<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
ITXC CORP.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_____________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_____________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________________________________
(5) Total fee paid:
_____________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
____________________________________________________________
(2) Form, Schedule or Registration Statement No.:
____________________________________________________________
(3) Filing Party:
____________________________________________________________
(4) Date Filed:
____________________________________________________________
<PAGE>
ITXC CORP.
, 2000
Dear Stockholder:
On behalf of the Board of Directors and management, I am pleased to
invite you to the 2000 Annual Meeting of Stockholders of ITXC Corp., our first
annual meeting as a public company. The meeting will be held on Wednesday, May
3, 2000 at 10:00 a.m. at the Princeton Marriott, Forrestal Village, 201 Village
Boulevard, Princeton, New Jersey. A notice of meeting, proxy statement and
proxy card are enclosed for your review.
I urge you to read the enclosed materials carefully and to complete,
sign and mail promptly the proxy card contained with this letter to assure that
your vote will be counted.
The officers, directors and staff of ITXC sincerely appreciate your
continuing support and look forward to meeting with you.
Very truly yours,
Tom Evslin
Chairman of the Board
<PAGE>
ITXC CORP.
Notice of Annual Meeting
The Annual Meeting of Stockholders of ITXC Corp. (the "Company") will
be held at the Princeton Marriott, Forrestal Village, 201 Village Boulevard,
Princeton, New Jersey on Wednesday, May 3, 2000 at 10:00 a.m., to consider and
act upon the following:
1. Election of two directors each to serve for a term of three years.
2. A proposal to amend the Company's Third Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
65,000,000 shares to shares.
3. A proposal to amend the Company's 1998 Stock Incentive Plan to add
a limitation on the maximum number of shares of Common Stock covered by options
and awards which may be granted to any participant in any calendar year.
4 The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the closing of business on March 28,
2000 are entitled to notice of, and to vote at, the meeting.
Edward B. Jordan
Secretary
Princeton, NJ
, 2000
- ----------------------------------------------------------------------------
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE
PROVIDED.
- ----------------------------------------------------------------------------
<PAGE>
ITXC CORP.
600 College Road East
Princeton, New Jersey 08540
PROXY STATEMENT
The Board of Directors of ITXC Corp. (the "Company") is soliciting proxies
for use at the Annual Meeting of Stockholders to be held on Wednesday, May 3,
2000, at the Princeton Marriott, Forrestal Village, 201 Village Boulevard,
Princeton, New Jersey at 10:00 a.m., and for use at any adjournments thereof
(the "Annual Meeting"). The Company is first sending this Proxy Statement and
the enclosed form of proxy to stockholders on or about , 2000.
Record Date and Quorum. Only stockholders of record at the close of
business on March 28, 2000 (the "Record Date") will be entitled to vote at the
Annual Meeting. On that date, there were __________ shares of the Company's
Common Stock (the "Common Stock") outstanding. Each share of Common Stock is
entitled to one vote on each matter to be voted on at the Annual Meeting. The
presence at the Annual Meeting, in person or by proxy, of holders as of the
Record Date of a majority of the outstanding shares of Common Stock will
constitute a quorum.
Voting Procedures. Directors will be elected by a plurality of the votes
cast. Approval of the proposal to amend the Company's Certificate of
Incorporation to increase the number of shares of Common Stock that IXTC will be
authorized to issue will require the affirmative vote of holders of a majority
of the shares of Common Stock outstanding on the Record Date. Approval of the
proposal to amend the Company's 1998 Stock Incentive Plan and approval of any
other matter to be submitted to the stockholders will require the affirmative
vote of a majority of the votes cast at the Annual Meeting. Properly executed
proxies will be voted as directed in the proxy; however, if no direction is
given, a properly executed proxy will be voted FOR the election of the nominees
described below, FOR the proposed amendment to the Company's Third Restated
Certificate of Incorporation and FOR the proposed amendment to the Company's
1998 Stock Incentive Plan. Votes will not be considered "cast" if the shares are
not voted for any reason, including if an abstention is indicated as such on a
written proxy or ballot or if votes are withheld by a broker. Abstentions and
broker non-votes will be counted for purposes of determining whether a quorum is
present and will have the same effect as a negative vote for purposes of
determining whether holders of a majority of the outstanding shares of the
Company's Common Stock have approved the proposed amendment to the Company's
Third Restated Certificate of Incorporation; if a quorum is present, abstentions
and broker non-votes will have no effect upon the election of directors, upon
the approval of the proposed amendment to the Company's 1998 Stock Incentive
Plan or any other matters (other than the proposed amendment to the Company's
Third Restated Certificate of Incorporation) submitted to stockholders at the
Annual Meeting.
Proxies and Revocation. A proxy card is enclosed. Any stockholder giving
a proxy may revoke it at any time before it is exercised. In order to revoke a
proxy, the stockholder must either give written notice of such revocation to the
Secretary of the Company or to the Secretary
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<PAGE>
of the Annual Meeting or vote the shares of Common Stock subject to the proxy by
a later dated proxy or by written ballot at the Annual Meeting. The presence at
the Annual Meeting of any stockholder who has given a proxy will not in and of
itself revoke the proxy.
PROPOSAL ONE: ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with each
class serving staggered terms of three years, so that only one class is elected
in any one year. At present there are six directors on the Board. Two
directors are to be elected at the Annual Meeting to serve until the 2003 Annual
Meeting and until their respective successors are elected and have qualified.
While the Company intends to add an additional independent director to its
Board, no determination has yet been made with respect to such selection and it
is not anticipated that such determination will be made until after the Annual
Meeting.
Each of the nominees for director is presently a director of the Company.
Each has consented to being named as a nominee in this Proxy Statement and has
agreed to serve as a director if elected at the Annual Meeting. It is the
intention of the persons named as proxies to vote the shares represented by the
accompanying form of proxy for the election of each of the nominees listed
below. If any nominee shall become unable or unwilling to serve as a director,
the persons named as proxies will cast their votes for the remaining nominee and
have discretion to vote for other persons designated by the Board of Directors.
The Board of Directors has no reason to believe that either of the nominees will
be unavailable for election.
We have set forth below a description of the current and past five years'
business experience, certain directorships and age of each nominee for director
and of each director whose term extends beyond 2000 and thus is continuing in
office. The following information is given as of January 31, 2000 and was
furnished to the Company by the respective nominees and continuing directors.
Nominees
Tom I. Evslin: Mr. Evslin, the Company's founder, has been Chairman of the
Board, Chief Executive Officer and President since ITXC's inception in July
1997. From December 1994 until July 1997, he was employed by AT&T, where he
designed its Internet strategy and launched and ran its Internet service
provider, AT&T WorldNet Service. From December 1991 until December 1994, Mr.
Evslin worked for Microsoft, where he last served as General Manager, Server
Applications Division from May 1993. From 1969 to 1991, he was Chairman and
Chief Executive Officer of Solutions, Inc., a communications software
development company. He is the Chairman of the Policy Committee and a member of
the Board of the Voice On The Net Coalition. Mr. Evslin served on the board of
directors of VocalTec Communications, a principal shareholder of ITXC, from 1997
until his resignation on June 10, 1999. Director since 1997. Age: 56.
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<PAGE>
Frederick R. Wilson: Mr. Wilson founded Flatiron Partners, a venture
capital firm which primarily invests in Internet-oriented companies, in August
1996. For ten years prior to August 1996, he worked for Euclid Partners, an
early-stage venture capital firm. Mr. Wilson is the Chairman of the Board of
TheStreet.com and a director of StarMedia Network. Director since 1998. Age: 38.
