SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14-a6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
IDT CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rule 14a-6(i)(1), and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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IDT CORPORATION
294 State Street
Hackensack, NJ 07601
(201) 928-1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, DECEMBER 11, 1997
TO THE STOCKHOLDERS OF IDT CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders (the
"Annual Meeting") of IDT CORPORATION, a Delaware corporation (the "Company"),
will be held on Thursday, December 11, 1997 at 11:00 a.m. The Annual Meeting
will be held at the offices of the Company at 171 Main Street, Hackensack, New
Jersey, to consider and vote upon the following matters:
1. ELECTION OF DIRECTORS. The election of Class II directors for a term of
three years which shall expire at the Company's annual meeting of stockholders
in 2000 and until their successors are elected and qualified. The Board of
Directors (the "Board") intends at this time to present the following nominees:
Howard S. Balter
Meyer A. Berman
Hal Brecher
2. APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
1996 STOCK OPTION AND INCENTIVE PLAN. The ratification of an amendment to the
Company's Amended and Restated 1996 Stock Option and Incentive Plan to reserve
an additional 1,000,000 shares of the Company's Common Stock for the grant of
awards thereunder.
3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS. The ratification
of the appointment of Ernst & Young LLP as the independent auditors for the
Company for the fiscal year ending July 31, 1998.
4. OTHER BUSINESS. Such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
These matters are more fully described in the Proxy Statement accompanying
this Notice.
Only stockholders of record at the close of business on November 10, 1997,
are entitled to notice of and to vote at the Annual Meeting.
All stockholders are invited to attend the Annual Meeting in person.
However, if you do not expect to be present at the Annual Meeting and wish your
shares to be voted, you should complete, sign and date the attached form of
proxy and return it by mail in the enclosed envelope as promptly as possible.
Any stockholder attending the Annual Meeting may vote in person even if such
stockholder has returned a proxy.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Howard S. Jonas
-------------------------------------------
Howard S. Jonas,
Chairman and Chief Executive Officer
Hackensack, New Jersey
November 12, 1997
IDT CORPORATION
294 State Street
Hackensack, NJ 07601
(201) 928-1000
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of IDT Corporation, a
Delaware corporation ("the Company"), in connection with the solicitation by the
Board of Directors of the Company (the "Board") of proxies in the accompanying
form for use in voting at the Annual Meeting of Shareholders of the Company (the
"Annual Meeting") to be held on Thursday, December 11, 1997 at 11:00 a.m., local
time. The Annual Meeting will be held at the offices of the Company at 171 Main
Street, Hackensack, New Jersey 07601. The shares of the Company's common stock,
par value $0.01 per share (the "Common Stock"), represented by the proxies
received, properly marked, dated, executed, and not revoked will be voted at the
Annual Meeting. This Proxy Statement is being mailed to the Company's
stockholders on or about November 14, 1997.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by delivering to the Company (to
the attention of Joyce J. Mason, Secretary) a written notice of revocation or a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
SUBMISSION OF PROPOSALS FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS.
Subject to the regulations of the Securities and Exchange Commission,
proposals of shareholders intended to be presented at the 1998 Annual Meeting
must be received by the Company no later than July 15, 1998 in order to be
included in the 1998 Proxy Statement.
SOLICITATION AND VOTING PROCEDURES
This solicitation of proxies is being made by the Company. The solicitation
is being conducted by mail and the Company will bear all attendant costs. These
costs will include the expense of preparing and mailing proxy materials for the
Annual Meeting and any reimbursements paid to brokerage firms and others for
their expenses incurred in forwarding the solicitation materials regarding the
Annual Meeting to the beneficial owners of the Company's Common Stock and the
holders of the Company's Class A Common Stock, par value $0.01 per share (the
"Class A Stock"). The Company may conduct further solicitation personally, by
telephone or by facsimile through its officers, directors and employees, none of
whom will receive additional compensation for assisting with the solicitation.
The close of business on Monday, November 10, 1997 has been fixed as the
record date (the "Record Date") for determining the holders of shares of Common
Stock of the Company entitled to notice of and to vote at the Annual Meeting. As
of the close of business on the Record Date, the Company had 23,239,315 shares
outstanding and entitled to vote at the Annual Meeting, consisting of 12,130,887
shares of Common Stock and 11,108,428 shares of Class A Stock. Each holder of
Class A Stock is entitled to three votes per share, while each holder of Common
Stock is entitled to one vote per share. Both holders of Class A Stock and
Common Stock will vote as a single body on all matters presented to the
stockholders. The presence at the Annual Meeting of 11,619,658 shares, a
majority of the shares of Common Stock and Class A Stock (voting together),
either in person or by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting.
1
For each of the following matters to be submitted to the vote of the
stockholders, a majority of the votes cast will be required for approval,
ratification or election.
Proposal No. 1: Election of Directors A majority of the votes cast for each
candidate.
Proposal No. 2: Approval of the A majority of the votes cast will approve
Proposed amendment to the amendment.
the Company's Amended
and Restated 1996
Stock Option and
Incentive Plan
Proposal No. 3 Ratification of A majority of the votes cast will ratify the
Auditors. appointment of Ernst & Young LLP.
Abstentions and broker non-votes will be included in the determination of
the number of shares present and voting, but will not be counted for or against
any of the proposals to be voted upon at the Annual Meeting.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock (and Class A Stock, assuming conversion
of all shares of Class A Stock into Common Stock) as of October 31, 1997 by (i)
each person known by the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common Stock (and Class A Stock, on an as-converted
basis), (ii) each of the Company's directors and the Named Executive Officers
(as defined below), and (iii) all directors and officers of the Company as a
group. Unless otherwise noted in the footnotes to the table, the persons named
in the table have sole voting and investing power with respect to all shares of
Common Stock (or Class A Stock) indicated as being beneficially owned by them.
NAME AND ADDRESS OF NUMBER OF PERCENTAGE OF
BENEFICIAL OWNER SHARES OWNERSHIP(%)
- -------------------------------------------------------------------------------------- ------------ ---------------
Howard S. Jonas(1).................................................................... 10,323,367 45.1
294 State Street
Hackensack, NJ 97068
The Equitable Companies, Inc.(2)...................................................... 1,209,700 5.3
787 Seventh Avenue
New York, NY 10019
Putnam Investments, Inc.(3)........................................................... 1,154,113 5.0
One Post Office Square
Boston, MA 02109
Howard S. Balter(4)................................................................... 502,920 2.2
James A. Courter(5)................................................................... 317,000 1.4
Joyce J. Mason(6)..................................................................... 41,533 *
Meyer A. Berman....................................................................... 103,500 *
J. Warren Blaker(7)................................................................... 20,000 *
Marc E. Knoller(7).................................................................... 230,000 *
James R. Mellor(7).................................................................... 10,000 *
Stephen R. Brown(7)................................................................... 57,420 *
Hal Brecher(7)........................................................................ 82,500 *
Elmo R. Zumwalt(7).................................................................... 16,000 *
All directors and officers as a group (11 persons).................................... 11,704,240 50.4
- ------------------------
* Less than 1%.
(1) Shares of Class A Stock which are convertible on a share-for-share basis
into Common Stock at the option of the holder. 10,434 of these shares of
Class A Stock are owned of record by the Jonas Family Limited Partnership,
over which Mr. Jonas exercises the power to vote and the power to dispose.
(2) Includes 161,200 shares beneficially owned by The Equitable Life Assurance
Society of the United States, a subsidiary of The Equity Companies
Incorporated, and 873,500 shares beneficially owned by the Alliance Capital
Management L.P., also a subsidiary of The Equitable Companies Incorporated.
(3) Includes 1,154,113 shares held by Putnam Investment Management, Inc. as the
wholly-owned investment adviser of Putnam Investments, Inc., a wholly owned
subsidiary of Marsh & McLennan Companies, Inc. 817,940 of these shares are
held by the Putnam Voyager Fund. The investment adviser has dispository
power over the shares in each of the funds, but the investment trustee has
voting power over the shares in each fund.
(4) Includes 295,920 shares beneficially owned pursuant to stock options
exercisable within 60 days.
(5) Includes 85,000 shares beneficially owned pursuant to stock options
exercisable within 60 days.
(6) Includes 40,200 shares beneficially owned pursuant to stock options
exercisable within 60 days.
(7) Common Stock beneficially owned pursuant to stock options exercisable within
60 days.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation, the authorized
number of directors has been set at twelve. There are eleven directors presently
on the Board. On September 5, 1997, the Board of Directors elected Mr. Denis A.
Bovin as a Class III director to fill a then-remaining vacancy. Mr. Bovin is
currently expected to take office prior to the third quarter of the Company's
fiscal year ending July 31, 1998. Each director holds office until that
director's successor has been duly elected and qualified. The Company's Board is
divided into three classes with Messrs. Blaker, Courter, Knoller and Zumwalt
constituting Class I, Messrs. Balter, Berman and Brecher constituting Class II
and Messrs. Jonas, Mellor, Ms. Mason and Mr. Bovin (at such time as he shall
take office) constituting Class III. In addition, Mr. Bert Wasserman is a member
of Class II until the Annual Meeting, at which time his term will expire. Upon
the expiration of the term of each class, directors comprising such class of
directors will be elected for a three-year term at the next succeeding annual
meeting of stockholders. Executive officers of the Company are elected by the
Board of Directors on an annual basis and serve until their successors are duly
elected and qualified.
A total of three Class II directors will be elected at the Annual Meeting to
serve for a term of three (3) years until the 2000 Annual Meeting of
Stockholders, or until their successors are elected or appointed and qualified
or until the director's earlier resignation or removal. As provided by the
By-Laws of the Company, a plurality of the votes cast at the Annual Meeting
shall elect each director.
Upon the election of three Class II directors at the Annual Meeting, there
will be one vacancy in the Company's Board (not including the vacancy in the
Company's Board that will be filled at such time as Mr. Bovin takes office). The
enclosed proxy may not be voted for a greater number of persons than three,
which is the number of nominees identified herein.
