As filed with the Securities and Exchange Commission on November 12, 1997
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
RSL COMMUNICATIONS, LTD.
(Exact name of registrant as specified in its charter)
Bermuda N/A
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
Clarendon House, Church Street
Hamilton HM CX Bermuda
(Address of principal executive offices)
-------------------
RSL Communications, Ltd.
Amended and Restated 1995 Stock Option Plan
1997 Performance Incentive Plan
1997 Stock Incentive Plan
1997 Directors' Compensation Plan
(Full title of the plan)
-------------------
Avery S. Fischer Copy to:
Legal Counsel Robert L. Kohl, Esq.
RSL Communications, N. America, Inc. Mark D. Fischer, Esq.
767 Fifth Avenue, Suite 4300 Rosenman & Colin LLP
New York, New York 10153 575 Madison Avenue
(212) 317-1800 New York, New York 10022
(Name, address and telephone (212) 940-8800
number of agent for service)
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=======================================================================================
Title of Proposed maximum Proposed maximum Amount of
securities to Amount to be offering price aggregate offering registration
be registered registered per share(2) price(2) fee(2)
=======================================================================================
<S> <C> <C> <C> <C>
Class A common shares,
par value $0.00457
per share...... 6,542,888(1) $24.0625 $157,438,242.50 $47,709
=======================================================================================
</TABLE>
(1) Includes up to 2,792,888 shares issuable upon the exercise of options
granted under the Registrant's Amended and Restated 1995 Stock Option
Plan, up to 400,000 shares issuable under the Registrant's 1997
Performance Incentive Plan, up to 3,100,000 shares issuable, or to be
issued upon the exercise of options and SARs granted, under the
Registrant's 1997 Stock Incentive Plan (including 432,856 shares issuable
upon the exercise of options granted to the Registrant's Chief Executive
Officer pursuant to his employment agreement) and up to 250,000 shares
issuable upon the exercise of options granted under the Registrant's 1997
Directors' Compensation Plan. There are also registered such indeterminate
number of additional shares as may become available for sale pursuant to
anti-dilution provisions of such Plans and the options thereunder.
(2) Estimated solely for the purpose of calculating the registration fee;
computed, pursuant to Rule 457(c), upon the basis of the average of the
high and low prices of the Class A common shares as quoted on the Nasdaq
Stock Market's National Market on November 11, 1997.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
RSL Communications, Ltd. (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). The following documents, or portions
thereof, filed by the Company with the Commission pursuant to the Exchange Act
are incorporated by reference in this Registration Statement:
a. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, filed with the Commission on June 6, 1997;
b. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, filed with the Commission on August 8, 1997;
c. The Company's Quarterly Report on Form 10-Q/A for the second
quarter ended June 30, 1997, filed with the Commission on September 26,
1997;
d. The information in respect of the Company's Class A common
shares, $.00457 par value (the "Class A Common Stock"), under the caption
"Description of Capital Stock" contained in the Company's Registration
Statement on Form S-1 (Registration No. 333-34281) filed with the
Commission on August 25, 1997, as amended.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment hereto indicating that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
of this Registration Statement from the respective dates of filings of such
documents.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Bermuda law and the Company's Memorandum of Association and
bye-laws, the directors, secretary and other officers for the time being of the
Company and the liquidator or trustees (if any) for the time being acting in
relation to any of the affairs of the Company and every one of them, and their
heirs, executors and administrators, shall be indemnified and secured harmless
out of the assets of the Company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them, their heirs, executors
or administrators, shall or may incur or
II - 1
<PAGE>
sustain by or by reason of any act done, concurred in or omitted in or about the
execution of their duty, or supposed duty, or in their respective offices or
trusts, and none of them shall be answerable for the acts, receipts, neglects or
defaults of the others of them or for joining in any receipts for the sake of
conformity, or for any bankers or other persons with whom any moneys or effects
belonging to the Company shall or may be lodged or deposited for safe custody,
or for insufficiency or deficiency of any security upon which any moneys of or
belonging to the Company shall be placed out on or invested, or for any other
loss, misfortune or damage which may happen in the execution of their respective
offices or trusts, or in relation thereto, PROVIDED THAT this indemnity shall
not extend to any matter in respect of any fraud or dishonesty which may attach
to any of said persons.
ITEM 8. EXHIBITS
Exhibit No. Description
- ----------- -----------
4.1 Form of Class A Common Share Certificate (incorporated by
reference to Exhibit 4.8 to the Company's Registration
Statement on Form S-1, Registration No. 333-34281).
5.1 Opinion of Conyers, Dill and Pearman.
10.1 RSL Communications, Ltd.'s 1995 Amended and Restated Stock
Option Plan (incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1, Registration No.
333-34281).
10.2 RSL Communications, Ltd. 1997 Performance Incentive Plan.
10.3 RSL Communications, Ltd. 1997 Stock Incentive Plan.
10.4 RSL Communications, Ltd. 1997 Directors' Compensation Plan.
10.5 Employment Agreement dated as of September 2, 1997, by and
between the Company and Itzhak Fisher, Chief Executive Officer
(incorporated by reference to Exhibit 10.66 to the Company's
Registration Statement on Form S-1, Registration No.
333-34281).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Conyers, Dill & Pearman (included in Exhibit 5.1).
II - 2
<PAGE>
ITEM 9. UNDERTAKINGS
1. The undersigned registrant hereby undertakes (a) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement to include any material information with respect to
the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement; (b)
that, for the purpose of determining any liability under the Securities Act of
1933 (the "Act"), each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (c) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. The registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report, to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14a-3 or 14c-3 under the Securities and Exchange Commission Act of 1934; and,
where interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
4. Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate
II - 3
<PAGE>
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II - 4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this 12th day of
November 1997.
RSL COMMUNICATIONS, LTD.
By: /s/ Itzhak Fisher
-----------------------------------
Itzhak Fisher
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Director and Chairman November __, 1997
- -------------------
Ronald S. Lauder of the Board of
Directors
/s/ Itzhak Fisher Director, President November 12, 1997
- ------------------- and Chief Executive
Itzhak Fisher Officer (Principal
Executive Officer)
/s/ Andrew Gaspar Director and Vice November 12, 1997
- ------------------- Chairman of the Board
Andrew Gaspar of Directors
/s/ Jacob Schuster Director, Executive November 12, 1997
- ------------------- Vice President, Chief
Jacob Z. Schuster Financial Officer,
Assistant Secretary
and Treasurer
(Principal Financial
Officer)
II - 5
<PAGE>
/s/ Mark Hirschhorn Vice President- November 12, 1997
- ------------------- Finance, Global
Mark J. Hirschhorn Controller and
Assistant Secretary
(Controller and
Principal Accounting
Officer)
Director November __, 1997
- -------------------
Gustavo A. Cisneros
/s/ Fred Langhammer Director November 12, 1997
- -------------------
Fred H. Langhammer
/s/ Leonard Lauder Director November 12, 1997
- -------------------
Leonard A. Lauder
/s/ Eugene Sekulow Director November 12, 1997
- -------------------
Eugene Sekulow
/s/ Nicolas Trollope Director November 12, 1997
- --------------------
Nicolas G. Trollope
II - 6
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Form of Class A Common Share Certificate (incorporated by
reference to Exhibit 4.8 to the Company's Registration
Statement on Form S-1, Registration No. 333-34281).
5.1 Opinion of Conyers, Dill and Pearman.
10.1 RSL Communications, Ltd.'s 1995 Amended and Restated Stock
Option Plan (incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-1, Registration No.
333-34281).
10.2 RSL Communications, Ltd. 1997 Performance Incentive Plan.
10.3 RSL Communications, Ltd. 1997 Stock Incentive Plan.
10.4 RSL Communications, Ltd. 1997 Directors' Compensation Plan.
10.5 Employment Agreement dated as of September 2, 1997, by and
between the Company and Itzhak Fisher, Chief Executive Officer
(incorporated by reference to Exhibit 10.66 to the Company's
Registration Statement on Form S-1, Registration No.
333-34281).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Conyers, Dill & Pearman (included in Exhibit 5.1).
November 12, 1997 Exhibit 5.1
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: RSL Communications, Ltd.
Ladies/Gentlemen:
We refer to the Registration Statement on Form S-8 (the "Registration
Statement") filed by RSL Communications, Ltd. (the "Company"), a Bermuda
corporation, with the Securities and Exchange Commission with respect to the
registration of up to an aggregate of 6,542,888 shares of the Company's Class A
common shares, par value $0.00457 per share (the "Class A Common Stock"), to be
issued pursuant to, or to be issued upon the exercise of options and stock
appreciation rights granted under the Company's Amended and Restated 1995 Stock
Option Plan, 1997 Performance Incentive Plan, 1997 Stock Incentive Plan and 1997
Directors' Compensation Plan and pursuant to an employment agreement between the
Company and Itzhak Fisher, Chief Executive Officer of the Company.
We have made such examination as we have deemed necessary for the purpose of
this opinion. Based upon such examination, it is our opinion, that, when the
Registration Statement has become effective under the Securities Act of 1933,
and when the Class A Common Stock to be issued are sold and paid for in the
manner described in the aforementioned plans and employment agreement, the Class
A Common Stock will have been validly issued, fully paid and not subject to
further calls.
We hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Yours faithfully,
/s/ Conyers, Dill and Pearman
RSL COMMUNICATIONS, LTD.
1997 PERFORMANCE INCENTIVE PLAN
1. Purpose
The purposes of the Plan are 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.
2. Definitions
Unless the context requires otherwise, the following words as used in the
Plan shall have the meanings ascribed to each below, it being understood that
masculine, feminine and neuter pronouns are used interchangeably and that each
comprehends the others.
"Board" means the Board of Directors of the Company.
"Common Stock" shall mean the Class A common shares, par value $.00457 per
share, of the Company.
"Committee" means the Compensation Committee of the Board (or such other
committee of the Board that the Board shall designate from time to time) or any
subcommittee thereof consisting of two or more directors each of whom is a
Disinterested Director.
"Company" means RSL Communications, Ltd., a Bermuda Corporation.
"Disinterested Director" shall mean a director of the Company who is both
a "Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange
Act and an "outside director" within the meaning of Section 162(m) of the Code.
