<PAGE>
April 28, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of Shareholders
of iBasis, Inc., which will be held at The Marriot, Rt. 128 and 3A, One Mall
Road in Burlington, Massachusetts, on Wednesday, May 24, 2000 at 10:00 a.m.
The Notice of Annual Meeting of Shareholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, accompany this
letter. The Company's Annual Report to Shareholders is also enclosed for your
information.
All shareholders are invited to attend the Annual Meeting. However, to
ensure your representation at the Annual Meeting, you are urged to complete,
date, sign and return the enclosed Proxy Card (a postage-prepaid envelope is
enclosed for that purpose).
YOUR SHARES CANNOT BE VOTED UNLESS YOU DATE, SIGN, AND RETURN THE ENCLOSED
PROXY CARD OR ATTEND THE ANNUAL MEETING IN PERSON. Regardless of the number of
shares you own, your careful consideration of, and vote on, the matters before
the shareholders is important.
Very truly yours,
[LOGO]
Ofer Gneezy
President and
Chief Executive Officer
<PAGE>
IBASIS, INC.
20 SECOND AVENUE
BURLINGTON, MASSACHUSETTS 01803
------------------------
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
---------------------
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders (the "MEETING") of iBasis, Inc., a
Delaware corporation (the "COMPANY"), will be held on Wednesday, May 24, 2000 at
10:00 a.m., at The Marriot, Rt. 128 and 3A, One Mall Road, Burlington,
Massachusetts. The purposes of the Meeting shall be:
1. To elect two Class 1 directors to hold office for a three year term and
until such directors' successors have been duly elected and qualified.
2. To ratify the appointment of the firm of Arthur Andersen LLP, as
independent auditors for the Company for the fiscal year ending
December 31, 2000.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Shareholders of record on the books of the Company at the close of business
on April 21, 2000 will be entitled to notice of and to vote at the Meeting.
Please sign, date, and return the enclosed proxy card in the enclosed
envelope at your earliest convenience. If you return the proxy, you may
nevertheless attend the Meeting and vote your shares in person.
All shareholders of the Company are cordially invited to attend the Meeting.
By Order of the Board of Directors
[LOGO]
Ofer Gneezy
Secretary
Burlington, Massachusetts
April 28, 2000
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE, AND MAIL THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED FROM WITHIN
THE UNITED STATES.
<PAGE>
IBASIS, INC.
20 SECOND AVENUE
BURLINGTON, MASSACHUSETTS 01803
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 24, 2000
Proxies enclosed with this Proxy Statement are solicited by the Board of
Directors of iBasis, Inc., a Delaware corporation (the "COMPANY"), for use at
the Annual Meeting of Shareholders (the "MEETING") to be held on Wednesday,
May 24, 2000 at 10:00 a.m., at The Marriot, Rt. 128 and 3A, One Mall Road,
Burlington, Massachusetts, and any adjournments thereof.
Registered shareholders can vote their shares by mailing their signed proxy
card. The Company believes that the procedures that have been put in place are
consistent with the requirements of applicable law.
Shares represented by duly executed proxies received by the Company prior to
the Meeting will be voted as instructed in the proxy on each matter submitted to
the vote of shareholders. If any duly-executed proxy is returned without voting
instructions, the persons named as proxies thereon intend to vote all shares
represented by such proxy FOR the election of the nominees for director named
below and FOR the ratification of selection of auditors described in this Proxy
Statement. The Board of Directors of the Company (the "BOARD OF DIRECTORS") is
not aware of any other matters to be presented at the Meeting. If any other
matter should be presented at the Meeting upon which a vote properly may be
taken, shares represented by all duly executed proxies received by the Company
will be voted with respect thereto in accordance with the best judgment of the
persons named in the proxies.
Any shareholder may revoke a proxy at any time prior to its exercise by
delivering a later-dated proxy, by written notice of revocation to the Secretary
of the Company at the address of the Company set forth above, or by voting in
person at the Meeting. If a shareholder does not intend to attend the Meeting,
any written proxy or notice should be returned for receipt by the Company, not
later than the close of business on May 23, 2000. The Company has retained
EquiServe Trust Company N.A. to organize the distribution and return of the
proxy materials. EquiServe is paid $15,000 annually for various services,
including those rendered in connection with the Companies Annual Meeting. The
Company will bear the cost of solicitation of proxies relating to the Meeting.
Only shareholders of record as of the close of business on April 21, 2000
(the "RECORD DATE") will be entitled to notice of and to vote at the Meeting and
any adjournments thereof. As of the Record Date there were 32,287,190 shares
(excluding treasury shares) of the Company's Common Stock, $0.001 par value (the
"COMMON STOCK"), issued and outstanding. Such shares of Common Stock are the
only voting securities of the Company. Shareholders are entitled to cast one
vote for each share of Common Stock held of record on the Record Date.