Continuing Directors Serving Until 2001
Elon A. Ganor: Mr. Ganor has served as the Chairman of the Board of
VocalTec Communications, Ltd. since 1993. He has served as VocalTec's CEO since
November 1999, and also from 1993 to 1998. Director since 1997. Age: 49.
John G. Musci: Mr. Musci joined ITXC in February 1999 as Executive Vice
President and Chief Operating Officer. From June 1998 until February 1999, he
served as Senior Vice President of Wholesale Switched Services at Qwest
Communications International, an Internet communications company. Mr. Musci held
various positions at LCI International, a long distance telecommunications
company, including Senior Vice President--Wholesale Switched Services, from 1985
until June 1998, when LCI was acquired by Qwest. Prior to 1985, Mr. Musci held
various positions at AT&T Information Systems and Ohio Bell. Director since
1999. Age: 43.
Continuing Directors Serving Until 2002
William P. Collatos: Mr. Collatos is a founder of Spectrum Equity
Investors, L.P., a private equity investment firm which invests in
telecommunications, information and media companies. Prior to co-founding
Spectrum in 1994, Mr. Collatos was a founding General Partner of
Media/Communications Partners and a General Partner of TA Associates. Mr.
Collatos currently serves on the boards of directors of Jazztel, plc, and Golden
Sky Systems, Inc. and serves on the board of directors of Galaxy Telecom GP, the
general partner of Galaxy Telecom, LP. Director since 1998. Age: 45.
Edward B. Jordan: Mr. Jordan has been an Executive Vice President since
February 1999, and has served as the Company's Chief Financial Officer,
Secretary and Treasurer since he joined ITXC in September 1997. From September
1997 until February 1999, Mr. Jordan was the Company's Vice President,
Administration. For ten years prior to joining the Company, he was employed by
Dialogic Corporation, a manufacturer of computer telephony products, serving
first as Controller and then as Chief Financial Officer, Treasurer and Vice
President. Prior to joining Dialogic, Mr. Jordan served in the Audit Department
of Deloitte & Touche from 1982 to 1986. He is a certified public accountant.
Director since 1998. Age: 39.
The Company's Board of Directors has four standing committees: an Audit
Committee, a Compensation Committee, an Executive Committee and a CEO Committee.
During 1999, the Board of Directors held [ ] meetings, the Executive Committee
held [ ] meetings, the Audit Committee held [ ] meetings and the Compensation
Committee held [ ] meetings. As Mr. Evslin is the sole member of the CEO
Committee, that entity does not conduct formal meetings. During
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<PAGE>
1999, no director attended less than 75 percent of the aggregate number of
meetings of the Board of Directors and committees of the Board of which he was a
member[, except [________]].
The Audit Committee consists of Messrs. Collatos, Wilson and Ganor, with
Mr. Collatos serving as Chairman. The Audit Committee recommends the firm to be
appointed as independent accountants to audit ITXC's financial statements and to
perform services related to the audit; reviews the scope and results of the
audit with the independent accountants; reviews the Company's year-end operating
results with management and the independent accountants; considers the adequacy
of ITXC's internal accounting and control procedures; reviews the non-audit
services to be performed by the independent accountants, if any; and evaluates
the accountants' independence.
The Compensation Committee consists of Messrs. Collatos, Wilson and Ganor,
with Mr. Wilson serving as Chairman. The Compensation Committee reviews,
recommends and approves compensation arrangements for executive officers and
other senior level employees, and administers certain benefit and compensation
plans and arrangements.
The Executive Committee consists of Messrs. Collatos, Evslin and Wilson,
with Mr. Evslin serving as Chairman. Except as limited by Delaware law, the
Executive Committee can perform each of the responsibilities of the full Board,
providing ITXC with added flexibility in situations when full Board meetings
cannot be convened.
The CEO Committee, composed solely of Mr. Evslin, grants stock options and
determines the basic terms of option grants to certain employees under ITXC's
stock incentive plan in accordance with the terms set for that plan by the
Compensation Committee. The stock incentive plan grants the CEO Committee this
authority with respect to persons other than directors, specified executive
officers, consultants and other individuals identified by the Compensation
Committee.
The Board has no nominating committee; the functions of a nominating
committee are performed by the entire Board. No procedures have been developed
with respect to obtaining nominations from stockholders.
There are no relationships by blood, marriage, or adoption, not more remote
than first cousin, between any nominee for director, continuing director or
executive officer of the Company and any other nominee for director, continuing
director or executive officer of the Company, except that Tom I. Evslin, ITXC's
Chairman of the Board and Chief Executive Officer, and Mary A. Evslin, ITXC's
Vice President, Marketing and Customer Success, are husband and wife.
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<PAGE>
Outside Director Compensation
The Company has not yet paid any compensation to non-employee directors.
ITXC anticipates that in the future, non-employee directors may receive annual
fees, meeting fees and periodic option grants.
Securities Ownership of Management and Others
The following table sets forth the beneficial ownership of shares of Common
Stock as of March 15, 2000 by each stockholder of the Company known to own more
than five percent of the Company's Common Stock, by the directors of the
Company, by the executive officers named in the Summary Compensation Table below
and by all directors and executive officers of the Company as a group.
-5-
<PAGE>
<TABLE>
<CAPTION>
Name Shares Beneficially Owned Percentage
- ---- ------------------------- ----------
<S> <C> <C>
Executive Officers and
Directors:
Tom I. Evslin 6,939,308(1)(2)(3)
Edward B. Jordan 983,012(1)(3)
John G. Musci 268,344(1)
Steven J. Ott 185,500(1)
Eric Weiss 116,668(1)
Elon A. Ganor 4,788,165(4)
William P. Collatos 4,457,243(5)
Frederick R. Wilson 990,064(6)(7)
All executive officers and directors as a 18,824,137(1)
group (11 persons).
Other 5% Stockholders:
VocalTec Communications 4,788,165(4)(8)
Spectrum Equity Investors II, L.P. 4,457,243(5)(9)
Chase Venture Capital Associates, L.L.C. 4,261,395(6)(7)(10)
Intel Corporation 3,315,034(11)
Essex Investment Management Company 2,096,445(12)
DS Polaris Ltd. 1,953,181(13)
</TABLE>
* Represents less than one percent.
(1) The table above includes the following number of shares which the
following persons may acquire under options and warrants held as of March 15,
2000 and exercisable within 60 days of such date:
Tom I. Evslin..................................... 711,826
Edward B. Jordan.................................. 634,604
John G. Musci..................................... 210,644
Steven J. Ott..................................... 68,832
Eric G. Weiss..................................... 50,000
All executive officers and directors as a group... 1,771,739
The 711,826 shares referenced above for Mr. Evslin include options granted
to Mary A. Evslin, his wife, to purchase 66,666 shares of common stock.
The table above excludes:
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<PAGE>
. options covering 500,000 shares of common stock granted to Mr.
Musci in February 1999 which will vest on the earliest of the date on which
a change in control of his former employer, Qwest Communications
International, occurs, the seventh anniversary of the date on which the
options were granted and such other date as is provided for in our stock
incentive plan; and
. options covering an additional 666,666 shares of common stock
granted to Mr. Musci, an additional 400,000 shares of common stock granted
to Mr. Jordan and an additional 846,445 shares granted to other executive
officers, all of which were granted on or before March 15, 2000 and will not
vest prior to May 14, 2000.