"Fair Market Value" shall mean, on any date, the average of the closing
price of a Share as reported on the National Association of Securities Dealers
Automated Quotation/National Market System ("NASDAQ/NMS") (or on such other
recognized market or quotation system on which the trading prices of the Share
are traded or quoted at the relevant time) over the preceding twenty business
days.
<PAGE>
"Participant" means (i) each executive officer of the Company and (ii)
each other key employee of the Company or a Subsidiary recommended by the Chief
Executive Officer of the Company and selected by the Committee and approved by
the Board to be a participant under the Plan.
"Performance Period" means each calendar year or multi-year cycle as
determined by the Committee.
"Plan" means the RSL Communications, Ltd. 1997 Performance Incentive Plan,
as set forth herein and as may be amended from time to time.
"Section 162(m)" means section 162(m) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (including any
proposed regulations).
"Subsidiary" means any corporation of which the Company possesses directly
or indirectly fifty percent (50%) or more of the total combined voting power of
all classes of stock of such corporation and any other business organization,
regardless of form, in which the Company possesses directly or indirectly fifty
percent (50%) or more of the total combined equity interests in such
organization.
3. Administration
The Committee shall administer and interpret the Plan. The Committee shall
establish the performance objectives for any calendar year in accordance with
Section 4 and certify whether such performance objectives have been attained.
Any determina tion made by the Committee under the Plan shall be final and
conclusive. The Committee may employ such legal counsel, consultants and agents
(including counsel or agents who are employees of the Company or a Subsidiary)
as it may deem desirable for the administration of the Plan and may rely upon
any opinion received from any such counsel or consultant or agent and any
computation received from such consultant or agent. All expenses incurred in the
administration of the Plan, including, without limitation, for the engagement of
any counsel, consultant or agent, shall be paid by the Company. No member or
former member of the Board or the Committee shall be liable for any act,
omission, interpretation, construction or determination made in connection with
the Plan other than as a result of such individual's willful misconduct.
2
<PAGE>
4. Bonuses
(a) Performance Criteria. Within 90 days after each Performance Period
begins (or, in the case of the 1997 calendar year, as promptly as practicable
following the adoption of this Plan), the Committee shall establish the
performance objective or objectives that must be satisfied in order for a
Participant to receive a bonus for such Performance Period. Any such performance
objectives will be based upon the achievement of one or more of the following
criteria, which may be absolute, relative or comparative, with respect to the
Company, a Subsidiary or a division or business unit of the Company or a
Subsidiary, as determined by the Committee: (i) consolidated earnings before
income taxes, depreciation and amortization; (ii) revenues; (iii) earnings per
share; (iv) net income; (v) gross profit margin; (vi) maximum capital
expenditures; (vii) return on equity; (viii) return on total capital; and/or
(ix) completion of an initial public offering of Common Stock.
(b) Maximum Amount Payable for 1997. With respect to calendar year 1997, a
cash bonus pool of $2,675,000 will be established if the Company achieves the
performance objectives established by the Committee for such calendar year. In
the event that all of such performance targets are achieved, $650,000 will be
awarded to the Company's Chief Executive Officer, and the remainder will be
awarded to Participants based upon the recommendation of the Company's Chief
Executive Officer and approved by the Compensation Committee and the Board of
Directors, with no individual receiving more than $650,000.
(c) Maximum Amount Payable for 1998 and Thereafter. With respect to
calendar years 1998 and thereafter, if the Committee certifies in writing that
the performance objectives established for the relevant Performance Period under
Section
3
<PAGE>
4(a) have been satisfied, each Participant who is employed by the Company or one
of its Subsidiaries on the last day of the Performance Period for which the
bonus is payable shall be eligible to receive a maximum bonus hereunder
determined as follows:
(i) in the case of a Participant other than the Company's Chief
Executive Officer:
Less than 120% or
80% of 80% of 100% of more of
Target Target Target Target
----------- ----------- ------------- -------------
0 25% of 100% of 200% of base
base base salary salary
salary
(ii) in the case of the chief executive officer of the Company and
the chief executive officer of International Telecommunications Group,
Ltd., a Subsidiary of the Company,
Less than 120% or
80% of 80% of 100% of more of
Target Target Target Target
----------- ----------- ------------- -------------
0 25% of 150% of 250% of base
base base salary salary
salary
(iii) in the event of performance between 80% of target and 100% of
target, or between 100% of target and 120% of target, the maximum bonus
shall be pro rated between the applicable bonus percentages set forth in
the preceding clauses (i) and (ii) above.
If a Participant's employment terminates for any reason (including, without
limitation, his death, disability or retirement under the terms of any
retirement plan maintained by the Company or a Subsidiary) prior to the last day
of the Performance Period for which the bonus is payable but after March 31 of
such Performance Period, the Committee shall determine whether a pro rated bonus
shall be paid, provided that the maximum bonus for which such Participant shall
be eligible shall be the amount applicable to such Participant under the
preceding clause (i) or (ii) (as adjusted by clause (iii)) multiplied by a
fraction, the numerator of which is the number of days that have elapsed during
4
<PAGE>
the Performance Period in which the termination occurs prior to and including
the date of the Participant's termination of employment and the denominator of
which is the total number of days in the Performance Period.
(d) Nondiscretionary Bonus. Fifty percent (50%) of the maximum bonus
amount (if any) as determined pursuant to Section 4(c) above shall be payable to
the Participant.
(e) Discretionary Bonus. The Committee shall have the right, in its
absolute discretion, to award a bonus to any Participant equal to fifty percent
(50%), or such lesser percentage as the Committee shall determine, of the
maximum bonus amount as determined pursuant to Section 4(c), based on individual
performance or any other factors that the Committee, in its discretion, shall
deem appropriate.
(f) Affirmative Discretion. Notwithstanding any other provision in the
Plan to the contrary, but subject to Section 4(g) below, (i) the Committee shall
have the right, in its discretion, to pay to any Participant a bonus for the
year, based on individual performance or any other criteria that the Committee
deems appropriate, regardless of whether performance objectives are attained,
and (ii) in connection with the hiring of any person who is or becomes a
Participant, the Committee may provide for a minimum bonus amount in any
Performance Period.
(g) Absolute Maximum Bonus. Notwithstanding any other provision in the
Plan to the contrary, the maximum bonus that may be paid to any Participant
under the Plan with respect to any year may not exceed $2,000,000.
5. Payment
Except as otherwise provided hereunder, payment of any bonus amount
determined under Section 4 shall be made to each Participant as soon as
practicable after the Committee certifies that one or more of the applicable
performance objectives have been attained (or, in the case of any bonus payable
under the provisions of Section 4(e) or 4(f), after the Committee determines the
amount of any such bonus).
6. Form of Payment
The Committee shall determine whether any bonus payable under the Plan is
payable in cash, in shares of Common Stock or in any combination thereof,
provided that not less than 50%of such bonus shall be payable in cash. The
Committee shall have the right to impose whatever conditions it deems
appropriate with respect to the
5
<PAGE>
award of shares of Common Stock, including conditioning the vesting of such
shares on the performance of additional service. In addition, the Committee
shall permit a Participant to elect to receive all or a portion of his of her
bonus payable hereunder in shares of Common Stock (based on the Fair Market
Value of such shares at the time of payment (without regard to any deferral
under Section 7)). The maximum number of shares available for issuance under the
Plan shall be 400,000 Shares of Common Stock; provided that the Committee shall
adjust such number of Shares as appropriate in the event of any Share dividend
or Share split, recapitalization (including, without limitation, the payment of
an extraordinary dividend), merger, consolidation, combina tion, spin-off,
distribution of assets to shareholders, exchange of shares, or other similar
corporate change.
7. Deferral
Payment of a bonus hereunder on a deferred basis may be permitted at the
election of the Participant on terms and conditions established by the
Committee, which may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments or the
grant or crediting of dividend equivalents or other amounts in respect of
installment or deferred payments denominated in Common Stock.
8. General Provisions
(a) Effectiveness of the Plan. The Plan shall be effective with respect to
calendar years 1997 through 2000, unless the term hereof is extended by action
of the Board.
(b) Amendment and Termination. Notwithstanding Section 8(a), the Board or
the Committee may at any time amend, suspend, discontinue or terminate the Plan;
provided, however, that no such action shall be effective without approval by
the shareholders of the Company to the extent necessary to continue to qualify
the amounts payable hereunder to "covered employees" (within the meaning of
Section 162(m)) as deductible under Section 162(m).
(c) Designation of Beneficiary. Each Participant may designate a bene
ficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the consent of any such beneficiary. Any such designation, change or
cancellation must be made in a form approved by the Committee and shall not be
effective until received by the Committee.
6
<PAGE>
If no beneficiary has been named, or the designated beneficiary or beneficiaries
shall have predeceased the Participant, the beneficiary shall be the
Participant's spouse or, if no spouse survives the Participant, the
Participant's estate. If a Participant designates more than one beneficiary, the
rights of such beneficiaries shall be payable in equal shares, unless the
Participant has designated otherwise.
(d) No Right of Continued Employment. Nothing in this Plan shall be
construed as conferring upon any Participant any right to continue in the
employment of the Company or any of its Subsidiaries.
(e) No Limitation on Corporate Actions. Nothing contained in the Plan
shall be construed to prevent the Company or any Subsidiary from taking any
corporate action which is deemed by it to be appropriate or in its best
interest, whether or not such action would have an adverse effect on any awards
made under the Plan. No employee, beneficiary or other person shall have any
claim against the Company or any Subsidiary as a result of any such action.
(f) Nonalienation of Benefits. Except as expressly provided herein, no
Participant or beneficiary shall have the power or right to transfer,
anticipate, or other wise encumber the Participant's interest under the Plan.
The Company's obligations under this Plan are not assignable or transferable
except to (i) a corporation which acquires all or substantially all of the
Company's assets or (ii) any corporation into which the Company may be merged or
consolidated. The provisions of the Plan shall inure to the benefit of each
Participant and the Participant's beneficiaries, heirs, executors,
administrators or successors in interest.