The nominees are Howard S. Balter, Meyer A. Berman and Hal Brecher. Messrs.
Balter, Berman and Brecher are all incumbent directors. Certain information
about the nominees for Class II directors is furnished below:
HOWARD S. BALTER has served as Chief Operating Officer of the Company since
1993 and served as the Company's Chief Financial Officer from 1993 to May 1995.
Mr. Balter has been a director of the Company since December 1995 and became
Vice Chairman of the Board in October 1996. From 1985 to 1993, Mr. Balter
operated his own real estate development firm. Mr. Balter holds a B.A. in
Mathematics and Computers from Yeshiva University and attended New York
University School of Business.
MEYER A. BERMAN has been a director of the Company since March 1996. Mr.
Berman founded M.A. Berman Co. in 1981, a broker-dealer that services high net
worth individuals and institutions, and has served as its President from its
inception. Prior to such time Mr. Berman held various positions in the stock
brokerage business.
HAL BRECHER has served as the Company's Executive Vice President of
Operations since he joined the Company in November 1996, and was elected by the
Board to become a director of the Company in April 1997. Prior to joining the
Company, Mr. Brecher was the Executive Vice President of a direct marketing
firm. He holds a B.S. in Computer Science from Brooklyn College, and an M.B.A.
from the Wharton School of the University of Pennsylvania.
In the event that any nominee of the Company is unable or declines to serve
as a director at the time of the Annual Meeting, the proxies will be voted for
any nominee who shall be designated by the Board at such time to fill the
vacancy. The Board has no reason to believe that the persons named above will be
unable or unwilling to serve as a director, if elected.
THE BOARD RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEES NAMED ABOVE.
4
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and executive officers of the Company are as follows:
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
Howard S. Jonas (1).................................. 41 Chief Executive Officer, Chairman of the Board and
Treasurer
Howard S. Balter (1)................................. 36 Chief Operating Officer and Vice Chairman of the
Board
James A. Courter..................................... 56 President and Director
Stephen R. Brown..................................... 41 Chief Financial Officer
Joyce J. Mason....................................... 38 General Counsel, Secretary and Director
Marc E. Knoller...................................... 36 Vice President and Director
Hal Brecher.......................................... 39 Executive Vice President of Operations and Director
Meyer A. Berman...................................... 63 Director
J. Warren Blaker..................................... 63 Director
James R. Mellor...................................... 67 Director
Elmo Zumwalt......................................... 76 Director
- ------------------------
(1) Member of Executive Committee of the Board of Directors.
HOWARD S. JONAS founded IDT in August 1990 and has served as Chairman of the
Board and Treasurer since its inception and as Chief Executive Officer since
December 1991. He served as President of the Company from December 1991 through
September 1996. Mr. Jonas is also the founder and has been President of Jonas
Publishing Corp. ("Jonas Publishing"), a publisher of trade directories, since
its inception in 1979. Mr. Jonas received a B.A. in Economics from Harvard
University.
JAMES A. COURTER joined the Company as President in October 1996 and has
been a director of the Company since March 1996. Mr. Courter has been a senior
partner in the New Jersey law firm of Courter, Kobert, Laufer & Cohen since
1972. He was also a partner in the Washington, D.C. law firm of Verner,
Liipfert, Bernhard, McPherson & Hand from January 1994 to September 1996. Mr.
Courter was a member of the U.S. House of Representatives for 12 years, retiring
in January 1991. From 1991 to 1994, Mr. Courter was Chairman of the President's
Defense Base Closure and Realignment Commission. Mr. Courter also serves on the
Board of Directors of Envirogen, Inc. He received a B.A. from Colgate University
and a J.D. from Duke University Law School.
STEPHEN R. BROWN joined the Company as its Chief Financial Officer in May
1995. From 1985 to May 1995, Mr. Brown operated his own public accounting
practice servicing medium-sized corporations as well as high net worth
individuals. Mr. Brown received a B.A. in Economics from Yeshiva University and
a B.B.A. in Business and Accounting from Baruch College.
JOYCE J. MASON has been a director of the Company since March 1996. Ms.
Mason has served as General Counsel and Secretary of the Company since its
inception and as a director of the Company's predecessor since its inception to
March 1996. Ms. Mason has been in private legal practice since August 1990. Ms.
Mason received a B.A. from the City University of New York and a J.D. from New
York Law School. Ms. Mason is Mr. Jonas's sister.
MARC E. KNOLLER has been a director of the Company since March 1996. Mr.
Knoller joined the Company as its Vice President in March 1991 and also served
as a director of its predecessor since such time. From 1988 until March 1991,
Mr. Knoller was director of national sales for Jonas Publishing. Mr. Knoller
received a B.B.A. from Baruch College.
5
J. WARREN BLAKER has been a director of the Company since March 1996. Dr.
Blaker has been Professor of Physics and Director of the Center for Lightwave
Science and Technology at Fairleigh Dickinson University since 1987. Prior to
such time he worked in various capacities in the optics industry, including
serving as Chief Executive Officer of University Optical Products, Inc., a
wholly-owned subsidiary of University Patents, Inc., from 1982 to 1985. Dr.
Blaker received a B.S. from Wilkes University and a Ph.D. from the Massachusetts
Institute of Technology.
JAMES R. MELLOR joined the Company as a director in August, 1997. Since
1981, Mr. Mellor had been working for General Dynamics Corporation, a leader in
nuclear submarines, surface combatant ships and combat systems. From 1994 until
1997, Mr. Mellor served as CEO of General Dynamics Corporation. Before joining
General Dynamics, Mr. Mellor served as President and Chief Operating Officer of
AM International, Inc., now Multigraphics, Inc. Prior to that, Mr. Mellor spent
18 years with Litton Industries in a variety of engineering and management
positions, including Executive Vice President in charge of Litton's Defense
Group from 1973 to 1977.
ELMO R. ZUMWALT, JR. became a director of the Company in February 1997. He
is a retired United States Navy Admiral and served as Chief of Naval Operation
and a member of the Joint Chiefs of Staff from 1970 to 1974. He has been
President of Admiral Zumwalt & Consultants, Inc., a Washington-based consulting
firm, since prior to 1991. Admiral Zumwalt is a director of Magellan Aerospace
Corporation, Dallas Semiconductor Corporation and NL Industries Inc. He is also
a member of the President's Foreign Intelligence Advisory Board, Chairman of the
International Consortium for Research on the Health Effects of Radiation,
Chairman of the Morrow Foundation and Chairman of the Ethics and Public Policy
Center.
In addition to the directors identified above, Denis A. Bovin was elected to
serve as a director in September 1997 and is currently expected to take office
before the third quarter of Fiscal 1998. Mr. Bovin currently serves as Vice
Chairman of Investment Banking and Senior Managing Director of Bear Stearns &
Co. Prior to joining Bear Stearns, Mr. Bovin spent close to two decades in the
Investment Banking Corporate Coverage and Capital Markets divisions as well as
the Communications and Technology Group of Salomon Brothers, Inc.
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
Mr. Howard S. Jonas, the Chairman, Chief Executive Officer and Treasurer of
the Company, is Ms. Joyce J. Mason's brother. There are no other family
relationships among any of the directors or executive officers of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company currently leases one of its three headquarters facilities in
Hackensack, New Jersey from a corporation which is wholly-owned by Howard S.
Jonas. Aggregate lease payments under such lease were $24,000 for each of Fiscal
1995 and 1996 and $69,000 for Fiscal 1997. In addition, the Company leases one
floor in an office building which is owned by an entity controlled by Mr. Jonas;
pursuant to the lease, which expires in December 1998, the Company pays a
monthly rental fee of $5,200.
For information regarding grants of options to the Company's directors and
executive offices, see "Compensation of Directors and Executive Officers."
The Company has not and will not extend or guarantee loans to officers or
directors of the Company, unless such loans are approved by a majority of the
directors and a majority of the independent, disinterested, outside directors of
the Company, are for bona fide business purposes and may be reasonably expected
to benefit the Company.
James Courter, the President and a Director of the Company, was a partner of
the law firm of Verner, Liipfert, Bernhard, McPherson & Hand until September
1996. The firm has served as counsel to the
6
Company since January 1996. Mr. Courter is a partner of the law firm Courter,
Kobert, Laufer & Cohen, which has served as counsel to the Company since July
1996. Fees paid to each of the firms by the Company were less than 5% of the
firms' gross revenues for each fiscal year in which they represented the
Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established a Compensation Committee, which
currently consists of Messrs. Berman, Mellor and Blaker, and an Audit Committee
consisting of Messrs. Berman, Blaker and Wasserman. The Audit Committee is
responsible for recommending the independent auditors of the Company and
reviewing with the independent auditors (i) the scope and results of the audits
and the internal accounting controls of the Company, (ii) the audit practices
and professional services furnished by the independent auditors and (iii)
reporting to the Board with respect to any and all of the above. The
Compensation Committee is responsible for reviewing and approving all
compensation arrangements for the officers of the Company and is responsible for
administration of the Company's Amended and Restated Stock Option and Incentive
Plan.
Between July 31, 1996 and July 31, 1997, there were fourteen meetings of the
Board of Directors. All directors attended at least 75% of all Board meetings.
The Compensation Committee met twice, and the Audit Committee met once during
Fiscal 1997.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Each non-employee director received as of March 15, 1996 options exercisable
for 10,000 shares of Common Stock, and each such director appointed to the Board
after such date received options to purchase 10,000 shares of the Company's
Common Stock upon his or her appointment. However, Mr. Wasserman received
options to purchase 35,000 shares of the Company's Common Stock upon his
appointment to the Company's Board of Directors in Fiscal 1996, and Mr. Zumwalt
received options to purchase 16,000 shares of the Company's Common Stock upon
his appointment to the Company's Board in Fiscal 1997. In addition, each
continuing non-employee director of the Company will annually receive grants of
options exercisable for 10,000 shares of Common Stock.