(2) Includes shares beneficially owned by Mary A. Evslin, who is Mr.
Evslin's wife and an executive officer of ITXC. With the exception of shares
held with Mary A. Evslin as joint tenants, Tom I. Evslin disclaims beneficial
ownership of the shares owned beneficially by Ms. Evslin. Mr. Evslin's principal
business address is 600 College Road East, Princeton, New Jersey 08540.
(3) Tom I. Evslin and Edward B. Jordan are each investors in Flatiron
Associates, LLC, a fund described in note 6 below. Mr. Evslin is deemed to be
the beneficial owner of 604 shares of the common stock owned by Flatiron
Associates, LLC and Mr. Jordan is deemed to be the beneficial owner of 1,208
shares of the common stock owned by Flatiron Associates, LLC, representing their
respective percentage interests in that entity. Mr. Evslin's shares also include
5,000 shares owned by an adult child who resides with Mr. Evslin. Mr. Jordan's
shares also include 22,500 shares beneficially owned by his children, who are
minors. Mr. Musci's shares include 2,700 shares beneficially owned by his
children, who are minors. Messrs. Evslin, Jordan and Musci disclaim beneficial
ownership of the shares beneficially owned by their children.
(4) This number represents 4,778,165 shares of common stock beneficially
owned by VocalTec Communications. Mr. Ganor is the Chairman of the Board and CEO
of VocalTec Communications. Mr. Ganor disclaims beneficial ownership of these
shares.
(5) This number represents 4,415,784 shares of common stock beneficially
owned by Spectrum Equity Investors II, L.P. and 41,459 shares of common stock
beneficially owned by SEA 1998 II, L.P. Mr. Collatos is a managing general
partner of Spectrum Equity Investors II, L.P. and an affiliate of SEA 1998 II,
L.P. Mr. Collatos disclaims beneficial ownership of these shares, except to the
extent of his pecuniary interest therein.
(6) This number represents 576,384 shares of common stock beneficially
owned by The fl@tiron Fund LLC, 375,376 shares of common stock beneficially
owned by The Flatiron Fund 1998/99, LLC and 38,304 shares of common stock
beneficially owned by Flatiron Associates, LLC. Mr. Wilson is a manager of The
fl@tiron Fund LLC, The Flatiron Fund 1998/99, LLC and Flatiron Associates, LLC.
Mr. Wilson disclaims beneficial ownership of these shares, except to the extent
of his pecuniary interest therein.
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<PAGE>
(7) The Flatiron entities are parties to certain co-investment
arrangements with affiliates of Chase Venture Capital Associates. These parties
disclaim beneficial ownership of each other's securities.
(8) The principal business address of VocalTec is 1 Executive Drive, Suite
320, Fort Lee, New Jersey 07024.
(9) The principal business address of Spectrum Equity Investors II, L.P.
is One International Place, Boston, Massachusetts 02110.
(10) The principal business address of Chase Venture Capital Associates,
L.P. is 380 Madison Avenue, New York, New York 10017.
(11) The principal business address of Intel Corporation is 2200 Mission
College Boulevard, Santa Clara, California 95052.
(12) Based on information provided by Essex Capital Management Company in
its Schedule 13G filed on February 2, 2000. The principal business address of
Essex Capital Management Company is 125 High Street, Boston, Massachusetts
02110.
(13) This number represents 35,957 shares of common stock beneficially
owned by DS Polaris Ltd., 710,075 shares of common stock beneficially owned by
Polaris Fund II (Tax Exempt Investors), LLC, 468,649 shares of common stock
beneficially owned by Polaris Fund II, LLC, 177,519 shares of common stock
beneficially owned by Polaris Fund II, L.P., 417,161 shares of common stock
beneficially owned by DS Polaris Trust Company (foreign residents) (1997), Ltd.
and 143,820 shares of common stock beneficially owned by Canada-Israel
Opportunity Fund L.P. The Company has been informed that DS Polaris Ltd. is the
manager of Polaris Fund II (Tax Exempt Investors) LLC and Polaris Fund II, LLC,
the general partner of Polaris Fund II, L.P. and DS Polaris Trust Company
(foreign residents) (1997), Ltd. and an affiliate of Canada-Israel Opportunity
Fund L.P. The principal business address of DS Polaris Ltd. is 37 Shaul Hamelech
Avenue, Tel Aviv, Israel.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Company's common stock, to file reports of ownership and changes in
ownership of such securities with the SEC and NASDAQ. Such persons are required
by applicable regulations to provide the Company with copies of all Section
16(a) forms that they file. Based solely upon a review of the copies of the
forms furnished to the Company, or written representations from certain
reporting persons that no forms were required, the Company believes that all
filing requirements applicable to its officers, directors and known ten percent
stockholders were complied with during 1999.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total cash and non-cash compensation
that ITXC paid or accrued during the years ended December 31, 1999 and 1998 with
respect to its Chief Executive Officer and the individuals who, during 1999,
were the four other most highly compensated executive officers of the Company.
The principal components of these individuals' current cash compensation are the
annual base salary and bonus included in the Summary Compensation Table. The
Company has also described below other compensation these individuals receive
under employment agreements and ITXC's stock incentive plan. Mr. Shoemaker, the
Company's Executive Vice President in charge of business development, joined
ITXC in January 2000. His base salary for 2000 is $180,000. A portion of the
bonuses earned in 1999 will not be paid until 2000.
-9-
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Number of
Securities
Bonus Underlying
Name and Principal Position Year Salary ($) ($) Options/SARs (#)
- --------------------------- ---- ---------- --- ----------------
<S> <C> <C> <C> <C>
Tom I. Evslin 1999 250,769 153,672(1) 30,000
Chairman of the Board,
President and 1998 232,308 150,000(1) --
Chief Executive Officer
Edward B. Jordan 1999 148,269 102,339(1) 400,000
Executive Vice President
and Chief Financial Officer 1998 120,192 -- --
John G. Musci(2) 1999 176,923 172,350(1)(3) 1,500,000
Executive Vice President
and Chief Operating Officer
Steven J. Ott 1999 101,014 135,242(4) 80,000
Vice President, Global
Sales 1998 96,153 32,924(4) 350,000
Eric G. Weiss 1999 121,359 58,181(1) 50,000
Vice President and
Business Unit Manager, 1998 93,654 -- 50,000
WWeXchange Service
</TABLE>
(1) Bonuses for 1999 include some bonuses that were earned in 1999 but will not
be paid until 2000. Bonuses for 1998 were earned in 1998 but were not paid
until 1999.
(2) Mr. Musci joined ITXC in February 1999.
(3) Excludes reimbursement for relocation expenses
(4) Consists of commissions earned by Mr. Ott in 1998 and 1999.
