Exhibit 10.20
STOCKHOLDERS AGREEMENT
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STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of May 13, 1999,
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by and among IDT Corporation, a Delaware corporation ("IDT"), and Xxxxxxxx X.
Xxxxx ("Xxxxx") (together with IDT, the "Majority Stockholders"), Net2Phone,
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Inc., a Delaware corporation (the "Company"), and the additional investors
listed on Schedule A hereto (the "Series A Investors").
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WHEREAS, each of the Series A Investors has executed and delivered a
Series A Subscription Agreement, dated as of May 13, 1999 (collectively, the
"Series A Subscription Agreement"), by and among the Company and each such
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Series A Investor for the purchase of Series A Convertible Preferred Stock of
the Company, par value $.01 per share (the "Series A Preferred"), and Warrants
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(the "Warrants") to purchase Common Stock of the Company, par value $.01 per
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share (the "Common Stock").
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WHEREAS, Xxxxx holds shares individually and has donated shares to the
Xxxxx Xxxxx Annual Gift Trust (the "Xxxxx Trust").
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WHEREAS, Xxxxx is entering into this Agreement with respect to the
shares of Common Stock held by him and a trustee is entering into this Agreement
on behalf of the Xxxxx Trust.
WHEREAS, it is a condition to the Series A Investors entering into the
Series A Subscription Agreements that the Majority Stockholders enter into this
Agreement.
NOW, THEREFORE, the Majority Stockholders and each of the Series A
Investors hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise defined
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herein shall have the meanings given to them in the Series A Subscription
Agreements.
2. Election of Directors. (a) The Majority Stockholders agree that at the next
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meeting of stockholders of the Company following the date of this Agreement (the
"Stockholders' Meeting"), and for so long as the Series A Investors who are
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affiliates of Softbank (the "Softbank Investors") hold a majority of the shares
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of Series A Preferred originally purchased pursuant to their respective
Subscription Agreements or the capital stock into which such shares of Series A
Preferred are convertible, they will vote all of their respective shares of
capital stock in the Company in favor of the election of, and take all other
actions necessary to cause the election of, a director nominated by the Softbank
Investors (the "Softbank Director"), and shall, upon the request of the Softbank
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Investors, use their best efforts to cause such director to be appointed to the
Company's audit committee or compensation committee. In the event that the
Softbank Investors elect to terminate the appointment of the Softbank Director,
or fail to nominate a
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candidate, the Majority Stockholders will nominate and elect a director of their
choosing in place of the Softbank Director.
(b) The Majority Stockholders agree that at the Stockholders' Meeting, and for
so long as GE Capital Equity Investments Inc., its affiliates or beneficial
owners (collectively, the "GE Investors") hold a majority of the shares of
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Series A Preferred originally purchased pursuant to their respective
Subscription Agreements or the capital stock into which such shares of Series A
Preferred are convertible, they will vote all of their respective shares of
capital stock in the Company in favor of the election of, and take all other
actions necessary to cause the election of, a director nominated by the GE
Investors (the "GE Director"), and shall, upon the request of the GE Investors,
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use their best efforts to cause such director to be appointed to whichever of
the Company's audit committee or compensation committee to which the Softbank
Director is not elected.
3. Transfer Restrictions. Except as otherwise set forth in this Section 3,
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each Series A Investor agrees not to sell, transfer or otherwise dispose of,
pledge, collateralize, hypothecate or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer or other
disposition, pledge, collateralization, or hypothecation (any such event, a
"Disposition") of its shares of Series A Preferred or Warrants, or Common Stock
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underlying such securities, for a period of 180 days following the date upon
which a registration statement relating to an initial public offering of the
Company which results in the conversion of the Series A Preferred pursuant to
the Certificate of Designation is declared effective. No Series A Investor nor
any Majority Stockholder may for a period of 36 months from the date of this
Agreement, make any Dispositions to any Competitor of the Company. If, after 36
months from the date of this Agreement, a Series A Investor elects to make a
Disposition to a Competitor of the Company, such Disposition shall be subject to
a right of first refusal by the Company as set forth in Exhibit A hereto. For
purposes of this Agreement, a "Competitor" shall mean any person or entity who
derives a majority of its revenue from providing Internet telephony services.