An Annual Report to Shareholders, containing financial statements for the
fiscal year ended December 31, 1999, preceded or accompanies this Proxy
Statement. The mailing address of the Company's principal executive offices is
20 Second Avenue, Burlington, Massachusetts 01803.
This Proxy Statement and the proxy enclosed herewith were first mailed to
shareholders on or about April 28, 2000.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 15, 2000 (i) by each person
who is known by the Company to own beneficially more than five percent (5%) of
the Company's Common Stock, (ii) by each of the Company's directors, (iii) by
each of the Named Executive Officers (as defined under "Summary Compensation"
below) and (iv) by all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
---------------------
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS NUMBER PERCENT
- --------------------------------------- ---------- --------
<S> <C> <C>
Charles River Partnership VIII, LP and affiliated
entities(1)............................................... 3,711,500 11.0%
Izhar Armony(1)............................................. 3,711,500 11.0%
Ofer Gneezy(2).............................................. 3,661,939 10.9%
Menlo Ventures VII, L.P. and affiliated entities(3)......... 3,445,713 10.2%
John Jarve(3)............................................... 3,445,713 10.2%
Technology Crossover Ventures and affiliated entities(9).... 1,853,547 5.5%
Gordon J. VanderBrug(5)..................................... 1,780,251 5.3%
Robert Maginn(6)............................................ 1,381,719 4.1%
Charles N. Corfield(7)...................................... 1,214,416 3.6%
Integral Capital Partners IV, L.P. and affiliated entities
(8)....................................................... 1,029,749 3.1%
Charles S. Houser(9)........................................ 1,099,999 3.3%
Seruus Telecom Fund, L.P.................................... 999,999 3.0%
Michael J. Hughes(10)....................................... 60,827 *
John G. Henson, Jr.(11)..................................... 51,250 *
Carl Redfield............................................... 0 *
Charles M. Skibo............................................ 0 *
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (11
PERSONS)(12).............................................. 17,410,613 52%
</TABLE>
- ------------------------
* Less than 1%
(1) Consists of 3,742,493 shares held by Charles River Partnership VIII, LP and
69,007 shares held by Charles River VIII-A, LLC. Mr. Armony, one of our
directors, is a partner of Charles River Ventures, an affiliate of Charles
River Partnership VIII, LP and Charles River VIII-A, LLC. Mr. Armony
disclaims beneficial ownership of the shares held by the entities affiliated
with Charles River Ventures, except to the extent of his pecuniary interest
therein. Based upon information provided by Charles River Partnership VIII
and affiliated entities' Schedule 13G, filed with the SEC February 2, 2000.
The address for Mr. Armony and Charles River Ventures is 1000 Winter Street,
Suite 3300, Waltham, Massachusetts 02451.
(2) Includes 20,000 shares of common stock issuable upon exercise of options
within 60 days of December 31, 1999. Also includes 50,000 shares held by The
Ofer Gneezy 1999 Family Trust for the benefit of Mr. Gneezy's children.
Mr. Gneezy disclaims beneficial ownership of the shares held by The Ofer
Gneezy 1999 Family Trust. Based in part upon information provided by
Mr. Gneezy's Schedule 13G, filed with the SEC February 14, 2000. Mr. Gneezy
is our President, Chief Executive Officer and one of our directors.
(3) Consists of 3,657,869 shares held by Menlo Ventures VII, L.P. and 153,631
shares held by Menlo Entrepreneurs Fund VII, L.P. Mr. Jarve, one of our
directors, is managing director of MV Management VII, LLC, the general
partner of Menlo Ventures VII, L.P. and Menlo Entrepreneurs Fund VII, L.P.
Mr. Jarve disclaims beneficial ownership of the shares held by the entities
affiliated with Menlo Ventures, except to the extent of his pecuniary
interest therein. Based upon information provided by Menlo Ventures VII,
L.P. and affiliated entities' Schedule 13G, filed with the SEC February 4,
2000.
2
<PAGE>
The address for Mr. Jarve and Menlo Ventures is 3000 Sand Hill Road,
Building 4, Suite 100, Menlo Park, California 94025.
(4) Consists of 14,955 shares held by TCV III (GP), 71,034 shares held by TCV
III, L.P., 1,888,010 shares held by TCV III (Q), L.P. and 85,498 shares held
by TCV III Strategic Partners, L.P., who are referred to collectively as the
"TCV Funds." Jay C. Hoag and Richard H. Kimball are the sole managing
members of Technology Crossover Management III, L.L.C., "TCM III", the
general partner of each of the TCV Funds. Consequently, TCM III and Messrs.
Hoag and Kimball may each be deemed to beneficially own all of the shares
held by the TCV Funds. TCM III and Messrs. Hoag and Kimball each disclaim
beneficial ownership of such shares, except to the extent of their
respective pecuniary interest in those shares. Based upon information
provided by Technology Crossover Ventures and affiliated entities'
Schedule 13G, filed with the SEC January 31, 2000. The address for each of
these entities is 575 High Street, Suite 400, Palo Alto, California 94301.
(5) Includes 15,000 shares of common stock issuable upon exercise of options
within 60 days of December 31, 1999. Also includes 1,317,345 shares held by
the G.J. & C.E. VanderBrug Family Limited Partnership. Dr. VanderBrug
disclaims beneficial ownership of the shares held by the G.J. & C.E.
VanderBrug Family Limited Partnership, except to the extent of his pecuniary
interest therein. Does not include 37,865 shares of common stock held by Dr.
VanderBrug's spouse. Dr. VanderBrug disclaims beneficial ownership of the
shares held by his spouse. Dr. VanderBrug is our Executive Vice President
and one of our directors.