(g) Withholding. Any amount payable to a Participant or a beneficiary
under this Plan shall be subject to any applicable Federal, state and local
income and employment taxes and any other amounts that the Company or a
Subsidiary is required at law to deduct and withhold from such payment.
(h) Severability. If any provision of this Plan is held unenforceable, the
remainder of the Plan shall continue in full force and effect without regard to
such unenforceable provision and shall be applied as though the unenforceable
provision were not contained in the Plan.
(i) Governing Law. The Plan shall be construed in accordance with and
governed by the laws of Bermuda.
7
<PAGE>
(j) Headings. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in a construction of the provisions of the
Plan.
8
RSL COMMUNICATIONS, LTD.
1997 STOCK INCENTIVE PLAN
1. Purpose
The purpose of the Plan is to foster and promote the long-term financial
success of the Company and materially increase shareholder value by
(a) motivating superior performance by means of performance-related
incen tives,
(b) encouraging and providing for the acquisition of an ownership
interest in the Company by Eligible Employees and
(c) 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.
2. Definitions
"Award" shall mean any grant or award under the Plan, as evidenced in a
written document delivered to a Participant as provided in Section 11(b).
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (i) the willful failure by the Participant to perform
substantially the Participant's duties as an employee of the Company (other than
due to physical or mental illness) after reasonable notice to the Participant of
such failure, (ii) the Participant's engaging in serious misconduct that is
injurious to the Company or any Subsidiary (iii) the Participant's having been
convicted of, or entered a plea of nolo contendere to, a crime that constitutes
a felony, or (iv) the breach by the Partici pant of any written covenant or
agreement not to compete, in each case with respect to the Company or any
Subsidiary, regarding confidentiality of information of the Company or any
Subsidiary or nonsolicitation or hiring of employees of the Company or any
Subsidiary.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
<PAGE>
"Committee" shall mean the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan.
"Common Stock" shall mean the Class A common shares, par value $.00457 per
share, of the Company.
"Company" shall mean RSL Communications, Ltd., a Bermuda corporation, and
any successor thereto.
"Deferred Annual Amount" shall mean, with respect to any year, the amount
of compensation that a Participant elects to defer in exchange for an award of
Elective Units as determined pursuant to Section 9 hereof.
"Deferred Stock" shall mean a contractual right to receive a share of
Common Stock at the time and subject to the conditions set forth in Section 9
hereof.
"Disability" shall mean long-term disability as defined under the terms of
the Company's applicable long term disability plans or policies.
"Disinterested Director" shall mean a director of the Company who is both
a "Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange
Act and an "outside director" within the meaning of Section 162(m) of the Code.
"Early Retirement" shall mean retirement at or after the earliest age at
which the Participant may retire and receive an immediate, but actuarially
reduced, retirement benefit under any defined benefit pension plan maintained by
the Company or any of its Subsidiaries in which such Participant participates,
or, in the absence of any such applicable plan, as determined by the Committee.
"Elective Units" shall mean an award of Deferred Stock made pursuant to
Section 9 in respect of a Participant's Deferred Annual Amount.
"Eligible Employee" shall mean each Executive Officer and each other key
employee of the Company or its Subsidiaries, but shall not include Directors who
are not employees of any such entity.
"Employment" shall mean, for purposes of Sections 5(e), 7(b) and 8(b),
continuous and regular salaried employment with the Company or a Subsidiary,
which shall include (unless the Committee shall otherwise determine) any period
of vacation,
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any approved leave of absence or any salary continuation or severance pay period
and, at the discretion of the Committee, may include service with any former
Subsidiary of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Executive Officer" shall mean those persons who are officers of the
Company within the meaning of Rule 16a-1(f) of the Exchange Act.
"Fair Market Value" shall mean, on any date, the average of the closing
price of a Share as reported on the National Association of Securities Dealers
Automated Quotation/National Market System ("NASDAQ/NMS") (or on such other
recognized market or quotation system on which the trading prices of the Share
are traded or quoted at the relevant time) over the preceding twenty business
days. Notwithstanding the foregoing, (i) in the case of any Award made on the
date of the initial public offering of the Company's Common Stock, "Fair Market
Value" on such date shall be the price at which the Company's Common Stock is
sold to the public in such initial public offering and (ii) in the case of an
Incentive Stock Option, "Fair Market Value" shall, on any date, mean the average
of the bid and asked price of a Share reported on the NASDAQ/NMS (or on such
other recognized market or quotation system on which the trading prices of the
Share are traded or quoted at the relevant time) on such date.
"Incentive Stock" shall mean any Award of Common Stock granted under
Section 8 which becomes vested and nonforfeitable upon the attainment, in whole
or in part, of performance objectives determined by the Committee.
"Incentive Stock Option" shall mean an Option which is intended to meet
the requirements of Section 422 of the Code.
"Incentive Unit" shall mean any Award of a contractual right granted under
Section 8 to receive Common Stock (or, at the discretion of the Committee, cash
based on the Fair Market Value of the Common Stock) which becomes vested and
nonforfeitable upon the attainment, in whole or in part, of performance
objectives determined by the Committee.
"Nonstatutory Stock Option" shall mean an Option which is not intended to
be an Incentive Stock Option.
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"Normal Retirement" shall mean retirement at or after the earliest age at
which the Participant may retire and receive a retirement benefit without an
actuarial reduction for early commencement of benefits under any defined benefit
pension plan maintained by the Company or any of its Subsidiaries in which such
Participant parti cipates, or, in the absence of any such applicable plan, as
determined by the Committee.
"Option" shall mean the right to purchase the number of shares of Common
Stock specified by the Committee, at a price and for the term fixed by the
Committee in accordance with the Plan and subject to any other limitations and
restrictions as this Plan and the Committee shall impose.
"Participant" shall mean an Eligible Employee who is selected by the
Committee to receive an Award under the Plan.
"Plan" shall mean the RSL Communications, Ltd. 1997 Stock Option Plan,
described herein, and as may be amended from time to time.
"Reload Option" shall have the meaning ascribed thereto in Section 5(f).
"Restricted Period" shall mean the period during which a grant of
Incentive Stock, Restricted Stock, Incentive Units or Restricted Units is
subject to forfeiture.
"Restricted Stock" shall mean any Award of Common Stock granted under
Section 7 which becomes vested and nonforfeitable, in whole or in part, upon the
completion of such period of service as shall be determined by the Committee.
"Restricted Unit" shall mean any Award of a contractual right granted
under Section 7 to receive Common Stock (or, at the discretion of the Committee,
cash based on the Fair Market Value of the Common Stock) which becomes vested
and nonforfeitable, in whole or in part, upon the completion of such period of
service as shall be determined by the Committee.
"Share" shall mean a share of Common Stock.
"Stock Appreciation Right" shall mean a contractual right granted under
Section 6 to receive cash, Common Stock or a combination thereof.
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"Subsidiary" shall mean any corporation of which the Company possesses
directly or indirectly fifty percent (50%) or more of the total combined voting
power of all classes of stock of such corporation and any other business
organization, regardless of form, in which the Company possesses directly or
indirectly fifty percent (50%) or more of the total combined equity interests in
such organization.
"Supplemental Units" shall mean an award of Deferred Stock made pursuant
to Section 9 with respect to a number of shares in excess of the number of
shares corresponding to the Participant's Elective Units.
3. Administration
The Plan shall be administered by the Committee which shall consist of at
least two Directors of the Company chosen by the Board each of whom is a
Disinterested Director. The Committee shall have the responsibility of
construing and interpreting the Plan and of establishing and amending such rules
and regulations as it deems necessary or desirable for the proper administration
of the Plan. Any decision or action taken or to be taken by the Committee,
arising out of or in connection with the construction, administration,
interpretation and effect of the Plan and of its rules and regulations, shall,
to the maximum extent permitted by applicable law, be within its absolute
discretion (except as otherwise specifically provided herein) and shall be
conclusive and binding upon all Participants and any person claiming under or
through any Participant.
4. Maximum Amount of Shares Available for Awards
(a) Maximum Number of Shares. The maximum number of shares of Stock in
respect of which Awards may be made under the Plan shall be a total of 3,100,000
shares of Common Stock. Without limiting the generality of the foregoing,
whenever shares are received by the Company in connection with the exercise of
or payment for any Award granted under the Plan only the net number of shares
actually issued shall be counted against the foregoing limit.
(b) Shares Available for Issuance. Shares of Common Stock may be made
available from the authorized but unissued shares of the Company or from Shares
held in the Company's treasury and not reserved for some other purpose. In
addition, if any Award in respect of Shares is canceled or forfeited for any
reason without delivery of shares of Common Stock, the shares subject to such
Award shall thereafter again be available for award pursuant to the Plan.
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(c) Adjustments Upon Certain Events. In the event of any Share dividend or
Share split, recapitalization (including, without limitation, the payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to shareholders, exchange of shares, or other similar
corporate change, the aggregate number of Shares available for Options under
Section 4(a) or subject to outstanding Options and the respective prices
applicable to outstanding Options shall be appropriately adjusted.
(d) No Adjustment If Value Received. Except as hereinbefore expressly
provided, the issuance by the Company of shares of stock of any class or
securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or other securities, and in any
case whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to the number of Shares subject to
Options to be awarded to an Eligible Employee pursuant to Section 5.
5. Stock Options
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
the authority to grant Options to an Eligible Employee and to determine (i) the
number of shares to be covered by each Option, (ii) the exercise price therefor
and (iii) the conditions and limitations applicable to the exercise of the
Option. Notwithstanding the foregoing, in no event shall the Committee grant any
Participant Options in any single calendar year for more than 500,000 shares of
Common Stock, as such number may be adjusted pursuant to Section 4(c). The
Committee shall have the authority to grant Incentive Stock Options or
Nonstatutory Stock Options. In the case of Incentive Stock Options, the terms
and conditions of such grants shall be subject to and comply with Section 422 of
the Code and the regulations thereunder.