Notwithstanding anything contained herein, there shall be no restrictions on
transfer between Series A Investors or from a Series A Investor to any of its
affiliates or beneficial owners or to IDT or the Company, nor shall there be any
restrictions on any Disposition (i) which have been consented to by the Company,
(ii) pursuant to a third party tender offer, (iii) pursuant to a merger,
consolidation or reorganization to which the Company is a party, (iv) in a bona
fide public distribution or bona fide underwritten public offering, or (v)
pursuant to Section 144 or Section 144A of the Securities Act (including
distributions by a partnership to its partners or a limited liability company to
its members); provided, however, that in the case of any such permitted transfer
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to an affiliate or beneficial owner of a Series A Investor or Majority
Stockholder, this contract shall be binding on the affiliate or beneficial
owner.
4. Representations, Warranties and Acknowledgments of IDT. IDT hereby
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represents, warrants and acknowledges to Xxxxx and the Series A Investors as
follows:
(i) Organization and Qualification. IDT has been duly organized and is validly
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existing and is in good standing under the laws of the State of Delaware,
and has all requisite corporate power
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and authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
(ii) Authorization. All corporate actions on the part of IDT necessary for
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the authorization, execution and delivery of this Agreement and the performance
of all obligations of IDT hereunder have been taken. This Agreement has been
duly executed and delivered by IDT and constitutes a valid and legally binding
obligation of IDT, enforceable against IDT in accordance with its terms, subject
to (a) the laws of bankruptcy and the laws affecting creditors' rights
generally, and (b) the availability of equitable remedies.
(iii) Ownership of Shares. IDT owns of record and beneficially owns the number
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of shares of Common Stock set forth opposite its name on Schedule B attached
hereto.
(iv) No Proxy. IDT has not granted and is not a party to any proxy, voting
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trust or other agreement which is inconsistent with, conflicts with or violates
any provision of this Agreement.
5. Representations, Warranties and Acknowledgment of Xxxxx. Xxxxx hereby
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represents, warrants and acknowledges to IDT and the Series A Investors as
follows:
(i) This Agreement has been duly executed and delivered by Xxxxx individually
and a trustee of the Xxxxx Trust and constitutes a legal, valid and binding
agreement of Xxxxx and the Xxxxx Trust, enforceable against each of Xxxxx and
the Xxxxx Trust in accordance with its terms, subject to (a) the laws of
bankruptcy and the laws affecting creditors' rights generally, and (b) the
availability of equitable remedies.
(ii) Ownership of Shares. Xxxxx and the Xxxxx Trust own of record and
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beneficially own the number of shares of Common Stock set forth opposite its
name on Schedule C attached hereto.
(iii) No Proxy. Neither Xxxxx nor the Xxxxx Trust has granted nor is either a
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party to any proxy, voting trust or other agreement which is inconsistent with,
conflicts with or violates any provision of this Agreement.
6. Representations, Warranties and Acknowledgments of the Series A
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Investors. Each Series A Investor hereby represents, warrants and acknowledges
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to the Majority Stockholders as follows:
Authorization. All action on the part of such Series A Investor
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necessary for the authorization, execution and delivery of this Agreement and
the performance of all obligations of such Series A Investor hereunder has been
taken. This Agreement has been duly executed and delivered by such Series A
Investor and constitutes a valid and legally binding obligation of such
Investor, enforceable in accordance with its terms, subject to (a) the laws of
bankruptcy and the laws affecting creditors' rights generally and (b) the
availability of equitable remedies.
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7. Miscellaneous.