(6) Consists of 996,000 shares held by Sunapee Securities, Inc. and 517,784
shares held by New Media Investors III, LLC. Mr. Maginn, one of our
directors, is a director of Bain & Co., Inc., an affiliate of Sunapee
Securities, Inc. and New Media Investors III, LLC. Mr. Maginn disclaims
beneficial ownership of the shares held by the entities affiliated with Bain
& Co., Inc., except to the extent of his pecuniary interest therein. The
address for Mr. Maginn and Bain & Co., Inc. is Two Copley Place, Boston,
Massachusetts 02116.
(7) Consists of 1,114,416 shares held by the Charles N. Corfield Trust u/a/d
12/19/91, a revocable trust of which Mr. Corfield is the sole trustee and
100,000 shares held by Mr. Corfield, individually, Mr. Corfield is one of
our directors.
(8) Consists of 1,137,761 shares held by Integral Capital Partners IV, L.P. and
6,404 Integral Capital Partners IV MS Side Fund, L.P. The address for
Integral Capital is 2750 Sand Hill Road, Menlo Park, California 94025.
(9) Consists of 999,999 shares held by Seruus Telecom Fund, L.P. and 100,000
shares held by Mr. Houser, individually. Mr. Houser, one of our directors,
is the managing director of Seruus Ventures, an affiliate of Seruus Telecom
Fund, L.P. Mr. Houser disclaims beneficial ownership of the shares held by
Seruus Telecom Fund, L.P., except to the extent of his pecuniary interest
therein.
(10) Includes 63,750 shares of common stock issuable upon the exercise of
options within 60 days of December 31, 1999. Mr. Hughes is our Vice
President, Finance and our Chief Financial Officer.
(11) Consists entirely of 71,250 shares of common stock issuable upon the
exercise of options within 60 days of December 31, 1999. Mr. Henson is our
Vice President, Engineering & Operations.
(12) Includes 170,000 shares of common stock issuable upon exercise of options
within 60 days of December 31, 1999 and certain shares held by affiliates of
such directors and executive officers.
3
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation in each of the last two fiscal years for the Company's
Chief Executive Officer and the next four most highly compensated executive
officers (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION (1) ---------------------
------------------------------ SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
- --------------------------- -------- -------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Ofer Gneezy............................... 1999 $150,000 $135,000 -- --
President and Chief Executive Officer 1998 134,866 37,500 80,000 --
Gordon J. VanderBrug...................... 1999 135,000 122,400 -- --
Executive Vice President 1998 122,240 33,750 60,000 --
John G. Henson, Jr. (2)................... 1999 125,000 85,600 50,000 --
Vice President, Engineering & Operations 1998 67,898 30,000 200,000 $17,791(3)
Michael J. Hughes (3)..................... 1999 120,000 75,750 50,000 --
Vice President, Finance and Chief
Financial Officer 1998 48,808 12,500 200,000 --
</TABLE>
- ------------------------
(1) Excludes certain perquisites and other benefits, the amount of which did not
exceed 10% of the employee's total salary and bonus.
(2) Mr. Henson became Vice President, Engineering and Operations in June 1998.
(3) Mr. Hughes became Vice President, Finance and Chief Financial Officer in
August 1998.
The following table contains information concerning options to purchase
common stock that we granted during the year ended December 31, 1999 to each of
the officers named in the summary compensation table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
----------------------------------------------------------------- RATES OF
PERCENT OF TOTAL STOCK PRICE APPRECIATION
NUMBER OF OPTIONS GRANTED EXERCISE FOR OPTION TERM(2)
SECURITIES UNDERLYING TO EMPLOYEES PRICE PER EXPIRATION -------------------------
NAME OPTIONS GRANTED(1) IN 1999 SHARE DATE 5% 10%
- ---- --------------------- ---------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ofer Gneezy............... -- -- -- -- -- --
Gordon J. VanderBrug...... -- -- -- -- -- --
John G. Henson, Jr........ 50,000 2.5% $4.00 6/3/2009 $2,142,000 $3,529,000
Michael J. Hughes......... 50,000 2.5 4.00 6/3/2009 2,142,000 3,529,000
</TABLE>
- ------------------------
(1) Shares underlying options generally vest over a four-year period, with 6.25%
of the shares vesting on each of the first sixteen three-month anniversaries
after the grant date. However, during the first year of employment, no
shares underlying an option vest until the first anniversary of the
optionee's employment when all of the shares that would have vested before
such date become exercisable. For disclosure regarding terms of the stock
options, see "1997 Stock Incentive Plan."
4
<PAGE>
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do
not represent an estimate or projection of our future stock prices.
Potential realizable value is determined by multiplying $28.75, the closing
price of the common stock on the Nasdaq National Market on December 31,
1999, by the stated annual appreciated rate compounded annually for the term
of the option, subtracting the exercise price or base price per share from
the product, and multiplying the remainder by the number of options granted.
Actual gains, if any, on stock option exercises and common stock holdings
are dependent on the future performance of the common stock and overall
stock market conditions. There can be no assurance that the amounts
reflected in the table will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table contains information concerning option holdings for the
year ended December 31, 1999 and at such date with respect to each of the
officers named in the summary compensation table.
<TABLE>
<CAPTION>
1999 YEAR-END OPTION VALUES
---------------------------------------------------------
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR END OPTIONS AT YEAR END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ofer Gneezy.................................... 20,000 60,000 $ 553,000 $1,659,000
Gordon J. VanderBrug........................... 15,000 45,000 414,750 1,244,250
John G. Henson, Jr............................. 71,250 178,750 1,980,938 4,866,563
Michael J. Hughes.............................. 63,750 186,250 1,769,063 5,078,438
</TABLE>
- ------------------------
(1) Value is determined by subtracting the exercise price from $28.75, the
closing price of the common stock on the Nasdaq National Market on
December 31, 1999, multiplied by the number of shares underlying the
options.
