UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A
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Proxy Statement Pursuant
to Section 14(a) of the
Securities Exchange Act
of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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IDT Corporation
(Name of Registrant as
Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rule 14a-6(i)(1), and 0-11.
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Per unit price or other underlying value of
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Fee paid previously with preliminary
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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.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement
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Filing Party:
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Date Filed:
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IDT
CORPORATION
520
Broad Street
Newark,
New Jersey 07102
(973)
438-1000
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
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TIME
AND DATE:
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10:30 a.m., local time, on Thursday, December
14, 2017
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PLACE:
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Offices of IDT Corporation, 520 Broad Street,
Newark, New Jersey 07102
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ITEMS
OF BUSINESS:
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1.
To elect five directors, each for
a term of one year.
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2.
To approve an amendment to the
IDT Corporation 2015 Stock Option and Incentive Plan that will
increase the number of shares of the Company’s Class B Common
Stock available for the grant of awards thereunder by an additional
330,000 shares.
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3.
To ratify a May 2, 2017 grant to
Howard S. Jonas of fully vested options to purchase up to 1,000,000
shares of the Company’s Class B Common Stock at an exercise
price of $14.93 per share and with certain repurchase rights held
by the Company.
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4.
To approve and ratify two sales
by the Company to Howard S. Jonas of an aggregate 1,728,332 shares
of the Company’s Class B Common Stock from the
Company’s treasury account at an aggregate purchase price of
$24,929,998.
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5.
To ratify the appointment of BDO
USA, LLP as the Company’s independent registered public
accounting firm for the Fiscal Year ending July 31, 2018.
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6.
To transact other business as may
properly come before the Annual Meeting and any adjournment or
postponement thereof.
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RECORD DATE:
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You can vote if you were a stockholder of record
as of the close of business on October 19, 2017.
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PROXY
VOTING:
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You can vote either in person at the Annual
Meeting or by proxy without attending the meeting. See details
under the heading “How do I Vote?”
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ANNUAL MEETING ADMISSION:
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If you are a stockholder of record, a form of
personal photo identification must be presented in order to be
admitted to the Annual Meeting. If your shares are held in the name
of a bank, broker or other holder of record, you must bring a
brokerage statement or other written proof of ownership as of
October 19, 2017 with you to the Annual Meeting, as well as a form
of personal photo identification.
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ANNUAL MEETING DIRECTIONS:
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You may request directions to the annual meeting
via email at invest@idt.net or by calling IDT Investor Relations at
(973) 438-3838.
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Important
Notice Regarding the Availability of Proxy Materials for the IDT
Corporation Stockholders Meeting to be Held on December 14,
2017
: The Notice of Annual
Meeting and Proxy Statement and the 2017 Annual Report are
available at:
www.idt.net/ir
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BY ORDER OF THE BOARD OF DIRECTORS
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/s/ Joyce Mason
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Joyce Mason
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Executive Vice President, General Counsel and
Corporate Secretary
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Newark, New Jersey
November 6, 2017
IDT
CORPORATION
520 Broad Street
Newark, New
Jersey 07102
(973)
438-1000
_____________________
PROXY
STATEMENT
_____________________
GENERAL
INFORMATION
Introduction
This Proxy Statement is
furnished to the stockholders of record of IDT Corporation, a
Delaware corporation (the “Company” or
“IDT”) as of the close of business on October 19, 2017,
in connection with the solicitation by the Company’s Board of
Directors (the “Board of Directors”) of proxies for use
in voting at the Company’s Annual Meeting of Stockholders
(the “Annual Meeting”). The Annual Meeting will be held
on Thursday, December 14, 2017 at 10:30 a.m., local time, at the
Offices of IDT Corporation, 520 Broad Street, Newark, New Jersey
07102. The shares of the Company’s Class A common stock, par
value $0.01 per share (“Class A Common Stock”) and
Class B common stock, par value $0.01 per share (“Class B
Common Stock”), present at the Annual Meeting or represented
by the proxies received by Internet or mail (properly marked, dated
and executed) and not revoked, will be voted at the Annual Meeting.
This Proxy Statement is being mailed to the Company’s
stockholders starting on November 13, 2017.
Solicitation and Voting
Procedures
This solicitation of proxies is being made by the Company. The
solicitation is being conducted by mail and by e-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 Class A Common Stock and Class B Common Stock.
The Company may conduct further solicitations 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 October 19, 2017 has been fixed as the
record date (the “Record Date”) for determining the
holders of shares of Class A Common Stock and Class B Common Stock
entitled to notice of, and to vote at, the Annual Meeting. As of
the close of business on the Record Date, the Company had
24,841,407 shares outstanding and entitled to vote at the Annual
Meeting, consisting of 1,574,326 shares of Class A Common Stock and
23,267,081 shares of Class B Common Stock. The remaining shares
issued, consisting of 1,698,000 shares of Class A Common Stock and
2,298,467 shares of Class B Common Stock, are beneficially owned by
the Company, and are not entitled to vote or to be counted as
present at the Annual Meeting for purposes of determining whether a
quorum is present. The shares of stock owned by the Company will
not be deemed to be outstanding for determining whether a majority
of the votes cast have voted in favor of any proposal.
Stockholders are entitled to three votes for each share of Class A
Common Stock held by them and one-tenth of one vote for each share
of Class B Common Stock held by them. The holders of Class A Common
Stock and Class B Common Stock will vote as a single body on all
matters presented to the stockholders. There are no
dissenters’ rights of appraisal in connection with any
proposal.
How do I
Vote?
You can vote either in person at the Annual Meeting or by proxy
without attending the meeting.
Beneficial holders of the Company’s Class A Common Stock and
Class B Common Stock as of the Record Date whose stock is held of
record by another party should receive voting instructions from
their bank, broker or other holder of record. If a
stockholder’s shares are held through a nominee and the
stockholder wants to vote at the meeting, such stockholder must
obtain a proxy from the nominee record holder authorizing such
stockholder to vote at the Annual Meeting.
1
Stockholders of record should receive a paper copy of our proxy
materials and may vote by following the instructions on the proxy
card that is included with the proxy materials. As set forth on the
proxy card, there are two convenient methods for holders of record
to direct their vote by proxy without attending the Annual Meeting:
on the Internet or by mail. To vote by Internet, visit
www.voteproxy.com
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To vote by mail, mark, date and sign the enclosed proxy card and
return it in the postage-paid envelope provided. Holders of record
may also vote by attending the Annual Meeting and voting by
ballot.
All shares for which a proxy has been duly executed and delivered
(by Internet or mail) and not properly revoked prior to the meeting
will be voted at the Annual Meeting. If a stockholder of record
signs and returns a proxy card but does not give voting
instructions, the shares represented by that proxy will be voted as
recommended by the Board of Directors. If any other matters are
properly presented at the Annual Meeting for consideration and if
you have voted your shares by Internet or mail, the persons named
as proxies will have the discretion to vote on those matters for
you. On the date of filing this Proxy Statement with the SEC, the
Board of Directors did not know of any other matter to be raised at
the Annual Meeting.
How Can I Change My
Vote?
A stockholder of record can revoke his, her or its proxy at any
time before it is voted at the Annual Meeting by delivering to the
Company (to the attention of Joyce J. Mason, Esq., Executive Vice
President, General Counsel and Corporate Secretary) a written
notice of revocation or by executing a later-dated proxy by
Internet or mail, or by attending the Annual Meeting and voting in
person.
If your shares are held in the name of a bank, broker, or other
nominee, you must obtain a proxy executed in your favor from the
holder of record (that is, your bank, broker, or nominee) to be
able to vote at the Annual Meeting.
Quorum and Vote
Required
The presence at the Annual Meeting of a majority of the voting
power of the Company’s outstanding Class A Common Stock and
Class B Common Stock (voting together), either in person or by
proxy, will constitute a quorum for the transaction of business at
the Annual Meeting. Abstention votes and any broker non-votes
(i.e., votes withheld by brokers on non-routine proposals in the
absence of instructions from beneficial owners) will be counted as
present or represented at the Annual Meeting for purposes of
determining whether a quorum exists.
The affirmative vote of a majority of the voting power present (in
person or by proxy) at the Annual Meeting and casting a vote on a
Proposal will be required for the approval of the election of any
director (Proposal No. 1), the adoption of an amendment to the 2015
Stock Option and Incentive Plan (the “2015 Plan”)
(Proposal No. 2), the ratification of a grant to Howard S. Jonas of
fully vested options to purchase up to 1,000,000 shares of the
Company’s Class B Common Stock at an exercise price of $14.93
per share and with certain repurchase rights held by the Company
(Proposal No. 3), the approval and ratification of two sales by the
Company to Howard S. Jonas of an aggregate 1,728,332 shares of the
Company’s Class B Common Stock from the Company’s
treasury account at an aggregate purchase price of $24,929,998
(Proposal No. 4), and the ratification of the appointment of BDO
USA, LLP as the Company’s independent registered public
accounting firm for the Fiscal Year ending July 31, 2018 (Proposal
No. 5). This means that the number of votes cast “for”
a Proposal must exceed the number of votes cast
“against” that Proposal. Abstentions are not counted as
votes “for” or “against” a nominee or any
of these proposals.
If you are a beneficial owner whose shares are held of record by a
broker, you must instruct the broker how to vote your shares. If
you do not provide voting instructions, your shares will not be
voted on any proposal on which the broker does not have
discretionary authority to vote. This is called a “broker
non-vote.” In these cases, the broker can register your
shares as being present at the Annual Meeting for purposes of
determining the presence of a quorum but will not be able to vote
on those matters for which specific authorization is required under
the rules of the New York Stock Exchange.
If you are a beneficial owner whose shares are held of record by a
broker, your broker has discretionary voting authority under NYSE
rules to vote your shares on the ratification of the appointment of
BDO USA, LLP as the Company’s independent registered public
accounting firm for the Fiscal Year ending July 31, 2018 (Proposal
No. 5), even if the broker does not receive voting instructions
from you. However, your broker does not have discretionary
authority to vote on the election of directors (Proposal No. 1),
the adoption of an amendment to the 2015 Stock
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Option and Incentive Plan (Proposal No. 2), the ratification of a
grant to Howard S. Jonas of fully vested options to purchase up to
1,000,000 shares of the Company’s Class B Common Stock at an
exercise price of $14.93 per share and with certain repurchase
rights held by the Company (Proposal No. 3), the approval and
ratification of two sales by the Company to Howard S. Jonas of an
aggregate 1,728,332 shares of the Company’s Class B Common
Stock from the Company’s treasury account at an aggregate
purchase price of $24,929,998 (Proposal No. 4), or on any
stockholder proposal or other matter raised at the Annual Meeting
without instructions from you, in which case a broker non-vote will
occur and your shares will not be voted on these matters.
How Many Votes Are
Required to Approve Other Matters?
Unless otherwise required by law or the Company’s Bylaws, the
affirmative vote of a majority of the voting power represented at
the Annual Meeting and entitled to vote will be required for other
matters that may properly come before the meeting.
Stockholders Sharing the
Same Address
We are sending only one copy of the Annual Report and Proxy
Statement to stockholders of record who share the same last name
and address, unless they have notified the Company that they want
to continue to receive multiple copies. This practice, known as
“householding,” is designed to reduce duplicate
mailings and printings and postage costs. However, if any
stockholder residing at such address wishes to receive a separate
Annual Report or Proxy Statement in the future, he or she may
contact Joyce J. Mason, Esq., Corporate Secretary, IDT Corporation,
520 Broad Street, Newark, New Jersey 07102, or by phone at (973)
438-1000, and we will promptly forward to such stockholder a
separate Annual Report and/or Proxy Statement. The contact
information above may also be used by members of the same household
currently receiving multiple copies of the Annual Report and Proxy
Statement in order to request that only one set of materials be
sent in the future.
References to Fiscal
Years
The Company’s fiscal year ends on July 31 of each calendar
year. Each reference to a fiscal year refers to the fiscal year
ending in the calendar year indicated (e.g., Fiscal 2017 refers to
the Fiscal Year ended July 31, 2017).
3
CORPORATE
GOVERNANCE
Introduction
The Company has in place a comprehensive corporate governance
framework that reflects the corporate governance requirements and
the rules and regulations promulgated under the Securities Exchange
Act of 1934, as amended, and the corporate governance-related
listing requirements of the New York Stock Exchange. Consistent
with the Company’s commitment to strong corporate governance,
the Company does not rely on the exceptions from the New York Stock
Exchange’s corporate governance listing requirements
available to it because it is a “controlled company,”
except as described below with regard to (i) the composition of the
Nominating Committee and (ii) the Company not having a single
Nominating/Corporate Governance Committee.
In accordance with Sections 303A.09 and 303A.10 of the New York
Stock Exchange Listed Company Manual, the Company has adopted a set
of Corporate Governance Guidelines and a Code of Business Conduct
and Ethics, the full texts of which are available for your review
in the Governance section of our website at
http://ir.idt.net/Governance
and which also are available in print to any stockholder upon
written request to the Corporate Secretary.
The Company qualifies as a “controlled company” as
defined in Section 303A of the New York Stock Exchange Listed
Company Manual, because more than 50% of the voting power of the
Company is controlled by one individual, Howard S. Jonas, who
serves as Chairman of the Board of Directors. Notwithstanding that
being a “controlled company” entitles the Company to
exempt itself from the requirement that a majority of its directors
be independent directors and that the Compensation Committee and
Corporate Governance Committee be comprised entirely of independent
directors, the Board of Directors has determined affirmatively that
a majority of the members of the Board of Directors and the
director nominees are independent in accordance with Section
303A.02 of the New York Stock Exchange Listed Company Manual and
that the Compensation Committee and the Corporate Governance
Committee are in fact comprised entirely of independent directors.
As a “controlled company,” the Company may, and has chosen to, exempt itself from the New York
Stock Exchange requirement that it have a single
Nominating/Corporate Governance Committee composed entirely of
independent directors. As noted above, and discussed in greater
detail below, the Board of Directors maintains a separate Corporate
Governance Committee comprised entirely of independent directors,
and a Nominating Committee comprised of the Chairman of the Board
of Directors and one independent director.
Director
Independence
The Corporate Governance Guidelines adopted by the Board of
Directors provide that a majority of the members of the Board of
Directors, and each member of the Audit, Compensation and Corporate
Governance Committees, must meet the independence requirements set
forth therein. The full text of the Corporate Governance
Guidelines, including the independence requirements, is available
for your review in the Governance section of our website at
http://ir.idt.net/Governance
.
For a director to be considered independent, the Board of Directors
must determine that a director meets the Independent Director
Qualification Standards set forth in the Corporate Governance
Guidelines, which comply with the New York Stock Exchange
definitions of independent, and is free from any material
relationship with the Company and its executive officers. The Board
of Directors considers all relevant facts and circumstances known
to it in making an independence determination, and not merely from
the standpoint of the director, but also from that of persons or
organizations with which the director has an affiliation or
significant financial interest. In addition to considering all
relevant information available to it, the Board of Directors uses
the following categorical Independent Director Qualification
Standards in determining the “independence” of its
directors:
1.
During the past three years, the Company shall not have employed
the director, or, except in a non-officer capacity, any of the
director’s immediate family members;
2.
During the past three years, the director shall not have received,
and shall not have an immediate family member who has received,
during any twelve-month period within the last three years, more
than $120,000 in direct compensation from the Company, other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service);
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3.
(a)
The director shall not be a current partner or employee of a firm
that is the Company’s internal or external auditor, (b) the
director shall not have an immediate family member who is a current
partner of such firm, (c) the director shall not have an immediate
family member who is a current employee of such firm and personally
works on the Company’s audit, and (d) neither the director
nor any of his or her immediate family members shall have been,
within the last three years, a partner or employee of such firm and
personally worked on the Company’s audit within that
time;
4.
Neither the director, nor any of his or her immediate family
members, shall be, or shall have been within the last three years,
employed as an executive officer of another company where any of
the Company’s present executive officers at the same time
serves or served on that company’s compensation (or
equivalent) committee; and
5.
The
director shall not be a current employee and shall not have an
immediate family member who is a current executive officer of a
company (excluding tax exempt organizations) that has made payments
to, or received payments from, the Company for property or services
in an amount which, in any of the last three Fiscal Years, exceeds
the greater of (a) $1 million or (b) two percent of the
consolidated gross revenues of such other company. The Corporate
Governance Committee will review the materiality of such
relationship to tax exempt organizations to determine if such
director qualifies as independent.
In addition, all members of the Company’s Audit Committee
must meet the independence requirements of Section 2014.10A-3 of
the Securities Exchange Act of 1934, which are set forth in the
Audit Committee Charter.
Based on the review and recommendation of the Corporate Governance
Committee, the Board of Directors has determined that each of
Michael Chenkin, Eric Cosentino, and Judah Schorr is independent in
accordance with the Corporate Governance Guidelines and the Audit
Committee Charter and, thus, that a majority of the current Board
of Directors, a majority of the director nominees, and each member
or nominee intended to become a member of the Audit, Compensation
and Corporate Governance Committees is independent. As used herein,
the term “non-employee director” shall mean any director
who is not an employee or consultant of the Company, and who is
deemed to be independent by the Board of Directors. Therefore,
neither Howard S. Jonas nor Bill Pereira is a non-employee
director. With the exception of Judah Schorr’s $100,000
investment in Rafael Holdings, Inc. (formerly Cornerstone
Pharmaceuticals), none of the non-employee directors had any
relationships with the Company that the Corporate Governance
Committee was required to consider when reviewing independence.
Director Selection
Process
The Nominating Committee will consider director candidates
recommended by the Company’s stockholders. Stockholders may
recommend director candidates by contacting the Chairman of the
Board as provided under the heading “Director
Communications.” The Nominating Committee considers
candidates suggested by its members, other directors, senior
management and stockholders in anticipation of upcoming elections
and actual or expected board vacancies. All candidates, including
those recommended by stockholders, are evaluated on the same basis
in light of the entirety of their credentials and the needs of the
Board of Directors and the Company. Of particular importance is the
candidate’s wisdom, integrity, ability to make independent
analytical inquiries, understanding of the business environment in
which the Company operates, as well as his or her potential
contribution to the diversity of the Board of Directors and his or
her willingness to devote adequate time to fulfill duties as a
director. Under “Proposal No. 1 — Election of
Directors” below, we provide an overview of each
nominee’s experience, qualifications, attributes and skills
that led the Nominating Committee and the Board of Directors to
determine that each nominee should serve as a Director.
Director
Communications
Stockholders and other interested parties may communicate with: (i)
the Board of Directors, by contacting the Chairman of the Board;
(ii) the non-employee directors, by contacting the Lead Independent
Director (currently Eric Cosentino); and (iii) the Audit,
Compensation, Corporate Governance or Nominating Committees of the
Board of Directors, by contacting the respective chairmen of such
committees. All communications should be in writing, should
indicate in the address whether the communication is intended for
the Lead Independent Director, the Chairman of the Board, or a
Committee Chairman, and should be directed care of IDT
Corporation’s Corporate Secretary, Joyce J. Mason, Esq.,
Stockholder Communications, IDT Corporation, 520 Broad Street,
Newark, New Jersey 07102.
5
The Corporate Secretary will relay correspondence (i) intended for
the Board of Directors, to the Chairman of the Board, who will, in
turn, relay such correspondence to the entire Board of Directors,
(ii) intended for the non-employee directors, to the Lead
Independent Director, and (iii) intended for the Audit,
Compensation, and Corporate Governance Committees, to the Chairmen
of such committees.
The Corporate Secretary may filter out and disregard or re-direct
(without providing a copy to the directors or advising them of the
communication), or may otherwise handle at his or her discretion,
any director communication that falls into any of the following
categories:
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Obscene materials;
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Unsolicited marketing or advertising material or mass mailings;
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Unsolicited newsletters, newspapers, magazines, books and
publications;
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Surveys and questionnaires;
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Resumes and other forms of job inquiries;
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Requests for business contacts or referrals;
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Material that is threatening or illegal; or
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Any communications or materials that are not in writing.
In addition, the Corporate Secretary may handle in her discretion
any director communication that can be described as an
“ordinary business matter.” Such matters include the
following:
•
Routine questions, service and product complaints and comments that
can be appropriately addressed by management; and
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Routine invoices, bills, account statements and related
communications that can be appropriately addressed by
management.
6
BOARD OF DIRECTORS AND
COMMITTEES
Board of
Directors
The Board of Directors held sixteen meetings in Fiscal 2017. In
Fiscal 2017, each of the Company’s directors attended or
participated in 75% or more of the aggregate of (i) the total
number of regularly scheduled meetings of the Board of Directors
held during the period in which each such director served as a
director and (ii) the total number of regularly scheduled meetings
held by all committees of the Board of Directors during the period
in which each such director served on such committees.
Directors are encouraged to attend the Company’s annual
meeting of stockholders, and the Company generally schedules a
meeting of the Board of Directors on the same date and at the same
place as the annual meeting of stockholders to encourage director
attendance. All of the members constituting the current Board of
Directors attended the 2016 annual meeting of stockholders.
Board of Directors
Leadership Structure and Risk Oversight Role
Howard S. Jonas has served as Chairman of the Board since the
Company’s inception. From October 2009 through December 2013,
he also served as Chief Executive Officer. The Board of
Directors’ decided to retain Howard S. Jonas as Chief
Executive Officer based on Howard S. Jonas’ leadership skills
and his knowledge of the Company’s businesses since its
inception and the value he brought to the Company in serving in
both capacities. As Chairman of the Board, Howard S. Jonas provides
overall leadership to the Board of Directors in its oversight
function while, as Chief Executive Officer, he provided leadership
in respect to the day-to-day management and operation of the
Company’s businesses. On January 1, 2014, Shmuel Jonas, who
was the Company’s Chief Operating Officer from June 2010
through December 2013, was elected as Chief Executive Officer of
the Company. Howard S. Jonas remains Chairman of the Board and
continues to provide overall leadership to the Board of Directors
in its oversight function. The risk management oversight roles of
the Audit, Compensation and Corporate Governance Committees
discussed below, which are comprised solely of independent
directors, provide an appropriate and effective balance to the
Chairman of the Board role.
Section 303A.03 of the New York Stock Exchange Listed Company
Manual and the Company’s Corporate Governance Guidelines
require that the non-employee directors of the Company meet without
management at regularly scheduled executive sessions. These
executive sessions are held at every regularly scheduled meeting of
the Board of Directors. Eric F. Cosentino, an independent director
and the “Lead Independent Director,” serves as the
presiding director of these executive sessions and has served in
that capacity since December 17, 2009. The Board of Directors
determined that the role of Lead Independent Director is important
to maintain a well-functioning Board of Directors that objectively
assesses management’s proposals.
The Board of Directors and each of its committees conduct annual
self-assessments in executive sessions to review and monitor their
respective continued effectiveness.
The Board of Directors as a whole, and through its committees, has
responsibility for the oversight of risk management, including the
review of the policies with respect to risk management and risk
assessment. With the oversight of the full Board of Directors, the
Company’s senior management is responsible for the day-to-day
management of the material risks the Company faces. The Board of
Directors is required to satisfy itself that the risk management
process implemented by management is adequate and functioning as
designed.
Each of the Audit, Compensation and Corporate Governance Committees
oversees certain aspects of risk management and reports its
respective findings to the full Board of Directors on a quarterly
basis, and as is otherwise needed. The Audit Committee is
responsible for overseeing risk management of financial matters,
financial reporting, the adequacy of the risk-related internal controls,
internal investigations, and security risks, generally. The
Compensation Committee oversees risks related to compensation
policies and practices. The Corporate Governance Committee oversees
our Corporate Governance Guidelines and governance-related risks,
such as board independence, as well as senior management succession
planning.
7
Board
Committees
The Board of Directors has established an Audit Committee, a
Compensation Committee, a Corporate Governance Committee and a
Nominating Committee.
The Audit
Committee
The Audit Committee is responsible for, among other things, the
appointment, compensation, removal and oversight of the work of the
Company’s independent registered public accounting firm. The
Audit Committee also oversees management’s performance of its
responsibility for the integrity of the Company’s accounting
and financial reporting and its systems of internal controls, the
performance of the Company’s internal audit function and the
Company’s compliance with legal and regulatory requirements.
