EXHIBIT 10.6
INTERNET/TELECOMMUNICATIONS AGREEMENT
INTERNET/TELECOMMUNICATIONS AGREEMENT, dated May 7, 1999 (this
"Agreement"), by and between IDT Corporation, a Delaware corporation ("IDT"),
and Net2Phone, Inc., a Delaware corporation ("Net2Phone").
WHEREAS, Net2Phone is currently a subsidiary of IDT;
WHEREAS, IDT currently maintains a telecommunication switching
infrastructure and network which provides Internet access and Internet telephony
services for the customers of IDT and Net2Phone;
WHEREAS, parties intend that Net2Phone be given an indefeasible right to
use parts of IDT's Internet network.
NOW, THEREFORE, in consideration of the premises and mutual promises and
representations contained herein, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto do mutually
covenant, stipulate and agree as follows:
1. Internet Network.
(a) Existing Network. IDT hereby grants and conveys to Net2Phone an
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indefeasible right to use and enjoy, to the extent of IDT's rights therein,
those equipment items, equipment leases and rights of use and/or access which
are part of IDT's existing DS3 network and are described on Exhibit A hereto
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(the "Existing Network"), such grant and conveyance to be effective as of the
date hereof. The foregoing grant and conveyance shall terminate with respect to
any item described on Exhibit A hereto upon the first of the following to occur:
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(i) with respect to any part of the Existing Network, upon the expiration of the
respective lease or other agreement set forth in Exhibit A relating to such part
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of the Existing Network; (ii) with respect to any part of the Existing Network
which will be replaced by the Frontier Network (as defined below), upon
Net2Phone exercising its rights set forth in Section 2(a) hereof with respect to
such part of the Existing Network; or (iii) with respect to any part of the
Existing Network not sooner terminated pursuant to clauses (i) or (ii) above,
upon the mutual consent of IDT and Net2Phone.
Net2Phone hereby agrees it shall perform all obligations
reasonably required of it by IDT and shall do nothing whatsoever in violation of
the agreements set forth on Exhibit A. It is expressly understood that IDT
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remains the primary party with respect to all agreements set forth on Exhibit A
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and retains all obligations to pay rent and/or usage fees in connection
therewith.
(b) Frontier Network. Pursuant to a Telecommunications Services
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Agreement, dated September 24, 1998 (the "Frontier Agreement"), by and between
IDT and Frontier Communications of the West, Inc. ("Frontier"), IDT has an
indefeasible right to use a certain telecommunication network as it is completed
and delivered pursuant to the terms and conditions set forth in the Frontier
Agreement. IDT hereby grants and conveys to Net2Phone an
indefeasible right to use and enjoy, to the extent of IDT's rights therein,
those parts of such telecommunication network which are described on Exhibit B
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hereto (the "Frontier Network"), such grant and conveyance to be effective, with
respect to those parts of the Frontier Network which have already been completed
and delivered, on the date hereof and, with respect to any part of the Frontier
Network which has not yet been completed and delivered, on the date such part of
the Frontier Network is completed and delivered. The foregoing grant and
conveyance with respect to the Frontier Network shall terminate upon the
expiration of the Frontier Agreement, in accordance with its terms; provided,
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however, Net2Phone shall have the right to request an earlier termination of
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such grant and conveyance, in whole or in part, which request shall be granted
by IDT solely in the event that Frontier agrees to amend the Frontier Agreement
to permit a termination of IDT's corresponding obligations under the Frontier
Agreement and that Net2Phone pays all costs and expenses incurred to secure
Frontier's consent to such amendment.
Net2Phone hereby agrees it shall perform all obligations reasonably
required of it by IDT and shall do nothing whatsoever in violation of the
Frontier Agreement. It is expressly understood that IDT remains the primary
party with respect to the Frontier Agreement and retains all obligations to pay
maintenance and/or usage fees in connection therewith.
(c) Networking Infrastructure. IDT hereby grants and conveys to
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Net2Phone the right to use and enjoy, to the extent of IDT's rights therein, the
equipment, equipment leases, co-location agreements and rights of use and/or
access primarily located at the backbone points of presence on its Internet
network and comprising its networking infrastructure, as more particularly
described on Exhibit C hereto (the "Networking Infrastructure Equipment"), for a
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period of two years commencing on the date hereof.