7
EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's last
completed fiscal year concerning the compensation of the Company's Chief
Executive Officer and the Company's four most highly compensated executive
officers, other than the Chief Executive Officer, who were serving as executive
officers as of July 31, 1997 (collectively, the "Named Executive Officers").
Except as described below, the Company does not have executive long-term
compensation or incentive plans.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION($) OPTIONS (#) COMPENSATION($)
- ---------------------------------------- ------- --------- -------- ---------------- ------------ ----------------
Howard S. Jonas......................... 1997 153,846 0 0 0 0
Chairman of the Board, Chief Executive 1996 65,000 0 0 0 0
Officer, and Treasurer
Howard S. Balter........................ 1997 200,251 14,000 0 0 0
Chief Operating Officer and 1996 175,000 64,000 0 0 0
Vice Chairman
James A. Courter........................ 1997 169,230 0 0 300,000 0
President
Stephen R. Brown........................ 1997 122,855 15,000 0 27,500 0
Chief Financial Officer 1996 68,125 12,500 0 0 0
Hal Brecher............................. 1997 129,731 15,000 0 150,000 0
Executive Vice President of Operations
- ------------------------
(1) Information with respect to Fiscal 1995 is not presented because the Company
was not a reporting Company pursuant to the Securities Exchange Act of 1934,
as amended, prior to Fiscal 1996. James Courter joined the Company as
President in October 1996. Hal Brecher joined the Company as Vice President
of Operations in November 1996.
STOCK OPTIONS GRANTED IN LAST FISCAL YEAR
PERCENT OF RATES OF STOCK
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION
SHARES GRANTED TO FOR OPTION TERM
UNDERLYING EMPLOYEES IN EXERCISE DATE OF ---------------------
NAME OPTIONAL(#) FISCAL YEAR(%) PRICE($)(1) EXPIRATION 5%($) 10%($)
- ------------------------------------- ----------- ----------------- ------------------- ----------- --------- ----------
James A. Courter..................... 300,000 32.4 4.375 10/29/06 825,300 2,091,900
Stephen R. Brown..................... 20,000 2.1 4.375 8/14/06 55,020 139,460
Stephen R. Brown..................... 7,500 0.8 5.250 5/1/07 24,765 62,753
Hal Brecher.......................... 75,000 8.1 4.375 10/29/06 206,325 522,975
Hal Brecher.......................... 75,000 8.1 5.250 5/1/07 247,650 627,525
- ------------------------
(1) See "Ten-Year Option Repricings" below for additional information regarding
the exercise price of certain stock options.
8
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table provides certain information concerning the number of
shares of Common Stock underlying unexercised stock options held by each of the
Named Executive Officers, and the value of such stock options at July 31, 1997.
222,000 stock options were exercised by the Named Executive Officers during
Fiscal 1997.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ON VALUE -------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ---------- ----------- ------------- ---------- -------------
Howard S. Jonas.......................... 0 0 0 0 0 0
Howard S. Balter......................... 207,000 1,470,686 345,920 0 2,825,475 0
James A. Courter......................... 0 0 85,000 225,000 306,300 900,000
Stephen R. Brown......................... 15,000 137,520 67,420 15,000 485,250 55,625
Hal Brecher.............................. 0 0 25,000 125,000 100,000 384,375
- ------------------------
(1) The closing price of the Common Stock on July 31, 1997, as reported by the
Nasdaq National Market, was $8.375 per share.
TEN-YEAR OPTION REPRICINGS
The following table summarizes the Company's cancellation and reissuance
during Fiscal 1997 of certain stock options that were granted to the Named
Executive Officers:
MARKET PRICE LENGTH OF ORIGINAL
NUMBER OF OF STOCK AT OPTION TERM
SECURITIES TIME OF EXERCISE PRICE AT NEW REMAINING AT DATE
UNDERLYING REPRICING OR TIME OF REPRICING EXERCISE OF REPRICING OR
NAME DATE OPTIONS(#) AMENDMENT($) OR AMENDMENT($) PRICE($) AMENDMENT
- -------------------------- ------------ ----------- ----------------- ------------------- ----------- --------------------
James A. Courter.......... Feb. 1997 300,000 7.75 10.00 7.75 9 years, 9 months
James A. Courter.......... Feb. 1997 10,000 7.75 10.00 7.75 9 years, 1 month
James A. Courter.......... April 1997 300,000 4.375 7.75 4.375 9 years, 7 months
Stephen R. Brown.......... Feb. 1997 20,000 7.75 10.00 7.75 9 years, 9 months
Stephen R. Brown.......... April 1997 20,000 4.375 7.75 4.375 9 years, 7 months
Hal Brecher............... Feb. 1997 75,000 10.00 7.75 7.75 9 years, 9 months
Hal Brecher............... April 1997 75,000 7.75 4.375 7.75 9 years, 7 months
In each of February 1997 and April 1997, the Compensation Committee of the
Company's Board of Directors determined that it was in the best interests of the
Company to cancel a broad range of the outstanding stock options that the
Company had previously issued to many of its executive officers and other
employees, and to reissue stock options with substantially equivalent terms, but
with a lower exercise price that would reflect the market price of the Company's
Common Stock as of the date of such reissuance. Acordingly, in February 1997,
outstanding stock options previously granted to employees at all levels of the
Company were canceled and reissued. In April 1997, stock options held by members
of the Company's middle and senior management were so canceled and reissued. In
each case, the new options were issued with an exercise price equal to the fair
market value of the Company's Common Stock on the date of reissuance.
In February 1997, the reissuance of the Company's outstanding options was
intended primarily to raise the morale of the Company's employees. The Company's
Internet-related business had produced lackluster results during the first and
second quarter of Fiscal 1997, and the Company reduced the scope of its
Internet-related operations during that period. In addition, the market price of
the Company's Common Stock had fallen beneath the exercise price of many
outstanding stock options, further reducing
9
morale. Under these circumstances, the Compensation Committee determined that it
was in the best interests of the Company to reissue such outstanding options
with an exercise price equal to the prevailing market price of $7.75 per share.
In April 1997, the Compensation Committee elected to reissue outstanding
options, in this case, to members of the Company's mid-level and senior
employees, in order to reward such individuals for their performance during the
period described above. The Compensation Committee determined that the relevant
officers and employees had made diligent, serious and fairly successful efforts
to improve the Company's performance, as indicated by the fact that in March
1997, the Company had its first profitable month since its initial public
offering. Under these circumstances, the Compensation Committee decided to
reward the responsible officers and employees by reissuing certain outstanding
stock options with an exercise price equal to the then-prevailing market price
of $4.375 per share.
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Meyer A. Berman
James R. Mellor
J. Warren Blaker
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Jonas,
Balter, Courter and Brecher. Mr. Jonas's employment agreement, dated as of
January 1, 1996, provides for a minimum base salary of $200,000, which may be
increased, but not decreased, during the term of the agreement. During the third
quarter of Fiscal 1997, Mr. Jonas agreed to waive a portion of his base salary
for such year. The Company may terminate Mr. Jonas's employment only for cause
(as defined in the agreement). If the agreement is terminated without cause, the
Company is obligated to pay to Mr. Jonas an amount equal to twice his base
salary as then in effect. The agreement has a three year term, but is
automatically extendable for additional one year periods unless the Board or Mr.
Jonas notifies the other, within ninety days of the anniversary of such period,
that the agreement will not be extended. Pursuant to the agreement, Mr. Jonas
has agreed not to compete with the Company for a period of one year following
the termination of the agreement.
Mr. Balter's employment agreement, dated as of January 1, 1996, provides for
a minimum base salary of $175,000, which may be increased, but not decreased,
during the term of the agreement. The Company may terminate Mr. Balter's
employment only for cause (as defined in the agreement). If the agreement is
terminated without cause, the Company is obligated to pay to Mr. Balter an
amount equal to twice his base salary as then in effect. The agreement has a
three year term, but is automatically extendable for additional one year periods
unless the Board or Mr. Balter notifies the other, within 90 days of the
anniversary of such period, that the agreement will not be extended. Pursuant to
the agreement, Mr. Balter has agreed not to compete with the Company for a
period of one year following the termination of the agreement.
Mr. Courter's employment agreement, dated as of September 4, 1996, provides
for a minimum base salary of $200,000, which may be increased, but not
decreased, during the term of the agreement. The Company may terminate Mr.
Courter's employment only for cause (as defined in the agreement). If the
agreement is terminated without cause, the Company is obligated to pay to Mr.
Courter an amount equal to twice his base salary as then in effect. The
agreement has a three year term but is automatically extendable for additional
one year periods unless the Board or Mr. Courter notifies the other, within
ninety days of the anniversary of such period, that the agreement will not be
extended. Pursuant to the
10
agreement, Mr. Courter has agreed not to compete with the Company for a period
of one year following the termination of the agreement.
Mr. Hal Brecher is employed as the Company's Executive Vice President of
Operations pursuant to a three year employment contract that was executed in
October 1996. Mr. Brecher's agreement provides for a minimum base salary of
$160,000, which may be increased, but not decreased, during the term of the
agreement. In the event of termination, Mr. Brecher will receive three months'
salary and benefits. In addition, options to purchase 12,500 shares of the
Company's Common Stock that have been issued to Mr. Brecher, which are currently
non-vested, will vest upon the termination of his employment with the Company.
EMPLOYEE STOCK OPTION PROGRAM
The Company had an informal stock option program whereby selected key
employees were granted options to purchase shares of Common Stock. The primary
purpose of this program was to provide long-term incentives to the Company's key
employees and to further align their interests with those of the Company.
Options granted under such program have a term of ten years and are subject to
all other reasonable terms and conditions as the Company deems necessary and
appropriate. The selection of the participants and the determination of the
number of options to be granted to each participant were made by the Company's
Board of Directors. Under such program, options to purchase an aggregate of
2,158,770 shares of Common Stock have been granted, of which 1,204,865 were
outstanding as of November 10, 1997. The Company does not anticipate that any
additional options will be granted under this program. In addition to this
program, the Company also has adopted an Amended and Restated Stock Option and
Incentive Plan which is described further in Proposal No. 2 below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal 1997, the Compensation Committee was comprised of Messrs.