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7.1. Legends. Each of the parties consents to the printing of a legend on the
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certificates representing its shares of Common Stock or Series A Preferred that
refer to the limitations on transfer set forth in this Agreement. Unless sold
pursuant to an effective registration statement, each certificate representing
Securities shall bear a legend substantially in the following form:
"The shares represented by this certificate
have not been registered under the United
States Securities Act of 1933, as amended
(the "Act"), and may not be offered, sold
or otherwise transferred, pledged or
hypothecated unless and until such shares
are registered under the Act or, except as
otherwise permitted pursuant to Rule 144
under the Act or another exemption from
registration under the Act or an opinion
of counsel reasonably satisfactory to the
Company is obtained to the effect that such
registration is not required and are subject
to transfer restrictions as set forth in a
Subscription Agreement, dated May __, 1999,
and the operative agreements entered into in
connection therewith, copies of which may be
obtained from the Company."
The foregoing legend except for the last sentence thereof, if necessary, shall
be removed from the certificates, at the request of the holder thereof, at such
time as (i) they are sold pursuant to an effective registration statement, (ii)
they become eligible for resale pursuant to Rule 144(k) under the Act or another
provision of Rule 144 of the Act pursuant to which all such underlying Common
Shares could be sold in a single transaction, or (iii) an opinion of counsel
reasonably satisfactory to the Company is obtained to the effect that the
proposed transfer is exempt from the Act. The transfer agent for the Securities
will issue new Securities without the legend upon receipt of a certificate from
the Investor stating that the Securities have been registered or transferred
pursuant to an effective registration statement under the Act or can be sold in
reliance upon Rule 144.
7.2. Termination. This Agreement shall terminate with respect to a Series A
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Investor upon the earlier to occur of (i) the mutual consent of all of the
Series A Investors and IDT or (ii) with respect to each provision of this
Agreement, in accordance with its terms.
7.3. Specific Performance. The parties hereto agree that the remedy at law
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for any breach of this Agreement will be inadequate and that any party by whom
this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.
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7.4. Successors and Assigns. This Agreement may not be assigned by any Series
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A Investor or the Majority Stockholders without the prior written consent of the
other party hereto; provided, however, that this Agreement may be transferred by
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any Investor to one or more of its affiliates or beneficial owners, or to any
other Investor. Nothing in this Agreement, express or implied, is intended to
confer upon any party, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.5. Additional Shares. In the event that subsequent to the date of this
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Agreement any shares or other securities are issued on, or in exchange for, any
of the securities of the Company owned by a Majority Stockholder by reason of
any stock dividend, stock split, combination of shares, reclassification or the
like, such shares or securities shall be subject to the terms of this Agreement
to the same extent as Majority Stockholder Shares hereunder.
7.6. Addition of Series A Investors. Notwithstanding anything to the contrary
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contained herein, if the Company shall issue additional shares of its Series A
Preferred pursuant to a Series A Subscription Agreement, any purchaser of such
shares of Series A Preferred may become a party to this Agreement by executing
and delivering an additional counterpart signature page to this Agreement and
shall be deemed a "Series A Investor" hereunder.
7.7. Waiver. No waivers of any breach of this Agreement extended by any party
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hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
7.8. Governing Law; Submission to Jurisdiction. This Agreement shall be
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governed by and construed in accordance with the laws of the State of New York
without giving effect to the conflict of laws provisions. Each of the Series A
Investors and the Majority Stockholders hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby. Each of the Series A Investors and the
Majority Stockholders irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
7.9. Counterparts. This Agreement may be executed in counterparts, each of
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which shall be deemed an original, and all of which together shall be deemed to
constitute one and the same instrument.
7.10. Captions and Headings. The captions and headings used in this Agreement
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are for convenience only and are not to be considered in construing or
interpreting this Agreement.