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<PAGE>
The following table presents certain information regarding stock options
granted to the named executive officers during 1999 under the Company's stock
incentive plan.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
-------------------------------------------------------------- -----------------------------
Number
of % of Fair
Securities Total Exercise Market
Underlying Options Price Value on
Options Granted to Per Share Grant Date Expiration
Name Granted (#) Employees ($/Sh) ($/Sh) Date 0%($) 5% ($) 10% ($)
- ---- ---------- ---------- --------- ---------- ---------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tom I. Evslin......... 30,000 * 4.00 12.00 6/8/09 240,000 466,402 813,747
Edward B. Jordan...... 200,000 5.73 1.16 2.32 2/25/09 232,000 523,807 971,497
200,000 5.73 4.00 12.00 6/8/09 1,600,000 3,109,347 5,424,982
John G. Musci......... 1,500,000 43.01 .63 2.32 2/1/09 2,542,500 4,731,053 8,088,724
Steven J. Ott......... 50,000(1) 1.43 .63 2.32 1/7/09 84,750 157,702 269,624
30,000 * 4.00 12.00 6/8/09 240,000 466,402 813,747
Eric Weiss............ 50,000 1.43 4.00 12.00 6/8/09 400,000 777,337 1,356,425
</TABLE>
(1) These options were granted under the terms of Mr. Ott's offer of employment.
* Less than one percent.
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<PAGE>
The following table presents information regarding stock option exercises
by the named executive officers during 1999 and the number and value of stock
options held by the named executive officers at December 31, 1999. The
calculation of the value of unexercised options is based upon a market price of
$33.625 per share, representing the closing sale price of one share of the
Company's common stock on December 31, 1999.
<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options at
Number of Year-end (#) Fiscal Year-end ($)
---------------- --------------------------
Shares Value
Acquired Realized
Name on Exercise(#) (1)($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------ ------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tom I. Evslin................. 30,000 240,000 -- -- -- --
Edward B. Jordan.............. 200,000 2,399,000 400,000 400,000 13,217,000 12,649,000
John G. Musci................. -- -- 333,334 1,166,666 11,000,022 38,499,978
Steven J. Ott................. 116,668 1,365,016 -- 313,332 -- 10,314,539
Eric Weiss.................... 50,000 596,050 50,000 133,332 1,677,300 4,265,172
16,668 192,932
</TABLE>
- ------------
(1) Each of the options exercised by the named executive officers was exercised
prior to the Company's initial public offering. The amount realized on
exercise represents the number of shares acquired multiplied by the
difference between the public offering price in the Company's initial
public offering and the option exercise price.
Employment Agreements
Tom I. Evslin. The Company has entered into an amended employment agreement
with Tom I. Evslin, the Company's Chairman, President and Chief Executive
Officer. The agreement expires on March 31, 2001. Under his agreement, Mr.
Evslin is entitled to receive a base salary in 2000 of not less than $300,000
and annual bonuses which could amount to 100% or more of base salary. The actual
amount of bonuses paid or to be paid is determined by the Compensation Committee
before the start of the year in which the bonus is to be paid and is contingent
upon ITXC's achieving certain performance objectives. Mr. Evslin is eligible to
receive an additional bonus under the Company's cash incentive plan.
If Mr. Evslin's employment with the Company is terminated by the Company
without cause, or by Mr. Evslin for good reason, Mr. Evslin is entitled to
receive his salary and other benefits for a period of six months, as well as his
annual bonus for the year in which the termination occurs and for the severance
period. If Mr. Evslin's employment is terminated for any other reason, ITXC's
obligation to pay any further compensation or benefits ends. Mr. Evslin's
employment agreement also prohibits him from being employed by a competing
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<PAGE>
business for a period of six months after his employment is terminated by the
Company without cause or by him with or without good reason. ITXC can extend
this restriction against competition for up to an additional 18 months, provided
that the Company pays Mr. Evslin additional proportionate severance amounts. If
ITXC terminates Mr. Evslin's employment for cause, this restriction will apply
for a period of two years.
Under his employment agreement, Mr. Evslin is also bound to keep certain
information confidential and to assign to the Company any intellectual property
developed by him during the term of his employment.
John G. Musci. The Company also entered into an employment agreement with
John G. Musci, ITXC's Executive Vice President and Chief Operating Officer. The
term of Mr. Musci's employment agreement began on February 8, 1999 and expires
on February 7, 2001. Under his employment agreement, Mr. Musci is entitled to
receive an annual base salary of not less than $200,000 and he is eligible to
receive a cash bonus under the Company's cash incentive plan. Mr. Musci was also
entitled to receive up to $100,000 in relocation expenses.
Under his employment agreement, Mr. Musci received non-qualified options
covering 1,500,000 shares of ITXC common stock at an exercise price of $0.625
per share under the Company's stock incentive plan. A total of 1,000,000 of Mr.
Musci's options vested or will vest and become exercisable at the rate of 33
1/3% per year on December 21, 1999, 2000 and 2001. The remaining 500,000 will
vest and become exercisable on December 21, 2005. These options could, however,
vest and become exercisable under certain circumstances, prior to December 21,
2005.
Under his employment agreement, if Mr. Musci is terminated for cause or any
reason other than constructive termination or wrongful termination, he is
entitled to receive accrued but unpaid base salary, bonus and other benefits and
forfeits any unvested options. If Mr. Musci is terminated by reason of a
constructive termination or wrongful termination, in addition to any accrued but
unpaid base salary, bonus and other benefits, Mr. Musci is entitled to receive
as severance a lump sum payment in cash equal to his current salary as of the
date of termination for a period equal to the greater of the remainder of the
then current term or six months, certain additional benefits and an acceleration
of the vesting period for any of his options that have not vested as of the date
of the termination. Upon expiration of the term of his employment, Mr. Musci is
entitled to receive as severance his base salary compensation in effect at the
time of the termination for a period of six months, any accrued but unpaid base
salary, bonus and other benefits and forfeits any unvested options.
Mr. Musci's employment agreement prohibits him from becoming associated
with any competing business for the applicable severance period in the case of a
wrongful termination or expiration of his term of employment or for six months
in the case of his termination for any other reason.
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<PAGE>
Under his employment agreement, Mr. Musci is also bound to keep certain
information confidential and to assign to the Company any intellectual property
developed by him during the term of his employment.
Thomas J. Shoemaker. The Company entered into an employment agreement with
Thomas Shoemaker, ITXC's Executive Vice President of Business Development,
effective as of January 2, 2000. The term of Mr. Shoemaker's employment
agreement expires on January 2, 2001, after which his employment with the
Company will be on an at-will basis unless the term of the employment agreement
is extended by ITXC and Mr. Shoemaker. Under his employment agreement, Mr.
Shoemaker is entitled to receive an annual base salary of not less than
$180,000. In addition, for the calendar year 2000 and thereafter, Mr. Shoemaker
is eligible to receive a cash bonus under the Company's cash incentive plan.
Under his employment agreement, Mr. Shoemaker received options covering
300,000 shares of the Company's common stock at an exercise price of $40.00 per
share under ITXC's stock incentive plan. A total of 250,000 of Mr. Shoemaker's
options will vest and become exercisable at the rate of 33 1/3% per year on
January 2, 2001, 2002 and 2003. The remaining 50,000 options will vest and
become exercisable on January 2, 2003. Those 50,000 options could, however, vest
and become exercisable under certain circumstances, on January 2, 2001.
Under his employment agreement, if Mr. Shoemaker is terminated for cause or
any reason other than constructive termination or wrongful termination, he is
entitled to receive accrued but unpaid base salary, bonus and other benefits, in
accordance with the Company's employee benefits plans, and forfeits any unvested
options. If Mr. Shoemaker is terminated by reason of a constructive termination
or wrongful termination, in addition to any accrued but unpaid base salary,
bonus and other benefits, Mr. Shoemaker is entitled to receive, as severance,
payments through January 2, 2001 of his current salary as of the date of
termination, less his income from other employment, and his options will
continue to vest for the remainder of that year.