Net2Phone hereby agrees that it shall perform all obligations
reasonably required of it by IDT and shall do nothing whatsoever in violation of
the leases and other agreements set forth on Exhibit C. It is expressly
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understood that IDT remains the primary party with respect to all agreements set
forth on Exhibit C and retains all obligations to pay rent and/or usage fees in
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connection therewith.
(d) Transit Relationship Agreements. IDT hereby agrees to enter into
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transit relationship agreements with Net2Phone to provide Net2Phone with rights
of access substantially identical with those of IDT at the locations set forth
on Exhibit D hereto, for a period of one year commencing on the date hereof. In
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accordance with current industry custom, such transit relationships shall be
provided on a mutual and gratuitous basis. At the end of such initial term and
of each year thereafter, such rights of access shall automatically renew for an
additional one (1) year period unless one party has given the other party sixty
(60) days' prior written notice terminating such rights of access. Following
such initial term, such rights of access may be terminated at any time at the
option of either IDT or Net2Phone upon sixty (60) days' prior written notice.
(e) Network Operations Center. IDT hereby grants and conveys to
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Net2Phone the right to use and enjoy, to the extent of IDT's rights therein, the
equipment, equipment leases and rights of use and/or access and other facilities
comprising its Network
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Operations Center, as more particularly described on Exhibit E hereto (the "NOC
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Facilities"), for a period of two years commencing on date hereof.
Net2Phone hereby agrees that upon such grant and conveyance it shall
perform all obligations reasonably required of it by IDT and shall do nothing
whatsoever in violation of the leases and other agreements set forth on Exhibit
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E. It is expressly understood that IDT remains the primary party with respect
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to all agreements set forth on Exhibit E and retains all obligations to pay rent
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and/or usage fees in connection therewith. The IDT employees at the NOC
Facilities who are listed on Exhibit F hereto shall be transferred to, and
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become employees of, Net2Phone on the date hereof or as promptly thereafter as
is feasible so as to permit an orderly transition.
(f) Maintenance and Support. With respect to leases and other
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agreements described in the Exhibits hereto, IDT shall use commercially
reasonable efforts to cause the other parties to such leases and other
agreements to fulfill their respective contractual obligations, including those
(if any) relating to the maintenance of equipment or network access. With
respect to equipment listed on the exhibits hereto which is or becomes owned by
IDT or which is leased by IDT pursuant to leases which obligate IDT to maintain
such equipment, IDT shall maintain such equipment in accordance with industry
practice and, upon notice from Net2Phone of any malfunctioning of such
equipment, shall promptly repair or cause the repair of such equipment.
Net2Phone shall reimburse IDT for all costs and expenses incurred by IDT for the
maintenance and repair of such equipment to the extent that IDT is contractually
obligated for such maintenance and repair. Net2Phone shall also reimburse IDT
for all necessary upgrades to such equipment and, to the extent permitted by the
respective leases (if any), Net2Phone shall own any upgrades so installed.
(g) Equipment with Expiring Leases. To the extent that any equipment
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described on the Exhibits hereto is subject to a lease which terminates during
the term of Net2Phone's right to use such item of equipment, following the
termination of such lease IDT shall be responsible for providing Net2Phone with
an item of equipment of equivalent function and quality for the remainder of
Net2Phone's right of use hereunder.
(h) No Modifications to Third Party Contracts. With respect to the
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Frontier Agreement and all the leases and other agreements described on the
Exhibits hereto from which IDT derives the rights necessary for Net2Phone to
exercise the rights of use granted herein, IDT shall fulfill all of its
obligations with respect to each such agreement and shall not amend, alter,
supplement, terminate, cancel, assign, transfer or otherwise modify any such
agreement without the prior written consent of Net2Phone; provided, however,
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that IDT's obligation with respect to any such agreement shall cease upon the
expiration of the corresponding Net2Phone right of use granted herein.