The Audit Committee operates under a written Audit Committee
charter adopted by the Board of Directors, which can be found in
the Governance section of our web site,
http://ir.idt.net/Governance, and is also available in print to any
stockholder upon request to the Corporate Secretary. The Audit
Committee consists of Messrs. Chenkin (Chairman), Cosentino and
Schorr. The Audit Committee held nine meetings during Fiscal 2017.
The Board of Directors has determined that (i) all of the members
of the Audit Committee are independent within the meaning of the
Section 303A.07(b) and Section 303A.02 of the New York Stock
Exchange Listed Company Manual and Rule 10A-3(b) under the
Securities Exchange Act of 1934, (ii) all of the members of the
Audit Committee are financially literate and (iii) that Mr. Chenkin
qualifies as an “audit committee financial expert”
within the meaning of Item 407(d)(5) of Regulation S-K.
The Compensation
Committee
The Compensation Committee is responsible for, among other things,
reviewing, evaluating and approving all compensation arrangements
for the executive officers of the Company, evaluating the
performance of executive officers, administering the
Company’s 2015 Stock Option and Incentive Plan, as amended
and restated (the “2015 Plan”), and its predecessor,
the 2005 Stock Option and Incentive Plan, as amended and restated
(the “2005 Plan”), and recommending to the Board of
Directors the compensation for Board members, such as retainers,
committee and other fees, stock option, restricted stock and other
stock awards, and other similar compensation as deemed appropriate.
The Compensation Committee confers with the Company’s
executive officers when making the above determinations. The
Compensation Committee currently consists of Messrs. Cosentino
(Chairman), Chenkin and Schorr. The Compensation Committee held
eleven meetings during Fiscal 2017. The Compensation Committee
operates under a written charter adopted by the Board of Directors,
which can be found in the Governance section of our web site,
http://ir.idt.net/Governance, and which is also available in print
to any stockholder upon request to the Corporate Secretary. The
Board of Directors has determined that all of the members of the
Compensation Committee are independent within the meaning of
Section 303A.02 of the New York Stock Exchange Listed Company
Manual and the categorical standards set forth above.
The Compensation Committee adopts Company-wide goals and objectives
for the fiscal year to be used as a guide when determining annual
bonus payments to executive officers after the end of the fiscal
year. The Compensation Committee reviews the performance of the
Company relative to those goals and objectives, and the
contribution of each executive officer to such performance at the
end of the fiscal year and considers them as some of the factors
when determining the amounts of annual bonuses to be awarded to
executive officers.
Compensation Committee
Interlocks and Insider Participation
None of the members of the Compensation Committee have served as an
officer or employee of the Company or have any relationship with
the Company that is required to be disclosed under the heading
“Related Person Transactions.” No executive officer of
the Company served or serves on the compensation committee or board
of any company that employed or employs any member of the
Company’s Compensation Committee or Board of Directors.
The Corporate Governance
Committee
The Corporate Governance Committee is responsible for, among other
things, reviewing and reporting to the Board of Directors on
matters involving relationships among the Board of Directors, the
stockholders and senior management. The Corporate Governance
Committee (i) reviews the Corporate Governance Guidelines and other
policies and governing documents of the Company and recommends
revisions as appropriate, (ii) reviews any potential conflicts of
interest of independent directors, (iii) reviews and monitors
related person transactions,
8
(iv) oversees the self-evaluations of
the Board of Directors, the Audit Committee and the Compensation
Committee and (v) reviews and determines director independence, and
makes recommendations to the Board of Directors regarding director
independence. The Corporate Governance Committee currently consists
of Messrs. Cosentino (Chairman), Chenkin and Schorr. The Corporate
Governance Committee held eight meetings in Fiscal 2017. The
Corporate Governance Committee operates under a written charter
adopted by the Board of Directors, which can be found in the
Governance section of our web site,
http://ir.idt.net/Governance
,
and which is also available in print to any stockholder upon
request to the Corporate Secretary. The Board of Directors has
determined that all of the members of the Corporate Governance
Committee are independent within the meaning of Section 303A.02 of
the New York Stock Exchange Listed Company Manual and the
categorical standards set forth above.
The Nominating
Committee
The Nominating Committee is responsible for overseeing nominations
to the Board of Directors, including: (i) developing the criteria
and qualifications for membership on the Board of Directors, (ii)
recommending candidates to fill new or vacant positions on the
Board of Directors, and (iii) conducting appropriate inquiries into
the backgrounds of potential candidates. A summary of new director
qualifications can be found under the heading “Director
Selection Process.” The Nominating Committee currently
consists of Howard S. Jonas (Chairman) and Eric Cosentino. The
Board of Directors has determined that Eric Cosentino is
independent in accordance with Section 303A.04 of the New York
Stock Exchange Listed Company Manual. Howard S. Jonas is not
independent. The Company, as a “controlled company,” is
exempt from the requirement to maintain an independent nominating
committee pursuant to Section 303A.00 of the New York Stock
Exchange Listed Company Manual. The Nominating Committee operates
under a written charter adopted by the Board of Directors, which
can be found in the Governance section of our web site,
http://ir.idt.net/Governance, and which is also available in print
to any stockholder upon request to the Corporate Secretary. The
Nominating Committee held one meeting in Fiscal 2017.
9
2017 COMPENSATION FOR
NON-EMPLOYEE DIRECTORS
Annual compensation for non-employee directors for Fiscal 2017 was
comprised of equity compensation, consisting of awards of
restricted shares of Class B Common Stock, and cash
compensation.
Director Equity
Grants
During Fiscal 2017, pursuant to the 2015 Plan, each non-employee
director of the Company who was determined to be independent
received, on January 5, 2017, an automatic grant of 4,000
restricted shares of the Company’s Class B Common Stock,
which vested immediately upon grant. A new non-employee director
who becomes a member of the Board of Directors during the course of
the calendar year receives an automatic grant on the date that he
or she becomes a director in the amounts specified above, pro rated
based on the calendar quarter of the year in which such person
became a director. The stock is granted on a going-forward basis,
before the director completes his or her service for the calendar
year. All such grants of stock to non-employee directors are
subject to certain terms and conditions described in the 2015
Plan.
Director Board
Retainers
Each non-employee director of the Company receives an annual cash
retainer of $50,000. Such retainer is paid in equal quarterly
payments provided the non-employee director attended at least 75%
of the regularly-scheduled meetings of the Board of Directors that
quarter. The annual cash retainer is pro-rated (by calendar quarter
based on the calendar quarter when service on the Board of
Directors began or ended) for non-employee directors who join the
Board of Directors or depart from the Board of Directors during the
calendar year, if such director attended 75% of the applicable
board meetings for such quarter. The Company’s Chief
Executive Officer may, in his discretion, waive the requirement of
75% attendance by a director to receive the retainer in the case of
mitigating circumstances.
Committee
Fees
Non-employee directors do not receive fees for committee
service.
Lead Independent
Director
The Lead Independent Director receives an additional annual cash
retainer of $50,000, paid in equal quarterly amounts upon the
completion of each quarter of service. Eric Cosentino has served as
the Lead Independent Director since December 17, 2009.
2017 Director
Compensation Table
The following table lists Fiscal 2017 compensation for any person
who served as a non-employee director during Fiscal 2017. This
table does not include compensation to Howard S. Jonas or Bill
Pereira, as they are not non-employee directors and do not receive
any compensation for their service as directors.
|
|
|
Dates
of Board Service
During Fiscal 2017
|
|
Fees
Earned or Paid in Cash
($)
|
|
|
|
All
Other Compensation ($)
(4)
|
|
|
|
Michael Chenkin
|
|
08/01/2016–07/31/2017
|
|
$
|
50,000
|
(1)
|
|
$
|
78,430
|
(3)
|
|
$
|
1,520
|
|
$
|
129,950
|
|
Eric F. Cosentino
|
|
08/01/2016–07/31/2017
|
|
$
|
100,000
|
(2)
|
|
$
|
78,430
|
(3)
|
|
$
|
1,292
|
|
$
|
179,722
|
|
Judah Schorr
|
|
08/01/2016–07/31/2017
|
|
$
|
50,000
|
(1)
|
|
$
|
78,430
|
(3)
|
|
$
|
1,520
|
|
$
|
129,950
|
10
As of July 31, 2017, non-employee directors held the following
shares of the Company’s Class B Common Stock granted for
their service as directors. Non-employee directors did not hold any
options to purchase shares of the Company’s capital stock as
of July 31, 2017.
|
|
|
|
|
Michael Chenkin
|
|
18,083
|
|
Eric F. Cosentino
|
|
2,849
|
|
Judah Schorr
|
|
63,287
|
11
RELATED PERSON
TRANSACTIONS
Review of Related Person
Transactions
The Board of Directors has adopted a Statement of Policy with
respect to Related Person Transactions, which is administered by
the Corporate Governance Committee. This policy covers any
transaction or series of transactions in which the Company or a
subsidiary is a participant, the amount involved exceeds $120,000
and a Related Person has a direct or indirect material interest.
Related Persons include directors, director nominees, executive
officers, any beneficial holder of more than 5% of any class of the
Company’s voting securities, and any immediate family member
of any of the foregoing persons. The policy also covers
transactions which, despite not meeting all of the criteria set
forth above, would otherwise be considered material to investors
based on qualitative factors, as determined by the Corporate
Governance Committee with input from the Company’s management
and advisors. Transactions that fall within the definition are
considered by the Corporate Governance Committee for approval,
ratification or other action. Based on its consideration of all of
the relevant facts and circumstances, the Corporate Governance
Committee will decide whether or not to approve such transactions
and will approve only those transactions that are in the best
interests of the Company and its stockholders. If the Company
becomes aware of an existing Related Person Transaction that has
not been approved under this policy, the matter will be referred to
the Corporate Governance Committee at its next regularly scheduled
meeting. The Corporate Governance Committee will evaluate all
options available, including ratification, revision or termination
of such transaction.
Transactions with
Related Persons, Promoters and Certain Control Persons
All of the following ongoing Related Person Transactions were
approved in accordance with the policy described above:
There is a father/son relationship between Howard S. Jonas,
Chairman of the Board and controlling stockholder, and Shmuel
Jonas, Chief Executive Officer. Howard S. Jonas’ and Shmuel
Jonas’ total compensation during Fiscal 2017 are set forth in
the Summary Compensation Table.
There is a brother/sister relationship between Howard S. Jonas,
Chairman of the Board and controlling stockholder, and Joyce J.
Mason, General Counsel, Corporate Secretary and Executive Vice
President. Howard S. Jonas’ total compensation during Fiscal
2017 is set forth in the Summary Compensation Table. Joyce J.
Mason’s total compensation during Fiscal 2017 was
$336,606.
On October 28, 2011, the Company spun off its subsidiary, Genie
Energy Ltd. (“Genie”). In connection with the spin-off,
the Company and Genie entered into a Transition Services Agreement,
dated October 28, 2011 (the “Genie TSA”), pursuant to
which the Company provides certain services to Genie, which is
controlled by Howard S. Jonas and for which Howard S. Jonas serves
as the Chairman of the Board and was the Chief Executive Officer
until November 1, 2017. The services include, but are not limited
to, services relating to human resources, employee benefits
administration, finance, accounting, tax, facilities, investor
relations and legal. Furthermore, the Company granted Genie a
license to use the IDT name for its Retail Energy Provider
business. Genie paid the Company a total of $2,098,101 for services
provided by the Company pursuant to the Genie TSA during Fiscal
2017. As of July 31, 2017, Genie owed the Company $248,334 for such
services. Additionally, Genie provided human resource services to
the Company pursuant to the Genie TSA. The Company paid Genie a
total of $385,938 for services provided by Genie pursuant to the
Genie TSA during Fiscal 2017. As of July 31, 2017, the Company owed
Genie $35,178 for such services.
Between January and September 2016, the Company invested $10
million in its controlled subsidiary, CS Pharma Holdings LLC
(“CS Pharma”). CS Pharma raised an additional $10
million from unaffiliated investors and CS Pharma has invested $10
million in Rafael Pharmaceuticals, Inc. (f/k/a Cornerstone
Pharmaceuticals) (“Rafael”). The Company and CS Pharma
were issued warrants to purchase shares of capital stock of Rafael
representing up to 56% of the then issued and outstanding capital
stock of Rafael, on an as-converted and fully diluted basis. The
right to exercise warrants as to the first $10 million thereof is
held by CS Pharma and the remainder is owned by the Company. Howard
S. Jonas has served as a director of Rafael since April 2013 and
was appointed Chairman of the Board in April 2016. At the time of
the Company’s investment, Howard and Debbie Jonas, Howard S.
Jonas’ wife, jointly owned $525,000 of Series C Convertible
Notes of Rafael, and the Jonas Foundation owned an additional
$525,000 of Series C Notes. The Series C Notes are convertible into
shares of capital stock of Rafael and, depending on the valuation
at the time of conversion, the combined interests of Howard and
Debbie Jonas and the Jonas
12
Foundation, which is beneficially owned
by Howard S. Jonas, represented between 1% and 2% of the total
capital stock of Rafael. On March 2, 2017, Howard S. Jonas
purchased, for a purchase price of $1 million, 10% of IDT’s
original investment in Rafael, including an interest in a
convertible promissory note issued by Rafael held by CS Pharma, the
warrant to purchase additional interests in Rafael and other
contractual rights. In September 2017, IDT transferred to Howard S.
Jonas its right to acquire its remaining nine percent of the equity
interests in Rafael upon the happening of any of the following: (i)
Food and Drug Administration approval of a Rafael drug application,
(ii) an initial public offering of Rafael at a valuation of over
$500 million or (iii) a sale of Rafael above certain valuations.
The Company provides the following services to Rafael:
administrative, finance, accounting, tax, human resources,
information technology, and legal. The Company is leasing space to
Rafael at 520 Broad Street, Newark, NJ. The Company charges Rafael
$23.00 per square foot annually for the approximate 1,500 square
foot space occupied by Rafael at 520 Broad Street, Newark, NJ. The
Company billed Rafael a total of $599,325 during Fiscal 2017, the
total amount of which was outstanding as of July 31, 2017.
On April 9, 2017, the Company entered into a binding term sheet
with Straight Path Communications, Inc. (“Straight
Path”) that provides for, among other things, the settlement
and mutual release of the potential indemnification claims asserted
by each of the Company and Straight Path in connection with, among
other things, liabilities (including but not limited to fines, fees
or penalties) that may exist or arise relating to the subject
matter of an investigation by the FCC. Pursuant to this term sheet,
Straight Path will transfer to the Company or its affiliate,
subsidiary, or assignee, Straight Path’s ownership interest
in Straight Path IP Group, Inc. (“SPIP”), a subsidiary
of Straight Path that holds intellectual property primarily related
to communications over computer networks, for $6 million, the
parties will provide mutual releases, and the Company will pay
Straight Path $10 million and stockholders of Straight Path will
receive 22% of the net proceeds, if any, received by SPIP from any
license, transfer or assignment of any of the patent rights held by
SPIP as of the effective date of transfer, or any settlement, award
or judgment involving any of the patent rights (including any net
proceeds received following the effective date of transfer) to be
pursued under the terms of the term sheet. Howard S. Jonas, the
Chairman of the Board and controlling stockholder of the Company,
is the father of Davidi Jonas, who serves as the Chief Executive
Officer of Straight Path. Howard S. Jonas agreed to purchase, in an
entity to be organized by Howard S. Jonas, the Company’s
ownership interest in SPIP for a purchase price of $6 million,
which is the price to be paid by us to Straight Path for the
ownership interest in SPIP under the settlement arrangement with
Straight Path. The new entity will assume the Company’s
obligations to Straight Path and its stockholders with respect to
the net proceeds, if any, related to the patents as described
above.
On June 1, 2016, the Company spun off its subsidiary, Zedge, Inc.
(“Zedge”). Zedge and the Company entered a Transition
Services Agreement (the “Zedge TSA”), effective June 1,
2016. Howard S. Jonas is a director and his son, Michael Jonas, is
the Chairman of the board of directors of Zedge. Both Zedge and the
Company were controlled by Howard S. Jonas until October 2016, at
which time Howard S. Jonas transferred, via a series of
transactions, his controlling ownership of Zedge to his adult son,
Michael Jonas, and therefore no longer controls Zedge. Pursuant to
the Zedge TSA, the Company provides certain services to Zedge. The
services include, but are not limited to, services relating to
human resources, administrative, finance, accounting, tax, investor
relations, regulatory, consulting and legal. Zedge paid the Company
a total of $1,200,445 for services provided by the Company pursuant
to the Zedge TSA during Fiscal 2017. As of July 31, 2017, Zedge
owed the Company $35,627 for such services.
On April 11, 2017, the Company sold to Howard S. Jonas 728,332
shares of the Company’s Class B Common Stock from the
Company’s treasury account for a purchase price of
$9,999,998. On June 9, 2017, the Company sold to Howard S. Jonas
1,000,000 shares of the Company’s Class B Common Stock from
the Company’s treasury account for a purchase price of
$14,930,000.
See Proposal 4,
below
.
IDT Domestic Telecom, Inc., a subsidiary of the Company, leases
space at 3220 Arlington Avenue, Bronx, New York. The property is
owned by Arlington Suites, LLC, a company jointly owned by Shmuel
Jonas and Howard S. Jonas. The parties entered into a lease, which
became effective November 1, 2012 and had a one-year term, with a
one-year renewal option for IDT Domestic Telecom. Since the
expiration of this lease, the parties have continued IDT Domestic
Telecom’s occupancy of the space on the same terms. IDT
Domestic Telecom utilizes 1,140 square feet of office space, at an
annual rental rate of $25 per square foot, 1,240 square feet of
storage space, at an annual rental rate of $15 per square foot, and
five parking spaces, at a monthly rental rate of $230 per space,
for a total annual rent of $60,900. The Company has determined that
the space is well suited and located to meet the needs of IDT
Domestic Telecom, and that the terms of the lease, including the
rental price, are in accord with the terms for comparable
commercial space in the area.
13
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company’s Class A Common Stock
and Class B Common Stock by (i) each person known by the Company to
be the beneficial owner of more than 5% of the outstanding shares
of the Class A Common Stock or the Class B Common Stock of the
Company, (ii) each of the Company’s directors, director
nominees, and the Named Executive Officers (who are listed under
Executive Compensation below), and (iii) all directors, Named
Executive Officers and executive officers of the Company as a
group. Unless otherwise noted in the footnotes to the table, to the
best of the Company’s knowledge, the persons named in the
table have sole voting and investing power with respect to all
shares indicated as being beneficially owned by them.
Unless otherwise noted, the security ownership information provided
below is given as of the close of business on October 19, 2017 and
all shares are owned directly. Percentage ownership information is
based on the following amount of outstanding shares: 1,574,326
shares of Class A Common Stock and 23,267,081 shares of Class B
Common Stock. The ownership numbers reported for Howard S. Jonas
assume the conversion of all 1,574,326 currently outstanding shares
of Class A Common Stock into shares of Class B Common Stock.
|
|
|
Number of Shares of Class B Common
Stock
|
|
Percentage of Ownership of Class B Common
Stock
|
|
Percentage of Aggregate Voting
Power
d
|
|
Howard S. Jonas
520 Broad Street
Newark, NJ 07102
|
|
5,279,503
|
(1)
|
|
20.4
|
%
|
|
71.2
|
%
|
|
The Vanguard Group Inc.
100 Vanguard Blvd.
Malvern, PA 19355
|
|
1,799,996
|
(2)
|
|
7.7
|
%
|
|
2.6
|
%
|
|
Blackrock, Inc.
55 East 52
nd
Street
New York, NY 10055
|
|
1,203,298
|
(2)
|
|
5.2
|
%
|
|
1.7
|
%
|
|
Renaissance Technologies, LLC
800 Third Avenue
New York, NY 10022
|
|
1,381,306
|
(2)
|
|
5.9
|
%
|
|
2.0
|
%
|
|
Shmuel Jonas
|
|
88,568
|
(3)
|
|
*
|
|
|
*
|
|
|
Marcelo Fischer
|
|
21,545
|
(4)
|
|
*
|
|
|
*
|
|
|
Bill Pereira
|
|
31,107
|
(5)
|
|
*
|
|
|
*
|
|
|
Menachem Ash
|
|
20,236
|
(6)
|
|
*
|
|
|
*
|
|
|
Michael Chenkin
|
|
18,083
|
|
|
*
|
|
|
*
|
|
|
Eric F. Cosentino
|
|
2,300
|
|
|
*
|
|
|
*
|
|
|
Judah Schorr
|
|
90,752
|
(7)
|
|
*
|
|
|
*
|
|
|
All directors, Named Executive Officers and
other executive officers as a group (11) persons)
|
|
4,051,624
|
(8)
|
|
21.8
|
%
(9)
|
|
71.7
|
%
|
14
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
ten percent or more of a registered class of the Company’s
equity securities are required to file reports of ownership and
changes in ownership, on a timely basis, with the SEC and the New
York Stock Exchange. Based on material provided to the Company, the
Company believes that all such required reports were filed on a
timely basis in Fiscal 2017, except for the following two late
Forms 4: a late Form 4 was filed on behalf of Marcelo Fischer on
January 19, 2017 and a late Form 4 was filed on behalf of Judah
Schorr on July 7, 2017.
15
EXECUTIVE
COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with
management the following Compensation Discussion and Analysis
section of the Company’s 2017 Proxy Statement. Based on our
review and discussions, we have recommended to the Board of
Directors that the Compensation Discussion and Analysis be included
in IDT’s 2017 Proxy Statement.
Eric Cosentino, Chairman
Michael Chenkin
Judah Schorr
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 foregoing report shall not be incorporated by reference
into any such filings, nor shall it be deemed to be soliciting
material or deemed filed with the Securities and Exchange
Commission (the “SEC”) under the Act or under the
Exchange Act.
COMPENSATION DISCUSSION AND ANALYSIS
The following discussion and analysis of our compensation practices
and related compensation information should be read in conjunction
with the Summary Compensation table and other tables included in
this proxy statement, as well as our financial statements and
management’s discussion and analysis of our financial
condition and results of operations included in our Annual Report
on Form 10-K for the fiscal year ended July 31, 2017, which we
refer to as the Form 10-K. The following discussion includes
statements of judgment and forward-looking statements that involve
risks and uncertainties. These forward-looking statements are based
on our current expectations, estimates and projections about our
industry, our business, compensation, management’s beliefs,
and certain assumptions made by us, all of which are subject to
change. Forward-looking statements can often be identified by words
such as “anticipates,” “expects,”
“intends,” “plans,” “predicts,”
“believes,” “seeks,”
“estimates,” “may,” “will,”
“should,” “would,” “could,”
“potential,” “continue,”
“ongoing,” similar expressions, and variations or
negatives of these words and include, but are not limited to,
statements regarding projected performance and compensation. Actual
results could differ significantly from those projected in the
forward-looking statements as a result of certain factors,
including, but not limited to, the risk factors discussed in the
Form 10-K. We assume no obligation to update the forward-looking
statements or such risk factors.
Introduction
It is the responsibility of the Compensation Committee of our board
of directors to: (i) oversee our general compensation policies;
(ii) determine the base salary and bonus to be paid each year to
each of our executive officers; (iii) oversee our compensation
policies and practices as they relate to our risk management; and
(iv) determine the compensation to be paid each year to our
non-employee directors for service on our board of directors and
the various committees of our board of directors. In addition, the
Compensation Committee administers our Stock Option and Incentive
Plans with respect to restricted stock and stock option grants or
other equity-based awards made to our executive officers. Further,
certain individuals have received grants of equity in certain of
our subsidiaries. Shares of restricted stock are granted to our
non-employee directors automatically on an annual basis under our
2015 Stock Option and Incentive Plan, and under other policies
adopted by the Board and Compensation Committee.
