<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2000 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____.
Commission File Number: 333-80411
ITXC CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-35-31960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 College Road East
Princeton, New Jersey 08540
(Address of principal executive office, including zip code)
(609) 419-1500
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At April 30, 2000, there were 38,478,903 shares of Common Stock, par value $.001
per share, outstanding.
<PAGE>
ITXC CORP.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1999
and March 31, 2000 (Unaudited)........................................................... 3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1999 and 2000 (Unaudited)......................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 2000 (Unaudited)................................................ 5
Notes to Condensed Consolidated Financial Statements (Unaudited)......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................... 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk................................ 15
Part II. Other Information
Item 1. Legal Proceedings........................................................................ 15
Item 2. Changes in Securities and Use of Proceeds................................................ 15
Item 4. Submission of Matters to a Vote of Security Holders...................................... 16
Item 6. Exhibits and Reports on Form 8-K......................................................... 17
Signatures......................................................................................... 18
</TABLE>
<PAGE>
ITXC CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
(Unaudited)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 49,017,768 $195,036,383
Short term investments 25,378,297 27,273,495
Accounts receivable, net 5,738,804 7,006,301
Prepaid expenses and other current assets 1,298,102 1,191,681
------------ ------------
Total current assets 81,432,971 230,507,860
Property and equipment, net 15,411,656 20,658,912
Deposits and other assets 66,232 110,759
Long-term investment - 7,924,000
Service contract rights, net of amortization 2,950,750 2,708,860
------------ ------------
Total assets $ 99,861,609 $261,910,391
============ ============
Accounts payable and accrued liabilities $ 13,560,456 $ 12,435,577
Customer deposits 442,240 585,462
Current portion of capital lease obligations 1,620,317 1,772,182
------------ ------------
Total current liabilities 15,623,013 14,793,221
Equipment note payable 1,723,191 1,723,191
Capital lease obligation, less current portion 2,149,177 2,013,377
Preferred Stock - -
Common Stock 35,816 38,433
Additional paid in capital 118,089,750 295,691,613
Deferred employee compensation (10,240,858) (9,185,345)
Accumulated deficit (27,518,480) (43,164,099)
------------ ------------
Total stockholders' equity 80,366,228 243,380,602
------------ ------------
Total liabilities and stockholders' equity $ 99,861,609 $261,910,391
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
ITXC CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31,
1999 2000
------------------------------
<S> <C> <C>
Telecommunications revenue $ 2,429,413 $ 15,066,079
Consulting revenue 688,232 -
------------ ------------
Total revenue 3,117,645 15,066,079
Data communications and telecommunications 2,528,184 13,653,406
Network operations 546,313 1,387,069
Selling, general and administrative 2,558,130 5,932,116
Depreciation and amortization 278,136 1,836,955
Non-cash employee compensation 217,053 1,055,513
------------ ------------
Total costs and expenses 6,127,816 23,865,059
Loss from operations (3,010,171) (8,798,980)
Loss relating to joint venture - (8,195,000)
Interest income, net 41,490 1,348,361
------------ ------------
Net loss $ (2,968,681) $(15,645,619)
============ ============
Accretion of redemption value of mandatorily redeemable
convertible preferred stock (113,446) -
Net loss applicable to common stockholders $ (3,082,127) $(15,645,619)
============ ============
Basic and diluted net loss per share applicable to common
stockholders $ (0.37) $ (0.43)
============ ============
Weighted average shares used in computation of basic and
diluted net loss per share applicable to common stockholders 8,381,000 36,587,424
Pro forma basic and diluted net loss per share $ (0.12) $ (0.43)
============ ============
Weighted average shares used in computation of pro forma basic
and diluted net loss per share 24,067,410 36,587,424
</TABLE>
See accompanying notes.
4
<PAGE>
ITXC CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31,
1999 2000
---------------------------------
<S> <C> <C>
Operating activities
Net loss $(2,968,681) $(15,645,619)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 278,136 1,836,955
Provision for doubtful accounts 312,294 496,715
Loss relating to joint venture - 8,195,000
Amortization for non-cash deferred employee compensation 217,053 1,055,513
Amortization of original issue discounts - (622,475)
Changes in operating assets and liabilities:
Increase in accounts receivable (580,658) (1,764,213)
(Increase) decrease in prepaid expenses and other assets (145,021) 61,897
Increase (decrease) in accounts payable and accrued
expenses 2,129,986 (1,124,879)
Increase (decrease) in customer deposits and deferred
revenue (628,818) 143,221
----------- ------------
Net cash used in operating activities (1,385,709) (7,367,885)
Investing activities
Purchase of property and equipment (1,507,209) (6,360,594)
Purchase of service contract rights - (8,110)
Purchase of available for sale securities - (59,345,743)
Maturities of available for sale securities - 58,073,019
----------- ------------
Net cash used in investing activities (1,507,209) (7,641,428)
Financing activities
Proceeds from equipment line of credit 523,191 -
Repayment of capital lease obligations (23,859) (457,552)
Issuance of convertible preferred stock 14,931,582 -
Proceeds from issuance of second public offering - 161,296,000
Proceeds from exercise of stock options - 189,480
----------- ------------
Net cash provided by financing activities 15,430,914 161,027,928
----------- ------------
Increase in cash 12,537,996 146,018,615
Cash and cash equivalents at beginning of period 3,971,237 49,017,768
----------- ------------
Cash and cash equivalents at end of period $16,509,233 $195,036,383
=========== ============
</TABLE>
See accompanying notes.
5
<PAGE>
ITXC CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
-----------
1. Basis of Presentation
The March 31, 1999 and 2000 financial statements have been prepared by ITXC
Corp. (the "Company" or "ITXC") and are unaudited. In the opinion of the
Company's management, all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the Company's consolidated financial
position, results of operations and cash flows for the interim periods have
been made. Certain information and footnote disclosures required under
generally accepted accounting principles have been condensed or omitted from
the consolidated financial statements and notes thereto presented herein
pursuant to the rules and regulations of the Securities and Exchange
Commission. The condensed consolidated financial statements and notes thereto
presented herein should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1999 and
notes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 filed with the Securities and Exchange
Commission. The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results to be expected for any
other interim period or the entire fiscal year.
2. Joint Venture
In July 1998, the Company obtained a 49% interest in ITXC Comunicacoes Ltda
("ITXC Ltda"), a newly formed joint venture, in consideration of rights to
certain technology, which provided exchange carrier long-distance services in
certain countries in South America. The Company's ownership interest in ITXC
Ltda. was accounted for under the equity method of accounting. No investment
was recorded as no consideration was paid.
The ITXC Ltda joint venture agreement, as amended, provided the Company a
call option and provided TeleNova Communicacoes Ltda and its assignee
(collectively, "TeleNova") a put option which required the Company to acquire
TeleNova's interest in ITXC Ltda which option would be triggered upon the
occurrence of certain events, at a price based either on a formula, as
defined in the agreement, or an appraisal of ITXC Ltda's fair value.
In February 2000, the Company recast this relationship. The Company issued
150,000 shares of its common stock to TeleNova and its affiliates in exchange
for: (1) equity in a private affiliate of TeleNova; (2) termination of the
puts and calls which previously could have required substantial cash or
equity outlays by the Company; and (3) certain contractual
6
<PAGE>
commitments by the parties. As part of this transaction, the parties
terminated the joint venture agreement and a license agreement that the
Company previously furnished to the joint venture. During the three months
ended March 31, 2000, the Company recorded a charge of $8.2 million,
representing the difference between the value of the Company's 150,000 shares
issued by the Company and the value of the equity received by the Company,
valued as of the time of the transaction.
3. Public Offering
On March 15, 2000, the Company completed a public offering of its common
stock, selling 2 million shares at a price of $85.00 per share, generating
net proceeds to the Company of approximately $161.3 million. In addition,
certain stockholders sold 2 million previously unregistered shares.
4. Earnings Per Share
The Company's historical capital structure prior to the completion of its
initial public offering ("IPO") on October 1, 1999, is not indicative of its
ongoing structure due to the automatic conversion of all shares of the
Company's Series B and Series C Convertible Preferred Stock (the "Series B
and Series C Stock") upon closing of the IPO on October 1, 1999.
Accordingly, the unaudited pro forma net loss per share for the three months
ended March 31, 1999 assumes the conversion of the Series B and Series C
Stock to Common Stock as if it had been converted at the date of issuance,
even though the result is antidilutive.
The following table presents the calculation of basic and diluted net loss
per share and pro forma net loss per share:
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 2000
---- ----
Denominator Denominator
(Weighted (Weighted
Numerator Average Per Numerator Average Per
(Net Loss) Shares) Share (Net Loss) Shares) Share
---------- ------- ----- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Basic and diluted net
loss per common share $(3,082,127) 8,381,000 $(0.37) $(15,645,619) 36,587,424 $(0.43)
Accretion of redemption
value of mandatorily
redeemable convertible
preferred stock 113,446 -- -- -- -- --
Assumed conversion of
shares of mandatorily
redeemable convertible
preferred stock into
shares of common stock
at issuance -- 15,686,410 -- -- -- --
----------- ----------- ------ ------------ ----------- ------
Pro forma basic and
diluted net loss per
common share. $(2,968,681) 24,067,410 $(0.12) $(15,645,619) 36,587,424 $(0.43)
=========== =========== ====== ============ =========== ======
</TABLE>
5. Capital Stock
On May 3, 2000, the Company's stockholders approved an increase in the
authorized Common Stock to 400,000,000 shares.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, the related Notes to Consolidated
Financial Statements and Management's Discussion and Analysis of Results of
Operations and Financial Condition included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 (the "10-K") and the Unaudited
Condensed Consolidated Financial Statements and related Notes to the Unaudited
Condensed Consolidated Financial Statements included in Item 1 of Part 1 of this
Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, which involve risks and
uncertainties. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements. Factors that could cause
such a difference are described in Exhibit 99.1 to the 10-K ("Exhibit 99.1").
Such factors may also cause substantial volatility in the market price of the
Company's common stock.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amount of costs and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates and assumptions.
Overview
The Company is a leading global provider of Internet-based voice and fax
services. From the Company's inception in July 1997 through April 1998, its
operating activities were focused primarily on:
. developing monitoring and analysis software (the Company's BestValue
Routing software) to enable the Company to efficiently and cost effectively
route voice over the Internet;
. developing relationships with affiliates throughout the world to
increase the global reach of ITXC.net, the Company's network;
. developing additional business strategies to supplement the Company's
affiliate network; and
. hiring the Company's initial employee group.
In April 1998, the Company launched its first service delivered over
ITXC.net -- the Company's WWeXchange service. The Company's operations since
that time have included:
. increasing its voice traffic, from 2,746 minutes during April 1998 to
approximately 122 million minutes carried thorough its WWeXchange service during
the quarter ended March 31, 2000;
. refining its monitoring and analysis software in order to achieve
BestValue Routing;
. expanding its affiliate network and increasing the global reach of
ITXC.net;
. increasing its employee headcount, from 29 employees on April 1, 1998 to
142 employees on March 31, 2000; and
. developing and, during the quarter ended March 31, 2000, implementing
its WebtalkNOW! Service, reaching nine million minutes of voice traffic during
the first quarter of its operations.
9
<PAGE>
The Company's primary sources of revenue have been the fees that it
receives from customers for terminating calls that they have originated on the
Internet. To date, the Company's revenue for terminating calls over ITXC.net has
depended primarily upon the following factors:
. the volume of voice traffic carried over ITXC.net, which is measured in
terms of minutes of voice traffic;
. the mix of voice traffic carried over ITXC.net, which reflects the fact
that calls made over certain routes will generate greater revenues than calls
of a similar duration made over other routes; and
. pricing pressures resulting from competitive conditions in the Company's
markets.
Increased competition from other providers of Internet telephony services
and traditional telephony services could materially adversely affect revenues in
future periods.
The Company has also received consulting revenue derived from a market
trial agreement that it entered into with a third-party shortly after its
inception in order to generate funds to sustain operations. Under that
agreement, the Company earned a portion of the revenue ratably over the term of
the agreement and the remainder of the revenue as it met specific milestones.
The Company does not consider it likely that consulting revenue will continue
beyond the year ended December 31, 1999.
To date, the Company has derived a significant portion of its revenue from
a small number of customers. The loss of a major customer could have a material
adverse effect on the Company's business, financial condition, operating results
and future prospects.
The Company's operating expenses have been primarily:
. Data Communications and Telecommunications Expenses. Communications
expenses, consisting primarily of:
. costs associated with sending voice traffic over the Internet,
primarily fees that the Company pays to its affiliates to terminate or
assist it in terminating calls, fees that the Company pays when it finds it
necessary to utilize the traditional telephone network or private data
networks to terminate calls and expenses incurred in connecting the
Company's customers to its network; these expenses are largely proportional
to the volume of voice traffic carried over the Company's network; and
. costs associated with buying Internet access at ITXC-operated
locations; these costs are largely proportional to the bandwidth of access
available and do not typically vary based upon volume.
. Network Operations Expenses. Expenses associated with operating the
network, consisting primarily of the salaries, payroll taxes and benefits
that the Company pays for those employees directly involved in the
operation of ITXC.net and related expenses.
. Selling, General and Administrative Expenses. There are three components
of selling, general and administrative expenses, consisting of the following:
. Sales and Marketing Expenses. Expenses relating to the salaries,
payroll taxes, benefits and commissions that the Company pays for sales
personnel and expenses associated with the development and implementation
of the Company's promotion and marketing campaigns. The Company
anticipates that sales and marketing expenses will increase in the future
as it expands its
10
<PAGE>
internal sales force, hires additional marketing personnel and increases
expenditures for promotion and marketing. The Company expects that such
expenses will also increase as telecommunications revenue increases.