(i) No Assignment. This Agreement shall not be construed as an
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assignment or as an attempted assignment of any of the leases or other
agreements set forth on the Exhibits hereto. To the extent that any transaction
contemplated by the provisions of this Agreement requires the consent of a party
to the leases or other agreements set forth on the Exhibits hereto (other than
IDT), such transaction shall not be effective with respect to such lease or
other agreement until such consent has been received and IDT hereby agrees to
use all commercially reasonable efforts to procure such consent.
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(j) Hosting Service. It is understood that IDT retains primary
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control over the Internet equipment listed on the Exhibits hereto.
Notwithstanding the foregoing, to the extent that IDT requires Net2Phone's
assistance in gaining Internet access as a result of Net2Phone exercising the
rights to use the equipment and/or access granted to Net2Phone herein, Net2Phone
hereby agrees to facilitate such access for a period of five years commencing on
the date hereof. At the end of such initial term and of each year thereafter,
Net2Phone's obligation to facilitate IDT's Internet access shall automatically
renew for an additional one (1) year period unless one party has given the other
party sixty (60) days' prior written notice terminating such facilitation of
Internet access. Following such initial term, such facilitation of Internet
access may be terminated at any time at the option of either IDT or Net2Phone
upon sixty (60) days' prior written notice. As compensation to Net2Phone for
facilitating such access, IDT agrees to pay for such usage and services as
provided in Section 2(d) hereof.
(k) Transfer Pricing. For a period of two years commencing on the
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date hereof, Net2Phone hereby agrees (i) that IDT is hereby granted the right of
first refusal to provide Net2Phone's carrier traffic, (ii) that any carrier
traffic actually routed over IDT's direct routes (whether or not pursuant to the
foregoing right of first refusal) shall be charged at the greater of (A) IDT's
overall most favorite nation selling price less 5% and (B) IDT's cost plus 5%,
and (iii) that any other carrier traffic actually routed over IDT's
telecommunications network (whether or not pursuant to this right of first
refusal) shall be charged at IDT's cost plus 10%. For a two year period
commencing on the date hereof, each party hereby grants the other party an
option to purchase bandwidth from such granting party at the granting party's
cost plus 10% and Net2Phone hereby grants IDT an option to use Net2Phone's
indirect telecommunications network (to the extent that Net2Phone has excess
availability thereon) to route IDT's carrier traffic at Net2Phone's cost plus
10%. At the end of such initial terms and of each year thereafter, such
agreements with respect to carrier traffic and bandwidth shall automatically
renew for an additional one (1) year period unless one party has given the other
party sixty (60) days' prior written notice terminating such respective
agreements. Following such initial term, such agreements with respect to carrier
traffic or bandwidth may be terminated at any time at the option of either IDT
or Net2Phone upon sixty (60) days' prior written notice.
(l) Network Unavailability. Each of the parties acknowledges that
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the Internet network or any of the networks or equipment referred to herein may
be unavailable periodically for the purposes of maintenance and/or upgrades.
Each of the parties further acknowledges that periodic service outages, known as
"brownouts," may occur in connection with the network. Each of the parties shall
use all reasonable efforts to minimize any such interruptions and brownouts with
respect to equipment or other aspects of the network and network infrastructure
which it controls. Each party agrees to hold the other party harmless of any and
all losses arising to such party and/or any third parties as a result of
"brownouts," service interruptions and server unavailability.
Notwithstanding the foregoing, in the event that either Net2Phone or
IDT suffers a "brownout" from the equipment or rights of access referenced in
this Section 1 for any reason, IDT or Net2Phone, as the case may be, shall use
reasonable commercial efforts to obtain a rebate or other concession from any
third party which may have responsibility for such unavailability. In case
either party receives any such rebate or concession, such party shall share any
such rebate
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or concession with the other in a manner reflecting the relative loss of usage
incurred by each of Net2Phone and IDT.
(m) With respect to any equipment or rights of use and/or access to
which IDT has granted Net2Phone a right of use herein, Net2Phone shall have the
right to use such equipment and access to the exclusion of IDT for the duration
of the right granted herein.