Berman, Blaker and David S. Steiner (a former director of the Company), and the
Audit Committee was comprised of Messrs. Berman, Blaker and Wasserman. None of
the members of the Compensation Committee and the Audit Committee were employees
of the Company during such period.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "Act"), or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that might
incorporate future filings, including this Proxy Statement, in whole or in part,
the following report and the Performance Graph set forth below shall not be
incorporated by reference into any such filings, nor shall they be deemed to be
soliciting material or deemed filed with the Securities and Exchange Commission
under the Act or under the Exchange Act.
The Compensation Committee determines the compensation levels of the various
officers of the Company with a view to attract, retain, motivate, and reward key
employees who possess the necessary leadership and management skills, through a
competitive base salary, long-term incentives such as awards of stock options,
and various other benefits.
The policies of the Compensation Committee are intended to combine
competitive levels of compensation with rewards for commendable performance, and
to align each officer's relative compensation with the Company's achievement of
key business objectives, optimal satisfaction of customers and maximization of
shareholder value. The Compensation Committee believes that stock ownership by
management is beneficial in aligning management and shareholder interests,
thereby enhancing shareholder value.
BASE SALARIES. Salaries for the Company's executive officers are determined
primarily on the basis of the executive officer's responsibility, the general
salary practices of peer companies and the officer's
11
individual qualifications and experience. The base salaries are reviewed by the
Compensation Committee in accordance with criteria including individual
performance, the functions charged to each officer, the scope of the officer's
duties, trends in the compensation peer group in which the Company competes for
executive talent, and the Company's financial performance generally. The weight
given such factors by the Compensation Committee may vary across each individual
arrangement.
STOCK OPTION GRANTS. Stock options are currently granted to executive
officers and other employees under the Company's Amended and Restated 1996 Stock
Option and Incentive Plan. In the past, stock options were granted under the
Employee Stock Option Program. The Compensation Committee believes that the
appreciation of stock value underlying stock options provides a strong incentive
for recipients of awards to manage the Company in accordance with the interests
of the Company's shareholders. Stock option grants and awards are given with the
intent to focus the grantee's attention on the long-term performance of the
Company, as well as to give an incentive for the grantee to maintain a long-term
relationship with the Company. The number of options or awards granted and other
options terms, such as vesting, are determined by the Compensation Committee,
based on recommendations of management in light of the grantee's level of
responsibility, prior performance, and other compensation. However, neither plan
provides for specific quantitative criteria for weighing these factors. Rather,
a decision to grant an option or award is primarily based upon an evaluation of
the past as well as the future anticipated performance and responsibilities of
the grantee.
401(K) PLAN. The Company established a plan in September 1996, pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended (the "401(k)
Plan"), for the benefit of employees. Executive officers of the Company are
permitted to participate on a parity with other employees.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Company has entered into an
employment agreement with Mr. Howard S. Jonas, dated as of January 1, 1996,
providing for a minimum annual base salary of $200,000 which may be increased,
but not decreased, during the term of the agreement. Mr. Jonas's compensation
for Fiscal 1997 was $153,846. Mr. Jonas's base salary was established in part by
comparing the base salaries of chief executive officers at other companies of
similar size. Mr. Jonas's compensation is also based on his position and
responsibilities, his past and expected contribution to the Company's future
success and on the financial performance of the Company. Mr. Jonas did not
receive a bonus or any grants or awards of stock options in Fiscal 1997.
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
Meyer A. Berman
James R. Mellor
J. Warren Blaker
12
PERFORMANCE GRAPH OF STOCK
The following chart sets forth the cumulative total stockholder return
(assuming reinvestment of dividends, if any) on the Company's Common Stock from
the date of the Company's initial public offering (March 15, 1996) through
October 31, 1997, as well as the cumulative total return on (i) the Nasdaq
National Market Composite Index and (ii) a composite of the Nasdaq
Telecommunications and Computer Indices. THE STOCK PRICE PERFORMANCE ON THE
GRAPH BELOW IS NOT NECESSARILY INDICATIVE OF FUTURE PRICE PERFORMANCE.
The figures for the composite industry index (the "Composite C&T") have been
derived from the average returns of each of the Nasdaq Computer and Nasdaq
Telecommunications Indices, each weighted according to the approximate
percentage of total revenues from each of the Company's operations for the
fiscal year ended July 31, 1997 (75.7% telecommunications, 24.3% Internet
access).(+)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
PERFORMANCE GRAPH
3/15/96 9/16/96 3/14/97 9/15/97 10/31/97
IDT Corp. 100 128 64 154 167
NNM Composite 100 109 118 150 146
Composite C & T 100 103 106 140 145
- --
The stock performance graph assumes that $100 was invested on March 15,
1996.
- ------------------------
(+) 1.7% of the Company's revenues for the fiscal year ended July 31, 1997
consisted of revenues from Net2Phone. There are no indices applicable directly
to Internet telephony. For purposes of the performance graph, Internet telephony
revenues were counted as part of the Company's revenues from telecommunications
services (74.0% telecommunications and 1.7% Internet telephony). Therefore, the
performance graph assumes that 75.7% of the Company's revenues during the
relevant periods were derived from telecommunications services, and that 24.3%
of the Company's revenues were derived from Internet access services.
13
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE AMENDED
AND RESTATED 1996 STOCK OPTION AND INCENTIVE PLAN
A proposal has been submitted to the Company's stockholders to approve the
actions of the Board in amending the Company's Amended and Restated 1996 Stock
Option Plan (the "Plan") to reserve an additional 1,000,000 shares of the
Company's Common Stock for the grant of awards thereunder.
SUBMISSION TO STOCKHOLDER VOTE
Under the terms of the Plan, a stockholder vote is not required for
amendment of the Plan. However, the amendment of the Plan is being submitted for
a stockholder vote in order to be able to qualify certain grants of options made
under the Plan as incentive stock options ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
THE AMENDED AND RESTATED 1996 STOCK OPTION AND INCENTIVE PLAN
The Company's Amended and Restated 1996 Stock Option and Incentive Plan was
ratified by the Company's stockholders in February of 1997. The description in
this Proxy Statement of the principal terms of the Plan is a summary, does not
purport to be complete, and is qualified in its entirety by the full text of the
Plan, which is attached hereto as Exhibit A.
Pursuant to the Plan, key employees, directors and consultants of the
Company are eligible to receive awards of stock options, stock appreciation
rights, limited stock appreciation rights and restricted stock. Options granted
under the Plan may be ISOs, or nonqualified stock options ("NQSOs"). Stock
appreciation rights ("SARs") and limited stock appreciation rights ("LSARs") may
be granted simultaneously with the grant of an option or (in the case of NQSOs),
at any time during the term of the Plan. Restricted stock may be granted in
addition to or in lieu of any other award granted under the Plan.
The Company originally authorized 2,300,000 shares of Common Stock for
issuance under the Plan (subject to antidilution and similar adjustments).
Options covering all of the underlying shares were granted as of November 10,
1997, of which 1,683,600 shares were outstanding as of such date. Subject to the
approval of the proposed amendment to the Plan by the Company's stockholders, an
additional 1,000,000 shares of the Company's Common Stock will be reserved for
the grant of awards under the Plan, and the Company has entered into commitments
to issue options to purchase approximately 600,000 of such additional shares to
certain officers and employees. These options have exercise prices ranging from
$8.25 to $16.00, with an average exercise price of approximately $8.50 per
share.
The Plan is administered by the Compensation Committee appointed by the
Board. Subject to the provisions of the Plan, the Compensation Committee will
determine the type of award, when and to whom awards will be granted, the number
of shares covered by each award and the terms, provisions and kind of
consideration payable (if any), with respect to awards. The Compensation
Committee may interpret the Plan and may at any time adopt such rules and
regulations for the Plan as it deems advisable. The Compensation Committee has
granted certain authority to the Executive Committee of the Board of Directors
under the Plan, including the authority to select recipients of awards under the
Plan to all employees of the Company other than members of the Executive
Committee.
In determining the persons to whom awards shall be granted and the number of
shares covered by each award, the Compensation Committee shall take into account
the duties of the respective persons, their present and potential contribution
to the success of the Company and such other factors as the Compensation
Committee shall deem relevant.
14
An option may be granted on such terms and conditions as the Compensation
Committee may approve, and generally may be exercised for a period of up to ten
years from the date of grant. Generally, ISOs will be granted with an exercise
price equal to the "Fair Market Value" (as defined in the Plan) on the date of
grant. In the case of ISOs, certain limitations will apply with respect to the
aggregate value of option shares which can become exercisable for the first time
during any one calendar year, and certain additional limitations will apply to
ISOs granted to "Ten Percent Stockholders" (as defined in the Plan) of the
Company. The Compensation Committee may provide for the payment of the option
price in cash, by delivery of Common Stock having a Fair Market Value equal to
such option price, by a combination thereof or by any other method. Options
granted under the Plan will become exercisable at such times and under such
conditions as the Compensation Committee shall determine, subject to
acceleration of the exercisability of options in the event of, among other
things, a "Change in Control" (as defined in the Plan).
The Plan provides for automatic formula option grants to eligible
non-employee directors of the Company. Options to purchase 10,000 shares of
Common Stock were granted to each non-employee director upon the consummation of
the Company's initial public offering in March 1996 and options to purchase
10,000 shares of Common Stock will be granted to each new non-employee director
upon such director's initial election and qualification for the Board. In
addition, options to purchase 10,000 shares of Common Stock will be granted
annually to each non-employee director. Each option will have an exercise price
equal to the Fair Market Value of a share of Common Stock on the date of grant.