. Development Expenses. Salary, payroll tax and benefit expenses that
the Company pays for employees and consultants who work on the
development of the Company's network management approaches and future
applications of its technology. The Company believes that investing in
the enhancement of its technology is critical to its future success. The
Company expects that its development expenses will increase in future
periods, based upon various factors, including:
. the importance to the Company of BestValue Routing;
. the pace of technological change in the Company's industry; and
. the Company's goal of expanding the applications of its
technology.
. General and Administrative Expenses. Salary, payroll tax and benefit
expenses and related costs for general corporate functions, including
executive management, administration, facilities, information technology
and human resources. The Company expects that general and administrative
expenses will increase in the future as it hires additional personnel and
incurs additional costs related to the growth of its business and
operations. In addition, the Company expects to expand its facilities and
incur associated expenses to support its anticipated growth.
. Non-cash Employee Compensation Expenses. Non-cash employee compensation
represents compensation expense incurred in connection with the grant of
certain stock options to employees with exercise prices less than the fair
value of the Company's Common Stock at the respective dates of grant. During
1999, but prior to the Company's initial public offering, the Company granted
options to purchase 3,413,500 shares of common stock at exercise prices equal
to or less than fair value, resulting in non-cash charges of approximately
$12.4 million. Such charges will be expensed, generally over the next three
to seven years, in connection with the underlying vesting periods of the
options granted.
The Company believes that the services that it provides over the Internet
are not currently actively regulated in the United States. Several efforts have
been made, however, to enact federal legislation that would regulate certain
aspects of the Internet. If adopted, such legislation could increase the
Company's costs significantly and could materially adversely affect its
business, operating results, financial condition and future prospects.
As ITXC.net continues to grow, the Company anticipates that from time to
time its operating expenses may increase on a per minute basis. This increase is
related to the Company's decision to route additional traffic over the
traditional telephone network or private data networks in order to maintain
quality transmissions during relatively short periods of time as the Company
transitions its network to increased levels of capacity. During these periods,
the Company occasionally experiences reductions in volume from certain
customers. Historically, the Company has satisfactorily resolved these
transition issues. However, the Company anticipates that in the future other
anticipated or unanticipated operating problems associated with the growth of
ITXC.net may develop.
Since the Company's inception in July 1997, it has experienced operating
losses in each quarterly and annual period and negative cash flows from
operations in each quarter since it commenced offering services over ITXC.net in
April 1998. As of March 31, 2000, the Company had an accumulated deficit of
$43.2 million. The profit potential of the Company's business is unproven, and
the Company's limited operating history makes
11
<PAGE>
an evaluation of it and its prospects difficult. The Company may not achieve
profitability or, if it achieves profitability, the Company might not sustain
profitability.
Results of Operations - Comparison of the Three Months Ended March 31, 1999
and 2000
Revenues
Telecommunications revenues of $15.1 million during the quarter ended
March 31, 2000 represented an increase of more than 383% from the quarter ended
March 31, 1999. The Company carried 131 million minutes of traffic over
ITXC.net, as compared with 11 million minutes during the 1999 period. Of the
131 million minutes, 122 million minutes were carried through the Company's
WWeXchange service, which provides international call completion to the
Company's customers and enables them to offer their own customers phone-to-phone
global voice service. The remaining 9 million minutes were provided through the
Company's recently initiated WebtalkNOW! Service, a PC-to-telephone service
which allows Internet portals, Internet service providers and web sites to offer
web-to-phone calling to their customers under their own brands. During the
quarter ended March 31, 2000, the Company's average revenues per minute were
12.2 cents per minute for WWeXchange and 2 cents per minute for WebtalkNOW!.
The Company recorded consulting revenues of $688,000 during the quarter
ended March 31, 1999. As of June 30, 1999, the Company had satisfied all of the
performance requirements under its market trial agreement and had received all
consulting payments required by that agreement. Accordingly, the Company did not
recognize any such revenues during the quarter ended March 31, 2000. The Company
does not expect to earn significant consulting revenue in subsequent periods.
Operating Expenses
Data Communications and Telecommunications Expenses. During the three
months ended March 31, 1999 and 2000, data communication expenses amounted to
$2.5 million and $13.7 million, respectively, or 104% and 91% of
telecommunications revenues, respectively. The increase in the dollar amount of
such costs primarily reflected the increased traffic during 2000, as well as
costs associated with establishing a new network hub in Jersey City, New Jersey
and increasing capacity at the Company's other hubs in anticipation of future
growth in traffic.
Network Operations Expenses. Network operations expenses increased from
$546,000 during the three months ended March 31, 1999 to $1.4 million during the
three months ended March 31, 2000. Such expenses primarily reflected the cost of
operating the Company's 24-hours-a-day, 7 days-a-week network operations center,
as well as start-up costs associated with the Jersey City, New Jersey hub. Such
costs represented 22% of telecommunications revenues during the three months
ended March 31, 1999 and 9% of telecommunications revenues during the three
months ended March 31, 2000.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased from $2.6 million during the three
months ended March 31, 1999 to $5.9 million during the three months ended March
31, 2000. This increase was due primarily to the hiring of additional sales and
marketing, development and administrative personnel, commissions paid on the
Company's increased telecommunications revenue, expanded sales and marketing
campaigns and increased facilities expenses associated with the Company's
growth. Such increase reflected not only the expansion of the Company's core
business, but also the development and deployment of the WebtalkNOW! Service.
As a percentage of revenues, SG&A expenses decreased from 82% to 39%, reflecting
the leveraging of such expenses over the Company's significantly increased
revenue base. As the Company's revenues continue to grow, the Company expects
SG&A expenses to decrease as a percentage of revenues. Such expectation
represents a forward-looking statement under the
12
<PAGE>
Private Securities Litigation Reform Act of 1995. Actual results could differ
from such expectation as a result of a number of factors, including the extent
to which the Company incurs unanticipated expenses associated with revenue
growth and other factors referred to in Exhibit 99.1.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased from $278,000 during the three months ended March 31, 1999 to
$1.8 million during the three months ended March 31, 2000. This increase
reflects the expansion of the Company's network and hubs and the addition of new
technologies deployed throughout the Company's network.
Non-cash Employee Compensation Expenses. Non-cash employee compensation
expense increased from $217,000 during the three months ended March 31, 1999 to
$1.1 million during the three months ended March 31, 2000, representing
amortization of deferred compensation incurred in connection with the grant of
options at exercise prices less than fair value.
Loss From Operations
The Company incurred operating losses of $3.0 million and $8.8 million,
respectively, during the three months ended March 31, 1999 and 2000,
respectively. The Company anticipates that it will incur additional operating
and net losses for the foreseeable future. The amount of these losses may exceed
the amount of the losses that the Company has incurred in prior periods.
Loss Relating to Joint Venture.
During the quarter ended March 31, 2000, the Company incurred a one-time
non-cash charge of $8.2 million relating to the modifications made in the
Company's South America joint venture. See Note 2 of the Notes to the Company's
Unaudited Condensed Consolidated Financial Statements.
Interest Income, Net
The Company's interest income, net principally represents income from cash
and investments which, in turn, were derived from capital contributions made by
the Company's investors. In addition to the capital invested near the inception
of the Company's business, the Company raised (a) net proceeds of $9.9 million
and $14.9 million from a group of investors in private transactions completed
during April 1998 and February 1999, (b) net proceeds of $78.4 million from the
Company's initial public offering completed on October 1, 1999 and (c) net
proceeds of $161.3 million from the Company's follow-on offering completed on
March 15, 2000. The interest generated from these capital contributions exceeded
the interest that the Company paid on its line of credit by $41,000 and $1.3
million, respectively, during the three months ended March 31, 1999 and 2000,
respectively.
Liquidity and Capital Resources
Prior to the Company's initial public offering, the Company financed its
operations primarily through the private placement of its capital stock and, to
a lesser extent, through equipment financing, and for the period after June 30,
1999, through capital leases. Net proceeds from the Company's initial public
offering, including proceeds resulting from the exercise by the underwriters of
their over-allotment option, were $78.4 million. This capital was supplemented
by net proceeds of $161.3 million raised upon consummation of the Company's
March 2000 follow-on offering of common stock.
Net cash provided by financing activities amounted to $161.0 million for
the three months ended March 31, 2000 and was primarily attributable to net
proceeds from the Company's follow-on offering.
13
<PAGE>
Net cash used in operating activities amounted to $7.4 million for the
three months ended March 31, 2000. Cash used in operating activities was
primarily the result of net operating losses, increased accounts receivable and
decreased accounts payable and accrued liabilities, partially offset by the one-
time charge of $8.2 million relating to the modification of the Company's joint
venture arrangement in South America and deprecation and amortization.
Net cash used in investing activities amounted to $7.6 million for the
three months ended March 31, 2000. Cash used in investing activities was
primarily related to the purchases of property and equipment and purchases of
investments with the proceeds of the Company's public offerings.
As of March 31, 2000, the Company's principal commitments consisted of
obligations outstanding under operating and capital leases. At that date, future
minimum payments for non-cancelable leases includes required payments of $2.3
million during 2000 and $8.3 million for years after 2000 under all leases. The
Company anticipates a substantial increase in capital expenditures and lease
commitments consistent with the anticipated growth in operations, infrastructure
and personnel, including the deployment of additional network hubs and SNARCs
(a proprietary device which allows customers to access the Company's network
directly from their premises, eliminating the costs of special traditional
telephone connections dedicated to connecting with network hubs and improving
the economics of the Company's services to them).
The Company maintains a credit agreement that provides a committed line of
credit from a financial institution in the aggregate amount of $10.0 million.
The Company is permitted to use any portion of that commitment under a revolving
line of credit for working capital or under an equipment sub-line for the
purchase of certain capital equipment and related software. This credit
agreement is collateralized by substantially all of the Company's assets. The
Company is permitted to borrow under the credit agreement until February 2001.
At that time, the Company must repay the outstanding working capital loans
unless that revolving line is extended. Loans outstanding under the equipment
sub-line are due and payable 36 months after the final draw under the equipment
sub-line. Interest accrues at a floating rate per annum equal to the higher of
the lender's published prime rate and the weighted average federal funds rate
available to the Company's lender plus 0.5%. The credit agreement contains
customary financial and other covenants and may be terminated by the lender 45
days after the occurrence of certain mergers, acquisitions and investments.
The Company has also arranged for financing in the ordinary course for
gateway equipment, switching equipment and general office equipment, from
vendors such as Lucent and Cisco.
The Company's capital requirements depend on numerous factors, including
market acceptance of ITXC's services, the responses of its competitors, the
resources allocated to ITXC.net and the development of future applications of
the Company's technology, the Company's success in marketing and selling its
services, and other factors. The Company has experienced substantial increases
in its capital expenditures since its inception, consistent with growth in its
operations and staffing, and anticipates that its capital expenditures will
continue to increase in the future. Additionally, the Company will evaluate
possible acquisitions of, or investments in, complementary businesses,
technologies or services and plans to expand its sales and marketing programs.
Any such possible acquisition may be material and may require the Company to
incur a significant amount of debt or issue a significant number of equity
securities. Further, any businesses that the Company acquires will likely have
their own capital needs, which may be significant, which the Company would be
called upon to satisfy independent of the acquisition price. The Company
currently believes that its available cash and cash equivalents will be
sufficient to meet its anticipated needs for working capital and capital
expenditures for at least the next 12 months. This statement represents a
forward-looking statement under the Private Securities Litigation Reform Act of
1995. Actual results could differ materially from the Company's expectations.
The Company may need to raise additional funds in order to fund more rapid
expansion, to develop new or enhance
14
<PAGE>
existing services, to respond to competitive pressures or to acquire or invest
in complementary business, technologies or services. Additional funding may not
be available on favorable terms or at all.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company had investments of $219.5 million as of March 31, 2000 in
certain marketable securities, which primarily consist of short-term fixed
income investments. Due to the short-term nature of the Company's investments,
the Company believes that the effects of changes in interest rates are limited
and would not have a material impact on the Company's financial condition or
operating results.
Part II
Item 1. Legal Proceedings
From time to time, the Company is involved in various legal
proceedings relating to claims arising in the ordinary course of business. The
Company is not a party to any legal proceeding, the adverse outcome of which is
expected to have a material adverse effect on its business, financial condition,
operating results or future prospects.
Item 2. Changes in Securities and Use of Proceeds
Pursuant to the rules of the Securities and Exchange Commission, the
Company has provided the following information with respect to its initial
public offering (comparable disclosures are not required with respect to the
Company's follow-on offering).
The Company's initial public offering was effected pursuant to a
registration statement on Form S-1 (No. 333-80411) declared effective by the SEC
on September 27, 1999. The offering commenced on September 27, 1999 and
terminated after all securities registered were sold. The managing underwriters
of the initial public offering in the United States were Lehman Brothers, CIBC
World Markets and First Analysis Securities Corporation and the managing
underwriters of the initial public offering outside of the United States were
Lehman Brothers International (Europe), CIBC World Markets International Limited
and First Analysis Securities Corporation.
The sole class of capital stock registered in the Company's public
offering was the Company's Common Stock. The total amount of Common Stock
registered was $93,437,500. In the initial public offering, a total of 7,187,500
shares were sold at an offering price of $12 per share, for total gross proceeds
of $86,250,000. All of the shares were sold for the account of the Company.