EMPLOYMENT AGREEMENTS
We currently have employment contracts in effect with Ofer Gneezy, our
President and Chief Executive Officer, Dr. VanderBrug, our Executive Vice
President, Mr. Henson, our Vice President of Engineering and Operations, Mr.
Hughes, our Vice President of Finance and Chief Financial Officer and
Mr. Giambalvo, our Senior Vice President of Worldwide Sales.
iBasis and Mr. Gneezy are parties to an employment agreement, dated
August 11, 1997, governing his employment with iBasis as President and Chief
Executive Officer. Under the terms of the employment agreement, Mr. Gneezy is to
be paid a base salary of $125,000, and is eligible to receive an annual bonus at
the discretion of the board of directors. iBasis and Dr. VanderBrug are parties
to an employment agreement, dated August 11, 1997, governing his employment with
iBasis as Executive Vice President. Under the terms of the employment agreement,
Dr. VanderBrug is to be paid a base salary of $115,000, and is eligible to
receive an annual bonus at the discretion of the board of directors. iBasis and
Mr. Henson are parties to an employment agreement dated as of August 17, 1999
governing his employment with iBasis as Vice President, Engineering and
Operations. Under the terms of the employment agreement, Mr. Henson is to be
paid a base salary of $120,000, and is eligible to receive an annual bonus at
the discretion of the chief executive officer or board of directors. iBasis and
Mr. Hughes are parties to an employment agreement dated as of August 17, 1999
governing his employment with iBasis as Vice President, Finance and Chief
Financial Officer. Under the terms of the employment agreement, Mr. Hughes is to
be paid a base salary of $120,000, and is eligible to receive an annual bonus at
the discretion of the chief executive officer or board of directors. iBasis and
Mr. Giambalvo are parties to an employment agreement, dated as of February 8,
2000, governing his employment with iBasis as Senior Vice President of Worldwide
Sales. Under the terms of the employment agreement, Mr. Giambalvo is to be paid
a base salary of $185,000, and is eligible to receive an annual bonus at the
discretion of the board of directors.
5
<PAGE>
We may terminate the employment agreements with Messrs. Gneezy and
VanderBrug "for cause" or at any time upon at least thirty days prior written
notice, and Messrs. Gneezy and VanderBrug may terminate their employment
agreements "for good reason" or at any time upon at least thirty days prior
written notice. If we terminate either of Messrs. Gneezy and VanderBrug without
cause or if either resigns for good reason, we must continue to pay his base
salary for one year and continue to provide health benefits for one year.
We may terminate the employment agreements with Messrs. Henson, Hughes and
Giambalvo "for cause" or at any time upon at least thirty days prior written
notice, and Messrs. Henson, Hughes and Giambalvo may terminate their employment
agreements for "good reason" or at any time upon at least thirty days prior
written notice. If, within six months following an acquisition or change in
control, we terminate either of Messrs. Henson, Hughes and Giambalvo without
cause or if either resigns for good reason, we must continue to pay his base
salary for nine months and continue to provide health benefits for nine months.
The employment agreements with Messrs. Gneezy, VanderBrug, Henson, Hughes
and Giambalvo entitle them to life insurance, health insurance and other
employee fringe benefits to the extent that we make benefits of this type
available to our other executive officers. All intellectual property that
Messrs. Gneezy, VanderBrug, Henson, Hughes and Giambalvo may invent, discover,
originate or make during the term of their employment shall be the exclusive
property of iBasis. Each of Messrs. Gneezy, VanderBrug, Henson, Hughes and
Giambalvo may not, during or after the term of his employment, disclose or
communicate any confidential information without our prior written consent. Each
employment agreement also contains a non-competition provision that is intended
to survive the termination of each officer's employment for a period of one
year. The agreements with Messrs. Gneezy and VanderBrug also provide that in the
event of an acquisition or change in control, each of their options and
restricted shares, if any, shall automatically become fully vested immediately
prior to such event, and each such option shall remain exercisable until the
expiration of such option or until it sooner terminates in accordance with its
terms. The agreements with Messrs. Henson, Hughes and Giambalvo provide that in
the event that we terminate the employment of the officer without cause, or the
officer terminates his employment with "good reason," in either case within six
months after the occurrence of an acquisition or change in control, then his
options and restricted stock, if any, shall immediately vest and become
exercisable, and each option shall remain exercisable until the expiration of
the option or until it sooner terminates in accordance with its terms.
We have also entered into a stock restriction agreement with Mr. Gneezy and
Dr. VanderBrug. Under the terms of the agreement, if either Mr. Gneezy or Dr.
VanderBrug leaves his employment with us, either because he terminates his
employment voluntarily and without "good reason," or he is terminated "for
cause," we have the right to purchase a percentage of the common stock held by
him at the fair market value, as determined by our board of directors, on the
date of the purchase by iBasis. The percentage we have the right to acquire
under these circumstances decreases over time, from approximately 16.9% as of
the date of this prospectus to 0% on or after August 26, 2000, at which time the
agreement will terminate. The terms "good reason" and "for cause" have the same
meanings as they do in the officers' employment agreements.
