Employment Agreement [Amendment] - IDT Corp. and Clifford M. Sobel
AMENDMENT TO EMPLOYMENT AGREEMENT
BETWEEN
IDT CORPORATION AND CLIFFORD M. SOBEL
This Amendment dated May 11, 1999 between IDT Corporation (the "Company"),
Net2Phone Inc. ("Net2Phone") and Clifford M. Sorbel (the "Executive"), is
intended to and does restate and amend certain sections of the Employment
Agreement (the "Agreement") entered into between the Company and the Executive
as of May 1, 1997.
WHEREAS, the parties desire to restate and amend certain sections of the
Agreement of May 1, 1997;
WHEREAS, the parties acknowledge that certain of the Executive's
compensation provisions set forth in the Agreement were intended to and, in fact
were, based upon the assets of Net2Phone at the time the parties entered into
the Agreement as of May 1, 1997 and such assets have changed since that time;
WHEREAS, the parties recognize that the change in Net2Phone's assets may
result in the creation of issues regarding the Executive's compensation based on
said assets;
WHEREAS, the parties acknowledge that subsequent to the execution of the
Agreement by the parties, Net2Phone includes significantly more assets than
contemplated or intended as of May 1, 1997, and thus, the parties have agreed to
amend the grant of stock to Executive as set forth in Paragraph 6, sub-
paragraphs (b) and (c) of the Agreement;
WHEREAS, the parties desire to avoid future disputes regarding the
Executive's Net2Phone ownership potential by amending the Agreement;
WHEREAS, the parties desire to add Net2Phone as a party to the Agreement
and to make the Agreement binding on Net2Phone.
NOW, THEREFORE, in consideration of the promises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Paragraph 2 of the Agreement is hereby amended and restated to read as
follows:
Term. This Agreement is for the three-year period (the "Term") commencing
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on September 15, 1997, and terminating on the third anniversary of such date, or
upon the Executive's earlier death or other termination of employment pursuant
to Section 7 hereof; provided however, that commencing on September 15, 2000 and
each anniversary thereafter, the Term shall automatically be extended for one
additional year beyond its otherwise expiration unless, not later than 90 days
prior to any such anniversary,
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Net2phone or Executive shall have notified the other party hereto in writing
that such extension shall not take effect.
2. The Executive hereby acknowledges that he shall serve as Chairman and
President of Net2Phone and shall not be Chief Executive Officer of Net2Phone as
originally contemplated in paragraph 3 of the Agreement.
3. Paragraph 4(a) of the Agreement is hereby amended and restated to read
as follows:
The initial Board of Directors of Net2Phone will be selected based upon the
mutual agreement among the Executive and the Chief Executive Officer of the
Company. Thereafter, the Board of Directors shall be elected by the
stockholders of Net2Phone pursuant to the applicable provisions of Delaware
general corporate law.
4. Net2Phone Ownership Potential: The parties hereby acknowledge that
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paragraph 6, sub-paragraphs (b) and (c) of the Agreement provided the Executive
with stock in the new company, as defined in the Agreement, equal to a total of
11% of the value of the new company at the time of the initial public offering.
A copy of the Agreement is attached herewith as Attachment 1. The parties agree
that paragraph 6, sub-paragraphs (b) and (c) of the Agreement are hereby amended
to provide the Executive with stock in the new company equal to a total of eight
(8)% of the value of the new company which percentage may be maintained by the
Executive through the time of Net2Phone's initial public offering by transfer of
the Company's shares in Net2Phone; it being understood, that any express or
implied anti-dilution rights granted by the Company hereunder shall not apply,
nor shall the Executive's percentage in Net2Phone be guaranteed, in connection
with any transactions affecting Net2Phone's capitalization after its initial
public offering.