7.11. Notices. Unless otherwise provided, any notice or other communication
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required or permitted to be given or effected under this Agreement shall be in
writing and shall be deemed effective upon personal or facsimile delivery to the
party to be notified or one business day after
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deposit with an internationally recognized courier service, delivery fees
prepaid, and addressed to the party to be notified at the following respective
addresses, or at such other addresses as may be designated by written notice:
If to the Majority
Stockholders: IDT Corporation
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Chief Financial Officer
Fax: 000-000-0000
and: Xxxxxxxx X. Xxxxx
Net2Phone, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
with a copy to: Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxx X. Xxxxxxxxxx
Fax: 000-000-0000
If to the Series A Investors: At the address specified in
Schedule A
with a copy to: Softbank Technology Ventures, IV
000 Xxxx Xxx Xxxxxx Xx.,
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxx
Fax: 000-000-0000
with a copy to: Xxxxxx Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxx Xxxxxx
Fax: 000-000-0000
and a copy to: Paul, Hastings, Xxxxxxxx &
Xxxxxx LLP
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Fax: 000-000-0000
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and a copy to: NBC Multimedia, Inc.
c/o National Broadcasting Company
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Vice President, Law,
Corporate Transactions Group
Fax: (000) 000-0000
7.12. Amendments. This Agreement may not be modified, amended, altered or
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supplemented, except upon the execution and delivery of a written agreement
executed by the party or parties against which the same will be enforced.
Notwithstanding the foregoing, the consent of a Majority Stockholder who, as of
the date hereof, is an employee or director of, or consultant to, the Company to
any amendment or waiver which diminishes such Majority Stockholder's rights
shall not be required if such person is no longer serving as an employee or
director of, or consultant to the Company.
7.13. Further Assurances. Each party hereto shall execute and deliver such
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additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
7.14. Severability. If one or more provisions of this Agreement are held to be
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unenforceable under applicable law, such provisions shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.15. Entire Agreement. This Agreement together with Schedule(s) with the
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Series A Subscription Agreement and the Additional Agreements contain the entire
understanding of the parties hereto and thereto with respect to the subject
matter contained herein and therein, and supersede and cancel all prior
agreements, negotiations, correspondence, undertakings and communications of the
parties, oral or written, respecting such subject matter. There are no
restrictions, promises, representations, warranties, agreements or undertakings
of any party hereto or to the Subscription Agreement or any of the Additional
Agreements with respect to the respect contemplated hereby and thereby, other
than those set forth herein or therein or made hereunder or thereunder.
7.16. No Fiduciary Duty of Investors. It is understood and accepted that each
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of the Series A Investors and their respective affiliates (as defined in Rule
405 of the SEC under the Act) and beneficial owners have or may hereafter have
interests in other business ventures that are or may be competitive with the
activities of the Company and that, to the fullest extent permitted by law,
nothing in this Agreement shall limit the current or future business activities
of each of such Persons whether or not such activities are competitive with
those of the Company or otherwise. Nothing in this Agreement shall limit in any
manner the ability of the Investors to exercise their rights under this
Agreement or as stockholders or other security holders of the Company and this
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Agreement shall not create, or be deemed or interpreted to create, any fiduciary
or similar duty of any party owing to any other party or the Company.
7.17. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ITS RIGHTS TO A
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JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO
BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. THIS SECTION 7.17 HAS BEEN FULLY DISCUSSED BY
EACH OF THE PARTIES HERETO AND THESE PROVISIONS SHALL NOT BE SUBJECT TO ANY
EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH
PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS
AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
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IN WITNESS WHEREOF, the parties, each by its duly authorized signatory
(if not an individual), have executed this Agreement as of the date first above
written.
