulatory and
professional bodies.
8. Recommend to the Board each year an external auditing firm to be
employed to audit and report upon the Corporation's financial
statements and review the performance of the current external
auditors.
9. Oversee the independence of the Corporation's external auditors
by, among other things:
(a) requiring the external auditors to deliver to the
Committee on a periodic basis a formal written statement
delineating all relationships between the external
auditors and the Corporation; and
(b) actively engaging in a dialogue with the external
auditors with respect to any disclosed relationships or
services that may impact the objectivity and independence
of the external auditors and recommending that the Board
take appropriate action to satisfy itself of the
auditors' independence;
10. Review with the external auditors their audit plans and scope for
the coming year, any non-audit services performed or planned, and
the compensation paid the external auditors for services
performed.
11. Obtain from the external auditors any information pursuant to
Section 10A of the Securities Exchange Act of 1934.
12. Review with management the status of tax returns and tax audits.
13. Meet independently with the external auditors without members of
the management present. Among items to be discussed in these
meetings are the external auditors' evaluation of the
Corporation's financial and accounting personnel, and the
cooperation which the auditors received during the course of their
activities.
14. Perform such additional activities, and consider such other
matters, within the scope of its responsibilities, as the
Committee or the Board deems necessary or appropriate.
The chairperson of the Committee shall, in consultation with the external
auditors and management, prepare an agenda for the meetings to be held
during the year which will allow the committee to perform the above
activities and adequately discharge its duties. Minutes of the all
committee meetings shall be prepared and reported to the Board and be
maintained by the Controller.
* * *
While the Committee has the duties and responsibilities set forth in this
charter, the Committee is not responsible for planning or conducting the
audit or for determining whether the Corporation's financial statements are
complete and accurate and are in accordance with generally accepted
accounting principles. Similarly, it is not the responsibility of the
Committee to resolve disagreements, if any, between management and the
external auditors or to ensure that the Corporation complies with all laws
and regulations.
*************
PROXY
DELTATHREE, INC.
75 BROAD STREET, 31ST FLOOR, NEW YORK, NEW YORK 10004
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON JUNE 27, 2002
The undersigned hereby appoints Paul C. White and Shimmy Zimels,
each of them with full power of substitution and resubstitution, as proxies
to represent the undersigned at the Annual Meeting of Stockholders of
deltathree, Inc. (the "Company") to be held on Thursday, June 27, 2002 at
10:00 a.m., local time, at The Regent Wall Street, 55 Wall Street, New
York, New York 10005, 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:
Noam Bardin
Ehud Erez
Amir Gera
Issakhar Hacmun
Elie Housman
Joshua Maor
Lior Samuelson
Shimmy Zimels
[ ] 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, as our independent auditors for the
fiscal year ending December 31, 2002.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
(Please date and sign on reverse side and return promptly.)
3. To approve the amended and restated certificate of incorporation
of the Company, which amends the authorized capital stock of the
Company to decrease the authorized number of shares of Class A
Common Stock from 200,000,000 to 75,000,000 and the authorized
number of shares of Class B Common Stock from 200,000,000 to
1,000.
[ ] 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: _____________________