Mr. Shoemaker's employment agreement prohibits him from becoming associated
with any competing business for six months after the date of his termination.
Under his employment agreement, Mr. Shoemaker is also bound to keep certain
information confidential and to assign to ITXC any intellectual property
developed by him during the term of his employment.
Compensation Committee Interlocks and Insider Participation
During 1999, Messrs. Ganor, Collatos and Wilson participated on the
Company's Compensation Committee. Mr. Ganor is the Chairman of the Board and CEO
of VocalTec. Tom I. Evslin, ITXC's Chairman of the Board, President and Chief
Executive Officer, served on the board of directors and compensation committee
of VocalTec until June 1999, when he resigned from VocalTec's board. None of the
members of ITXC's Compensation Committee served as an officer or employee of
ITXC or any of its subsidiaries during 1999.
-14-
<PAGE>
In October 1997, the Company entered into an agreement with VocalTec under
which:
. the Company issued to VocalTec:
. 1,800,000 shares of common stock;
. 278,000 shares of Series A convertible preferred stock;
. warrants to purchase 122,000 shares of Series A convertible
preferred stock; and
. warrants to purchase 1,200,000 shares of common stock, the
exercisability of which was conditioned, in part, upon
ITXC's use of the credit described below;
. the Company received from VocalTec $500,000 in cash and the rights to
certain information regarding VocalTec's business; and
. the Company received a credit entitling ITXC to purchase $1.0 million of
VocalTec's equipment.
In April 1998:
. VocalTec Communication's shares of Series A convertible preferred stock
were converted into a total of 556,000 shares of Common Stock; and
. VocalTec Communication's preferred stock warrant was converted into a
warrant to purchase a total of 244,000 shares of Common Stock.
In June 1999, VocalTec exercised its outstanding warrants, acquiring
1,444,000 shares of Common Stock upon payment of $722.
VocalTec also acquired 668,622 shares of ITXC's Series B convertible
preferred stock and 215,332 shares of ITXC's Series C convertible preferred
stock as part of the Company's April 1998 and February 1999 private placements.
Each of those shares of preferred stock was converted into two shares of Common
Stock when the Company completed its initial public offering. See "Certain
Transactions--ITXC Equity Financings."
The Company also has an ongoing business relationship with VocalTec. From
inception through December 31, 1999, ITXC purchased $1.0 million of hardware and
software from VocalTec. ITXC offset the purchase price of these products against
the $1.0 million credit that the Company received in connection with its 1997
agreement with VocalTec.
-15-
<PAGE>
1998 Incentive Stock Option Plan
Under the Company's stock incentive plan, incentive stock options and non-
qualified stock options to purchase shares of Common Stock may be granted to
directors, officers, employees and consultants. As of January 31, 2000, stock
options covering 2,439,824 shares were available for grant under the plan and
stock options to purchase 5,561,130 shares were outstanding with a weighted
average exercise price of $4.83 per share. Under the plan, the Company may also
issue stock appreciation rights, either alone or in connection with options,
restricted stock awards and performance awards. As of January 31, 2000, the
Company had not issued any such stock appreciation rights, restricted stock
awards or performance awards.
On January 1 of each year, the number of shares of Common Stock available
for issuance under the plan will be increased by the least of:
. 2,000,000 shares;
. 3% of the outstanding shares; or
. a number of shares determined by the Board of Directors.
The plan provides that in the event of a change in control, all options
outstanding on that date will be immediately and fully exercisable upon
termination of an option holder's employment or service for certain specified
reasons within twelve months following the change in control. In addition, under
certain circumstances, upon such specified termination, an option holder may be
permitted to exchange any unexercised options for a cash payment.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan intended to meet the
qualifications for such a plan under applicable federal income tax laws. The
plan is administered by the Compensation Committee. The number of shares
available for purchase under the plan presently consists of 858,164 shares of
common stock and will increase on January 1 of each subsequent year in an amount
equal to the least of:
. 600,000 shares of common stock;
. 1% of the outstanding shares; or
. a number of shares determined by the Board of Directors.
During periods when employees are permitted to make purchases, the purchase
price of the shares of Common Stock will be equal to 85% of the lesser of:
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<PAGE>
. the fair market value of the Common Stock on the employee's entry date
into the applicable offering period; or
. the fair market value of the Common Stock on the date of purchase.
However, the purchase price for any employee whose entry date is other than the
start date of an offering period shall not be less than 85% of the fair market
value of the Common Stock on the start date of that offering period.
In the event of a change in control, each outstanding purchase right shall
automatically be exercised. ITXC will use its best efforts to provide written
notice in advance of the occurrence of any transaction. Upon receipt of
such notice, employees may terminate their outstanding purchase rights.
Cash Incentive Plan
The Company maintains a cash incentive plan to encourage and reward its
employees for their contributions to ITXC's performance. All employees, except
salespeople, are eligible to participate in this plan. Employees who are
eligible receive bonuses calculated according to a formula which takes into
account individual performance and Company performance.
CERTAIN TRANSACTIONS
For a description of the Company's relationship with VocalTec, see
"Executive Compensation--Compensation Committee Interlocks and Insider
Participation."
Loans from Senior Management
Between February 9, 1998 and April 22, 1998, the Company borrowed an
aggregate of $550,000 from Tom I. Evslin, ITXC's Chairman of the Board, Chief
Executive Officer and President, and $200,000 from Edward B. Jordan, ITXC's
Executive Vice President and Chief Financial Officer, and delivered a series of
demand notes to these officers. The notes bore interest at a rate of 10% per
year. On April 27, 1998, each of those notes was canceled and the Company paid
accrued interest to Mr. Evslin and Mr. Jordan in the amounts of $5,762 and $932,
respectively. In consideration for canceling those notes, Mr. Evslin and Mr.
Jordan received 322,581 and 117,302 shares of Series B convertible preferred
stock, respectively, and warrants to purchase 645,162 and 234,604 shares of
Common Stock, respectively, at an exercise price of $0.8525 per share. ITXC
valued the Series B convertible preferred stock issued to Mr. Evslin and Mr.
Jordan at the same $1.705 per share price paid by all other purchasers of the
Series B convertible stock. Thus, Mr. Evslin's shares and Mr. Jordan's shares
had an aggregate value of $550,000 and $200,000, respectively. The Company
concluded that the fair value of the warrants granted to Mr. Evslin and Mr.
Jordan was $90,000, which was included in interest expense during 1998.
-17-
<PAGE>
ITXC Equity Financings
In April 1998, the Company sold to a limited group of investors a total of
5,865,104 shares of Series B convertible preferred stock at a purchase price of
$1.705 per share. The following table sets forth the names of those investors
who, either directly or through an affiliate, are presently directors, officers
or five percent stockholders of ITXC, the number of shares of Series B
convertible preferred stock that such investors acquired, the aggregate purchase
price paid by such investors and the aggregate number of shares of Common Stock
that were issued upon conversion of the preferred shares when ITXC completed its
initial public offering. Each share of Series B convertible preferred stock was
converted into two shares of Common Stock.
<TABLE>
<CAPTION>
Shares of Shares of
Principal Preferred Common
Relationship Stock Total Stock
Investor to ITXC Purchased Price ($) Issued
-------- ------- --------- ---------- ------
<S> <C> <C> <C> <C>
Chase Venture Capital Associates, L.P. Principal stockholder 1,361,290 2,321,000 2,722,580
Intel Corporation Principal stockholder 1,173,021 2,000,000 2,346,042
Spectrum Equity Investors II, L.P. and Principal stockholders; 1,173,021 2,000,000 2,346,042
SEA 1998 II, L.P. furthermore, William
P. Collatos, an affiliate of
these stockholders, is a
director of ITXC.