(b) Option Price. The Committee shall establish the exercise price at the
time each Option is granted, which price shall, unless the Committee shall
determine otherwise, initially equal the Fair Market Value of the Common Stock
at the date of grant and shall be increased on the first day of each calendar
quarter, by an amount, compounded annually, based on the yield to maturity of
United States Treasury Securities having a maturity approximately equal to the
term of such Option on the date that such Option is granted. Notwithstanding the
foregoing, (i) the exercise price at the time an Option is granted shall not be
less than the Fair Market Value of the Common Stock at the date of grant and
(ii) in the case of an Incentive Stock Option issued to a Participant who owns
stock in the Company possessing more than 10% of
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the total combined voting power of all classes of stock of the Company, the
exercise price at the time of such Incentive Stock Option at the time such
Incentive Stock Option is granted to such individual shall equal at least 110%
of the Fair Market Value of the Common Stock at the date of grant.
(c) Option Term. If not previously exercised each Option shall expire upon
the seventh (7th) anniversary of the date of the grant thereof or, upon the
earlier termination of the Participant's Employment (or, if applicable, on the
day following the last day on which such Option is exercisable under Section
5(e) below), provided that (i) the Committee may establish a shorter term for an
Option at the time of the grant of such Option and (ii) in the case of an
Incentive Stock Option issued to a Participant who owns stock in the Company
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, such Incentive Stock Option shall expire on the fifth
(5th) anniversary of the date of grant.
(d) Exercise. Each Option shall be exercised at such times and subject to
such terms and conditions as the Committee may specify in the applicable Award
or thereafter; provided, however, that if the Committee does not establish a
different exercise schedule at or after the date of grant of an Option, such
Option shall become exercisable on a cumulative basis in three equal annual
installments commencing on the first anniversary of the date the Option is
granted. The Committee may impose such conditions with respect to the exercise
of Options as it shall deem appropriate, includ ing without limitation, any
conditions relating to the application of federal or state securities laws. No
Shares shall be delivered pursuant to any exercise of an Option unless
arrangements satisfactory to the Committee have been made to assure full payment
of the option price therefor and of applicable taxes as provided in Section
11(a) below. Without limiting the generality of the foregoing, payment of the
option price may be made in cash or its equivalent or, if and to the extent
permitted by the Committee, by exchanging shares of Common Stock owned by the
optionee for at least six (6) months (or such longer period as is required by
applicable accounting standards to avoid a charge to earnings) and that are not
the subject of any pledge or other security interest, or by a combination of the
foregoing, provided that the combined value of all cash and cash equivalents and
the Fair Market Value of any such Common Stock so tendered to the Company,
valued as of the date of such tender, is at least equal to such option price.
(e) Termination of Employment. Unless the Committee shall otherwise
determine at or after grant, an Option shall be exercisable following the
termination of a Participant's Employment only to the extent provided in this
Section 5(e). If a Participant's Employment terminates due to the Participant's
(i) death, (ii) Disability,
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(iii) Early Retirement with the consent of the Committee or (iv) Normal
Retirement, the Participant (or, in the event of the Participant's death or
Disability during Employment or during the period during which an Option is
exercisable under this sentence, the Participant's beneficiary or legal
representative) may exercise any Option held by the Participant at the time of
such termination, regardless of whether then exer cisable, for a period of three
years (or such greater or lesser period as the Committee shall determine at or
after grant), but in no event after the date the Option otherwise expires. If a
Participant's Employment is terminated for Cause (or, if after the Participant's
termination of Employment, the Committee determines that the Parti cipant's
Employment could have been terminated for Cause had the Participant still been
employed or has otherwise engaged in conduct that is detrimental to the
interests of the Company, as determined by the Committee in its sole
discretion), all Options held by the Participant shall immediately terminate,
regardless of whether then exercis able. In the event of a Participant's
termination of Employment for any reason not described in the preceding two
sentences, the Participant (or, in the event of the Partici pant's death or
Disability during the period during which an Option is exercisable under this
sentence, the Participant's beneficiary or legal representative) may exercise
any Option which was exercisable at the time of such termination for 90 days (or
such greater or lesser period as the Committee shall specify at or after the
grant of such Option) following the date of such termination, but in no event
after the date the Option otherwise expires.
(f) Reload Options. The Committee may provide that a Participant (or, if
applicable, his permitted transferee) who delivers shares of Common Stock that
have been owned by such Participant (or permitted transferee) for any minimum
period of time specified by the Committee to exercise an Option (when the fair
market value of Common Stock exceeds the exercise price of such Option) will
automatically be granted new Options ("Reload Options") for a number of shares
of Common Stock equal to the number of shares so delivered. Unless the Committee
determines otherwise, such Reload Options will be subject to the same terms and
conditions (including the same expiration date) as the related Option except (i)
that the exercise price shall initially be equal to the Fair Market Value of a
share of Common Stock on the date such Reload Option is granted and (ii) such
Reload Option shall not be exercisable prior to the six month anniversary of the
date of grant and, thereafter, shall be exercisable in full.
6. Stock Appreciation Rights
(a) Grant of SARs. The Committee shall have the authority to grant Stock
Appreciation Rights in tandem with an Option, in addition to an Option, or
freestanding and unrelated to an Option. Notwithstanding the foregoing, in no
event
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shall the Committee grant any Participant more than 500,000 SARs in any single
calendar year, as such number may be adjusted pursuant to Section 4(c). Stock
Appreciation Rights granted in tandem or in addition to an Option may be granted
either at the same time as the Option or at a later time. Stock Appreciation
Rights shall not be exercisable after the expiration of ten years from the date
of grant and shall have a base price determined in the same manner as, and
subject to the same conditions as apply with respect to, a Nonstatutory Stock
Option under Section 5(b).
(b) Exercise of SARs. A Stock Appreciation Right shall entitle the
Participant to receive from the Company an amount equal to the excess of the
Fair Market Value of a share of Common Stock on the date of exercise of the
Stock Appreciation Right over the base price thereof. The Committee shall
determine the time or times at which or the event or events (including, without
limitation, a Change of Control) upon which a Stock Appreciation Right may be
exercised in whole or in part, the method of exercise and whether such Stock
Appreciation Right shall be settled in cash, shares of Common Stock or a
combination of cash and shares of Common Stock; provided, however, that unless
otherwise specified by the Committee at or after grant, a Stock Appreciation
Right granted in tandem with an Option shall be exercisable only at the same
time or times as the related Option is exercisable.
7. Restricted Stock and Restricted Units
(a) Grant of Restricted Stock or Restricted Units. The Committee may grant
Awards of Restricted Stock or Restricted Units to Participants at such times and
in such amounts, and subject to such other terms and conditions not inconsistent
with the Plan, as it shall determine. Each grant of Restricted Stock or
Restricted Units shall be evidenced by an Award Agreement. Unless the Committee
provides otherwise at or after the date of grant, stock certificates evidencing
any shares of Restricted Stock so granted shall be held in the custody of the
Secretary of the Company until the Restricted Period lapses, and, as a condition
to the grant of any Award of shares of Restricted Stock, the Participant shall
have delivered to the Secretary of the Company a certificate, endorsed in blank,
relating to the shares of Common Stock covered by such Award.
(b) Termination of Employment. Unless the Committee otherwise determines
at or after grant, the rights of a Participant with respect to an award of
Restricted Stock or Restricted Units outstanding at the time of the
Participant's termination of Employment shall be determined under this Section
7(b). In the event that a Participant's Employment terminates due to the
Participant's (i) death, (ii) Disability, (iii) Early Retirement with the
consent of the Committee or (iv) Normal
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Retirement, any award of Restricted Stock or Restricted Units shall become
vested and nonforfeitable as to that number of shares which is equal to the
number of shares of Common Stock subject to such Award times a fraction, the
numerator of which is the number of days actually worked during the Restricted
Period (or, in the case of an Award which has previously vested in part (an
"Installment Award"), the number of days worked since the last vesting date) and
the denominator of which is the total number of days during the Restricted
Period (or, in the case of an Installment Award, the number of days between the
last vesting date and the end of the Restricted Period). Unless the Committee
otherwise determines, any portion of any Restricted Stock or Restricted Unit
Award that has not become nonforfeitable at the date of a Participant's
termination of Employment shall be forfeited as of such date.
(c) Delivery of Shares. Upon the expiration or termination of the
Restricted Period and the satisfaction (as determined by the Committee) of any
other conditions determined by the Committee, the restrictions applicable to the
Restricted Stock or Restricted Units shall lapse and a stock certificate for the
number of shares of Common Stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions, except any that may be
imposed by law, to the Participant or the Participant's beneficiary or estate,
as the case may be. No payment will be required to be made by the Participant
upon the delivery of such shares of Common Stock and/or cash, except as
otherwise provided in Section 11(a) of the Plan. At or after the date of grant,
the Committee may accelerate the vesting of any award of Restricted Stock or
Restricted Units or waive any conditions to the vesting of any such award.
(d) Restricted Period; Restrictions on Transferability during Restricted
Period. Unless otherwise determined by the Committee at or after the date of
grant, the Restricted Period applicable to any award of Restricted Stock or
Restricted Units shall lapse, and the shares related to such award shall become
freely transferable, on the third anniversary of the date of grant. Restricted
Stock or Restricted Units may not be sold, assigned, pledged or otherwise
encumbered, except as herein provided, during the Restricted Period. Any
certificates issued in respect of Restricted Stock shall be registered in the
name of the Participant and deposited by such Participant, together with a stock
power endorsed in blank, with the Company. At the expiration of the Restricted
Period with respect to any award of Restricted Stock, unless otherwise
forfeited, the Company shall deliver such certificates to the Participant or to
the Participant's legal representative. Payment for Restricted Stock Units shall
be made by the Company in shares of Common Stock, cash or in any combination
thereof, as determined by the Committee.
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(e) Rights as a Stockholder; Dividend Equivalents. Unless otherwise
determined by the Committee at or after the date of grant, Participants granted
shares of Restricted Stock shall be entitled to receive, either currently or at
a future date, as specified by the Committee, all dividends and other
distributions paid with respect to those shares, provided that if any such
dividends or distributions are paid in shares of Common Stock or other property
(other than cash), such shares and other property shall be subject to the same
forfeiture restrictions and restrictions on transferability as apply to the
shares of Restricted Stock with respect to which they were paid. The Committee
will determine whether and to what extent to credit to the account of, or to pay
currently to, each recipient of Restricted Units, an amount equal to any
dividends paid by the Company during the Restricted Period with respect to the
corresponding number of shares of Common Stock ("Dividend Equivalents"). To the
extent provided by the Committee at or after the date of grant, any Dividend
Equivalents with respect to cash dividends on the Common Stock credited to a
Participant's account shall be deemed to have been invested in shares of Common
Stock on the record date established for the related dividend and, accordingly,
a number of additional Restricted Units shall be credited to such Participant's
account equal to the greatest whole number which may be obtained by dividing (x)
the value of such Dividend Equivalent on the record date by (y) the Fair Market
Value of a share of Common Stock on such date.