In general, "good reason" as used in both the employment agreements and the
stock restriction agreement of Messrs. Gneezy, VanderBrug, Hughes, Henson and
Giambalvo is defined to mean any material change in the compensation, position,
location of employment or responsibilities of the employee. "For cause"
generally means gross negligence or willful misconduct of the employee, a breach
of the employment agreement or the commission of a crime.
Our employment agreement with Mr. Giambalvo also contains provisions
relating to Mr. Giambalvo's relocation to the Boston area. Under the terms of
Mr. Giambalvo's employment agreement, we have agreed to provide Mr. Giambalvo
with $70,000 to cover his relocation expenses. In addition, we have agreed to
guarantee a loan of up to $500,000 to Mr. Giambalvo for a period of six months,
in the event he purchases a home in the Boston area before he sells his existing
home.
6
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee, which is composed of four directors, establishes and administers the
Company's executive compensation policies and plans and administers the
Company's stock option and other equity-related employee compensation plans. The
Committee considers internal and external information in determining officers'
compensation, including outside survey data.
COMPENSATION PHILOSOPHY
The Company's compensation policies for executive officers are based on the
belief that the interests of executives should be closely aligned with those of
the Company's shareholders. The Compensation policies are designed to achieve
the following objectives:
- Offer compensation opportunities that attract highly qualified executives,
reward outstanding initiative and achievement, and retain the leadership
and skills necessary to build long-term shareholder value.
- Maintain a significant portion of executives' total compensation at risk,
tied to both the annual and long-term financial performance of the Company
and the creation of shareholder value.
- Further the Company's short and long-term strategic goals and values by
aligning compensation with business objectives and individual performance.
COMPENSATION PROGRAM
The Company's executive compensation program has three major integrated
components, base salary, annual incentive awards, and long term incentives.
BASE SALARY. Base salary levels for executive officers are determined
annually by reviewing the competitive pay practices of internet Telephony
Companies of similar size and market capitalization, the skills, performance
level, and contribution to the business of individual executives, and the needs
of the Company. Overall, the Committee believes that base salaries for executive
officers are approximately competitive with median base salary levels for
similar positions in these internet Telephony Companies.
INCENTIVE AWARDS. The Company's executive officers are eligible to receive
cash bonus awards designed to motivate executives to attain short-term and
longer-term corporate and individual management goals. The Committee establishes
annual incentive opportunities for each executive officer in relation to his or
her base salary. Awards under this program are based on the attainment of
specific Company performance measures established by the Compensation Committee
early in the fiscal year, and by the achievement of specified individual
objectives and the degree to which each executive officer contributes to the
overall success of the Company and the management team. In 1999 the formula for
these bonuses was based on a combination of individual objectives and Company
financial performance objectives. The Company's performance generally met the
objectives set by the Committee in 1999.
LONG TERM INCENTIVES. The Committee believes that stock options are an
excellent vehicle for compensating its officers and employees. The Company
provides long term incentives through its 1997 Stock Incentive Plan, as amended,
the purpose of which is to create a direct link between executive compensation
and increases in shareholder value. Stock options are granted at fair market
value and vest in quarterly installments, generally over four years. When
determining option awards for an executive officer, the Committee considers the
executive's current contribution to Company performance, the anticipated
contribution to meeting the Company's long-term strategic performance goals, and
industry practices and norms. Long-term incentives granted in prior years and
existing levels of stock ownership are also taken into consideration. Because
the receipt of value by an executive officer under a stock option is dependent
upon an increase in the price of the Company's Common Stock, this portion of the
executive's compensation is directly aligned with an increase in shareholder
value.
7
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's base salary, annual incentive award and
long-term incentive compensation are determined by the Committee based upon the
same factors as those employed by the Committee for executive officers
generally. Mr. Gneezy's annualized base salary for the year ended December 31,
1999 was $150,000. The Chief Executive Officer may also be entitled to an annual
cash bonus depending on the Company's achievement of certain performance
objectives, including certain growth milestones in sales and financial
performance during a fiscal year, as compared to the preceding fiscal year. Any
such cash bonus will be computed on a formula basis established by the
Committee. For the year ended December 31, 1999, Mr. Gneezy was paid a cash
bonus of $135,000.
Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1 million for compensation paid to certain executives of public companies.
Having considered the requirements of Section 162(m), the Committee believes
that grants made pursuant to the Company's 1997 Stock Incentive Plan, as
amended, meet the requirement that such grants be "performance based" and are,
therefore, exempt from the limitations on deductibility. Historically, the
combined salary and bonus of each executive officer has been well below the
$1 million limit. The Committee's present intention is to comply with
Section 162(m) unless the Committee feels that required changes would not be in
the best interest of the Company or its shareholders.
Respectfully Submitted by the Compensation
Committee,
Ofer Gneezy
John Jarve
Izhar Armony
Charles Skibo
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
With the exception of Mr. Gneezy, no member of the Committee is or has been
an officer or employee of ours. All decisions regarding the compensation of our
executive officers for the fiscal year ended December 31, 1999 were made by the
Committee, except that Mr. Gneezy did not participate in deliberations or
decisions regarding his own compensation. None of our executive officers serves
as a member of the board of directors or compensation committee of any other
entity that has one or more executive officers serving as a member of our board
of directors or the Committee.
COMPENSATION OF DIRECTORS
Our directors do not receive cash compensation for their services as
directors. However, non-employee directors are reimbursed for travel expenses.