The expenses incurred by the Company (for underwriters' discounts and
commissions, finders' fees, expenses paid to or for underwriters, other expenses
and total expenses) during the period from September 27, 1999 through March 31,
2000 (the "Reporting Period") in connection with the initial public offering
were (based on reasonable estimates) as follows:
Underwriters' discounts and commissions................. $6,037,500
Finders' fees........................................... 0
15
<PAGE>
Expenses paid to or for underwriters........................ 0
Other expenses.............................................. 1,812,500
Total expenses.............................................. 7,850,000
None of such amounts represented direct or indirect payments to directors,
officers or general partners of ITXC or their associates, to persons owning 10%
percent or more of any class of equity securities of ITXC or to any affiliates
of ITXC or direct or indirect payments to persons other than the underwriters
and persons indicated in Part II of the Company's registration statement.
The net offering proceeds to ITXC after deducting total expenses amounted
to $78.4 million. The following table indicates (based on reasonable estimates)
the manner in which such net proceeds have been allocated during the Reporting
Period:
<TABLE>
<CAPTION>
<S> <C>
Construction of plant, building and facilities.................... 0
Purchase and installation of machinery and equipment.............. 0
Purchase of real estate........................................... 0
Acquisition of other businesses................................... 0
Repayment of indebtedness......................................... 0
Working capital (including investments and capital expenditures).. $78,400,000
</TABLE>
None of such amounts represented direct or indirect payments to directors,
officers or general partners of ITXC or their associates, to persons owning 10%
percent or more of any class of equity securities of ITXC or to any affiliates
of ITXC or direct or indirect payments to other persons.
Item 4. Submission of Matters to a Vote of Security Holders
The Company conducted its annual meeting of stockholders on May 3, 2000.
At that meeting, the stockholders elected Tom Evslin and Fred Wilson to the
Board of Directors for three year terms (the terms of Edward Jordan, William
Collatos, John Musci and Elon Ganor continued in accordance with the provisions
of the Company's Third Restated Certificate of Incorporation), approved an
amendment to the Company's Third Restated Certificate of Incorporation
increasing the number of authorized shares of Common Stock to 400 million shares
and approved an amendment to the Company's Stock Incentive Plan to establish a
limit on annual option and stock awards.
The following table sets forth the number of shares voted for and against,
the number of abstentions and the number of broker non-votes for each of the
above-mentioned matters.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Matter For Against Abstentions Broker Non-Votes
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Election of Tom Evslin 34,454,292 65,663
- ---------------------------------------------------------------------------------------------------
Election of Fred Wilson 34,456,792 63,163
- ---------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Amendment of the Third Restated 26,220,299 8,297,100 2,556
Certificate of Incorporation
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Amendment of the Stock Incentive 34,345,799 161,630 12,526
Plan
- ---------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Third Amended and Restated Certificate of Incorporation, as amended.
3.2 Amended and Restated By-Laws
10.1 Stock Incentive Plan, as amended
27.1 Financial Data Schedule
99.1 Risk Factors (incorporated by reference to Exhibit 99.1 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1999)
(b) There were no Current Reports on Form 8-K filed by the Registrant
during the quarter ended March 31, 2000.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ITXC CORP.
By: /s/ Edward B. Jordan
----------------
Edward B. Jordan
Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer
Dated: May 15, 2000
18
<PAGE>
EXHIBIT INDEX
3.1 Third Amended and Restated Certificate of Incorporation, as amended.
3.2 Amended and Restated By-Laws
10.1 Stock Incentive Plan, as amended
27.1 Financial Data Schedule
99.1 Risk Factors (incorporated by reference to Exhibit 99.1 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1999)
19
<PAGE>
Exhibit 3.1
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
ITXC CORP.
ITXC Corp. (the "Corporation"), a Delaware corporation, hereby certifies as
follows:
1. The name of the Corporation is ITXC Corp.
2. The original certificate of incorporation of the Corporation was filed
with the Secretary of State of Delaware on July 21, 1997. A restated
certificate of incorporation of the Corporation was filed with the Secretary of
State of Delaware on April 22, 1998. A second restated certificate of
incorporation of the Corporation was filed with the Secretary of State of
Delaware on February 23, 1999.
3. This third restated certificate of incorporation of the Corporation has
been duly adopted in accordance with Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
4. This third restated certificate of incorporation amends, restates and
integrates the provisions of the certificate of incorporation of the
Corporation.
5. The text of the certificate of incorporation of the Corporation is
hereby amended, restated and integrated to read in its entirety as follows:
FIRST: The name of the corporation is ITXC Corp. (the "Corporation").
-----
SECOND: The registered office of the Corporation is located at 9 East
------
Loockerman Street, in the City of Dover, in the County of Kent, in the State of
Delaware. The name of its registered agent at that address is National
Registered Agents, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
------
have authority to issue is Eighty Two Million Five Hundred Thousand (82,500,000)
shares, of which Sixty Seven Million Five Hundred Thousand (67,500,000) shares
are designated as Common Stock, having a par value of $.001 per share ("Common
Stock"), and Fifteen Million (15,000,000) shares are designated as Preferred
Stock, having a par value of $.001 per share ("Preferred Stock").
<PAGE>
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to provide for the issuance of
shares of Preferred Stock in one or more series and, by filing a certificate
pursuant to the applicable law of the State of Delaware (hereinafter referred to
as "Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board of Directors
with respect to each series shall include, but not be limited to, determination
of the following:
(a) The designation of the series, which may be by distinguishing
number, letter or title.
(b) The number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares thereof
then outstanding).
(c) The amounts payable on, and the preferences, if any, of shares of
the series in respect of dividends, and whether such dividends, if any, shall be
cumulative or noncumulative.
(d) Dates at which dividends, if any, shall be payable.
(e) The redemption rights and price or prices, if any, for shares of
the series.
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on, and the preferences, if any, of shares of
the series in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into or
exchangeable for shares of any other class or series, or any other security, of
the Corporation or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the date or dates at which
such shares shall be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made.
(i) Restrictions on the issuance of shares of the same series or of
any other class or series.
-2-
<PAGE>
(j) The voting rights, if any, of the holders of shares of the
series.
The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof. Except as may otherwise be provided in this
restated certificate of incorporation, in a Preferred Stock Designation or by
applicable law, the holders of shares of Common Stock shall be entitled to one
vote for each such share upon all questions presented to the stockholders, the
Common Stock shall have the exclusive right to vote for the election of
directors and for all other purposes, and holders of Preferred Stock shall not
be entitled to vote at or receive notice of any meeting of stockholders.
Subject to the rights of the holders of any series of Preferred Stock
pursuant to the terms of this restated certificate of incorporation or any
resolution or resolutions providing for the issuance of such series of stock
adopted by the Board of Directors, the number of authorized shares of Preferred
Stock or Common Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote generally in the
election of directors irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of the State of Delaware.
FIFTH: The authorized number of members of the Board of Directors will be
-----
fixed from time to time by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors but in no event may the number be less
than three.
The Directors shall be divided into three classes, each consisting of one-
third of such directors, as nearly as may be, designated Class I, Class II and
Class III. Class I directors shall initially serve until the 2000 meeting of
stockholders; Class II directors shall initially serve until the 2001 meeting of
stockholders; and Class III directors shall initially serve until the 2002
meeting of stockholders. Commencing with the stockholders' meeting in 2000, and
at each succeeding annual stockholders' meeting, successors to the class of
directors whose term expires at such annual stockholders' meeting shall be
elected for a three-year term. If the number of such directors is changed, an
increase or decrease in such directors shall be apportioned among the classes so
as to maintain the number of directors comprising each class as nearly equal as
possible, and any additional directors of any class shall hold office for a term
which shall coincide with the remaining term of such class. A director shall
hold office until the annual stockholders' meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification, or
removal from office.
Except as otherwise required by law, any vacancy on the board of directors
that results from an increase in the number of directors and any other vacancy
occurring in the board of directors shall only be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his or
her predecessor. A director may be removed only for cause by the stockholders.
-3-
<PAGE>
Notwithstanding the foregoing, whenever the holders of any one or more
series of Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of this
restated certificate of incorporation applicable thereto and such directors so
elected shall not be divided into classes pursuant to this Article Fifth, in
each case unless expressly provided by such terms. During any period when the
holders of any series of Preferred Stock have the right to elect additional
directors as provided for or fixed pursuant to the provisions of Article Fourth
hereof, then upon commencement and for the duration of the period during which
such right continues: (i) the then otherwise total authorized number of
directors of the Corporation shall automatically be increased by such specified
number of directors, and the holders of such Preferred Stock shall be entitled
to elect the additional directors so provided for or fixed pursuant to said
provisions, and (ii) each such additional director shall serve until such
director's successor shall have been duly elected and qualified, or until such
director's right to hold such office terminates pursuant to said provisions,
whichever occurs earlier, subject to his earlier death, disqualification,
resignation or removal. Except as otherwise provided by the Board of Directors
in the resolution or resolutions establishing such series, whenever the holders
of any series of Preferred Stock having such right to elect additional directors
are divested of such right pursuant to the provisions of such stock, the terms
of office of all such additional directors elected by the holders of such stock,
or elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional directors, shall forthwith
terminate and the total and authorized number of directors of the Corporation
shall be reduced accordingly.
SIXTH: Meetings of stockholders may be held within or without the State of
-----
Delaware as the By-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-laws of the Corporation. The election of
directors need not be by written ballot unless the By-laws so provide.
SEVENTH: The Board of Directors of the Corporation is authorized and
-------
empowered from time to time in its discretion to make, alter, amend or repeal
By-laws of the Corporation.
EIGHTH: A director of the Corporation shall not be liable to the
------
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence shall not adversely
affect any right or protection of a director of the Corporation hereunder in
respect of any act or omission occurring prior to the time of such amendment,
modification or repeal.
-4-
<PAGE>
NINTH:
-----
1. Right to Indemnification. The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person (an "Covered Person") who was or
is made or is threatened to be made a party or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he or she, or a
person for whom he or she is the legal representative, is or was a director or
officer of the Corporation or, while a director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer,
employee, manager or agent of another corporation or of a partnership, limited
liability company, joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans, against all liability
and loss suffered and expenses (including attorneys' fees) reasonably incurred
by such Covered Person. Notwithstanding the preceding sentence, except as
otherwise provided in Section 3 of this Article Ninth, the Corporation shall be
required to indemnify an Covered Person in connection with a Proceeding (or part
thereof) commenced by such Covered Person only if the commencement of such
Proceeding (or part thereof) by the Covered Person was authorized by the Board
of Directors of the Corporation. Notwithstanding any provision herein to the
contrary, the Corporation shall not be required to advance expenses to an
Covered Person who is a party to an action, suit or proceeding brought by the
Corporation and approved by a majority of the Board of Directors of the
Corporation which alleges willful misappropriation of corporate assets by such
Covered Person, disclosure of confidential information in violation of such
Covered Person's fiduciary or contractual obligations to the Corporation or any
other willful and deliberate breach in bad faith of such Covered Person's duty
to the Corporation or its stockholders.
2. Prepayment of Expenses. Except as otherwise provided in Section 1 of
this Article Ninth, the Corporation shall pay the expenses (including attorneys'
fees) incurred by an Covered Person in defending any Proceeding in advance of
its final disposition, provided, however, that to the extent required by law,
-----------------
such payment of expenses in advance of the final disposition of the Proceeding
shall be made only upon receipt of an undertaking by the Covered Person to repay
all amounts advanced if it should be ultimately determined that the Covered
Person is not entitled to be indemnified under this Article Ninth or otherwise.
3. Claims. If a claim for indemnification or advancement of expenses
under this Article Ninth is not paid in full within sixty days after a written
claim therefor by the Covered Person has been received by the Corporation, the
Covered Person may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the Corporation shall have the
burden of proving that the Covered Person is not entitled to the requested
indemnification or advancement of expenses under applicable law.
-5-
<PAGE>
4. Nonexclusivity of Rights. The rights conferred on any Covered Person
by this Article Ninth shall not be exclusive of any other rights which such
Covered Person may have or hereafter acquire under any statute, provision of
this restated certificate of incorporation, the Corporation's by-laws or any
agreement, vote of stockholders or disinterested directors or otherwise.
5. Other Sources. The Corporation's obligation, if any, to indemnify or
to advance expenses to any Covered Person who was or is serving at its request
as a director, officer, employee, manager or agent of another corporation,
partnership, limited liability company, joint venture, trust, enterprise or
nonprofit entity shall be reduced by any amount such Covered Person may collect
as indemnification or advancement of expenses from such other corporation,
partnership, limited liability company, joint venture, trust, enterprise or non-
profit enterprise.
6. Amendment or Repeal. Any repeal or modification of the foregoing
provisions of this Article Ninth shall not adversely affect any right or
protection hereunder of any Covered Person in respect of any act or omission
occurring prior to the time of such repeal or modification.
7. Other Indemnification and Prepayment of Expenses. This Article Ninth
shall not limit the right of the Corporation, to the extent and in the manner
permitted by law, to indemnify and to advance expenses to persons other than
Covered Persons when and as authorized by appropriate corporate action.
TENTH: No action required to be taken or which may be taken at any annual
-----
or special meeting of stockholders of the Corporation may be taken without a
meeting; and the power of the stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
ELEVENTH: Except as otherwise required by law, the provisions of Articles
--------
Fifth and Tenth and the provisions of this Article Eleventh may not be amended
in any respect unless such amendment is approved by the affirmative vote of the
holders of two thirds in voting power of the outstanding stock of the
Corporation entitled to vote generally.