8. Incentive Awards
(a) Incentive Stock and Incentive Units. Subject to the provisions of the
Plan, the Committee shall have the authority to grant Incentive Stock or
Incentive Units to any Eligible Employee and to determine (i) the number of
shares of Incentive Stock and the number of Incentive Units to be granted to
each Participant and (ii) the other terms and conditions of such Awards;
provided that, to the extent necessary to comply with applicable law, Incentive
Stock shall only be awarded to an Eligible Employee who has been employed for
such minimum period of time as shall be determined by the Committee. The
Restricted Period related to Incentive Stock or Incentive Units shall lapse upon
the determination by the Committee that the performance objectives established
by the Committee have been attained, in whole or in part. Such performance
objectives may be related to the performance of (i) the Company, (ii) a
Subsidiary, (iii) a division or unit of the Company or any Subsidiary, (v) the
Participant or (vi) any combination of the foregoing, over a measurement period
or periods established by the Committee. Unless the Committee otherwise
determines at the time of grant of Incentive Stock or Incentive Units to an
Executive Officer, the performance objectives with respect to such Award shall
be related to at least one of the following criteria, which may be determined
solely by reference to the performance of the Company or a Subsidiary or a
division or unit of the Company or a Subsidiary or
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based on comparative performance relative to other companies: (i) consolidated
earn ings before income taxes, depreciation and amortization; (ii) revenues;
(iii) earnings per share; (iv) net income; (v) gross profit margin; (vi) maximum
capital expenditures; (vii) return on equity; and/or (viii) return on total
capital. Except to the extent otherwise expressly provided herein, the Committee
may, at any time and from time to time, change the performance objectives
applicable with respect to any Incentive Stock or Incentive Units to reflect
such factors, including, without limitation, changes in a Participant's duties
or responsibilities or changes in business objectives (e.g., from corporate to
Subsidiary or business unit performance or vice versa), as the Committee shall
deem necessary or appropriate. In making any such adjustment, the Committee
shall adjust the number of Incentive Stock or Incentive Units or take other
appropriate actions to prevent any enlargement or diminution of the
Participant's rights related to service rendered and performance attained prior
to the effective date of such adjustment.
(b) Termination of Employment. Unless the Committee otherwise determines
at or after grant, the rights of a Participant with respect to an award of
Incentive Stock or Incentive Units outstanding at the time of the Participant's
termination of Employment shall be determined under this Section 8(b). In the
event that a Participant's Employment terminates due to the Participant's (i)
death, (ii) Disability, (iii) Early Retirement with the consent of the Committee
or (iv) Normal Retirement, any award of Incentive Stock or Incentive Units shall
become vested and nonforfeitable at the end of the measurement period as to that
number of shares which is equal to that percentage, if any, of such award that
would have been earned based on the attainment or partial attainment of such
performance objectives times a fraction, the numerator of which is the number of
days employed during the Restricted Period (or, in the case of an Award which
has previously vested in part (an "Installment Award"), the number of days
employed since the last vesting date) and the denominator of which is the total
number of days during the Restricted Period (or, in the case of an Installment
Award, the number of days between the last vesting date and the end of the
Restricted Period); provided that, any portion of any Incentive Stock or
Incentive Unit award that does not become vested as of the times set forth in
this sentence shall be forfeited at such times. In all other cases, any portion
of any award of Incentive Stock or Incentive Units that has not become
nonforfeitable at the date of a Participant's termination of Employment shall be
forfeited as of such date.
(c) Awards Nontransferable. Incentive Stock or Incentive Units may not be
sold, assigned, pledged or otherwise encumbered, except as herein provided,
during the Restricted Period. Any certificates issued in respect of Incentive
Stock shall be registered in the name of the Participant and deposited by such
Participant, together
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with a stock power endorsed in blank, with the Company. At the expiration of the
Restricted Period with respect to any award of Incentive Stock, unless otherwise
forfeited, the Company shall deliver such certificates to the Participant or to
the Participant's legal representative. Payment for Incentive Stock Units shall
be made by the Company in shares of Common Stock, cash or in any combination
thereof, as determined by the Committee.
(d) Rights as a Stockholder; Dividend Equivalents. Unless otherwise
determined by the Committee at or after the date of grant, Participants granted
shares of Incentive Stock shall be entitled to receive, either currently or at a
future date, as specified by the Committee, all dividends and other
distributions paid with respect to those shares, provided that if any such
dividends or distributions are paid in shares of Common Stock or other property
(other than cash), such shares and other property shall be subject to the same
forfeiture restrictions and restrictions on transferability as apply to the
shares of Incentive Stock with respect to which they were paid. The Committee
will determine whether and to what extent to credit to the account of, or to pay
currently to, each recipient of Incentive Units, an amount equal to any
dividends paid by the Company during the period of deferral with respect to the
corresponding number of shares of Common Stock ("Dividend Equivalents"). To the
extent provided by the Committee at or after the date of grant, any Dividend
Equivalents with respect to cash dividends on the Common Stock credited to a
Participant's account shall be deemed to have been invested in shares of Common
Stock on the record date established for the related dividend and, accordingly,
a number of additional Incentive Units shall be credited to such Participant's
account equal to the greatest whole number which may be obtained by dividing (x)
the value of such Dividend Equivalent on the record date by (y) the Fair Market
Value of a share of Common Stock on such date.
(e) Interpretation. Notwithstanding anything else contained in this
Section 8 to the contrary, if any award of Incentive Stock or Incentive Units is
intended, at the time of grant, to be other performance based compensation
within the meaning of Section 162(m)(4)(C) of the Code, to the extent required
to so qualify any Award hereunder, the Committee shall not be entitled to
exercise any discretion otherwise authorized under this Section 8 with respect
to such award if the ability to exercise such discretion (as opposed to the
exercise of such discretion) would cause such award to fail to qualify as other
performance based compensation.
9. Deferred Stock
(a) Deferred Stock Awards. On such date or dates as shall be established
by the Committee and subject to such terms and conditions as the
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Committee shall determine, a Participant may be permitted to elect to defer
receipt of all or a portion of his annual compensation and/or annual incentive
bonus ("Deferred Annual Amount") payable by the Company or a Subsidiary and
receive in lieu thereof a number of Elective Units equal to the greatest whole
number which may be obtained by dividing (x) the amount of the Deferred Annual
Amount by (y) the Fair Market Value of a share of Common Stock on the date of
grant. No shares of Common Stock will be issued at the time an award of Deferred
Stock is made and the Company shall not be required to set aside a fund for the
payment of any such award. The Company will establish a separate account for the
Participant and will record in such account the number of Elective Units awarded
to the Participant. To the extent the Committee so determines, a Participant who
receives an award of Elective Units shall receive that number of Supplemental
Units equal to the greatest whole number which may be obtained by dividing (x)
such percentage of the Deferred Annual Amount as is determined by the Committee
at the date of grant by (y) the Fair Market Value of a share of Common Stock on
the date of grant.
(b) Rights as a Stockholder; Dividend Equivalents. A Participant shall not
have any right in respect of Deferred Stock awarded pursuant to the Plan to vote
on any matter submitted to the Company's stockholders until such time as the
shares of Common Stock attributable to such Deferred Stock have been issued to
such Participant or his beneficiary. The Committee will determine whether and to
what extent to credit to the account of, or to pay currently to, each recipient
of a Deferred Stock Unit award, any Dividend Equivalents. To the extent provided
by the Committee at or after the date of grant, any Dividend Equivalents with
respect to cash dividends on the Common Stock credited to a Participant's
account shall be deemed to have been invested in shares of Common Stock on the
record date established for the related dividend and, accordingly, a number of
Deferred Stock shall be credited to such Participant's account equal to the
greatest whole number which may be obtained by dividing (x) the value of such
Dividend Equivalent on the record date by (y) the Fair Market Value of a share
of Common Stock on such date.
(c) Vesting of Deferred Stock Unit Awards. The portion of each Deferred
Stock Unit award that consists of Elective Units, together with any Dividend
Equivalents credited with respect thereto, shall be fully vested at all times.
Unless the Committee provides otherwise at or after the date of grant, the
portion of each Deferred Stock Unit award that consists of Supplemental Units,
together with any Dividend Equivalents credited with respect thereto, will
become vested in full on the third anniversary of the date the corresponding
Deferred Annual Amount would have been paid absent the Participant's election to
defer provided the Participant remains in the continuous employ of the Company
or a Subsidiary through such date.
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Notwithstanding the foregoing, the Committee may accelerate the vesting of any
Deferred Stock Unit award at or after the date of grant.
(d) Settlement of Deferred Stock. Unless the Committee determines
otherwise at or after the date of grant, a Participant shall receive one share
of Common Stock for each Elective Unit (and related Dividend Equivalents) as of
the date of such Participant's termination of employment (or such later date as
may be elected by the Participant in accordance with the rules and procedures of
the Committee). Unless the Committee determines otherwise at or after the date
of grant, a Participant shall receive one share of Common Stock for each
Supplemental Unit (and related Dividend Equivalents) that shall have become
vested on or prior to the date of such Participant's termination of employment
with the Company and the Subsidiaries, other than any such termination for
Cause, on the date of such termination of employment (or on such earlier date as
the Committee shall permit or such later date as may be elected by the
Participant in accordance with the rules and procedures of the Committee). In
the event of the termination of a Participant's employment with the Company and
the Subsidiaries for Cause, the Participant shall immediately forfeit all rights
with respect to any Supplemental Units (and related Dividend Equivalents)
credited to his account. The Committee may provide in the Award Agreement
applicable to any Incentive Award of Deferred Stock that, in lieu of issuing
shares of Common Stock in settlement of the vested portion of such Deferred
Stock Unit, the Committee may direct the Company to pay to the Participant the
cash balance of such Deferred Stock.