We maintain directors' and officers' liability insurance and our by-laws provide
for mandatory indemnification of directors and officers to the fullest extent
permitted by Delaware law. In addition, our certificate of incorporation limits
the liability of our directors to either the Company or its stockholders for
breaches of the directors' fiduciary duties to the fullest extent permitted by
Delaware law.
Messrs. Gneezy and VanderBrug, each of whom is both a director and executive
officer of iBasis, received a stock option grant in 1998 for their service as
officers of the Company. See "Executive Compensation." In addition, in September
1999, each of Messrs. Skibo and Redfield received an option to purchase 80,000
shares of common stock under the Company's 1997 Stock Incentive Plan, with such
options vesting in equal 25% increments on the date of each of the next four
annual meetings of our stockholders following our initial public offering,
beginning with the annual meeting to take place in 2000, provided that the
director is re-elected to the board of directors at such meeting. Each of the
other non-employee members of the board of directors, including Messrs. Armony,
Houser, Jarve, Corfield, and Maginn, received an option to purchase 40,000
shares of common stock on the same terms. The vesting of each of the options
will accelerate by 12 months, or 25% of the total grant, in the event of a
change in control of the Company, as defined in the option agreements.
SECTION 16(A)--BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's officers, directors, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities to file
reports of ownership on Forms 3, 4, and 5 with the Securities and Exchange
Commission and the Company. Based on the Company's review of copies of such
forms, most officers, directors and 10% holders complied with his/her
obligations in a timely fashion with respect to transactions in securities of
the Company during the year ended December 31, 1999. Mr. Corfield filed a
delinquent Form 4 for the month of November and Mr. Giambalvo filed a delinquent
Form 3 in February 2000.
9
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total returns for the Company's
Common Stock with the comparable return for the Nasdaq Stock Market Index and
the Nasdaq Electronic Components Stock Index (SIC Code 4813), as calculated by
the Center for Research in Security Prices at the University of Chicago,
Graduate School of Business, for the period beginning November 9, 1999 (the date
on which the Company's Common Stock was first registered with the SEC) and
ending December 31, 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
IBASIS COMP SIC4813
<S> <C> <C> <C>
11/10/2003 100.00 100.00 100.00
11/11/1999 90.06 101.31 101.68
11/12/1999 86.34 102.07 104.18
11/15/1999 90.37 102.01 105.23
11/16/1999 86.49 104.34 107.51
11/17/1999 79.35 103.59 106.51
11/18/1999 82.61 106.06 106.51
11/19/1999 86.80 106.76 105.95
11/22/1999 83.85 107.50 103.58
11/23/1999 79.19 105.92 103.58
11/24/1999 78.57 108.38 103.58
11/25/1999 78.57 108.38 103.58
11/26/1999 84.01 109.25 105.07
11/29/1999 96.89 108.41 103.94
11/30/1999 84.16 105.71 99.23
12/01/1999 90.68 106.27 97.01
12/02/1999 94.25 109.41 98.66
12/03/1999 98.14 111.55 101.39
12/06/1999 91.77 112.36 101.15
12/07/1999 91.93 113.66 101.62
12/08/1999 90.37 113.63 100.96
12/09/1999 90.68 113.89 100.96
12/10/1999 89.60 114.71 103.48
12/13/1999 91.77 115.91 105.42
12/14/1999 84.63 113.17 103.25
12/15/1999 77.17 114.77 103.25
12/16/1999 73.60 117.72 106.75
12/17/1999 67.70 118.92 109.82
12/20/1999 63.66 119.90 111.02
12/21/1999 71.12 123.93 112.53
12/22/1999 69.25 124.76 111.89
12/23/1999 74.53 125.78 114.90
12/24/1999 74.53 125.78 114.90
12/27/1999 77.64 125.96 112.60
12/28/1999 85.40 125.86 115.16
12/29/1999 78.88 128.06 115.25
12/30/1999 78.88 127.91 113.76
12/31/1999 71.43 128.94 115.38
</TABLE>
10
<PAGE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class serves a
three-year term. The Class 1 Directors' term will expire at the Meeting. All
directors will hold office until their successors have been duly elected and
qualified.
The Board has nominated Gordon VanderBrug and Charles Houser for reelection
as Class 1 Directors, to hold office until the Annual Meeting of Shareholders to
be held in 2003 and until their respective successors are duly elected and
qualified. Shares represented by all proxies received by the Board of Directors
and not marked so as to withhold authority to vote for Messrs. VanderBrug and
Houser will be voted FOR the election of all nominees. The nominees have
indicated their willingness to serve, if elected; however, if
Messrs. VanderBrug and Houser should be unable or unwilling to serve, the
proxies will be voted for the election of a substitute nominee designated by the
Board of Directors or for fixing the number of directors at a lesser number.
The following table sets forth for the nominee to be elected at the Meeting
and for each director whose term of office will extend beyond the Meeting, his
age, the position(s) currently held by each nominee or director with the
Company, the year such nominee or director was first elected a director, the
year each nominee's or director's term will expire and the class of director of
each nominee or director.