IN WITNESS WHEREOF, ITXC Corp. has caused this certificate to be signed by
Edward B. Jordan, its Executive Vice President, on the 1ST day of October, 1999.
ITXC CORP.
/s/ Edward B. Jordan
____________________________________
Edward B. Jordan, Executive Vice President
-6-
<PAGE>
CERTIFICATE OF AMENDMENT TO
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF ITXC CORP.
ITXC Corp. (the "Corporation"), a Delaware corporation, hereby certifies as
follows:
ARTICLE I
1.1. The name of the Corporation is ITXC Corp.
1.2. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on July 21, 1997. A Restated
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of Delaware on April 22, 1998. A Second Restated Certificate of
Incorporation of the Corporation was filed with the Secretary of State of
Delaware on February 23, 1999. A Third Restated Certificate of Incorporation of
the Corporation was filed with the Secretary of State of Delaware on October 1,
1999.
1.3. This Certificate of Amendment to the Third Restated Certificate of
incorporation of the Corporation has been duly adopted and approved in
accordance with Section 242 of the General Corporation Law of the State of
Delaware.
ARTICLE II
The First Paragraph of Article Fourth of the Corporation's certificate of
incorporation is amended to read in its entirety as follows:
"The total number of shares of stock which the Corporation shall
have authority to issue is Four Hundred and Fifteen Million
(415,000,000) shares, of which Four Hundred Million (400,000,000)
shares are designated as Common Stock, having a par value of
$.001 per share ("Common Stock"), and Fifteen Million
(15,000,000) shares are designated as Preferred Stock, having a
par value of $.001 per share ("Preferred Stock")."
IN WITNESS WHEREOF, ITXC Corp. has caused this certificate to be signed by
Edward B. Jordan, its Executive Vice President, on the 3rd day of May, 2000.
ITXC Corp.
By: /s/ Edward B. Jordan
Edward B. Jordan,
Executive Vice President
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
ITXC CORP.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the city of Dover, County of
Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may
be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual meetings of stockholders shall be held at such date and
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the
<PAGE>
meeting, at which they shall elect by a plurality vote a board of directors, and
transact such other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote as such meeting.
-2-
<PAGE>
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. All questions (other than the election of directors) shall,
unless otherwise provided by the certificate of incorporation, these By-laws,
the rules or regulations of any stock exchange applicable to the corporation, or
applicable law or pursuant to any regulation applicable to the corporation or
its securities, be decided by the affirmative vote of the holders of a majority
in voting power of the shares of stock of the corporation which are present in
person or by proxy and entitled to vote thereon.
Section 10. Unless otherwise provided in the certificate of incorporation,
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no
-3-
<PAGE>
proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period.
Section 11. A. Annual Meetings of Stockholders.
--------------------------------
1. Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders only (a) pursuant to the corporation's notice of
meeting, (b) by or at the direction of the Board of Directors or (c) by any
stockholder of the corporation who was a stockholder of record at the time of
giving of notice provided for in this Section 11, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section
11.
2. For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Section 11, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not later than the close of business on the
ninetieth (90/th/) day nor earlier than the close of business on the one hundred
twentieth (120/th/) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that if the date of the annual meeting is
more than thirty (30) days before or more than sixty (60) days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the one hundred twentieth (120/th/)
day prior to such annual meeting and not later than the close of business on the
later of the ninetieth (90/th/) day prior to such annual meeting or the close of
business on the tenth (10/th/) day following the day on which public
announcement of the date of such meeting is first made by the corporation. In no
event shall the public announcement of an
-4-
<PAGE>
adjournment or postponement of an annual meeting commence a new time period (or
extend any time period) for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director it elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the text
of the proposal or business (including the text of any resolutions proposed for
consideration and in the event that such business includes a proposal to amend
the By-laws of the corporation, the language of the proposed amendment), the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner, (ii) the class and number of
shares of capital stock of the corporation that are owned beneficially and held
of record by such stockholder and such beneficial owner, (iii) a representation
that the stockholder is a holder of record of stock of the corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to propose such business or nomination, and (iv) a representation as to
whether the stockholder or the beneficial owner, if any, intends or is part of a
group which intends (a) to deliver a proxy statement and/or form of proxy to
holders
-5-
<PAGE>
of at least the percentage of the corporation's outstanding capital stock
required to approve or adopt the proposal or elect the nominee and/or (b)
otherwise to solicit proxies from stockholders in support of such proposal or
nomination. The corporation may require any proposed nominee to furnish such
other information as it may reasonably require to determine the eligibility of
such proposed nominee to serve as a director of the corporation.
3. Notwithstanding anything in the second sentence of paragraph (A)(2) of
this Section 11 to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the corporation at an annual meeting is
increased and there is no public announcement by the corporation naming the
nominees for additional directorships at least seventy(70) days prior to the
first anniversary of the preceding year's annual meeting (or, if the annual
meeting is held more than thirty (30) days before or sixty (60) days after such
anniversary date, at least seventy (70) days prior to such annual meeting), a
stockholder's notice required by this Section 11 shall also be considered
timely, but only with respect to nominees for the additional directorships, if
it shall be delivered to the Secretary at the principal executive office of the
corporation not later than the close of business on the tenth (10/th/) day
following the day on which such public announcement is first made by the
corporation.
B. Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
corporation who is a stockholder of record at
-6-
<PAGE>
the time of giving of notice provided for in this Section 11(B), who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Section 11. If the corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder entitled to vote in such election of directors
may nominate a person or persons (as the case may be) for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Section 11 shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the one hundred twentieth (120/th/) day prior to such special
meeting and not later than the later of (x) the close of business on the
ninetieth (90/th/) day prior to such special meeting or (y) the close of
business on the tenth (10/th/) day following the day on which public
announcement is first made of the date of such special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment or postponement of a
special meeting commence a new time period (or extend any time period) for the
giving of a stockholder's notice as described above.
C. General.
-------
1. Only such persons who are nominated in accordance with the procedures
set forth in this Section 11 shall be eligible to be elected at an annual or
special meeting of stockholders of the Corporation to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section 11. Except as otherwise provided by law, the certificate of
incorporation or these By-Laws, the chairperson of the meeting shall have the
power and duty (a) to determine whether a nomination or any business proposed to
be brought before the meeting
-7-
<PAGE>
was made or proposed, as the case may be, in accordance with the procedures set
forth in this Section 11 (including whether the stockholder or beneficial owner,
if any, on whose behalf the nomination or proposal is made solicited (or is part
of a group which solicited) or did not so solicit, as the case may be, proxies
in support of such stockholder's nominee or proposal in compliance with such
stockholder's representation as required by clause (A)(2)(c)(iv) of this Section
11) and (b) if any proposed nomination or business is not in compliance
herewith, to declare that such nomination shall be disregarded or that such
proposed business shall not be transacted.
2. For purposes of this Section 11, "public announcement" shall include
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 and 15(d) of the Exchange Act.
3. Notwithstanding the foregoing provisions of this Section 11, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section 11 shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors pursuant to any applicable
provisions of the certificate of incorporation.
Notwithstanding any other provision of law, the certificate of
incorporation or these By-Laws, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least two thirds of the votes which all the stockholders would
-8-
<PAGE>
be entitled to cast at any annual election of directors or class of directors
shall be required to amend or repeal, or to adopt any provision inconsistent
with, this Section 11.
Section 12. The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting by the person presiding over the meeting. The Board of
Directors may adopt by resolution such rules and regulations for the conduct of
the meeting of stockholders as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairperson of any meeting of stockholders shall have the right
and authority to convene and to adjourn the meeting, to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairperson, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairperson of the meeting, may include, without limitation,
the following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as the chairperson of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the Board of Directors or the chairperson of the meeting, meetings of
stockholders shall not be required to be held in accordance with the rules of
parliamentary procedure.
ARTICLE III
-9-
<PAGE>
DIRECTORS
Section 1. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these By-laws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 2. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 3. The first meeting of each newly elected Board of Directors
shall be held immediately after the annual meeting of stockholders and no notice
of such meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present. In the
event such meeting is not held at such time and place, the meeting may be held
at such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 4. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 5. Special meetings of the board may be called by the president on
three (3) days' notice to each director by mail or two (2) days' notice to each
director either personally or by telegram, facsimile or other lawful means of
communication (including electronic mail); special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of two directors unless the board consists of only one director, in
which case
-10-
<PAGE>
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of the sole director.
Section 6. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 7. Unless otherwise restricted by the certificate of incorporation
or these By-laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
Section 8. Unless otherwise restricted by the certificate of incorporation
or these By-laws, members of the Board of Directors, or any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
-11-
<PAGE>
Section 9. The Board of Directors may designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Except as otherwise required by law, any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
PROCEDURES
Section 10. The following provisions shall apply to each committee
established by the Board of Directors:
A. Chairperson. Unless specified by the board of directors, each
-----------
committee of the board shall choose one of its members to act as chairperson.
B. Secretary. Each committee shall from time to time designate a
---------
secretary of the committee who shall keep a record of its proceedings.
-12-
<PAGE>
C. Vacancies. Vacancies occurring from time to time in the membership of
---------
any committee may be filled by a majority of the entire board for the unexpired
term of the member whose death, resignation, removal or disability causes such
vacancy.
D. Meetings. Each committee shall adopt its own rules of procedure and
--------
shall meet at such stated time as it may, by resolution, appoint, and shall also
meet whenever called together by the chairman of the board or the chief
executive officer.
E. Notice of Meetings. If a committee establishes regular meeting dates,
------------------
it shall not be necessary to give notice of any such regular meeting. Notice of
every special meeting shall be given in the manner and within the time periods
specified in these by-laws with respect to notices of special meetings of the
board of directors. Notice of any special meeting may be waived in writing by
all of the absent members of the committee either before or after the meeting.
F. Quorum. A quorum at any meeting of any committee shall be not less
------
than one-half (1/2) of the entire committee. Every act or decision done or made
by a majority of the directors present at a committee meeting duly held at which
a quorum is present shall be regarded as the act of the committee.
G. Reports. Actions taken at a meeting of any committee shall be reported
-------
to the board at its next meeting following such committee meeting.
COMPENSATION OF DIRECTORS
Section 11. Unless otherwise restricted by the certificate of
incorporation or these By-laws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the
-13-
<PAGE>
corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these By-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to stockholders and directors may also be given by all other lawful
means.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
By-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a president, treasurer and a secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also choose one or more vice-
presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these By-laws otherwise provide.
-14-
<PAGE>
Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a chief executive officer, a president, a
chief financial officer, a treasurer and a secretary and may choose vice
presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he or she
shall be present. He or she shall have and may exercise such powers as are,
from time to time, assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which he or she shall be present. He or she shall
have and may exercise such powers as are, from time to time, assigned to him by
the Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
-15-
<PAGE>
Section 8. The president shall be the chief operating officer or chief
executive officer of the corporation; and in the absence of the Chairman and
Vice Chairman of the Board he or she shall preside at all meetings of the
stockholders and the Board of Directors; he or she shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
Section 9. He or she shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He or she shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or president, under
-16-
<PAGE>
whose supervision he or she shall be. He or she shall have custody of the
corporate seal of the corporation and he or she, or an assistant secretary,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by his signature or by the signature of such
assistant secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 12. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He or she shall disburse the funds of the corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he or she shall give
the corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as
-17-
<PAGE>
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
chairperson or vice-chairperson of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificate issued to represent any such partly paid shares,
the total amount of the consideration to be paid therefor, and the amount paid
thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional
-18-
<PAGE>
or other special rights of each class of stock or series thereof and the
qualification, limitations or restrictions or such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in section 202 of the General
Corporation Law of the State of Delaware, in lieu of the foregoing requirements,
there may be set forth on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
-19-
<PAGE>
and/or give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such
-20-
<PAGE>
owner, and to hold liable for calls and assessments a person registered on its
books as the owner of shares and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
FISCAL YEAR
Section 3. The fiscal year of the corporation shall end of December 31 of
each calendar year.
SEAL
-21-
<PAGE>
Section 4. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new By-laws be contained in
the notice of such special meeting. If the power to adopt, amend or repeal By-
laws is conferred upon the Board of Directors by the certificate of
incorporation it shall not divest or limit the power of the stockholders to
adopt, amend or repeal By-laws.
-22-
<PAGE>
EXHIBIT 10.1
ITXC CORP.
1998 STOCK INCENTIVE PLAN
(as amended through May 3, 2000)
1. Introduction.
------------
This Plan was approved by the Board of Directors of the Company
on February 17, 1998 and by the shareholders of the Company by unanimous written
consent dated April 2, 1998.
2. Purpose.
-------
The purpose of this Plan is to strengthen the Company by
providing an incentive to its officers, employees, Consultants and directors and
thereby encourage them to devote their abilities and industry to the success of
the Company's business enterprise. It is intended that this purpose be achieved
by extending to officers, employees, Consultants and directors of the Company
and its subsidiaries an added long-term incentive for high levels of performance
and unusual efforts through the grant of Incentive Stock Options, Nonqualified
Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Units
and Performance Shares (as each term is hereinafter defined).
3. Definitions.
-----------
For purposes of the Plan, the following terms shall have the
following meanings:
"Agreement" means the written agreement between the Company and
an Optionee or Grantee evidencing the grant of an Option or Award and setting
forth the terms and conditions thereof.