5. Paragraph 6(b)(i) of the Agreement is hereby amended and restated to
read as follows:
Upon the Executive's completion of the second year of the Term and for a
period of one year thereafter, Executive will have the option to do one of the
following two things: (1) transfer to the Company all of the stock representing
his 7% interest in Net2Phone (calculated by subtracting from the 8% he received
pursuant to this Agreement, the 1% interest he previously transferred to
irrevocable trusts for the benefit of his children), in exchange for an option
from the Company exercisable from September 15, 1999 through September 15, 2000
to purchase 875,000 registered and marketable shares of the Company's common
stock, adjusted for stock splits, at a purchase price of $6.50 per share; or (2)
keep his 7% interest in Net2Phone and forfeit the option set forth in the
preceding subparagraphs 6(b)(i)(1). Notwithstanding the foregoing, once
Executive no longer owns and holds in his own name each and every share of stock
representing the above referenced 7% interest he received pursuant to this
Agreement, he will forfeit the option set forth in the preceding subparagraph
6(b)(i)(1).
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6. Paragraph 17 of the Agreement is hereby amended and restated to read as
follows:
Notices: For the purposes of the Agreement, notices, demands and all other
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communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Company:
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IDT Corporation
190 Main Street
Hackensack, NJ 07601
With a copy to:
Ira Greenstein, Esq.
Morrison & Foerster, LLP
1290 Avenue of the Americas
New York, NY 10104
If to the Executive:
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Clifford M. Sobel
c/o Net2Phone
171 Main Street
Hackensack, NJ 07601
With a copy to:
Steven Greenberg, Esq.
Stern & Greenberg
75 Livingston Avenue
Roseland, NJ 07068
If to Net2Phone:
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Net2Phone, Inc.
171 Main Street
Hackensack, NJ 07601
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. Release: The Executive hereby releases and forever discharges the
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Company and Net2Phone from any and all actions, claims and/or damages and agrees
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that he has not filed and will not file any action or proceeding in Federal,
State or other court, or before any Administrative Agency, under any statute,
law, ordinance, regulation or constitution arising out of or in connection with
the re-negotiation of the Net2Phone or IDT Ownership or stock option provisions
set forth in Paragraphs 4 and 5 of this Amendment.
8. Severability: If any part or provision of this Amendment is
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determined to be invalid, unenforceable or contrary to public policy under an
applicable statute or rule of law, the parties agree to ratify the Restatement
with the affected part or provision (and only that part or provision) considered
to be omitted from the Amendment.
9. Representations: Executive has been advised to obtain independent
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counsel to evaluate the terms, conditions and covenants herein set forth and he
has been afforded ample opportunity to obtain such independent advice and
evaluation. Executive warrants to the Company that he has relied upon such
independent counsel and not upon any representation (legal or otherwise),
statement or advice said or offered by the Company of the Company's counsel in
connection herewith.
10. Modification: This Amendment may not be amended except upon mutual
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agreement in writing signed by the Company and the Executive and no amendments
or modifications are contemplated at this time.
11. Superseding Provisions: This Amendment is intended to and does
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supersede certain sections of the Agreement executed as of May 1, 1997 between
the Company and the Executive. In all other respects, the Agreement executed as
of May 1, 1997 remains in full force and effect. The parties further acknowledge
that all references in paragraph 22 of the Agreement making references to
paragraphs or sections amended or deleted by this Amendment are hereby updated
or deleted, as the case may be.
12. Controlling Law: This Amendment will be governed by the laws of the
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State of New Jersey and both parties agree to submit to the jurisdiction of the
courts of the State of New Jersey, both state and federal.
13. Breach: The parties agree that in the event of a breach of any term of
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this Amendment, the non-breaching party may commence an action at law or in
equity to enjoin or recover any loss, cost, damage or expense incurred by the
breach, including without limitation, any attorney's fees incurred.
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It is so Agreed this 11 day
of May, 1999
Signed in the Presence of
WITNESS
/s/ Heather Valpone /s/ Clifford M. Sobel
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Clifford M. Sobel,
President
Net2Phone, Inc.
WITNESS
/s/ Heather Valpone /s/ Jim Courter
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James Courter,
President, IDT Corporation
WITNESS
/s/ Heather Valpone /s/ Howard Balter
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Howard Balter,
CEO, Net2Phone, Inc.
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