2. Payments.
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(a) Existing Network. On May 1, 1999, and on the first day of each
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month thereafter until such time as the grant and conveyance set forth in
Section 1(a) hereof has terminated in its entirety, Net2Phone shall pay to IDT
an Existing Network Fee (as defined below) as compensation for the grant and
conveyance set forth in Section 1(a) hereof with respect to the Existing
Network.
As the Frontier Network is completed and delivered, Net2Phone shall
have the right to require IDT to terminate, in whole or in part, any or all of
the leases and other agreements set forth in Exhibit A, to the extent permitted
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by such instruments. With respect to any termination requested by Net2Phone,
the actual date such lease or other agreement is terminated shall hereinafter be
referred to as the "Termination Date" with respect to such lease or other
agreement. To the extent that IDT incurs any termination or cancellation
charges as a result of any such lease or contract termination, Net2Phone shall
reimburse IDT for such charges upon demand.
The Existing Network Fee shall equal, on each date payable, the
product of $60,000 multiplied by a fraction, the numerator of which is the total
mileage of all circuits set forth on Exhibit A hereto except those circuits with
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respect to which a Termination Date has occurred and the denominator of which is
the total mileage of all circuits set forth on Exhibit A hereto. Ten (10) days
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following the end of any month in which a Termination Date has occurred, IDT
shall refund to Net2Phone upon the request of Net2Phone that portion of the
Existing Network Fee for such month representing the per diem charge for each
circuit deemed terminated during such month (based on mileage) for the number of
days in such month following the Termination Date with respect to such circuit.
(b) Frontier Network. Pursuant to the Frontier Agreement, IDT must
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pay Frontier certain non-recurring charges for the installation of the Frontier
network, some of which IDT has already paid Frontier and the remainder of which
IDT will pay Frontier as the network is completed and delivered. Upon the
completion and delivery of each circuit set forth on Exhibit B, Net2Phone shall
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pay to IDT an amount equal to the non-recurring charge with respect to such
circuit (as set forth on Exhibit B) plus 10%, such amount to be paid with
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interest at 9% per annum in sixty (60) equal monthly installments commencing
thirty (30) days following the completion and delivery of such circuit. Upon the
completion and delivery of all of the circuits set forth on Exhibit B, the
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amount payable by Net2Phone with respect to the non-recurring charges for the
individual circuits shall be aggregated and the payments restructured so that
such aggregate outstanding amount shall be paid, with interest at 9% per annum,
in equal monthly payments during the Restructured Term (as defined below)
commencing thirty (30) days following the completion and delivery of the final
circuit of the Frontier Network. The
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"Restructured Term" shall commence thirty (30) days following the completion and
delivery of the final circuit of the Frontier Network and shall continue for
that number of months equal the weighted average, rounded to the nearest whole
number, of the number of months remaining in the original payment periods of the
individual circuits.
In addition, Net2Phone shall pay to IDT with respect to the completion
and delivery of the Frontier Network an installation fee of $600,000 (the
"Installation Fee"). Upon the completion and delivery of each circuit set forth
on Exhibit B hereto, Net2Phone shall pay to IDT an amount equal to the product
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of the Installation Fee multiplied by a fraction, the numerator of which is the
non-recurring charge with respect to such circuit (as set forth on Exhibit B)
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and the denominator of which is the sum of all non-recurring charges (as set
forth on Exhibit B) with respect to all of the circuits of the Frontier Network
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described on Exhibit B hereto.
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In addition, beginning on the date hereof and continuing until the
termination in its entirety of the grant and conveyance with respect to the
Frontier Network, Net2Phone shall reimburse IDT an amount equal to the costs and
fees IDT incurs subsequent to the date hereof with respect to the Frontier
Network pursuant to the Frontier Agreement (other than the non-recurring
charges), such reimbursement shall be due and payable upon payment by IDT of
such costs and fees.