<TABLE>
<CAPTION>
YEAR TERM
WILL CLASS OF
NOMINEE OR DIRECTOR'S NAME AGE POSITION(S) HELD DIRECTOR SINCE EXPIRE DIRECTOR
- -------------------------- -------- ------------------------------- -------------- --------- --------
<S> <C> <C> <C> <C> <C>
Ofer Gneezy (1).......... 48 President and Chief Executive 1996 2002 3
Officer, Director
Gordon J. VanderBrug..... 57 Executive Vice President, 1996 2000 1
Director
Charles N. Corfield (2)... 40 Director 1997 2002 3
John Jarve (1)........... 44 Director 1998 2001 2
Charles S. Houser (2).... 56 Director 1997 2000 1
Charles M. Skibo (1)..... 61 Director 1999 2001 2
Carl Redfield (2)........ 53 Director 1999 2002 3
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
MR. GNEEZY has served as the President, Chief Executive Officer and as a
director of the Company since our formation in August 1996. From 1994 to 1996,
Mr. Gneezy was President of Acuity Imaging, Inc., a multinational public company
focused on the industrial automation industry. From 1980 to 1994, prior to being
renamed Acuity Imaging in connection with a merger with Itran, Mr. Gneezy was an
executive of Automatix Inc., a public industrial automation company, most
recently serving as its President and Chief Executive Officer. Mr. Gneezy
graduated from Tel-Aviv University, obtained his Masters of Science from the
Massachusetts Institute of Technology and is a graduate of the Advanced
Management Program of the Harvard Business School.
DR. VANDERBRUG has served as Executive Vice President and as a director of
the Company since October 1996. From 1991 to 1996, Dr. VanderBrug was the
Director of Marketing, Electronic Imaging Systems of Polaroid Corporation. In
1980 Dr. VanderBrug co-founded Automatix, Inc. Dr. VanderBrug received his B.A.
in mathematics from Calvin College, an M.A. in mathematics from Wayne State
University, and his Ph.D. in computer science from the University of Maryland.
MR. CORFIELD has been a director of the Company since September 1997.
Mr.Corfield has been a partner at each of Whitman Capital and Mercury Capital,
both investment firms, since 1996. Mr. Corfield serves on the board of directors
of Liberate Technologies, a web-based, enhanced television company.
11
<PAGE>
Mr. Corfield co-founded Frame Technology, a software company, in 1986 and was a
member of its board of directors and its Chief Technology Officer until it was
acquired by Adobe Systems in 1995.
MR. JARVE has been a director of the Company since August 1998. Since 1985,
Mr. Jarve has been employed by Menlo Ventures, a venture capital firm focused on
the software, communications, health care, and Internet sectors, where he
currently serves as a general partner and managing director. Mr. Jarve serves on
the board of directors of Digital Insight Corporation, a provider of Internet
banking services. Mr. Jarve received a B.S. and M.S. in electrical engineering
from the Massachusetts Institute of Technology and an M.B.A. from Stanford
University.
MR. HOUSER has been a director of the Company since October 1997. He is
currently a principal and managing director of Seruus Capital Partners, LP and
Seruus Telecom Fund, LP. Mr. Houser is the Chairman and Chief Executive Officer
of State Communications Inc. (d/b/a Trivergent Communications), a
telecommunications company. He was Executive Vice President of LCI
International, a long-distance company, from October 1995 until May 1996. Prior
to that date, he was Chairman and CEO of Corporate Telemanagement Group from its
inception in November 1989 until its sale to LCI International in
September 1995.
MR. SKIBO has been a director of the Company since September 1999.
Currently, Mr. Skibo is the Chief Executive Officer and Chairman of Colo.com, a
provider of facilities and co-location services to the communication and
information technology industries. Since 1994, Mr. Skibo has served as Chairman
and Chief Executive Officer of Strategic Enterprises and Communications, Inc., a
venture capital firm. Mr. Skibo also serves as Chairman and Chief Executive
Officer of Allied Telecommunications, a communications company. From 1985 to
1987, Mr. Skibo was President and CEO of US Sprint and its predecessor company,
U.S. Telecom.
MR. REDFIELD has been a director of the Company since September 1999.
Mr. Redfield has been Senior Vice President, Manufacturing and Logistics of
Cisco since February 1997. From September 1993 to February 1997, Mr. Redfield
was Vice President of Manufacturing at Cisco. Mr. Redfield also is a director of
CTC Communications Corp., and VA Linux Systems, Inc. Mr. Redfield received a
B.S. in Materials Engineering from Rensselaer Polytechnic Institute.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of 9 meetings during the year ended
December 31, 1999. During that period the Audit Committee of the Board did not
hold any meetings and the Compensation Committee of the Board held 2 meetings.
Each of the directors attended at least seventy-five percent (75%) of the
meetings of the Board of Directors and committees of the Board on which the
director served during the year.
The Compensation Committee consists of Messrs. Gneezy, Armony, Jarve and
Skibo. The Compensation Committee determines the compensation of the Company's
senior management and administers the Company's stock option plans. The Audit
Committee consists of Messrs. Corfield, Armony and Redfield. The Audit Committee
recommends engagement of the Company's independent auditors, consults with the
Company's auditors concerning the scope of the audit, reviews the results of
their examination, reviews and approves any material accounting policy changes
affecting the Company's operating results, and reviews the Company's financial
controls.
The Board of Directors has no standing nominating committee.