Elements of
Compensation
The three broad components of our executive officer compensation
are annual base salary, annual cash incentive bonus awards, and
long-term equity-based incentive awards. The Compensation Committee
periodically reviews total compensation levels and the allocation
of compensation among these three components for each of the
executive officers, as well as for the Company, in the context of
our overall compensation policy. Additionally, the Compensation
Committee, in conjunction with our board, reviews the relationship
of executive compensation to corporate performance generally and
with respect to specific enumerated goals that are approved by the
Compensation Committee in each fiscal year. The Compensation
Committee believes that our current compensation
16
plans are serving their intended purposes and are functioning
reasonably. Below is a description of the general policies and
processes that govern the compensation paid to our executive
officers, as reflected in the accompanying compensation tables.
Company
Performance
In Fiscal 2017, IDT Telecom continued to face multiple significant
challenges to revenue and profitability, as the telecom industry
experienced accelerated movement from paid voice calling over
switched phone networks to free over-the-top communications
services provisioned over broadband. The Company was able to
maintain revenue while seeing its bottom line negatively impacted.
IDT Telecom instituted several efforts that were successful in
mitigating the impact of the challenges, including cost cutting and
development of several new initiatives to diversify revenues and
introduce operations with growth and profitability potential.
Certain core telecommunications and payment offerings showed
resilience to the pressures and new initiatives showed promise and
early growth. IDT maintained a healthy balance sheet and paid
quarterly dividends. The Company also made progress on monetizing
and spinning off non-core assets and operations and developing
additional new initiatives.
In Fiscal 2016, IDT Telecom faced significant challenges to revenue
and profitability, in particular on the U.S. to Mexico corridor,
which was one of the key routes for telecommunications traffic. As
previously disclosed, when the cost of terminating calls to Mexico
dropped almost to zero, competitors began offering unlimited
calling for flat monthly fees. The Company maintained its price
constant for a period of time and absorbed the resulting customer
attrition. Eventually, the Company lowered its price and offered
its own unlimited calling plan, absorbing the consequential impact
on profitability. The Company made significant cuts to SG&A
expenses to right size and maintain bottom line results despite the
top line and margin pressures. As a result, after eliminating the
impact of the sale of Fabrix on Fiscal 2015 results, the Company
delivered consistent or improved income from operations and net
income. Other than on the U.S. to Mexico corridor, revenues from
the Company’s flagship Boss Revolution voice service were
relatively stable, as growth has slowed. Additionally, the Company
continued to invest in newer initiatives and saw growth in several
offerings, including Boss Revolution’s international money
transfer business, net2Phone’s unified communications as a
service offerings and the National Retail Solutions, Inc.
(“NRS”) point-of-sale initiative. The Company also
invested in efforts that improved its operating efficiencies and
allow for development of yet-to-be-launched growth initiatives.
Compensation
Structure, Philosophy and Process
Our executive compensation structure is designed to attract and
retain qualified and motivated personnel and align their interests
with the short-term and long-term goals of the Company and with the
best interests of our stockholders. Our compensation philosophy is
to provide sufficient compensation to attract the individuals
necessary to meet our current needs and planned organic growth and
changes in operations, as well as for the business units that
represent longer-term growth initiatives, and provide them with the
proper incentives to motivate those individuals to achieve our
long-term plans.
The base salary levels we pay to each of our Named Executive
Officers are based on the responsibilities undertaken by the
respective individuals, if applicable, the business unit managed
and its complexity and role within the Company, and the market
place for employment of people of similar skills and backgrounds.
The base salaries paid are determined by discussions with the
covered individual and his or her manager, as well as budgetary
considerations. Such base salaries are approved by the relevant
members of our senior management and, in the case of executive
officers and certain other key, highly compensated individuals, our
Compensation Committee.
Incentive compensation is designed to reward contributions towards
achieving the Company’s goals for the current period, as well
as for the longer term. The Compensation Committee, with
recommendations from the Company’s management, sets goals for
executive compensation in each fiscal year. These goals are set for
the Company and for specific operating divisions, and are designed
to set forth achievable goals for the current performance of the
Company and its business units and for current contributions to
long-term initiatives. The Compensation Committee’s decision
regarding bonuses is primarily subjective and specific to each
Named Executive Officer and is made by the Committee in its
discretion after an overall assessment of all of the factors it
deems appropriate, which includes, but is not limited to, the
specific Company-wide goals, the individual’s role in
achieving those goals, if relevant, the performance of the business
unit over which the individual exercised management, and other
accomplishments during the fiscal year that were deemed relevant in
specific instances. Following the
17
end of a fiscal year, our management sets Company-wide bonus
amounts for the fiscal year then-ended, based on Company
performance and available resources. The proposed bonuses are then
presented to the Compensation Committee. The bonus amounts awarded
to executive officers are the result of subjective determinations
made by the relevant members of management and the Compensation
Committee with respect to each subject individual, based on Company
and individual performance, particularly relative to the
performance goals set by the Compensation Committee for the fiscal
year, and levels relative to the bonuses of other personnel and
officers. Individual bonus amounts are not determined based on
previously established formulae, targets or ranges, though prior
year amounts, performance versus budgets and similar figures may
serve as guidelines for bonuses for certain executives, and
individuals and their direct supervisors may use target figures in
initiating discussions of bonus levels.
Executive officers are eligible to receive cash bonuses of up to
100% of base salary (or up to 120% or higher upon extraordinary
performance) based upon performance, including the specific
financial and other goals set by the Compensation Committee, which
goals are Company-wide, specific to a business unit or specific to
an executive and his or her area of responsibility, as well as
specific extraordinary accomplishments by such officers during the
relevant period. Specific bonuses will depend on the individual
achievements of executives and their contribution to achievement of
the enumerated goals. These goals are approved by the Compensation
Committee.
Equity grants are made to provide longer term incentive
compensation and to better align the interests of our executives
with our stockholders. Executives have been granted equity
interests in the Company and, in limited circumstances, with regard
to individuals whose areas of responsibility focus on specific
operations or who have contributed in significant ways to specific
subsidiaries, in those subsidiaries, so as to better incentivize
and reward the executives for the results of their efforts.
Compensation
Decisions Made in Fiscal 2017
Goals and
Performance
At a meeting held on September 21, 2016, our Compensation Committee
approved the following goals for Fiscal 2017: (i) meet or exceed
budgeted revenue and/or budgeted relevant margin; (ii) meet or
exceed budgeted EBITDA less capital expenditures (excluding capital
expenditures made by entities in which IDT has a minority
interest); (iii) achieve positive cash flow (excluding results of
entities included in IDT’s consolidated financial results in
which IDT owns a minority equity interest); (iv) launch MVNO beta
in the marketplace; (v) release version 3.0 of Boss Revolution
calling app (including messaging and peer-to-peer calling) along
with various version enhancements including introduction of Boss
Share; (vi) grow net2Phone Office seats, expand into Brazil, and
launch PICUP premium features including an app for outbound
service; (vii) continue growing money remittance via geographic
expansion, release of a payments app for money remittance, while
launching initial version of new payment mechanism; (viii) grow
National Retail Solutions and enhance functionality; (ix) release
new version of Boss Revolution retailer portal nationwide and
expand its functionality to include Money Remittance, Bill Pay and
deeper integration with NRS; (x) continue to upgrade IDT Telecom
technology infrastructure by improving back-end systems, automating
processes, expanding deployment of Birst initiative, and moving a
significant amount of applications to the cloud; (xi) develop Beta
version of next generation communications app as well as MagicWords
2.0; (xii) maintain PCI Level 1 compliance; (xiii) diversify
current revenue stream to more destinations both for calling and
remittance by targeting a more diverse immigrant population; and
(xiv) complete NCT customer and network migration.
At a meeting held on September 18, 2017, management reported to the
Compensation Committee on the Company’s performance relative
to the above goals as follows:
•
The Company exceeded its budgeted revenue and its internal measure
of gross profit;
•
The Company’s EBITDA less capital expenditures (excluding
capital expenditures made by entities in which IDT has a minority
interest) exceeded budget;
•
The Company did not achieve positive cash flow;
•
IDT Telecom launched an MVNO beta offering in Denver, Colorado;
•
Version 3.0 of Boss Revolution calling app (including messaging and
peer-to-peer calling) along with various version enhancements
including introduction of Boss Share was successfully launched;
18
•
net2Phone Office seats grew but did not achieve the Company’s
internal target; service was expanded into Brazil and Argentina;
and PICUP premium features were introduced, all as the
Company’s UCaaS segment;
•
Money remittance was expanded geographically and the number of
transactions processed grew by 70%; payment app was launched;
•
National Retail Solutions met its targets for installations of its
POS terminals and enhanced functionality;
•
The Boss Revolution retailer portal was launched but with more
limited functionality than was targeted;
•
Certain upgrades to IDT Telecom technology infrastructure were
successfully implemented; expanded deployment of Birst and
initiative to moving a significant amount of applications to the
cloud is behind schedule;
•
MagicWords 2.0 was completed; focus shifted from Beta version of
next generation communications app to version 4.0 of the Calling
App;
•
The Company maintained PCI Level 1 compliance;
•
Revenue streams were diversified in accordance with plan; and
•
NCT customer and network migration were completed.
In addition, Rafael Pharmaceuticals, in which the Company owns
interests, was cleared by the FDA to conduct further clinical
trials.
Bonus Awards for Fiscal 2017 Performance
Despite the achievement of the majority of the goals set for Fiscal
2017, in light of the Company’s overall operational
performance in Fiscal 2017, management recommended reduced
performance bonuses from Fiscal 2016 levels for all executives with
direct responsibility for operational matters. The following
individual bonus levels were determined and paid in Fiscal 2018 in
respect of Fiscal 2017:
Shmuel Jonas received a cash bonus of $236,500. For Fiscal 2016, he
received no cash bonus, but was granted equity representing 7.5% of
the equity interests in NRS. For Fiscal 2015, he received a cash
bonus of $330,000. Shmuel Jonas provided overall strategic
guidance, making key decisions as to direction and on new
initiatives. He continued to implement cost cutting efforts that
enable the Company to maintain performance in extremely challenging
competitive and industry environments.
Marcelo Fischer was paid a cash bonus of $103,500, a reduction from
$120,000 paid in respect of fiscal 2016. The reduction was in line
with the cut to operational executive bonuses described above. As
the principal financial officer of the Company and the Chief
Financial officer of IDT Telecom, Mr. Fischer is one of the
principal executives responsible for strategic planning and
anticipating changes to the marketplace and in preparing responses
to such changes. He was an essential participant in planning and
executing on IDT Telecom’s new initiatives. He plays a
significant role in internal controls and other matters necessary
to achieve and maintain PCI compliance.
Bill Pereira was paid a cash bonus of $400,000, a reduction from
$600,000 he received for Fiscal 2016. The reduction was in line
with the cut to operational executive bonuses described above. As
Chief Executive Officer of IDT Telecom, Mr. Pereira is closely and
directly involved in all aspects IDT Telecom operations. Mr.
Pereira was the principal executive responsible for developing and
implementing all initiatives related to new products and existing
products. Mr. Pereira is a principal decision maker on allocation
of resources to developing operations. He provided the strategic
guidance in balancing current performance and investment in future
growth. Finally, he was integral to the changes implemented in IDT
Telecom infrastructure and internal compliance efforts.
Menachem Ash was paid a cash bonus of $185,000, an increase from
the $100,000 bonus he received for Fiscal 2016 performance. Mr. Ash
is responsible for supporting existing operations and plays a
significant role in various strategic initiatives. He successfully
navigated the resolution of several legal and regulatory matters
and played a key role in supporting development at Rafael
Pharmaceuticals and in the planned spin-off of the
Company’s
19
non-core assets and operations. Mr. Ash is also actively involved
in the legal aspects of dealing with third parties, including
commercial relationships, strategic partnerships and disputes.
Joyce J. Mason received a bonus of $65,000, a $5,000 increase from
the level of the prior fiscal year. As General Counsel, Ms. Mason
guides corporate legal, disclosure and compliance policy, and plays
an active role in major transactions and all aspects of corporate
governance. She serves as Corporate Secretary for the Company and
its subsidiaries and ensures ongoing compliance with corporate and
regulatory requirements. Ms. Mason plays a major role in
structuring new initiatives and strategic investments, and leads
internal compliance efforts. She was instrumental in creating the
infrastructure that houses and supports many key initiatives and
plays a key role in the planned spin-off of the Company’s
non-core assets and operations.
Howard S. Jonas did not receive a cash bonus for Fiscal 2017
performance. For fiscal 2016, he received equity interests
representing 2.5% of the equity interests in NRS. Howard S. Jonas
provides strategic guidance to the Company and is actively involved
in all major decisions and in the implementation of key initiatives
for the Company.
Base
Salaries
The Company pays base salaries to its executives intended to meet
the goals and purposes outlined above. The base salaries of certain
executives are set forth in written agreements with the Company,
which agreements are described below. Subject to those written
agreements, the base salaries are set by the Compensation Committee
on an annual basis, based on presentations made by management. No
changes were made to the base compensation of any executive
officers for Fiscal 2017, and all such salaries remain at the
Fiscal 2016 level.
Pursuant to the Fourth Amended and Restated Employment Agreement
(the “Fourth Amended H. Jonas Agreement”), dated
December 14, 2016, between the Company and Howard S. Jonas that is
discussed in more detail below, Howard S. Jonas receives a cash
base salary of $250,000 per annum, plus he received a grant of
69,624 restricted shares of Class B common stock of the Company
that vest over the term of the agreement.
Shmuel Jonas receives a base salary of $495,000 per annum.
Marcelo Fischer receives a base salary of $395,000 per annum.
Under an employment agreement with IDT Telecom, Bill Pereira
receives a base salary of $500,000 per annum. That agreement is
expiring on December 31, 2017, and the Company and Mr. Pereira are
discussing the terms of his continued employment with the
Company.
Mr. Ash receives a base salary of $370,000 per annum.
Ms. Mason receives a base salary of $315,000 per annum.
Equity
Grants
In connection with the entry into the Fourth Amended H. Jonas
Agreement, the Company granted 69,624 restricted shares of Class B
common stock of the Company to Mr. Jonas. The shares vest in equal
installments in January 2017, 2018 and 2019 and constitute a
portion of Mr. H. Jonas’ base compensation for the term of
the agreement.
On May 2, 2017, the Company granted Howard S. Jonas options to
purchase 1,000,000 shares of the Company’s Class B common
stock at a price per share of $14.93 per share, which was the
closing price of the Class B common stock on the day prior to the
grant date. The options have a term of five years. The options were
exercisable upon grant, and, subject to the terms of the Fourth
Amended H. Jonas Agreement, the Company has the right to repurchase
the shares (if the option is exercised) at the exercise price upon
termination of Mr. Jonas’ employment with the Company. The
repurchase right lapses pro rata in May 2018, 2019 and 2020 and the
option grant is subject to ratification by the Company’s
stockholders. The options were granted in connection with Mr.
Jonas’ expanded role managing the Company’s investment
in Rafael Pharmaceuticals.
20
Employment
Agreement
On December 14, 2016, the Company and Howard S. Jonas entered into
the Fourth Amended H. Jonas Agreement that replaced the Third
Amended and Restated Employment Agreement that was expiring. The
Company entered into the agreement to ensure itself of the
continued service of Mr. Jonas. The terms of the agreement are
described in more detail below.
Compensation
Decisions Made in Fiscal 2016
Goals and
Performance
At a meeting held on September 24, 2015, our Compensation Committee
approved the following goals for Fiscal 2016: (i) meet or exceed
(A) budgeted Revenue and/or (B) budgeted direct cost of revenue as
a percentage of revenue (“Relevant Margin”); (ii) meet
or exceed budgeted EBITDA less Capital Expenditures; (iii) achieve
positive cash flow; (iv) reorganize the Company into three separate
entities, with goal to spin-off two business units to stockholders;
(v) continue to enhance Boss Revolution product platform including
the introduction of new functionality and products; (vi) get closer
to consumers by updating the Boss Revolution Calling App, providing
for greater flexibility and expanding options for customers to
access our systems and their accounts; (vii) significantly grow the
Money Remittance business unit’s number of transactions
processed via the retailer portal and website and advance payment
functionality; (viii) grow the IDT Retail point of sale offering;
(ix) grow net2Phone Office seats and other net2Phone initiatives;
(x) operate South American retail operations at break even or
positive; (xi) continue to improve IDT Telecom technology
infrastructure by reducing duplicate platforms when possible,
improving internal systems and platforms, and moving a significant
number of applications to the Cloud; (xii) maintain PCI Level 1
compliance; and (xiii) grow Zedge revenues by 25% while having it
remain cash flow positive.
At a meeting held on September 21, 2016, management reported to the
Compensation Committee on the Company’s performance relative
to the above goals as follows:
•
The Company missed its internal revenue target by 2.2% and Relevant
Margin target by 4.9%, as the pressures in the U.S. to Mexico
corridor negatively impacted performance.
•
The Company exceeded its internal EBITDA less Capital Expenditures
target by 7.6%, and generated $30.7 million in cash flow from
operations less capital expenditures.
•
The Zedge spin-off was successfully completed and the spin-off of
other non-telecom operations was deferred as management focused on
alternative strategic initiatives.
•
While advances were made, management did not believe it met its
goal with respect to enhancements of the Boss Revolution product
and platform.
•
The Boss Revolution calling app was not launched, but other
advances were made.
•
Money remittance transactions increased but fell short of internal
targets.
•
IDT Retail Solutions grew installations, but missed its internal
target for store count. Investment exceeded budget.
•
net2Phone Office grew beyond internal targets. PICUP launched and
spent far less than was budgeted.
•
South American Retail operations were profitable.
•
Significant progress was made in the multi-year plan to improve IDT
Telecom infrastructure.
•
The Company maintained PCI Level 1 compliance.
•
Zedge revenues grew 23% and it achieved record operational
profitability.
21
Bonus Awards for
Fiscal 2016 Performance
In connection with performance and accomplishments, management
recommended, and the Compensation Committee approved, in general,
to maintain bonuses for executive officers and other key employees
at the prior year level, with some increases and decreases in
specific circumstances. The following individual bonus levels were
determined and paid in Fiscal 2017 in respect of Fiscal 2016:
Shmuel Jonas did not receive a cash bonus for Fiscal 2016, compared
to the $330,000 cash bonus he received in Fiscal 2015, but the
Compensation Committee did approve the transfer of equity in NRS to
him discussed below in respect of his performance during Fiscal
2016 and contribution to the achievement of the stated goals.
Shmuel was instrumental in providing overall strategic guidance,
support of new initiatives and the cost cutting efforts that
enabled the Company to operate profitably despite revenue and
margin pressure. In light of the steps undertaken by the Company,
Shmuel Jonas refused a cash bonus.
Marcelo Fischer was paid a cash bonus of $120,000, unchanged from
the prior fiscal year’s bonus. As the principal financial
officer of the Company and the Chief Financial officer of IDT
Telecom, Mr. Fischer was involved in all decisions on budgeting,
new initiatives, spending and otherwise related to IDT Telecom
operations and execution of the initiatives that produced the
Company’s results. He was an essential participant in the
spin-off of Zedge and driving the growth of new initiatives. He
helped to craft and implement the responses to the challenges from
the changes on the U.S. to Mexico route, and played a significant
role in the internal controls and other matters necessary to
achieve and maintain PCI compliance.
Bill Pereira was paid a cash bonus of $600,000, and unchanged from
the prior year. As Chief Executive Officer of IDT Telecom, Mr.
Pereira was the principal executive responsible for IDT
Telecom’s performance and for implementing all initiatives
related to new products and growth of sales of existing products.
He played a leading role in all strategic initiatives involving IDT
Telecom. Mr. Pereira was the principal decision maker on the launch
of new products, customer relations initiatives and relations with
strategic partners, as well as on allocation of resources to
developing operations. He provided the strategic guidance in
balancing current performance and investment in future growth.
Finally, he was integral to the changes implemented in IDT Telecom
infrastructure and internal compliance efforts.
Menachem Ash was paid a cash bonus of $100,000, an increase of
$15,000 from the bonus he received for Fiscal 2015 performance. Mr.
Ash served as Executive Vice President of Strategy and Legal
Affairs, and was actively involved in the legal aspects of many
matters and dealing with third parties, including commercial
relationships, strategic partnerships and disputes. Mr. Ash was
instrumental in creating the infrastructure that houses and
supports many of the new initiatives and consummated certain
strategic investments advanced by the Company during Fiscal 2016.
He played a major role in implementing the Zedge spin-off.
Joyce J. Mason received a bonus of $60,000, a $5,000 reduction from
the level of the prior fiscal year. As General Counsel, Ms. Mason
guides corporate legal, disclosure and compliance policy, and plays
an active role in major transactions and all aspects of corporate
governance. She serves as Corporate Secretary for the Company and
its subsidiaries and ensures ongoing compliance with corporate and
regulatory requirements. As Corporate Secretary, Ms. Mason plays a
major role in structuring new initiative and strategic investments,
and leads internal compliance efforts.
Howard S. Jonas did not receive a cash bonus for Fiscal 2016
performance, but the Compensation Committee did approve the
transfer of equity in NRS discussed below in respect of his
performance during Fiscal 2016 and contribution to the achievement
of the stated goals. Howard S. Jonas provides strategic guidance to
the Company and is actively involved in all major decisions and in
the implementation of key initiatives for the Company.
Base
Salaries
The Company pays base salaries to its executives intended to meet
the goals and purposes outlined above. The base salaries of certain
executives are set forth in written agreements with the Company,
which agreements are described below. Subject to those written
agreements, the base salaries are set by the Compensation Committee
on an annual basis, based on presentations made by management. No
changes were made to the base compensation of any executive
officers for Fiscal 2017, therefore all such salaries in Fiscal
2016 were the same as Fiscal 2017 described above.
22
Equity Grants in
respect of Fiscal 2016 Performance
At a meeting held on September 21, 2016, the Compensation Committee
approved the transfer of equity interests in National Retail
Solutions (“NRS”) to Shmuel Jonas and Howard S. Jonas.
Shmuel Jonas received common stock representing 7.5%, and Howard S.
Jonas received common stock representing 2.5%, of the total equity
in NRS. The grants were made on November 2, 2016, after a valuation
of NRS was completed, and vest in equal portions on the first,
second and third anniversaries of the grant date, and are entitled
to protection against dilution.
Compensation
Decisions Made in Fiscal 2015
Bonuses Paid for
Fiscal 2014 Performance
In Fiscal 2015, the Company paid bonuses to its named executive
officers based on performance in Fiscal 2014 and the goals for that
fiscal year that were set out by the Compensation Committee.
Shmuel Jonas was paid a cash bonus of $155,000, and was granted
restricted shares of Class B Common Stock with a value of $200,000
that vest in equal amounts over three years from grant. Marcelo
Fischer was paid a cash bonus of $143,000. Bill Pereira was paid a
cash bonus of $600,000. Menachem Ash was paid a cash bonus of
$85,000. Joyce J. Mason was paid a cash bonus of $75,000.
Employment
Agreement
Bill Pereira was party to an
employment agreement with IDT Telecom that expired on December 31,
2014. IDT Telecom and Mr. Pereira entered into an Amended and
Restated Employment Agreement on January 12, 2015. The amended
agreement, which is described in more detail below, has a
three-year term, began on the scheduled expiration of the then
existing Employment Agreement with Mr. Pereira, and provides for
annual compensation and the one-time grant of 25,000 shares of
Class B Common Stock which vests over three years from grant. Such
grant was made on January 12, 2015. In light of Mr. Pereira’s
performance as CEO of IDT Telecom, the Company and IDT Telecom
determined that it was in their best interests to retain Mr.
Pereira’s services for an additional three-year
period.
On November 29, 2013, the Company announced that Howard S. Jonas
would step down as Chief Executive Officer of the Company on
December 31, 2013, but would remain Chairman of the Board. On
December 20, 2013, the Company and Howard S. Jonas entered into the
Third Amended and Restated Employment Agreement (which was
subsequently replaced by the Fourth Amended H. Jonas
Agreement).