DS Polaris, Ltd., Polaris Principal stockholder 753,079 1,284,000 1,506,158
Fund II (Tax Exempt
Investors), LLC, Polaris
Fund II, LLC, Polaris
Fund II, L.P., DS Polaris
Trust Company (foreign
residents) (1997), Ltd.
and Canada--Israel
Opportunity Fund LP
VocalTec Communications Principal stockholder. 668,622 1,140,000 1,337,244
Elon A. Ganor, the Chairman
of the Board and CEO of
VocalTec, is a director of
ITXC
Tom I. Evslin and Mary A. Evslin Chairman of the Board, 322,581 550,000 645,162
Chief Executive Officer
and President, and Vice
President, Marketing and
Customer Success
The fl@tiron Fund LLC Frederick R. Wilson, the 296,188 505,000 592,376
manager of The fl@tiron
Fund LLC, is a director of
ITXC
Edward B. Jordan Executive Vice President 117,302 200,000 234,604
and Chief Executive Officer
</TABLE>
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<PAGE>
As part of the Series B financing, the Company entered into various
agreements with the investors, including a stockholders' agreement, the
principal terms of which terminated upon the closing of ITXC's initial public
offering, and a registration rights agreement.
In February 1999, the Company sold to a limited group of investors a
total of 3,229,975 shares of Series C convertible preferred stock at a purchase
price of $4.644 per share. The following table sets forth the names of those
investors who, either directly or through an affiliate, are presently directors,
officers or five percent stockholders of ITXC, the number of shares of Series C
convertible preferred stock that such investors acquired, the aggregate purchase
price paid by such investors and the aggregate number of shares of Common Stock
that were issued upon conversion of the preferred shares when ITXC completed it
initial public offering. Each share of Series C convertible preferred stock was
converted into two shares of common stock.
<TABLE>
<CAPTION>
Shares of Shares of
Preferred Common
Stock Total Stock
Investor Principal Relationship to ITXC Purchased Price ($) Issued
------------------------------ --------- --------- ------
<S> <C> <C> <C> <C>
Spectrum Equity See table above 1,173,559 5,450,008 2,347,118
Investors II, L.P. and
SEA 1998 II, L.P
Chase Venture Capital See table above 870,138 4,040,921 1,740,276
Associates, L.P
Intel Corporation 484,496 2,249,999 968,992
DS Polaris, Ltd., See table above 263,194 1,222,273 526,388
Polaris Fund II (Tax
Exempt Investors), LLC,
Polaris Fund II, LLC,
Polaris Fund II, L.P.,
DS Polaris Trust
Company (foreign
residents) (1997), Ltd.
and Canada-Israel
Opportunity Fund L.P.
The Flatiron Fund See table above. 223,256 1,036,801 446,512
1998/99, LLC and
Flatiron Associates, LLC
VocalTec
Communications See table above 215,332 1,000,002 430,664
</TABLE>
As part of the Series C financing, the Company's entered into various
agreements with its investors, including a stockholders' agreement, the
principal terms of which terminated upon the closing of ITXC's initial public
offering, and a registration rights agreement.
Third Amended Registration Rights Agreement
Each of the purchasers of Series B and Series C convertible preferred
stock, including Mr. and Mrs. Evslin and Mr. Jordan, and ITXC entered into an
amended registration rights agreement whereby each purchaser has the right,
under certain circumstances and subject to
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<PAGE>
certain conditions, to cause the Company to register under the Securities Act
shares of Common Stock held by them. Subject to certain conditions and
exceptions, those purchasers also have the right to require that shares of
Common Stock held by them be included in any registration under the Securities
Act commenced by the Company.
Stock Option Exercises
During 1999, certain of ITXC's executive officers exercised stock options,
resulting in the issuance of a total of 480,004 shares of Common Stock.
-20-
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for implementing, overseeing and
administering the Company's overall compensation policy. The basic objectives
of that policy are to (a) provide compensation levels that are fair and
competitive with peer companies, (b) align pay with performance and (c) where
appropriate, provide incentives which link executive and stockholder interests
and long-term corporate objectives through the use of equity-based incentives.
Overall, the Company's compensation program is designed to attract, retain and
motivate high quality and experienced employees at all levels of the Company.
The principal elements of executive officer compensation are base pay, bonus and
stock options, together with health benefits. The various aspects of the
compensation program, as applied to the Company's Chief Executive Officer and
the Company's other executive officers, are outlined below.
Executive officer compensation is, in large part, determined by the
individual officer's ability to achieve his or her performance objectives. Each
of ITXC's executive officers participates in the development of an annual
business strategy from which individual objectives are established and
performance goals are measured periodically. Initially, the objectives are
proposed by the particular officer involved. Those objectives are then
determined by the Chief Executive Officer or, in the case of Mr. Evslin's
objectives, by the Board of Directors.
Base Pay
The Company has only been in existence since 1997. Initially, base pay was
established at levels that were considered to be sufficient to attract
experienced personnel but which would not exhaust available resources. As the
Company has grown, the Company's compensation focus continues to emphasize other
areas of compensation. Executive officers understand that their principal
opportunities for substantial compensation lay not in enhanced base salary, but
rather through appreciation in the value of previously granted stock options.
Thus, base pay has not represented the most critical element of executive
officer compensation.
Three of the executive officers have employment contracts, described
elsewhere herein, that establish their base pay. Mr. Evslin's employment
agreement was recently amended. Among other things, this amendment resulted in
an increase in the Chief Executive's base salary from $250,000 to $300,000.
Given Mr. Evslin's equity ownership in the Company, the Compensation Committee
recognizes that the Chief Executive Officer's principal financial incentives are
more directly related to the market price of the Company's Common Stock than to
the dollar amount of cash compensation paid to him.
Bonus
The Company maintains a cash incentive plan for non-commission employees,
including each of the executive officers other than Steve Ott. Each executive
officer of the Company is eligible to receive a bonus under the Company's cash
incentive plan if such officer achieves his or her individual performance
objectives and the Company achieves its performance goals. The Company's
performance goals are based on revenue targets, subject to a gross margin
collar. The Board's semi-annual review of the Chief Executive Officer's
performance determines whether he will receive a bonus for individual
performance under the Company's cash incentive plan. The Chief Executive
Officer, in turn, reviews his "direct reports" on a semi-annual basis to
determine whether their individual bonuses have been earned. Bonuses payable
with respect to the
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<PAGE>
Company's performance are payable quarterly. Employees have different bonus
targets, depending on their position within the Company.
Of the Named Officers, Mr. Ott is the only officer whose bonuses includes
commissions. Commission-based compensation is considered to be appropriate for
Mr. Ott in light of his position as Vice President, Global Sales.
Stock Options
The Compensation Committee believes that a stock option plan provides
capital accumulation opportunities to participants in a manner that fosters the
alignment of the participants' interests and risks with the interests and risks
of the Company's public stockholders. The Compensation Committee further
believes that stock options can function to assure the continuing retention and
loyalty of employees. Options that have been granted to executive officers
typically carry three-year vesting schedules. Officers who leave the Company's
employ before their options are fully vested will lose a portion of the benefits
that they might otherwise receive if they remain in the Company's employ for the
entire vesting period. Stock option grants have been based upon amounts deemed
necessary to attract qualified employees and amounts deemed necessary to retain
such employees and to equitably reward high performance employees for their
contributions to the Company's development.