All such options granted to non-employee directors will be immediately
exercisable. All options held by non-employee directors, to the extent not
exercised, expire on the earliest of (i) the tenth anniversary of the date of
grant, (ii) one year following the optionee's termination of directorship on
account of death or disability or (iii) three months following the optionee's
termination of directorship with the Company for any other reason.
The Plan also permits the Compensation Committee to grant SARs and/or LSARs
with respect to all or any portion of the shares of Common Stock covered by
options. Generally, SARs may be exercised only at such time as the related
option is exercisable and LSARs may be exercised only during the 90 days
immediately following an "Acceleration Date" (as defined in the Plan) except
that, in the case of an "Insider" (as defined in the Plan), (i) an SAR and an
LSAR must be held for at least six months before it becomes exercisable and (ii)
an LSAR must automatically be paid out in cash. LSARs will be exercisable only
if, and to the extent, that the option to which the LSARs relate is then
exercisable, and if such option is an ISO, only to the extent the Fair Market
Value per share of Common Stock exceeds the option price.
Upon exercise of an SAR, a grantee will receive for each share for which an
SAR is exercised, an amount in cash or Common Stock, as determined by the
Compensation Committee, equal to the excess, if any, of (i) the Fair Market
Value of a share of Common Stock on the date the SAR is exercised over (ii) the
exercise price per share of the option to which the SAR relates.
Upon exercise of an LSAR, a grantee will receive for each share for which an
LSAR is exercised, an amount in cash equal to the excess, if any, of (i) the
greater of (x) the highest Fair Market Value of a share of Common Stock during
the 90-day period ending on the date the LSAR is exercised, and (y) whichever of
the following is applicable: (1) the highest per share price paid in any tender
or exchange offer which is in effect at any time during the 90 days ending on
the date of exercise of the LSAR; (2) the fixed or formula price for the
acquisition of shares of Common Stock in a merger in which the Company will not
continue as the surviving corporation, or upon a consolidation, or a sale,
exchange or disposition of all or substantially all of the Company's assets,
approved by the Company's stockholders (if such price is determinable on the
date of exercise); and (3) the highest price per share of Common Stock shown on
Schedule 13D, or any amendment thereto, filed by the holder of the specified
percentage of Common Stock, the acquisition of which gives rise to the
exercisability of the LSAR over (ii) the exercise price per share of the option
to which the LSAR relates. In no event, however, may the holder of an LSAR
granted
15
in connection with an ISO receive an amount in excess of the maximum amount
which will enable the option to continue to qualify as an ISO.
When an SAR or LSAR is exercised, the option to which it relates will cease
to be exercisable to the extent of the number of shares with respect to which
the SAR or LSAR is exercised, but will be deemed to have been exercised for
purposes of determining the number of shares available for the future grant of
awards under the Plan.
The Plan further provides for the granting of restricted stock awards, which
are awards of Common Stock which may not be disposed of, except by will or the
laws of descent and distribution, for such period as the Compensation Committee
determines (the "restricted period"). The Compensation Committee may also impose
such other conditions and restrictions, if any, on the shares as it deems
appropriate, including the satisfaction of performance criteria. All
restrictions affecting the awarded shares lapse in the event of a Change in
Control.
During the restricted period, the grantee will be entitled to receive
dividends with respect to, and to vote the shares awarded to him. If, during the
restricted period, the grantee's service with the Company terminates for any
reason, any shares remaining subject to restrictions will be forfeited. The
Compensation Committee has the authority to cancel any or all outstanding
restrictions prior to the end of the restricted period, including cancellation
of restrictions in connection with certain types of termination of service.
The Board may at any time and from time to time suspend, amend, modify or
terminate the Plan; provided however, that, to the extent required by Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any other law, regulation or stock exchange rule, no
such change shall be effective without the requisite approval of the Company's
stockholders. In addition, no such change may adversely affect an award
previously granted, except with the written consent of the grantee.
No awards may be granted under the Plan after the tenth anniversary of its
initial adoption.
OPTIONS AND AWARDS UNDER THE PLAN.
The Company cannot now determine the number of options or awards to be
granted in the future under the Plan to officers, directors, and employees.
THE BOARD RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT TO THE PLAN AS DESCRIBED ABOVE.
16
PROPOSAL NO. 3
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS INDEPENDENT AUDITORS.
The stockholders will be asked to approve the reappointment of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending July 31,
1998.
Ernst & Young has served as the Company's independent auditors since 1993
and has been appointed by the Board to continue as the Company's independent
auditors. In the event that ratification of this selection of auditors is not
approved by a majority of the shares of Common Stock voting at the Annual
Meeting in person or by proxy, management will review its future selection of
auditors. A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. The representative will have an opportunity to make a statement
and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JULY 31, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than 10 percent of the Common
Stock are required to report their ownership of Common Stock and any changes in
that ownership, on a timely basis, to the Securities and Exchange Commission.
Based on material provided to the Company, all such required reports were filed
on a timely basis in Fiscal 1997, other than the report of Mr. Howard S. Balter,
the Company's Chief Operating Officer and Vice Chairman of the Board, who failed
to file a report with respect to a transaction that occurred in Fiscal 1997.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented at
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgments of the persons voting the
proxies.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to fill in, sign and promptly return the
accompanying form in the enclosed envelope.
BY ORDER OF THE BOARD OF
DIRECTORS
November 12, 1997
/s/ Howard S. Jonas
______________________________________
Howard S. Jonas, Chairman and Chief
Executive Officer
17
EXHIBIT A
IDT CORPORATION
AMENDED AND RESTATED
1996 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE; TYPES OF AWARDS; CONSTRUCTION.
The purpose of the IDT Corporation 1996 Stock Option and Incentive Plan (the
"Plan") is to afford an incentive to executive officers, other key employees,
directors and consultants of IDT Corporation (the "Company"), or any subsidiary
of the Company which now exists or hereafter is organized or acquired by the
Company, to acquire a proprietary interest in the Company, to continue as
employees, directors or consultants, to increase their efforts on behalf of the
Company and to promote the success of the Company's business. The provisions of
the Plan are intended to satisfy the requirements of Section 16(b) of the
Securities Exchange Act of 1934, as Amended, and of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and shall be interpreted in a manner
consistent with the requirements thereof.
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Acceleration Date" shall have the meaning set forth in Section 12.
(b) "Agreement" shall mean an agreement entered into between the Company and
a Grantee in connection with an award under the Plan.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" shall mean a committee established by the Board to
administer the Plan.
(f) "Common Stock" shall mean shares of common stock, par value $.01 per
share, of the Company.
(g) "Company" shall mean IDT Corporation, a corporation organized under the
laws of the State of Delaware, or any successor corporation.
(h) "Disability" shall mean a Grantee's inability to perform his duties with
the Company or any of its affiliates by reason of any medically determinable
physical or mental impairment, as determined by a physician selected by the
Grantee and acceptable to the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" per share as of a particular date shall mean (i) the
closing sales price per share of Common Stock on the national securities
exchange on which the Common Stock is principally traded for the last preceding
date on which there was a sale of such Common Stock on such exchange, or (ii) if
the shares of Common Stock are then traded in an over-the-counter market, the
average of the closing bid and asked prices for the shares of Common Stock in
such over-the-counter market for the last preceding date on which there was a
sale of such Common Stock in such market, or (iii) if the shares of Common Stock
are not then listed on a national securities exchange or traded in an
over-the-counter market, such value as the Committee, in its sole discretion,
shall determine; provided, however, that the Fair Market Value per share on the
date of the Initial Public Offering will equal the Initial Public Offering price
per share or such other price that the Committee determines in its sole
discretion.
(k) "Grantee" shall mean a person who receives a grant of Options, Stock
Appreciation Rights, Limited Rights or Restricted Stock under the Plan.
A-1
(l) "Incentive Stock Option" shall mean any option intended to be, and
designated as, an incentive stock option within the meaning of Section 422 of
the Code.
(m) "Initial Public Offering" shall mean the underwritten initial public
offering of shares of Common Stock.
(n) "Insider" shall mean a Grantee who is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
(o) "Limited Right" shall mean a limited stock appreciation right granted
pursuant to Section 10.
(p) "Non-Employee Director" means a member of the Board who is not an
employee of the Company or any Subsidiary.
(q) "Nonqualified Stock Option" shall mean any option not designated as an
Incentive Stock Option.
(r) "Option" or "Options" shall mean a grant to a Grantee of an option or
options to purchase shares of Common Stock.
(s) "Option Price" shall mean the exercise price of the shares of Common
Stock covered by an Option.
(t) "Parent" shall mean any company (other than the Company) in an unbroken
chain of companies ending with the Company if, at the time of granting an
Option, each of the companies other than the Company owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other companies in such chain.
(u) "Plan" means this IDT Corporation 1996 Stock Option and Incentive Plan,
as amended from time to time.
(v) "Retirement" shall mean a Grantee's retirement in accordance with the
terms of any tax-qualified retirement plan maintained by the Company or any of
its affiliates in which the Grantee participates.
(w) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in effect,
promulgated under the Exchange Act, including any successor to such Rule.
(x) "Stock Appreciation Right" shall mean the right, granted to a Grantee
under Section 9, to be paid an amount measured by the appreciation in the Fair
Market Value of a share of Common Stock from the date of grant to the date of
exercise of the right, with payment to be made in cash or Common Stock as
specified in the award or determined by the Committee.
(y) "Subsidiary" shall mean any company (other than the Company) in an
unbroken chain of companies beginning with the Company if, at the time of
granting an Option, each of the companies other than the last company in the
unbroken chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other companies in
such chain.
(z) "Ten Percent Stockholder" shall mean a Grantee who, at the time an
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary.
3. ADMINISTRATION.
The Plan shall be administered by the Committee, the members of which shall,
except as may otherwise be determined by the Board, be "disinterested directors"
under Rule 16b-3 and "outside directors" under Section 162(m) of the Code.
The Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and
to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
A-2
including, without limitation, the authority to grant Options, Stock
Appreciation Rights, Limited Rights and Restricted Stock; to determine which
options shall constitute Incentive Stock Options and which Options shall
constitute Nonqualified Stock Options; to determine which Options (if any) shall
be accompanied by Limited Rights; to determine the purchase price of the shares
of Common Stock covered by each option; to determine the persons to whom, and
the time or times at which awards shall be granted; to determine the number of
shares to be covered by each award; to interpret the Plan; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of the Agreements (which need not be identical) and to cancel or
suspend awards, as necessary; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
All decisions, determination and interpretations of the Committee shall be
final and binding on all Grantees of any awards under this Plan. No member of
the Board or Committee shall be liable for any action taken or determination
made in good faith with respect to the Plan or any award granted hereunder.
4. ELIGIBILITY.
Awards may be granted to executive officers, other key employees, directors
and consultants of the Company. In addition to any other awards granted to
Non-Employee Directors hereunder, awards shall be granted to Non-Employee
Directors pursuant to Section 13 hereof. In determining the persons to whom
awards shall be granted and the number of shares to be covered by each award,
the Committee shall take into account the duties of the respective persons,
their present and potential contributions to the success of the Company and such
other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of the Plan.
5. STOCK.
The maximum number of shares of Common Stock reserved for the grant of
awards under the Plan shall be 3,300,000, subject to adjustment as provided in
Section 12 hereof. Such shares may, in whole or in part, be authorized but
unissued shares or shares that shall have been or may be reacquired by the
Company.
If any outstanding award under the Plan should, for any reason expire, be
canceled or be forfeited (other than in connection with the exercise of a Stock
Appreciation Right or Limited Right), without having been exercised in full, the
shares of Common Stock allocable to the unexercised, canceled or terminated
portion of such award shall (unless the Plan shall have been terminated) become
available for subsequent grants of awards under the Plan.
In no event may a Grantee be granted during any calendar year Options to
acquire more than 1,000,000 shares of Common Stock or more than 1,000,000 shares
of Restricted Stock.
6. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted pursuant to the Plan shall be evidenced by a written
agreement between the Company and the Grantee (the "Option Agreement"), in such
form and containing such terms and conditions as the Committee shall from time
to time approve, which Option Agreement shall comply with and be subject to the
following terms and conditions, unless otherwise specifically provided in such
Option Agreement. For purposes of interpreting this Section 6, a director's
service as a member of the Board shall be deemed to be employment with the
Company.
(a) NUMBER OF SHARES. Each Option Agreement shall state the number of shares
of Common Stock to which the Option relates.
(b) TYPE OF OPTION. Each Option Agreement shall specifically state that the
Option constitutes an Incentive Stock Option or a Nonqualified Stock Option.
(c) OPTION PRICE. Each Option Agreement shall state the Option Price, which,
in the case of an Incentive Stock Option, shall not be less than one hundred
percent (100%) of the Fair Market Value of the shares of Common Stock covered by
the Option on the date of grant. The Option Price shall be subject to adjustment
as provided in Section 12 hereof.
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(d) MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid in full, at
the time of exercise, in cash or in shares of Common Stock (whether then owned
by the Grantee or issuable upon exercise of the Option) having a Fair Market
Value equal to such Option Price or in a combination of cash and Common Stock or
in such other manner as the Committee shall determine including a cashless
exercise procedure through a broker-dealer.
(e) TERM AND EXERCISABILITY OF OPTIONS. Each Option Agreement shall provide
the exercise schedule for the Option as determined by the Committee, PROVIDED,
THAT, the Committee shall have the authority to accelerate the exercisability of
any outstanding option at such time and under such circumstances as it, in its
sole discretion, deems appropriate. The exercise period will be ten (10) years
from the date of the grant of the option unless otherwise determined by the
Committee; PROVIDED, HOWEVER, that in the case of an Incentive Stock option,
such exercise period shall not exceed ten (10) years from the date of grant of
such Option. The exercise period shall be subject to earlier termination as
provided in Sections 6(f) and 6(g) hereof. An Option may be exercised, as to any
or all full shares of Common Stock as to which the Option has become
exercisable, by written notice delivered in person or by mail to the Secretary
of the Company, specifying the number of shares of Common Stock with respect to
which the Option is being exercised.
(f) TERMINATION. Except as provided in this Section 6(f) and in Section 6(g)
hereof, an Option may not be exercised unless the Grantee is then in the employ
of or maintaining a director or consultant relationship with the Company or a
Subsidiary thereof (or a company or a Parent or Subsidiary company of such
company issuing or assuming the Option in a transaction to which Section 424(a)
of the Code applies), and unless the Grantee has remained continuously so
employed or in the director or consultant relationship since the date of grant
of the Option. In the event that the employment or consultant relationship of a
Grantee shall terminate (other than by reason of death, Disability or
Retirement), all Options of such Grantee that are exercisable at the time of
such termination may, unless earlier terminated in accordance with their terms,
be exercised within thirty (30) days after the date of such termination (or such
different period as the Committee shall prescribe).
(g) DEATH, DISABILITY OR RETIREMENT OF GRANTEE. If a Grantee shall die while
employed by, or maintaining a director or consultant relationship with, the
Company or a Subsidiary thereof, or within thirty (30) days after the date of
termination of such Grantee's employment, director or consultant relationship
(or within such different period as the Committee may have provided pursuant to
Section 6 (f) hereof), or if the Grantee's employment, director or consultant
relationship shall terminate by reason of Disability, all Options theretofore
granted to such Grantee (to the extent otherwise exercisable) may, unless
earlier terminated in accordance with their terms, be exercised by the Grantee
or by the Grantee's estate or by a person who acquired the right to exercise
such Options by bequest or inheritance or otherwise by result of death or
Disability of the Grantee, at any time within 180 days after the death or
Disability of the Grantee (or such different period as the Committee shall
prescribe). In the event that an option granted hereunder shall be exercised by
the legal representatives of a deceased or former Grantee, written notice of
such exercise shall be accompanied by a certified copy of letters testamentary
or equivalent proof of the right of such legal representative to exercise such
Option. In the event that the employment or consultant relationship of a Grantee
shall terminate on account of such Grantee's Retirement, all Options of such
Grantee that are exercisable at the time of such Retirement may, unless earlier
terminated in accordance with their terms, be exercised at any time within one
hundred eighty (180) days after the date of such Retirement (or such different
period as the Committee shall prescribe).
(h) OTHER PROVISIONS. The Option Agreements evidencing awards under the Plan
shall contain such other terms and conditions not inconsistent with the Plan as
the Committee may determine.
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7. NONQUALIFIED STOCK OPTIONS.
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms and
conditions specified in Section 6 hereof.
8. INCENTIVE STOCK OPTIONS.
Options granted pursuant to this Section 8 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms and
conditions, in addition to the general terms and conditions specified in Section
6 hereof.
(a) VALUE OF SHARES. The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of Common Stock with
respect to which Incentive Stock Options granted under this Plan and all other
option plans of any subsidiary become exercisable for the first time by each
Grantee during any calendar year shall not exceed $100,000.
(b) TEN PERCENT STOCKHOLDER. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one hundred ten percent (110%) of the Fair Market Value of the shares of
Common Stock on the date of grant of such Incentive Stock Option, and (ii) the
exercise period shall not exceed five (5) years from the date of grant of such
Incentive Stock Option.
9. STOCK APPRECIATION RIGHTS.
The Committee shall have authority to grant a Stock Appreciation Right to
the Grantee of any Option under the Plan with respect to all or some of the
shares of Common Stock covered by such related Option. A Stock Appreciation
Right shall, except as provided in this Section 9 or as may be determined by the
Committee, be subject to the same terms and conditions as the related Option.
Each Stock Appreciation Right granted pursuant to the Plan shall be evidenced by
a written Agreement between the Company and the Grantee in such form as the
Committee shall from time to time approve, which Agreement shall comply with and
be subject to the following terms and conditions, unless otherwise specifically
provided in such Agreement:
(a) TIME OF GRANT. A Stock Appreciation Right may be granted either at the
time of grant of the related option, or at any time thereafter during the term
of the Option; provided, however that Stock Appreciation Rights related to
Incentive Stock Options may only be granted at the time of grant of the related
Option.
(b) PAYMENT. A Stock Appreciation Right shall entitle the holder thereof,
upon exercise of the Stock Appreciation Right or any portion thereof, to receive
payment of an amount computed pursuant to Section 9(d).
(c) EXERCISE. A Stock Appreciation Right shall be exercisable at such time
or times and only to the extent that the related Option is exercisable, and will
hot be transferable except to the extent the related option may be transferable.
A Stock Appreciation Right granted in connection with an Incentive Stock Option,
shall be exercisable only if the Fair Market Value of a share of Common Stock on
the date of exercise exceeds the purchase price specified in the related
Incentive Stock Option.
(d) AMOUNT PAYABLE. Upon the exercise of a Stock Appreciation Right, the
Optionee shall be entitled to receive an amount determined by multiplying (i)
the excess of the Fair Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right over the Option Price under the
related Option, by (ii) the number of shares of Common Stock as to which such
Stock Appreciation Right is being exercised.
(e) TREATMENT OF RELATED OPTIONS AND STOCK APPRECIATION RIGHTS UPON
EXERCISE. Upon the exercise of a Stock Appreciation Right, the related Option
shall be canceled to the extent of the number of shares of Common Stock as to
which the Stock Appreciation Right is exercised and upon the exercise or
surrender of an option granted in connection with a Stock Appreciation Right,
the Stock Appreciation Right shall be canceled to the extent of the number of
shares of Common Stock as to which the Option is exercised or surrendered.
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(f) METHOD OF EXERCISE. Stock Appreciation Rights shall be exercised by a
Grantee only by a written notice delivered in person or by mail to the Secretary
of the Company, specifying the number of shares of Common Stock with respect to
which the Stock Appreciation Right is being exercised. If requested by the
Committee, the Grantee shall deliver the Agreement evidencing the Stock
Appreciation right being exercised and the Option Agreement evidencing any
related Option to the Secretary of the Company who shall endorse thereon a
notation of such exercise and return such Agreements to the Grantee.