Goals and
Performance
At a meeting held on October 28, 2014, our Compensation Committee
approved the following goals for Fiscal 2015: (i) meet or exceed
(A) budgeted Revenue and/or (B) budgeted Relevant Margin; (ii) meet
or exceed budgeted EBITDA less Capital Expenditures; (iii) achieve
positive cash flow; (iv) continue to improve IDT Telecom’s
technology infrastructure by merging duplicate platforms when
possible, improving back-end support systems for Boss Revolution
including Retailer Settlement, and begin the process of moving
viable parts of the network to the Cloud; (v) continue to enhance
the Boss Revolution product suite including the launch of Unlimited
Plans and the re-launch of Call Me and domestic closed loop cards
and nationwide GPR cards; (vi) get closer to consumers by updating
the Calling App, launching Web/Mobile site (including remittance),
expanding distribution through e-kiosks and kicking-off a payments
app and a CRM initiative; (vii) grow Money Remittance active retail
agent base to over 1,000 agents and or 400,000 transactions; (viii)
restructure IDT Retail Europe business to be break-even; (ix)
maintain PCI Level 1 compliance; (x) fully execute the move of all
IDT Newark employees to 520 Broad Street; and (xi) effectuate the
sale of Fabrix, in a tax efficient form.
On September 24, 2015, management reported to the Compensation
Committee on the Company’s performance relative to the above
goals as follows:
•
Fiscal 2014 revenue missed the Company’s internal budget by
3% and Fiscal 2014 Relevant Margin missed the Company’s
internal budget by 1%.
•
Fiscal 2014 EBITDA less Capital Expenditures exceeded the
Company’s internal budget by 39%.
23
•
The Company generated positive cash flow from operations.
•
IDT Telecom improved its technology infrastructure, including
moving several on-line and mobile portals and functions to unified
platforms, consolidation of back-end functions, and transitioning
to proprietary switched from third party suppliers, while lagging
behind target for migrating functions to the Cloud.
•
The Company significantly enhanced the Boss Revolution suite of
products, including introducing Boss Revolution Unlimited
(unlimited calling for a flat monthly fee) to dozens of countries,
re-launching Call-Me, and introducing domestic and international
closed loop cards, but failed to launch a GPR card.
•
The Company launched a web/mobile site with extensive
functionality, but did not release an update of the Boss Revolution
calling app or a payments app.
•
The Company did not grow its money remittance agent base to 1,000
agents, but processed in excess of 400,000 transactions during
Fiscal 2015.
•
The Company completed the restructuring of IDT Europe Retail and,
other than a one-time write-off related to a specific product, the
business unit operated at break-even.
•
The Company maintained PCI Level 1 compliance. All Newark, NJ
employees were relocated back to the Company’s owned 520
Broad Street headquarters, and the Company completed its sale of
Fabrix, and all proceeds received in a tax efficient manner.
Bonus Awards for
Fiscal 2015 Performance
In connection with such performance and accomplishments, management
determined, in general, to modestly reduce the bonuses paid to some
executive officers and other key employees from the levels paid in
respect of Fiscal 2014. The following individual bonus levels were
determined and paid in Fiscal 2016 in respect of Fiscal 2015:
Shmuel Jonas was paid a cash bonus of $330,000, a reduction from
Fiscal 2014’s bonus that was paid via a $155,000 cash bonus
plus $200,000 in shares of Class B Common Stock. Shmuel Jonas
served as Chief Executive Officer of the Company for the entire
Fiscal 2015 and was integrally involved in all strategic decisions
and initiatives undertaken by the Company. He spearheaded the
cost-cutting measures instituted during the fiscal year quarters
that were instrumental in the bottom line performance of the
Company. Shmuel Jonas was an active participant in the sale process
for Fabrix, from initiation to completion.
Marcelo Fischer was paid a cash bonus of $120,000, a reduction of
$23,000 from the prior fiscal year’s bonus. As the principal
financial officer of the Company, Mr. Fischer was involved in all
decisions on budgeting, new initiatives, spending and otherwise
related to IDT Telecom operations and execution of the initiatives
that produced the Company’s operating and bottom line
results. Mr. Fischer was a lead participant in implementing changes
to the internal systems and in maintaining the financial discipline
and implementing cost cutting that generated the Company’s
cash flows and bottom line results. Mr. Fischer was a driver of the
IDT Retail Europe restructuring, provided the financial analysis
necessary for all such enterprises and played a significant role in
the internal controls and other matters necessary to achieve and
maintain PCI compliance.
Bill Pereira was paid a cash bonus of $600,000, unchanged from the
prior year. As Chief Executive Officer of IDT Telecom, Mr. Pereira
was the principal executive responsible for IDT Telecom’s
performance and for implementing all initiatives related to new
products and growth of sales of existing products. He oversaw the
launch of new products and customer relationship initiatives, as
well as changes to IDT Telecom infrastructure and internal
compliance efforts. Mr. Pereira provided the strategic guidance in
balancing current performance and investment in future growth and
ensuring that the Company will have the offerings to drive
performance in future periods.
Menachem Ash was paid a cash bonus of $85,000, the same bonus as he
received for Fiscal 2014 performance. He also received a mid-year
bonus of $25,000 upon completion of the Fabrix sale. Mr. Ash served
as Executive Vice President of Strategy and Legal Affairs, and was
actively involved in the legal aspects of many matters and dealing
with third parties, including commercial relationships, strategic
partnerships and disputes. In that capacity, he participated in
implementing many of the initiatives that produced the
Company’s results and growth potential. Mr. Ash was one of
the principal individuals tasked with implementing the sale of
Fabrix that was completed during Fiscal 2015.
24
Joyce J. Mason received a bonus of $65,000, a $10,000 reduction
from the level of the prior fiscal year. As General Counsel, Ms.
Mason guides corporate legal, disclosure and compliance policy, and
plays an active role in major transactions and all aspects of
corporate governance. She serves as Corporate Secretary for the
Company and its subsidiaries and ensures ongoing compliance with
corporate and regulatory requirements.
Howard S. Jonas did not receive a bonus for his Fiscal 2015
performance.
Base
Salaries
The Company pays base salaries to its executives intended to meet
the goals and purposes outlined above. The base salaries of certain
executives are set forth in written agreements with the Company,
which agreements are described below. Subject to those written
agreements, the base salaries are set by the Compensation Committee
on an annual basis, based on presentations made by management. No
changes were made to the base compensation of any executive
officers for Fiscal 2016, and all such salaries remain at the
Fiscal 2015 level.
Howard S. Jonas received a cash base salary of $250,000 per annum,
pursuant to the Third Amended and Restated Employment Agreement
that was entered into during Fiscal 2014. Pursuant to the Third
Amended Agreement, on January 6, 2014, the Company granted Mr.
Jonas 63,320 restricted shares of Class B Common Stock, with a
grant date value of $1,349,982, that vested in January 2014, 2015
and 2016 as a portion of his base salary for the three-year term of
that agreement (which was subsequently replaced the Fourth Amended
H. Jonas Agreement).
Shmuel Jonas receives a base salary of $495,000 per annum. Marcelo
Fischer receives a base salary of $395,000 per annum. Bill Pereira
received a base salary of $500,000 per annum, in accordance with
his employment agreement with IDT Telecom. Mr. Ash received a base
salary of $370,000 per annum. Ms. Mason received a base salary of
$315,000 per annum.
Equity Grants during
Fiscal 2015
On March 11, 2015, the Compensation Committee approved the
following grants of restricted shares of Class B Common Stock, with
one half vesting on each of January 16, 2017 and July 16, 2018:
Shmuel Jonas — 18,000 shares, Marcelo Fischer — 15,000
shares, Bill Pereira — 18,000 shares, Menachem Ash —
7,500 shares and Joyce J. Mason — 7,500 shares. The above
grants were in addition to the grant to Shmuel Jonas on September
17, 2014 in connection with his bonus and the grant to Bill Pereira
on January 12, 2015 in connection with his entry into the Amended
and Restated Employment Agreement. The March 11, 2015 grants of
restricted shares of Class B Common Stock to Named Executive
Officers were part of a broader Company-wide grant of 316,500
restricted shares of Class B Common Stock to incentivize certain
employees over a three-year period.
Goals for Fiscal Year
2018
At a meeting held on September 18, 2017, our Compensation Committee
approved the following goals for Fiscal 2018:
•
Meet or exceed total IDT budgeted revenue and/or budgeted gross
profit (based on internal non-GAAP calculation);
•
Meet or exceed total IDT budgeted EBITDA, and EBITDA less capital
expenditures;
•
Achieve positive free cash flow;
•
Rollout the Boss Revolution MVNO nationwide, while introducing
unlimited pricing for data, device financing, MVNO promotion tools
and broader plan choices;
•
Increase customer retention by deploying various CRM initiatives
including micro-targeting segments, use of promotion codes and
money remittance offers on the retailer portal, online and
in-apps;
•
Grow Boss Revolution retailers and improve retailer engagement and
interaction across all products and services;
•
Improve Boss Revolution retailer portal user experience with Phase
2 enhancements for PINless, Top-up and Money Remittance;
25
•
Launch Calling App 4.0 and increase monthly app callers;
•
Introduce a Boss Revolution Money wallet for telecommunications,
payment services and purchase transactions;
•
Introduce the Boss Revolution Money remittance portal nationally
and expand into new states and grow retailer and online
transactions;
•
Integrate Picup and Live Ninja features and launch as a unified
communications product enhanced by additional features while
developing an in-house Hosted PBX platform;
•
Grow net2phone total seats; Create an outsourcing business model
for Carrier Services that provides a new strategic capability in
the international long-distance marketplace;
•
Increase ratio of IP to TDM wholesale traffic by 25%
•
Grow NRS point of sale terminal installs and generate additional
revenue from all NRS offerings;
•
Launch NRS ordering apps for both retailers and consumers and
better integrate with Boss Revolution platform;
•
Restructure internal technology organization;
•
Complete spin-off of non-core assets and operations as Rafael
Holdings;
•
Complete sale of Gibraltar-based bank; and
•
Maintain PCI Level 1 compliance.
26
EXECUTIVE COMPENSATION
TABLES
Summary Compensation
Table
The table below summarizes the total compensation paid or awarded
for performance during Fiscal 2017, Fiscal 2016 and Fiscal 2015, to
each of the Chief Executive Officer, the principal financial
officer and the three other highest paid executive officers of the
Company during Fiscal 2017 (the “Named Executive
Officers”).
Name
and Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
All
Other Compensation
($)
|
|
|
|
Shmuel
Jonas
|
|
2017
|
|
$
|
495,000
|
|
$
|
236,500
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,643
|
(4)
|
|
$
|
751,143
|
|
Chief
Executive Officer
(3)
|
|
2016
|
|
$
|
495,000
|
|
$
|
—
|
|
$
|
93,450
|
(5)
|
|
$
|
—
|
|
|
$
|
37,226
|
(4)
|
|
$
|
625,676
|
|
|
|
2015
|
|
$
|
497,288
|
|
$
|
330,000
|
|
$
|
293,400
|
(6)
|
|
$
|
—
|
|
|
$
|
141,175
|
(4)
|
|
$
|
1,261,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard
S. Jonas
|
|
2017
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
1,366,023
|
(8)
|
|
$
|
3,261,198
|
(9)
|
|
$
|
17,638
|
(10)
|
|
$
|
4,894,859
|
|
Chairman
of the Board
(7)
|
|
2016
|
|
$
|
250,000
|
|
$
|
—
|
|
$
|
31,150
|
(11)
|
|
$
|
—
|
|
|
$
|
7,810
|
(10)
|
|
$
|
288,960
|
|
|
|
2015
|
|
$
|
250,961
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
64,587
|
(10)
|
|
$
|
315,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcelo
Fischer
|
|
2017
|
|
$
|
395,000
|
|
$
|
103,500
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,550
|
(13)
|
|
$
|
509,050
|
|
Senior
Vice President – Finance
|
|
2016
|
|
$
|
395,000
|
|
$
|
120,000
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,250
|
(14)
|
|
$
|
528,250
|
|
(Principal
Financial Officer)
(12)
|
|
2015
|
|
$
|
396,546
|
|
$
|
120,000
|
|
$
|
244,500
|
(15)
|
|
$
|
—
|
|
|
$
|
37,850
|
(16)
|
|
$
|
798,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill
Pereira
|
|
2017
|
|
$
|
500,000
|
|
$
|
400,000
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,760
|
(18)
|
|
$
|
921,760
|
|
Chief
Executive Officer and
President of IDT Telecom,
|
|
2016
|
|
$
|
500,000
|
|
$
|
600,000
|
|
$
|
—
|
|
|
$
|
22,263
|
(19)
|
|
$
|
31,083
|
(20)
|
|
$
|
1,153,346
|
|
Current
Board Member
(17)
|
|
2015
|
|
$
|
501,923
|
|
$
|
600,000
|
|
$
|
809,150
|
(21)
|
|
$
|
—
|
|
|
$
|
40,563
|
(22)
|
|
$
|
1,951,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Menachem
Ash
|
|
2017
|
|
$
|
370,000
|
|
$
|
185,000
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,275
|
(24)
|
|
$
|
561,275
|
|
Executive
Vice President of Strategy
|
|
2016
|
|
$
|
370,000
|
|
$
|
100,000
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,625
|
(25)
|
|
$
|
477,625
|
|
and
Legal Affairs
(23)
|
|
2015
|
|
$
|
371,423
|
|
$
|
110,000
|
|
$
|
122,250
|
(26)
|
|
$
|
—
|
|
|
$
|
33,120
|
(27)
|
|
$
|
636,793
|
27
Employment
Agreements
Howard S.
Jonas
: On October 28, 2011, the Company and Howard S.
Jonas entered into the Second Amended and Restated Employment
Agreement (the “Second Revised Jonas Agreement”) with a
term from October 28, 2011 to December 31, 2013. Pursuant to the
Second Revised Jonas Agreement, Howard S. Jonas was entitled to
receive an annual cash base salary of $50,000 and 883,333
restricted shares of Common Stock (which were later converted to
shares of Class B Common Stock) and 1,176,427 restricted shares of
Class B Common Stock in lieu of a cash base salary from January 1,
2009 through December 31, 2013.
28
On October 28, 2011, the Company spun off its subsidiary, Genie
Energy Ltd. Since the spin-off, Howard S. Jonas has served as the
Chairman of the Board of Genie Energy and, from January 1, 2014
until November 1, 2017, also as Chief Executive Officer of Genie
Energy.
On November 29, 2013, the Company announced that Howard S. Jonas
would step down as Chief Executive Officer of the Company on
December 31, 2013, but would remain Chairman of the Board. On
December 20, 2013, the Company and Howard S. Jonas entered into the
Third Amended and Restated Employment Agreement (the “Third
Revised Jonas Agreement”) with a term from January 1, 2014 to
December 31, 2016. Pursuant to the Third Revised Jonas Agreement,
Howard S. Jonas (i) served as Chairman of the Board of Directors of
the Company, (ii) received an annual cash base salary of $250,000
and (iii) received a grant of 63,320 restricted shares of Class B
Common Stock that vested in equal amounts on January 5
th
of 2014, 2015 and 2016.
On December 14, 2016, the
Company and Howard S. Jonas entered into the Fourth Amended and
Restated Employment Agreement (the “Fourth Revised Jonas
Agreement”) with a term from January 1, 2017 to December 31,
2019. Pursuant to the Fourth Revised Jonas Agreement, Howard S.
Jonas (i) will serve as Chairman of the Board of Directors of the
Company, (ii) will receive an annual cash base salary of $250,000
and (iii) received a grant of 69,624 restricted shares of Class B
Common Stock that as to vest in equal amounts on January
5
th
of 2017, 2018 and 2019.
Bill
Pereira
: On April 29, 2009, the Company and Mr. Pereira
entered into an Employment Agreement (the “Original Pereira
Agreement”), pursuant to which Mr. Pereira received an annual
base salary of $435,000 from January 2, 2009 through January 1,
2012 (the term of the Original Pereira Agreement). In addition, Mr.
Pereira was entitled to participate in any established bonus
program for senior executive management.
On October 31, 2011, Mr. Pereira was appointed as the Chief
Executive Officer of IDT Telecom, the Company’s subsidiary.
On November 22, 2011, Mr. Pereira and IDT Telecom entered into an
Employment Agreement (the “Pereira Agreement”) pursuant
to which Mr. Pereira received an annual base salary of $500,000
from November 22, 2011 to December 31, 2014 (the term of the
Pereira Agreement). In addition, Mr. Pereira was entitled to
participate in any established bonus program for senior executive
management as approved by the Compensation Committee. Mr. Pereira
also received, on November 22, 2011, (i) a grant of options to
purchase 7,750 shares of the Company’s Class B Common Stock
with an exercise price equal to the fair market value on the date
of grant ($12.67) and an expiration date of November 21, 2021 and
(ii) a grant of 25,000 restricted shares of the Company’s
Class B Common Stock. Such options and restricted stock were
granted pursuant to the Company’s 2005 Plan, and vested in
equal annual installments on November 22, 2012, 2013 and 2014.
Among other things, the Revised Pereira Agreement provided that Mr.
Pereira would serve as Chief Executive Officer of IDT Telecom.
On January 12, 2015, Mr. Pereira and IDT Telecom entered into an
Amended and Restated Employment Agreement (the “Revised
Pereira Agreement”), which amended and restated the Pereira
Agreement, pursuant to which Mr. Pereira receives an annual base
salary of $500,000 from January 1, 2015 to December 31, 2017 (the
term of the Revised Pereira Agreement). In addition, Mr. Pereira is
entitled to participate in any established bonus program for senior
executive management as approved by the Compensation Committee. Mr.
Pereira also received, on January 12, 2015, a grant of 25,000
restricted shares of the Company’s Class B Common Stock,
which was granted pursuant to the Company’s 2015 Plan, and
vest in three equal annual installments commencing on January 5,
2016. Among other things, the Revised Pereira Agreement provides
that Mr. Pereira will serve as Chief Executive Officer of IDT
Telecom. The Revised Pereira Agreement is automatically extendable
for additional one-year periods unless IDT Telecom or Mr. Pereira
notifies the other within thirty days of the end of the term that
the agreement will not be extended.
In addition, including pursuant to their employment agreements,
executives are eligible to receive bonuses based upon performance,
including the specific financial and other goals set by the
Compensation Committee of the Board of Directors.
Menachem Ash, Shmuel Jonas and Joyce J. Mason do not have
employment agreements with the Company or any of its subsidiaries.
On November 13, 2008, Mr. Fischer and the Company entered into a
Confidential Release and Retention Agreement, which is described
below under “Potential Payments Upon Termination or
Change-in-Control.”
29
Grants of Plan-Based
Awards
The following table sets forth information concerning the number of
shares of Class B Common Stock underlying stock options and shares
of restricted Class B Common Stock granted to the Named Executive
Officers in Fiscal 2017 as Plan-based awards. All of the following
were issued pursuant to the Company’s 2015 Stock Option and
Incentive Plan, as amended and restated, except as indicated. There
are no estimated future payouts in connection with such awards.
|
|
|
Compensation
Committee Approval
|
|
|
|
All
Other Awards: Number of Securities in Restricted Stock Grant (#)
|
|
All
Other Awards: Number of Securities underlying Options
(#)
|
|
Exercise
of Base Price of Option Awards
($/Sh)
|
|
Grant
Date Fair Value of Option Awards
($)
(1)
|
|
Howard
S. Jonas
|
|
12/14/2016
|
|
01/05/2017
|
|
69,624
|
(2)
|
|
|
|
|
|
|
|
$
|
1,366,023
|
|
|
|
05/02/2017
|
|
05/02/2017
|
|
|
|
|
1,000,000
|
(3)
|
|
$
|
14.93
|
|
$
|
3,261,198
|
Outstanding Equity
Awards at Fiscal Year-End
The following table sets forth all equity awards made to each of
the Named Executive Officers that were outstanding at the end of
Fiscal 2017.
|
|
|
|
|
|
|
|
|
Number of Securities Underlying Unexercised Options (#)
Exercisable
|
|
Number of Securities Underlying Unexercised Options (#)
Unexercisable
|
|
Option Exercise
Price
($)
|
|
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
|
Market Value of Shares or Units of Stock That Have Not
Vested
($)
(1)
|
|
Shmuel Jonas
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
13,138
|
(2)
|
|
$
|
194,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcelo Fischer
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
7,500
|
(3)
|
|
$
|
111,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill Pereira
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
17,333
|
(4)
|
|
$
|
256,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Menachem Ash
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
3,750
|
(5)
|
|
$
|
55,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard S. Jonas
|
|
1,000,000
|
|
—
|
|
$
|
14.93
|
|
05/01/2022
|
|
46,416
|
(6)
|
|
$
|
687,421
|
30
Option Exercises and
Stock Vested
The following table sets forth information regarding the stock
options exercised and restricted shares of Class B Common Stock
that vested for each of the Named Executive Officers in Fiscal
2017.
|
|
|
|
|
|
|
|
|
Number of Shares Acquired Upon
Exercise
(#)
|
|
Value
Realized On Exercise
($)
|
|
Number of Shares Acquired Upon
Vesting
(#)
|
|
Number of Shares Withheld to Cover Taxes
(#)
|
|
Value
Realized on Vesting
($)
(1)
|
|
Shmuel Jonas
|
|
—
|
|
$
|
—
|
|
18,262
|
|
11,293
|
|
$
|
555,809
|
|
Marcelo Fischer
|
|
—
|
|
$
|
—
|
|
4,273
|
|
3,227
|
|
$
|
145,425
|
|
Bill Pereira
|
|
10,222
|
|
$
|
46,563
|
|
10,576
|
|
6,758
|
|
$
|
336,523
|
|
Menachem Ash
|
|
—
|
|
$
|
—
|
|
2,159
|
|
1,591
|
|
$
|
72,713
|
|
Howard S. Jonas
|
|
—
|
|
$
|
—
|
|
0
|
|
23,208
|
|
$
|
451,164
|
31
POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE-IN-CONTROL
Marcelo
Fischer
: On November 13, 2008, Mr. Fischer and the
Company entered into a Confidential Release and Retention Agreement
(the “Fischer Agreement”), pursuant to which the
Company shall pay Mr. Fischer (or his estate) a severance payment
of $550,000 in the event he is terminated without
“cause,” as defined in the Fischer Agreement, or in the
event of Mr. Fischer’s death or disability. Mr. Fischer has
agreed not to compete with the Company for a period of one year
following the termination of his employment.
Howard S.
Jonas
: Under the terms of the Fourth Revised Jonas
Agreement, in the event of Howard S. Jonas’ death or
disability, or in the event the Company terminates Howard S.
Jonas’ employment without “cause” or Howard S.
Jonas voluntarily terminates his employment with “good
reason,” which includes a “change in control,”
any unvested restricted stock or other equity grant granted in
connection with Howard S. Jonas’ service to the Company shall
vest. In the event of Howard S. Jonas’ death or disability,
or in the event the Company terminates Howard S. Jonas’
employment without “cause” or Howard S. Jonas
voluntarily terminates his employment with “good
reason,” which includes a “change in control,”
the Company shall pay Howard S. Jonas’ estate a lump sum
payment equal to twelve (12) months of Howard S. Jonas’
annual base salary (at the rate in effect on the date of his
death). Howard S. Jonas has agreed not to compete with the Company
for a period of one year following the termination of his agreement
(other than termination of his employment for “good
reason” or by the Company other than for
“cause”). In the event that Howard S. Jonas is
terminated for “cause,” the restrictions shall lapse on
the pro-rata portion of the unvested restricted stock for the time
served between January of that year and the date of
termination.