(c) Networking Infrastructure and Network Operations Center. For
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24 months commencing on April 1, 1999, Net2Phone shall pay to IDT $50,000 per
month as compensation for the rights of usage and enjoyment with respect to the
Networking Infrastructure Equipment (as set forth in Section 1(c) hereof) and
the NOC Facilities (as set forth in Section 1(e) hereof). Upon the expiration of
Net2Phone's rights to use and enjoy the Networking Infrastructure Equipment and
NOC Facilities pursuant to Sections 1(c) and (e) hereof, IDT hereby grants to
Net2Phone the right to purchase from IDT at fair market value any such items of
equipment then owned by IDT.
(d) Internet Usage and Services. During the period set forth in
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Section 1(j) hereof (as extended pursuant to the terms thereof), IDT shall pay
on the first day of each month (i) for each of IDT's dial-up Internet customers,
$1.00 and (ii) for each of IDT's dedicated-line Internet customers, the lesser
of $100.00 or 20% of the fee that IDT charges such customer. Additionally, in
the case of IDT's dedicated-line customers, IDT shall pay Net2Phone 25% of all
installation fees charged such customers by IDT.
3. Ownership of Equipment and Intellectual Property.
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Nothing herein is intended to, nor shall it, change the legal
ownership of any equipment or intellectual property.
4. Termination.
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(a) This Agreement may only be terminated by the mutual agreement of
the parties in writing, except as specifically set forth in this Agreement with
respect to specific portions hereof.
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(b) Sections 3 and 4 shall survive termination of this Agreement.
5. Miscellaneous.
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(a) This Agreement may not be transferred or assigned by either
party, whether voluntarily or by operation of law, without the prior written
consent of the other. This Agreement shall inure to the benefit of and be
binding upon all permitted successors and assigns.
(b) This Agreement shall be governed by the laws of the State of New
York (regardless of the laws that might otherwise govern under applicable
principles of conflicts of law) as to all matters, including, but not limited
to, matters of validity, construction, effect, performance and remedies.
(c) This Agreement may be executed in counterparts, each of which
shall constitute an original and both of which together shall be deemed to be
one and the same instrument.
(d) All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or by facsimile
transmission or mailed (certified or registered mail, postage prepaid, return
receipt requested):
If to IDT, to:
IDT Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Net2Phone, to:
Net2Phone, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date on which hand
delivered, upon transmission of the facsimile transmission by the sender and
issuance by the transmitting machine of a confirmation slip confirming that the
number of pages constituting the notice have been transmitted without error, or
on the third business day following the date on which so mailed, except for a
notice of change of address, which shall be effective only upon receipt thereof.
In the case of a notice sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above. However, such mailing shall in no way alter the
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time at which the facsimile notice is deemed received. In no event shall the
provision of notice pursuant to this Section 5(d) constitute notice for service
of process.
(e) This Agreement and those provisions of the Separation Agreement
(defined below) specifically referred to herein contain the entire understanding
of the parties hereto with respect to the subject matter of this Agreement. This
Agreement and such referenced provisions of the Separation Agreement supersede
all prior agreements and understandings, oral or written, with respect to the
subject matter of this Agreement.
(f) In the event that any one or more of the provisions contained
herein is held invalid or unenforceable in any respect, the parties shall
negotiate in good faith with a view toward substituting therefor a suitable and
equitable solution in order to carry out the intent and purpose of such invalid
provision; provided, however, that the validity and enforceability of any such
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provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended that all of
the rights and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
(g) The Section headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of this
Agreement.
(h) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION,
LOSS OF PROFITS, REVENUES OR DATA), WHETHER BASED ON BREACH OF CONTRACT, TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGE. THE LIABILITY OF EITHER PARTY FOR DAMAGES OR
ALLEGED DAMAGES HEREUNDER, WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY,
IS LIMITED TO, AND WILL NOT EXCEED, THE OTHER PARTY'S DIRECT DAMAGES.
(i) Any dispute, controversy or claim arising out of or relating to
this Agreement or the breach, termination or validity hereof, or any transaction
contemplated hereby shall be settled in accordance with the procedures set forth
in Article VIII of the Separation Agreement, dated as of May 7, 1999, by and
between IDT and Net2Phone, as if such Article VIII were set forth herein in its
entirety.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
IDT CORPORATION
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
NET2PHONE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
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