"Authority" means either the Compensation Committee or the CEO
Committee, depending upon the context in which such term is used. With respect
to Awards and Options awarded or to be awarded to Selected Persons, the term
"Authority" refers to the Compensation Committee. With respect to Awards and
Options awarded or to be awarded to Non-Selected Persons, the term "Authority"
refers to the CEO Committee.
"Award" means a grant of Restricted Stock, a Stock Appreciation
Right, a Performance Award or any or all of them.
"Board" means the Board of Directors of the Company.
<PAGE>
"Cause" shall mean (i) a failure by an Eligible Individual to
perform his or her material employment responsibilities in accordance with
instructions given to such Eligible Individual by one or more persons to whom
such Eligible Individual reports, which failure is not cured within 20 days
after such Eligible Individual receives written or electronic notice thereof, or
(ii) an Eligible Individual's conviction in connection with a felony or a
misdemeanor, but with respect to a misdemeanor, only if such conviction directly
and substantially calls into question such Eligible Individual's integrity or
ability to perform his or her employment responsibilities after such conviction.
"CEO Committee" shall mean a committee of the Board consisting
solely of the Company's Chief Executive Officer; provided, however, if the
Company's Chief Executive Officer is not a member of the Board or if the Board
determines at any time that it does not desire to have the Plan administered by
any committee other than the Compensation Committee, all references to the CEO
Committee hereunder shall be deemed to be references to the Compensation
Committee
"Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, extraordinary cash dividend, property dividend, combination
or exchange of shares, repurchase of shares, change in corporate structure or
otherwise.
"Change in Control" shall mean the occurrence of one or more of
the following events:
(i) the consummation of any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or
pursuant to which Shares would be converted into cash, securities or
other property, other than a merger of the Company in which the
holders of the Company's Shares immediately prior to the merger have
the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) the consummation of
any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the
assets of the Company, other than to a subsidiary or affiliate, or
(iii) an approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company, or (iv)
(A) a purchase by any person (as such term is defined in Section 13(d)
of the Exchange Act), corporation or other entity of any voting
securities of the Company (the "Voting Securities") (or securities
convertible into Voting Securities) for cash, securities or any other
consideration
-2-
<PAGE>
pursuant to a tender offer or exchange offer, unless, prior to the
making of such purchase of Voting Securities (or securities
convertible into Voting Securities), the Board shall determine that
the making of such purchase shall not constitute a Change in Control,
or (B) any action pursuant to which any person (as such term is
defined in Section 13(d) of the Exchange Act), corporation or other
entity (other than the Company or any benefit plan sponsored by the
Company or any of its subsidiaries) shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of Voting Securities representing fifty-one
(51%) percent or more of the combined voting power of the Company's
then outstanding Voting Securities ordinarily (and apart from any
rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in Rule 13d-3(d)
in the case of rights to acquire any such securities), unless, prior
to such person so becoming such beneficial owner, the Board shall
determine that such person so becoming such beneficial owner shall not
constitute a Change in Control, or (v) at any time during any period
of two consecutive years, a situation in which individuals who at the
beginning of such period constituted the entire Board shall have
ceased for any reason to constitute at least a majority thereof,
unless the election or nomination for election of each new director
during such two-year period is approved by a vote of at least a
majority of the directors then still in office who were directors at
the beginning of such two-year period.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means ITXC Corp., a Delaware corporation.
"Compensation Committee" means the full Board or a committee
appointed by the Board to perform the functions assigned to the Compensation
Committee hereunder.
"Consultant" shall mean any person who performs consulting
services for, or who serves as an advisor to, any member of the Group.
"Disability" means a physical or mental infirmity which impairs
an Optionee's ability to perform substantially his or her duties for ninety (90)
days in any 360 consecutive day period.
"Division" means any of the operating units or divisions of the
Company or any Subsidiary designated as a Division by the Compensation
Committee.
-3-
<PAGE>
"Effective Date" shall mean the first date, if any, on which the
Securities and Exchange Commission declares effective a registration statement
filed by the Company with the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
"Eligible Individual" means any officer, employee, Consultant or
director of any member of the Group, but only if such officer, employee,
Consultant or director is designated by the Compensation Committee (with respect
to Selected Persons) or the CEO Committee (with respect to Non-Selected Persons)
as a recipient of Options or Awards subject to the conditions set forth herein.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" on any date means the average of the high and
low sales prices of the Shares on such date on the principal national securities
exchange on which the Shares are listed or admitted to trading, or, if the
Shares are not so listed or admitted to trading, the closing sales price of a
Share on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") on such date, or if such closing price is not available, the
arithmetic mean of the per share closing bid price and per share closing asked
price of the Shares on such date as quoted on NASDAQ or such other market in
which such prices are regularly quoted, or, if there have been no such published
bid or asked quotations with respect to the Shares on such date, or if the
Shares are not publicly traded, the Fair Market Value shall be the value
established by the Compensation Committee (with respect to Selected Persons) or
the CEO Committee (with respect to Non-Selected Persons) in good faith and, in
the case of an Incentive Stock Option, in accordance with Section 422 of the
Code.
"Grantee" means a person to whom an Award has been granted under
the Plan.
"Group" means the Company (including any Division of the
Company), each Parent of the Company and each Subsidiary of the Company
(including any Division of any such Subsidiary).
"Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Compensation
Committee (with respect to Selected Persons) or the CEO Committee (with respect
to Non-Selected Persons) as an Incentive Stock Option.
"Incentives" shall mean Awards or Options granted or to be
granted pursuant to the Plan.
"Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
-4-
<PAGE>
"Non-Selected Person" means any part-time or full-time employee
or officer of any member of the Group other than any such employee or officer
who is a Selected Person.
"Option" means an option granted pursuant to Section 5 hereof.
"Optionee" means a person to whom an Option has been granted
under the Plan.
"Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
"Performance Awards" means Performance Units, Performance Shares
or either or both of them.
"Performance Cycle" means the time period specified by the
Compensation Committee (with respect to Selected Persons) or the CEO Committee
(with respect to Non-Selected Persons), at the time a Performance Award is
granted, during which the performance of the Company, a Subsidiary or a Division
will be measured.
"Performance Shares" means Shares issued or transferred to an
Eligible Individual under Section 9.3 hereof.
"Performance Unit" means Performance Units granted to an Eligible
Individual under Section 9.2 hereof
"Restricted Stock" means Shares issued or transferred to an
Eligible Individual pursuant to Section 8 hereof.
"Plan" means this ITXC Corp. 1998 Stock Incentive Plan, as
amended and restated.
"Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
"Share" means a share of the common stock, par value $0.001 per
share, of the Company.
"Selected Person" means (i) any director of the Company, (ii) any
Ten-Percent Stockholder, (iii) after the Effective Date, any person who is
identified by the Company
-5-
<PAGE>
as an executive officer of the Company or who is advised by the Company's
counsel that he or she is subject to the restrictions imposed under Section 16
of the Exchange Act, (iv) any Consultant and (v) any other person designated
from time to time by the Compensation Committee as a "Selected Person" for
purposes of the Plan.
"Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in Section 7
hereof.
"Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.
"Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
"Ten-Percent Stockholder" means an Eligible Individual, who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.
4. Administration.
--------------
4.1 Administrative Body.
-------------------
4.1.1 CEO Committee. The CEO Committee shall have
-------------
authority to administer the Plan to the express extent provided for in the Plan.
4.1.2 Compensation Committee. Except to the extent that
----------------------
the Plan expressly provides for the CEO Committee to administer the Plan, the
Plan shall be administered by the Compensation Committee. All questions of
interpretation as to whether the CEO Committee or the Compensation Committee
shall have the authority to take any action with respect to a particular
Eligible Individual shall be resolved by the Compensation Committee, whose
determination shall be final and conclusive.
4.2 Authority. The Compensation Committee shall serve as the
---------
Authority with respect to Selected Persons. The CEO Committee shall serve as
the Authority with respect to Non-Selected Persons. Subject to applicable law
and the terms of the Plan, the Authority shall have plenary authority to:
(A) determine those Eligible Individuals to whom Options
shall be granted under the Plan and the number of Incentive Stock Options and/or
Nonqualified Stock Options to be granted to each Eligible Individual and to
prescribe the terms and conditions of
-6-
<PAGE>
each Option, including the purchase price per Share subject to each Option, and
make any related amendment or modification to any Agreement consistent with the
terms of the Plan; and
(B) select those Eligible Individuals to whom Awards shall
be granted under the Plan and to determine the number of Stock Appreciation
Rights, Performance Units, Performance Shares, and/or Shares of Restricted Stock
to be granted pursuant to each Award, the terms and conditions of each Award,
including, if applicable, the restrictions or performance criteria relating to
such Units or Shares, the maximum value of each Performance Unit and Performance
Share, and make any related amendment or modification to any Agreement
consistent with the terms of the Plan;
(C) determine the duration and purposes for leaves of
absence which may be granted to an Eligible Individual on an individual basis
without constituting a termination of employment or service for purposes of the
Plan; and
(D) subject to Section 6.2 hereof, accelerate the date on
which previously granted Incentives may be exercised.
The terms, conditions and restrictions of Incentives may vary from Eligible
Individual to Eligible Individual and from Incentive to Incentive. Acceleration
of Incentives may be to any date, including the date on which an Incentive is
granted.
4.3 Role of the Compensation Committee. Subject to applicable
----------------------------------
law and the terms of the Plan, the Compensation Committee shall have plenary
authority, with respect to Incentives granted to all Eligible Individuals, to
(a) prescribe the form of agreements awarding and governing all Incentives, (b)
interpret the Plan, (c) establish any rules or regulations determined by the
Compensation Committee to be necessary for the proper administration of the
Plan; (d) provide for the limited transferability of Options to certain family
members, family trusts or family partnerships of Optionees; (e) make all other
determinations necessary for the proper administration of the Plan (other than
determinations with respect to Non-Selected Persons delegated to the CEO
Committee as the Authority for Incentives granted and to be granted to Non-
Selected Persons), including, but not limited to, correcting any defect or
supplying any omission, or reconciling any inconsistency in the Plan or in any
Agreement, in the manner and to the extent it shall deem necessary or advisable
to make the Plan fully effective and comply with applicable law; and (f)
generally, exercise such powers and perform such acts as are deemed necessary or
advisable to promote the best interests of the Company with respect to the Plan.
The Compensation Committee's decisions on matters pertaining to the Plan shall
be final and conclusive on the Group, all Eligible Individuals and their
respective successors, assigns, transferees, heirs and representatives.
4.4 Limitations on the Role of the CEO Committee; Scope. From
---------------------------------------------------
time to time, the Compensation Committee shall deliver to the CEO Committee a
memorandum
-7-
<PAGE>
setting forth the maximum number of Shares for which the CEO Committee may grant
Incentives during a specified period of time and setting forth the guidelines
under which the CEO Committee may grant such Incentives during such period. Such
memorandum may be amended by the Compensation Committee at any time. Without the
prior approval of the Compensation Committee, the CEO Committee shall not grant
Incentives in any such period in excess of the applicable maximum Share limit
established by the Compensation Committee and shall not grant Incentives that do
not satisfy the applicable guidelines established by the Compensation Committee.
Subject to the limitations of the CEO Committee's authority hereunder, the CEO
Committee's decisions on matters pertaining to the Plan shall be final and
conclusive on the Group, all Non-Selected Persons and their respective
successors, assigns, transferees, heirs and representatives.
4.5 Procedures. The Compensation Committee, and the CEO
----------
Committee (collectively, the "Committees") shall hold meetings at such times as
may be necessary for the proper administration of the Plan. Each of the
Committees shall keep minutes of its meetings. A quorum of the Compensation
Committee shall consist of a majority of the members of such Committee and a
majority of a quorum may authorize any action. Any decision or determination
reduced to writing and signed by a majority of the members of the Compensation
Committee or by the sole member of the CEO Committee shall be as fully effective
as if made by a majority vote at a meeting duly called and held. No member of
any of the Committees shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this Plan or
any transaction hereunder, except for liability arising from his or her own
willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of each of the
Committees for all costs and expenses and, to the extent permitted by applicable
law, any liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing, or denying authorization to, any
transaction hereunder.
5. Stock Subject to the Plan.
-------------------------
5.1 The maximum number of Shares that may be made the subject of
Options and Awards granted under the Plan is 3,850,000, plus an annual increase
to be added on January 1 of each year beginning in the year 2000 equal to the
least of (i) 1,000,000 Shares, (ii) 3% of the outstanding Shares (on a non-
diluted basis) on such date or (iii) an amount specified by the Board of
Directors. Upon a Change in Capitalization, the maximum number of Shares shall
be adjusted in number and kind pursuant to Section 11 hereof. The Company shall
reserve for the purposes of the Plan, out of its authorized but unissued Shares
or out of Shares held in the Company's treasury, or partly out of each, such
number of Shares as shall be determined by the Board.
-8-
<PAGE>
5.2 Whenever any outstanding Option or Award or portion thereof
expires, is canceled or is otherwise terminated for any reason without having
been exercised or payment having been made in respect of the entire Option or
Award, the Shares allocable to the expired, canceled or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.
5.3 In any calendar year, the number of Shares covered by
Options and Awards granted to any one participant in the Plan shall not exceed
500,000 Shares.
6. Option Grants for Eligible Individuals.
--------------------------------------
6.1 Power of the Authority. Subject to the provisions of the
----------------------
Plan and to Section 4 hereof, each Authority shall have full and final power to
select those Eligible Individuals who will receive Options, the terms and
conditions of which shall be set forth in an Agreement; provided, however, that
-------- -------
no person shall receive any Incentive Stock Options unless he or she is an
employee of the Company, a Parent or a Subsidiary at the time the Incentive
Stock Option is granted.