10. Stock in Lieu of Cash
The Committee may grant Awards or shares of Common Stock in lieu of all or
a portion of an award otherwise payable in cash to an Executive Officer pursuant
to any bonus or incentive compensation plan of the Company (subject to any
applicable limitations in such bonus or incentive compensation plan). If shares
are issued in lieu of cash, the number of shares of Common Stock to be issued
shall be the greatest number of whole shares which has an aggregate Fair Market
Value on the date the cash would otherwise have been payable pursuant to the
terms of such other plan equal to or less than the amount of such cash.
11. General Provisions
(a) Withholding. The Company shall have the right to deduct from all
amounts paid to a Participant in cash (whether under this Plan or otherwise) any
taxes required by law to be withheld in respect of Awards under this Plan. In
the case of any Award satisfied in the form of Common Stock, no shares shall be
issued unless and
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until arrangements satisfactory to the Committee shall have been made to satisfy
any withholding tax obligations applicable with respect to such Award. Without
limiting the generality of the foregoing and subject to such terms and
conditions as the Committee may impose, the Company shall have the right to
retain, or the Committee may, subject to such terms and conditions as it may
establish from time to time, permit Participants to elect to tender, Common
Stock (including Common Stock issuable in respect of an Award) to satisfy, in
whole or in part, the amount required to be withheld.
(b) Awards. Each Award hereunder shall be evidenced in writing. The
written agreement shall be delivered to the Participant and shall incorporate
the terms of the Plan by reference and specify the terms and conditions thereof
and any rules applicable thereto (each, an "Award Agreement").
(c) Nontransferability. No Award shall be transferable by a Participant
otherwise than by will or under the applicable laws of descent and distribution,
unless such transfer shall be (i) permitted by the Committee (on such terms as
it shall establish) or (ii) if the Option agreement pursuant to which an Award
is made so provides, to (A) the spouse, children or grandchildren of such
Participant (collectively, "Family Members"), (B) a trust or trusts for the
exclusive benefit of such Family Members, or (C) a partnership or limited
liability company in which such Family Members and trusts for the exclusive
benefit of such Family Members are the only partners or members, as the case may
be. In addition, no Award shall be assigned, negotiated, pledged or hypothecated
in any way (whether by operation of law or otherwise) and no Award shall be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, negotiate, pledge or hypothecate any Award, or in the event of
any levy upon any Award by reason of any attachment or similar pro cess, in
either case contrary to the provisions hereof, such Award shall immediately
become null and void.
(d) Legend. To the extent any stock certificate is issued to a Participant
in respect of shares of Restricted Stock or Incentive Stock awarded under the
Plan prior to the expiration of the applicable Restricted Period, such
certificate shall be registered in the name of the Participant and shall bear
the following (or similar) legend:
"The shares of stock represented by this certificate are subject to
the terms and conditions contained in the RSL Communications, Ltd. 1997
Stock Incentive Plan and the Award Agreement, dated as of _____, between
the Company and the Participant, and may not be sold, pledged,
transferred, assigned, hypothecated or otherwise encumbered in any
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<PAGE>
manner (except as provided in Section 11(c) of the Plan or in such
Award Agreement) until _______________."
Upon the lapse of the Restricted Period with respect to any such shares of
Restricted Stock or Incentive Stock, the Company shall issue or have issued new
share certificates without the legend described herein in exchange for those
previously issued.
(e) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Company or any
Subsidiary. Further, the Company and each Subsidiary expressly reserves the
right at any time to dismiss a Participant free from any liability, or any claim
under the Plan, except as provided herein or in any agreement entered into with
respect to an Award.
(f) No Rights to Awards, No Shareholder Rights. No Participant or Eligible
Employee shall have any claim to be granted any Award under the Plan, and there
is no obligation of uniformity of treatment of Participants and Eligible
Employees. Subject to the provisions of the Plan and the applicable Award, no
person shall have any rights as a shareholder with respect to any shares of
Common Stock to be issued under the Plan prior to the issuance thereof.
(g) Effective Date. Subject to the approval of the shareholders of the
Company (which shall be sought by the Company if so authorized by the Board),
the Plan shall be effective on the date the Plan is approved by shareholders. No
Awards may be granted under the Plan after the expiration of ten years from the
date this Plan is adopted.
(h) Amendment of Plan. The Board or the Committee may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without shareholder approval if such amendment would
(1) increase the number of shares of Common Stock subject to the Plan,
except pursuant to Section 4(c);
(2) change the price at which Options may be granted; or
(3) remove the administration of the Plan from the Committee.
Without the written consent of an affected Participant, no termination,
suspension or modification of the Plan shall adversely affect any right of such
Participant under the
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terms of an Award granted before the date of such termination, suspension or
modification.
(i) Application of Proceeds. The proceeds received by the Company from the
sale of its shares under the Plan will be used for general corporate purposes.
(j) Compliance with Legal and Exchange Requirements. The Plan, the
granting and exercising of Awards thereunder, and the other obligations of the
Company under the Plan, shall be subject to all applicable federal and state
laws, rules, and regulations, and to such approvals by any regulatory or
governmental agency as may be required. The Company, in its discretion, may
postpone the granting and exercising of Awards, the issuance or delivery of
Common Stock under any Award or any other action permitted under the Plan to
permit the Company, with reasonable diligence, to complete such stock exchange
or similar listing or registration or qualification of such Common Stock or
other required action under any federal or state law, rule, or regulation and
may require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Common Stock in compliance with applicable laws, rules, and
regulations. The Company shall not be obligated by virtue of any provision of
the Plan to recognize the exercise of any Award or to otherwise sell or issue
Common Stock in violation of any such laws, rules, or regulations; and any
postponement of the exercise or settlement of any Award under this provision
shall not extend the term of such Awards, and neither the Company nor its
directors or officers shall have any obligation or liability to the Participant
with respect to any Award (or Stock issuable thereunder) that shall lapse
because of such postponement.
(k) Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
(l) Governing Law. This Plan shall be construed and enforced according to
the laws of Bermuda.
18
RSL COMMUNICATIONS, LTD.
1997 DIRECTORS COMPENSATION PLAN
1. Purposes
The purposes of this RSL Communications, Ltd. 1997 Directors Compensation
Plan (the "Plan") are to enable the Company to attract, retain and motivate the
best qualified directors and to enhance a long-term mutuality of interest
between the directors and shareholders of the Company by granting them shares
and options to purchase the Company's shares.
2. Definitions
Unless the context requires otherwise, the following words as used in the
Plan shall have the meanings ascribed to each below, it being understood that
masculine, feminine and neuter pronouns are used interchangeably, and that each
comprehends the others.
"Award" shall mean any Option or Share awarded under the Plan.
"Board" shall mean the Board of Directors of the Company.
"Class A Common Stock" shall mean the Class A common shares of the
Company, par value $.00457.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean RSL Communications, Ltd., a Bermuda corporation, and
any successor thereto.
"Eligible Director" shall mean the Chairman of the Board and the Vice
Chairman of the Board (so long as such person receives no compensation for his
services to the Company other than as a non-executive Chairman or Vice Chairman)
and any director of the Company who is not an officer or employee of the Company
or any of its subsidiaries.
"Fair Market Value" shall mean, on any date, the average of the closing
price of a Share of Class A Common Stock as reported on the National Association
of Securities Dealers Automated Quotation/National Market System ("NASDAQ/NMS")
<PAGE>
(or on such other recognized market or quotation system on which the trading
prices of the Share are traded or quoted at the relevant time) over the
preceding twenty business days. Notwithstanding the foregoing, "Fair Market
Value" on the date of the IPO shall be the price at which the Class A Common
Stock is sold to the public in the IPO.
"Initial Option Award" shall mean an Option to purchase that number of
Shares (rounded to the nearest whole number) equal to (a) in the case of (i) the
Chairman of the Board, $150,000, (ii) the Vice Chairman of the Board, $75,000
and (iii) each other Eligible Director, $50,000, divided by (b) the Fair Market
Value of a Share as of the date of the IPO, in each case with an initial
exercise price per Share equal to the Fair Market Value of a Share on the date
of such IPO, subject to adjustment as provided in Section 6(e).
"IPO" shall mean the initial pubic offering of the Company's Class A
Common Stock.
"Option" shall mean the right to purchase Shares at a stated price for a
specified period of time. For purposes of the Plan, the Options are nonstatutory
stock options and are not intended to qualify under Section 422 of the Code.
"Share" shall mean a share of Class A Common Stock.
"Share Value" shall mean the amount equal to the product of (i) the Fair
Market Value on the date that the corresponding Share grant would be made under
Section 7 and (ii) the number of Shares to be awarded to the Eligible Director
who is electing to defer receipt of the Share grant.
"Stock Account" shall mean a memorandum account established to record the
deferral of certain compensation otherwise payable to an Eligible Director which
shall be deemed invested in notional Shares.
"Term Option Award" shall mean an Option to purchase that number of Shares
(rounded to the nearest whole number) equal to (a) in the case of (i) the
Chairman of the Board, $150,000, (ii) the Vice Chairman of the Board, $75,000
and (iii) each other Eligible Director, $50,000, divided by (b) the Fair Market
Value of a Share as of the date of grant, in each case with an initial exercise
price per Share equal to the Fair Market Value of a Share on such date, subject
to adjustment as provided in Section 6(e).
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<PAGE>
"Term Share Award" shall mean that number of Shares (rounded to the
nearest whole number) equal to $30,000, divided by the Fair Market Value of a
Share as of the date of grant, provided that an Eligible Director who served as
a director for only a portion of the time since the last annual meeting of
shareholders shall receive an award for that number of Shares (rounded to the
nearest whole number) equal to the product of such number of Shares times a
fraction, the numerator of which is the number of regular meetings of the Board
occurring since the last annual meeting of shareholders and while the Eligible
Director was a member of the Board and the denominator of which is the total
number of regular meetings of the Board occurring from the date of such last
annual meeting of shareholders to the date of the annual meeting on which the
award of Shares occurs.