Given Mr. Evslin's substantial equity interest in the Company, stock
options have not represented a significant portion of his compensation to date.
The 30,000 options granted to Mr. Evslin during 1999 represent bargained-for
compensation in the context of negotiations relating to his employment
agreement. For the other executive officers, stock options generally constitute
the most substantial portion of the Company's compensation program, given the
significant increase in the market price of the Common Stock since the Company's
September 1999 initial public offering.
The Compensation Committee believes that an appropriate compensation
program can help in fostering competitive operations if the program reflects a
suitable balance between providing appropriate awards to key employees while at
the same time effectively controlling compensation costs, principally by
establishing cash compensation at competitive levels and emphasizing
supplemental compensation that correlates the performance of individuals, the
Company and the Company's Common Stock.
This report has been furnished by the Compensation Committee of ITXC's
Board of Directors.
Frederick R. Wilson, Chairman
William P. Collatos
Elon A. Ganor
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<PAGE>
Performance Graph
The following graph compares the percentage change in the cumulative total
stockholder return on the Company's Common Stock with the cumulative total
return of the Nasdaq Stock Market - United States Index and the Hambrecht &
Quist Internet Index for the period from September 28, 1999 (the date on which
the Common Stock was first publicly traded) through December 31, 1999. For
purposes of the graph, it is assumed that the value of the investment in ITXC's
Common Stock and each index was 100 on September 28, 1999 and that all dividends
were reinvested. The first datapoint reflected for the Company is the initial
public offering price of the Common Stock.
COMPARISON OF 3 MONTH CUMULATIVE TOTAL RETURN
AMONG ITXC CORPORATION, THE NASDAQ
STOCK MARKET - US INDEX AND THE
HAMBRECHT & QUIST INTERNET INDEX*
Cumulative Total Return-1999
----------------------------
9/28 9/30 10/31 11/30 12/31
---- ---- ----- ----- -----
ITXC CORP. 100
NASDAQ STOCK MARKET (US) 100
HAMBRECHT & QUIST
INTERNET 100
* $100 INVESTED ON 09/28/99 AT THE INITIAL PUBLIC OFFERING PRICE IN THE
COMPANY'S COMMON STOCK OR ON 9/1/99 IN INDEX INCLUDING REINVESTMENT OF DIVIDENDS
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<PAGE>
PROPOSAL TWO: APPROVAL OF AN AMENDMENT TO THE COMPANY'S
THIRD RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
General
The Board of Directors has declared advisable an amendment to the Company's
Third Restated Certificate of Incorporation to increase the aggregate number of
authorized shares of Common Stock from 67,500,000 shares to shares
(the "Amendment") and has directed that the Amendment be submitted to the
stockholders at the Annual Meeting. The Third Restated Certificate of
Incorporation presently authorizes the issuance of 67,500,000 shares of common
stock and 15,000,000 shares of preferred stock. The Amendment would increase the
authorized number of shares of common stock to shares. No change is
proposed in the number of authorized shares of preferred stock.
Proposed Amendment
If the Amendment is approved, the text of the first paragraph of the fourth
article of the Company's Third Restated Certificate of Incorporation would read
in its entirety as follows:
The total number of shares of stock which the Corporation shall have
authority to issue is Million ( )
shares, of which Million ( ) shares are designated
as Common Stock, having a par value of $.001 per share ("Common Stock"),
and Fifteen Million (15,000,000) shares are designated as Preferred Stock,
having a par value of $.001 per share ("Preferred Stock").
General Effect of the Proposed Amendment and Reasons for Approval
Of the Company's 67,500,000 authorized shares of Common Stock, shares
were issued and outstanding as of March 15, 2000. At that date, the Company had
also reserved for issuance a total of additional shares of Common Stock for
issuance as follows:
. __________ shares are issuable upon the exercise of options or other
benefits under the Company's stock incentive plan, consisting of:
. outstanding options to purchase __________ shares, of which options
covering __________ shares were exercisable as of March 15, 2000; and
. __________ shares available for future awards after March 15, 2000;
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<PAGE>
. __________ shares are issuable upon the exercise of outstanding warrants;
and
. __________ shares are issuable under the Company's employee stock
purchase plan.
On March 16, 2000, the date on which the Board of Directors approved the
Amendment (subject to stockholder approval), the closing sale price of the
Common Stock on the NASDAQ National Market System was $77.625.
The Board of Directors concluded that the Amendment is advisable in part in
order to enable the Board to approve stock splits in the future. The Board
believes that depending upon the market price of the Common Stock, stock splits
can improve the trading flexibility of stockholders in the market by increasing
the number of shares of Common Stock held by persons who are not subject to
trading restrictions (the so-called "float"). The Board of Directors also
believes that the Amendment is advisable in order to have additional shares
available for potential acquisitions, to maintain the Company's financing and
capital-raising flexibility, to have shares available for use for employee
benefit plans and other corporate purposes and to generally maintain the
Company's flexibility in today's competitive, fast-changing environment.
As of the date of this Proxy Statement, there are no present agreements,
understandings or plans for the issuance of any of the additional shares that
would be authorized by the Amendment.
Adoption of the Amendment would enable the Board from time to time to issue
additional shares of Common Stock for such purposes and such consideration as
the Board may approve without further approval of the Company's stockholders,
except as may be required by law or the rules of NASDAQ or any national
securities exchange on which the shares of Common Stock are at the time listed.
As is true for shares presently authorized but unissued, Common Stock authorized
by the Amendment may, among other things, have a dilutive effect on earnings per
share and on the equity and voting power of existing holders of Common Stock.
There are no preemptive rights with respect to the Common Stock. The
additional authorized shares of Common Stock would have the identical powers and
rights as the shares now authorized. Under Delaware law, stockholders will not
have any dissenter's or appraisal rights in connection with the Amendment. If
the Amendment is approved by the stockholders, it will become effective upon the
Company's executing, acknowledging and filing a Certificate of Amendment
required by the General Corporation Law of the State of Delaware.
The Board of Directors recommends a vote FOR the approval of the Amendment
to the Company's Third Restated Certificate of Incorporation.
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<PAGE>
PROPOSAL THREE: APPROVAL OF AN AMENDMENT TO THE COMPANY'S
1998 STOCK INCENTIVE PLAN TO PLACE A LIMIT ON BENEFITS
GRANTED TO ANY PARTICIPANT IN ANY CALENDAR YEAR
General
The Board of Directors proposes that shareholders approve an amendment (the
"Incentive Plan Amendment") to the Company's 1998 Stock Incentive Plan (the
"Incentive Plan") adopted by the Board on March 16, 2000. The Board adopted the
Incentive Plan Amendment so that stock compensation paid under the Incentive
Plan in the form of stock options, stock appreciation rights, restricted stock
and performance awards (collectively, "Awards") would not be subject to the
compensation deduction limitation of Section 162(m) of the Internal Revenue Code
(the "Code"), which is discussed more fully below. The Incentive Plan Amendment
places a limitation on the number of shares of Common Stock with respect to
which Awards may be granted or awarded to any one employee in any one calendar
year. At present, while there is a limitation on the aggregate number of shares
of Common Stock that may be issued under the Incentive Plan, there is no annual
limitation on the number of shares with respect to which stock-based Awards may
be granted to an employee (other than a limitation imposed by the Code with
respect to "incentive stock options" within the meaning of Section 422 of the
Code).