6.2 Purchase Price. The purchase price or the manner in which
--------------
the purchase price is to be determined for Shares under each Option shall be
determined by the applicable Authority and set forth in the Agreement; provided,
--------
however, that the purchase price per Share under each Incentive Stock Option
- -------
shall not be less than 100% of the Fair Market Value of a Share on the date the
Incentive Stock Option is granted (or 110% in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder). Notwithstanding any provision
herein to the contrary, with respect to any Option granted on or after the
Effective Date at an exercise price that is expressly designated by the
applicable Authority at the time of grant as an exercise price of less than 100%
of the Fair Market Value of a Share on such date, such Option shall not vest
sooner than three years from the date of grant (and shall not have its vesting
accelerated to a date that is less than three years from the date of grant)
unless such vesting (or acceleration) arises as a result of (a) the Optionee's
satisfying performance criteria established by the applicable Authority, (b) the
termination of the Optionee's employment by a member of the Group without Cause
or due to the Optionee's death or Disability or (c) provisions to be made in
connection with a Change in Control.
6.3 Maximum Duration. Options granted hereunder shall be for
----------------
such term as the applicable Authority shall determine, provided that an
Incentive Stock Option shall not be exercisable after the expiration of ten (10)
years from the date it is granted (or five (5) years in the case of an Incentive
Stock Option granted to a Ten-Percent Stockholder) and a Nonqualified Stock
Option shall not be exercisable after the expiration of ten (10) years from the
date it is granted. The applicable Authority may, subsequent to the granting of
any Option,
-9-
<PAGE>
extend the term thereof but in no event shall the term as so extended exceed the
maximum term provided for in the preceding sentence.
6.4 Vesting. Subject to Sections 6.2, 6.7 and 10 hereof, each
-------
Option shall become exercisable in such installments (which need not be equal)
and at such times as may be designated by the applicable Authority and set forth
in the Agreement. Unless the applicable Authority provides otherwise, Options
shall vest in three equal installments on the first, second and third
anniversaries of the date of grant. To the extent not exercised, installments
shall accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date the Option expires. Subject to
Section 6.2 hereof, the applicable Authority may accelerate the exercisability
of any Option or portion thereof at any time.
6.5 Method of Exercise. The exercise of an Option shall be
------------------
made only by an "Exercise Notice" (as hereinafter defined) delivered in person
or by "Mail" (as hereinafter defined) to the Secretary of the Company at the
Company's principal executive office, specifying the number of Shares to be
purchased and accompanied by payment therefor and otherwise in accordance with
the Agreement pursuant to which the Option was granted. The purchase price for
any Shares purchased pursuant to the exercise of an Option shall be paid in full
upon such exercise by any one or a combination of the following: (I) cash or
(II) transferring Shares to the Company upon such terms and conditions as
determined by the applicable Authority or (iii) a combination of cash and such
transfer of Shares. Notwithstanding the foregoing, the applicable Authority
shall have discretion to determine, at the time of grant of each Option or at
any later date (up to and including the date of exercise), the form of payment
acceptable in respect of the exercise of such Option. Any Shares transferred to
the Company as payment of the purchase price under an Option shall be valued at
their Fair Market Value on the day preceding the date of exercise of such
Option. If requested by the applicable Authority, the Optionee shall deliver the
Agreement evidencing the Option to the Secretary of the Company who shall
endorse thereon a notation of such exercise and return such Agreement to the
Optionee. No fractional Shares (or cash in lieu thereof) shall be issued upon
exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares. For purposes of
this Section 6.5 and Section 7.4, the term "Exercise Notice" shall mean written
notice, electronic notice or such other notice as shall be authorized from time
to time by the applicable Authority and "Mail" shall mean regular mail or, if
electronic notice is used, an e-mail message, entitled "Exercise Notice".
6.6 Rights of Optionees. No Optionee shall be deemed for any
-------------------
purpose to be the owner of any Shares subject to any Option unless and until (I)
the Option shall have been exercised pursuant to the terms thereof, (II) the
Company shall have issued and delivered a certificate representing the Shares to
the Optionee and (III) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the Optionee shall
have full voting, dividend and other ownership rights with respect to such
Shares, subject to such terms and conditions as may be set forth in the
applicable Agreement.
-10-
<PAGE>
6.7 Effect of Change in Control. Notwithstanding anything
---------------------------
contained in the Plan or an Agreement to the contrary, all Options outstanding
on the date of a Change in Control shall become immediately and fully
exercisable upon termination of the Optionee's employment or service within
twelve (12) months following such Change in Control if such termination is by a
member of the Group or any successor thereto without Cause or by the Optionee in
connection with a material adverse change in the Optionee's responsibilities or
duties. In addition, to the extent set forth in an Agreement evidencing the
grant of an Option, an Optionee will be permitted to surrender for cancellation
within sixty (60) days after such termination, any Option or portion of an
Option to the extent not yet exercised and the Optionee will be entitled to
receive a cash payment in an amount equal to the excess, if any, of the Fair
Market Value, on the date preceding the date of surrender, of the Shares or
other securities subject to the Option or portion thereof surrendered over (y)
the aggregate purchase price for such Shares or other securities under the
Option or portion thereof surrendered. In the event an Optionee's employment or
service with the Company is terminated as described above following a Change in
Control, each Option held by the Optionee that was exercisable as of the date of
termination of the Optionee's employment or service (including by way of
acceleration) shall remain exercisable for a period ending not before the
earlier of the first anniversary of the termination of the Optionee's employment
or service or the expiration of the stated term of the Option.
6.8 Modification or Substitution. The applicable Authority
----------------------------
may, in its discretion, modify outstanding Options or accept the surrender of
outstanding Options (to the extent not exercised) and grant new Options in
substitution for them, provided that as so modified such Options are consistent
with the terms of the Plan. Notwithstanding the foregoing, no modification of
an Option shall adversely alter or impair any rights or obligations under the
Option without the Optionee's consent.
6.9 Non-transferability. No Option granted hereunder shall be
-------------------
transferable by the Optionee to whom granted otherwise than by will or the laws
of descent and distribution unless specifically authorized by the Compensation
Committee pursuant to Section 4.3(d) hereof, and unless transferred in a manner
permitted by the Compensation Committee an Option may be exercised during the
lifetime of such Optionee only by the Optionee or his or her guardian or legal
representative. The terms of such Option shall be final, binding and conclusive
upon the beneficiaries, executors, administrators, heirs and successors of the
Optionee.
6.10 Conversion Rights. The Compensation Committee may, at any
-----------------
time, and from time to time, convert all or any of the Options into Stock
Appreciation Rights or Performance Units. If Options are converted into Stock
Appreciation Rights, the purchase price per Share of the Option shall be deemed
to be the Fair Market Value of a Share on the date the Stock Appreciation Right
is granted. If Options are converted into Performance Units, the Compensation
Committee may, in its discretion, denominate the Unit in the number of Shares
-11-
<PAGE>
subject to the Option or some lesser number which reflects the appreciation in
the Shares over the Option purchase price per Share. The term of each Stock
Appreciation Right or Performance Unit shall be equal to the remaining term of
the Options which had been awarded, subject to the right of the applicable
Authority to accelerate the exercisability of any Stock Appreciation Right or
Performance Unit in accordance with the terms of the Plan.
7. Stock Appreciation Rights. The applicable Authority may, in its
-------------------------
discretion, either alone or in connection with the grant of an Option, grant
Stock Appreciation Rights in accordance with the Plan; the terms and conditions
of such Stock Appreciation Rights shall be set forth in an Agreement. If
granted in connection with an Option, a Stock Appreciation Right shall cover the
same Shares covered by the Option (or such lesser number of Shares as the
applicable Authority may determine) and shall, except as provided in this
Section 7, be subject to the same terms and conditions as the related Option.
7.1 Time of Grant. A Stock Appreciation Right may be granted
-------------
(I) at any time if unrelated to an Option, or (II) if related to an Option,
either at the time of grant, or at any time thereafter during the term of the
Option.
7.2 Stock Appreciation Right Related to an Option.
---------------------------------------------
(A) Exercise. A Stock Appreciation Right granted in
--------
connection with an Option shall be exercisable at such time or times and only to
the extent that the related Option is exercisable, and will not be transferable
except to the extent the related Option may be transferable. A Stock
Appreciation Right granted in connection with an Incentive Stock Option shall be
exercisable only if the Fair Market Value of a Share on the date of exercise
exceeds the purchase price specified in the related Incentive Stock Option
Agreement.
(B) Amount Payable. Upon the exercise of a Stock
--------------
Appreciation Right related to an Option, the Grantee shall be entitled to
receive an amount determined by multiplying (A) the excess of the Fair Market
Value of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the per Share purchase price under the related Option,
by (B) the number of Shares as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the applicable Authority may limit in
any manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at the time it is granted.
(C) Exercise. Upon the exercise of a Stock Appreciation
--------
Right granted in connection with an Option, the Option shall be canceled to the
extent of the number of Shares as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Option granted in connection with a Stock
Appreciation Right or the surrender of such Option pursuant to Section 6.7
hereof, the Stock Appreciation Right shall be canceled to the extent of the
number of Shares as to which the Option is exercised or surrendered.
-12-
<PAGE>
7.3 Stock Appreciation Right Unrelated to an Option. The
-----------------------------------------------
applicable Authority may grant to Eligible Individuals Stock Appreciation Rights
unrelated to Options. Stock Appreciation Rights unrelated to Options shall
contain such terms and conditions as to exercisability, vesting and duration as
the applicable Authority shall determine, but in no event shall they have a term
of greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the Fair Market Value of a Share on the date such Stock Appreciation Right was
granted, by (B) the number of Shares as to which such Stock Appreciation Right
is being exercised. Notwithstanding the foregoing, the applicable Authority may
limit in any manner the amount payable with respect to any such Stock
Appreciation Right by including such a limit in the Agreement evidencing such
Stock Appreciation Right at the time it is granted.
7.4 Method of Exercise. Stock Appreciation Rights shall be
------------------
exercised by a Grantee only by an Exercise Notice delivered in person or by Mail
to the Secretary of the Company at the Company's principal executive office,
specifying the number of Shares with respect to which the Stock Appreciation
Right is being exercised. If requested by the applicable Authority, the Grantee
shall deliver the Agreement evidencing the Stock Appreciation Right being
exercised and the Agreement evidencing any related Option to the Secretary of
the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Grantee.
7.5 Form of Payment. Payment of the amount determined under
---------------
Sections 7.2(B) or 7.3 may be made, in the discretion of the applicable
Authority, solely in whole Shares in a number determined as their Fair Market
Value on the date preceding the date of exercise of the Stock Appreciation
Right, or solely in cash, or in a combination of cash and Shares. If the
applicable Authority decides to make full payment in Shares and the amount
payable results in a fractional Share, payment for the fractional Share will be
made in cash.
7.6 Modification or Substitution. Subject to the terms of the
----------------------------
Plan, the Committee may modify outstanding Awards of Stock Appreciation Rights
or accept the surrender of outstanding Awards of Stock Appreciation Rights (to
the extent not exercised) and grant new Awards in substitution for them,
provided that as so modified such Stock Appreciation Rights are consistent with
the terms of the Plan. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
7.7 Effect of Change in Control. Notwithstanding anything
---------------------------
contained in this Plan to the contrary, all Stock Appreciation Rights shall
become immediately and fully exercisable upon termination of the Grantee's
employment or service within twelve (12) months
-13-
<PAGE>
following a Change in Control if such termination is by a member of the Group or
any successor thereto without Cause or by the Grantee in connection with a
material adverse change in the Grantee's responsibilities or duties. In the
event a Grantee's employment or service with the Company is terminated as
described above following a Change in Control, each Stock Appreciation Right
held by the Grantee that was exercisable as of the date of termination of the
Grantee's employment or service (including by way of acceleration) shall remain
exercisable for a period ending not before the earlier of the first anniversary
of the termination of the Grantee's employment or service or the expiration of
the stated term of the Stock Appreciation Right.
8. Restricted Stock.
----------------
8.1 Grant. The Applicable Authority may grant to Eligible
-----
Individuals Awards of Restricted Stock, and may issue Shares of Restricted Stock
in payment in respect of vested Performance Units (as hereinafter provided in
Section 9.2 hereof), which shall be evidenced by an Agreement between the
Company and the Grantee. Each Agreement shall contain such restrictions, terms
and conditions as the applicable Authority may, in its discretion, determine and
(without limiting the generality of the foregoing) such Agreements may require
that an appropriate legend be placed on Share certificates. Awards of
Restricted Stock shall be subject to the terms and provisions set forth below in
this Section 8. Notwithstanding the foregoing, but subject to all provisions
herein regarding a Change in Control, all Shares issuable pursuant to a
Restricted Stock Award granted after the Effective Date shall be subject to at
least one of the following conditions:
(A) except as otherwise provided in Section 8.4(B) hereof,
the Grantee shall be required to forfeit his or her Shares if the Grantee ceases
to be employed by a member of the Group within three years after the date of
grant other than by reason of the death or Disability of the Grantee or a
termination without Cause by a member of the Group; or
(B) the Grantee shall be required to forfeit the Shares if
the Grantee fails to satisfy performance criteria approved by the applicable
Authority.