Bill
Pereira
: Under the terms of the Revised Pereira
Agreement, in the event of Mr. Pereira’s death or disability,
the Company shall pay Mr. Pereira or his estate a death/disability
benefit equal to $1,225,000, one-half to be paid within sixty (60)
days of termination, and one-half to be paid monthly in equal
installments over the six month period following the date of the
initial payment. If Mr. Pereira is terminated without
“cause,” if he voluntarily terminates his employment
with “good reason,” each as defined in the Revised
Pereira Agreement, or if IDT Telecom does not extend the term of
the agreement upon its expiration, (i) he is entitled to a payment
equal to the greater of (a) his annual base salary at the rate in
effect on the termination date and (b) $1,225,000; one-half paid
upon the effective date of a release agreement and one-half paid
monthly over the following six month period and (ii) all awards
granted under the Company’s incentive plan shall vest (and
the restrictions thereon lapse). A “change in control”
is deemed to be “good reason” under the Revised Pereira
Agreement. Mr. Pereira has agreed not to compete with the Company
for a period of one year following the termination of his
agreement.
All Named Executive
Officers
: The Named Executive Officers have all been
granted stock options and/or restricted stock pursuant to the
Company’s 2005 Plan and the 2015 Plan. Under the 2005 Plan
and the 2015 Plan, in the event of “change in control”
(other than a “change in control” which is also a
“corporate transaction”), each as defined in the 2005
Plan and the 2015 Plan, (i) each option award which is outstanding
at the time of the change in control automatically becomes fully vested and exercisable, and
(ii) each share of restricted stock is released from any
restrictions on transfer and repurchase or forfeiture rights. All
severance payments are contingent on Named Executive Officers
executing the Company’s standard release agreement.
The Named Executive Officers are subject to the Company’s
Severance Pay and Plan Document (the “Severance Plan”),
which was amended and restated on August 3, 2017. Under the
Severance Plan, U.S. employees who are terminated without cause are
entitled, in specific instances as set forth in the Severance Plan,
to severance payments as follows: (i) employees who started on our
before August 1, 2009 shall receive four weeks of base pay for each
completed year of service and two weeks for each completed period
of service that is less than one year of service but greater than
six months of service or (ii) employees who started after August 1,
2009 shall receive two weeks of base pay for each completed year of
service and one week for each completed period of service that is
less than one year of service but greater than six months of
service. Such severance payments are capped at 40 weeks of base pay
but were capped at 52 weeks throughout Fiscal 2017, i.e., prior to
the Severance Plan being amended and restated on August 3, 2017. If
a Named Executive Officer is entitled to a greater severance
payment pursuant to an agreement, the greater severance payment
shall control.
32
The following table sets forth quantitative information with
respect to potential payments to be made to each of the Named
Executive Officers upon termination in various circumstances and/or
a change in control of the Company (each an “Event”).
The following table assumes the Event took place on July 31, 2017
for each of the Named Executive Officers. The following table uses
the closing price of the Company’s Class B Common Stock on
July 31, 2017, the last trading day in Fiscal 2017 ($14.81). The
potential payments are based on agreements entered into by Named
Executive Officers with the Company, discussed above, the 2005 Plan
and the 2015 Plan. The value of each restricted share is computed
by multiplying the closing market price per share of the
Company’s Class B Common Stock on July 31, 2017, the last
trading day in Fiscal 2017 ($14.81), by the number of unvested
restricted shares of Class B Common Stock held by the Named
Executive Officer on that date.
|
|
|
Event
of Death or Disability
($)
|
|
|
|
Termination For Cause
($)
|
|
Voluntary Termination for Good Reason
($)
|
|
Termination Without Cause
($)
|
|
Shmuel Jonas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
|
—
|
|
|
$
|
194,574
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Severance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
361,731
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marcelo Fischer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
|
—
|
|
|
$
|
111,075
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Severance
|
|
$
|
550,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill
Pereira
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
|
—
|
|
|
$
|
256,701
|
(4)
|
|
|
—
|
|
|
$
|
256,701
|
(4)
|
|
$
|
256,701
|
(4)
|
|
Severance
|
|
$
|
1,225,000
|
|
|
$
|
1,225,000
|
|
|
|
—
|
|
|
$
|
1,225,000
|
(5)
|
|
$
|
1,225,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Menachem Ash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
|
—
|
|
|
$
|
55,538
|
(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Severance
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
370,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard S. Jonas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
|
|
$
|
687,420
|
(7)
|
|
$
|
687,420
|
(7)
|
|
$
|
200,498
|
(8)
|
|
|
687,420
|
|
|
$
|
687,420
|
|
|
Severance
|
|
$
|
250,000
|
|
|
$
|
250,000
|
(9)
|
|
|
—
|
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
33
PROPOSAL REQUIRING YOUR
VOTE
PROPOSAL NO.
1
ELECTION OF
DIRECTORS
Pursuant to the Company’s Third Restated Certificate of
Incorporation, the authorized number of members of the Board of
Directors is between three and seventeen, with the actual number to
be set, within that range, by the Board of Directors from time to
time. The Board of Directors has set the number of directors on the
Board of Directors at five. There are currently five directors on
the Board of Directors. The current terms of all of the serving
directors expire at the Annual Meeting. All five of the directors
are standing for re-election at the Annual Meeting.
The nominees to the Board of Directors are Michael Chenkin, Eric F.
Cosentino, Howard S. Jonas, Bill Pereira and Judah Schorr, each of
whom has consented to be named in this proxy statement and to serve
if elected. Each of the nominees is currently serving as a director
of the Company. Brief biographical information about the nominees
for directors is furnished below.
Each of these director nominees is standing for election for a term
of one year until the 2018 Annual Meeting, or until his successor
is duly elected and qualified or until his earlier resignation or
removal. A majority of the votes cast for or against a director
nominee at the Annual Meeting shall elect each director.
Stockholders may not vote for more than five persons, which is the
number of nominees identified herein. The following pages contain
biographical information and other information about the nominees.
Following each nominee’s biographical information, we have
provided information concerning particular experience,
qualifications, attributes and/or skills that the Nominating
Committee and the Board of Directors considered when determining
that each nominee should serve as a director.
Michael Chenkin
has been a director of the Company since
October 16, 2013. Mr. Chenkin is a Certified Public Accountant and
worked in the Audit Department of Coopers and Lybrand from 1974 to
1993 and as a consultant to the securities industry from 1993 to
2008 with an emphasis on business implementation, internal
controls, compliance and regulatory matters for large financial
institutions. Mr. Chenkin received a Bachelor of Science degree
from Cornell University and a Master of Business Administration
from Columbia University.
Key Attributes,
Experience and Skills:
Mr. Chenkin’s diverse business experiences as a Certified
Public Accountant — working as an auditor for a large
multi-national accounting firm for close to 20 years — and
consulting for large financial institutions for 15 years, offer
valuable insights to the Board of Directors, particularly given the
enhanced accounting rules and regulations affecting public
companies. Mr. Chenkin’s strong accounting background, as
well as his M.B.A. from Columbia University, provides financial and
audit-related expertise to the Board of Directors.
Eric F. Cosentino
has been a director of the Company since
February 2007. Rev. Cosentino was a director of Zedge, Inc., a
former subsidiary of the Company that was spun off to stockholders
in June 2016, from September 2008 until May 2016. Rev. Cosentino
has been a member of the National Association of Corporate
Directors (NACD) since March 2009. Rev. Cosentino has been an NACD
Governance Fellow since 2014, when he completed NACD’s
comprehensive program study for corporate directors. He supplements
his skill sets through ongoing engagement with the director
community and access to leading practices. Rev. Cosentino served on
the Board of Directors of a Company subsidiary, IDT Entertainment,
until it was sold to Liberty Media in 2006. Rev. Cosentino was the
Rector of the Episcopal Church of the Divine Love in Montrose, New
York, from 1987 until his retirement in 2014. He remains
canonically resident in the Episcopal Diocese of New York. He began
his ordained ministry in 1984 as curate (assistant) at St.
Elizabeth’s Episcopal Church in Ridgewood, Bergen County, New
Jersey. He has also served on the Board of Directors of the
Evangelical Fellowship Anglican Communion of New York. Rev.
Cosentino has published articles and book reviews for The Episcopal
New Yorker, Care & Community, and Evangelical Journal. Rev.
Cosentino received a B.A. from Queens College and a M.Div. from
General Theological Seminary, New York.
Key Attributes,
Experience and Skills:
Rev. Cosentino has strong leadership skills, having served as the
Rector of the Episcopal Church of the Divine Love in Montrose, New
York, from 1987 until 2014. As Chairman of the Company’s
Corporate Governance Committee, Rev. Cosentino has become
well-versed in corporate governance issues by attending seminars
and
34
joining the National Association of Corporate Directors in March
2009. Rev. Cosentino’s long tenure as a director of the
Company, as well as prior tenures with former subsidiaries Zedge
and IDT Entertainment, brings extensive knowledge of our Company to
the Board.
Howard S. Jonas
founded IDT in August 1990, and has served
as Chairman of the Board of Directors since its inception. Mr.
Jonas served as Chief Executive Officer of the Company from October
2009 through December 2013 and from December 1991 until July 2001.
Mr. Jonas is also the founder and has been President of Jonas Media
Group (formerly Jonas Publishing) since its inception in 1979. From
January 2014 until November 2017, Mr. Jonas served as the Chief
Executive Officer of Genie Energy Ltd, a former subsidiary of IDT
that was spun off to stockholders in October 2011, and has served
as Chairman of the board of directors of Genie Energy since the
spin-off. From June 2016 to November 2016, Mr. Jonas served as the
Chairman of the Board of Zedge, Inc., a former subsidiary of the
Company that was spun off to stockholders in June 2016. Mr. Jonas
has served as the Vice Chairman of Zedge, Inc. since November 2016.
Mr. Jonas also serves as the Chairman of the Board of IDW Media
Holdings, Inc., a former subsidiary of IDT that was spun off to
stockholders in September 2009. Mr. Jonas has been a director of
Rafael Pharmaceuticals, Inc. (f/k/a Cornerstone Pharmaceuticals)
since April 2013 and was appointed Chairman of the Board in April
2016. Mr. Jonas received a B.A. in Economics from Harvard
University.
Key Attributes,
Experience and Skills:
As founder of the Company and Chairman of the Board since its
inception, Howard S. Jonas brings tremendous knowledge of all
aspects of our Company and each industry in which it is involved to
the Board. Howard S. Jonas’ service as Chairman of the Board
creates a critical link between management and the Board, enabling
the Board to perform its oversight function with the benefits of
management’s perspectives on the businesses of the Company.
In addition, having Howard S. Jonas on the Board provides our
Company with effective leadership.
Bill Pereira
has served as a member of the Company’s
Board of Directors and as the Chief Executive Officer, President
and Co-Chairman of IDT Telecom since October 31, 2011. Mr. Pereira
served as Chief Financial Officer of the Company from January 2009
until October 2011, and served as the Treasurer from January 2009
to December 2010. Previously, he served as Executive Vice President
of Finance for the Company from January 2008 to January 2009. Mr.
Pereira initially joined the Company in December 2001 when the
Company bought Horizon Global Trading, a financial software firm
where he was a managing partner. In February 2002, Mr. Pereira
joined Winstar Communications, a subsidiary of the Company, as a
Senior Vice President of Finance. Mr. Pereira was promoted to CFO
of Winstar Communications, a position he held until 2006 when he
was named a Senior Vice President of the Company responsible for
financial reporting, budgeting and planning. Prior to joining the
Company, Mr. Pereira worked for a number of companies in the
financial sector, including Prudential Financial, SBC Warburg and
UBS. Mr. Pereira received a B.S. from Rutgers University and an
M.B.A. from the New York University Stern School of Business.
Key Attributes,
Experience and Skills:
Mr. Pereira’s history with the Company, particularly his
nearly three-year tenure as Chief Financial Officer of the Company,
brings extensive knowledge of the Company’s business
divisions. Mr. Pereira’s financial background, coupled with
his first-hand knowledge of the Company’s financial reporting
and internal audit process, provides financial expertise to the
Board. Mr. Pereira’s successful leadership of the
Company’s turn-around plan provides valuable insight to the
Board.
Judah Schorr
has been a director of the Company since
December 2006. Dr. Schorr founded Judah Schorr MD PC in 1994, an
anesthesia provider to hospitals, ambulatory surgery centers and
medical offices, and has been its President and owner since its
inception, as well as the President of its subsidiary, Tutto
Anesthesia. Dr. Schorr is an attending physician at Anesthesia
Services at Bergen Regional Medical Center, the largest hospital in
the state of New Jersey, and the Managing Partner of Chavrusa
Realty Corp., a commercial real-estate company in Long Island, New
York. Dr. Schorr received his B.S. in Psychology from Brooklyn
College and his M.D. from the University of Trieste Faculty of
Medicine and Surgery in Italy.
35
Key Attributes,
Experience and Skills:
Through Dr. Schorr’s career as an entrepreneur driving the
growth of Judah Schorr MD PC and Chavrusa Realty Corp., he has
obtained valuable business and management experience and brings
important perspectives on the issues facing the Company. Dr.
Schorr’s tenure as a member of the Board and its
Compensation, Corporate Governance and Audit Committees brings
useful compliance insights to the Board.
The Board of Directors has no reason to believe that any of the
persons named above will be unable or unwilling to serve as a
director, if elected.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
FOR
THE ELECTION OF THE NOMINEES NAMED ABOVE.
Directors, Director
Nominees and Executive Officers
The executive officers, directors, director nominees and Named
Executive Officers of the Company are as follows:
|
|
|
|
|
|
|
Shmuel Jonas
|
|
36
|
|
Chief Executive Officer and Named Executive
Officer
|
|
Howard S. Jonas
|
|
61
|
|
Chairman of the Board of Directors, Director and
Director Nominee and Named Executive Officer
|
|
Marcelo Fischer
|
|
50
|
|
Senior Vice President — Finance and Named
Executive Officer
|
|
Bill Pereira
|
|
52
|
|
Director, Director Nominee, Chief Executive
Officer and President of IDT Telecom and Named Executive
Officer
|
|
Joyce J. Mason
|
|
58
|
|
Executive Vice President, General Counsel and
Corporate Secretary
|
|
Mitch Silberman
|
|
49
|
|
Chief Accounting Officer and
Controller
|
|
Menachem Ash
|
|
45
|
|
Executive Vice President of Strategy and Legal
Affairs and Named Executive Officer
|
|
Anthony S. Davidson
|
|
49
|
|
Senior Vice President —
Technology
|
|
Michael Chenkin
|
|
66
|
|
Director and Director Nominee
|
|
Eric F. Cosentino
|
|
60
|
|
Director and Director Nominee
|
|
Judah Schorr
|
|
65
|
|
Director and Director Nominee
|
Set forth below is biographical information with respect to the
Company’s current executive officers and named executive
officers, except Howard S. Jonas and Bill Pereira, whose
information is set forth above in Proposal No. 1:
Shmuel Jonas
has served as Chief Executive Officer of the
Company since January 2014. Mr. Shmuel Jonas served as Chief
Operating Officer of the Company from June 2010 through December
2013. Mr. Shmuel Jonas joined the Company in June 2008 and served
as a Vice President until June 2009 when he was elected to serve as
the Company’s Vice President of Operations. Since 2004, Mr.
Shmuel Jonas has been the managing member of Arlington Suites, LLC,
manager of a thirty million dollar mixed-use ground up development
project in Bronx, New York. In addition, Mr. Shmuel Jonas was a
director of Zedge, Inc., a former subsidiary of the Company that
was spun off to stockholders in June 2016, from October 2010 until
May 2016. From 2006 through 2008, Mr. Shmuel Jonas was a partner in
a 160-unit garden apartment complex in Memphis, Tennessee. Between
2004 and 2005, Mr. Shmuel Jonas owned and operated various
businesses in the food industry, including BID Distribution, a
distributor and marketer of frozen desserts to grocery stores and
food service operations.
Marcelo Fischer
has served as the Company’s Senior
Vice President–Finance (the Company’s principal
financial officer position) since October 31, 2011 and as Chief
Financial Officer of IDT Telecom since June 2007. Mr. Fischer also
served as the Company’s Senior Vice President of Finance from
March 2007 to June 2007. Mr. Fischer served as the Company’s
Chief Financial Officer and Treasurer from June 2006 to March 2007,
as the Company’s Controller from May 2001 until June 2006 and
as Chief Accounting Officer from December 2001 until June 2006.
Prior to joining the Company, Mr. Fischer was the Corporate
Controller of Viatel, Inc. from 1999 until 2001. From 1998 through
1999, Mr. Fischer was the Controller of the Consumer International
Division of Revlon, Inc. From 1991 through 1998, Mr. Fischer held
various accounting and finance positions at Colgate-Palmolive
36
Corporation. Mr. Fischer, a Certified Public Accountant, received a
B.A. from the University of Maryland and an M.B.A. from the New
York University Stern School of Business.
Joyce J. Mason
has served as an Executive Vice President of
the Company since December 1998 and as General Counsel and
Corporate Secretary of the Company from its inception. Ms. Mason
also served as a director of the Company from its inception until
December 2006. In addition, Ms. Mason was a director of Zedge,
Inc., a former subsidiary of the Company that was spun off to
stockholders in June 2016, from September 2008 until May 2016, and
she also served as a director of IDT Telecom from December 1999
until May 2001 and as a director of Net2Phone from October 2001
until October 2004. Prior to joining the Company, Ms. Mason had
been in private legal practice. Ms. Mason received a B.A. from the
City University of New York and a J.D. from New York Law
School.
Mitch Silberman
has served as the Company’s Chief
Accounting Officer and Controller since June 2006. Mr. Silberman
joined the Company in October 2002 as Director of Financial
Reporting until his promotion to Assistant Controller in October
2003. Prior to joining the Company, Mr. Silberman was a senior
manager at KPMG LLP, where he served in the firm’s
Biotechnology and Pharmaceutical practice. Prior to KPMG, Mr.
Silberman worked for Grant Thornton LLP, serving in the
firm’s Telecommunications, Service and Technology practice.
Mr. Silberman, a Certified Public Accountant, received a Bachelor
of Science in Accounting from Brooklyn College.
Menachem Ash
has served as the Company’s Executive
Vice President of Strategy and Legal Affairs since October 2012.
Mr. Ash served as the managing attorney of the Company’s
legal department from June 2011 to October 2012. Mr. Ash has served
as senior counsel to several IDT divisions since he joined the
Company in July 2004, including IDT Telecom and IDT Carmel. Prior
to joining the Company, Mr. Ash served as General Counsel to
Telstar International, Inc., a telecommunications services
provider. Mr. Ash also worked at KPMG as a senior associate in its
tax group focusing on financial services and technology companies.
He is a graduate of Brooklyn College and the Benjamin N. Cardozo
School of Law.
Anthony S. Davidson
has served as Senior Vice President
– Technology of the Company since December 2014. Mr. Davidson
has also served as Executive Vice President – Carrier
Operations of IDT Telecom since 2003 and in several different
senior management positions in finance, technology and commercial
operations and corporate development at IDT Investments and IDT
Telecom since January 2000. Prior to joining IDT, Mr. Davidson
served as Director of Finance at a small, privately held satellite
television programming company in New Jersey and was previously a
middle market relationship manager at Fleet Bank in Albany, NY. He
holds a B.A. from Williams College and an M.B.A. from Cornell
University.
Relationships among
Directors or Executive Officers
Howard S. Jonas and Joyce J. Mason are brother and sister. Howard
S. Jonas and Shmuel Jonas are father and son. Joyce J. Mason and
Shmuel Jonas are aunt and nephew. There are no other familial
relationships among any of the directors or executive officers of
the Company.
37
PROPOSAL NO.
2
APPROVAL OF AMENDMENT TO
THE COMPANY’S
2015 STOCK OPTION AND INCENTIVE PLAN
The Company’s stockholders are being asked to approve an
amendment to the Company’s 2015 Stock Option and Incentive
Plan (the “2015 Plan”) that will increase the number of
shares of the Company’s Class B Common Stock available for
the grant of awards thereunder by an additional 330,000 shares. The
Board of Directors adopted the proposed amendment to the 2015 Plan
on September 28, 2017, subject to stockholder approval at the
Annual Meeting.
The Board of Directors believes that the proposed amendment to
increase the number of shares of the Company’s Class B Common
Stock available for the grant of awards thereunder by an additional
330,000 shares is necessary in order to provide the Company with a
sufficient reserve of shares of Class B Common Stock for future
grants needed to attract and retain the services of key employees,
directors and consultants of the Company essential to the
Company’s long-term success.
The proposed amendment is being submitted for a stockholder vote in
order to enable the Company to grant, among other equity grants
permitted pursuant to the 2015 Plan, options which are incentive
stock options (“ISOs”) within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the
“Code”); and because such approval may be required or
advisable in connection with (i) the provisions set forth in
Section 162(m) of the Code relating to the deductibility of certain
compensation (ii) the provisions set forth in Rule 16b-3
promulgated under the Exchange Act and (iii) the rules and
regulations applicable to New York Stock Exchange-listed
companies.
The following description of the 2015 Plan, as proposed to be
amended by this Proposal, is a summary, does not purport to be
complete and is qualified in its entirety by the full text of the
2015 Plan, as proposed to be amended. A copy of the 2015 Plan, as
proposed to be amended, is attached hereto as Exhibit A and has
been filed with the SEC with this Proxy Statement.
DESCRIPTION OF THE 2015
PLAN
Pursuant to the 2015 Plan, officers, employees, directors and
consultants of the Company and certain of its subsidiaries are
eligible to receive awards of stock options, stock appreciation
rights, limited stock appreciation rights, restricted stock and
deferred stock units. There are approximately 1,227 employees and
directors eligible for grants under the Plan. Options granted under
the 2015 Plan may be ISOs or non-qualified stock options
(“NQSOs”). Stock appreciation rights
(“SARs”) and limited stock appreciation rights
(“LSARs”) may be granted either alone or simultaneously
with the grant of an option. Restricted stock and deferred stock
units may be granted in addition to or in lieu of any other award
made under the 2015 Plan.
The maximum number of shares reserved for the grant of awards under
the 2015 Plan is 1,030,000 shares of Class B Common Stock
(including the 330,000 shares of Class B Common Stock reserved
subject to approval of the stockholders). Such share reserves are
subject to further adjustment in the event of specified changes to
the capital structure of the Company. The shares may be made
available either from the Company’s authorized but unissued
capital stock or from capital stock reacquired by the Company.
The Compensation Committee of the Board of Directors administers
the 2015 Plan. Subject to the provisions of the 2015 Plan, the
Compensation Committee determines the type of awards, when and to
whom awards will be granted, the number and class 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 2015 Plan and may at any time adopt
such rules and regulations for the 2015 Plan as it deems advisable,
including the delegation of certain of its authority. In
determining the persons to whom awards shall be granted and the
number of shares covered by each award, the Compensation Committee
takes 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 Compensation Committee deems
relevant.
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 2015 Plan) on
the date of grant. In the
38
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” of the Company (as defined in the 2015 Plan).
The Compensation Committee may provide for the payment of the
option price in cash, by delivery of Class B 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 2015 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,” a “Corporate
Transaction” or a “Related Entity Disposition”
(in each case, as defined in the 2015 Plan).
Each non-employee director will receive 4,000 shares of Class B
Common Stock annually. New non-employee directors will receive a
pro-rata amount (based on projected quarters of service for such
calendar year following the grant date) of such annual grant on
their date of initial election and qualification as a non-employee
director. The grant date for incumbent annual non-employee director
grants will be each January 5
th
(or the next business day).
The 2015 Plan also provides for the granting of restricted stock
awards, which are awards of Class B Common Stock that 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, a
Corporate Transaction or a Related Entity Disposition.
During the restricted period for a restricted stock award, the
grantee will be entitled to receive dividends with respect to, and
to vote, the shares of restricted stock awarded to him or her. If,
during the restricted period, the grantee’s service with the
Company terminates, 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 2015 Plan also permits the Compensation Committee to grant SARs
and/or LSARS. Generally, SARs may be exercised at such time or
times and only to the extent determined by the Compensation
Committee and LSARs may be exercised only (i) during the 90 days
immediately following a Change in Control or (ii) immediately prior
to the effective date of a Corporate Transaction (as defined in the
2015 Plan). LSARs will be exercisable at such time or times and
only to the extent determined by the Compensation Committee. An
LSAR granted in connection with an ISO is exercisable only if the
Fair Market Value per share of Class B Common Stock on the date of
grant exceeds the purchase price specified in the related ISO.