(g) FORM OF PAYMENT. Payment of the amount determined under Section 9(d),
may be made solely in whole shares of Common Stock in a number based upon their
Fair Market Value on the date of exercise of the Stock Appreciation Right or,
alternatively, at the sole discretion of the Committee, solely in cash, or in a
combination of cash and shares of Common Stock as the Committee deems advisable.
If the Committee decides to make full payment in shares of Common Stock, and the
amount payable results in a fractional share, payment for the fractional share
will be made in cash. Notwithstanding the foregoing, to the extent required by
Rule 16b-3 no payment in the form of cash may be made upon the exercise of a
Stock Appreciation Right pursuant to Section 9 (d) to an Insider, unless the
exercise of such Stock Appreciation Right is made during the period beginning on
the third business day and ending on the twelfth business day following the date
of release for publication of the Company's quarterly or annual statements of
earnings.
10. LIMITED STOCK APPRECIATION RIGHTS.
The Committee shall have authority to grant a Limited Right to the Grantee
of any Option under the Plan with respect to all or some of the shares of Common
Stock covered by such related Option. Each Limited Right granted pursuant to the
Plan shall be evidenced by a written Agreement between the Company and the
Grantee, in such form as the Committee shall from time to time approve, which
Agreement shall comply with and be subject to the following terms and
conditions, unless otherwise specifically provided in such Agreement:
(a) TIME OF GRANT. A Limited Right granted in tandem with a Nonqualified
Stock Opt ion may be granted either at the time of grant of the related Option
or any time thereafter during its term. A Limited Right granted in tandem with
an Incentive Stock Option may only be granted at the time of grant of the
related Option.
(b) EXERCISE. A Limited Right may be exercised only during the ninety-day
period beginning on an Acceleration Date. Each Limited Right shall be
exercisable only if, and to the extent that, the related Option is exercisable
and, in the case of a Limited Right granted in tandem with an Incentive Stock
Option, only when the Fair Market Value per share of Common Stock exceeds the
Option Price per share. Notwithstanding the provisions of the two immediately
preceding sentences, a Limited Right granted to a Grantee who is an Insider must
be (i) held by the Insider for at least six (6) months from the date of grant of
the Limited Right before it becomes exercisable and (ii) automatically paid out
in cash to the Insider on an Acceleration Date (provided such six (6) month
holding period requirement has been met).
(c) AMOUNT PAYABLE. Upon the exercise of a Limited Right, the Grantee
thereof shall receive in cash whichever of the following amounts is applicable:
(i) in the case of the realization of Limited Rights by reason of an
acquisition of Common Stock described in Section 12 (b)(i) below, an amount
equal to the Acquisition Spread as defined in Section 10(d)ii) hereof; or
(ii) in the case of the realization of Limited Rights by reason of
stockholder approval of an agreement or plan described in Section 12(b)(iii)
below, an amount equal to the Merger Spread as defined in Section 10(d)(iv)
hereof; or
(iii) in the case of the realization of Limited Rights by reason of the
change in composition of the Board described in Section 12(b)(ii) or
stockholder approval of a plan or agreement described in Section 12(b)(iv)
below, an amount equal to the Spread as defined in Section 10(d)(v) hereof.
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Notwithstanding the foregoing provisions of this Section 10(c), in the case
of a Limited Right granted in respect of an Incentive Stock Option, the Grantee
may not receive an amount in excess of the maximum amount that will enable such
option to continue to qualify as an Incentive Stock Option.
(d) DETERMINATION OF AMOUNTS PAYABLE. The amounts to be paid to a Grantee
pursuant to Section 10(c) shall be determined as follows:
(i) The term "Acquisition Price per Share" as used herein shall mean,
with respect to the exercise of any Limited Right by reason of an
acquisition of Common Stock described in Section 12(b)(i) below, the
greatest of (A) the highest price per share shown on the Statement of
Schedule 13D or amendment thereto filed by the holder of 25%, or more of the
voting power of the Company that gives rise to the exercise of such Limited
Right, (B) the highest price paid in any tender or exchange offer which is
in effect at any time during the ninety-day period ending on the date of
exercise of the Limited Right, or (C) the highest Fair Market Value per
share of Common Stock during the ninety day period ending on the date the
Limited Right is exercised.
(ii) The term "Acquisition Spread" as used herein shall mean an amount
equal to the product computed by multiplying (A) the excess of (1) the
Acquisition Price per Share over (2) the Option Price per share of Common
Stock at which the related option is exercisable, by (B) the number of
shares of Common Stock with respect to which such Limited Right is being
exercised.
(iii) The term "Merger Price per Share" as used herein shall mean, with
respect to the exercise of any Limited Right by reason of stockholder
approval of an agreement described in Section 12(b)(iii) below, the greatest
of (A) the fixed or formula price for the acquisition of shares of Common
Stock specified in such agreement, if such fixed or formula price is
determinable on the date on which such Limited Right is exercised, (B) the
highest price paid in any tender or exchange offer which is in effect at any
time during the ninety-day period ending on the date of exercise of the
Limited Right, (C) the highest Fair Market Value per share of Common Stock
during the ninety-day period ending on the date on which such Limited Right
is exercised.
(iv) The term "Merger Spread" as used herein shall mean an amount equal
to the product. computed by multiplying (A) the excess of (1) the Merger
Price per Share over (2) the Option Price per share of Common Stock at which
the related Option is exercisable, by (B) the number of shares of Common
Stock with respect to which such Limited Right is being exercised.
(v) The term "Spread" as used herein shall mean, with respect to the
exercise of any Limited Right by reason of a change in the composition of
the Board described in Section 12(b)(ii) or stockholder approval of a plan
or agreement described in Section 12(b)(iv) below, an amount equal to the
product computed by multiplying (i) the excess of (A) the greater of (1) the
highest price paid in any tender or exchange offer which is in effect at any
time during the ninety-day period ending on the date of exercise of the
Limited Right or (2) the highest Fair Market Value per share of Common Stock
during the ninety day period ending on the date the Limited Right is
exercised over (B) the Option Price per share of Common Stock at which the
related Option is exercisable, by (ii) the number of shares of Common Stock
with respect to which the Limited Right is being exercised.
(e) TREATMENT OF RELATED OPTIONS AND LIMITED RIGHTS UPON EXERCISE. Upon the
exercise of a Limited Right, the related Option shall cease to be exercisable to
the extent of the shares of Common Stock with respect to which such Limited
Right is exercised but shall be considered to have been exercised to that extent
for purposes of determining the number of shares of Common Stock available for
the grant of further awards pursuant to this Plan. Upon the exercise or
termination of a related option, the Limited Right with respect to such related
Option shall terminate to the extent of the shares of Common Stock with respect
to which the related Option was exercised or terminated.
(f) METHOD OF EXERCISE. To exercise a Limited Right, the Grantee shall (i)
deliver written notice to the Secretary of the Company specifying the number of
shares of Common Stock with respect to which the Limited Right is being
exercised, and (ii) if requested by the Committee, deliver the Agreement
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evidencing the Limited Rights being exercised and, if applicable, the Option
Agreement evidencing the related Option to the Secretary of the Company, who
shall endorse thereon a notation of such exercise and return such Agreements to
the Grantee. The date of exercise of a Limited Right that is validly exercised
shall be deemed to be the date on which there shall have been delivered the
instruments referred to in the first sentence of this paragraph (f).
11. RESTRICTED STOCK.
The Committee may award shares of Restricted Stock to any eligible employee
or consultant. Each award of Restricted Stock under the Plan shall be evidenced
by a written Agreement between the Company and the Grantee, in such form as the
Committee shall from time to time approve, which Agreement shall comply with and
be subject to the following terms and conditions, unless otherwise specifically
provided in such Agreement:
(a) NUMBER OF SHARES. Each Agreement shall state the number of shares of
Restricted Stock to be subject to an award.
(b) RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
the laws of descent and distribution, for such period as the Committee shall
determine from the date on which the award is granted (the "Restricted Period").
The Committee may also impose such additional or alternative restrictions and
conditions on the shares as it deems appropriate including the satisfaction of
performance criteria. Such performance criteria may include sales, earnings
before interest and taxes, return on investment, earnings per share, any
combination of the foregoing or rate of growth of any of the foregoing, as
determined by the Committee. Certificates for shares of stock issued pursuant to
Restricted Stock awards shall bear an appropriate legend referring to such
restrictions, and any attempt to dispose of any such shares of stock in
contravention of such restrictions shall be null and void and without effect.
During the Restricted Period, such certificates shall be held in escrow by an
escrow agent appointed by the Committee. In determining the Restricted Period of
an award the Committee may provide that the foregoing restrictions shall lapse
with respect to specified percentages of the awarded shares on successive
anniversaries of the date of such award.
(c) FORFEITURE. Subject to such exceptions as may be determined by the
Committee, if the Grantee's continuous employment or consultant relationship
with the company or any Subsidiary shall terminate for any reason prior to the
expiration of the Restricted Period of an award, any shares remaining subject to
restrictions (after taking into account the provisions of Subsection (e) of this
Section 11) shall thereupon be forfeited by the Grantee and transferred to, and
required by, the Company or a subsidiary at no cost to the Company or
subsidiary.
(d) OWNERSHIP. During the Restricted Period the Grantee shall possess all
incidents of ownership of such shares, subject to Subsection (b) of this Section
11, including the right to receive dividends with respect to such shares and to
vote such shares.
(e) ACCELERATED LAPSE OF RESTRICTIONS. Upon the occurrence of an
Acceleration Event, all restrictions then outstanding with respect to shares of
Restricted Stock awarded hereunder shall automatically expire and be of no
further force and effect. The Committee shall have the authority (and the
Agreement may so provide) to cancel all or any portion of any outstanding
restrictions prior to the expiration of the Restricted Period with respect to
any or all of the shares of Restricted Stock awarded on such terms and
conditions as the Committee shall deem appropriate.