"Units" shall have the meaning ascribed thereto in Section 8(c).
3. Effective Date
The effective date of the Plan shall be the date of the closing of the
initial public offering of the Company's Class A Common Stock.
4. Administration
(a) Powers of the Board. This Plan shall be administered by the Board. The
Board may delegate its powers and functions hereunder to a duly appointed
committee of the Board. The Board shall have full authority to interpret this
Plan; to establish, amend and rescind rules for carrying out this Plan; to
administer this Plan; to incorporate in any option agreement such terms and
conditions, not inconsistent with this Plan, as it deems appropriate; to
construe the respective option agreements and this Plan; and to make all other
determinations and to take such steps in connection with this Plan as the Board,
in its discretion, deems necessary or desirable for administering this Plan. All
expenses incurred in the administration of the Plan, including, but not limited
to, for the engagement of any counsel, consultant or agent, shall be paid by the
Company.
(b) Disinterested Status. Notwithstanding the foregoing, neither the
Board, any committee thereof nor any person designated pursuant to (c) below may
take any action which would cause any Eligible Director to cease to be a
"Non-Employee Director" for purposes of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended, as then in effect or any successor
provisions
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<PAGE>
("Rule 16b-3"), with regard to this Plan or any other stock option or other
equity plan of the Company. In particular, neither the Board nor any committee
thereof shall have any discretion as to
(i) the selection of Eligible Directors as eligible to receive
awards pursuant to the Plan;
(ii) the number of Shares subject to Options awarded pursuant to
Section 6; or
(iii) the number of Shares that may be awarded pursuant to
Section 7.
(c) Delegation. The Board may designate the Secretary of the Company,
other officers or employees of the Company or competent professional advisors to
assist the Board in the administration of this Plan, and may grant authority to
such persons to execute agreements or other documents on its behalf.
(d) Agents and Indemnification. The Board may employ such legal counsel,
consultants and agents as it may deem desirable for the administration of this
Plan, and may rely upon any opinion received from any such counsel or consultant
and any computation received from any such consultant or agent. No member or
former member of the Board or any committee thereof or any person designated
pursuant to paragraph (c) above shall be liable for any action or determination
made in good faith with respect to this Plan. To the maximum extent permitted by
applicable law and the Company's Memorandum of Association and Bye-Laws, each
member or former member of the Board or any committee thereof or any person
designated pursuant to (c) above shall be indemnified and held harmless by the
Company against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the
Company) arising out of any act or omission to act in connection with this Plan,
unless arising out of such person's own fraud or bad faith. Such indemnification
shall be in addition to any rights of indemnification the person may have as a
director, officer or employee or under the Memorandum of Association of the
Company or the Bye-Laws of the Company.
5. Shares; Adjustment Upon Certain Events
(a) Shares Available. Shares to be issued under this Plan shall be made
available, at the discretion of the Board, either from authorized but unissued
Shares or from issued Shares reacquired by the Company. The aggregate number of
Shares that may be issued under this Plan shall not exceed 250,000 Shares,
except as
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<PAGE>
provided in this Section. Shares subject to any Option granted hereunder which
expires or is terminated or canceled prior to exercise will be available for
future grants under the Plan.
(b) No Limit on Corporate Action. The existence of this Plan and Shares
granted hereunder shall not affect in any way the right or power of the Board or
the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference shares ahead of or affecting
common shares, the dissolution or liquida tion of the Company or any sale or
transfer of all or part of its assets or business, or any other corporate act or
proceeding.
(c) Adjustments Upon Certain Events. In the event of any Share dividend or
Share split, recapitalization (including, without limitation, the payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to shareholders, exchange of shares, or other similar
corporate change, the aggregate number of Shares available for Options under
Section 5(a) or subject to outstanding Options and the respective prices
applicable to outstanding Options shall be appropriately adjusted.
(d) No Adjustment If Value Received. Except as hereinbefore expressly
provided, the issuance by the Company of shares of stock of any class or
securities convertible into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or other securities, and in any
case whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to the number of Shares subject to
Options to be awarded to an Eligible Director pursuant to Section 6.
6. Option Awards
(a) Initial Option Awards. Upon the date of the closing of the IPO, each
Eligible Director shall automatically be granted an Initial Option Award.
(b) Term Option Awards. On the first business day after each annual
meeting of shareholders of the Company occurring during the term of the Plan,
each Eligible Director shall automatically be granted a Term Option Award.
5
<PAGE>
(c) Option Agreement. Options shall be evidenced by a written option
agreement embodying the terms of this Section 6.
(d) Option Term. If not previously exercised, each Option shall expire
upon the tenth (10th) anniversary of the date of the grant thereof or, upon the
earlier termination of the Eligible Director's status as a director of the
Company (or, if applicable, on the day following the last day on which such
Option is exercisable under Section 7 below).
(e) Adjustment to Exercise Price. The exercise price of any Option granted
hereunder shall be increased on the first day of each calendar quarter, by an
amount, compounded annually, based on the yield to maturity of United States
Treasury Securities with a maturity closest to ten years following the date that
such Option is granted.
(f) Exercisability. Each Term Award granted under this Plan shall be
become exercisable on a cumulative basis in five equal installments commencing
on the first anniversary of the date of grant, subject to the acceleration
provisions of Section 7 hereof.
(g) Procedure for Exercise. An Eligible Director electing to exercise one
or more Options shall give written notice to the Secretary of the Company of
such election and of the number of Shares he has elected to purchase. Shares
purchased pur suant to the exercise of Options shall he paid for at the time of
exercise in cash or by delivery to the Company of unencumbered Shares owned by
the Eligible Director for at least six (6) months (or such longer period as is
required by applicable accounting stan dards to avoid a charge to earnings) or a
combination thereof. Upon receipt of payment the Company shall deliver to the
Eligible Director as soon as practicable a certificate or certificates for the
Shares then purchased.
(h) Termination of Director Status
(i) Termination due to Death or Disability. In the event an Eligible
Director ceases to serve as a member of the Board due to death or
disability, any Option granted to such Eligible Director which is then
outstanding (whether or not exercisable prior to the date of termination)
may be exercised by the Eligible Director or his designated beneficiary,
and if none is named, in accordance with Section 13(c) hereof, within one
(1) year following the Eligible Director's termination
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<PAGE>
of service or prior to the expiration date of the term of the Option,
whichever period is shorter.
(ii) Termination for Any Other Reason. If an Eligible Director
ceases to serve as a member of the Board for any other reason,
(resignation, failure to stand for reelection or failure to be reelected),
any Option granted to such Eligible Director may be exercised, to the
extent it was exercisable at such date of termination, within ninety (90)
days following the Eligible Director's termination of service or prior to
the expiration date of the term of the Option, whichever period is
shorter.
7. Share Awards
Except to the extent that an Eligible Director shall have elected pursuant
to Section 8(a) to defer receipt of the Share Value instead of receiving a grant
under this Section 7, on the date of the annual meeting of shareholders of the
Company occurring in each of 1998 through 2007, each Eligible Director who has
performed service as a director for at least the six months preceding such date
shall receive a Term Share Award.
8. Deferred Compensation Program
(a) Deferral Election. On or before December 31 of any calendar year
ending on or before December 31, 2006, an Eligible Director may elect to defer
receipt of all or any part of the Share Value payable in respect of the calendar
year following the year in which such election is made, and to have such amounts
credited, in whole or in part, to a Stock Account.
(b) Form and Duration of Deferral Election. A deferral election shall be
made by written notice filed with the Secretary of the Company. Such election
shall continue in effect (including with respect to the Share Value payable for
subsequent calendar years) unless and until the Eligible Director revokes or
modifies such election by written notice filed with the Secretary of the
Company. Any such revocation or modification of a deferral election shall become
effective as of the end of the calendar year in which such notice is given and
only with respect to any Share Value related to Share grants to be made in
subsequent calendar years; provided that if the effect of such revocation or
modification of a deferral election is to change the amount of deferred
compensation that would otherwise have been credited to the Stock Account it
shall in no event become effective earlier than six months after it is received
7
<PAGE>
by the Secretary. Amounts credited to the Eligible Director's Account prior to
the effective date of any such revocation or modification of a deferral election
shall not be affected by such revocation or modification and shall be
distributed only in accordance with the otherwise applicable terms of the Plan.
An Eligible Director who has revoked an election to participate in the Plan may
file a new election to defer the Share Value with respect to Shares to be
granted no sooner than in the calendar year following the year in which such
election is filed.
(c) Stock Account. Any Share Value deferred shall be deemed to be invested
in a number of notional Shares of the Company (the "Units") equal to the
quotient of (i) such Share Value divided by (ii) the Fair Market Value on the
date the Shares would have been granted. Whenever a dividend other than a
dividend payable in the form of Shares is declared with respect to the Shares,
the number of Units in the Eligible Director's Stock Account shall be increased
by the number of Units determined by dividing (i) the product of (A) the number
of Units in the Eligible Director's Stock Account on the related dividend record
date and (B) the amount of any cash dividend declared by the Company on a Share
(or, in the case of any dividend distributable in property other than Shares,
the per share value of such dividend, as determined by the Company for purposes
of income tax reporting) by (ii) the Fair Market Value on the related dividend
payment date. In the case of any dividend declared on Shares which is payable in
Shares, the Eligible Director's Stock Account shall be increased by the number
of Units equal to the product of (i) the number of Units credited to the
Eligible Director's Stock Account on the related dividend record date and (ii)
the number of Shares (including any fraction thereof) distributable as a
dividend on a Share. In the event of any change in the number or kind of
outstanding Shares by reason of any recapitalization, reorganization, merger,
consolidation, stock split or any similar change affecting the Shares, other
than a stock dividend as provided above, the Board shall make an appropriate
adjustment in the number of Units credited to the Eligible Director's Stock
Account. Fractional Units shall be credited, but shall be rounded to the nearest
hundredth percentile, with amounts equal to or greater than .005 rounded up and
amounts less than .005 rounded down.
(d) Distribution from Accounts Upon Termination of Service as a Director.