8.2 Rights of Grantee. Shares of Restricted Stock granted
-----------------
pursuant to an Award hereunder shall be issued in the name of the Grantee as
soon as reasonably practicable after the Award is granted, provided that the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the applicable Authority, an escrow
agreement and any other documents which the applicable Authority may require as
a condition to the issuance of such Shares. If a Grantee shall fail to execute
the Agreement evidencing a Restricted Stock Award, the appropriate blank stock
powers and, in the discretion of the applicable Authority, an escrow agreement
and any other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall be
null and void. At the discretion of the applicable Authority, Shares issued in
connection with a Restricted Stock Award shall be deposited together with the
stock
-14-
<PAGE>
powers with an escrow agent (which may be the Company) designated by the
applicable Authority. Unless the applicable Authority determines otherwise and
as set forth in the Agreement and as set forth in Section 8.6 hereof, upon
delivery of the Shares to the escrow agent, the Grantee shall have all of the
rights of a stockholder with respect to such Shares, including the right to vote
the Shares and to receive all dividends or other distributions paid or made with
respect to the Shares.
8.3 Non-transferability. Until any restrictions upon the
-------------------
Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner
set forth in Section 8.4 hereof, such Shares shall not be sold, transferred or
otherwise disposed of by, and shall not be pledged or otherwise hypothecated by,
nor shall they be delivered to, the Grantee.
8.4 Lapse of Restrictions.
---------------------
(A) Generally. Subject to Section 8.1 hereof,
---------
restrictions upon Shares of Restricted Stock awarded hereunder shall lapse at
such time or times and on such terms and conditions as the applicable Authority
may determine, which restrictions shall be set forth in the Agreement evidencing
the Award.
(B) Effect of Change in Control. Notwithstanding anything
---------------------------
to the contrary contained in the Plan, unless the Agreement evidencing the Award
provides to the contrary, all restrictions upon any Shares of Restricted Stock
(other than restrictions imposed by applicable law) shall lapse immediately and
all such Shares shall become fully vested in the Grantee upon termination of the
Grantee's employment or service within twelve (12) months following a Change in
Control if such termination is by a member of the Group or any successor thereto
without Cause or by the Grantee in connection with a material adverse change in
the Optionee's responsibilities or duties.
8.5 Modification or Substitution. Subject to the terms of the
----------------------------
Plan, the applicable Authority may modify outstanding Awards of Restricted Stock
or accept the surrender of outstanding Shares of Restricted Stock (to the extent
the restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them, provided that as so modified such Awards of Restricted
Stock are consistent with the terms of the Plan. Notwithstanding the foregoing,
no modification of an Award shall adversely alter or impair any rights or
obligations under the Agreement without the Grantee's consent.
8.6 Treatment of Dividends. At the time the Award of Shares of
----------------------
Restricted Stock is granted, the applicable Authority may, in its discretion,
determine that the payment to the Grantee of dividends, or a specified portion
thereof, declared or paid on such Shares by the Company shall be (I) deferred
until the lapsing of the restrictions imposed upon such Shares and (II) held by
the Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the applicable Authority shall determine whether
such
-15-
<PAGE>
dividends are to be reinvested in Shares (which shall be held as additional
Shares of Restricted Stock) or held in cash. If deferred dividends are to be
held in cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at such rate
per annum as the applicable Authority, in its discretion, may determine.
Payment of deferred dividends in respect of Shares of Restricted Stock (whether
held in cash or as additional Shares of Restricted Stock), together with
interest accrued thereon, if any, shall be made upon the lapsing of restrictions
imposed on the Shares in respect of which the deferred dividends were paid, and
any dividends deferred (together with any interest accrued thereon) in respect
of any Shares of Restricted Stock shall be forfeited upon the forfeiture of such
Shares.
8.7 Delivery of Shares. Upon the lapse of the restrictions on
------------------
Shares of Restricted Stock, the Company shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.
9. Performance Awards.
------------------
9.1 Performance Objectives. Performance Awards may be granted
----------------------
subject to the attainment of performance objectives or the passage of time.
Performance objectives for Performance Awards may be expressed in terms of (I)
earnings per Share, (II) pre-tax profits, (III) net earnings or net worth, (IV)
return on equity or assets, (V) any combination of the foregoing, or (VI) any
other standard or standards deemed appropriate by the applicable Authority at
the time the Award is granted. Performance objectives may be in respect of the
performance of the Company and its Subsidiaries (which may be on a consolidated
basis), a Subsidiary or a Division. Performance objectives may be absolute or
relative and may be expressed in terms of a progression within a specified
range. Prior to the end of a Performance Cycle, the applicable Authority, in
its discretion, may adjust the performance objectives to reflect a Change in the
Capitalization, a change in the tax rate or book tax rate of the Company or any
Subsidiary, or any other event which may materially affect the performance of
the Company, a Subsidiary or a Division, including, but not limited to, market
conditions or a significant acquisition or disposition of assets or other
property by the Company, a Subsidiary or a Division. In the event that a
Performance Award is granted on or after the Effective Date and is subject to no
conditions other than the passage of time, the minimum amount of time necessary
to satisfy any such condition shall be three years, subject to acceleration in
the event that employment is terminated by any member of the Group without
Cause, by the Grantee as a result of the Grantee's death or Disability or under
the circumstances described in Section 9.4 hereof.
9.2 Performance Units. The applicable Authority, in its
-----------------
discretion, may grant Awards of Performance Units to Eligible Individuals, the
terms and conditions of which shall be set forth in an Agreement between the
Company and the Grantee. Performance Units may be denominated in Shares or a
specified dollar amount and, contingent upon the attainment of specified
performance objectives within the Performance Cycle, represent the right to
receive payment, as provided in Section 9.2(B) hereof, of (I) in the case of
Share-denominated
-16-
<PAGE>
Performance Units, the Fair Market Value of a Share on the date the Performance
Unit was granted, the date the Performance Unit became vested or any other date
specified by the applicable Authority, (II) in the case of dollar-denominated
Performance Units, the specified dollar amount or (III) a percentage (which may
be more than 100%) of the amount described in clause (i) or (ii) depending on
the level of performance objective attainment; provided, however, that the
-------- -------
applicable Authority may, at the time a Performance Unit is granted, specify a
maximum amount payable in respect of a vested Performance Unit. Each Agreement
shall specify the number of the Performance Units to which it relates, the
performance objectives which must be satisfied in order for the Performance
Units to vest and the Performance Cycle within which such objectives must be
satisfied.
(A) Vesting and Forfeiture. A Grantee shall become vested with
----------------------
respect to the Performance Units to the extent that the performance objectives
or other vesting criteria set forth in the Agreement are satisfied.
(B) Payment of Awards. Payment to Grantees in respect of vested
-----------------
Performance Units shall be made within one hundred twenty (120) days after the
last day of the Performance Cycle to which such Award relates unless the
Agreement evidencing the Award provides for the deferral of payment, in which
event the terms and conditions of the deferral shall be set forth in the
Agreement. Subject to Section 9.4, such payments may be made entirely in Shares
valued at their Fair Market Value as of the last day of the applicable
Performance Cycle or such other date specified by the applicable Authority,
entirely in cash, or in such combination of Shares and cash as the applicable
Authority, in its discretion, shall determine at any time prior to such payment;
provided, however, that if the applicable Authority, in its discretion,
- -------- -------
determines to make such payment entirely or partially in Shares of Restricted
Stock, the applicable Authority shall determine the extent to which such payment
will be in Shares of Restricted Stock and the terms of such Restricted Stock at
the time the Award is granted.
9.3 Performance Shares. The applicable Authority, in its
------------------
discretion, may grant Awards of Performance Shares to Eligible Individuals, the
terms and conditions of which shall be set forth in an Agreement between the
Company and the Grantee. In addition to the terms and provisions specified in
this Section 9.3, each Agreement shall contain such other restrictions, terms
and conditions as the applicable Authority may, in its discretion, determine and
(without limiting the generality of the foregoing) such Agreements may require
that an appropriate legend be placed on Share certificates. Awards of
Performance Shares shall be subject to the following terms and provisions:
(A) Rights of Grantee. The applicable Authority shall
-----------------
provide at the time an Award of Performance Shares is made, the time or times at
which the actual Shares represented by such Award shall be issued in the name of
the Grantee; provided, however, that no Performance Shares shall be issued until
-------- -------
the Grantee has executed an Agreement evidencing
-17-
<PAGE>
the Award, the appropriate blank stock powers and, in the discretion of the
applicable Authority, an escrow agreement and any other documents which the
applicable Authority may require as a condition to the issuance of such
Performance Shares. If a Grantee shall fail to execute the Agreement evidencing
an Award of Performance Shares, the appropriate blank stock powers and, in the
discretion of the applicable Authority, an escrow agreement and any other
documents which the applicable Authority may require within the time period
prescribed by the applicable Authority at the time the Award is granted, the
Award shall be null and void. At the discretion of the applicable Authority,
Shares issued in connection with an Award of Performance Shares shall be
deposited together with the stock powers with an escrow agent (which may be the
Company) designated by the applicable Authority. Unless the applicable Authority
determines otherwise, subject to Section 9.3(D) hereof, upon delivery of the
Shares to the escrow agent, the Grantee shall have, in the discretion of the
applicable Authority, all of the rights of a stockholder with respect to such
Shares, including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.
(B) Non-transferability. Until any restrictions upon the
-------------------
Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 9.3(C) or 9.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The applicable
Authority may also impose such other restrictions and conditions on the
Performance Shares, if any, as it deems appropriate.
(C) Lapse of Restrictions. Subject to Section 9.4,
---------------------
restrictions upon Performance Shares (other than restrictions imposed by
applicable law) awarded hereunder shall lapse and such Performance Shares shall
become vested at such time or times and on such terms, conditions and
satisfaction of performance objectives as the applicable Authority may, in its
discretion, determine at the time an Award is granted.
(D) Treatment of Dividends. At the time the Award of
----------------------
Performance Shares is granted, the applicable Authority may, in its discretion,
determine that the payment to the Grantee of dividends, or a specified portion
thereof, declared or paid on actual Shares represented by such Award which have
been issued by the Company to the Grantee shall be (I) deferred until the
lapsing of the restrictions imposed upon such Performance Shares and (II) held
by the Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the applicable Authority shall determine whether
such dividends are to be reinvested in Shares (which shall be held as additional
Performance Shares) or held in cash. If deferred dividends are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at such rate
per annum as the applicable Authority, in its discretion, may determine. Payment
of deferred dividends in respect of Performance Shares (whether held in cash or
in additional Performance Shares), together with interest accrued thereon, if
any, shall be made upon the lapsing of restrictions imposed on the Performance
Shares in respect of which the deferred dividends were
-18-
<PAGE>
paid, and any dividends deferred (together with any interest accrued thereon) in
respect of any Performance Shares shall be forfeited upon the forfeiture of such
Performance Shares.
(E) Delivery of Shares. Upon the lapse of the
------------------
restrictions on Performance Shares awarded hereunder, the Company shall cause a
stock certificate to be delivered to the Grantee with respect to such Shares,
free of all restrictions hereunder.
9.4 Effect of Change in Control. Notwithstanding anything
---------------------------
contained in the Plan or any Agreement to the contrary, in the event of a Change
in Control:
(A) With respect to the Performance Units, the Grantee may
(I) become vested in a percentage of Performance Units as determined by the
applicable Authority at the time of the Award of such Performance Units and as
set forth in the Agreement and (II) be entitled to receive in respect of all
Performance Units which become vested as a result of a Change in Control, a cash
payment within thirty (30) days after such Change in Control in an amount as
determined by the applicable Authority at the time of the Award of such
Performance Unit and as set forth in the Agreement.
(B) With respect to the Performance Shares, restrictions
(other than restrictions imposed by applicable law) may lapse immediately on all
or a portion of the Performance Shares as determined by the applicable Authority
at the time of the Award of such Performance Shares and as set forth in the
Agreement.
(C) The Agreements evidencing Performance Shares and
Performance Units may provide, as determined by the applicable Authority, for
the treatment of those Awards (or portions thereof) which do not become vested
as the result of a Change in Control, including, but not limited to, provisions
for the adjustment of applicable performance objectives.
9.5 Non-transferability. No Performance Awards shall be
-------------------
transferable by the Grantee otherwise than by will or the laws of descent and
distribution.
9.6 Modification or Substitution. Subject to the terms of the
----------------------------
Plan, the Committee may modify outstanding Performance Awards or accept the
surrender of outstanding Performance Awards and grant new Performance Awards in
substitution for them, provided that as so modified such Performance Awards are
consistent with the terms of the Plan. Notwithstanding the foregoing, no
modification of a Performance Award shall adversely alter or impair any rights
or obligations under the Agreement without the Grantee's consent.