SERIES A INVESTOR:
By:____________________________
Name:
Title:
Name:__________________________
Address:_______________________
Title:_________________________
Telephone No.__________________
Fax No.________________________
Date:__________________________
IDT Corporation Net2Phone, Inc.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxx X. Xxxxx Name: Xxxxxx Xxxxxx
Title: General Counsel Title: Chief Executive Officer
Xxxxx Xxxxx Annual Gift Trust
By: a Trustee
/s/ Xxxxxxxx X. Xxxxx /s/ Xxxxxxx Xxxxxxxxx
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Xxxxxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxxxxxx, Trustee
SCHEDULE A
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Subscription Shares of
Investor Amount Preferred A Warrants
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Softbank Technology Ventures IV, L.P. $14,718,000.00 1,471,800 29,436
Softbank Technology Advisors Fund L.P. $ 282,000.00 28,200 564
GE Capital Equity Investments, Inc. $ 7,500,000.00 750,000 15,000
America Online, Inc. $ 7,500,000.00 750,000 15,000
Xxxxxxxxx & Xxxxx Individuals $
Xxxxxxx Xxxxxxxx $ 20,000.00 2,000 0
Xxxxxx Xxxxx $ 20,000.00 2,000 0
Xxxxx Xxxxxx $ 15,000.00 1,500 0
Xxxx Xxxxxx $ 15,000.00 1,500 0
Xxxxxx X. Case III $ 10,000.00 1,000 0
Xxxxxx Xxxxxxx $ 5,000.00 500 0
Xxxxxxxxx & Xxxxx Entities
Xxxxxxxxx & Xxxxx California $ 78,750.00 7,875 0
Xxxxxxxxx & Xxxxx Employee Venture Fund, X.X. XX $ 37,500.00 3,750 0
Access Technology Partners, L.P. $ 790,000.00 79,000 0
Access Technology Partners Brokers Fund, L.P. $ 8,750.00 875 0
ABS Employee's Venture Fund Limited Partnership $ 400,000.00 40,000 0
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TOTAL $31,400,000.00 3,140,000 60,000
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SCHEDULE B
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IDT Corporation 9,288,000 shares
SCHEDULE C
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Xxxxxxxx X. Xxxxx
Xxxxx Xxxxx Annual Gift Trust
EXHIBIT A
RIGHT OF FIRST REFUSAL
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1. If any Series A Investor seeks to make a Disposition pursuant to this
Agreement, such Series A Investor (the "Offering Holder") shall first make
a written offer (the "Offer") to sell such shares of Series A Preferred or
Warrants or Common Stock underlying such securities. The Offer shall set
forth:
(i) the name and address of any proposed transferee;
(ii) the number of shares of Series A Preferred or Warrants or
Common Stock underlying such securities to be transferred ("Offered Shares");
(iii) if the proposed transfer is a sale, the cash consideration per
share to be received by the Offering Holder in connection with such Disposition
and, if the consideration is other than cash or partly in cash and partly in the
form of other consideration, a statement as to the nature of the other
consideration (with a reasonably sufficient and accurate description thereof)
and the fair and reasonable cash equivalent value (discounted at the prime
commercial rate of interest most recently published by The Wall Street Journal
(the "Prime Rate") to present value) of such other consideration;
(iv) the address of the Offering Holder at which each Offeree may
give any notice required herein;
(v) an offer to sell and transfer the Offered Shares to the Company
pursuant to the provisions of this Agreement; and
(vi) all other terms and conditions of the proposed transfer.
As used herein, the term "Offer Date" shall mean the date on which the Company
actually receives an Offer unless, an independent investment banking firm is
required to determine the fair market value of the Offered Shares, in which
event the "Offer Date" shall be deemed to be the fifth day that is not a
Saturday, Sunday or legal holiday in the State of New York (a "Business Day")
after such investment banking firm shall have notified the Company of its
determination of the value of the Offered Shares.
The Company shall have the option and preferential right, but shall not
be obligated, for 60 days following the Offer Date to purchase any or all of the
Offered Shares.
2. If the Company elects to purchase less than all of the Offered Shares
pursuant to this right of first refusal, the Offering Holder will have the
right to make a Disposition of the balance Offered Shares to the proposed
transferee pursuant to the terms of the Offer, and such proposed transferee
shall execute and become a party to this Agreement and must hold the
Offered Shares subject to all the terms and conditions of this Agreement.
Notwithstanding the failure to execute a counterpart of this Agreement, any
such proposed transferee shall take such Offered Shares subject to this
Agreement and by acceptance of any certificate representing such Offered
Shares shall be bound by this Agreement. If all of the Offered Shares are
not transferred in accordance with the terms described in the Offer within
a period of 45 days after the expiration of the option period provided in
Paragraph (1) hereof, then no Disposition of any Offered Shares may be made
unless a new Offer covering such Offered Shares is given and this Exhibit A
is complied with again.
