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:
Section 1. Internet Network.
----------------
(a) Existing Network. IDT hereby grants and conveys to
Net2Phone an indefeasible right to use and enjoy those equipment items,
equipment leases and rights of use and/or access which are part of its existing
DS3 network and are described on Exhibit A hereto (the "Existing Network"), such
---------
grant and conveyance to be effective as of the date hereof. The foregoing grant
and conveyance shall terminate as follows: (i) 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; (ii) 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 of the Existing Network;
---------
(iii) with respect to any part of the Existing Network not sooner terminated
pursuant to clauses (i) or (ii) above,...[consider a date certain with renewals;
consider whether either party should have the unilateral right to terminate].
Net2Phone hereby agrees 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 A. It is expressly understood that
---------
IDT retains all obligations to pay rent and/or usage fees in connection with all
agreements set forth on Exhibit A.
---------
(b) Frontier Network. Pursuant to a Telecommunications
----------------
Services 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
1
grants and conveys to Net2Phone an indefeasible right to use and enjoy those
parts of such telecommunication network which are described on Exhibit B 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, delivered and installed, on the date hereof and, with respect to any
part of the Frontier Network which has not yet been completed, delivered and
installed, on the date such part of the Frontier Network is completed, delivered
and installed. 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.
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 retains all obligations
to pay rent and/or usage fees in connection with the Frontier Agreement.
(c) Networking Infrastructure. IDT hereby grants and conveys
-------------------------
to Net2Phone the right to use and enjoy 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 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 understood that
---------
IDT retains all obligations to pay rent and/or usage fees in connection with all
agreements set forth on Exhibit C.
---------
(d) Transit Relationship Agreements. IDT hereby agrees to
-------------------------------
enter into 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.
---------
(e) Network Operations Center. IDT hereby grants and conveys
-------------------------
to Net2Phone the right to use and enjoy the equipment, equipment leases and
rights of use and/or access and other facilities comprising its Network
Operations Center, as more particularly described on Exhibit E hereto (the "NOC
---------
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
-------
E. It is expressly understood that IDT retains all obligations to pay rent
-
and/or usage fees in connection with all agreements set forth on Exhibit E. All
---------
IDT employees at the NOC Facilities (listed on Exhibit F hereto) shall be
---------
transferred to, and become employees of, Net2Phone on the date hereof or as
promptly thereafter as is feasible so as to permit an orderly transition.
2
(f) Maintenance and Support. With respect to leases and
-----------------------
other agreements described in the Exhibits hereto, IDT shall be responsible 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, and shall use commercially
reasonable efforts to do so. With respect to equipment leased by IDT to which
Net2Phone has been given the right of use pursuant to this Agreement, Net2Phone
shall reimburse IDT for all costs and expenses incurred by IDT for the
maintenance of such equipment to the extent that IDT is contractually obligated
for such maintenance. Net2Phone shall also reimburse IDT for all necessary
upgrades to such equipment and, to the extent permitted by the respective
leases, Net2Phone shall own any upgrades so installed.
(g) Equipment Transfers. To the extent that any equipment
-------------------
described on the Exhibits hereto is subject to a lease containing a purchase
option which may be exercised during the term of Net2Phone's right to use such
item of equipment hereunder, IDT shall exercise such option only upon the
direction of, and at the expense of, Net2Phone. Any purchase options which are
so exercised shall be exercised exclusively for the account of Net2Phone and IDT
shall instruct any lessor to transfer title directly to Net2Phone. In the event
that a lessor cannot or will not transfer title directly to Net2Phone upon the
exercise of a purchase options, IDT shall take title in its own name and as soon
as practicable thereafter transfer title to Net2Phone of any such equipment so
acquired for no additional consideration.
(h) No Modifications to Third Party Contracts. With respect
-----------------------------------------
to the 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 under such agreements and shall not amend, alter, supplement,
terminate, cancel, assign, transfer or otherwise modify any such agreement
without the prior written consent of Net2Phone.
(i) No Assignment. This Agreement shall not be construed as
-------------
an 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 effectiveness with respect to such lease or
other agreement until such consent has been received.
(j) Hosting Service. It is understood that IDT retains
---------------
primary 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 facilitate such access for a period of two years commencing on the
date hereof. Following such two year period, Net2Phone's obligation to
facilitate IDT's Internet access shall automatically renew for one year periods
unless either party has given the other written notice terminating such
facilitation 60 days prior to the end of the original two year period or any one
year period thereafter.
3
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. IDT and Net2Phone agree to route one
----------------
another's telecommunications traffic at the providing party's cost plus 10%, for
a period of two years commencing on the date hereof. Following such two year
period, such obligation shall automatically renew for one year periods unless
either party has given the other written notice terminating such obligation 60
days prior to the end of the original two year period or any one year period
thereafter.
(l) Network Unavailability. Each of the parties acknowledges
----------------------
that 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 server. 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.
Each of the parties acknowledges that data stored on the Internet Network
may be lost due to accidents or unforeseen circumstances. Each of the parties
agrees to make daily backup copies of its own data stored on the Internet
Network.
Section 2. Payments.
------------- --------
(a) Existing Network. Beginning on the date hereof and
----------------
continuing until the termination in its entirety of the grant and conveyance
with respect to the Existing Network, Net2Phone shall reimburse IDT an amount
equal to the costs and fees IDT incurs subsequent to the date hereof pursuant to
such leases and other agreements, such reimbursement shall be due and payable
upon payment by IDT of such costs and fees. As the Frontier Network is
completed, delivered and installed, 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 by such
---------
instruments. To the extent that IDT incurs any termination or cancellation
charges as a result of any such lease or contract terminations, Net2Phone shall
reimburse IDT for such charges upon demand.
(b) Frontier Network. Pursuant to the Frontier Agreement,
----------------
IDT must 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, delivered and
installed. Net2Phone shall reimburse IDT for those non-recurring charges
incurred (or to be incurred) by IDT with respect to those parts of the Frontier
Agreement set forth on Exhibit B hereto, with interest at 9% per annum, in 60
---------
equal monthly payments commencing on _________ __, 1999.
In addition, beginning on the date hereof and continuing until the
termination in
4
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, Transit Relationships and
----------------------------------------------------
Network Operations Center. For 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) and for the Transit Relationship Agreements (as described
in Section 1(d) 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 (excluding any items temporarily in the name of IDT pursuant to Section 1(g)
hereof).
(d) Internet Usage and Services. During the period set forth
---------------------------
in Section 1(j) hereof, 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.
Section 3. Ownership of Equipment and Intellectual Property.
------------------------------------------------
[to be provided following the Company's completion of Exhibit A and B]
Section 4. Termination.
-----------
(a) Except as specifically set forth in this Agreement, this
Agreement may not be terminated except by the mutual agreement of the parties in
writing.
(b) Sections 3 and 4 shall survive termination of this
Agreement.
Section 5. Miscellaneous.
-------------
(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.
5
(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 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 contains the entire understanding of the
parties hereto with respect to its subject matter. This Agreement supersedes all
prior agreements and understandings, oral or written, with respect to its
subject matter.
(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 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.
6
(g) The Section headings contained in this Agreement are for
reference only and shall not affect the meaning or interpretation of this
Agreement.
(h) 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.
7
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/ ▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: COO
NET2PHONE, INC.
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO
8