Proposed Amendment
If the Incentive Plan Amendment is approved, the text of Section 5.3 of the
Stock Incentive Plan would read in its entirety as follows:
In any calendar year, the number of Shares covered by Options and Awards
granted to any one participant in the Plan shall not exceed 500,000 Shares.
General Effect of the Proposed Incentive Plan Amendment and Reasons for Approval
Section 162(m) of the Code precludes public corporations from deducting
compensation paid to certain senior executive officers in a taxable year to the
extent such compensation exceeds $1,000,000. However, certain kinds of
compensation, including qualified "performance based compensation," are
disregarded for purposes of the deduction limitation. In accordance with
Treasury regulations issued under Code Section 162(m), compensation attributable
to stock options, stock appreciation rights, restricted stock and other
performance awards denominated in shares will qualify as "performance-based
compensation" if, among other things, the stock award plan contains a per-
employee limit on the number of shares for which such stock-based incentives may
be granted or awarded during a specified period and the per-employee limitation
is approved by shareholders.
The proposed Incentive Plan Amendment would limit the number of shares of
Common Stock with respect to which Awards may be granted to any employee in any
calendar year to
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<PAGE>
500,000 shares, although neither the Board nor the Board's Compensation
Committee has any current plan to grant Awards covering 500,000 shares to any
particular employee in one calendar year.
Under transition regulations approved by the Internal Revenue Service,
a corporation generally has up to three years after it has become a public
company to adopt a limitation comparable to the Incentive Plan Amendment. The
Board of Directors has concluded, however, that it is in the best interests of
the Company to adopt such an amendment at the first annual meeting of
stockholders after the Company became a public corporation.
The Board of Directors recommends a vote FOR the approval of the
Incentive Plan Amendment to the Company's 1998 Stock Incentive Plan.
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<PAGE>
OTHER MATTERS
Costs
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited personally or by telephone or
telegraph by regular employees of the Company and its subsidiaries. Brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward soliciting material to their principals, and the Company will, upon
request, reimburse them for the reasonable expense of doing so.
Relationship With Independent Accountants
Ernst & Young LLP has audited all periods since the Company's inception. A
representative of that firm is expected to be present at the Annual Meeting and
will have an opportunity to make a statement if he or she so desires. The
representative is expected to be available to respond to appropriate questions
from stockholders. The Board of Directors has not yet met to select independent
accountants to audit and report on the Company's financial statements for the
year ending December 31, 2000.
Other Matters to be Presented
The Board of Directors does not know of any matters, other than those
referred to in the accompanying Notice of the Annual Meeting, to be presented at
the Annual Meeting for action by stockholders. However, if any other matters
are properly brought before the Annual Meeting or any adjournment thereof, it is
intended that votes will be cast with respect to such matters, pursuant to the
proxies, in accordance with the best judgment of the persons acting under the
proxies.
Stockholder Proposals
If a stockholder of the Company wishes to have a proposal included in the
Company's proxy statement for the 2001 Annual Meeting of Stockholders, the
proposal must be received at
the Company's principal executive offices by December 2, 2000 and must otherwise
comply with rules promulgated by the Securities and Exchange Commission in order
to be eligible for inclusion in the proxy material for the 2001 Annual Meeting.
If a stockholder desires to bring business before the meeting which is not
the subject of a proposal meeting the SEC proxy rule requirements for inclusion
in the proxy statement, the stockholder must follow procedures outlined in the
Company's by-laws in order to personally present the proposal at the meeting. A
copy of these procedures is available upon request from the Secretary of the
Company.
One of the procedural requirements in the Company's by-laws is timely
notice in writing of the business that the stockholder proposes to bring before
the meeting. Notice of business proposed to be brought before the 2001 Annual
Meeting or notice of a proposed nomination to
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<PAGE>
the Board must be received by the Secretary of the Company no earlier than
January 3, 2001 (the "Earliest Date"), and no later than February 2, 2001 (the
"Latest Date"), to be presented at the meeting. If, however, the date of next
year's Annual Meeting is earlier than April 3, 2001 or later than July 2, 2001,
the Earliest Date will be 120 days prior to the meeting date and the Latest Date
will be the later of the 90th day before the meeting date or the tenth day after
the Company publicly announces the date of the 2001 Annual Meeting.
Any such notice must provide the information required by the Company's by-
laws with respect to the shareholder making the proposal, the nominee (if any)
and the other business to be considered (if any). Under rules promulgated by the
Securities and Exchange Committee, the Company, acting through the persons named
as proxies in the proxy materials for such meeting, may exercise discretionary
voting authority with respect to any proposals that do not comply with the
procedures described above.
By Order of the Board of Directors,
, 2000 Edward B, Jordan, Secretary
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1999, including consolidated financial statements, accompanies this
Proxy Statement. The Annual Report is not to be regarded as proxy soliciting
material or as a communication by means of which any solicitation is to be made.
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<PAGE>
ITXC CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS,
MAY 3, 2000
The undersigned hereby appoints Tom I. Evslin, Edward B. Jordan and
John G. Musci, and each of them, attorneys and proxies, with power of
substitution in each of them, to vote for and on behalf of the undersigned at
the annual meeting of the shareholders of the Company to be held on May 3, 2000,
and at any adjournment thereof, upon matters properly coming before the meeting,
as set forth in the related Notice of Meeting and Proxy Statement, both of which
have been received by the undersigned. Without otherwise limiting the general
authorization given hereby, said attorneys and proxies are instructed to vote as
follows:
1. Election of the Board's nominees for Director. (The Board of
Directors recommends a vote "FOR".)
FOR the nominees listed below (except as marked to the contrary below) [_]
WITHHOLD AUTHORITY to vote for the nominees listed below [_]
Nominees: Tom I. Evslin and Frederick R. Wilson
INSTRUCTION: To withhold authority to vote for any individual nominee
listed above, write the nominee's name in the space provided below.
__________________________________________________________________________
2. Proposal to amend the Company's Third Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
65,000,000 to .
FOR [_] AGAINST [_] ABSTAIN [_]
3. Proposal to amend the Company's 1998 Stock Incentive Plan to add
a limitation on the maximum number of shares of common stock covered by options
and awards which may be granted to any participant in any calendar year.
FOR [_] AGAINST [_] ABSTAIN [_]
4. Upon all such other matters as may properly come before the
meeting and/or any adjournment or adjournments thereof, as they in their
discretion may determine. The Board of Directors is not aware of any such other
matters.
<PAGE>
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY, THIS
PROXY WILL BE VOTED FOR EACH OF THE BOARD'S NOMINEES, FOR THE PROPOSED AMENDMENT
TO THE COMPANY'S THIRD RESTATED CERTIFICATE OF INCORPORATION AND FOR THE
PROPOSED AMENDMENT TO THE COMPANY'S 1998 STOCK INCENTIVE PLAN.
Dated: _______________________, 2000
Signed_____________________________
___________________________________
Please sign this proxy and return it promptly
whether or not you expect to attend the
meeting. You may nevertheless vote in person
if you attend.
Please sign exactly as you name appears
hereon. Give full title if an Attorney,
Executor, Administrator, Trustee, Guardian,
etc.
For an account in the name of two or more
persons, each should sign, or if one signs, he
should attach evidence of his authority.