At the time an Eligible Director makes a deferral election pursuant to Section
8(a), the Eligible Director shall also file with the Secretary of the Company a
written election (a "Distribution Election") with respect to whether (i) the
value of any Units to be credited to the Stock Account shall be distributed
wholly in cash, in the greatest number of whole Shares (with any fractional
interest payable in cash) or a combination of cash and whole Shares, (ii) such
distribution shall commence immediately following the date the Eligible Director
ceases to be a director or on the first business day of any
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calendar year following the calendar year in which the Eligible Director ceases
to be a director and (iii) such distribution shall be in one lump-sum payment or
in such number of annual installments (not to exceed ten) as the Eligible
Director may designate. An Eligible Director may at any time, and from time to
time, change any Distribution Election applicable to his or her Stock Account,
provided that no election to change the timing of any terminal distribution
shall be effective unless it is made in writing and received by the Secretary of
the Company at least one full calendar year prior to the time at which the
Eligible Director ceases to be a director.
(e) Distribution from Stock Account Prior to Termination of Service as a
Director. Any Eligible Director may, by filing a written election with the
Secretary of the Company, elect to receive a distribution of all or any portion
of the amounts credited to the Eligible Director's Stock Account as of a date
which is at least one full year after the date as of which such election is so
filed with the Secretary; provided that, any Eligible Director who elects to
receive a distribution pursuant to this first sentence of this Section 8(e)
shall cease to be eligible to make any additional deferrals under this Section 8
with respect to compensation payable in the two calendar years immediately
following the year in which such election is filed with the Secretary.
(f) Payment of Plan Distributions. Any distribution to be made hereunder,
whether in the form of a lump-sum payment or installments, following the
termination of an Eligible Director's service as a director shall commence in
accordance with the Distribution Election made by the Eligible Director in
accordance with Section 8(d). If an Eligible Director fails to specify a form of
payment or a commencement date for a distribution in accordance with Section
8(d), such distribution shall be made in cash and commence on the first business
day of the calendar year immediately following the year in which the Eligible
Director ceases to be a director. If an Eligible Director fails to specify in
accordance with Section 8(d) that a distribution shall be made in a lump-sum
payment or a number of installments, such distribution shall be made in a
lump-sum payment. In the case of any distribution being made in annual
installments, each installment after the first installment shall be paid on the
first business day of each subsequent calendar year until the entire amount
subject to such installment Distribution Election shall have been paid.
9. Transferability of Awards
No Award shall be transferable by the Eligible Director otherwise than by
will or under the applicable laws of descent and distribution, unless such
transfer shall be (a) acceptable under Rule 16b-3 and is approved by the Board
or its authorized delegate or (b) in the case of an Option, if the Option
agreement pursuant to which an
9
<PAGE>
Award is made so provides, to (i) the spouse, children or grandchildren of such
Eligible Director (collectively, "Family Members"), (ii) a trust or trusts for
the exclusive benefit of such Family Members, or (iii) a partnership or limited
liability company in which such Family Members and trusts for the exclusive
benefit of such Family Members are the only partners or members, as the case may
be. In addition, no Award shall be assigned, negotiated, pledged or hypothecated
in any way (whether by operation of law or otherwise) and no Award shall be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, negotiate, pledge or hypothecate any Award, or in the event of
any levy upon any Award by reason of any attachment or similar process, in
either case contrary to the provisions hereof, such Award shall immediately
become null and void.
10. Rights as a Shareholder
An Eligible Director (or a permitted transferee of an Option) shall have
no rights as a shareholder with respect to any Shares covered by his Option
until he shall have become the holder of record of such Share(s), and no
adjustments shall be made for dividends in cash or other property or
distribution or other rights in respect to any such Shares, except as otherwise
specifically provided for in this Plan.
11. Determinations
Each determination, interpretation or other action made or taken pursuant
to the provisions of this Plan by the Board shall be final and binding for all
purposes and upon all persons, including, without limitation, the Company, the
directors, officers and other employees of the Company, the Eligible Director
and their respective heirs, executors, administrators, personal representatives
and other succes sors in interest.
12. Termination, Amendment and Modification
(a) Termination and Amendment. This Plan shall terminate at the close of
business on December 31, 2007, unless sooner terminated by action of the
shareholders of the Company, and no Awards shall be granted under this Plan
thereafter. The Board at any time or from time to time may amend this Plan to
effect (i) amendments necessary or desirable in order that this Plan and the
Awards shall conform to all applicable laws and regulations and (ii) any other
amendments deemed appropriate. Notwithstanding the foregoing, (i) the provisions
of the Plan relating to (A) the number of Shares to be granted under the Plan or
subject to any Option granted to any Participant, (B) the material terms of any
such grant of Shares or Options
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(including, without limitation, the time of any such grant) or (C) the manner in
which the Stock Account operates, may not be amended without the approval of the
Company's shareholders and (ii) the Board may not effect any amendment that
would require the approval of the shareholders of the Company under any
applicable laws or the listing requirements of NASDAQ/NMS (if applicable to the
Company at the time such amendment is adopted or will be effective) unless such
approval is obtained.
(b) No Effect on Existing Rights. Except as otherwise required by law, no
termination, amendment or modification of this Plan may, without the consent of
an Eligible Director or the permitted transferee of an Award, alter or impair
the rights and obligations arising under any then outstanding Award held by such
Eligible Director or the permitted transferee.
13. Non-Exclusivity
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the shareholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other
compensatory arrangements as it may deem desirable, including, without
limitation, payments of cash amounts related to the tax liabilities arising
directly or indirectly from the issuance of Shares in respect of an Eligible
Director hereunder.
14. General Provisions
(a) No Right to Serve as a Director. This Plan shall not impose any
obligations on the Company to retain any Eligible Director as a director nor
shall it impose any obligation on the part of any Eligible Director to remain as
a director of the Company, provided that each Eligible Director by accepting
each Award shall represent to the Company that it is his good faith intention to
continue to serve as a director of the Company until the next annual meeting of
shareholders and that he agrees to do so unless a change in circumstances
arises.
(b) No Right to Particular Assets. Nothing contained in this Plan and no
action taken pursuant to this Plan shall create or be construed to create a
trust of any kind or any fiduciary relationship between the Company and any
Eligible Director, the executor, administrator or other personal representative
or designated beneficiary of such Eligible Director, or any other persons. Any
reserves that may be established by the Company in connection with this Plan
shall continue to be part of the general funds of the Company, and no individual
or entity other than the Company shall have any interest in such funds until
paid to an Eligible Director. To the extent that any Eligible
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Director or his executor, administrator, or other personal representative, as
the case may be, acquires a right to receive any payment from the Company
pursuant to this Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
(c) Beneficiary Designation. Each Eligible Director under the Plan may
from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
or by whom any right under the Plan is to be exercised in case of his death.
Each designation will revoke all prior designations by the same Eligible
Director, shall be in a form prescribed by the Company, and will be effective
only when filed by the Eligible Director in writing with the Company during his
lifetime. In the absence of any such designation, benefits remaining unpaid at
the Eligible Director's death shall be paid to or exercised by the Eligible
Director's surviving spouse, if any, or otherwise to or by his estate.
(d) Listing of Shares and Related Matters. The Plan, the granting and
exercising of Awards thereunder, and the other obligations of the Company under
the Plan, shall be subject to all applicable federal and state laws, rules, and
regulations, and to such approvals by any regulatory or governmental agency as
may be required. If at any time the Board shall determine in its discretion that
the listing, registration or qualification of the Shares covered by this Plan
upon any national securities exchange or under any United States or non-United
States federal, state or other law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the delivery of Shares under this Plan, no Shares will be
delivered unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Board. The Company, in its discretion,
may require an Eligible Director to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Common Stock in compliance with applicable laws, rules, and
regulations. The Company shall not be obligated by virtue of any provision of
the Plan to recognize the exercise of any Award or to otherwise sell or issue
Common Stock in violation of any such laws, rules, or regulations; and any
postponement of the exercise or settlement of any Award under this provision
shall not extend the term of such Awards, and neither the Company nor its
directors or officers shall have any obligation or liability to any person with
respect to any Award (or Shares issuable thereunder) that shall lapse because of
such postponement.
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(e) Issuance of Stock Certificates; Legends. Upon any exercise of an
Option and payment of the exercise price thereof and upon the issuance of Shares
pursuant to this Plan, a certificate or certificates for the Shares shall be
issued by the Company in the name of the person or persons exercising such
Option or receiving such Shares and shall be delivered to or upon the order of
such person or persons. Certificates for Shares issued upon exercise of an
Option or otherwise hereunder shall bear such legend or legends as the Board, in
its discretion, determines to be necessary or appropriate to prevent a violation
of, or to perfect an exemption from, the registration requirements of the
Securities Act of 1933, as amended, or to implement the provisions of any
agreements between the Company and the Eligible Director with respect to such
Shares.
(f) Withholding Taxes. The Company shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
may have to withhold federal, state or local income or other taxes incurred by
reason of the issuance of Shares under the Plan, including requiring an Eligible
Director to reimburse the Company for any taxes required to be withheld or
otherwise deducted and paid by the Company in respect of the issuance of Shares.
(g) Notices. Each Eligible Director shall be responsible for fur nishing
the Board with the current and proper address for the mailing of notices and
delivery of agreements and Shares. Any notices required or permitted to be given
shall be deemed given if directed to the person to whom addressed at such
address and mailed by regular United States mail, first-class and prepaid. If
any item mailed to such address is returned as undeliverable to the addressee,
mailing will be suspended until the Eligible Director furnishes the proper
address.
(h) Severability of Provisions. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be construed and
enforced as if such provision had not been included.
(i) Incapacity. Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipting therefor shall be
deemed paid when paid to such person's guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Board, the Company and other parties with respect
thereto.
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(j) Headings and Captions. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this Plan,
and shall not be employed in the construction of this Plan.
(k) Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include the
singular.
(l) Governing Law. This Plan shall be construed and enforced according to
the laws of Bermuda.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
RSL Communications, Ltd. on Form S-8 of our report dated September 19, 1997
relating to the consolidated financial statements and consolidated financial
statement schedules of RSL Communications, Ltd. and subsidiaries.
Deloitte & Touche LLP
New York, New York
November 7, 1997