CERTAIN TRANSACTIONS
SERIES C PREFERRED STOCK. In July 1999, we issued 5,744,103 shares of
Series C preferred stock to a number of independent investors, our founders and
certain existing shareholders at a purchase price of
12
<PAGE>
$4.37 per share, for a total cash consideration to us of approximately
$25.1 million. In this transaction, we sold 4,577 shares of Series C preferred
stock to Ofer Gneezy, 114,416 shares to the Charles N. Corfield Trust, 37,500
shares to Charles S. Houser, 12,429 shares to Charles River VIII-A LLC, 674,071
shares to Charles River Partnership VIII, LP, 121,234 shares to the Melvin C.
VanderBrug Trust, 658,829 shares to Menlo Ventures VII, L.P., 27,671 shares to
Menlo Entrepreneurs Fund VII, L.P., 517,784 shares to New Media Investors III,
LLC, 1,888,010 shares to TCV III (Q), L.P. and an aggregate of 171,487 shares to
affiliates of TCV III (Q). All of the outstanding Series C preferred stock
automatically converted into common stock on a share-for-share basis upon the
closing of our initial public offering.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES LISTED ABOVE.
PROPOSAL NUMBER 2--RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen, LLP,
certified public accountants, to serve as independent auditors for the fiscal
year ending December 31, 2000. Arthur Andersen, LLP has served as the Company's
independent auditors since 1996. It is expected that a member of the firm of
Arthur Andersen, LLP will be present at the Meeting and will be available to
make a statement and to respond to appropriate questions. If the shareholders do
not ratify the selection of Arthur Andersen, LLP, the Board of Directors may
consider selection of other independent certified public accountants to serve as
independent auditors, but no assurances can be made that the Board of Directors
will do so or that any other independent certified public accountants would be
willing to serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF THE COMPANY'S AUDITORS.
VOTING PROCEDURES
The affirmative vote of a plurality of the shares of the Company's Common
Stock present or represented at the Meeting and entitled to vote is required for
the election of each Class 1 Director and the affirmative vote of a majority of
such shares is required for the ratification of the appointment of the Company's
auditors. For purposes of determining whether a proposal has received a majority
vote, abstentions will be included in the vote totals, with the results that an
abstention will have the same effect as a negative vote. In instances where
brokers are prohibited from exercising discretionary authority for beneficial
holders who have not returned a proxy (so-called "broker non-votes"), those
shares will not be included in the vote totals and, therefore, will have no
effect on the outcome of the vote. Shares that abstain or for which the
authority to vote is withheld on certain matters will, however, be treated as
present for quorum purposes on all matters.
OTHER BUSINESS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that stated above. If other business
should come before the Meeting, the persons named in the proxies solicited
hereby, each of whom is an employee of the Company, may vote all shares subject
to such proxies with respect to any such business in the best judgment of such
persons.
SHAREHOLDER PROPOSALS
It is currently contemplated that the 2001 Annual Meeting of Shareholders
will be held on or about May 24, 2001. Proposals of shareholders intended for
inclusion in the proxy statement to be furnished to all shareholders entitled to
vote at the next annual meeting of the Company must be received at the Company's
principal executive offices not later than December 15, 2000. It is suggested
that proponents submit their proposals by certified mail, return receipt
requested.
Dated: April 28, 2000
13
<PAGE>
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 will be furnished without charge to beneficial stockholders or
stockholders of record upon request to Investor Relations, iBasis, Inc., 20
Second Avenue, Burlington, MA 01803.
14
<PAGE>
IBS48B DETACH HERE
PROXY
iBASIS, INC.
PROXY FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of iBASIS, INC., a Delaware corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 28, 2000, and hereby appoints Ofer Gneezy
and Gordon VanderBrug, and each of them, jointly and severally, as proxies
and attorneys-in-fact, with full power of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 2000 Annual
Meeting of Stockholders of iBasis, Inc. to be held on Wednesday, May 24, 2000
at 10:00 a.m., local time, at The Marriott, Rt. 128 and 3A (One Mall Road)
Burlington, Massachusetts and at any adjournment or adjournments thereof, and
to vote all shares of Common Stock which the undersigned would be entitled to
vote, if personally present, on the matters set forth on the reverse side and,
in accordance with their discretion, on any other business that may come
before the meeting, and revokes all proxies previously given by the
undersigned with respect to the shares covered hereby.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR IBASIS, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
------------- -------------
| SEE REVERSE | | SEE REVERSE |
| SIDE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SIDE |
------------- -------------
<PAGE>
DETACH HERE
IBS48A
<TABLE>
<S> <C>
____
|
---- PLEASE MARK |
| | VOTES AS IN
| | THIS EXAMPLE
----
1. ELECTION OF DIRECTORS
FOR AGAINST ABSTAIN
NOMINEES: (01) Charles S. Houser and 2. PROPOSAL TO RATIFY AND --- --- ---
(02) Gordon VanderBrug APPOINT ARTHUR ANDERSEN | | | | | |
LLP AS INDEPENDENT | | | | | |
AUDITORS --- --- ---
FOR WITHHELD
---- ----
| | | |
| | | |
---- ----
----
| |
| |
---- ______________________________________ MARK HERE ---- MARK HERE ----
For all nominees except as noted above IF YOU PLAN | | FOR ADDRESS | |
TO ATTEND | | CHANGE AND | |
THE MEETING ---- NOTE AT LEFT ----
Please sign exactly as your name(s) appear(s) hereon. All
holders must sign.
Corporation or partnership, please sign in full corporate
or partnership name by authorized person.
Signature: ________________________ Date: _________ Signature: ________________________ Date: _________
</TABLE>