Upon exercise of an SAR, a grantee will receive for each share for
which an SAR is exercised, an amount in cash or shares of Class B
Common Stock, as determined by the Compensation Committee, equal to
the excess, if any, of (i) the Fair Market Value of a share of
Class B Common Stock on the date the SAR is exercised, over (ii)
the exercise or other base price of the SAR or, if applicable, 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 Class B 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 Class B 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 Class B Common Stock shown on Schedule 13D, or any
amendment thereto, filed by the holder of the specified percentage
of Class B Common Stock, the acquisition of which gives rise to the
exercisability of the LSAR over (ii) the exercise or other base
price of the LSAR or, if applicable, the exercise price per share
of the option to which the LSAR relates. In no event, however, may
the holder of an LSAR granted 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, if any, 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 2015
Plan.
39
The 2015 Plan further provides for the granting of deferred stock
units, which are awards providing a right to receive shares of
Class B Common Stock on a deferred basis, subject to such
restrictions and a restricted period as the Compensation Committee
determines. The Compensation Committee may also impose such other
conditions and restrictions, if any, on the payment of shares as it
deems appropriate, including the satisfaction of performance
criteria. All deferred stock awards become fully vested in the
event of a Change in Control, a Corporate Transaction or a Related
Entity Disposition.
The grantee of a deferred stock unit will not be entitled to
receive dividends or vote the underlying shares until the
underlying shares are delivered to the grantee. 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 of Directors may at any time and from time to time
suspend, amend, modify or terminate the 2015 Plan; provided,
however, that, to the extent required by 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 2015 Plan after September 16,
2024, ten years from the Board’s approval of the 2015
Plan.
ISOs (and any related SARs) are not assignable or transferable
except by the laws of descent and distribution. Non-qualified stock
options (and any SARs or LSARs related thereto) may be transferred
to the extent permitted by the Compensation Committee. Holders of
NQSOs (and any SARs or LSARs related thereto) are permitted to
transfer such NQSOs for no consideration to such holder’s
“family members” (as defined in Form S-8) with the
prior approval of the Compensation Committee.
Except as set forth in the table below, the Company cannot now
determine the number of options or other awards to be granted in
the future under the 2015 Plan to officers, directors, employees
and consultants. Actual awards under the 2015 Plan to Named
Executive Officers for Fiscal 2017 are reported under the heading
“Grant of Plan-Based Awards.”
New Plan
Benefits
Name
and Principal Position
|
|
Number of Shares of
Class B Common
Stock
|
|
Non-Employee Director Group
|
|
12,000
|
(1)
|
Federal Income Tax
Consequences of Awards Granted under the 2015 Plan
The Company believes that, under present law, the following are the
U.S. federal income tax consequences generally arising with respect
to awards under the 2015 Plan:
Incentive Stock
Options
. ISOs granted under the 2015 Plan are intended
to meet the definitional requirements of Section 422(b) of the Code
for “incentive stock options.” A participant who
receives an ISO does not recognize any taxable income upon the
grant of such ISO. Similarly, the exercise of an ISO generally does
not give rise to federal taxable income to the participant,
provided that (i) the federal “alternative minimum
tax,” which depends on the participant’s particular tax
situation, does not apply and (ii) the participant is employed by
the Company from the date of grant of the option until three months
prior to the exercise thereof, except where such employment or
service terminates by reason of disability or death (where the
three month period is extended to one year).
Further, if after exercising an ISO, a participant disposes of the
Class B Common Stock so acquired more than two years from the date
of grant and more than one year from the date of transfer of the
Class B Common Stock pursuant to the exercise of such ISO (the
“applicable holding period”), the participant will
normally recognize a
40
long-term capital gain or loss equal to the difference, if any,
between the amount received for the shares and the exercise price.
If, however, the participant does not hold the shares so acquired
for the applicable holding period — thereby making a
“disqualifying disposition” — the participant
would realize ordinary income on the excess of the fair market
value of the shares at the time the ISO was exercised over the
exercise price, and the balance of income, if any, would be
long-term capital gain (provided the holding period for the shares
exceeded one year and the participant held such shares as a capital
asset at such time).
A participant who exercises an ISO by delivering Class B Common
Stock previously acquired pursuant to the exercise of another ISO
is treated as making a “disqualifying disposition” of
such Class B Common Stock if such shares are delivered before the
expiration of their applicable holding period. Upon the exercise of
an ISO with previously acquired shares as to which no disqualifying
disposition occurs, the participant would not recognize gain or
loss with respect to such previously acquired shares. The Company
will not be allowed a federal income tax deduction upon the grant
or exercise of an ISO or the disposition, after the applicable
holding period, of the Class B Common Stock acquired upon exercise
of an ISO. In the event of a disqualifying disposition, the Company
generally will be entitled to a deduction in an amount equal to the
ordinary income recognized by the participant, provided that such
amount constitutes an ordinary and necessary business expense to
the Company and is reasonable and the limitations of Sections 280G
and 162(m) of the Code (discussed below) do not apply.
Non-Qualified Stock
Options and Stock Appreciation Rights
. Non-qualified
stock options granted under the 2015 Plan are options that do not
qualify as ISOs. A participant who receives an NQSO or an SAR
(including an LSAR) will not recognize any taxable income upon the
grant of such NQSO or SAR. However, the participant generally will
recognize ordinary income upon exercise of an NQSO in an amount
equal to the excess of (i) the fair market value of the shares of
Class B Common Stock at the time of exercise over (ii) the exercise
price. Similarly, upon the receipt of cash or shares pursuant to
the exercise of an SAR, the individual generally will recognize
ordinary income in an amount equal to the sum of the cash and the
fair market value of the shares received.
The ordinary income recognized with respect to the receipt of
shares or cash upon exercise of a NQSO or an SAR will be subject to
both wage withholding and other employment taxes. In addition to
the customary methods of satisfying the withholding tax liabilities
that arise upon the exercise of an SAR for shares or upon the
exercise of a NQSO, the Company may satisfy the liability in whole
or in part by withholding shares of Class B Common Stock from those
that otherwise would be issuable to the participant or by the
participant tendering other shares owned by him or her, valued at
their fair market value as of the date that the tax withholding
obligation arises.
A federal income tax deduction generally will be allowed to the
Company in an amount equal to the ordinary income recognized by the
individual with respect to his or her NQSO or SAR, provided that
such amount constitutes an ordinary and necessary business expense
to the Company and is reasonable and the limitations of Sections
280G and 162(m) of the Code do not apply.
If a participant exercises an NQSO by delivering shares of Class B
Common Stock to the Company, other than shares previously acquired
pursuant to the exercise of an ISO which is treated as a
“disqualifying disposition” as described above, the
participant will not recognize gain or loss with respect to the
exchange of such shares, even if their then fair market value is
different from the participant’s tax basis. The participant,
however, will be taxed as described above with respect to the
exercise of the NQSO as if he or she had paid the exercise price in
cash, and the Company likewise generally will be entitled to an
equivalent tax deduction.
Other
Awards
. With respect to other awards under the 2015
Plan that are settled either in cash or in shares of Class B Common
Stock that are either transferable or not subject to a substantial
risk of forfeiture (as defined in the Code and the regulations
thereunder), participants generally will recognize ordinary income
equal to the amount of cash or the fair market value of the Class B
Common Stock received. Participants also will not recognize income
upon the grant of a deferred stock unit, and will instead recognize
ordinary income when shares of Class B Common Stock are delivered
in satisfaction of such award.
With respect to restricted stock awards under the 2015 Plan that
are restricted to transferability and subject to a substantial risk
of forfeiture — absent a written election pursuant to Section
83(b) of the Code filed with the Internal Revenue Service within 30
days after the date of transfer of such shares pursuant to the
award (a “Section 83(b) election”) — a
participant will recognize ordinary income at the earlier of the
time at which (i) the shares become transferable or (ii) the
restrictions that impose a substantial risk of forfeiture of such
shares (the “Restrictions”) lapse, in an amount equal
to the excess of the fair market value (on such date) of such
shares over the price paid
41
for the award, if any. If a Section 83(b) election is made, the
participant will recognize ordinary income, as of the transfer
date, in an amount equal to the excess of the fair market value of
the Class B Common Stock as of that date over the price paid for
such award, if any.
The ordinary income
recognized with respect to the receipt of cash, shares of Class B
Common Stock or other property under the 2015 Plan will be subject
to both wage withholding and other employment taxes. In addition to
the customary methods of satisfying withholding tax liabilities
that arise with respect to the delivery of cash or property (or
vesting thereof), the Company may satisfy the liability in whole or
in part by withholding shares of Class B Common Stock from those
that would otherwise be issuable to the participant or by the
participant tendering other shares owned by him or her, valued at
their fair market value as of the date that the tax withholding
obligation arises.
The Company generally will be allowed a deduction for federal
income tax purposes in an amount equal to the ordinary income
recognized by the participant, provided that such amount
constitutes an ordinary and necessary business expense and is
reasonable and the limitations of Sections 280G and 162(m) of the
Code do not apply.
Change in
Control
. In general, if the total amount of payments to
a participant that are contingent upon a “change in
control” of the Company (as defined in Section 280G of the
Code), including awards under the 2015 Plan that vest upon a
“change in control,” equals or exceeds three times the
individual’s “base amount” (generally, such
participant’s average annual compensation for the five
calendar years preceding the change in control), then, subject to
certain exceptions, the payments may be treated as “parachute
payments” under the Code, in which case a portion of such
payments would be non-deductible to the Company and the participant
would be subject to a 20% excise tax on such portion of the
payments.
Certain Limitations
on Deductibility of Executive Compensation
. With
certain exceptions, Section 162(m) of the Code denies a deduction
to publicly held corporations for compensation paid to certain
executive officers in excess of $1 million per executive per
taxable year (including any deduction with respect to the exercise
of an NQSO or SAR or the disqualifying disposition of stock
purchased pursuant to an ISO). One such exception applies to
certain performance-based compensation provided that such
compensation has been approved by stockholders in a separate vote
and certain other requirements are met. The Company believes that
Stock Options, SARs and LSARs granted under the 2015 Plan should
qualify for the performance-based compensation exception to Section
162(m).
On October 19, 2017, the last reported sale price of the
Company’s Class B Common Stock on the New York Stock Exchange
was $13.81 per share.
42
EQUITY COMPENSATION PLAN
INFORMATION
Employee Stock Incentive
Program
The Company adopted the 2015 Plan, pursuant to which options to
purchase Class B Common Stock, restricted shares of Class B Common
Stock and Deferred Stock Units may be awarded. As fully described
in Proposal No. 2, the Company is asking the Stockholders to vote
on an amendment to the 2015 Plan that will increase the number of
shares of the Company’s Class B Common Stock available for
grant of awards thereunder by an additional 330,000 shares. The
Company anticipates awarding options to purchase shares of Class B
Common Stock, restricted shares of Class B Common Stock and
Deferred Stock Units to employees, officers, directors and
consultants under the 2015 Plan.
Equity Compensation
Plans and Individual Compensation Arrangements
The following chart provides aggregate information regarding grants
under all equity compensation plans of the Company through July 31,
2017.
|
|
|
Number of Securities to be Issued upon Exercise of
Outstanding Options
(1)
|
|
Weighted-Average Exercise Price of Outstanding
Options
|
|
Number of Securities Remaining Available for Future
Issuance under Equity Compensation Plans
|
|
Equity compensation plans approved by security
holders
|
|
273,148
|
|
|
$
|
11.88
|
|
92,026
|
|
Equity compensation plans not approved by
security holders
|
|
1,000,000
|
(2)
|
|
$
|
14.93
|
|
—
|
|
Total
|
|
1,273,148
|
|
|
$
|
14.28
|
|
92,026
|
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
FOR
APPROVAL OF THE AMENDMENT TO THE 2015 PLAN AS DESCRIBED
ABOVE.
43
PROPOSAL NO.
3
APPROVAL OF THE GRANT TO
HOWARD S. JONAS OF AN OPTION TO
PURCHASE UP TO 1,000,000 SHARES OF THE CLASS B COMMON STOCK OF THE
COMPANY
The Company’s stockholders are being asked to ratify the
actions of the Compensation Committee of the Board of Directors in
granting on May 2, 2017 an option (the “Option”) to
purchase up to 1,000,000 shares of the Company’s Class B
Common Stock with an exercise price of $14.93 per share and with
certain repurchase rights held by the Company to Howard S. Jonas,
the Company’s Chairman of the Board and controlling
stockholder.
On May 2, 2017, the Compensation Committee of the Board of
Directors approved the grant of the Option to purchase up to
1,000,000 shares of the Company’s Class B Common Stock to
Howard S. Jonas, the Company’s Chairman of the Board and
controlling stockholder. The option was fully vested upon grant,
and has an exercise price of $14.93.
The unexercised portion of the Option will terminate should Mr.
Jonas cease being an officer or director of the Company or one or
more of its subsidiaries. The Company has the right to repurchase
the Class B Common Stock issued upon exercise of the Option at a
purchase price equal to the exercise price of the Option should Mr.
Jonas cease being an officer or director of the Company or one or
more of its subsidiaries. The Company’s repurchase right will
lapse as to 333,333 shares underlying the Option on each of May 2,
2018 and 2019 and as to 333,334 shares underlying the Option on May
2, 2020. Mr. Jonas will be prohibited from transferring any shares
of the Class B Common Stock issued on exercise of the Option that
are subject to the Company’s repurchase right. The Option has
not been granted under the Company’s 2015 Stock Option Plan,
but, except to the extent otherwise provided in the related grant
agreement, will be subject to the terms of the 2015 Stock Option
Plan. The grant of the Option is subject to ratification by the
stockholders of the Company.
The grant is subject to the terms of an agreement in the form of
Exhibit B attached hereto.
Howard S. Jonas is the Company’s Chairman of the Board and
its controlling stockholder.
See SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
above
.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
FOR
RATIFICATION OF THE
GRANT OF THE OPTION AS DESCRIBED ABOVE.
44
PROPOSAL NO.
4
APPROVAL AND
RATIFICATION OF TWO SALES BY THE COMPANY TO HOWARD S. JONAS OF
AN
AGGREGATE 1,728,332 SHARES OF THE COMPANY’S CLASS B COMMON
STOCK FROM
THE COMPANY’S TREASURY ACCOUNT AT AN AGGREGATE PURCHASE PRICE
OF $24,929,998
The Company’s stockholders are being asked to approve and
ratify the actions of the Board of Directors and the Corporate
Governance Committee of the Board of Directors (the
“Governance Committee”) that authorized, in two
separate transactions, the Company to sell to Howard S. Jonas, the
Company’s Chairman of the Board and controlling stockholder,
an aggregate 1,728,332 shares of the Company’s Class B Common
Stock from the Company’s treasury account for an aggregate
purchase price of $24,929,998 (the “Howard Jonas Stock
Sales”). The rules of the New York Stock Exchange require
stockholder approval of the Howard Jonas Stock Sales.
On April 10, 2017, the Board of Directors and the Governance
Committee approved the sale by the Company to Howard S. Jonas of up
to $10,000,000 of the Company’s Class B Common Stock from the
Company’s treasury account at a price of $13.73 per share,
which was the closing price of the Company’s Class B Common
Stock on the New York Stock Exchange the date of approval. On April
11, 2017, the Company sold to Howard S. Jonas 728,332 shares of the
Company’s Class B Common Stock from the Company’s
treasury account for a purchase price of $9,999,998.
On May 2, 2017, the Board of Directors and the Governance Committee
approved the sale by the Company to Howard S. Jonas of 1,000,000
shares of the Company’s Class B from the Company’s
treasury account at a price of $14.93 per share, which was the
closing price of the Company’s Class B Common Stock on the
New York Stock Exchange on the date immediately prior to approval.
On June 9, 2017, the Company sold to Howard S. Jonas 1,000,000
shares of the Company’s Class B Common Stock from the
Company’s treasury account for a purchase price of
$14,930,000.
Howard S. Jonas is the Company’s Chairman of the Board and
its controlling stockholder.
See SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
above
.
Section 312.03 of the NYSE Listed Company Manual requires the
Company’s stockholders to approve the Howard Jonas Stock
Sales.
Howard S. Jonas will not vote the 1,728,332 shares of Class B
Common Stock that he acquired in the Howard Jonas Stock Sales for
or against this Proposal, but Mr. Jonas may vote some or all of the
other shares of the Company’s Class B Common Stock and Class
A Common Stock that he beneficially owns on this Proposal. In
addition, Howard S. Jonas will not sell the 1,728,332 shares of
Class B Common Stock purchased in the Howard Jonas Stock Sales
unless this Proposal is approved by the Company’s
stockholders.
The closing price of the Company’s Class B Common Stock on
the New York Stock Exchange on November 1 was $13.14.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
FOR
APPROVAL AND
RATIFICATION OF THE
HOWARD JONAS STOCK SALES, AS DESCRIBED ABOVE.
45
PROPOSAL NO.
5
RATIFICATION OF THE
APPOINTMENT OF BDO USA, LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
FOR THE FISCAL YEAR ENDING JULY 31, 2018
The Company’s stockholders are being asked to ratify the
Board of Directors’ appointment of BDO USA, LLP as the
Company’s independent registered public accounting firm for
the Fiscal Year ending July 31, 2018.
BDO USA, LLP is the Company’s independent registered public
accounting firm and has served the Company as its independent
registered public accounting firm since February 1, 2017. BDO USA,
LLP was the Company’s independent registered public
accounting firm for Fiscal 2017. Prior to February 1, 2017, Grant
Thornton LLP served the Company as its independent registered
public accounting firm since 2008. The Audit Committee of the Board
of Directors has appointed BDO USA, LLP as the Company’s
independent registered public accounting firm for Fiscal 2018.
Neither the Company’s governing documents nor applicable law
require stockholder ratification of our independent registered
public accounting firm. However, the Audit Committee will consider
the results of the stockholder vote for this proposal and, in the
event of a negative vote, will review any future selection of BDO
USA, LLP. Even if BDO USA, LLP’s appointment is ratified by
the stockholders, the Audit Committee may, in its discretion,
appoint a new independent registered public accounting firm at any
time if it determines that such a change would be in the best
interests of the Company and its stockholders.
We expect that representatives for BDO USA, LLP will be present at
the Annual Meeting, will be available to respond to appropriate
questions and will have the opportunity to make such statements as
they may desire.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE
FOR
RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
FOR THE FISCAL YEAR ENDING JULY 31, 2018.
Grant Thornton LLP served as the Company’s independent
registered public accounting firm from 2008 to February 1, 2017. On
February 1, 2017, the Audit Committee of the Board of Directors
dismissed February 1, 2017 and appointed BDO USA, LLP as the
Company’s independent registered public accounting firm for
the remainder of Fiscal 2017.
The audit reports of Grant Thornton LLP on the Company’s
consolidated financial statements as of and for the years ended
July 31, 2015 and 2016 did not contain an adverse opinion or a
disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During the
Fiscal Years ended July 31, 2015 and 2016 and through February 1,
2017, the date of the Audit Committee action, there were (1) no
disagreements with Grant Thornton LLP on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Grant Thornton LLP, would have caused Grant
Thornton LLP to make reference to the subject matter of the
disagreement in connection with its reports on the Company’s
financial statements for such periods, and (2) no reportable events
as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company provided Grant Thornton LLP with a copy of the above
disclosures and requested that Grant Thornton LLP furnish the
Company with a letter addressed to the Securities and Exchange
Commission stating whether it agrees with the foregoing statements
and, if not, stating the respects in which it does not agree. A
copy of the letter from Grant Thornton LLP was filed as Exhibit
16.1 to the Company’s Form 8-K filed with the SEC on February
7, 2017.
During Fiscal 2015 and Fiscal 2016 and through February 1, 2017,
the date of BDO USA, LLP’s appointment by the Audit
Committee, the Company did not consult with BDO USA, LLP regarding
either (1) the application of accounting principles to any specific
completed or proposed transaction, (2) the type of audit opinion
that might be rendered on the Company’s financial statements
or (3) any matters or reportable events as set forth in Item
30
4(a)(1)(iv
) and (v) of Regulation
S-K.
46
Audit and Non-Audit
Fees
The following table presents fees billed for professional services
rendered by BDO USA, LLP for the period from February 1, 2017 to
July 31, 2017.
Fiscal Year Ended July 31
|
|
|
|
Audit Fees
(1)
|
|
$
|
803,400
|
|
Audit Related Fees
(2)
|
|
|
—
|
|
Tax Fees
(3)
|
|
|
1,440
|
|
All Other Fees
(4)
|
|
|
18,540
|
|
Total
|
|
$
|
823,380
|
The Audit Committee concluded that the provision of the non-audit
services listed above is compatible with maintaining the
independence of BDO USA, LLP.
The following table presents fees billed for professional services
rendered by Grant Thornton LLP from August 1, 2016 to February 1,
2017 and for the fiscal year ended July 31, 2016.
|
|
|
|
|
|
|
Audit Fees
(1)
|
|
$
|
70,000
|
|
$
|
1,183,821
|
|
Audit Related Fees
(2)
|
|
|
—
|
|
|
—
|
|
Tax Fees
|
|
|
—
|
|
|
57,631
|
|
All Other Fees
|
|
|
|
|
|
—
|
|
Total
|
|
$
|
70,000
|
|
$
|
1,241,452
|
The Audit Committee concluded that the provision of the non-audit
services listed above is compatible with maintaining the
independence of Grant Thornton LLP.
Policy on Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services
of the Independent Registered Public Accounting Firm
The Audit Committee is responsible for appointing, setting
compensation for, and overseeing the work of the Company’s
independent registered public accounting firm. The Audit Committee
has established a policy regarding pre-approval of all audit and
permissible non-audit services provided by the independent
registered public accounting firm, and all such services were
approved by the Audit Committee in Fiscal 2017 and Fiscal 2016.
The Audit Committee assesses requests for services by the
independent registered public accounting firm using several
factors. The Audit Committee will consider whether such services
are consistent with the Public Company Accounting Oversight
Board’s (“PCAOB”) and SEC’s rules on
auditor independence. In addition, the Audit Committee will
determine whether the independent registered public accounting firm
is best positioned to provide the most effective and efficient
service based upon the members’ familiarity with the
Company’s business, people, culture, accounting systems, risk
profile and whether the service might enhance the Company’s
ability to manage or control risk or improve audit quality.
47
Report of the Audit
Committee
The purpose of the Audit Committee is to assist the Board of
Directors in its general oversight of the Company’s financial
reporting process, internal controls, and audit functions. The
Audit Committee’s purpose is more fully described in its
charter, which can be found on the Company’s website at
http://ir.idt.net/Committees
.
The Audit Committee reviews its charter on an annual basis. The
Board of Directors annually reviews the NYSE listing
standards’ definition of independence for Audit Committee
members and has determined that each member of the Audit Committee
meets that standard. The Board of Directors has also determined
that Michael Chenkin qualifies as an “audit committee
financial expert” within the meaning of Item 407(d)(5) of
Regulation S-K.
The Company’s management is responsible for the preparation,
presentation, and integrity of the Company’s financial
statements, accounting and financial reporting principles, internal
controls, and procedures designed to reasonably assure compliance
with accounting standards, applicable laws, and regulations. The
Company has a full-time Internal Audit department that reports to
the Audit Committee and to the Company’s management. This
department is responsible for objectively reviewing and evaluating
the adequacy, effectiveness, and quality of the Company’s
system of internal controls related to, for example, the
reliability and integrity of the Company’s financial
information and the safeguarding of the Company’s assets.
The Company’s independent registered public accounting firm
for Fiscal 2017, BDO USA, LLP, is responsible for performing an
independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards and
expressing an opinion on the conformity of those financial
statements with U.S. generally accepted accounting principles. In
accordance with law, the Audit Committee has ultimate authority and
responsibility for selecting, compensating, evaluating, and, when
appropriate, replacing the Company’s independent audit firm,
and evaluates its independence. The Audit Committee has the
authority to engage its own outside advisors, including experts in
particular areas of accounting, as it determines appropriate, apart
from counsel or advisors hired by the Company’s
management.