12. EFFECT OF CERTAIN CHANGES.
(a) In the event of any extraordinary dividend, stock dividend,
recapitalization, merger, consolidation, stock split, warrant or rights
issuance, or combination or exchange of such shares, or other similar
transactions, the number of shares of Common Stock available for awards, the
number of such shares covered by outstanding awards, and the price per share of
Options or the applicable market value of Stock Appreciation Rights or Limited
Rights shall be equitably adjusted by the Committee to reflect such event
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and preserve the value of such awards; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated.
(b) If, subsequent to the Initial Public Offering, while any awards remain
outstanding under the Plan, any of the following events shall occur (which
events shall constitute a "Change in Control of the Company")--
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than (1) the Company, (2) any trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
(3) any corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of
Common Stock, or (4) any person who, immediately prior to the Initial Public
Offering, owned more than 25% of the combined voting power of the Company's
then outstanding voting securities), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company (not including in the securities beneficially
owned by such person any securities acquired directly from the Company or
any of its affiliates other than in connection with the acquisition by the
Company or its affiliates of a business) representing 25% or more of the
combined voting owner of the Company's then outstanding voting securities;
(ii) during any period of not more than two consecutive years, not
including any period prior to the adoption of this Plan by the board,
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest, including,
but not limited to a consent solicitation, relating to the election of
directors of the Company) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at
least a majority thereof;
(iii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity) 80%; or more of the combined voting power of the
voting securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation or (B) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "Person" (as hereinabove defined) acquired
25% or more of the combined voting power of the Company's then outstanding
securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect)--
then from and after the date on which any such Change in Control shall have
occurred (the "Acceleration Date"), the award covered by such Agreement
(including awards granted pursuant to Section 13 hereof) shall be exercisable or
otherwise nonforfeitable in full, whether or not otherwise exercisable or
forfeitable.
(c) In the event of a change in the Common Stock of the Company as presently
constituted that is limited to a change of all of its authorized shares of
Common Stock into the same number of shares with a different par value or
without par value, the shares resulting from any such change shall be deemed to
be the Common Stock within the meaning of the Plan.
13. NON-EMPLOYEE DIRECTOR OPTIONS.
The provisions of this Section 13 shall apply only to certain grants of
Options to Non-Employee Directors, as provided below. Except as set forth in
this Section 13, the other provisions of the plan shall apply to grants of
Options to Non-Employee Directors to the extent not inconsistent with this
Section. For
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purposes of interpreting Section 6 of the Plan, a Non-Employee Director's
service as a member of the Board shall be deemed to be employment with the
Company.
(a) GENERAL. Non-Employee Directors shall receive Nonqualified Stock Options
in accordance with this Section 13. The Option Price per share of Common Stock
purchasable under Options granted to Non-Employee Directors shall be the Fair
Market Value of a share on the date of grant. Options granted pursuant to this
Section 13 shall be subject to the terms of such section and shall not be
subject to discretionary acceleration of exercisability by the Committee.
(b) INITIAL GRANTS. On the date of the Initial Public Offering, each
Non-Employee Director will be granted automatically, without action by the
Committee, an Option to purchase 10,000 shares of Common Stock. The Option Price
shall equal the offering price of the Common Stock in connection with the
Initial Public Offering.
(c) SUBSEQUENT GRANTS. Each person who, after the Initial Public Offering,
becomes a Non-Employee Director for the first time, will, at the time such
director is elected and duly qualified, be granted automatically, without action
by the Committee, an Option to purchase 10,000 shares of Common Stock. The
Option Price shall equal the Fair Market Value of the Common Stock as of the
date of grant.
(d) ANNUAL GRANTS. On the date of each annual meeting of stockholders
commencing with the annual meeting at which this Plan is approved, each
Non-Employee Director will be granted automatically, without action by the
Committee, an Option to purchase 10,000, shares of Common Stock. The Option
Price shall equal the Fair Market Value of the Common Stock as of the date of
grant.
(e) VESTING. Each option granted under this Section 13 shall be fully
exercisable on the date of grant. Sections 6 (e) , 6 (f) and 6 (g) hereof shall
not apply to Options granted to Non-Employee Directors.
(f) DURATION. Each Option granted to a Non-Employee Director shall expire on
the first to occur of (i) the tenth anniversary of the date of grant of the
Option, (ii) the first anniversary of the Non-Employee Director's termination of
service as a member of the Board other than for Cause or (iii) three months
following the Non-Employee Director's removal from the Board for Cause. The
Committee may not provide for an extended exercise period beyond the periods set
forth in this Section 13.
(g) DEFINITIONS. For purposes of this Section 13, the following terms shall
have the following meanings:
"Cause" shall mean the termination of service as a member of the Board by a
Non-Employee Director due to any act of (i) fraud or intentional
misrepresentation, or (ii) embezzlement, misappropriation or conversion of
assets or opportunities of the Company or any Subsidiary.
14. PERIOD DURING WHICH AWARDS MAY BE GRANTED.
Awards may be granted pursuant to the Plan from time to time within a period
of ten (10) years from the date the Plan is adopted by the Board.
15. NONTRANSFERABILITY OF AWARDS.
Awards granted under the Plan shall not be transferable otherwise than by
will or by the laws of descent and distribution, and awards may be exercised or
otherwise realized, during the lifetime of the Grantee, only by the Grantee or
by his guardian or legal representative.
16. APPROVAL OF STOCKHOLDERS.
The Plan shall take effect upon its adoption by the Board and shall
terminate on the tenth anniversary of such date.
17. AGREEMENT BY GRANTEE REGARDING WITHHOLDING TAXES.
If the Committee shall so require, as a condition of exercise of an option,
Stock Appreciation Right or Limited Right or the expiration of the Restricted'
Period (each a "Tax Event"), each Grantee shall agree that no later than the
date of the Tax Event, the Grantee will pay to the Company or make arrangements
satisfactory to the Committee regarding payment of any federal, state or local
taxes of any kind required by
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law to be withheld upon the Tax Event. Alternatively, the Committee may provide
that a Grantee may elect, to the extent permitted or required by law, to have
the Company deduct federal, state and local taxes of any kind required by law to
be withheld upon the Tax Event from any payment of any kind due to the Grantee.
The withholding obligation may be satisfied by the withholding or delivery of
Common Stock.
18. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; PROVIDED, HOWEVER, that, unless otherwise determined by the
Board, an amendment which requires stockholder approval in order for the Plan to
continue to comply with Rule 16b-3 or any other law, regulation or stock
exchange requirement shall not be effective unless approved by the requisite
vote of stockholders. Except as provided in Section 12(a) hereof, no suspension,
termination, modification or amendment of the Plan may adversely affect any
award previously granted, unless the written consent of the Grantee is obtained.
19. RIGHTS AS A STOCKHOLDER.
Except as provided in Section 11(d) hereof, a Grantee or a transferee of an
award shall have no rights as a stockholder with respect to any shares covered
by the award until the date of the issuance of a stock certificate to him for
such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distribution of
other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 12(a) hereof.
20. NO RIGHTS TO EMPLOYMENT.
Nothing in the Plan or in any award granted or Agreement entered into
pursuant hereto shall confer upon any Grantee the right to continue in the
employ of, or in a consultant relationship with, the Company or any Subsidiary
or to be entitled to any remuneration or benefits not set forth in the Plan or
such Agreement or to interfere with or limit in any way the right of the Company
or any such Subsidiary to terminate such Grantee's employment. Awards granted
under the Plan shall not be affected by any change in duties or position of a
Grantee as long as such Grantee continues to be employed by, or in a consultant
relationship with, the Company or any Subsidiary.
21. BENEFICIARY.
A Grantee may file with the Committee a written designation of a beneficiary
on such form as may be prescribed by the Committee and may, from time to time,
amend or revoke such designation. If no designated beneficiary survives the
Grantee, the executor or administrator of the Grantee's estate shall be deemed
to be the Grantee's beneficiary.
22. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto shall
be governed by the laws of the State of Delaware.
A-11
[Form of Proxy Card]
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
IDT CORPORATION
294 State Street Hackensack, NJ 07601
(201) 928-1000
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 11, 1997
The undersigned appoints Howard S. Jonas and Stephen R. Brown, or either one
of them, as the proxy of the undersigned with full power of substitution to
attend and vote at the Annual Meeting of Stockholders (the "Annual Meeting")
of IDT Corporation to be held at the offices of IDT Corporation at 171 Main
Street, Hackensack, New Jersey on December 11, 1997 at 11:00 a.m., and any
adjournment of the Annual Meeting, according to the number of votes the
undersigned would be entitled to cast if personally present, for or against
any proposal, including the election of members of the Board of Directors,
and any and all other business that may come before the Annual Meeting,
except as otherwise indicated on the reverse side of this card.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE
BOARD OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
/x/ Please mark your votes as in this example.
1. Election of Directors.
Howard S. Balter, Meyer A. Berman and Hal Brecher
/ / FOR / / WITHHOLD / / FOR except vote withheld from following
nominee(s):________________________________
__________________________________________
2. Ratification and approval of the proposed amendment to the Company's
Amended and Restated 1996 Stock Option and Incentive Plan:
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the appointment of Ernst & Young LLP as the Company's
Independent Auditors for the fiscal year ending July 31, 1998:
/ / FOR / / AGAINST / / ABSTAIN
/ / WILL ATTEND / / WILL NOT ATTEND
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.
________________________________
Printed Name of Shareholder
________________________________
Signature
________________________________
Signature
Date: ______________, 1997
NOTE: Please sign exactly as your name appears on this proxy card. If shares
are held jointly, each holder should sign. When signing as attorney,
executor, administrator, corporation, trustee or guardian, a complete title
should be provided. If a corporation, please sign in full corporate name by
the President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.