10. Effect of a Termination of Employment or Service. The Agreement
------------------------------------------------
evidencing the grant of each Option and each Award may set forth the terms and
conditions applicable to such Option or Award upon a termination or change in
the status of the
-19-
<PAGE>
employment or service of the Optionee or Grantee with the Company, a Subsidiary
or a Division (including a termination or change by reason of the sale of a
Subsidiary or a Division), as the applicable Authority may, in its discretion,
determine at the time the Option or Award is granted or thereafter. In the
absence of such provisions in an Agreement and unless specifically set forth in
an Agreement to the contrary, (a) in the event that an Optionee's or Grantee's
employment or service with the Company is terminated for Cause, the Incentives
granted to the Optionee or Grantee hereunder shall immediately terminate in
full, in the case of Options, no rights thereunder may be exercised, and in all
other cases, no payment will be made with respect thereto, (b) in the event that
an Optionee's employment or service with the Company is terminated due to the
death or Disability of such Optionee, all Options and Stock Appreciation Rights
owned by such Optionee shall be exercisable in full, for a period ending on the
earlier of the expiration date of such Incentive or twelve (12) months after
such termination (at the end of which period, all such Options and Stock
Appreciation Rights shall lapse), by such decedent's executors or personal
administrators or by such disabled Optionee, (c) in the event that a Grantee's
employment or service with the Company is terminated due to the death or
Disability of such Grantee, all Incentives owned by such Grantee that are
covered by Sections 8 and 9 hereof shall expire on the earlier of the expiration
date of such Incentives or twelve (12) months after such termination (at the end
of which period, all such Incentives shall lapse),unless exercised in advance
thereof by such decedent's executors or personal administrators or by such
disabled Grantee, provided, however, that to the extent that the passage of time
is a condition to the realization of any such Incentive, the Grantee shall be
deemed to have satisfied such passage of time condition, and (d) in the event
that an Optionee's or Grantee's employment or service with the Company is
terminated by the Company without Cause or by the Optionee or Grantee for any
reason other than such Optionee's or Grantee's death or Disability, all
Incentives owned by such Optionee or Grantee shall be exercisable, but only to
the extent exercisable on the date of termination of employment, by such
Optionee or Grantee for a period of up to the sooner of (a) ninety (90) days
after the termination of employment and (b) the expiration date of such
Incentives (at the end of which period, all such Incentives shall lapse).
11. Adjustment Upon Changes in Capitalization.
-----------------------------------------
11.1 In the event of a Change in Capitalization, the
Compensation Committee shall conclusively determine the appropriate adjustments,
if any, to (I) the maximum number and class of Shares or other stock or
securities with respect to which Options or Awards may be granted under the
Plan, (II) the maximum number or class of Shares or other stock or securities
with respect to which Options may be granted to any Eligible Individual during
the term of the Plan and (III) the number and class of Shares or other stock or
securities which are subject to outstanding Options or Awards granted under the
Plan, and the purchase price therefor if applicable.
11.2 Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price)
-20-
<PAGE>
shall be made in such manner as not to constitute a modification as defined by
Section 424(h)(3) of the Code and only to the extent otherwise permitted by
Sections 422 and 424 of the Code.
11.3 If, by reason of a Change in Capitalization, a Grantee of
an Award shall be entitled to, or an Optionee shall be entitled to exercise an
Option with respect to, new, additional or different Shares or securities, such
new, additional or different shares shall thereupon be subject to all of the
conditions, restrictions and performance criteria which were applicable to the
Shares subject to the Award or Option, as the case may be, prior to such Change
in Capitalization.
12. Effect of Certain Transactions.
------------------------------
Subject to Sections 6.7, 7.7, 8.4(B) and 9.4 hereof, or as otherwise
provided in an Agreement, in the event of (I) the liquidation or dissolution of
the Company or (II) a merger or consolidation of the Company (a "Transaction"),
the Plan and the Options and Awards issued hereunder shall continue in effect in
accordance with their respective terms except that following a Transaction each
Optionee and Grantee shall be entitled to receive in respect of each Share
subject to any outstanding Options or Awards, as the case may be, upon exercise
of any Option or payment or transfer in respect of any Award, the same number
and kind of stock, securities, cash, property, or other consideration that each
holder of a Share was entitled to receive in the Transaction in respect of a
Share; provided, however, that such stock, securities, cash, property, or other
consideration shall remain subject to all of the conditions, restrictions and
performance criteria which were applicable to the Awards prior to such
Transaction.
13. Pooling Transactions.
--------------------
Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change in Control which is also intended to
constitute a Pooling Transaction, the Compensation Committee shall take such
actions, if any, which are specifically recommended by an independent accounting
firm retained by the Company to the extent reasonably necessary in order to
assure that the Pooling Transaction will qualify as such, including but not
limited to (I) deferring the vesting, exercise, payment or settlement with
respect to any Option or Award, (II) providing that the payment or settlement in
respect of any Option or Award be made in the form of cash, Shares or securities
of a successor or acquirer of the Company, or a combination of the foregoing and
(III) providing for the extension of the term of any Option or Award to the
extent necessary to accommodate the foregoing, but not beyond the maximum term
permitted for any Option or Award.
14. Company's Rights with Respect to Shares.
---------------------------------------
-21-
<PAGE>
14.1 Except as set forth herein, Shares acquired pursuant to the
Plan may not be transferred without the Company's consent. Before any Shares
acquired under the Plan may be sold, the Shares shall first be offered to the
Company in accordance with the following terms and conditions:
(A) The Grantee or Optionee shall deliver a notice to the
Company stating his bona fide intention to sell or transfer the Shares, the
number of Shares to be sold or transferred, the price at which the Grantee or
Optionee proposes to sell or transfer the Shares and the name of the proposed
purchaser or transferee, all accompanied by proof reasonably satisfactory to the
Company that the Grantee or Optionee has actually received a bona fide offer to
purchase the Shares on the terms stated in his notice.
(B) Within 30 days after receipt of the notice, the Company
or its assignee may elect to purchase any or all Shares to which the notice
refers, at the price at which the Grantee or Optionee has received a bona fide
offer to purchase the Shares.
(C) If all of the Shares to which the notice refers are not
elected to be purchased as provided in subsection (ii) hereof, the Grantee or
Optionee may sell the remaining Shares to any person named in the notice at the
price specified in the notice or at a higher price, provided that such sale or
transfer is consummated within 60 days of the date of the notice to the Company,
and provided further that (x) the sale is in accordance with all the terms and
conditions of this provision and (y) the Grantee or Optionee furnishes the
Company with reasonable proof of the date and terms of the sale.
(D) The sale must be in accordance with Section 18.5 hereof.
The provisions of this Section 14.1 and Section 14.2 hereof shall terminate on
(i) the effective date of a registration statement filed by the Company under
the Securities Act of 1933, as amended, with respect to an underwritten public
offering of Shares or (ii) the closing date of a sale of assets or merger of the
Company pursuant to which shareholders of the Company receive securities of a
buyer whose securities are publicly traded. The provisions of clauses (i)
through (iii) of this Section 14.1 shall not apply to a transfer of any Shares
by the Grantee or Optionee, either during his or her lifetime or on death by
will or intestacy, to his ancestors, descendants or spouse, or any custodian or
trustee for the account of such ancestors, descendants or spouse, provided,
however, in such case, such transferee shall receive and hold the Shares subject
to the provisions of the Plan and there shall be no further transfer of the
Shares except in accordance with this provision.
14.2 Upon the exercise of an Option or payment of an Award or at
any time thereafter, the Company shall have the right to (i) repurchase any or
all Shares held by the Grantee or Optionee that were acquired pursuant to the
Plan at a purchase price determined by the Compensation Committee to represent
the fair market value of the repurchased Shares at the
-22-
<PAGE>
time of such repurchase, (ii) convert any or all of those Shares to non-voting
shares or (iii) allow the Optionee to retain those Shares, subject to the other
terms and conditions of the Plan. To exercise its rights under either clause (i)
or (ii), the Company must give to the Grantee or Optionee notice to that effect.
The notice shall state the date, which shall not be more than 60 days after the
date of the notice, and the procedure for the repurchase or conversion. The
Grantee or Optionee must comply with the terms and procedure stated in the
notice.
15. Termination and Amendment of the Plan.
-------------------------------------
The Plan shall terminate on the day preceding the tenth
anniversary of the date of its initial adoption by the Board and no Option or
Award may be granted thereafter under the Plan. The Board may sooner terminate
the Plan and the Board may at any time and from time to time amend, modify or
suspend the Plan; provided, however, that:
-------- -------
15.1 No such amendment, modification, suspension or
termination shall impair or adversely alter any Options or Awards theretofore
granted under the Plan, except with the consent of the Optionee or Grantee, nor
shall any amendment, modification, suspension or termination deprive any
Optionee or Grantee of any Shares which he or she may have acquired through or
as a result of the Plan; and
15.2 To the extent necessary under applicable law or stock
exchange rules applicable to the Shares, no amendment shall be effective unless
approved by the stockholders of the Company in accordance with applicable law
and regulations.
16. Non-Exclusivity of the Plan.
---------------------------
The adoption of the Plan by the Board shall not be construed
as amending, modifying or rescinding any previously approved incentive
arrangement or as creating any limitations on the power of the Board to adopt
such other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
17. Limitation of Liability.
-----------------------
As illustrative of the limitations of liability of the
Company, but not intended to be exhaustive thereof, nothing in the Plan shall be
construed to:
(I) give any person any right to be granted an Option
or Award other than at the sole discretion of the applicable Authority;
-23-
<PAGE>
(II) give any person any rights whatsoever with
respect to Shares except as specifically provided in the Plan;
(III) limit in any way the right of the Company to
terminate the employment of any person at any time; or
(IV) be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any person at any
particular rate of compensation or for any particular period of time.
18. Regulations and Other Approvals; Governing Law.
----------------------------------------------
18.1 Except as to matters of federal law, this Plan and the
rights of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of Delaware without giving effect to
conflicts of law principles.
18.2 The obligation of the Company to sell or deliver Shares with
respect to Options and Awards granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Compensation
Committee.
18.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
18.4 Each Option and Award is subject to the requirement that, if
at any time the Compensation Committee determines, in its discretion, that the
listing, registration or qualification of Shares issuable pursuant to the Plan
is required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.
18.5 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended, and is not otherwise exempt from
such registration, such Shares shall be restricted against transfer to the
extent required by the Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to
-24-
<PAGE>
an Option or Award granted under the Plan, as a condition precedent to receipt
of such Shares, to represent and warrant to the Company in writing that the
Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder. The certificates evidencing any of such
Shares shall be appropriately amended to reflect their status as restricted
securities as aforesaid.
18.6 Certificates representing Share purchased or received under
the Plan shall have endorsed upon them the following legend, or such other
legend as the Company may reasonably require to comply with applicable law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF FIRST
REFUSAL AS SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION
AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION. THESE SECURITIES HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS, THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ALL APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
19. Miscellaneous.
-------------
19.1 Multiple Agreements. The terms of each Option or Award may
-------------------
differ from other Options or Awards granted under the Plan at the same time, or
at some other time. The applicable Authority may also grant more than one
Option or Award to a given Eligible Individual during the term of the Plan,
either in addition to, or in substitution for, one or more Options or Awards
previously granted to that Eligible Individual.
19.2 Withholding of Taxes.
--------------------
(A) The Company may make such provisions and take such steps
as it may deem necessary or appropriate for the withholding of any taxes which
the Company is required by any law or regulation of any governmental authority,
whether federal, state or local,
-25-
<PAGE>
domestic or foreign, to withhold in connection with any Option or the exercise
thereof, any Stock Appreciation Right or the exercise thereof, or the grant of
any other Award, including, but not limited to, the withholding of cash or
Shares which would be paid or delivered pursuant to such exercise or Award or
another exercise or Award under this Plan until the Grantee reimburses the
Company for the amount the Company is required to withhold with respect to such
taxes, or canceling any portion of such Award or another Award under this Plan
in an amount sufficient to reimburse itself for the amount it is required to so
withhold. The Compensation Committee may permit a Grantee (or any beneficiary or
other person authorized to act) to elect to pay a portion or all of any amounts
required or permitted to be withheld to satisfy federal, state, local or foreign
tax obligations by directing the Company to withhold a number of whole Shares
which would otherwise be distributed and which have a Fair Market Value
sufficient to cover the amount of such required or permitted withholding taxes.
(B) If an Optionee makes a disposition, within the meaning
of Section 424(c) of the Code and regulations promulgated thereunder, of any
Share or Shares issued to such Optionee pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the date of
the grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
(C) The Committee shall have the authority, at the time of
grant of an Option or Award under the Plan or at any time thereafter, to award
tax bonuses to designated Optionees or Grantees, to be paid upon their exercise
of Options or payment in respect of Awards granted hereunder. The amount of any
such payments shall be determined by the Committee. The Committee shall have
full authority in its absolute discretion to determine the amount of any such
tax bonus and the terms and conditions affecting the vesting and payment
thereof.
-26-
<PAGE>
20. Commencement Date. The Plan is effective as of February 17,
-----------------
1998, the date of its initial adoption by the Board; provided, however, that it
is intended that options granted prior to such date by the Company will become
subject to the Plan. The Plan was approved by the stockholders of the Company
in accordance with Delaware law.
-27-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF ITXC CORP AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 195,036,383
<SECURITIES> 27,273,495
<RECEIVABLES> 8,777,745
<ALLOWANCES> 1,771,444
<INVENTORY> 0
<CURRENT-ASSETS> 230,507,860
<PP&E> 25,013,248
<DEPRECIATION> 4,354,336
<TOTAL-ASSETS> 261,910,391
<CURRENT-LIABILITIES> 14,793,221
<BONDS> 1,732,191
0
0
<COMMON> 38,433
<OTHER-SE> 286,506,268
<TOTAL-LIABILITY-AND-EQUITY> 261,910,391
<SALES> 15,066,079
<TOTAL-REVENUES> 15,066,079
<CGS> 0
<TOTAL-COSTS> 15,040,475
<OTHER-EXPENSES> 8,824,584
<LOSS-PROVISION> 496,715
<INTEREST-EXPENSE> 136,258
<INCOME-PRETAX> (15,645,619)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,645,619)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,645,619)
<EPS-BASIC> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