Audit Committee members are not professional accountants or
auditors, and their functions are not intended to duplicate or to
certify the activities of the Company’s management and the
independent audit firm; nor can the Audit Committee certify that
the independent audit firm is “independent” under
applicable rules. The Audit Committee serves a Board-level
oversight role in which it provides advice, counsel, and direction
to the Company’s management and to the auditors on the basis
of the information it receives, discussions with the
Company’s management and the auditors, and the experience of
the Audit Committee’s members in business, financial, and
accounting matters.
The Audit Committee’s agenda for the year includes reviewing
the Company’s financial statements, internal control over
financial reporting, and audit and other matters. The Audit
Committee meets each quarter with BDO USA, LLP and the
Company’s management to review the Company’s interim
financial results before the publication of the Company’s
quarterly earnings releases. The Company’s management’s
and the independent audit firm’s presentations to, and
discussions with, the Audit Committee cover various topics and
events that may have significant financial impact or are the
subject of discussions between the Company’s management and
the independent audit firm. The Audit Committee reviews and
discusses with the Company’s management the Company’s
major financial risk exposures and the steps that the
Company’s management has taken to monitor and control such
exposures. In accordance with law, the Audit Committee is
responsible for establishing procedures for the receipt, retention,
and treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters,
including confidential, anonymous submission by the Company’s
employees, received through established procedures, of any concerns
regarding questionable accounting or auditing matters.
Among other matters, the Audit Committee monitors the activities
and performance of the Company’s internal auditors and
independent registered public accounting firm, including the audit
scope, external audit fees, auditor independence matters, and the
extent to which the independent audit firm can be retained to
perform non-audit services. The Company’s independent audit
firm has provided the Audit Committee with the written disclosures
and the letter required by the PCAOB regarding the independent
accountant’s communications with the Audit Committee
concerning independence, and the Audit Committee has discussed with
the independent audit firm and the Company’s management that
firm’s independence. In accordance with Audit Committee
policy and the requirements of law, the Audit Committee
pre-approves all services to be provided by BDO USA, LLP.
Pre-approval includes audit services, audit-related services, tax
services, and other services.
48
The Committee has reviewed and discussed with the Company’s
management the audited financial statements of the Company for the
Fiscal Year ended July 31, 2017, as well as the effectiveness of
the Company’s internal controls over financial reporting as
of July 31, 2017. The Committee has also reviewed and discussed
with BDO USA, LLP the matters required to be discussed with the
independent registered public accounting firm by applicable PCAOB
rules regarding “Communication with Audit
Committees.”
In reliance on these reviews and discussions, the Audit Committee
recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the
Company’s Annual Report on Form 10-K for the fiscal year
ended July 31, 2017, for filing with the Securities and Exchange
Commission.
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THE AUDIT COMMITTEE OF THE BOARD OF
DIRECTORS
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Michael Chenkin, Chairman
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Eric Cosentino
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Judah Schorr
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Notwithstanding
anything to the contrary set forth in any of the Company’s
previous filings under the Act, as amended, or the Exchange Act, as
amended, that might incorporate future filings, including this
Proxy Statement, in whole or in part, the foregoing report, as well
as any charters op policies referenced within this Proxy Statement,
shall not be incorporated by reference into any such filings, nor
shall they be deemed to be soliciting material or deemed filed with
the SEC under the Act or under the Exchange Act.
49
OTHER
INFORMATION
Submission of Proposals
for the 2018 Meeting of Stockholders
Stockholders who wish to present proposals for inclusion in the
Company’s proxy materials in connection with the 2018 annual
meeting of stockholders must submit such proposals in writing to
the General Counsel and Corporate Secretary of the Company at 520
Broad Street, Newark, New Jersey 07102, which proposals must be
received at such address no later than July 5, 2018. In addition,
any stockholder proposal submitted with respect to the
Company’s 2017 annual meeting of stockholders, which proposal
is submitted outside the requirements of Rule 14a-8 under the
Exchange Act and, therefore, will not be included in the relevant
proxy materials, will be considered untimely for purposes of Rule
14a-4 and 14a-5 if written notice thereof is received by the
Company’s General Counsel and Corporate Secretary after
September 22, 2018.
Availability of Annual
Report on Form 10-K
Additional copies of the Company’s Annual Report on Form 10-K
may be obtained by contacting Bill Ulrey, Vice
President–Investor Relations and External Affairs, by phone
at (973) 438-3838, by mail addressed to Bill Ulrey, Vice
President–Investor Relations and External Affairs, at 520
Broad Street, Newark, NJ 07102, or may be requested through the
Request Info section of our website:
http://ir.idt.net/Request_Info.
Other Matters
The Board of Directors knows of no other business that will be
presented at the Annual Meeting. If any other business is properly
brought before the Annual Meeting, it is intended that proxies
granted 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.
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BY ORDER OF THE BOARD OF DIRECTORS
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November 6, 2017
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/s/ Joyce Mason
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Joyce Mason
Executive Vice President,
General Counsel and Corporate Secretary
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50
EXHIBIT A
IDT
CORPORATION
2015 STOCK OPTION AND
INCENTIVE PLAN
Effective January 1, 2015 to September 16,
2024
(Amended and Restated on September 28,
2017)
1. Purpose; Types of
Awards; Construction.
The purpose of the IDT Corporation 2015 Stock Option and Incentive
Plan (the “Plan”) is to provide incentives to officers,
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
officers, 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) “Agreement” shall mean a written agreement entered
into between the Company and a Grantee in connection with an award
under the Plan.
(b) “Board” shall mean the Board of Directors of the
Company.
(c) “Change in Control” means a change in ownership or
control of the Company effected through
(i) any “person,” as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than (A) the Company,
(B) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (C) any corporation or other
entity owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
common stock, or (D) 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 issued or sold
directly by 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 power
of the Company’s then outstanding voting securities.
(d) “Class B Common Stock” shall mean shares of Class B
Common Stock, par value $.01 per share, of the Company.
(e) “Code” shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) “Committee” shall mean the Compensation Committee
of the Board or such other committee as the Board may designate
from time to time to administer the Plan.
(g) “Company” shall mean IDT Corporation, a corporation
incorporated under the laws of the State of Delaware, or any
successor corporation.
(h) “Continuous Service” means that the provision of
services to the Company or a Related Entity in any capacity of
officer, employee, director or consultant is not interrupted or
terminated. Continuous Service shall not be considered interrupted
in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related
Entity or any successor in any capacity of officer, employee,
director or consultant, or (iii) any change in status as long as
the individual remains in the service of the Company or a Related
Entity in any capacity of officer, employee, director or consultant
(except as otherwise provided in the applicable Agreement). An
approved leave of absence shall include, without limitation, sick
leave, temporary disability, maternity leave, military leave
(including, without limitation,
A-1
service in the National Guard or the Army Reserves) or any other
personal leave approved by the Committee. For purposes of Incentive
Stock Options, no such leave may exceed ninety (90) days unless
reemployment upon expiration of such leave is guaranteed by statute
or contract.
(i) “Corporate Transaction” means any of the following
transactions:
(i) a merger or consolidation of the Company with any other
corporation or other entity, 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 defined in the
Exchange Act) acquired 25% or more of the combined voting power of
the Company’s then outstanding securities; or
(ii) 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 its assets (or any transaction having a similar effect).
(j) “Deferred Stock Units” mean a Grantee’s
rights to receive shares of Class B Common Stock on a deferred
basis, subject to such restrictions, forfeiture provisions and
other terms and conditions as shall be determined by the
Committee.
(k) “Disability” shall mean a Grantee’s inability
to perform his or her 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.
(l) “Exchange Act” shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(m) “Fair Market Value” per share as of a particular
date shall mean (i) the closing sale price per share of Class B
Common Stock on the national securities exchange on which the Class
B Common Stock is principally traded for the last preceding date on
which there was a sale of such Class B Common Stock on such
exchange, or (ii) if the shares of Class B Common Stock are then
traded in an over-the-counter market, the average of the high and
low trades for the shares of Class B Common Stock in such
over-the-counter market for the last preceding date on which there
was a sale of such Class B Common Stock in such market, or (iii) if
the shares of Class B 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.
(n) “Grantee” shall mean a person who receives a grant
of Options, Stock Appreciation Rights, Limited Rights, Deferred
Stock Units or Restricted Stock under the Plan.
(o) “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.
(p) “Insider” shall mean a Grantee who is subject to
the reporting requirements of Section 16(a) of the Exchange
Act.
(q) “Insider Trading Policy” shall mean the Insider
Trading Policy of the Company, as may be amended from time to
time.
(r) “Limited Right” shall mean a limited stock
appreciation right granted pursuant to Section 10 of the Plan.
(s) “Non-Employee Director” means a member of the Board
or the board of directors of any Subsidiary (other than a
Subsidiary that has either (A) a class of “equity
securities” (as defined in Rule 3a11-1 promulgated under the
Exchange Act) registered under the Exchange Act or a similar
foreign statute or (B) adopted any stock option plan, equity
compensation plan or similar employee benefit plan in which
non-employee directors of such Subsidiary are eligible to
participate), in each of clause (A) and (B), who is not an employee
of the Company or any Subsidiary.
(t) “Non-Employee Director Annual Grant” shall mean an
award of 4,000 shares of Restricted Stock.
A-2
(u) “Non-Employee Director Grant Date” shall mean
January 5 of the applicable year (or the following business day if
January 5 is not a business day).
(v) “Nonqualified Stock Option” shall mean any option
not designated as an Incentive Stock Option.
(w) “Option” or “Options” shall mean a
grant to a Grantee of an option or options to purchase shares of
Class B Common Stock.
(x) “Option Agreement” shall have the meaning set forth
in Section 6 of the Plan.
(y) “Option Price” shall mean the exercise price of the
shares of Class B Common Stock covered by an Option.
(z) “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 award under the Plan, 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.
(aa) “Plan” means this IDT Corporation 2015 Stock
Option and Incentive Plan, as amended or restated from time to
time.
(bb) “Related Entity” means any Parent, Subsidiary or
any business, corporation, partnership, limited liability company
or other entity in which the Company, a Parent or a Subsidiary
holds a substantial ownership interest, directly or indirectly.
(cc) “Related Entity Disposition” means the sale,
distribution or other disposition by the Company of all or
substantially all of the Company’s interest in any Related
Entity effected by a sale, merger or consolidation or other
transaction involving such Related Entity or the sale of all or
substantially all of the assets of such Related Entity.
(dd) “Restricted Period” shall have the meaning set
forth in Section 11(b) of the Plan.
(ee) “Restricted Stock” means shares of Class B Common
Stock issued under the Plan to a Grantee for such consideration, if
any, and subject to such restrictions on transfer, rights of
refusal, repurchase provisions, forfeiture provisions and other
terms and conditions as shall be determined by the Committee.
(ff) “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.
(gg) “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.
(hh) “Stock Appreciation Right” shall mean the right,
granted to a Grantee under Section 9 of the Plan, to be paid an
amount measured by the appreciation in the Fair Market Value of a
share of Class B Common Stock from the date of grant to the date of
exercise of the right, with payment to be made in cash or Class B
Common Stock as applicable, as specified in the award or determined
by the Committee.
(ii) “Subsidiary” shall mean any company (other than
the Company) in an unbroken chain of companies beginning with the
Company if 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.
(jj) “Tax Event” shall have the meaning set forth in
Section 17 of the Plan.
(kk) “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.
(a) The Plan shall be administered by the Committee, the members of
which may be composed of “non-employee directors” under
Rule 16b-3 and “outside directors” under Section 162(m)
of the Code.
A-3
(b) 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,
including, without limitation, the authority to grant Options,
Stock Appreciation Rights, Limited Rights, Deferred Stock Units 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 Option
Price for 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
and any award under the Plan; to reconcile any inconsistent terms
in the Plan or any award under 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.
(c) 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.
(d) The Committee may delegate to one or more executive officers of
the Company the authority to (i) grant awards under the Plan to
employees of the Company and its Subsidiaries who are not executive
officers or a member of the Board, (ii) execute and deliver
documents or take such other ministerial actions on behalf of the
Committee with respect to awards and (iii) to make interpretations
of the Plan. The grant of authority in this Section 3(d) shall be
subject to such conditions and limitations as may be determined by
the Committee. If the Committee delegates authority to any such
executive officer or executive officers of the Company pursuant to
this Section 3(d), and such executive officer or executive officers
grant awards pursuant to such delegated authority, references in
this Plan to the “Committee” as they relate to such
awards shall be deemed to refer to such executive officer or
executive officers, as applicable.
4.
Eligibility.
Awards may be granted to officers, employees, members of the Board
and consultants of the Company or of any Subsidiary. In addition to
any other awards granted to Non-Employee Directors hereunder,
awards shall be granted to Non-Employee Directors pursuant to
Section 14 of the Plan. 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 purposes
of the Plan.
5. Stock.
(a) The maximum number of shares of Class B Common Stock reserved
for the grant of awards under the Plan shall be 1,030,000, all of
which may be granted as Incentive Stock Options, subject to
adjustment as provided in Section 12 of the Plan. 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.
(b) 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 a Limited Right),
without having been exercised in full, the shares of Class B 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,
unless otherwise determined by the Committee.
6. Terms and
Conditions of Options.
(a) OPTION AGREEMENT. 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 or a consultant’s service shall be deemed to be
employment with the Company.
A-4
(b) NUMBER OF SHARES. Each Option Agreement shall state the number
of shares of Class B Common Stock to which the Option relates.
(c) TYPE OF OPTION. Each Option Agreement shall specifically state
that the Option constitutes an Incentive Stock Option or a
Nonqualified Stock Option. In the absence of such designation, the
Option will be deemed to be a Nonqualified Stock Option.
(d) 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 Class B Common Stock covered by the Option on the
date of grant. The Option Price shall be subject to adjustment as
provided in Section 12 of the Plan.
(e) MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid in
full, at the time of exercise, in cash or in shares of Class B
Common Stock having a Fair Market Value equal to such Option Price
or in a combination of cash and Class B Common Stock including a
cashless exercise procedure through a broker-dealer; provided,
however, that in the case of an Incentive Stock Option, the medium
of payment shall be determined at the time of grant and set forth
in the applicable Option Agreement.
(f) TERM AND EXERCISABILITY OF OPTIONS. Each Option Agreement shall
provide the exercisability 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(g) and 6(h) of the Plan. An Option may be exercised, as
to any or all full shares of Class B Common Stock as to which the
Option has become exercisable, by written notice delivered in
person, by mail, e-mail, fax or overnight delivery to the
Company’s transfer agent or other administrator designated by
the Company, specifying the number of shares of Class B Common
Stock with respect to which the Option is being exercised.
(g) TERMINATION. Except as provided in this Section 6(g) and in
Section 6(h) of the Plan, 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 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 in Continuous
Service with the Company or any Subsidiary since the date of grant
of the Option unless otherwise determined by the Committee. 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 Grantee’s termination may, unless earlier
terminated in accordance with their terms, be exercised within 180
days after the date of termination (or such different period as the
Committee shall prescribe).
(h) 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(g) of the Plan), 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
A-5
the Committee shall prescribe). All unvested Options shall be
terminated upon death, disability or retirement, unless otherwise
determined by the Committee.
(i) 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.
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 of the
Plan.
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 of the Plan:
(a) LIMITATION ON VALUE OF SHARES. To the extent that the aggregate
Fair Market Value of shares of Class B Common Stock subject to
Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar
year (under all plans of the Company or any Subsidiary) exceeds
$100,000, such excess Options, to the extent of the shares covered
thereby in excess of the foregoing limitation, shall be treated as
Nonqualified Stock Options. For this purpose, Incentive Stock
Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of the shares of Class B Common
Stock shall be determined as of the date that the Option with
respect to such shares was granted.
(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 Class B 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, either alone or in tandem with any Option. A Stock
Appreciation Right granted in tandem with an Option 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 at
such time or times as may be determined by the Committee.
(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) of the Plan.
(c) EXERCISE. A Stock Appreciation Right shall be exercisable at
such time or times and only to the extent determined by the
Committee, and will not 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 Class B
Common Stock on the date of exercise exceeds the purchase price
specified in the related Incentive Stock Option. Unless otherwise
approved by the Committee, no Grantee shall be permitted to
exercise any Stock Appreciation Right during the period beginning
two weeks prior to the end of each of the Company’s fiscal
quarters and ending on the second business day following the day on
which the Company releases to the public a summary of its fiscal
results for such period.
(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 Class B Common Stock on the date of exercise of such
Stock Appreciation Right over the exercise or other
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base price of the Stock Appreciation Right or, if applicable, the
Option Price of the related Option, by (ii) the number of shares of
Class B 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, if any, shall be canceled to the extent of the
number of shares of Class B Common Stock as to which the Stock
Appreciation Right is exercised. 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 Class B Common Stock as to which the Option is
exercised or surrendered.
(f) METHOD OF EXERCISE. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered to the
Company in accordance with procedures specified by the Company from
time to time. Such notice shall state the number of shares of Class
B Common Stock with respect to which the Stock Appreciation Right
is being exercised. A Grantee may also be required to deliver to
the Company the underlying Agreement evidencing the Stock
Appreciation Right being exercised and any related Option Agreement
so that a notation of such exercise may be made thereon, and such
Agreements shall then be returned to the Grantee.
(g) FORM OF PAYMENT. Payment of the amount determined under Section
9(d) of the Plan may be made solely in whole shares of Class B
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 Class B Common Stock as the
Committee deems advisable. If the Committee decides to make full
payment in shares of Class B Common Stock and the amount payable
results in a fractional share, payment for the fractional share
will be made in cash.
10. Limited Stock
Appreciation Rights.
The Committee shall have authority to grant a Limited Right, either
alone or in tandem with any 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 may be granted at such time or
times as may be determined by the Committee.
(b) EXERCISE. A Limited Right may be exercised only (i) during the
ninety-day period following the occurrence of a Change in Control
or (ii) immediately prior to the effective date of a Corporate
Transaction. A Limited Right shall be exercisable at such time or
times and only to the extent determined by the Committee, and will
not be transferable except to the extent any related Option is
transferable or as otherwise determined by the Committee. A Limited
Right granted in connection with an Incentive Stock Option shall be
exercisable only if the Fair Market Value of a share of Class B
Common Stock on the date of exercise exceeds the purchase price
specified in the related Incentive Stock Option.
(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 clause (i) of the
definition of “Change in Control” (Section 2(c) of this
Plan), an amount equal to the Acquisition Spread as defined in
Section 10(d)(ii) below; or
(ii) in the case of the realization of Limited Rights by reason of
stockholder approval of an agreement or plan described in clause
(i) of the definition of “Corporate Transaction”
(Section 2(j) of this Plan), an amount equal to the Merger Spread
as defined in Section 10(d)(iv) below; or
(iii) in the case of the realization of Limited Rights by reason of
the change in composition of the Board described in clause (ii) of
the definition of “Change in Control” or stockholder
approval of a plan or agreement described in clause (ii) of the
definition of Corporate Transaction, an amount equal to the Spread
as defined in Section 10(d)(v) of this Plan.
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Notwithstanding the foregoing provisions of this Section 10(c) (or
unless otherwise approved by the Committee), 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 under the Code
as an Incentive Stock Option.
(d) DETERMINATION OF AMOUNTS PAYABLE. The amounts to be paid to a
Grantee pursuant to Section 10(c) of this Plan 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 Class B Common Stock described
in clause (i) of the definition of Change in Control, the greatest
of (A) the highest price per share shown on the Statement on
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 Class B
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 exercise
or other base price of the Limited Right or, if applicable, the
Option Price per share of Class B Common Stock at which the related
Option is exercisable, by (B) the number of shares of Class B
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 clause
(i) of the definition of Corporate Transaction, the greatest of (A)
the fixed or formula price for the acquisition of shares of Class B
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 Class B 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 exercise or
other base price of the Limited Right or, if applicable, the Option
Price per share of Class B Common Stock at which the related Option
is exercisable, by (B) the number of shares of Class B 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 clause (ii) of the
definition of Change in Control or stockholder approval of a plan
or agreement described in clause (ii) of the definition of
Corporate Transaction, 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 Class B Common Stock during the ninety day period
ending on the date the Limited Right is exercised over (B) the
exercise or other base price of the Limited Right or, if
applicable, the Option Price per share of Class B Common Stock at
which the related Option is exercisable, by (ii) the number of
shares of Class B 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, if any,
shall cease to be exercisable to the extent of the shares of Class
B 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 Class B
Common Stock available for the grant of future awards pursuant to
this Plan. Upon the exercise or termination of a related Option, if
any, the Limited Right with respect to such related Option shall
terminate to the extent of the shares of Class B Common Stock with
respect to which the related Option was exercised or
terminated.
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(f) METHOD OF EXERCISE. To exercise a Limited Right, the Grantee
shall (i) deliver written notice to the Company specifying the
number of shares of Class B Common Stock with respect to which the
Limited Right is being exercised, and (ii) if requested by the
Committee, deliver to the Company the Agreement evidencing the
Limited Rights being exercised and, if applicable, the Option
Agreement evidencing the related Option; the Company 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 Section 10(f).
11. Restricted
Stock.
The Committee may award shares of Restricted Stock to any eligible
employee, director or consultant of the Company or of any
Subsidiary. 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, but not limited to, the satisfaction of performance
criteria. Such performance criteria may include, without
limitation, 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. The Company may, at its option, maintain issued shares
in book entry form. Certificates, if any, 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, any such certificates shall be held in a
restricted account a at the transfer agent appointed by the
Company. 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 or other specified dates of the date of
such award.
(c) FORFEITURE. Subject to such exceptions as may be determined by
the Committee, if the Grantee’s Continuous Service 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 retired by, the
Company without cost to the Company or such Subsidiary, and such
shares shall become available for subsequent grants of awards under
the Plan, unless otherwise determined by the Committee.
(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 any
of the events specified in Section 13 of the Plan (and subject to
the conditions set forth therein), all restrictions then
outstanding on any shares of Restricted Stock awarded under the
Plan shall lapse as of the applicable date set forth in Section 13.
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.
11A. Deferred Stock
Units.
The Committee may award Deferred Stock Units to any outside
director, eligible employee or consultant of the Company or of any
Subsidiary. Each award of Deferred Stock Units 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
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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 for Deferred Stock Units shall
state the number of shares of Class B Common Stock to be subject to
an award.
(b) RESTRICTIONS. Deferred Stock Units may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except
by will or the laws of descent and distribution, until shares of
Class B Common Stock are payable with respect to an award. The
Committee may impose such vesting restrictions and conditions on
the payment of 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.
(c) FORFEITURE. Subject to such exceptions as may be determined by
the Committee, if the Grantee’s Continuous Service with the
Company or any Subsidiary shall terminate for any reason prior to
the Grantee becoming fully vested in the award, then the
Grantee’s rights under any unvested Deferred Stock Units
shall be forfeited without cost to the Company or such
Subsidiary.
(d) OWNERSHIP. Until shares are delivered with respect to Deferred
Stock Units, the Grantee shall not possess any incidents of
ownership of such shares, 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 any
of the events specified in Section 13 of the Plan (and subject to
the conditions set forth therein), all restrictions then
outstanding on any Deferred Stock Units awarded under the Plan
shall lapse as of the applicable date set forth in Section 13. 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 any restricted period with
respect to any or all of the shares of Deferred Stock Units awarded
on such terms and conditions as the Committee shall deem
appropriate.
12. Effect of Certain
Changes.
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
extraordinary liquidating dividend, stock dividend,
recapitalization, merger, consolidation, stock split, warrant or
rights issuance, or combination or exchange of such shares, or
other similar transactions, the Committee shall equitably adjust
(i) the number of shares of Class B Common Stock available for
awards under the Plan, (ii) the number and/or kind of shares
covered by outstanding awards and (iii) the Option Price per share
of Options or the applicable market value of Stock Appreciation
Rights or Limited Rights, in each such case so as to reflect such
event and preserve the value of such awards; provided, however,
that any fractional shares resulting from such adjustment shall be
eliminated. This provision shall not apply to cash dividends or
returns of capital.
(b) CHANGE IN CLASS B COMMON STOCK. In the event of a change in the
Class B Common Stock as presently constituted that is limited to a
change of all of its authorized shares of Class B 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 Class B Common Stock within the meaning of the Plan.
13. Corporate
Transaction; Change in Control; Related Entity
Disposition.
(a) CORPORATE TRANSACTION. In the event of a Corporate Transaction,
each award which is at the time outstanding under the Plan shall
automatically become fully vested and exercisable and, in the case
of an award of Restricted Stock or an award of Deferred Stock
Units, shall be released from any restrictions on transfer (except
with regard to the Insider Trading Policy and such other agreements
between the Grantee and the Company) and repurchase or forfeiture
rights, immediately prior to the specified effective date of such
Corporate Transaction. Effective upon the consummation of the
Corporate Transaction, all outstanding awards of Options, Stock
Appreciation Rights and Limited Rights under the Plan shall
terminate, unless otherwise determined by the Committee. However,
all such awards shall not terminate if the awards are, in
connection with the Corporate Transaction, assumed by the successor
corporation or Parent thereof.
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(b) CHANGE IN CONTROL. In the event of a Change in Control (other
than a Change in Control which is also a Corporate Transaction),
each award which is at the time outstanding under the Plan
automatically shall become fully vested and exercisable and, in the
case of an award of Restricted Stock or an award of Deferred Stock
Units, shall be released from any restrictions on transfer and
repurchase or forfeiture rights, immediately prior to the specified
effective date of such Change in Control.
(c) RELATED ENTITY DISPOSITION. The Continuous Service of each
Grantee (who is primarily engaged in service to a Related Entity at
the time it is involved in a Related Entity Disposition) shall
terminate effective upon the consummation of such Related Entity
Disposition, and each outstanding award of such Grantee under the
Plan shall become fully vested and exercisable and, in the case of
an award of Restricted Stock or an award of Deferred Stock Units,
shall be released from any restrictions on transfer (except with
regard to the Insider Trading Policy and such other agreements
between the Grantee and the Company). Unless otherwise determined
by the Committee, the Continuous Service of a Grantee shall not be
deemed to terminate (and each outstanding award of such Grantee
under the Plan shall not become fully vested and exercisable and,
in the case of an award of Restricted Stock or an award of Deferred
Stock Units, shall not be released from any restrictions on
transfer) if (i) a Related Entity Disposition involves the spin-off
of a Related Entity, for so long as such Grantee continues to
remain in the service of such entity that constituted the Related
Entity immediately prior to the consummation of such Related Entity
Disposition (“SpinCo”) in any capacity of officer,
employee, director or consultant or (ii) an outstanding award is
assumed by the surviving corporation (whether SpinCo or otherwise)
or its parent entity in connection with a Related Entity
Disposition.
(d) SUBSTITUTE AWARDS. The Committee may grant awards under the
Plan in substitution of stock-based incentive awards held by
employees, consultants or directors of another entity who become
employees, consultants or directors of the Company or any
Subsidiary by reason of a merger or consolidation of such entity
with the Company or any Subsidiary, or the acquisition by the
Company or a Subsidiary of property or equity of such entity, upon
such terms and conditions as the Committee may determine, and such
awards shall not count against the share limitation set forth in
Section 5 of the Plan.
14. Non-Employee
Director Restricted Stock.
The provisions of this Section 14 shall apply only to certain
grants of Restricted Stock to Non-Employee Directors, as provided
below. Except as set forth in this Section 14, the other provisions
of the Plan shall apply to grants of Restricted Stock to
Non-Employee Directors to the extent not inconsistent with this
Section. For purposes of interpreting Section 6 of the Plan and
this Section 14, a Non-Employee Director’s service as a
member of the Board or the board of directors of any Subsidiary
shall be deemed to be employment with the Company.
(a) GENERAL. Non-Employee Directors shall receive Restricted Stock
in accordance with this Section 14. Restricted Stock granted
pursuant to this Section 14 shall be subject to the terms of such
section and shall not be subject to discretionary acceleration of
vesting by the Committee. Unless determined otherwise by the
Committee, Non-Employee Directors shall not receive separate and
additional grants hereunder for being a Non-Employee Director of
(i) the Company and a Subsidiary or (ii) more than one
Subsidiary.
(b) INITIAL GRANTS OF RESTRICTED STOCK. A Non-Employee Director who
first becomes a Non-Employee Director shall receive a pro-rata
amount (based on projected quarters of service to the following
Non-Employee Director Grant Date) of a Non-Employee Director Annual
Grant on his date of appointment as a Non-Employee Director.
(c) ANNUAL GRANTS OF RESTRICTED STOCK. On each Non-Employee
Director Grant Date, each Non-Employee Director shall receive a
Non-Employee Director Annual Grant.
(d) VESTING OF RESTRICTED STOCK. Restricted Stock granted under
this Section 14 shall be fully vested on the date of grant.
15. Period During
which Awards May Be Granted.
Awards may be granted pursuant to the Plan from time to time
commencing on January 1, 2015 until September 16, 2024 (ten (10)
years from September 17, 2014, the date the Board initially adopted
the Plan). No awards shall be effective prior to the approval of
the Plan by a majority of the Company’s stockholders.
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16. Transferability
of Awards.
(a) Incentive Stock Options and Stock Appreciation Rights may not
be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by the laws of descent and distribution
and may be exercised, during the lifetime of the Grantee, only by
the Grantee or his or her guardian or legal representative.
(b) Nonqualified Stock Options shall be transferable in the manner
and to the extent acceptable to the Committee, as evidenced by a
writing signed by the Company and the Grantee. Nonqualified Stock
Options (together with any Stock Appreciation Rights or Limited
Rights related thereto) shall be transferable by a Grantee as a
gift to the Grantee’s “family members” (as
defined in Form S-8) under such terms and conditions as may be
established by the Committee; provided that the Grantee receives no
consideration for the transfer. Notwithstanding the transfer by a
Grantee of a Nonqualified Stock Option, the transferred
Nonqualified Stock Option shall continue to be subject to the same
terms and conditions as were applicable to the Nonqualified Stock
Option immediately before the transfer (including, without
limitation, the Insider Trading Policy) and the Grantee will
continue to remain subject to the withholding tax requirements set
forth in Section 17 hereof.
(c) The terms of any award granted under the Plan, including the
transferability of any such award, shall be binding upon the
executors, administrators, heirs and successors of the Grantee.
(d) Restricted Stock shall remain subject to the Insider Trading
Policy after the expiration of the Restricted Period. Deferred
Stock Units shall remain subject to the Insider Trading Policy
after payment thereof.
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, the expiration
of a Restricted Period or payment of a Deferred Stock Unit (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 law to be withheld upon the Tax Event. Unless determined
otherwise by the Committee, a Grantee shall permit, to the extent
permitted or required by law, the Company to withhold 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.
Unless otherwise determined by the Committee, any such
above-described withholding obligation may, in the discretion of
the Company, be satisfied by the withholding by the Company or
delivery to the Company of Class B Common Stock.
18. Rights as a
Stockholder.
Except as provided in Section 11(d) of the Plan, 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 such shares to him or her. 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 shares are issued,
except as provided in Section 12(a) of the Plan.
19. No Rights to
Employment; Forfeiture of Gains.
Nothing in the Plan or in any award granted or Agreement entered
into pursuant hereto shall confer upon any Grantee the right to
continue as a director of, 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 or consulting relationship. 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, or a director of the Company or any
Subsidiary. The Agreement for any award under the Plan may require
the Grantee to pay to the Company any financial gain realized from
the prior exercise, vesting or payment of the award in the event
that the Grantee engages in conduct that violates any non-compete,
non-solicitation or non-disclosure obligation of the Grantee under
any agreement with the Company or any Subsidiary, including,
without limitation, any such obligations provided in the
Agreement.
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20.
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.
21. Authorized Share
Approval; Amendment and Termination of the Plan.
(a) AUTHORIZED SHARE APPROVAL. The Plan was adopted by the Board on
September 17, 2014. The Plan was ratified by the Company’s
stockholders on December 15, 2014, with 500,000 shares of Class B
Common Stock authorized for awards under the Plan. The Plan shall
become effective on January 1, 2015 and shall terminate on
September 16, 2024. The Board amended the Plan on September 24,
2015 and October 13, 2016 to increase the amount of authorized
shares under the Plan to 600,000 and then 700,000, respectively,
shares of Class B Common Stock. The Company’s stockholders
ratified such amendments to the Plan on December 14, 2015 and
December 14, 2016, respectively. The Board amended the Plan on
September 28, 2017 to increase the amount of authorized shares
under the Plan to 1,030,000 shares of Class B Common Stock. The
Company’s stockholders ratified such amendment to the Plan on
December 14, 2017.
(b) AMENDMENT AND TERMINATION OF THE PLAN. The Board, or the
Committee if so delegated by the Board, at any time and from time
to time may suspend, terminate, modify or amend the Plan; however,
unless otherwise determined by the Board, or the Committee if
applicable, an amendment that requires stockholder approval in
order for the Plan to continue to comply with any law, regulation
or stock exchange requirement shall not be effective unless
approved by the requisite vote of stockholders. Except as provided
in Section 13(a) of the Plan, 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.
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.
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EXHIBIT B
IDT
CORPORATION
2015 STOCK OPTION AND
INCENTIVE PLAN
STOCK OPTION
AGREEMENT
This STOCK OPTION AGREEMENT (this “Agreement”) is
entered into as of May 2, 2017, by and between IDT Corporation, a
Delaware corporation (the “Company”), and Howard Jonas
(the “Employee”).
WHEREAS, the Company desires to grant to the Employee options to
acquire an aggregate of 1,000,000 shares of Class B Common Stock of
the Company, par value $.01 per share (the “Stock”), on
the terms set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
1.
Definitions
.
Capitalized terms are defined herein; those terms not defined
herein shall have the meaning giving to them in the Plan.
2.
Grant of
Options
. The Employee is hereby granted stock options (the
“Options”) to purchase an aggregate of 1,000,000 shares
of Stock, pursuant to the terms of this Agreement.
3.
Term
.
The term of the Options (the “Option Term”) shall be
for five (5) years commencing on May 2, 2017 and terminating on May
1, 2022.
4.
Option
Price
. The initial exercise price per share of the Options
shall be $14.93, subject to adjustment as provided herein.
5.
Conditions
to Exercisability
. The Options are immediately exercisable.
The unexercised portion of the Option will terminate should
Employee cease being an officer or director of the Company or one
or more of its subsidiaries.
6.
Method of
Exercise
. An Option may be exercised, as to any or all full
shares of Class B Common Stock as to which the Option has become
exercisable, by written notice delivered in person or by mail,
email, fax or overnight delivery to the Company’s transfer
agent or other administrator designated by the Company, specifying
the number of shares of Class B Common Stock with respect to which
the Option is being exercised.
7.
Medium and
Time of Payment
. The Option Price shall be paid in full, at
the time of exercise, in cash or in shares of Class B Common Stock
(whether then owned by the Employee or issuable upon exercise of
the Option) having a Fair Market Value equal to such Option Price
or in a combination of cash and Class B Common Stock, including a
cashless exercise procedure through a broker-dealer.
8.
Termination
.
Except as provided in this Section 8 and in Section 9 hereof, an
Option may not be exercised unless the Employee 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 of such company issuing or assuming the Option in a
transaction to which Section 424(a) of the Code applies), and
unless the Employee has remained continuously so employed or in the
director or consultant relationship since the date of grant of the
Option, unless otherwise determined by the Committee. In the event
that the employment or consultant relationship of a Employee shall
terminate (other than by reason of death, Disability or
Retirement), all Options of such Employee that are exercisable at
the time of Employee’s termination may, unless earlier
terminated in accordance with their terms, be exercised within one
hundred eighty (180) days after the date of such termination (or
such different period as the Compensation Committee of the Company
(the “Committee”) shall prescribe).
9.
Death,
Disability or Retirement of Employee
. If the Employee 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
Employee’s employment, director or consultant relationship
(or within such different period as the Committee may have provided
pursuant to Section 8 hereof), or if the Employee’s
employment, director or consultant relationship shall terminate by
reason of Disability, all Options theretofore granted to the
Employee (to the extent otherwise exercisable) may, unless earlier
terminated in accordance with their terms, be exercised by the
Employee or by the Employee’s estate or by a person who
acquired the right to exercise such Options by bequest
B-1
or inheritance or otherwise by result of death or Disability of the
Employee, at any time within 180 days after the death or Disability
of the Employee (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
Employee, 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 an Employee
shall terminate on account of such Employee’s Retirement, all
Options of the Employee 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). All unvested Options shall be
terminated upon death, disability or retirement, unless otherwise
determined by the Committee.
10.
Company’s
Repurchase Right
. The Company will have the right to
repurchase the Class B Common Stock issued upon exercise of the
Options at a purchase price equal to the exercise price of the
Options should Employee cease to provides services as an officer or
director of the Company or one or more of its subsidiaries. The
Company’s repurchase right will lapse as to 333,333 shares
underlying the Options on each of May 2, 2018 and 2019 and as to
333,334 shares underlying the Options on May 2, 2020. Employee will
be prohibited from transferring any shares of the Class B Common
Stock issued on exercise of the Option that are subject to the
Company’s repurchase right. The Company’s repurchase
right shall lapse as to all shares underlying the Options upon the
Employee’s death, “Disability,” termination by
the Company without “Cause” or termination by the
Employee for “Good Reason,” each as defined in the
Fourth Amended and Restated Employment Agreement between the
Company and the Employee, dated December 14, 2016 (the
“Employment Agreement”). If the Employee’s
employment is terminated by the Company for “Cause” or
by the Employee other than for “Good Reason,” each as
defined in the Employment Agreement, then the Company’s then
the Pro Rata Portion (as defined below) of its right to repurchase
the shares upon exercise of the Options shall lapse. As used
herein, the term “Pro Rata Portion” shall mean a
percentage of the shares subject to the repurchase right that is
scheduled to lapse on the May 2 that follows the twelve-month
period in which the Date of Termination (as defined in the
Employment Agreement) shall occur represented by the portion of
such twelve-month period that has elapsed as of the Date of
Termination.
11.
Withholding
Taxes
. No later than the date of exercise of an Option, the
Employee will pay to the Company or make arrangements satisfactory
to the Company regarding payment of any federal, state or local
taxes of any kind required by law to be withheld upon the exercise
of an Option. Alternatively, solely to the extent permitted or
required by law, the Company may deduct the amount of any federal,
state or local taxes of any kind required by law to be withheld
upon the exercise of an Option from any payment of any kind due to
the Employee. The withholding obligation may be satisfied by the
withholding or delivery of the Stock.
12.
Terms
Incorporated by Reference Herein
. Each of the terms of the
Company’s 2015 Stock Option and Incentive Plan, as Amended
and Restated (“Plan”), as in effect as of the date
hereof, shall be deemed to govern the Options granted hereunder, as
if the Options had been granted pursuant to the Plan. To the extent
that there is any inconsistency between this Agreement and the
terms of the Plan, the terms of this Agreement shall govern.
13.
Stockholder
Approval
. The grant of the Options will be subject to
ratification by the stockholders of the Company and will be
submitted to the stockholders and the next annual meeting of
stockholders. If the grant of the Options is not ratified by the
stockholders, the Options shall terminate and the Company shall buy
back all of the shares that were previously purchased upon exercise
of the Options.
14.
Transferability
of Options
. Stock Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner
other than to an immediate family member of Employee or to a trust
or other estate planning entity created for the benefit of the
Employee or one or more members of his immediate family as provided
for under the Plan, provided that, in all cases, such transferee
executes a written consent to be bound by the terms of this
Agreement and that written evidence of the transfer as well as the
written consent of the transferee is provided to the Compensation
Committee, care of Joyce J. Mason, General Counsel and Secretary of
the Company, within thirty (30) days of the transfer.
15.
Entire
Agreement
. This Agreement contains all of the understandings
between the parties hereto pertaining to the matters referred to
herein, and supersedes all undertakings and agreements, whether
oral or in writing, previously entered into by them with respect
thereto. The Employee represents that, in executing this Agreement,
he does not rely and has not relied upon any representation or
statement not set forth herein made by the Company with regard to
the subject matter of this Agreement or otherwise.
B-2
16.
Amendment
or Modification, Waiver
. No provision of this Agreement may
be amended or waived unless such amendment or waiver is agreed to
in writing, signed by the Employee and by a duly authorized officer
of the Company. No waiver by any party hereto of any breach by
another party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a
waiver of a similar of dissimilar condition or provision at the
same time, any prior time or any subsequent time.
17.
Notices
.
Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail to the proper address. All
notices to the Company shall be addressed to it at:
IDT Corporation
520 Broad Street
Newark, New Jersey 07102
Attention:
Nadine Shea
Options Administrator
All notices to the Employee or other person or persons then
entitled to exercise the Options shall be addressed to the Employee
or such other person or persons at:
Mr. Howard S. Jonas
Anyone to whom a notice may be given under this Agreement may
designate a new address by notice to such effect.
18.
Severability
.
If any provision of this Agreement or the application of any such
provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to
any extent, the remainder of this Agreement or the application of
such provision to such person or circumstances other than those to
which it is so determined to be invalid and unenforceable, shall
not be affected thereby, and each provision hereof shall be
validated and shall be enforced to the fullest extent permitted by
law.
19.
Governing
Law
. This Agreement shall be construed and governed in
accordance with the laws of the state of Delaware, without regard
to principles of conflicts of laws.
20.
Headings
.
All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of
this Agreement is to be construed by reference to the heading of
any section or paragraph.
21.
Counterparts
.
This Agreement may be executed in counterparts, each of which shall
be deemed to be an original but both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by an authorized officer and the Employee has hereunto set
his hand all as of the date first above written.
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IDT Corporation
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By:
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Name: Marcelo Fischer
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Title: Senior Vice President -
Finance
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By:
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Employee: Howard S. Jonas
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Telephone:
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B-3
ANNUAL MEETING OF
STOCKHOLDERS OF
IDT
CORPORATION
December 14,
2017
Important Notice Regarding the Availability of Proxy Materials for
the IDT Corporation
Stockholders Meeting to be Held on December 14,
2017
:
The Notice of Annual
Meeting and Proxy Statement and the 2017 Annual Report are
available at:
www.idt.net/ir
Please date, sign and
mail
your proxy card in
the
envelope provided as
soon
as possible.
â
Please detach along perforated line and mail in the envelope
provided.
â
PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTES IN
BLUE OR BLACK INK AS SHOWN HERE
x
THE BOARD OF DIRECTORS
RECOMMENDS VOTES
“FOR” THE LISTED NOMINEES AND “FOR”
PROPOSALS 2, 3, 4 & 5.
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN
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1.Election of
Directors:
NOMINEES:
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2.To approve an
amendment to the IDT Corporation 2015 Stock Option and Incentive
Plan that will increase the number of shares of the Company’s
Class B Common Stock available for the grant of awards thereunder
by an additional 330,000 shares.
3.
To ratify a May 2, 2017 grant to Howard S.
Jonas of fully vested options to purchase up to 1,000,000 shares of
the Company’s Class B Common Stock at an exercise price of
$14.93 per share and with certain repurchase rights held by the
Company.
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Michael Chenkin
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Eric F. Cosentino
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Howard S. Jonas
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Bill Pereira
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Judah Schorr
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4. To approve and
ratify two sales by the Company to Howard S. Jonas of an aggregate
1,728,332 shares of the Company’s Class B Common Stock from
the Company’s treasury account at an aggregate purchase price
of $24,929,998.
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5. To ratify the
appointment of BDO USA, LLP as the Company’s independent
registered public accounting firm for the Fiscal Year ending July
31, 2018.
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To change the address on your account, please
check the box at right and indicate your new address in the address
space above. Please note that changes to the registered name(s) on
the account may not be submitted via this method.
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MARK “X” HERE IF YOU PLAN TO ATTEND
THE MEETING.
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Signature of
Stockholder ______________________
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Date: ________
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Signature of
Stockholder ______________________
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Date: ________
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Note:
Please sign
exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by a duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by an authorized person.
Electronic Distribution
If you would like to receive future IDT CORPORATION proxy
statements and annual reports electronically, please visit
www.amstock.com
.
Click on Shareholder Account Access to enroll. Please enter your
account number and tax identification number to log in, then select
Receive Company Mailings via e-Mail and provide your e-mail
address.
THIS PROXY IS BEING
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
IDT
CORPORATION
520 Broad Street,
Newark, New Jersey 07102
(973)
438-1000
PROXY FOR ANNUAL MEETING
OF STOCKHOLDERS
To Be Held December 14,
2017
The undersigned appoints Howard S. Jonas and Joyce J. Mason, 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, 520 Broad Street,
Newark, New Jersey 07102 on December 14, 2017 at 10:30 a.m., and
any adjournment or postponement 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 FOR THE BOARD OF DIRECTORS
AND FOR PROPOSALS 2, 3, 4 & 5 LISTED ON THE REVERSE
SIDE.
CONTINUED AND TO BE
SIGNED ON REVERSE SIDE
ANNUAL MEETING OF
STOCKHOLDERS OF
IDT
CORPORATION
December 14,
2017
PROXY VOTING
INSTRUCTIONS
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INTERNET
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Access
“
www.voteproxy.com
”
and follow the on-screen instructions or scan the QR code with your
smartphone. Have your proxy card available when you access the web
page. Vote online until 11:59 PM EST the day before the
meeting.
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MAIL
- Date,
sign and mail your proxy card in the envelope provided as soon as
possible.
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IN PERSON
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You may vote your shares
in person by attending the Annual Meeting.
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COMPANY NUMBER ______________
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GO GREEN
-
e-Consent makes it easy
to go paperless. With e-Consent, you can quickly access your proxy
material, statements and other eligible documents online, while
reducing costs, clutter and paper waste. Enroll today via
www.amstock.com
to enjoy online access.
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ACCOUNT NUMBER ______________
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â
Please detach along perforated line and
mail in the envelope provided
IF
you are not voting via the Internet.
â
PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTES IN
BLUE OR BLACK INK AS SHOWN HERE
S
THE BOARD OF DIRECTORS
RECOMMENDS VOTES
“FOR” THE
LISTED NOMINEES AND “FOR” PROPOSALS 2, 3, 4 AND
5.
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FOR
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AGAINST
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ABSTAIN
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FOR
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AGAINST
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ABSTAIN
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1.Election of
Directors:
NOMINEES:
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2.To approve an
amendment to the IDT Corporation 2015 Stock Option and Incentive
Plan that will increase the number of shares of the Company’s
Class B Common Stock available for the grant of awards thereunder
by an additional 330,000 shares.
3.
To ratify a May 2, 2017 grant to Howard S.
Jonas of fully vested options to purchase up to 1,000,000 shares of
the Company’s Class B Common Stock at an exercise price of
$14.93 per share and with certain repurchase rights held by the
Company.
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¨
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¨
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¨
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Michael Chenkin
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¨
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¨
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¨
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Eric F. Cosentino
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¨
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Howard S. Jonas
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Bill Pereira
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Judah Schorr
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4. To approve and
ratify two sales by the Company to Howard S. Jonas of an aggregate
1,728,332 shares of the Company’s Class B Common Stock from
the Company’s treasury account at an aggregate purchase price
of $24,929,998.
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¨
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¨
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¨
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5. To ratify the
appointment of BDO USA, LLP as the Company’s independent
registered public accounting firm for the Fiscal Year ending July
31, 2018.
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¨
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¨
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¨
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To change the address on your account, please
check the box at right and indicate your new address in the address
space above. Please note that changes to the registered name(s) on
the account may not be submitted via this method.
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¨
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MARK “X” HERE IF YOU PLAN TO ATTEND
THE MEETING.
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¨
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Signature of
Stockholder ______________________
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Date: ________
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Signature of
Stockholder ______________________
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Date: ________
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Note:
Please sign exactly as your name or names
appear on this Proxy. When shares are held jointly, each holder
should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by a duly
authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by an authorized
person.